SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-KSB/A
[X] Annual Report pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the fiscal year ended December 31, 1998, or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ______________.
Commission File No. 0-12575
ARIZONA INSTRUMENT CORPORATION
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(Name of small business issuer as specified in its charter)
Delaware 86-0410138
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4114 East Wood Street, Phoenix, AZ 85040
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (602) 470-1414
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
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 past 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.
[X] Yes [ ] No
As of April 23, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $3,002,665.38. The aggregate market value
is computed with reference to the average bid and asked price of $2.125 as
reported on the Nasdaq SmallCap Market for April 23, 1999. Shares of Common
Stock held by each officer and director and by each person who owns 10% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates.
This determination of affiliate status is not necessarily conclusive.
[ ] Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
<PAGE>
As of April 23, 1999, 1,459,989 shares of Common Stock ($.01 par value)
were outstanding. All share amounts are adjusted to reflect the 5 to 1 stock
split made effective February 16, 1999.
Arizona Instrument Corporation (the "Company") hereby amends its Report
on Form 10-KSB for the year ended December 31, 1998 by adding thereto Items 9,
10, 11, and 12, as set forth below.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The names of the directors and certain executive officers of the
Company, and certain information about them, are set forth below.
NAME AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ---- --- --------------------------------------
S. Thomas Emerson 58 President and CEO of Arizona Technology Incubator, a
partnership that mentors promising young technology
companies. Dr. Emerson was chairman of Xantel
Corporation, a private company engaged in computer
communications, from August 1992 to January 1998 and
Chief Executive Officer of Syntellect Incorporated, a
manufacturer of voice response systems, from 1984 to
April 1992. Prior to founding Syntellect in 1984, Dr.
Emerson was a founder of Periphonics Corporation of
Bohemia, New York where he served for 14 years in
various executive capacities.
Steven G. Zylstra 44 Director of Business Development for Simula
Technologies, Inc., (as new subsidiary, formerly a
division of Simula Government Products, Inc.) of
Phoenix, Arizona, since 1995. The company specializes
in the development and production of high-tech
transportation seating and safety systems, composite
technologies, and ballistic armor systems. From 1984
to 1995, Mr. Zylstra served as General Manager of
General Pneumatics Corporation, Western Research
Center, of Scottsdale, Arizona. He is a Co- Founder
and Member of the Governor's Arizona Science and
Technology Council, Co-Founder and Director of the
Arizona Innovation Network and Director of the
Arizona Technology Incubator, among other outside
activities.
George G. Hays 43 Chairman of the Board, President and Chief Executive
Officer of the Company. Mr. Hays joined the Company
in March 1997 as Vice President of Finance, Chief
Financial Officer and Vice President of Manufacturing
of the Company. In November 1997, Mr. Hays was
elected President and Chief Executive Officer of the
Company. In January 1998, Mr. Hays was elected
Chairman of the Board of Directors. Prior to joining
the Company, Mr. Hays was President and founder of
Hays Financial Group, Inc., an investment banking
firm, since 1986. Mr. Hays is still President of Hays
Financial Group, Inc.
Harold D. Schwartz 73 President of Chez & Schwartz, Incorporated, a
marketing and sales consulting firm, since 1973. Mr.
Schwartz currently serves on the Board of Directors
of Cobra Electronics Corporation, a public company.
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<PAGE>
Linda Shepherd 46 Controller and Chief Accounting Officer of the
Company. Ms. Shepherd was named Controller and Chief
Accounting Officer in mid-1997. Ms. Shepherd has been
an accountant for the Company since 1984. Prior to
her position with the Company, she served as an
accountant for a local trucking firm for nine years.
COMPLIANCE WITH SECTION 16(a) REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than 10% of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the SEC.
Specific due dates for these reports have been established and the Company is
required to disclose any failure to file by these dates. All of these filing
requirements were satisfied during the year ended December 31, 1998, except that
Harold Schwartz, a director of the Company, reported an April and a July
purchase of shares by his wife on a Form 5 dated February 10, 1999 and Linda
Shepherd, the Controller and Chief Accounting Officer of the Company, reported
an August purchase of shares on a Form 5 dated February 8, 1999. In making these
disclosures, the Company has relied solely on written representation of its
directors and executive officers and copies of the reports that they have filed
with the Commission.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE (1)
The following table sets forth, with respect to the years ended December 31,
1996, 1997 and 1998, compensation awarded to, earned by or paid to all
individuals serving as the Company's Chief Executive Officer during fiscal 1998
and each of the Company's other executive officers who were serving as an
executive officer at December 31, 1998 and whose salary and bonus aggregated at
least $100,000 for services rendered to the Company during fiscal 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ----------------------------
PAY-
AWARDS OUTS
--------------------- ----
OTHER RE- SECURITIES
ANNUAL STRICTED UNDERLYING LTIP
COMPEN- STOCK OPTIONS/ PAY- ALL OTHER
SATION AWARDS SARS OUTS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) (#) (#)(3) ($) SATION($)
- --------------------------- ---- --------- ----- ------- -------- ---------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George G. Hays, 1998 171,300 0 5,400(2) 0 45,000 0 1,338(4)
President and Chief 1997 113,749 6,300 4,050(2) 0 15,000 0 1,228(4)
Executive Officer(6)
Walfred R. Raisanen, 1998 195,984 0 0 0 0 0 5,736(4)
Vice President of 1997 166,740 29,250 0 0 0 0 4,981(4)
Engineering(5) 1996 153,622 42,000 0 0 0 0 4,309(4)
</TABLE>
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(1) All share amounts are adjusted to reflect the 5 to 1 reverse stock split
effective February 16, 1999.
(2) Automobile allowance.
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<PAGE>
(3) Consists entirely of stock options.
(4) Life insurance premium payments.
(5) Mr. Raisanen left his employment with the Company on February 26, 1999. He
resigned from the Board of Directors on March 15, 1999.
(6) Mr. Hays commenced his employment with the Company on March 10, 1997.
Therefore no information for 1996 is available.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)(2)
The following table sets forth information about stock option grants
during the last fiscal year to the executive officers named in the Summary
Compensation Table.
INDIVIDUAL GRANTS
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NUMBER OF % OF TOTAL
SECURITIES OPTION/SARS
UNDERLYING GRANTED
OPTIONS/SARS TO EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) FISCAL YEAR PRICING ($/SH) DATE
---- ----------- ----------- -------------- ----
George G. Hays 45,000(4) 65% $4.60 1/13/2008
Walfred R. Raisanen (3) 0 -- -- --
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(1) All share amounts are adjusted to reflect the 5 to 1 reverse stock split
effective February 16, 1999.
(2) Consists entirely of stock options.
(3) Mr. Raisanen left his employment with the Company on February 26, 1999. He
resigned from the Board of Directors on March 15, 1999.
(4) Vest in three equal annual installments with the first installment vesting
on January 13, 1998.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE TABLE (1)
The following table sets forth information with respect to the
executive officers named in the Summary Compensation Table concerning option
exercises during the last fiscal year and the number and value of options
outstanding at the end of the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT FISCAL IN-THE-MONEY OPTIONS/SARS
ACQUIRED VALUE YEAR-END (#)(1) AT FISCAL YEAR END ($)(3)
ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George G. Hays 0 0 20,000 0 (4)(5) (4)(5)
Walfred R. Raisanen 0 0 12,000 0 (4)(5) (4)(5)
</TABLE>
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(1) All share amounts are adjusted to reflect the 5 to 1 reverse stock split
effective February 16, 1999.
(2) No SARs are outstanding.
(3) Calculated based on the closing price as reported on the Nasdaq SmallCap
Market for the date of exercise minus the exercise price, multiplied by the
number of shares acquired on exercise.
(4) Value as of December 31, 1998 is based upon the average bid and asked price
of $3.75 as reported on the Nasdaq SmallCap Market for December 31, 1998,
minus the exercise price, multiplied by the number of shares underlying the
options.
(5) None of these options were in-the-money on December 31, 1998.
EMPLOYMENT/CHANGE OF CONTROL ARRANGEMENTS
Effective January 1, 1998, the Company entered into an employment agreement
with George G. Hays pursuant to which Mr. Hays agreed to serve as President and
Chief Executive Officer. The agreement provides for a base annual salary of
$165,000, subject to merit increases, plus an annual incentive bonus of at least
30% of annual salary based on an incentive bonus plan administered by the Board
of Directors. Mr. Hays is also entitled to participate in any benefit
arrangements available to executive officers of the Company. Upon termination of
the employment agreement without cause, Mr. Hays is entitled to receive an
amount equal to the compensation due him over the balance of the term of the
employment agreement, and to participate in applicable benefit programs for the
balance of the term of the employment agreement. The agreement terminates on
March 31, 2000, and will automatically renew for additional one-year terms until
notice of non-renewal by the Company. This agreement replaces Mr. Hays' previous
employment agreement with the Company dated April 1, 1997, pursuant to which he
was employed as Vice President and Chief Financial Officer. The Company amended
and renewed Mr. Hays' employment agreement and extended it through March 31,
2001.
Effective November 5, 1992, the Company entered into a five-year
employment agreement with Walfred R. Raisanen pursuant to which Mr. Raisanen
agreed to serve as Vice President of Research and
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<PAGE>
Development for a base annual salary of $120,000, which is to be adjusted
annually for cost-of-living increases. Mr. Raisanen's employment agreement has
been renewed according to its terms effective November 5, 1997. In January 1998,
Mr. Raisanen's title was changed to Vice President of Engineering. Mr. Raisanen
is also entitled to participate in any benefit arrangements available to
executive officers of the Company. Upon termination of the employment agreement
by the Company without cause, Mr. Raisanen is entitled to receive a cash payment
equal to the compensation due him over the balance of the term of the employment
agreement, and to participate in applicable benefit programs for the balance of
the term of the employment agreement. In 1999, the Company decided not to renew
Mr. Raisanen's employment agreement. Mr. Raisanen terminated his employment with
the Company on February 26, 1999. He resigned from the Board of Directors on
March 15, 1999.
The Company's 1991 Option Plan provides that options granted to any
executive officer or director of the Company will become immediately exercisable
and vested in full upon the occurrence, before the expiration or termination of
such option, of (a) delivery of written notice of a stockholders' meeting at
which the stockholders will consider a proposed merger, sale of assets or other
reorganization of the Company, (b) the acquisition by any person of securities
representing 25% or more of the total number of votes entitled to be case for
the election of directors of the Company, (c) commencement of a tender offer for
the stock of the Company, or (d) failure, at any annual or special meeting of
stockholders following an election contest, of any of the persons nominated by
the Company to win election seats on the board of directors.
The Company's 1991 Option Plan further provides that subject to the
above provisions, in the event a merger or similar reorganization that the
Company does not survive, a sale of all or substantially all of the assets of
the Company, or the dissolution and liquidation of the Company, shall cause
every option outstanding under the 1991 Option Plan to terminate, to the extent
not then exercised, except to the extent that any surviving entity agrees to
assume the 1991 Option Plan and/or the obligations under any such option.
COMPENSATION OF DIRECTORS
Outside directors are currently paid $1,000 plus expenses per Board or
committee meeting attended. Pursuant to the 1991 Stock Option Plan, non-employee
directors are automatically granted options exercisable for 500 shares at the
market price on the date of grant upon joining the Board and on each January 1
thereafter. The options become exercisable six months after grant and expire two
years after termination of Board service. In addition, the Company decided to
grant each outside shareholder an additional 500 shares at the market price on
January 1, 1999. Directors who are employees are only paid their expenses (if
any) for attendance at meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock at April 23, 1999 with respect to (i)
each director and director nominee of the Company, (ii) each executive officer
named in the Summary Compensation Table set forth herein, (iii) all directors
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<PAGE>
and executive officers as a group, and (iv) each person known by the Company to
be the beneficial owner of more than 5% of the outstanding shares of the
Company's Common Stock:
SHARES OF COMMON STOCK BENEFICIALLY OWNED(1)(2)
NUMBER PERCENT
NAME AND ADDRESS (3) OF SHARES OF TOTAL
- -------------------- --------- --------
George G. Hays (4) 40,400 2.7%
S. Thomas Emerson (4) 10,500 (5)
Harold D. Schwartz (4) 45,370 3.1%
Steven G. Zylstra (4) 4,120 (5)
All directors and executive 101,614 7%
officers as a group (4) (6)
(5 persons)
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(1) All share amounts are adjusted to reflect the 5 to 1 revenue stock split
effective February 16, 1999.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally includes voting or
investment power with respect to securities. In accordance with SEC rules,
shares which may be acquired upon exercise of stock option which are
currently exercisable or which become exercisable within 60 days of the
date of the table are deemed beneficially owned by the optionee. Except as
indicated by footnote, and subject to community property laws where
applicable, the persons or entities 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.
(3) Unless otherwise indicated, the beneficial owner's address is: c/o the
Company, 4114 East Wood Street, Phoenix, Arizona 85040.
(4) Includes shares issuable upon exercise of options which are currently
exercisable or become exercisable within 60 days of April 23, 1999 as
applicable for each of the following individuals:
Hays 40,000 shares
Emerson 6,500 shares
Schwartz 3,000 shares
Zylstra 4,000 shares
(5) Less than one percent.
(6) Includes 1,144 shares issuable upon exercise of options and 80 shares owned
by officers (in addition to shares issuable upon exercise of options
indicated in note (4).
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MERGER AGREEMENT. On September 30, 1992, Horizon Engineering and
Testing, Inc. was merged (the "Merger") into a wholly-owned subsidiary of the
Company pursuant to an Agreement of Merger (the "Merger Agreement").
Shareholders of Horizon received cash consideration of $190,000 and shares of
the Company's Common Stock. Quinn Johnson, a former director of the Company,
held 90% of the outstanding stock of Horizon at the time of the Merger and
received 529,328 shares of Common Stock in connection with the Merger. The
Company agreed to register the shares of the Company's Common Stock
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<PAGE>
issued pursuant to the Merger Agreement under applicable federal and state
securities laws at any time after April 1, 1993 upon the request of holders of
25% of such shares and to keep such registration effective through September 30,
1995. Mr. Johnson has agreed to indemnify Horizon and the Company against
certain liabilities in connection with the Company's acquisition of Horizon, and
has placed 49,030 shares of the Company's Common Stock in escrow in connection
therewith.
NON-COMPETITION AGREEMENT. Pursuant to a Non-Competition Agreement
dated September 30, 1993, and in consideration of a cash payment of $350,000,
Mr. Johnson agreed to refrain from competing with Horizon until the later of
September 30, 1998 or two years after leaving the employment of Horizon, subject
to earlier termination under certain circumstances.
EMPLOYMENT AGREEMENT. Mr. Johnson served as President of Horizon
pursuant to an Employment Agreement dated September 30, 1992. Mr. Johnson
resigned from his position as President of Horizon in September 1996 and
resigned from his position as director of the Company in January 1998. The
Employment Agreement provided for a base salary of $125,000 over its four-year
term, with annual adjustments tied to increases in the Consumer Price Index. The
Employment Agreement also provided for an annual bonus equal to (i) 15% of
Horizon's pretax profit (as defined) with respect to pretax profit representing
up to 15% of Horizon's gross revenues; and (ii) 20% of Horizon's pretax profit
on that portion of the pretax profit in excess of 15% of gross revenues, with a
maximum bonus over the term of the four-year agreement equal to $700,000. In the
event of termination of the Employment Agreement by the Company without cause,
Mr. Johnson was entitled to receive (i) the difference between $700,000 and
bonus payments prior to termination; plus (ii) an amount equal to the
then-applicable annual base salary.
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<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 report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ARIZONA INSTRUMENT CORPORATION
Date: April 29, 1999 By: /s/ George G. Hays
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George G. Hays
President and Chief Executive Officer
By: /s/ Linda Shepherd
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Linda Shepherd
(Principal Accounting Officer)
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