U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A-1
(mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended January 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to .
Commission file Number 0-14835
TRANSNATIONAL INDUSTRIES, INC.
(Name of small business issuer in its charter)
DELAWARE 22-2328806
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
Post Office Box 198
U.S. Route 1
Chadds Ford, Pennsylvania 19317
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number (610) 459-5200
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock ($0.20 par value per share )
(Title of Class)
Check whether the Issuer (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
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S- B contained in this form, 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 the fiscal year January 31, 1998, were
$7,075,985.
The aggregate market value of the voting stock held by non-affiliates of
Registrant as of March 31, 1998 was approximately $329,451 based on the average
of bid and asked price of these shares. Shares of Common Stock held by each
executive officer and director and by each person who owns 5% or more of the
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates.
As of March 31, 1998, 500,970 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Pursuant to the Registrant's By-laws, the number of Directors of the
Registrant is determined by Board action, and is currently fixed at seven. There
currently exist, however, two vacancies. The first vacancy was caused by the
death of Alan W. Drew in July of 1996. The second vacancy was caused by the
resignation of Mason Carter in December of 1997.
The following information is submitted with respect to the current
directors of the Company. All such directors were elected as directors by the
holders of Common Stock at the Company's last annual meeting of shareholders.
All directors serve until the next annual meeting of shareholders and until
their successors have been duly elected and shall have qualified.
Director
Name Age Since
Michael S. Gostomski (1)(2) 47 1986
Charles H. Holmes, Jr. 57 1994
Charles F. Huber (1)(2) 68 1992
William D. Witter (1)(2) 68 1977
Calvin A. Thompson (1)(2) 73 1994
- ----------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
--------------------
Michael S. Gostomski joined the Company in May 1986 as Vice-President
Finance, Treasurer, and a director and became Corporate Secretary in March of
1988. In October of 1989, he became Executive Vice-President of the Company. On
May 1, 1992, he became President and Chief Executive Officer of the Company. Mr.
Gostomski resigned as an employee of the Company, while remaining as a director
of the Company, in September, 1993, at which time he became Executive Vice
President of Roller Bearing Company. From 1980 to 1986, he held various
financial and management positions at Peabody International Corporation, most
recently as a Sector Vice President in charge of its engineering and
construction subsidiaries. Mr. Gostomski, who is a Certified Public Accountant,
holds B.S. and M.B.A. degrees from the University of Connecticut.
Charles H. Holmes, Jr., became a director of the Company in 1994. He has
held various operating and management positions at the Company's Spitz, Inc.,
subsidiary since 1962. Mr. Holmes has been President of Spitz since 1988. He has
been President of the Company since September, 1993. Mr. Holmes holds a degree
in Business Management from Goldey Beacom College.
Charles F. Huber became a director of the Company in February 1992. He is
currently a managing director of William D. Witter, Inc. He holds a B.A. degree
from Princeton University.
3
<PAGE>
William D. Witter became a director of the Company in 1977 and
Vice-Chairman in August of 1987. He has been President of William D. Witter,
Inc., an investment management concern, since 1976. Mr. Witter holds an A.B.
degree from Yale University and an M.B.A. from Stanford Business School.
Calvin A. Thompson became a director of the Company in October 1994. He has
been a Managing Director of William D. Witter, Inc. since 1982. Mr. Thompson
holds a B.S. degree in industrial engineering from Columbia University.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
Name Position Age
Charles H. Holmes, Jr. President and Chief Executive 57
Officer and President of Spitz, Inc.
Paul L. Dailey, Jr. Chief Financial Officer, Secretary and 41
Vice President-Finance of Spitz, Inc.
John A. Fogleman Vice President - Operations of 49
Spitz, Inc.
Jonathan A. Shaw Vice President - Sales and Technology 41
of Spitz, Inc.
Information with respect to Mr. Holmes is set forth below in this Item 9.
Paul Dailey joined Spitz in September of 1983 as Controller. In June of
1986 he became Vice President - Finance for Spitz. In April 1993 he become Chief
Accounting Officer of the Company. In September 1993 he became Chief Financial
Officer and Secretary of the Company. Mr. Dailey is a certified public
accountant and holds a B.A. degree in accounting from Rutgers University.
John Fogleman became Vice President - Operations for Spitz in July of 1992.
He has held various operating and management positions at Spitz since 1972. Mr.
Fogleman holds a B.A. degree in business management from Wilmington College.
Jonathan Shaw became Vice President - Sales and Technology for Spitz in
July of 1992. He has held various engineering and management positions at Spitz
since 1986. Mr. Shaw is a registered Professional Engineer, holds an M.B.A.
degree from Widener University and a B.S. degree in Mechanical and Aerospace
Engineering from the University of Delaware.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and 10% beneficial owners of the Company's Common
Stock to file certain reports concerning their ownership of the Company's equity
securities. Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recently competed fiscal year and Forms
5 and amendments thereto furnished to the Company with respect to its most
recently completed fiscal year, and other information of which the Company is
aware, the directors, executive officers and beneficial owners of 10% or more of
the Company's Common Stock who failed to make the requisite filings on a timely
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<PAGE>
basis are as follows: (i) Messrs. Holmes and Dailey failed to timely file Forms
4 upon the exchange of their Series B Preferred Stock for 2,500 and 1,250 shares
of the Company's Common Stock, respectively, upon the termination of the
Company's exchange offer (the "Exchange Offer") on November 28, 1997, and failed
to timely file Forms 5 reporting the granting of 12,000 and 7,500 stock options,
respectively, to purchase shares of Common Stock at a price of $2.25 per share
on July 8, 1997 (although both Mr. Holmes and Mr. Dailey subsequently reported
each such transaction on a Form 5); (ii) Mr. Gostomski failed to timely file a
Form 4 upon his acquisition of 16,000 shares of Common Stock pursuant to the
Exchange Offer on November 28, 1997 (although Mr. Gostomski subsequently
reported such transaction on a Form 5); (iii) Messrs. Huber and Thompson failed
to timely file Forms 4 upon their acquisition of 12,500 shares of Common Stock
each on November 28, 1997 in the Exchange Offer; (iv) each of William D. Witter
and Penfield Limited Partnership ("Penfield") failed to timely file a Form 4 for
Penfield's acquisition of 50,000 shares of Common Stock on November 28, 1997 in
the Exchange Offer, and Mr. Witter additionally failed to report the acquisition
on November 28, 1997 in the Exchange Offer of 17,500 shares of Common Stock by
his son and 20,000 shares of Common Stock by the William D. Witter, Inc. Profit
Sharing Fund; (v) William D. Witter failed to timely file either a Form 4 or a
Form 5 reporting the sale of 223 shares of Common Stock by ADW, Inc., during
fiscal 1998; and (vi) both William D. Witter and Penfield Limited Partners
failed to timely file either a Form 4 or a Form 5 reporting the sale of 3,240
shares of Common Stock during fiscal 1998.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and the only other executive officer whose salary and bonus
exceeded $100,000 for the last completed fiscal year.
<TABLE>
<CAPTION>
Long Term
Annual Compensation (a) Compensation
------------------------- --------------
Securities
Underlying
Name and Options All Other
Principal Position Year Salary Bonus Granted (#) Compensation
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles H. Holmes, Jr 1998 $133,762 $ 15,000(b) 12,000 $ 4,480(c)
President and Chief .. 1997 130,999 3,000 4,421(c)
Executive Officer .... 1996 128,077 3,867(c)
Paul L. Dailey, Jr ... 1998 $ 86,047 $ 15,000(b) 7,500 $ 3,339(c)
Vice President, Chief 1997 82,924 2,500 2,779(c)
Financial Officer and 1996 79,131 2,645(c)
Secretary
- ----------
<FN>
(a) Perquisites and other personal benefits amounted to less than ten percent
of salary and is therefore not reported in table.
(b) Each of Messrs. Holmes and Dailey received a $5,000 annual performance
bonus and an additional $10,000 bonus awarded at the completion of the
refinancing of the Company's debt agreements.
(c) Consists entirely of Company contributions to 401(k) plan.
</FN>
</TABLE>
----------
5
<PAGE>
STOCK OPTION AND PERFORMANCE INCENTIVE PLAN
On July 14, 1995 the stockholders of the Company voted to approve the
Transnational Industries Inc. 1995 Stock Option and Performance Incentive Plan
(the "Option Plan") adopted by the Board of Directors of the Company on March
21, 1995. The purpose of the Option Plan is to attract and retain the best
available employees for the Company and its subsidiaries and to encourage the
highest level of performance by such employees, thereby enhancing the value of
the Company for the benefit of its stockholders. The Option Plan is also
intended to motivate employees to contribute to the Company's future growth and
profitability and to reward their performance in a manner that provides them
with means to increase their holdings of Common Stock of the Company and aligns
their interest with the interest of the stockholders of the Company. Under the
Option Plan, awards are granted to key employees whose initiative is deemed
valuable for the successful conduct and development of the Company's business.
The Option Plan provides for the awarding of up to 50,000 shares of the
Company's Common Stock to employees of the Company and its subsidiaries. Awards
may be in various forms of stock options, stock appreciation rights, and shares
of common stock. Awards are granted by the Compensation Committee of the Board
of Directors of the Company.
The following table sets forth information relating to individual grants of
options to the named executives under the Option Plan during the fiscal year
ended January 31, 1998.
<TABLE>
<CAPTION>
Option Grants in Fiscal Year ended January 31, 1998
- --------------------------------------------------------------------------------------------------
% of Total Market
Securities Options Price on
Under Granted to Exercise Date of
Options Employees in Price Grant Expiration
Name Granted (#) Fiscal Year ($/share) ($/share) Date
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles H. Holmes, Jr. 12,000(1) 30.3% $ 2.25 $ 3.63 July 8, 2007
Paul L. Dailey, Jr. 7,500(1) 19.0% $ 2.25 $ 3.63 July 8, 2007
- ----------
<FN>
(1) Options vest over four years at a rate of 25% per year.
</FN>
</TABLE>
<TABLE>
<CAPTION>
----------
Aggregated Option Exercises in Fiscal Year Ended January 31, 1998
and Fiscal Year End Option Values
- ---------------------------------------------------------------------------------------------------
Value of
Unexercised Options (#) Unexercised in-the-money Options
at Fiscal Year End at Fiscal Year End ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles H. Holmes, Jr. 750/14,250 $ 2,953/$ 53,109
Paul L. Dailey, Jr. 625/9,375 $ 2,461/$ 35,039
</TABLE>
6
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Holmes effective May
1, 1995. Under the agreement Mr. Holmes is currently paid an annual base salary
of $134,200, which may be increased from time to time by the Company's Board of
Directors, plus certain fringe benefits including group insurance, supplemental
medical benefits and an automobile allowance. Mr. Holmes may also receive, at
the sole discretion of the Company's Board of Directors, additional compensation
in the form of a cash bonus or equity securities under the Option Plan. The
original term of the agreement was one year, but the agreement automatically
extends an additional one year unless otherwise terminated by either party by
October 31 of the existing term. Pursuant to such provision, Mr. Holmes's
contract automatically renewed on May 1, 1998, for the period through April 30,
1999. In the event that Mr. Holmes's employment is terminated without cause, he
will be entitled to a lump sum payment equal to twice his annual base salary and
the continuation of his fringe benefits for a period of two years. A non-renewal
of the contract term by the Company within six months prior to or three years
after a "Change in Control" will be treated as a termination without cause. A
"Change in Control" is defined as (i) a change within twelve months of a
majority of the Company's Board of Directors, (ii) a change in control of fifty
percent of the Company's voting stock, (iii) the sale of the assets of Spitz, or
(iv) any merger or consolidation of the Company's business which results in a
change in ownership of the majority of the equity of the Company. The agreement
also includes a restrictive covenant whereby Mr. Holmes agrees not to engage in
a competing business of the Company for a period of (i) three years in the event
of a termination for cause or (ii) one year in the event that his employment is
otherwise terminated.
The Company entered into an Employment Agreement with Mr. Dailey effective May
1, 1995. Under the Agreement Mr. Dailey is currently paid an annual base salary
of $86,700, which may be increased from time to time by the Company's Board of
Directors, plus certain fringe benefits made available to the Company's
executive officers generally. Mr. Dailey may also receive, at the sole
discretion of the Company's Board of Directors, additional compensation in the
form of a cash bonus or equity securities under the Option Plan. The original
term of the Agreement was one year, but the Agreement automatically extends an
additional one year unless otherwise terminated by either party by December 31
of the existing term. Pursuant to such provision, Mr. Dailey's contract
automatically renewed on May 1, 1998, for the period through April 30, 1999. In
the event that Mr. Dailey's employment is terminated without cause, he will be
entitled to a lump sum payment equal to his annual base salary and the
continuation of his fringe benefits for a period of one year. A non-renewal of
the contract term by the Company within six months prior to or three years after
a "Change in Control" (as defined above) will be treated as a termination
without cause. The Agreement also includes a restrictive covenant whereby Mr.
Dailey agrees not to engage in a competing business of the Company for a period
of (i) three years in the event of a termination for cause or (ii) one year in
the event that his employment is otherwise terminated.
COMPENSATION OF DIRECTORS
The Chairman of the Board of Directors is paid a fee of $50,000 per annum and
each other outside director is paid a fee of $10,000 per annum. The fee paid to
the Chairman is based on the Chairman's spending one-third of his working hours
assisting the Company and its subsidiary.
7
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to the only persons known
to the Company to be the beneficial owners of more than five percent (5%) of the
outstanding Common Stock of the Company as of March 31, 1998 (except for William
D. Witter and Charles Huber, whose respective beneficial ownership is disclosed
in the immediately following table). The Common Stock is the Company's only
class of voting securities.
Amount and Nature
Name and Address of Beneficial Ownership % of Common Stock
- ------------------------------------------------------------------------------
Penfield Limited Partnership 81,760 16.3%
c/o William D. Witter, Inc.
153 East 53rd Street
New York, NY 10022
Estate of Alan Drew 48,710 9.7%
421 Sable Palm Lane
Vero Beach, FL 32963
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 31, 1998, the number of shares of
the outstanding Common Stock of the Company beneficially owned by each of the
current directors and executive officers for whom disclosure is required to be
made under the Summary Compensation Table pursuant to Item 402(a) (2) of
Regulation S-B promulgated under the Securities Exchange Act of 1934, as
amended, individually, and by the directors and all of the Company's executive
officers as a group:
Name Shares Owned % of Common Stock
William D. Witter 246,498 (1) 49.2%
Charles Huber 49,500 9.9%
Michael S. Gostomski 21,290 4.2%
Charles H. Holmes, Jr. 4,000 (2) * (3)
Calvin A. Thompson 18,400 (4) 3.7%
Paul L. Dailey, Jr. 2,500 (5) * (3)
All current Directors and executive 347,693 (6) 68.7% (3)
officers as a group (8 persons)
- ----------
* Less than 1%
(1) Includes (i) 102,813 shares of Common Stock owned by Mr. Witter's
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spouse and adult children, (ii)20,600 shares of Common Stock owned by
the William D. Witter, Inc., Profit Sharing Fund, (iii) 860 shares of
Common Stock owned by ADW Inc., (iv) 222 shares of Common Stock owned
by Virginia Woods Witter, (v) 209 shares of Common Stock owned by the
Helen C. Witter Trust, and (vi) the 81,760 shares of Common Stock
beneficially owned by Penfield Limited Partnership and described in
the immediately preceding table. Mr. Witter disclaims a beneficial
interest in the shares of Common Stock owned by Mr. Witter's spouse
and children.
(2) Includes 1,500 shares of Common Stock acquirable within sixty days
upon the exercise of Mr. Holmes's stock options.
(3) Assumes the issuance by the Company of all securities issuable to such
executive officer or all directors and executive officers as a group,
as the case may be, upon the exercise of all options owned by such
person or group.
(4) Includes 2,500 shares of Common Stock owned by Mr. Thompson's spouse.
Mr. Thompson disclaims a beneficial interest in the shares of Common
Stock owned by his spouse.
(5) Includes 1,250 shares of Common Stock acquirable within sixty days
upon the exercise of Mr. Dailey's stock options.
(6) Includes a total of 5,250 shares of Common Stock acquirable within
sixty days upon the exercise of all stock options owned by the
Company's executive officers.
----------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On September 26, 1997 the Company offered holders of 1,744 outstanding
shares of the Company's Series B Cumulative Convertible Preferred Stock
("Preferred") the right to exchange each share of the Preferred for 125 shares
of the Company's common stock ("Common"). The offer (the "Exchange Offer")
expired on November 28, 1997. Holders of 1,414 shares of Preferred accepted the
exchange offer. Accordingly, in January 1998, the Company issued 176,750 of its
authorized Common in exchange for 1,414 shares of Preferred, which were retired.
The holders of the remaining 330 shares of Preferred did not respond to the
solicitation and their shares will remain outstanding unless and until either
(i) the shares are redeemed or converted in accordance with the original
contractual terms of the Preferred or (ii) the holders of the Preferred request
and the Company agrees to exchange their shares at a future time (which neither
side is obligated to do and which, if done, would be at an exchange ratio to be
negotiated in conjunction therewith).
In the Exchange Offer, the following officers, directors and 10% beneficial
shareholders exchanged Preferred for Common: (i) Jonathan Shaw, an executive
officer, exchanged 20 shares of Preferred for 2,500 shares of Common; (ii)
Michael Gostomski, a director, exchanged 128 shares of Preferred for 16,000
shares of Common; (iii) Calvin Thompson, a director, exchanged 100 shares of
Preferred for 12,500 shares of Common; (iv) Charles Huber, Chairman of the
Board of Directors, exchanged 100 shares of Preferred for 12,500 shares of
Common; (v) Charles Holmes, a Director and an executive officer, exchanged 20
shares of preferred for 2,500 shares of Common; (vi) Paul Dailey, an executive
officer, exchanged 10 shares of Preferred for 1,250 shares of Common; (vii) John
Fogleman, an executive officer, exchanged 4 shares of Preferred for 500 shares
of Common; (viii) Penfield Limited Partners, a 10% beneficial shareholder,
exchanged 400 shares of Preferred for 50,000 shares of Common; and (ix) William
D. Witter's son exchanged 140 shares of Preferred for 17,500 shares of Common
9
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and the William D. Witter, Inc., Profit Sharing Fund exchanged 160 shares of
Preferred for 20,000 shares of Common.
On June 12, 1997, the Company entered in to a series of debt agreements
with a new lender, a commercial bank, whereby proceeds from two new promissory
notes payable to the new lender were used to retire previous bank debt owed to,
and a Stock Subscription Warrant held by, Comerica Bank, N.A., a commercial
lender ("Comerica"). Comerica agreed to accept $1,230,000 in full satisfaction
for all existing debt and for the surrender of the Stock Subscription Warrant to
purchase 108,913 shares of the Company's Common Stock for $0.20 per share. By
virtue of holding the aforesaid Stock Subscription Warrant Comerica was,
immediately prior to the consummation of the aforesaid transaction, a greater
than 5% beneficial shareholder of the Company.
10
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: May 29, 1998 TRANSNATIONAL INDUSTRIES, INC.
By: /s/ Paul L. Dailey
------------------------
Paul L. Dailey
Secretary-Treasurer
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ Charles F. Huber Chairman of the Board May 29, 1998
- --------------------
Charles F. Huber
/s/ Charles H. Holmes, Jr. Director, Chief Executive Officer May 29, 1998
- --------------------------
Charles H. Holmes, Jr.
/s/ William D. Witter Vice Chairman of the Board May 29, 1998
- ---------------------
William D. Witter
Director May 29, 1998
- ----------------------
Michael S. Gostomoski
Director May 29, 1998
- -----------------------
Calvin A. Thompson
