U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to ____________
Commission File No.: 0-13117
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ION NETWORKS, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 22-2413505
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(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
21 Meridian Road, Edison, New Jersey 08820
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (732) 494-4440
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Securities registered under Section 12(b) of the Exchange Act: None
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
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[X] 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.
Yes X No ___
[ ] Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
The issuer's revenues for its most recent fiscal year totaled $12,673,917.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average of the bid and asked prices as reported by the
Nasdaq Stock Market as of July 8, 1999 was approximately $40,127,256.
There were 10,572,091 shares of Common Stock outstanding as of July 8, 1999.
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>
This amendment to Form 10-KSB for the period ended March 31, 1999 is filed to
include Items 9-12 contained in Part III of Form 10-KSB that were previously
incorporated by reference to the Company's definitive Proxy Statement in
connection with the Company's 1999 Annual Meeting of Stockholders.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their ages
and present positions with the Company are as follows:
<TABLE>
<CAPTION>
Director
Name Age Position Held with the Company Since
- ---- --- ------------------------------ --------
<S> <C> <C> <C>
Stephen M. Deixler+*X* 64 Chairman of the Board of Directors 1985
Stephen B. Gray* 41 President, Chief Executive Officer, 1996
Chief Operating Officer and Director
Michael Radomsky 46 Executive Vice President, Secretary 1982
and Director
Kenneth G. Hay 50 Chief Financial Officer and Treasurer Not
applicable
Kevin B. LaTraverse 42 Executive Vice President - Sales Not
applicable
Peter A. Wilson 40 Executive Vice President - Marketing Not
applicable
Alexander C. Stark, Jr.+*X* 66 Director 1997
Alan Hardie 59 Director 1999
William Martin Ritchie 50 Director 1999
</TABLE>
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<PAGE>
- ------------------------------
+ Member of Compensation/Stock Option Committee
* Member of Nominating Committee
X Member of Audit Committee
* Member of Strategic Steering Committee
INFORMATION ABOUT DIRECTORS
Set forth below is certain information with respect to each director:
STEPHEN M. DEIXLER has been Chairman of the Board of Directors since
1985 and served as Chief Executive Officer of the Company from April 1996 to May
1997. He was President of the Company from May 1982 to June 1985 and served as
Treasurer of the Company from its formation in 1982 until September 1993. Mr.
Deixler was the Chairman of Princeton Credit Corporation until April 1995.
STEPHEN B. GRAY has been President and Chief Operating Officer of the
Company since April 1996. He has served as the Chief Executive Officer of the
Company and a director since May 1997. He also is a director of MicroFrame
Europe N.V, a wholly-owned subsidiary of the Company. He served as Senior Vice
President-Sales, Marketing and Support of the Company from December 1994 through
March 1996. From July 1993 through December 1994, Mr. Gray was an independent
consultant, engaged in assisting both private and publicly-held companies with
strategy development, internal operational reviews and stockholder value
enhancement programs.
MICHAEL RADOMSKY is an original founder of the Company and has been the
Executive Vice President and a director since the Company's formation in 1982
and has served as Secretary of the Company since November 1994. He is
responsible for the identification of industry directions, and the technical
appropriateness of Company designs as well as products acquired, licensed or
jointly developed with others. In addition, Mr. Radomsky has been responsible
for the design of network topologies for large corporate customers, ensuring
compatibility for future products. Mr. Radomsky has also previously been
responsible for the Company's technical support, purchasing and manufacturing
operations. Prior to 1989, Mr. Radomsky was responsible for the mechanical and
electronic engineering of the Company's products.
ALEXANDER C. STARK, JR. has been a director of the Company since 1997.
Mr. Stark is the President of AdCon, Inc., a consulting firm organized to advise
and council senior officers of global telecom companies. Mr. Stark previously
worked for 40 years at AT&T, where he most recently served as a Senior Vice
President.
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<PAGE>
ALAN HARDIE has served as a director of the Company since April 1,
1999. Mr. Hardie has served as a General Manager of BT Global Communications
since 1994, where he provides leadership and strategic direction for such
entity's Global Customer Service division.1
WILLIAM MARTIN RITCHIE has served as a director of the Company since
April 1999. Mr. Ritchie currently acts as a consultant in his own consulting
entity, MR Ventures, where he provides various start-up companies with
management assistance and early stage investment. Mr. Ritchie was a founder of
Spider Systems, a Scottish electronics company, where he served in several
capacities, including the Managing Director, from 1984 to 1995. Mr. Ritchie
currently serves on the board of directors of various companies in Scotland.*
NON-DIRECTOR EXECUTIVE OFFICERS
Set forth below is certain information with respect to each executive
officer of the Company who is not also a director of the Company:
KENNETH G. HAY has been the Chief Financial Officer and Treasurer of
the Company since May 1999. Mr. Hay was previously the Vice President of Finance
at Cunningham Graphics International, Inc., where he also served as a principal
financial officer. From 1992 through 1996, Mr. Hay served as the Chief Financial
Officer and Vice President of Finance at Dana Perfumes Corporation. Mr. Hay is a
licensed certified public accountant in the State of New Jersey.
KEVIN B. LATRAVERSE has been Executive Vice President-Sales of the
Company since January 1999. Mr. LaTraverse was previously the Vice President and
General Manager of Isolation Systems, a "virtual private network" startup
company. Prior to that, he served in several capacities at CrossComm Corporation
(acquired by Olicom Corporation in 1997), including Vice President- Switching
Division and Director of Sales-Eastern United States.
PETER A. WILSON has served as Executive Vice President-Marketing since
March 1999. Mr. Wilson was a co-founder of SolCom Systems Limited in 1992, a
Scottish company and wholly-owned subsidiary of the Company, where he served as
Technical & Marketing Director until 1998. From 1986 until 1992, Mr. Wilson
served as the Manager of Technical Support for SEEL, a systems integration
company.
The officers of the Company are elected by the Board of Directors at
its first meeting after each annual meeting of the Company's stockholders and
hold office until their successors are chosen and qualified, until their death,
or until they resign or have been removed from office. No family
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* Each of Messrs. Hardie and Ritchie was elected to serve as a director
in connection with an agreement among the Company and the shareholders
of SolCom Systems Limited ("SolCom") to nominate two nominees to the
Board of Directors upon the closing of the acquisition of SolCom by the
Company.
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<PAGE>
relationship exists between any director or executive officer and any other
director or executive officer.
COMPENSATION OF DIRECTORS
Each of the members of the Board of Directors who is not also an
employee of the Company ("Non-Employee Directors") receives options to purchase
10,000 shares of Common Stock at exercise prices per share equal to the fair
market value of the Common Stock on the date of grant on an annual basis under
the Company's 1998 Stock Option Plan. Non-Employee Directors are also granted
options to purchase an additional 1,500 shares of Common Stock for each meeting
of the Board of Directors attended by such Non-Employee Director.
Non-Employee Directors serving on committees of the Board of Directors
are granted, on an annual basis, options to purchase 1,500 shares of Common
Stock for each committee served thereby.
In addition, the Company reimburses all Non-Employee Directors
traveling more than fifty miles to a meeting of the Board of Directors for all
reasonable travel expenses.
EXECUTIVE OFFICERS
The executive officers of the Company are Stephen B. Gray, President,
Chief Executive Officer and Chief Operating Officer; Kenneth G. Hay, Chief
Financial Officer and Treasurer; Michael Radomsky, Executive Vice President and
Secretary; Kevin LaTraverse, Executive Vice President- Sales; and Peter A.
Wilson, Executive Vice President-Marketing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following persons have failed to file on a timely basis certain
reports required by Section 16(a) of the Securities Exchange Act of 1934 as
follows: Each of Messrs. Alexander C. Stark, Kevin LaTraverse and Peter A.
Wilson failed to timely file an Annual Statement of Changes in Beneficial
Ownership of Securities on Form 5. Mr. Kenneth G. Hay failed to timely file an
Initial Statement of Beneficial Ownership of Securities on Form 3. During the
fiscal year ended March 31, 1999, the Company is not aware of other late
filings, or failure to file, any other reports required by Section 16(a) of the
Exchange Act.
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<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended March 31, 1999, to those individuals
who as of March 31, 1999 served as the Company's Chief Executive Officer during
fiscal 1999 and to the Company's four most highly compensated officers other
than those who served as the Chief Executive Officer during fiscal 1999 who
earned salary and bonus compensation of at least $100,000 during the fiscal year
ended March 31, 1999 (these executive officers being hereinafter referred to as
the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------------------------------------------
Awards Payouts
------ -------
Other
Annual Restricted Securities All Other
Principal Compen- Stock Underlying LTIP Compen-
Position Year Salary($) Bonus($) sation($) Award(s)($) Options (#) Payouts($) sation($)(1)
- --------- ---- --------- -------- -------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen B. Gray 1999 265,750 -- -- -- 120,055 -- 779
President, Chief 1998 252,829 -- -- -- 75,000 -- --
Executive Officer, 1997 163,386 -- -- -- 400,000 -- --
Chief Operating
Officer
Michael Radomsky 1999 164,392 -- -- -- 43,823 -- 2,781
Executive Vice- 1998 139,858 -- -- -- 42,839 -- 2,526
President 1997 128,773 -- -- -- 90,000 -- 541
John F. McTigue 1999 160,301 -- -- -- 38,954 -- 1,888
Chief Financial
Officer 1998 92,482 -- -- -- 100,760 -- 1,418
1997 -- -- -- -- -- -- --
</TABLE>
(1) Represents contribution of the Company under the Company's 401(k) Plan.
6
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information concerning stock
option grants during the year ended March 31, 1999 to the Named Executive
Officers:
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------------------------------------
Percent
Number of of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
- ---- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Stephen B. Gray 60,055(1) 4.7% 3.00 3/31/08
60,000 4.7% 3.00 4/1/03
Michael Radomsky 43,823(1) 3.4% 3.00 3/31/08
John F. McTigue 38,954(1) 3.0% 3.00 3/31/08
</TABLE>
(1) Represents options granted pursuant to the Company's Time Accelerated
Restricted Stock Award Program (TARSAP).
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<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning each
exercise of stock options during the fiscal year ended March 31, 1999 by each of
the Named Executive Officers and the number and value of unexercised options
held by each of the Named Executive Officers on March 31, 1999.
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised
Underlying Unexer- In-the-Money
Shares cised Options Options at
Acquired on Value at FY-End(#) FY-End($)(1)
Name Exercise (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ ----------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Stephen B. Gray -- -- 577,309/60,055 $499,294/0
Michael Radomsky -- -- 142,239/43,823 $127,693/0
John F. McTigue -- -- 100,760/38,954 $97,737/0
- ----------------------
</TABLE>
(1) The average price for the Common Stock as reported by the Nasdaq
Stock Market on March 31, 1999 was $2.31 per share. Value is
calculated on the basis of the difference between the option exercise
price and $2.31 multiplied by the number of shares of Common Stock
underlying the options.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has no employment agreements other than an employment
agreement dated April 1, 1998 with Stephen B. Gray, the Company's Chief
Executive Officer and President pursuant to which Mr. Gray receives (i) salary
of $225,000 per annum for a term of two (2) years (the "Term"), (ii) a $30,000
one-time signing bonus and (iii) up to (x) $25,000 per annum during the Term and
(y) 60,000 stock options per annum during the Term as performance-related
bonuses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation/Stock Option Committee of the Board of Directors
consists of Messrs. Stephen M. Deixler and Alexander C. Stark, Jr. Mr. Deixler
previously served as the Company's Chief Executive Officer until May 1997. No
executive officer of the Company serves as a member of the board of directors or
compensation committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors.
8
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the number of shares of the Company's
Common Stock owned by each person or institution who, as of July 26, 1999, owns
of record or is known by the Company to own beneficially, more than five (5%)
percent of such securities, and by the Company's Named Executive Officers and by
its directors, both individually and as a group, and the percentage of such
securities owned by each such person and the group. Unless otherwise indicated,
such persons have sole voting and investment power with respect to shares listed
as owned by them.
Name and Address Shares Owned Percent of Class
Stephen M. Deixler(1) 788,032 7.2%
371 Eagle Drive
Jupiter, Florida 33477
Stephen B. Gray(2)(9) 577,309 5.3%
Michael Radomsky(3)(9) 356,643 3.3%
Alexander C. Stark, Jr.(4) 137,500 1.3%
356 Jupiter Drive
Jupiter, Florida 33477
Alan Hardie 0 *
PP318 Westgate
#11 Hope Street
Glasgow G2 6AB
Scotland
William Martin Ritchie 0 *
Keston
4 Buckstane Park
Edinburgh EH10 6PA
Scotland
Kenneth G. Hay(5)(9) 16,666 *
Kevin LaTraverse(6)(9) 50,000 *
Peter A. Wilson(7)(9) 494,426 4.5%
9
<PAGE>
Special Situations Fund III, L.P.(8) 2,308,633 21.1%
Special Situations Cayman Fund, L.P.
Special Situations Private Equity Fund, L.P.
Special Situations Technology Fund, L.P.
MGP Advisers Limited Partnership
AWM Investment Company, Inc.
MG Advisers L.L.C.
SST Advisers L.L.C.
Austin W. Marxe
David Greenhouse
Directors and executive 2,420,576 22.1%
officers as a group (9 Persons)
(1) Does not include 214,436 shares of Common Stock owned by Mr.
Deixler's wife, mother, children and grandchildren as to which shares
Mr. Deixler disclaims beneficial ownership. Includes 120,406 shares
of Common Stock held by Merrill Lynch Pierce Fenner & Smith custodian
f/b/o Stephen M. Deixler, IRA. Includes 55,000 shares of Common Stock
which may be acquired pursuant to currently exercisable options. Also
includes 53,330 shares issuable upon exercise of currently
exercisable Class A and Class B Warrants.
(2) Consists of 577,309 shares of Common Stock which may be acquired
pursuant to currently exercisable options.
(3) Includes 142,239 shares of Common Stock which may be acquired
pursuant to currently exercisable options.
(4) Includes 87,500 shares of Common Stock which may be acquired pursuant
to currently exercisable options.
(5) Includes 16,666 shares of Common Stock which may be acquired pursuant
to currently exercisable options.
(6) Includes 50,000 shares of Common Stock which may be acquired pursuant
to currently exercisable options.
(7) Includes 7,656 shares of Common Stock owned by Mr. Wilson's wife.
Also includes 215,480 shares of Common Stock which may be acquired
pursuant to currently exercisable options.
(8) Special Situations Fund III, L.P., a Delaware limited partnership
(the "Fund"), Special Situations Cayman Fund, L.P. (the "Cayman
Fund"), Special Situations Private Equity Fund,
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<PAGE>
L.P., a Delaware limited partnership (the "Private Equity Fund"),
Special Situations Technology Fund, L.P., a Delaware limited
partnership (the "Technology Fund"), MG Advisers L.L.C., a New York
limited liability company ("MG"), SST Advisers L.L.C., a Delaware
limited liability company ("SST"), MGP Advisers Limited Partnership,
a Delaware limited partnership ("MGP"), AWM Investment Company, Inc.,
a Delaware corporation ("AWM"), Austin W. Marxe ("Marxe") and David
Greenhouse ("Greenhouse") have filed a Schedule 13D, the latest
amendment of which is dated July 22, 1999. All presented information
is based on the information contained in the Schedule 13D. The
address of each of the reporting persons is 153 East 53rd Street, New
York, New York 10022. Each of the aforementioned entities/persons has
sole voting and dispositive power with respect to 2,308,633 shares;
each of the Fund and MGP beneficially owns 1,251,633 shares of Common
Stock (including warrants to purchase 485,992 shares of Common
Stock); each of the Cayman Fund and AWM beneficially owns 432,419
shares of Common Stock (including warrants to purchase 170,096 shares
of Common Stock); each of the Private Equity Fund and MG beneficially
owns 499,999 shares of Common Stock (including warrants to purchase
166,666 shares of Common Stock); each of the Technology Fund and SST
beneficially owns 125,002 shares of Common Stock (including warrants
to purchase 41,668 shares of Common Stock); and each of Marxe and
Greenhouse beneficially owns 2,308,633 shares of Common Stock
(including warrants to purchase 864,422 shares of Common Stock). MGP
is a general partner of and investment advisor to the Fund. MG is the
general partner of the Private Equity Fund; SST is the general
partner of the Technology Fund; and AWM is the sole general partner
of MGP and the general partner of and investment advisor to the
Cayman Fund. Marxe and Greenhouse serve as officers, directors and
members or principals of each of MGP, AWM, MG and SST.
(9) The address of such person is c/o the Company, 21 Meridian Road,
Edison, New Jersey 08820.
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* Indicates ownership of Common Stock of less than one (1%) percent of
the total issued and outstanding Common Stock on the Record Date.
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<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On June 7, 1999, the Company issued an aggregate of 1,000,000 shares of
Common Stock and warrants to purchase an aggregate of 500,000 shares of Common
Stock to Special Situations Private Equity Fund, L.P. ("Special Situations") and
certain affiliated entities of Special Situations in consideration of an amount
equal to $3,000,000. The securities issued are "restricted securities" under the
Securities Act of 1933, as amended (the "Act"). Pursuant to the transaction, the
Company agreed to register the shares of Common Stock (including those shares
underlying the warrants) under the Act. The warrants expire in three years and
the exercise prices thereof are $4.50 per share for 250,000 warrants and $6.00
per share for the remaining 250,000 warrants.
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<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in this City of
Edison and State of New Jersey
DATED: July 27, 1999
ION NETWORKS, INC.
By: /s/ Stephen B. Gray
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Stephen B. Gray, President
