SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Commission File Number: 0-18267
Noise Cancellation Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 59-2501025
- ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation organization) Identification No.)
1025 West Nursery Road, Linthicum, MD 21090
(Address of principal executive office) (Zip Code)
(410) 636-8700
(Registrant's telephone number, including area code)
<PAGE>
PART II
ITEM 11. EXECUTIVE COMPENSATION
Set forth below is certain information for the three fiscal years ended
December 31, 1997, 1996 and 1995 relating to compensation received by the
Company's Chief Executive Officer and all executive officers of the Company
other than the Chief Executive Officer (collectively the "Named Executive
Officers") whose total annual salary and bonus for the fiscal year ended
December 31, 1997, exceeded $100,000 for services rendered in all capacities.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Securities
Other Underlying All
Name and Principal Annual Options/Warrants Other
Position Year Salary($) Bonus($) Compensation($) SARs(#) Compensation
- ------------------- ------- --------- ------- --------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Parrella 1997 $120,000 $243,058 $15,348 3,062,500 (2) $5,218 (3)
President and 1996 120,000 106,885 15,348 475,000 5,218 (3)
Chief 1995 90,833 47,168 6,395 1,622,000 (4),(16) -
Executive
Officer (1)
Jay M. Haft 1997 52,638 - - 543,500 (5) -
Chairman (1) 1996 64,000 - - 200,000 -
1995 110,000 - - 937,000 (6),(16) -
Cy E. Hammond 1997 94,000 65,939 - 150,000 (8) -
Sr. Vice 1996 94,000 - - - -
President, Chief 1995 92,500 - - 439,436 (9),(16) -
Financial
Officer (7)
John B. Horton 1997 105,000 50,000 - 325,000 (10) -
Sr.Vice 1996 116,932 (11) - - - -
President, General 1995 93,101 (11) - - 903,834 (12),(16)
Counsel and
Secretary (11)
Irene Lebovics 1997 105,000 - - 301,250 (13) -
Sr. Vice 1996 105,000 - - - -
President and 1995 88,000 - - 658,850 (14),(16) -
President of
NCT Hearing
Products, a
div. of
the Company
Stephen J. Fogarty 1997 105,000 16,653 15,986 30,000 -
Sr.Vice 1996 105,833 - - - -
President,
Chief 1995 104,434 10,083 - 391,400 (15), (16) -
Financial Officer (7)
</TABLE>
(1) Mr. Haft was elected Chairman of the Board and relinquished the title
of Chief Executive Officer on July 17,1996. Prior thereto, and from
November 15, 1994, Mr. Haft served as Co-Chairman of the Board and
Chief Executive Officer. From July 17, 1996 to June 19, 1997, the
authority and responsibility of the Chief Executive Officer were
delegated by the Board of Directors to the Executive Committee
consisting of Messrs. Haft and Parrella with Mr. Haft serving as the
Committee's Chairman. Mr. Parrella was elected Chief Executive on June
19, 1997.
(2) Refer to the "Options and Warrants Granted in 1997" table and the
footnotes thereto.
(3) Consists of annual premiums for $2.0 million personal life insurance
policy paid by the Company on behalf of Mr. Parrella.
(4) Excludes options and warrants to purchase 1,385,000 shares of the
Company's common stock forfeited under the "Exchange Program"
described in footnote (16) below, for a net new grant under the
Exchange Program and the "1992 Plan", described in footnote (16)
below, of 237,000 options and warrants all of which were exercisable
at December 31, 1997.
(5) Refer to the "Options and Warrants Granted in 1997" table and the
footnotes thereto.
(6) Excludes options and warrants to purchase 585,000 shares of the
Company's common stock forfeited under the "Exchange Program"
described in footnote (16) below, for a net new grant under the
Exchange Program and the "Directors Plan", described in footnote (16)
below), of 402,000 options and warrants all of which were exercisable
at December 31, 1997.
(7) Mr. Fogarty resigned as Senior Vice President and Chief Financial
Officer on April 24, 1997, and Mr. Hammond was elected to those
offices on September 4, 1997. Services were rendered by Mr. Fogarty as
a consultant to the Company for the period July 1, 1997 through
December 31, 1997.
(8) Refer to the "Options and Warrants Granted in 1997" table and the
footnotes thereto.
(9) Excludes options to purchase 389,436 shares of the Company's common
stock forfeited under the "Exchange Program" described in footnote
(16) below, for a net new grant under the Exchange Program and the
"1992 Plan" described in footnote (16) below of 50,000 options all of
which were exercisable at December 31, 1997.
10) Refer to the "Options and Warrants Granted in 1997" table and the
footnotes thereto.
(11) Mr. Horton was elected Senior Vice President, General Counsel and
Secretary of the Company on May 6, 1996. Services were rendered by Mr.
Horton as a consultant to the Company for the period January, 1995
through April, 1996.
(12)Excludes options to purchase 828,834 shares of the Company's common
stock forfeited under the "Exchange Program" described in footnote
(16) below, for a net new grant under the Exchange Program and the
"1992 Plan" described in footnote (16) below of 75,000 options all of
which were exercisable at December 31, 1997.
(13) Refer to the "Options and Warrants Granted in 1997" table and the
footnotes thereto.
(14)Excludes options to purchase 507,600 shares of the Company's common
stock forfeited under the "Exchange Program" described in footnote
(16) below, for a net new grant under the Exchange Program and the
"1992 Plan", described in footnote (16) below, of 151,250 options all
of which were exercisable at December 31, 1997.
(15)Excludes options to purchase 316,400 shares of the Company's common
stock forfeited under the "Exchange Program" described in footnote
(16) below, for a new grant under the Exchange Program and the "1992
Plan", described in footnote (16) below, of 75,000 options all of
which were exercised at December 31, 1997.
(16)On November 8, 1995, the Company received an offer from a Canadian
institutional investor to purchase 4,800,000 shares of the Company's
common stock at a price of $0.75 per share, the fair market value of
such shares on that date. At that time virtually all of the Company's
authorized capital of 100,000,000 shares of common stock was issued
and outstanding or reserved for issuance upon the exercise of
outstanding warrants and options to purchase common stock of the
Company. Therefore, in order to make sufficient shares available to
effect the sale of 4,800,000 shares of common stock to such investor,
the Company adopted a program (the "Exchange Program"), to be
partially implemented through the Noise Cancellation Technologies,
Inc. Stock Incentive Plan (the "1992 Plan") and the Company's Option
Plan for Certain Directors (the "Directors Plan") and partially
outside such plans, under which all directors, officers, certain
active consultants (all of whom were former directors or officers of
the Company) and all current employees were given the right to
exchange presently owned warrants and options that had shares of
common stock reserved for issuance upon their exercise (respectively,
"Old Warrants" and "Old Options") for new warrants and options which
initially, and until the requisite corporate action was taken to
increase the authorized capital of the Company and reserve the
required number of shares of common stock for issuance upon their
exercise, would not have any shares of common stock reserved for
issuance upon their exercise (respectively, "New Warrants" and "New
Options"). The exercise price of the New Warrants and New Options was
established at $0.75 per share, the fair market value of the Company's
common stock on November 8, 1995, the date the Exchange Program was
adopted, and exchanges were to be effected starting with the Old
Warrants and Old Options having the highest exercise prices and
proceeding in descending order of exercise prices until sufficient
shares of common stock became available for the Company to implement
the sale of common stock to the Canadian investor. If possible, no
exchanges were to be made which would involve Old Warrants or Old
Options having an exercise price below $0.75 per share, and, in fact,
no such exchanges were required. The exercise prices of the Old
Warrants and Old Options exchanged for New Warrants and New Options
ranged from a high of $5.09 per share to $0.75 per share.
The New Warrants and New Options became fully vested upon the
surrender and forfeiture of Old Warrants and Old Options to
purchase a corresponding number of shares (as adjusted in
accordance with the foregoing formula in the case of those
having a $0.75 per share exercise price). However, the New
Warrants and New Options would not become exercisable until:
(i) approval by the Company's stockholders of an amendment
to the Certificate of Incorporation increasing the
authorized capital by an amount of additional shares of
common stock at least sufficient to provide the number of
shares needed to be reserved to permit the exercise of all
New Warrants and New Options, and (ii) the completion of
such further corporate action including amendments to the
1992 Plan and the Directors Plan that may be necessary or
appropriate in connection with the implementation of the
Exchange Program. Such stockholder approval and further
corporate action were obtained and completed on July 17,
1996, and August 14, 1996, respectively. The expiration
dates of the New Warrants and New Options are the same as
the expiration dates of the Old Warrants and Old Options
exchanged except that if such expiration date occurred prior
to the date on which the New Warrants or New Options become
exercisable, the expiration date for such New Warrants or
New Options would be ninety (90) days following the date on
which such New Warrants and New Options become exercisable.
In all other respects, the terms and conditions of the New
Warrants and New Options are the same as the terms and
conditions of the Old Warrants and Old Options exchanged.
Under the Exchange Program, 4,800,249 shares of the Company's
common stock were made available for issuance to the
Canadian institutional investor and it was necessary in
order to make the New Warrants and New Options fully
exercisable for the Company to take the appropriate
corporate action to reserve 5,055,499 shares of the
Company's common stock for issuance upon their exercise
which action was completed following the above described
increase in the Company's authorized capital.
Stock Options and Warrants
The following tables summarize the Named Executive Officers' stock option
and warrant activity during 1997.
<TABLE>
<CAPTION>
OPTIONS AND WARRANTS GRANTED IN 1997
Percent of
Total
Warrants Options Potential Realized Value
and at Assumed Annual
Shares Warrants Rates of Stock Price
Underlying Granted Exercise Appreciation for Option
Options and to Price and Warrant Term (4)
Warrants Employees Per Expiration ---------------------
Name Granted in 1997 Share Date 5% 10%
---- ----------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Parrella 862,500 (1) 13.3% $0.7500 12/31/99 $99,814 $209,398
250,000 (1) 3.9% 0.5000 02/26/99 13,473 27,700
450,000 (2) 6.9% 0.2656 05/02/04 48,657 113,391
1,500,000 (3) 23.1% 0.6875 10/06/04 419,822 978,365
Jay M. Haft 218,500 (1) 3.4% 0.7500 12/31/99 25,286 53,047
75,000 (2) 1.2% 0.2656 05/02/04 8,109 18,898
250,000 (3) 3.9% 0.6875 10/06/04 69,970 163,061
Cy E. Hammond 25,000 (1) 0.4% 0.7500 12/31/99 2,893 6,070
50,000 (2) 0.8% 0.2656 05/02/04 5,406 12,599
75,000 (3) 1.2% 0.6875 10/06/04 20,991 48,918
John B. Horton 200,000 (1) 3.1% 0.7500 09/16/00 20,744 43,285
50,000 (2) 0.8% 0.2656 05/02/04 5,406 12,599
75,000 (3) 1.2% 0.6875 10/06/04 20,991 48,918
Irene Lebovics 201,250 (1) 3.1% 0.7500 12/31/99 23,290 48,860
100,000 (2) 1.5% 0.2656 05/02/04 10,813 25,198
Stephen J. Fogarty 30,000 (2) 0.5% 0.2656 05/02/04 3,244 7,559
</TABLE>
(1) Expiration dates of the warrants and options to purchase common stock of the
Company were extended for an additional two years from the original date of
expiration.
(2) Options to purchase these shares were granted pursuant to the 1992 Plan and
are currently exercisable.
(3) Options to purchase these shares were granted pursuant to the 1992 Plan and
are not exercisable until such time as the Company's stockholders approve an
increase in the number of shares of the Company's common stock included in
the 1992 Plan.
(4) The dollar amounts on these columns are the result of calculations at the 5%
and 10% rates required by the SEC and, therefore, are not intended to
forecast possible future appreciation, if any, of the stock price.
<PAGE>
<TABLE>
<CAPTION>
1997 Aggregated Options and Warrant Exercises and
December 31, 1997 Option and Warrant Values
Number of Shares
Number Underlying Value of Unexercised
of Unexercised Options In-the-Money Options
Shares and Warrants at and Warrants at
Acquired December 31, 1997 December 31, 1997
on Value --------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------- -------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Parrella 449,456 $389,035 2,737,000 1,500,000 $1,401,962 $656,250
Jay M. Haft - - 1,282,000 250,000 587,074 109,375
Cy E. Hammond - - 319,718 75,000 148,018 32,813
John B. Horton - - 539,417 75,000 233,528 32,813
Irene Lebovics - - 592,550 - 282,358 -
Stephen J. Fogarty 263,200 77,640 - - - -
</TABLE>
Compensation Arrangements with Certain Officers and Directors
On February 1, 1996, the Compensation Committee awarded Mr. Parrella an
incentive bonus equal to 1% of the cash received by the Company upon the
execution of the agreement or other documentation evidencing transactions with
unaffiliated parties (other than certain parties involved in transactions then
in negotiation) or otherwise received at the closing of said transactions which
occur subsequent to January 1, 1996.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1997, the following persons
served as members of the Compensation Committee of the Company's Board of
Directors: Jay M. Haft, John J. McCloy, II, and Sam Oolie. Mr. Haft, Chairman of
the Committee, during such fiscal year, was Chairman of the Board and an
employee of the Company, and was a manager of OnActive Technologies, LLC, a
subsidiary of the Company. Mr. Haft served as President of the Company from
November, 1994, until July, 1995, and served as its Chief Executive Officer from
November, 1994, to July 17, 1996. Mr. Haft has also served as a member of the
Board of Directors of the Company's subsidiary, NCT Audio, since August 25,
1997. Messrs. McCloy and Oolie have also served as members of the Board of
Directors of NCT Audio since November 14, 1997, and September 4, 1997,
respectively.
In October 1990, the Company's Board of Directors authorized the issuance
of warrants to acquire 420,000 shares of common stock to each of Messrs. McCloy,
Parrella and Oolie and Ms. Lebovics, exercisable through September 30, 1994, at
$.375 per share, being the market price of the Company's common stock on the
date of such authorization, based upon each such person's commitment to extend
his or her personal guarantee on a joint and several basis with the others in
support of the Company's attempt to secure bank or other institutional
financing, the amount of which to be covered by the guarantee would not exceed
$350,000. No firm commitment for any such financing has been secured by the
Company and at present no such financing is being sought. However, each of such
persons' commitment to furnish said guarantee continues in full force and
effect.
In 1989, the Company established a joint venture with Environmental
Research Information, Inc., ("ERI") to jointly develop, manufacture and sell (i)
products intended for use solely in the process of electric power generation,
transmission and distribution and which reduce noise and/or vibration resulting
from such process, (ii) personal quieting products sold directly to the electric
utility industry and (iii) products that reduce noise and/or vibration emanating
from fans and fan systems (collectively, "Power and Fan Products"). In 1991, in
connection with the termination of this joint venture, the Company agreed, among
other things, during the period ending February 1996, to make payments to ERI
equal to (i) 4.5% of the Company's sales of Power and Fan Products and (ii)
23.75% of fees derived by the Company from its license of Power and Fan Products
technology, subject to an overall maximum of $4,500,000. Michael J. Parrella,
President of the Company, was Chairman of ERI at the time of both the
establishment and termination of the joint venture and owns approximately 12% of
the outstanding capital of ERI. In addition, Jay M. Haft, Co-Chairman, and Chief
Executive Officer of the Company, shares investment control over an additional
24% of the outstanding capital of ERI. The Company believes that the respective
terms of both the establishment of the joint venture with ERI and its
termination were comparable to those that could have been negotiated with other
persons or entities. During the fiscal year ended December 31, 1997, the Company
was not required to make any such payments to ERI under these agreements.
In 1993, the Company entered into three Marketing Agreements with Quiet
Power Systems, Inc. ("QSI") (until March 2, 1994, "Active Acoustical Solutions,
Inc."), a company which is 33% owned by ERI and 2% owned by Mr. Haft. Under the
terms of one of these Marketing Agreements, QSI has undertaken to use its best
efforts to seek research and development funding for the Company from electric
and natural gas utilities for applications of the Company's technology to their
industries. In exchange for this undertaking, the Company has issued a warrant
to QSI to purchase 750,000 shares of Common Stock at $3.00 per share. The last
sale price for the Common Stock reported on the NASDAQ National Market System on
May 15, 1993, the date of the Marketing Agreement, was $2.9375. The warrant
becomes exercisable as to specific portions of the total 750,000 shares of
Common Stock upon the occurrence of defined events relating to QSI's efforts to
obtain such funding for the Company. When such defined events occur, the Company
will record a charge for the amount by which the market price of the Common
Stock on such date exceeds $3.00 per share, if any. The warrant remains
exercisable as to each such portion from the occurrence of the defined event
through October 13, 1998. As of December 31, 1994, contingencies had been
removed against 525,000 warrants resulting in a 1993 non-cash charge of
$120,250. This Marketing Agreement also grants to QSI a non-exclusive right to
market the Company's products that are or will be designed and sold for use in
or with equipment used by electric and/or natural gas utilities for non-retrofit
applications in North America. QSI is entitled to receive a sales commission on
any sales to a customer of such products for which QSI is a procuring cause in
obtaining the first order from such customer. In the case of sales to utility
company customers, the commission is 6% of the revenues received by the Company.
On sales to original equipment manufacturers for utilities, the commission is 6%
on the gross revenue NCT receives on such sales from the customer in the first
year, 4% in the second year, 2% in the third year and 1% in the fourth year, and
.5% in any future years after the fourth year. QSI is also entitled to receive a
5% commission on any research and development funding it obtains for NCT, and on
any license fees it obtains for the Company from the license of the Company's
technology. The initial term of this Agreement is three years renewable
automatically thereafter on a year-to-year basis unless a party elects not to
renew.
Under the terms of the second of the three Marketing Agreements, QSI is
granted a non-exclusive right to market the Company's products that are or will
be designed and sold for use in or with feeder bowls throughout the world,
excluding Scandinavia and Italy. Under this Marketing Agreement, QSI is entitled
to receive commissions similar to those payable to end user and original
equipment manufacturer customers described above. QSI is also entitled to
receive the same 5% commission described above on research and development
funding and technology licenses which it obtains for the Company in the feeder
bowl area. The initial term of this Marketing Agreement is three years with
subsequent automatic one-year renewals unless a party elects not to renew.
Under the terms of the third Marketing Agreement, QSI is granted an
exclusive right to market the Company's products that are or will be designed
and sold for use in or with equipment used by electric and/or natural gas
utilities for retrofit applications in North America. QSI is entitled to receive
a sales commission on any sales to a customer of such products equal to 129% of
QSI's marketing expenses attributable to the marketing of the products in
question, which expenses are to be deemed to be the lesser of QSI's actual
expenses or 35% of the revenues received by the Company from the sale of such
products. QSI is also entitled to receive a 5% commission on research and
development funding similar to that described above. QSI's exclusive rights
continue for an indefinite term provided it meets certain performance criteria
relating to marketing efforts during the first two years following product
availability in commercial quantity and minimum levels of product sales in
subsequent years. In the event QSI's rights become non-exclusive, depending on
the circumstances causing such change, the initial term then becomes either
three or five years from the date of this Marketing Agreement, with subsequent
one-year automatic renewals in each instance unless either party elects not to
renew. During the fiscal year ended December 31, 1997, the Company was not
required to pay any commissions to QSI under any of these Marketing Agreements.
The Company has also entered into a Teaming Agreement with QSI under which
each party agrees to be responsible for certain activities relating to
transformer quieting system development projects to be undertaken with utility
companies. Under this Teaming Agreement, QSI is entitled to receive 19% of the
amounts to be received from participating utilities and the Company is entitled
to receive 81%. During the fiscal year ended December 31, 1997, the Company made
no payments to QSI for project management services.
In March 1995, the Company entered into a Master Agreement with QSI under
which QSI was granted an exclusive worldwide license under certain NCT patents
and technical information to market, sell and distribute transformer quieting
products, turbine quieting products and certain other products in the utility
industry. Under the Master Agreement, QSI is to fund development of the products
by the Company and the Company is to manufacture the products. However, QSI may
obtain the right to manufacture the products under certain circumstances include
NCT's failure to develop the products or the failure of the parties to agree on
certain development matters. In consideration of the rights granted under the
Master Agreement, QSI is to pay the Company a royalty of 6% of the gross
revenues received from the sale of the products and 50% of the gross revenues
received from sublicensing the rights granted to QSI under the Master Agreement
after QSI has recouped 150% of the costs incurred by QSI in the development of
the products in question. The Company is obligated to pay similar royalties to
QSI on its sale of the products and the licensing of rights covered under the
Master Agreement outside the utility industry and from sales and licensing
within the utility industry in the Far East. In addition to the foregoing
royalties, QSI is to pay an exclusivity fee to the Company of $750,000; $250,000
of which QSI paid to the Company in June 1994. The balance is payable in equal
monthly installments of $16,667 beginning in April 1995. QSI's exclusive rights
become non-exclusive with respect to all products if it fails to pay any
installment of the exclusivity fee when due and QSI loses such rights with
respect to any given product in the event it fails to make any development
funding payment applicable to that product. The Master Agreement supersedes all
other agreements relating to the products covered under the Master Agreement,
including those agreements between the Company and QSI described above.
Immediately following the execution to the Master Agreement, the Company
and QSI entered into a letter agreement providing for the termination of the
Master Agreement at the Company's election if QSI did not pay approximately
$500,000 in payables then owed to the Company by May 15, 1995.
In April 1995, the Company and QSI entered into another letter agreement
under which QSI agreed to forfeit and surrender the five year warrant to
purchase 750,000 shares of the Company's common stock issued to QSI under the
first Marketing Agreement described above. In addition, the $500,000 balance of
the exclusivity fee provided for under the Master Agreement was reduced to
$250,000 to be paid in 30 monthly installments of $8,333 each and the payment of
the indebtedness to be paid under the letter agreement described in the
preceding paragraph was revised to be the earlier of May 15, 1996, or the date
of closing of a financing of QSI in an amount exceeding $1.5 million, whichever
first occurs. Such indebtedness is to be evidenced by a promissory note, non
payment of which is to constitute an event of termination under the Master
Agreement.
On May 21, 1996, the Company and QSI entered into another letter agreement
extending the time by which the payments from QSI to the Company under the April
1995 letter agreement described above were to be made. Under the letter the
payment of certain arrearages in the payment of the exclusivity fee was to be
made not later than June 15, 1996, with the balance continuing to be payable by
monthly payments of $8,333 and as provided in the May 1995 letter agreement. In
addition the payment of the other indebtedness owed by QSI to the Company was to
be paid by a payment of $25,000 at the time QSI obtained certain anticipated
financing with the balance paid by monthly payments of $15,000 each. Default in
QSI's timely payment of any of the amounts specified in the May 21, 1996 letter
agreement was to cause the immediate termination of the Master Agreement and all
rights granted to QSI thereunder.
On April 9, 1997, the Company and QSI entered into another letter
agreement revising the payment schedule set forth in the May 21, 1996 letter
agreement applicable to the payment of the indebtedness owed to the Company by
QSI other than the unpaid portion of the exclusivity fee. Under the revised
schedule, the full amount of such indebtedness is to be paid by an initial
payment of $125,000 on or before April 21, 1997, and a second payment of
$200,000 upon the closing of a proposed financing in June 1997 or on January 1,
1998, whichever first occurs. The Company is also entitled to receive 15% of any
other financing obtained by QSI in the interim as well as interest at the rate
of 10% per annum on the unpaid amount of such indebtedness from July 1, 1997.
The letter agreement also provides for the continuation of QSI's payment of the
exclusivity fee in accordance with the earlier letter agreements as well as the
payment of $11,108 by April 21, 1997, for headset products sold by the Company
to QSI in 1996. In the event of a default in QSI's timely payment of any of the
amounts specified in the April 9, 1997 letter agreement, the Company has the
right to cause the termination of the Master Agreement and all rights granted by
QSI thereunder upon 10 days notice of termination to QSI.
As of April 15, 1998, QSI has paid all installments due and payable for
the exclusivity fee and owes the Company $150,000.00 which was due on January 1,
1998, and is fully reserved. Other than as described above, owes no other
amounts to the Company.
The Company believes that the terms of its agreements with QSI are
comparable to those that it could have negotiated with other persons or
entities.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth, as of April 24, 1998, information
concerning the shares of common stock beneficially owned by each person who, to
the knowledge of the Company, is the holder of 5% or more of the common stock of
the Company, each Director, and each Named Executive Officer, and all executive
officers and Directors of the Company as a group. Except as otherwise noted,
each beneficial owner has sole investment and voting power with respect to the
listed shares.
Amount and Approximate
Nature of Percentage
Beneficial of Class
Name of Beneficial Owner Ownership (1) (1)
- ------------------------------------- ------------------ ------------
Michael J. Parrella 2,750,333 (2) 2.03%
John J. McCloy 3,661,591 (3) 2.72%
Jay M. Haft 1,282,000 (4) 0.96%
Sam Oolie 565,000 (5) 0.42%
Morton Salkind 75,000 (6) 0.06%
Stephan Carlquist 150,000 (7) 0.11%
Irene Lebovics 1,388,067 (8) 1.04%
Cy E. Hammond 319,718 (9) 0.24%
John B. Horton 559,417 (10) 0.42%
Stephen J. Fogarty - -
All Executive Officers and Directors 10,876,126 (11) 7.72%
as a Group (10 persons)
Carole Salkind 9,542,143 (12) 7.18%
Her Majesty The Queen, 11,250,000 (13) 8.46%
Province of Alberta, Canada
(1) Assumes the exercise of currently exercisable outstanding options or
warrants to purchase shares of common stock. The percent of class
ownership is calculated separately for each person based on the
assumption that the person listed on the table has exercised all
options and warrants shown for that person, but that no other holder
of options or warrants has exercised such options or warrants.
(2) Includes 862,500 shares issuable upon the exercise of currently
exercisable warrants and 1,874,500 shares issuable upon the exercise
of currently exercisable options. Does not include 7,500,000 shares
issuable upon the exercise of options which become exercisable upon
stockholder approval of an amendment to the 1992 Plan increasing the
number of shares of common stock covered by the 1992 Plan (the "1992
Plan Amendment").
(3) Includes 862,500 shares issuable upon the exercise of currently
exercisable warrants and 900,000 shares issuable upon the exercise of
currently exercisable options. Does not include 150,000 shares
issuable upon the exercise of options which become exercisable upon
stockholder approval of the 1992 Plan Amendment.
(4) Includes 218,500 shares issuable upon the exercise of currently
exercisable warrants, 10,000 restricted shares and 1,053,500 shares
issuable upon the exercise of currently exercisable options. Does not
include 700,000 shares issuable upon the exercise of options which
become exercisable upon stockholder approval of the 1992 Plan
Amendment.
(5) Includes 25,000 restricted shares and 290,000 shares issuable upon the
exercise of currently exercisable options. Does not include 150,000
shares issuable upon the exercise of options which become exercisable
upon stockholder approval of the 1992 Plan Amendment.
(6) Includes 25,000 shares issuable upon the exercise of currently
exercisable options and 25,000 options to purchase shares in 1998 and
1999, respectively. Does not include 150,000 shares issuable upon the
exercise of options which become exercisable upon stockholder approval
of the 1992 Plan Amendment.
(7) Includes 150,000 shares issuable upon the exercise of currently
exercisable options. Does not include 150,000 shares issuable upon the
exercise of options which become exercisable upon stockholder approval
of the 1992 Plan Amendment.
(8) Includes 201,250 shares issuable upon the exercise of currently
exercisable warrants and 391,300 shares issuable upon the exercise of
currently exercisable options. Does not include 1,000,000 shares
issuable upon the exercise of options which become exercisable upon
stockholder approval of the 1992 Plan Amendment.
(9) Includes 25,000 shares issuable upon the exercise of currently
exercisable warrants and 294,718 shares issuable upon the exercise of
currently exercisable options. Does not include 325,000 shares
issuable upon the exercise of options which become exercisable upon
stockholder approval of the 1992 Plan Amendment.
(10) Includes 20,000 shares issuable upon the exercise of currently
exercisable warrants and 539,417 shares issuable upon the exercise of
currently exercisable options. Does not include 175,000 shares
issuable upon the exercise of options which become exercisable upon
stockholder approval of the 1992 Plan Amendment.
(11) Includes 2,189,750 shares issuable to 6 executive officers and
directors of the Company upon the exercise of currently exercisable
warrants, 5,643,435 shares issuable to 10 executive officers and
directors of the Company upon the exercise of currently exercisable
options, 35,000 restricted shares issued to 2 directors of the Company
and 50,000 shares issuable to 1 director of the Company, 25,000 shares
in each of the years 1998 and 1999, respectively. Does not include
10,550,000 sahres issuable t o 10 executive officers and directors of
the Company upon the exercise of options which become exercisable upon
stockholder approval of the 1992 Plan Amendment.
(12) Carole Salkind's address is 801 Harmon Cove Towers, Secaucus, New
Jersey 07094.
(13) Her Majesty the Queen, Province of Alberta, Canada's address is Room
530, Terrace Building, 9515 107th Street, Edmondton, Alberta T5K 2C3.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.
NOISE CANCELLATION TECHNOLOGIES, INC.
By: /s/ CY E. HAMMOND
-------------------------------
Cy E. Hammond
Senior Vice President and
Chief Financial Officer
April 30, 1998
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statements of
Noise Cancellation Technologies, Inc. on Form S-3 (File Nos. 33-47611, 33-51468,
33-74442, 33-84694 and 33-10545), on Form S-1 (File Nos. 33-19926, 33-38584 and
33-44790) and on Form S-8 (File Nos. 33-64792, 333-11209 and 333-11213) of our
report, which includes an explanatory paragraph about the Company's ability to
continue as a going concern, dated February 27, 1998, on our audits of the
consolidated financial statements and schedule of the Company as of December 31,
1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995 which
report is included in this Annual Report on Form 10-K/A.
/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
New York, New York
April 29, 1998
Exhibit 99
April 29, 1998
Noise Cancellation Technologies, Inc.
1025 West Nursery Road, Suite 120
Linthicum, Maryland 21090
Dear Sirs:
We consent to the inclusion of our opinion on the financial statements of Noise
Cancellation Technologies (UK) Limited as of December 31, 1997 and December 31,
1996 and for each of the three years ended December 31, 1997, included in the
Annual Report on Form 10-K/A.
Yours faithfully,
/s/ Peters Elworthy & Moore
Peters Elworthy & Moore
