UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999
COMMISSION FILE NO. 0-12641
================================================================================
IMAGING TECHNOLOGIES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 33-0021693
(State or Other Jurisdiction of (IRS Employer ID No.)
Incorporation or Organization)
15175 Innovation Drive
San Diego, California 92128
(858) 613-1300
(Address of Principal Executive Offices and Registrant's
Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.005 PAR VALUE
Indicate by a 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 a 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 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 |_| No |_|
At October 11, 1999, the aggregate market value of the voting stock held by non-
affiliates of the registrant was approximately $11,694,266 based on the last
trade price as reported by The Nasdaq SmallCap(R) Market. For purposes of this
calculation, shares owned by officers, directors, and 10% stockholders known to
the registrant have been excluded. Such exclusion is not intended, nor shall it
be deemed, to be an admission that such persons are affiliates of the
registrant.
At October 11, 1999, there were 43,823,672 shares of the registrant's Common
Stock, $0.005 par value, issued and outstanding.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages and
positions with the Company as of October 11, 1999 are as follows:
Name Age Position
- ---- --- --------
Harry J. Saal 55 Chairman of the Board
Brian Bonar 52 President, Chief Executive Officer and Director
A.L. Dubrow 66 Director
David L. Carver 52 Director
Joseph J. Pfeuffer 54 Senior Vice President of Engineering
Philip J. Englund 55 Senior Vice President, General Counsel and
Secretary
Christopher W. McKee 51 Senior Vice President of Operations Worldwide
INFORMATION ABOUT DIRECTORS
HARRY J. SAAL has served as a director of the Company since 1983 and
became the Company's Chairman of the Board in December 1995. From September 1993
through November 1995, Dr. Saal was President and Chief Executive Officer of
Smart Valley, Inc., a company which helped create an electronic community in the
San Francisco Bay Area. In addition, from 1986 until 1993, Dr. Saal was the
President and a director of Network General Corporation, a company engaged in
the design, manufacture and sale of diagnostic systems for local area networks
(and related products). Dr. Saal serves as a director of Inprise Corporation.
BRIAN BONAR has served as a director of the Company since August 1995.
From August 1992 through April 1994, Mr. Bonar served as the Company's Director
of Technology Sales and from April 1994 through September 1994, as the Company's
Vice President, Sales and Marketing. In September 1994, Mr. Bonar became the
Company's Executive Vice President, Sales, Marketing and, Engineering and in
July 1997, Mr. Bonar was appointed as the Company's President and Chief
Operating Officer. In April 1998, he was appointed as the Company's Chief
Executive Officer. From 1991 to 1992, Mr. Bonar was Vice President of Worldwide
Sales and Marketing for Bezier Systems, Inc., a San Jose, California-based
manufacturer and marketer of laser printers. From 1990 to 1991, he was Worldwide
Sales Manager for Adaptec, Inc., a San Jose-based laser printer controller
developer. From 1988 to 1990, Mr. Bonar was Vice President of Sales and
Marketing for Rastek Corporation, a laser printer controller developer located
in Huntsville, Alabama. From 1984 to 1988, Mr. Bonar was employed as Executive
Director of Engineering at QMS, Inc., an Alabama-based developer and
manufacturer of high-performance color and monochrome printing solutions. Prior
to these positions, Mr. Bonar was employed by IBM, U.K. Ltd. for approximately
17 years.
-2-
<PAGE>
A. L. DUBROW has served as a director of the Company since February
1997, at which time he was appointed as the Company's Vice President, Special
Projects, a post in which he served until the middle of 1997. In 1996, Mr.
Dubrow was involved in the acquisition and restructuring of NewGen Systems, Inc.
and served as its President and Chief Executive Officer prior to such
acquisition. From 1977 to April 1995, Mr. Dubrow was part of the senior
management of BW/IP, an operation acquired from Borg Warner, where Mr. Dubrow
served as General Manager from 1977 to 1992 and as Chief Operating Officer until
April 1995.
DAVID M. CARVER has served as a director of the Company from June 1998.
From November 1995 through December 1997, Mr. Carver served in several key
management positions, including Executive Vice President and Chief Operating
Officer, of Network General Corporation, the $250-million software firm which in
December 1997 merged with McAfee Associates to form Network Associates. From
March 1994 to October 1995, Mr. Carver worked as an independent consultant for
Institutional Venture Partners developing investment strategies for Internet
business opportunities. Mr. Carver also spent 20 years with the Hewlett- Packard
Company holding numerous management positions in the areas of sales and
marketing.
INFORMATION ABOUT NON-DIRECTOR EXECUTIVE OFFICERS
JOSEPH J. PFEUFFER has served as Senior Vice President of Engineering
of the Company since February 1998. Prior to joining the Company, Mr. Pfeuffer
was a Director of Engineering with Adobe Systems, Inc. during 1996 and 1997
where he was responsible for Postscript-Registration Mark- controller
development. From 1990 to 1996 Mr. Pfeuffer was a Director of Engineering with
Output Technology responsible for electronic and software engineering. Mr.
Pfeuffer holds a B.S. degree from Stevens Institute of Technology and a Masters
of Business Administration from Washington University.
PHILIP J. ENGLUND has served as Senior Vice President, General Counsel
and Secretary of the Company since February 1999. Prior to joining the Company,
Mr. Englund served as general counsel to a number of companies on a contract
basis from October 1997 through February 1999, as he had done form April 1995
through November 1996. He served as Senior Vice President, General Counsel and
Secretary to The Titan Corporation from November 1996 through October 1997; and
as Vice President and General Counsel to Optical Radiation Corporation from
November 1986 through April 1995.
CHRISTOPHER W. MCKEE has served as Senior Vice President of Operations
Worldwide since June 1999 and served as Vice President of Finance and Operations
of the Company from August 1998 to June 1999. Prior to joining the Company, Mr.
McKee spent 23 years with Flowserve Corporation and its predecessor company,
BW/IP, Inc., in various financial management positions, including most recently
as its Director of Information Technology and Baan Implementation. Mr. McKee
holds a masters in business administration from Pepperdine University.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board, the executive officers of the Company and
persons who hold more than 10 percent of the Company's outstanding Common Stock
are subject to the reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934 which require them to file reports with respect to their
ownership of the Common Stock and their transactions in such Common Stock. Based
upon (i) the copies of Section 16(a) reports which the Company received from
such persons for their 1999 Fiscal Year transactions in the Common Stock and
their Common Stock holdings, the Company, to the best of the Company's
knowledge, believes that certain of the reporting requirements under Section
16(a) for such fiscal year were not met in a timely manner by its directors,
executive officers and greater than 10 percent beneficial owners, including the
following.
Each of Messrs. Bonar, Pfeuffer, Englund and Charles Olson (a former
CFO of the Company) did not timely file a Form 4 with the SEC with respect to
transactions. In addition, each of Messrs. Carver, Saal,
-3-
<PAGE>
Frank Leonardi (a former Vice President of Sales and Marketing of the Company),
Olson, Bonar, Pfeuffer, Dubrow, McKee and Englund did not timely file a Form 5
with the SEC.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
cash compensation and certain other compensation paid, awarded, or accrued, by
the Company to the Company's Chief Executive Officer and the two most highly
compensated executive officers who were serving at the end of Fiscal Year 1999
and two former executive officers who served during Fiscal Year 1999, each of
whose salary and bonus exceeded $100,000 for the 1999 fiscal year for services
rendered in all capacities to the Company and its subsidiaries for the fiscal
years ended June 30, 1997, 1998 and 1999. The listed individuals shall be
hereinafter referred to as the "Named Officers."
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation Compensation Awards
Annual ------------ -------------------------
Fiscal ------------------- Other Annual Options/ Other
Name and Principal Position Year Salary Bonus Compensation SARS(#) Compensation
------ -------- -------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Brian Bonar 1999 $ 250,570 $ -- $ -- 850,000 $ --
Director, President and Chief 1998 235,243 -- -- 450,000 --
Executive Officer 1997 179,303 -- -- 150,000 --
Christopher McKee 1999 129,250 20,000 -- 100,000 --
Senior Vice President of 1998 0 -- -- -- --
Operations Worldwide 1997 0 -- -- -- --
Joseph Pfeuffer 1999 132,250 20,000 -- 27,000 --
Vice President of Engineering 1998 51,458 -- -- 45,000 --
1997 0 -- -- -- --
*Frank Leonardi 1999 180,000 -- 77,424(1) 100,000 --
Vice President of Worldwide Sales 1998 0 -- -- -- --
and Marketing (former) 1997 0 -- -- -- --
**Michael Clemens 1999 149,007 -- -- 60,000 --
Vice President of Accounting 1998 0 -- -- -- --
(former) 1997 0 -- -- -- --
</TABLE>
* Frank Leonardi resigned from his position with the Company in May of Fiscal
Year 1999.
** Michael Clemens resigned from his position with the Company in March of
Fiscal Year 1999.
(1) Such sum was earned pursuant to sales commissions.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on Options/SARs granted in the
1999 Fiscal Year to the Named Officers.
-4-
<PAGE>
-4-
<TABLE>
<CAPTION>
------------------------
Potential Realizable
Value at Assumed
Number of Percent of Total Annual Rates of Stock
Securities Options/SARs Exercise Price Appreciation for
Underlying Granted to or Base Option Term
Options/SARs Employees in Price Expiration ------------------------
Name Granted (#)(1) Fiscal Year ($/share) Date 5% ($) 10% ($)
- ------------------- -------------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Brian Bonar 850,000 30 1.13 2/19/08 $1,768,000 $3,383,000
Christopher McKee 100,000 4 2.65 8/11/09 56,000 246,000
Joseph Pfeuffer 27,000 1 0.75 6/9/09 66,420 117,720
Frank Leonardi 100,000 4 1.90 8/18/08 131,000 321,000
Michael Clemens 60,000(2) 7 1.90 8/18/08 78,6000 192,600
</TABLE>
(1) Warrants/options become exercisable monthly over a 10 year period from date
of grant. Each warrant/option was issued at the then market price.
(2) An additional 140,000 warrants/options originally granted to Mr. Clemens
were canceled pursuant to his March 1999 resignation.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information on option exercises in the
1999 Fiscal Year by the Named Officers and the value of such Named Officers'
unexercised options at June 30, 1999. Warrants to purchase Common Stock are
included as options. No stock appreciation rights were exercised by the Named
Officers during the 1999 Fiscal Year, and no stock appreciation rights were held
by them at the end of the 1999 Fiscal Year.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-money Options/SARs
Options/SARs at FY-end (#) At Fiscal Year End ($) (1)
Shares --------------------------- ---------------------------
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Brian Bonar 0 $ 0 150,000 700,000 $126,582 $590,716
Christopher McKee 0 0 33,333 81,668 0 0
Joseph Pfeuffer 27,000 20,250 18,752 26,248 0 0
Frank Leonardi 0 0 50,229 149,771 1,290 5,590
Michael Clemens 0 0 60,000 0 4,128 0
</TABLE>
(1) At the 1999 Fiscal Year end, the average of the bid and asked price of the
Common Stock on that date as quoted by the NASD Electronic Bulletin Board
was $1.9688.
-5-
<PAGE>
COMPENSATION OF DIRECTORS
As Chairman of the Board of Directors of the Company, Harry J. Saal
receives a monthly fee of $4,500 from the Company and as a member of the Board
of Directors of the Company, David Carver receives a monthly fee of $2,500 from
the Company. No other director receives any fees or other compensation for their
services as members of the Company's Board of Directors.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company entered into an employment agreement with Dr. Savarese as
of July 1, 1990, which was amended in 1994, 1997 and 1998, calling for
employment through June 30, 2002. The salary under the amended agreement,
commencing July 1, 1998, is $198,750 per year.
The Company also entered into an employment agreement with Mr. Bonar
(with Dr. Savarese, the "Executives"), effective September 1, 1994, and amended
April 1, 1998, calling for employment through June 30, 1999, at an annual base
salary of $250,000 plus incentive bonus.
These employment agreements provide that, in the event of termination
without cause, whether or not occurring in the aftermath of a change in
corporate control, the Company shall pay, within 72 hours after his termination,
his entire salary for the remainder of the entire term, and shall also continue
his fringe benefits for the remainder of the entire term.
In the event of an Executive's death or permanent disability, his
salary shall continue during the entire term, and his stock options shall be
exercisable until two years after his death or permanent disability.
An Executive shall be entitled to severance pay equal to one-half of
his fiscal 1999 annual salary if his employment terminates upon the scheduled
expiration of the employment agreement, or if he is terminated without cause
within six months before the scheduled expiration of the employment agreement.
The Company entered into an employment agreement with Mr. Englund as of
February 22, 1999, which calls for a base monthly salary of $11,667.67 for a
term of three years. Pursuant to his employment agreement, Mr. Englund is
eligible for the following bonuses:
- $5,000 quarterly bonuses based upon achievement of objectives to be
mutually agreed-upon by Mr. Englund and the Company's chief executive
officer; and
- at the sole discretion of the Company, Mr. Englund may receive from
time to time additional compensation or benefits.
In addition, Mr. Englund also receives other employee benefits,
including certain medical benefits and eligibility to be part of the Company
401(k) plan.
Mr. Englund's employment agreement provides that, in the event of
termination without cause, termination for good reason or pursuant to change in
corporate control, the Company shall pay, within 72 hours after his termination,
an amount equal to six months of his salary together with any other compensation
or benefits owed to him by the Company. In the event of his death or permanent
disability, his salary shall continue during the entire term, and his stock
options shall be exercisable until two years after his death or permanent
disability. Mr. Englund shall be entitled to severance pay equal to one-half of
his annual salary if his employment terminates upon the scheduled expiration of
the employment agreement or if he is terminated without cause within six months
before the scheduled expiration of the employment agreement.
The Company entered into an employment letter agreement with Mr. McKee
as of August 3, 1998, calling for a base monthly salary of $11,750. Pursuant to
the terms of his letter agreement, Mr. McKee is eligible for the following
bonuses:
- quarterly bonus based on the Company achieving quarterly sales and
profit objectives; and
-6-
<PAGE>
- at the sole discretion of the Board, Mr. McKee may receive from time
to time a percentage of the Company's net income.
He also received 100,000 stock option grants pursuant to the terms of
the Company's employee stock option plan and presently receives other employee
benefits, including certain medical benefits and eligibility to be part of the
Company 401(k) plan. Mr. McKee's employment with the Company is "at-will" and
may be terminated at any time.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Dr. Saal and Mr.
Carver. None of these individuals was an officer or employee of the Company at
any time during the 1999 Fiscal Year or at any other time.
No current executive officer of the Company has ever served as a member
of the Board or Compensation Committee of any other entity that has or has had
one or more executive officers serving as a member of the Board or Compensation
Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the best of
the Company's knowledge with respect to the beneficial ownership of Common Stock
as of October 11, 1999, by (i) all persons who are beneficial owners of five
percent (5 percent) or more of the Common Stick, (ii) each director, and (iii)
all current directors and executive officers individually and as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws, where applicable. In regard to Balmore Funds S.A. and Austost
Anstalt Schaan, these investors have contractually agreed pursuant to the Series
D Agreement not to hold at any given time more than 9.999 percent of the
outstanding shares of Common Stock.
Shares of
Beneficial Ownership of Common Stock Common Percentage
- ------------------------------------ --------- ----------
Harry J. Saal Trust UTA Dated 7/19/72 (2) 8,511,583 16.3%
Austost Anstalt Schaan (3) 4,222,014 8.8
Balmore Funds S.A. (4) 4,134,933 8.6
Brian Bonar (5) 296,047 *
A.L. Dubrow (6) 256,284 *
Joseph Pfeuffer (7) 88,625 *
David M. Carver (8) 33,333 *
Philip Englund (9) 28,667 *
Christopher W. McKee 0 *
All current directors and executive officers
(group of 7) (10) 9,214,539 17.5
* Owns less than one percent of the outstanding Common Stock
(1) Percentage of ownership is based on 43,823,672 shares of Common Stock
outstanding on October 11, 1999. Shares of Common Stock subject to stock
options, warrants and convertible securities
-7-
<PAGE>
which are currently exercisable or convertible or will become exercisable
or convertible within 60 days after October 11, 1999 are deemed outstanding
for computing the percentage of the person or group holding such options,
warrants or convertible securities but are not deemed outstanding for
computing the percentage of any other person or group.
(2) Harry J. Saal is a trustee of the Harry J. Saal Trust UTA Dated 7/19/72,
1955 Bryant Street, Palo Alto, CA 94301. Includes 3,031,073 shares issuable
upon exercise of warrants that are currently exercisable or will become
exercisable within 60 days after October 11, 1999. Includes also 5,377,280
shares issuable upon the conversion of Series E Stock (as defined
below)(see chart below) into shares of Common Stock assuming that the
conversion rate used is $0.22967. Includes also 100,000 shares issuable
upon exercise of stock options that are currently exercisable or will
become exercisable within 60 days after October 11, 1999.
(3) The address of the beneficial owner is 744 Fuerstentum, Landstrasse 163,
Lichtenstein, attention: Thomas Hackl. Includes 370 shares issuable upon
the conversion of 3,222,014 outstanding shares of Series D Stock (see chart
below). Includes also 1,000,000 shares issuable upon exercise of Series D
Warrants that are currently exercisable or will become exercisable within
60 days after October 11, 1999.
Austost Anstalt Schaan has agreed that it can in no event, without
providing prior notice to the Company of at least 75 days, convert Series D
Stock into shares of Common Stock if such conversion would cause its
holding of shares of Common Stock to be greater than 9.999 percent of the
outstanding shares of Common Stock. Furthermore, pursuant to the Series D
Agreement, Austost Anstalt Schaan has agreed that it may not vote more than
9.999 percent of the shares of Common Stock entitled to vote at a
stockholders' meeting on any given matter.
(4) The address of the beneficial owner is Trident Chambers, P.O. Box 146,
Roadstown Tortola, British Virgin Islands, attention: Francois Morax.
Includes 3,134,933 shares issuable upon the conversion of 360 outstanding
shares of Series D Stock (as defined below)(see chart below). Includes also
1,000,000 shares issuable upon exercise of Series D Warrants that are
currently exercisable or will become exercisable within 60 days after
October 11, 1999.
Balmore Funds S.A. has agreed that it can in no event, without providing
prior notice to the Company of at least 75 days, convert Series D Stock
into shares of Common Stock if such conversion would cause its holding of
shares of Common Stock to be greater than 9.999 percent of the outstanding
shares of Common Stock. Furthermore, pursuant to the Series D Agreement,
Balmore S.A. has agreed that it may not vote more than 9.999 percent of the
shares of Common Stock entitled to vote at a stockholders' meetings on any
given matter.
(5) Includes 288,041 shares issuable upon exercise of options and warrants that
are currently exercisable or will become exercisable within 60 days after
October 11, 1999.
(6) Includes 30,682 shares issuable upon exercise of warrants that are
currently exercisable or will become exercisable within 60 days after
October 11, 1999.
(7) Includes 20,625 shares issuable upon exercise of warrants that are
currently exercisable or will become exercisable within 60 days after
October 11, 1999.
(8) Includes 13,333 shares issuable upon exercise of warrants that are
currently exercisable or will become exercisable within 60 days after
October 11, 1999.
(9) Includes 16,667 shares issuable upon exercise of warrants that are
currently exercisable or will become exercisable within 60 days after
October 11, 1999.
(10) Includes 8,877,701 shares issuable upon exercise of options and warrants
that are currently exercisable or will become exercisable within 60 days
after October 11, 1999.
-8-
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership of Series D Stock(1) Shares of Series D Stock Percentage of Series D Stock
- ----------------------------------------- ------------------------ ----------------------------
<S> <C> <C>
Austost Anstalt Schaan (2) 370 44.6%
Balmore Funds S.A. (3) 360 43.4
Guarantee & Finance Corp. (4) 80 9.6
</TABLE>
(1) Percentage of ownership is based on 830 shares of Series D Convertible
Preferred Stock, par value $1,000 per share (the "Series D Stock"),
outstanding on October 11, 1999.
(2) The address of the beneficial owner is 744 Fuerstentum, Landstrasse 163,
Lichtenstein, attention: Thomas Hackl.
(3) The address of the beneficial owner is Trident Chambers, P.O. Box 146,
Roadstown Tortola, British Virgin Islands, attention: Francois Morax.
(4) The address of the beneficial owner is Vallarino P.H., Calle 52, Elvimo
Mendez, Panama, Panama, attention: Ricardo Durling.
<TABLE>
<CAPTION>
Beneficial Ownership of Series E Stock(1) Shares of Series E Stock Percentage of Series E Stock
- -------------------------------------- ------------------------ ----------------------------
<S> <C> <C>
Harry J. Saal Trust UTA Dated 7/19/92 247 56.5%
The Cuttyhunk Fund Limited (2) 60 13.7
Gilston Corporation, Ltd. (3) 50 11.4
Saal Family Charitable Lead Trust UTA Dated
2/28/98 (4) 33 7.6
Manchester Asset Management (5) 25 5.7
</TABLE>
(1) Percentage of ownership is based on 437 shares of Series E Convertible
Preferred Stock, par value $1,000 per share (the "Series E Stock"),
outstanding on October 11, 1999.
(2) The address of the beneficial is 73 Front Street, Hamilton, Bermuda MH12.
(3) The address of the beneficial owner is Charlotte House, Charlotte Street,
P.O. Box N-9204, Nassau, Bahamas, attention: Ms. Dawn Davies.
(4) The address of the beneficial owner is 1955 Bryant Street, Palo Alto, CA
94301, attention: Leonard J. Shustek.
(5) The address of the beneficial owner is Charlotte House, Charlotte Street,
P.O. Box N-9204, Nassau, Bahamas, attention: Anthony L.M. Inder Rieden.
-9-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
In May 1998, Dr. Harry Saal, a director of the Company, loaned
$1,000,000 to the Company under a 10 percent note payable on demand at any time
on or after December 31, 1999 (the "Saal 10% Note"). The note is convertible
into Common Stock at anytime at Dr. Saal's option at the lesser of $2.36 per
share or 85 percent of the volume weighted trade price of Common Stock on the
date of conversion.
In September 1998, Dr. Saal and certain other investors (either
individually or as part of a group), all of which were owners of more than 5
percent of the Company's outstanding Common Stock, provided the Company with
funding totaling $4,375,000. In exchange, the Company issued 500,000 shares of
its Common Stock at a price of $2.50 per share and subordinated promissory notes
in the amount of $3,125,000. Of the notes, Dr. Saal purchased $1,500,000 in the
form of non-convertible notes (the "Saal Non-convertible Notes"). The Company
also issued three-year warrants to the investors as part of this financing. The
warrants authorize the purchase of 490,000 shares of Common Stock at an exercise
price of $2.025 per share; Dr. Saal received 300,000 of these warrants. All of
the investors, including Dr. Saal, are parties to a Registration Rights
Agreement that grants certain registration rights with respect to the shares of
Common Stock purchased in the financing and issuable upon exercise of the
warrants.
In February 1999, pursuant to the Securities Purchase Agreement, of
which Dr. Saal was an investor, Dr. Saal exchanged and/or canceled the Saal 10%
Note, all accrued interest and fees associated therewith, certain accrued
interest on the Saal Non-convertible Notes and all accrued director's fees, in
the amount of $1.235 million, for 247 shares of the Company's Series E Stock.
Also pursuant to such Securities Purchase Agreement, Dr. Saal became a party to
a registration rights agreement that grants Dr. Saal certain registration rights
with respect to the shares of the Common Stock underlying his Series E Stock and
certain warrants received in such Securities Purchase Agreement.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the SEC on or
about October 13, 1999. Stockholders may obtain a copy of this report, without
charge, by writing to Philip J. Englund, Senior Vice President and General
Counsel of the Company, at the Company's principal executive offices located at
15175 Innovation Drive, San Diego, California 92128-3401.
<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.
IMAGING TECHNOLOGIES CORPORATION
October 28, 1999 By: /s/ Brian Bonar
--------------------------------------
Name: Brian Bonar
Title: President and CEO
