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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the fiscal year ended February 28, 1997,
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from to .
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Commission file number: 0-14843
DENSE-PAC MICROSYSTEMS, INC.
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(Name of Small Business Issuer in its Charter)
California 33-0033759
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
7321 Lincoln Way
Garden Grove, California 92641
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 898-0007
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the Issuer (1) has filed all reports required to be filed
by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period as 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 pursuant to Item
405 of Regulation S-B contained herein, and no disclosure will 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 [ ]
The Issuer's revenues for its most recent fiscal year were $14,024,000.
The aggregate market value of the Issuer's Common Stock, no par value, held by
non-affiliates of the Issuer on May 2, 1997 (based on the average bid and asked
price per share on that date as reported on NASDAQ), was $22,076,000.
Issuer's Common Stock outstanding at May 2, 1997: 16,997,681 shares.
Documents Incorporated By Reference - None
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following information is provided with respect to the Company's
current executive officers and directors.
AARON URI LEVY, age 38, was elected Chief Executive Officer, President
and Chairman of the Board in January 1997. Prior to joining the Company he was a
founder of Vivid Communications (video conferencing); President of Centennial
Capital Corp. (technology investments), a wholly owned subsidiary of Centennial
Technologies, Inc., from August through November 1996; President and Chief
Operating Officer of Centennial Technologies, Inc. (customized PCMCIA/PC cards)
from August 1994 to August 1996; and President and Chief Operating Officer of
Acom Computer, Inc. (laser printing applications and networking) from 1989 to
August 1994. Mr. Levy was also a founder of Cygnus Engineering (computer aided
design) and a project manager/senior support project engineer at Citicorp
(financial services). Mr. Levy received a B.S. with honors in Electrical
Engineering from the University of California, Irvine and an M.S. in aerospace
engineering from Northrup University where he was a recipient of "President's
Most Distinguished Graduate" award. He was also a former guest lecturer at
Pepperdine University on management strategies for the 90s.
JAMES G. TURNER, age 58, served as Chairman of the Board and Chief
Executive Officer of the Company from 1987 until January 1997, and is currently
an employee and director of the Company. From 1981 to 1987, Mr. Turner was
President of Titan Severe Environment Systems Company, a manufacturer of
computer memories and subsystems for the worldwide aerospace industry.
ROGER CLAES, age 51, was elected a director of the Company in August
1989. Since 1987, Mr. Claes has been a partner and managing director of
Euroventures Benelux Team B.V. which manages Euroventures Benelux I B.V. and
Euroventures Benelux II B.V., European venture capital funds which are principal
shareholders of the Company. Mr. Claes has also been a Managing Director of
Euroventures Benelux I B.V. since 1988.
TRUDE C. TAYLOR, age 76, a director of the Company since 1989, is the
principal of TC Associates, a management consulting firm. He is a Trustee of
Harvey Mudd College, Claremont, California, and a director of Plantronics, Inc.
and Xylan Corporation. From 1984 to 1988, Mr. Taylor was Chairman of the Board
of Zehntel, Inc., a manufacturer of automatic test equipment for subsystems and
printed circuit assemblies, where he also served as Chief Executive Officer from
1984 to 1986.
ROBERT SOUTHWICK, age 63, was elected a director of the Company in 1990.
For over 20 years, Mr. Southwick has been an independent consultant to the
electronics industry, specializing in the areas of technology applications,
market research, product development and manufacturing processes.
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WILLIAM M. STOWELL, age 41, has served as Vice President, Finance and
Chief Financial Officer of the Company since 1987. Mr. Stowell is a CPA with a
B.S. in accounting from the University of Southern California and a teaching
credential in management information systems. Prior to joining the Company, he
served as Chief Financial Officer for Hughes Enterprises and as an audit manager
at Price Waterhouse.
CHARLES A. GAMER, age 41, was elected Vice President, Sales and
Marketing in April 1997. For five years prior to joining the Company in February
1997, Mr. Gamer served as President of Scientific Dimensions USA, Inc., a
company which specializes in the commercialization of Russian technology. Mr.
Gamer also served as international marketing manager at Digital Equipment
Corporation, director of computer sales at Sanyo Business Systems, and eastern
director of sales at Compaq Computer.
RANDALL J. GREENE, age 36, joined the Company in 1993 as manager of
quality assurance. He was elected Vice President of Quality, Reliability and
Program Management in 1994. From 1990 to 1993, Mr. Greene was principal ASIC
engineer at Western Digital Corporation, a semiconductor and disk drive
manufacturer.
JOHN P. SPRINT, age 35, joined the Company in 1990 as a test manager. He
served as a production and operations manager before being elected Vice
President, Manufacturing in March 1996. From 1986 until joining the Company, Mr.
Sprint was a manager in the test, manufacturing and thick film departments at
Northrup Electronics Division.
Directors serve until the next annual meeting of shareholders and until
their successors are elected and qualified. Officers serve at the discretion of
the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During fiscal year 1997, the following persons filed late reports under
Section 16(a) of the Securities Exchange Act of 1934: Roger Claes (one
transaction); William M. Stowell (option grant and option exercise), Albert Kile
(option grant), EBTB II B.V. (one transaction reported one day late) and
Euroventures Benelux I B.V. (one transaction reported one day late). William
Stowell had filed his forms with the Company on time, but the forms were
misdirected in the mail and were subsequently filed again after the deadline. In
making these disclosures, the Company has relied solely on written
representations of its directors, executive officers and 10% shareholders and
copies of the reports that they have filed with the Securities and Exchange
Commission.
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ITEM 10. EXECUTIVE COMPENSATION
The following tables provide information concerning the compensation of
each person who served as chief executive officer during the last fiscal year
and the other executive officers whose total salary and bonus exceeded $100,000
in fiscal year 1997 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-term
Compensation Compensation
------------ ------------
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary(1) Bonus Options (#) Compensation
- --------------------------- ---- --------- ----- ------------- ------------
<S> <C> <C> <C> <C> <C>
Aaron Uri Levy, 1997 $28,605 $17,500 500,000 $ 19,742(2)
Chief Executive
Officer(2)
James G. Turner, 1997 141,829 0 70,000(6) 102,650 (3)(7)
Former Chief Executive 1996 231,853 52,914 87,500(6) 2,650
Officer(3) 1995 137,519 5,375 56,250 3,100
William M. Stowell, 1997 115,000 10,000 94,200(6) 2,000(7)
Vice President, Finance 1996 136,763 38,635 55,000(6) 2,000
1995 93,481 4,121 56,250 2,000
Floyd K. Eide, 1997 131,250 0 71,900(6) 133,250(4)(7)
Chief Operating 1996 168,690 44,095 50,000(6) 2,000
Officer(4) 1995 113,504 4,479 56,250 2,051
Albert Kile, 1997 112,392 0 31,000(6) 42,000(5)(7)
Vice President, Sales (5) 1996 150,290 27,027 30,000(6) 2,000
1995 119,597 2,866 68,750 2,000
</TABLE>
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(1) During fiscal year 1997, the Company terminated the variable
compensation plan and reimbursed all employees (other than Mr. Turner)
the amount of salary reductions they had sustained during the fiscal
year under such plan. See also Note 3 under "Fiscal Year 1997 Option
Grants."
(2) Mr. Levy became Chief Executive Officer on January 6, 1997. The Company
agreed to pay Mr. Levy the following compensation: $175,000 annual
salary; $17,500 signing bonus; a guaranteed bonus equal to 50% of base
salary for fiscal year 1998; $700 per month car allowance; 500,000 stock
options; and relocation expenses which are included under "All Other
Compensation."
(3) Mr. Turner resigned as Chief Executive Officer effective January 6,
1997. "All Other Compensation" includes $100,000 accrued in fiscal year
1997 which is payable through December 1997 in connection with Mr.
Turner's resignation. See "Severance Arrangements."
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(4) Mr. Eide resigned as Chief Operating Officer on March 28, 1997. "All
Other Compensation" includes $131,250 accrued in fiscal year 1997 which
is payable in fiscal year 1998 in connection with Mr. Eide's
resignation. See "Severance Arrangements."
(5) Mr. Kile served as Vice President, Sales from March 1996 through
February 1997. "All Other Compensation" includes $40,000 accrued in
fiscal year 1997 which is payable in fiscal year 1998 in connection with
Mr. Kile's resignation.
(6) During fiscal year 1997, the Company repriced options which were
originally granted in fiscal year 1996. Pursuant to rules of the
Securities and Exchange Commission, such repriced options are included
in the number of options granted in fiscal year 1997 (the year in which
they were repriced) and in fiscal year 1996 (the year they were
originally granted). See "Fiscal Year 1997 Option Grants."
(7) In fiscal year 1997, includes premiums of $650 for health insurance for
Mr. Turner and Company contributions to the 401(k) Plan for the account
of each Named Officer in the amount of $2,000.
FISCAL YEAR 1997 OPTION GRANTS
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees in Price Per Expiration
Name Granted (1) Fiscal Year Share (4) Date
- ----------------------- ------------- ------------- --------- -----
<S> <C> <C> <C> <C> <C>
Aaron Uri Levy 500,000 36.2% $1.25 12/22/06
James G. Turner 70,000(2) 5.1% 2.41 11/23/05
William M. Stowell 34,200(3) 2.5% 2.03 02/23/07
25,000 1.8% 2.03 02/23/07
35,000(2) 2.5% 2.41 11/23/05
Floyd K. Eide 36,900(3) 2.7% 2.03 02/23/07
35,000(2) 2.5% 2.41 11/23/05
Albert Kile 11,000(3) .8% 2.03 02/23/07
20,000(2) 1.5% 2.41 11/23/05
</TABLE>
(1) Unless otherwise indicated, the options vest in 25% installments
beginning one year after the grant date (beginning March 1, 1997 in the
case of Mr. Levy's options) and are subject to earlier termination in
the event of termination of employment, death and certain corporate
events. Under the terms of the Company's Stock Option Plans, the Stock
Option Committee may modify the terms of outstanding options, including
the exercise price and vesting schedule. See "Severance Arrangements."
(2) These options were granted in November 1995 at an exercise price of
$5.69 per share and were repriced in September 1996. No other terms of
the options were changed.
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(3) In connection with the termination of the variable compensation plan,
the Company granted a total of 203,900 stock options to employees (other
than Mr. Turner) who had participated in the plan (23 persons). The
number of options granted to each person was based on the amount of
salary reduction such person had experienced under the plan, and the
vesting schedule was based on the number of years of participation in
the plan. Messrs. Stowell's and Eide's options are 100% vested and Mr.
Kile's options are 50% vested.
(4) Fair market value of the Common Stock on the grant date.
FISCAL YEAR 1997 AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised In-the-
Acquired on Value Options Held at Money Options
Name Exercise Realized(1) Fiscal Year-End at Fiscal Year-End(2)
- -------------- ---------- ----------- --------------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Aaron Uri Levy 0 $ 0 0 500,000 $ 0 $670,000
James G. Turner 50,000 128,924 79,125 123,625 11,015 47,619
William M. Stowell 96,500 290,317 107,900 105,550 64,662 64,315
Floyd K. Eide 20,000 120,200 256,275 71,875 398,473 47,106
Albert Kile 5,000 26,720 81,875 44,375 50,334 21,288
</TABLE>
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(1) Represents the difference between the aggregate market value on the date
of exercise and the aggregate exercise price.
(2) Represents the difference between the aggregate market value on February
28, 1997 ($2.59 per share) and the aggregate exercise price.
SEVERANCE ARRANGEMENTS
In connection with his resignation as Chief Executive Officer, the Company
agreed to continue to employ James G. Turner for up to one year at a salary of
$10,000 per month and to maintain his medical benefits and a $50,000 life
insurance policy for his benefit. The Company also amended Mr. Turner's options
to provide that they will become exercisable in full on the first to occur of
termination of his employment or January 3, 1998. See "Fiscal Year 1997
Aggregated Option Exercises and Fiscal Year-End Option Values."
In connection with his resignation as Chief Operating Officer, the Company
agreed to continue to employ Floyd K. Eide at the rate of $10,938 per month and
to maintain his medical benefits until the earlier of March 31, 1998 or the date
he obtains other full-time employment. The Company also amended Mr. Eide's
options to provide that they will become exercisable in full on the date he is
no longer employed by the Company. See "Fiscal Year 1997 Aggregated Option
Exercises and Fiscal Year-End Option Values."
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DIRECTORS' COMPENSATION
The Company pays its non-employee directors $1,000 for each Board meeting
attended and $300 for each Committee meeting attended which is not held on the
same day as a Board meeting, and reimburses out-of-pocket expenses for attending
such meetings. In addition, in fiscal year 1997, the Company awarded stock
options to certain non-employee directors as set forth below:
<TABLE>
<CAPTION>
Number of Securities Exercise Expiration
Name Underlying Options Granted Date of Grant Price/Share Date
- ---- -------------------------- ------------- ----------- -----
<S> <C> <C> <C> <C>
Robert Southwick 20,000 12/13/96 $1.66 12/12/06
Trude C. Taylor 20,000 12/13/96 1.66 12/12/06
</TABLE>
The exercise price was equal to the fair market value of the Common Stock
on the date of grant and the options are exercisable in 25% annual cumulative
installments beginning one year after the grant date.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of May 31, 1997,
with respect to ownership of the Company's Common Stock by (a) each person who
is known by the Company to own beneficially 5% or more of the Common Stock, (b)
each Named Officer, (c) each director of the Company and (d) all executive
officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially Percentage
Name* Owned Ownership
- ------------------------------- ------------------- ----------
<S> <C> <C>
EBTB II B.V. 4,796,657(1)(2) 27.6%
Euroventures Benelux Team B.V.
Julianaplein 10
NL-5211 BC's Hertogenbosch
The Netherlands
Euroventures Benelux I B.V. 2,498,879 14.7%
Julianaplein 10
NL-5211 BC's Hertogenbosch
The Netherlands
Euroventures Benelux II B.V. 2,297,778(2) 13.2%
Julianaplein 10
NL-5211 BC's Hertogenbosch
The Netherlands
BeneVenture Founders 1,136,613(3) 6.7%
Risicokapitaalfonds II N.V.
Regentlaan 54 Bus 2
1000 Brussels, Belgium
Floyd Eide 258,775(4) 1.5%
Albert Kile 71,375(5) **
Current Directors and Executive Officers:
Roger Claes 8,500(6) **
Aaron Uri Levy 130,000(7) **
William M. Stowell 217,150(8) 1.3%
Robert Southwick 9,000(9) **
Trude C. Taylor 260,667(10) 1.5%
James G. Turner 313,000(11) 1.8%
All executive officers and 998,167(12) 5.7%
directors as a group (9 persons)
</TABLE>
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* Includes addresses of 5% or more shareholders.
** Less than 1%.
(1) Includes the shares owned by Euroventures Benelux I B.V. and
Euroventures Benelux II B.V., which are widely held venture capital
funds. According to filings made with the Securities and Exchange
Commission pursuant to Section 13(d) of the Securities Exchange Act of
1934, Euroventures Benelux Team B.V. is the investment manager of both
such funds and has voting and dispositive power over their shares of the
Company's Common Stock, and EBTB II B.V. is an indirect beneficial owner
of such shares. See Notes (2) and (6).
(2) Includes 375,000 shares subject to currently exercisable warrants. See
Notes (1) and (6).
(3) As reported in a Schedule 13D dated May 9, 1996, filed with the
Securities and Exchange Commission.
(4) Represents 258,775 shares subject to options which are exercisable
within 60 days.
(5) Represents 71,375 shares subject to options which are exercisable within
60 days.
(6) Mr. Claes is managing director of Euroventures Benelux I B.V. and a
partner and managing director of Euroventures Benelux Team B.V. and EBTB
II B.V. See Note (1).
(7) Includes 125,000 shares subject to options which are exercisable within
60 days.
(8) Includes 119,150 shares subject to options which are exercisable within
60 days.
(9) Represents 9,000 shares subject to options which are exercisable within
60 days.
(10) Includes 15,000 shares subject to options which are exercisable within
60 days.
(11) Includes 83,500 shares subject to options which are exercisable within
60 days.
(12) See Notes (6) through (11) above. Also includes 6,250 shares owned and
53,600 shares subject to options which are exercisable within 60 days
held by executive officers not named in the foregoing table.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has outstanding loans in the principal amount of $1.8
million payable to Euroventures Benelux II B.V., a Netherlands corporation
("Euroventures"), and $100,000 payable to Trude C. Taylor, a director of the
Company. The principal amount of the loans is due in October/November 1999 and
bears interest at the rate of 5% per annum with respect to $1.8 million and 8%
per annum with respect to $100,000, interest payable quarterly. The loans are
secured by all of the Company's assets, but Euroventures has agreed to
subordinate its security interest in accounts receivable in order to permit the
Company to obtain conventional bank financing for accounts receivable.
In connection with certain amendments to the terms of its loan in
October 1995, the Company issued Euroventures four year warrants to purchase
375,000 shares of Common Stock at $7.00 per share. The warrants are redeemable
by the Company if the Company's stock price reaches $9.00 per share for 20
consecutive trading days. The warrant exercise price will be subject to downward
adjustment if the Company sells Common Stock at a price which is less than $7.00
per share, excluding issuances pursuant to warrants outstanding at April 1, 1996
and any issuances pursuant to the Company's stock option plans. In addition,
Euroventures has the right to require the Company to register the shares
underlying the warrants under the Securities Act of 1933, as amended.
Euroventures is a major shareholder of the Company. See "Ownership of
Common Stock." Roger Claes, a director of the Company, is a partner and managing
director of Euroventures Benelux Team B.V., which manages Euroventures.
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SIGNATURES
In accordance with 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.
DENSE-PAC MICROSYSTEMS, INC.
Date: June 30, 1997 By: /S/ Aaron Uri Levy
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Aaron Uri Levy
Chief Executive Officer
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