SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange
Act of 1934 for the Fiscal Year Ended December 31, 1997.
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____.
Commission File Number 0-21662
STRATEGIA CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky 61-1064606
(State or other jurisdiction of (I.R.S. Identification No.)
Employer incorporation or organization)
6040 Dutchman's Lane
P.O. Box 37144
Louisville, Kentucky 40233-7144
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (502)426-3434
Securities registered pursuant to Section 12(b) of the Act: Common Stock
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by 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 _____.
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 aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 27, 1998: Common stock -- $22,875,915.
The number of shares of the registrant's common stock outstanding as of March
27, 1998 -- 4,667,677 shares.
Strategia Corporation (the "Corporation") hereby amends its annual report on
Form 10-KSB for the year ended December 31, 1997 to add the information
required by Items 9 through 12 of Part III of Form 10-KSB.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The following information is furnished as of March 27, 1998, with respect
to each of the Corporation's directors and executive officers. The
Corporation's four directors hold office for a one-year term expiring at the
Corporation's next annual meeting of shareholders or until their successors
are elected and qualified.
<TABLE>
<CAPTION>
Name Age Position with the Corporation
<S> <C> <C>
Richard W. Smith 44 President and Director
James P. Buren 59 Director
John P. Snyder 59 Secretary and Director
John A. Brenzel 57 Director
James A Huguenard 43 Vice President and General Counsel
Roland Esnis 31 Vice President - European Operations
Directeur General, Twinsys Dataguard SA
</TABLE>
Richard W. Smith has been President and a director of the Corporation
since its inception in September 1984. Mr. Smith previously served as
General Manager of PDW Computer Systems, Inc., which markets computer
systems.
James P. Buren has been a director of the Corporation since its
inception in September 1984. Mr. Buren, who served as Executive Vice
President - Technology of the Corporation for thirteen years prior to his
retirement in October 1997, also provides consulting services to the
Corporation. From 1980 to 1984, Mr. Buren was President and sole
shareholder of Buren & Company, Inc., a data processing consulting firm.
John P. Snyder has been a director of the Corporation since November
1984 and Secretary since 1985. During the past five years, Mr.Snyder has
served as President and Chairman of EPI Corporation, which currently operates
20 nursing homes.
John A. Brenzel, a director of the Corporation since November 1984, is a
business consultant. From January 1991 until June 1994, Mr. Brenzel was
President and Chief Executive Officer of Commonwealth Bank & Trust Company,
Middletown, Kentucky. From 1984 to 1990, he was Chairman and Chief Executive
Officer of Shelby County Trust Bank, Shelbyville, Kentucky.
James A. Huguenard has served as Vice President and General Counsel
of the Corporation since August 1997. Prior to August 1997, Mr. Huguenard
was a member of the law firm Brown, Todd & Heyburn PLLC, where he had
practiced since 1983.
Roland Esnis has served as Vice President - European Operations since
December 1997 and Directeur General of Twinsys Dataguard SA
("Twinsys"), the Corporation's Paris, France subsidiary since August 1995. Mr.
Esnis joined Twinsys in a marketing position when it was established in
February 1995. From July 1993 to February 1995 he held a similar position
with Twinsys SA, and unrelated computer services firm whose operating assets
were acquired by Twinsys. Mr. Esnis held marketing positions with Systar, a
software company, from November 1991 to June 1993 and with the disaster
recovery division of Telesystemes, a computer services affiliate of France
Telecom, from January 1990 to November 1992.
Richard W. Smith, James A. Huguenard, and Roland Esnis
are the Corporation's executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Corporation's executive
officers and directors and persons who beneficially own more than 10% of the
Corporation's Common Stock (collectively, "Reporting Persons") to file
reports of ownership and changes in ownership of the Common Stock with the
Securities and Exchange Commission. Reporting Persons are required by SEC
regulations to furnish the Corporation with copies of all Section 16(a) forms
that they file. Based solely on its review of the copies of such forms
received or written representations from certain Reporting Persons that no
Form 5s were required, the Corporation believes that during fiscal 1997, all
the Reporting Persons complied with all applicable filing requirements,
except that James E. Buchart filed Form 4 reports with respect to
eight transactions by him in April, July, September and November 1997
after the reports were due, and Richard W. Smith filed a Form 4 report
with respect to one transaction in August 1997 after the report was due.
Item 10. Executive Compensation.
The following table sets forth the cash compensation earned by the
Corporation's executive officers for each of the last three fiscal years.
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Name and Other Annual Compensation Awards
Principal Position Year Salary Bonus Compensation Stock Underlying
*** Options (#)
<S> <C> <C> <C> <C> <C>
Richard W. Smith, 1997 $156,585 $ 33,182 0 0
President (Chief 1996 117,000 0 0 75,664
Executive Officer) 1995 103,500 28,437 0 25,000
James P. Buren, 1997 $ 97,254 $ 20,452 0 0
Director and 1996 105,000 0 0 64,631
Consultant, 1995 93,000 14,788 0 17,500
Formerly, Executive
Vice President - Technology*
Roland Esnis 1997 $ 64,844 $ 42,647 $ 0 0
Directeur General, 1996 68,716 40,647 0 15,000
Twinsys Dataguard 1995** 56,864 23,530 0 0
SA
*(Mr. Buren retired as Executive Vice President - Technology in October 1997.)
**(Mr. Esnis joined Twinsys on February 1, 1995.)
***(Perquisites and other personal benefits paid to the named executive
officers did not exceed 10% of the total salary and bonus.)
</TABLE>
The Corporation currently does not have a retirement plan for its
officers and employees.
Options Grants in Last Fiscal Year
In 1997, no options were granted to the executive officers named in
the summary compensation table.
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth as of December 31, 1997 the value of
unexercised options granted to the Corporation's executive officers named
in the summary compensation table pursuant to the Corporation's 1988 Stock
Option Plan (the "1988 Plan"). In 1997, no options were exercised by
the named executive officers under the 1988 Plan. The average of the
closing bid and asked price of the Common Stock on December 31, 1997
was $7.625 per share.
<TABLE>
<CAPTION>
Number of Shares Subject Value of
to Unexercised Options Unexercised
Name Exercisable Unexercisable In-the-Money
Options
<S> <C> <C> <C>
Richard W. Smith 110,000 0 $ 248,126
James P. Buren 25,369 64,631 $ 186,379
James A. Huguenard 0 35,000 $ 0
Roland Esnis 0 15,000 $ 9,375
</TABLE>
Director Compensation
The Strategia 1988 Stock Option Plan (as amended by stockholders in
1989 and 1997) provides automatic grants of stock options to the Company's
directors who are not employees. Beginning in the second quarter of 1997,
options to purchase 1,000 shares of common stock have been granted quarterly
to each nonemployee director. In addition, each nonemployee director who was
not a director on May 15, 1989 will automatically be granted an option for
2,500 shares of common stock on May 15 following his subsequent election.
Options for nonemployee directors are granted at the fair market value of
the common stock on the grant date and vest on the first anniversary of the
grant date.
In 1997, Mr. Brenzel and Mr. Snyder each were granted options for 3,000
shares of Common Stock. The option exercise prices ranged
from $8.50 to $12.88 per share. No options were exercised in 1997.
In addition to the issuance of stock options, the Corporation paid its
Directors $750.00 per meeting for attendance at regularly scheduled board
meetings in 1997.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 31, 1998
with respect to the shares of Common Stock owned (i) by each person known to
the Corporation to own beneficially more than 5% of the outstanding shares of
Common Stock (ii) by each of the Corporation's directors and executive officers,
and (iii) by all directors and officers as a group. As of March 31, 1998,
there were 4,667,677 outstanding shares of Common Stock, which is the
Corporation's only class of voting shares.
<TABLE>
<CAPTION>
Directors and Number Percent
Executive Officers of Shares(1) of Class(2)
<S> <C> <C>
John P. Snyder
EPI Corporation
9707 Shelbyville Rd.
Louisville, KY 40223 1,397,937(3) 28.9%
Richard W. Smith
6040 Dutchman's Lane
P. O. Box 37144
Louisville, KY 40233 216,525(4) 4.5%
James P. Buren
6040 Dutchman's Lane
P. O. Box 37144
Louisville, KY 40233 129,778(5) 2.8%
John A. Brenzel
3501 Graham Rd.
Louisville, KY 40207 84,544(6) 1.8%
James A. Huguenard
6040 Dutchmans's Lane
P. O. Box 37144
Louisville, KY 40233 0(7) *
Roland Esnis
Twinsys Dataguard SA
Tour Mirabeau
39/43, Quai Andre Citroen
75015 PARIS 0(8) *
All current directors
and officers as a
group (6 persons) 1,828,784(9) 36.7%
5% Beneficial Owners
H. Joseph Schutte
1410 Hadleigh Place
Louisville, KY 40222 279,780(10) 5.9%
EPI Corporation
9707 Shelbyville Rd.
Louisville, KY 40223 1,363,903(11) 28.3%
* Indicates less than 1%.
</TABLE>
<TABLE>
<CAPTION>
Number Percent
5% Beneficial Owners of Shares(1) of Class(2)
<S> <C> <C>
EPI Corporation,
John P. Snyder,
Max G. Baumgardner,
James E. Buchart,
J. Ben Cress,
Robert H. Loeffler,
Henry A. Schumpf,
Grace W. Wilkins
9707 Shelbyville Rd.
Louisville, KY 40223 1,585,933(11)(12) 32.7%
</TABLE>
(1) Based on information furnished to the Corporation by the named
person, and information contained in filings with the Securities and
Exchange Commission (the "Commission"). Under the rules of the
Commission, a person is deemed to beneficially own shares over which
the person has or shares voting or investment power or has the right
to acquire beneficial ownership within 60 days. Except as otherwise
noted, each person or entity named in the table has sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned.
(2) Shares of Common Stock subject to options or warrants that are or
will become exercisable within 60 days have been deemed outstanding
for computing the percentage of class of the listed person or the
group, but are not deemed outstanding for computing the percentage of
class for any other person.
(3) Includes 1,363,903 shares of Common Stock beneficially owned by EPI
Corporation. (See footnote 12.) Mr. Snyder is President, a director,
and largest single shareholder of EPI Corporation. Mr. Snyder shares
voting and investment power with respect to, and disclaims beneficial
ownership of, the shares owned by EPI Corporation, which are included
once in the shares beneficially owned by all directors and officers
as a group. Mr. Snyder's total also includes 4,000 shares subject to
currently exercisable stock options, and 7,885 shares issuable upon the
exercise of warrants.
(4) Includes 110,000 shares subject to currently exercisable stock options,
3,710 shares issuable upon the conversion of warrants, and 500 shares
owned individually by Mr. Smith's wife.
(5) Includes 25,369 shares subject to currently exercisable stock options,
and 3,710 shares issuable upon the exercise of warrants.
(6) Includes 4,000 shares subject to currently exercisable stock options,
and 1,855 shares issuable upon the exercise of warrants.
(7) Does not include 35,000 shares subject to stock options that are not
currently exerciseable.
(8) Does not include 15,000 shares subject to stock options that are not
currently exercisable.
(9) Includes 34,589 shares subject to currently exercisable stock options
held by nonexecutive officers in addition to shares beneficially owned
by the four directors and executive officers listed in the table.
(10) Includes 45,403 shares issuable upon the exercise of warrants.
(11) Includes 153,271 shares issuable upon the exercise of warrants.
(12) Includes 1,363,903 shares of Common Stock beneficially owned by EPI
Corporation, for which the named individuals, as directors of EPI
Corporation, share voting and investment power. The individual
members of this group together own the majority of shares of EPI
Corporation. Also includes 23,082 shares issuable upon the exercise of
warrants, and 4,000 shares issuable upon the exercise of options,
respectively, held by group members other than EPI Corporation. Also
includes 7,500 shares held by members of the immediate family of a
group member for which beneficial ownership is disclaimed.
Item 12. Certain Relationships and Related Transactions.
In 1992, EPI Corporation loaned $300,000 to the Corporation to finance the
Corporation's purchase of certain equipment to be installed in its computer
center. On January 17, 1995, EPI extended an additional $500,000 in credit
under the loan to assist in financing the organization of, and purchase of
certain assets by its French subsidiary. The annual interest rate paid on the
loan was 1.5% above the "prime rate" as published in The Wall Street Journal.
Each term of the loan was for 90 days, and the loan was renewed for additional
90-day terms through April 5, 1997. The loan was secured by a second
mortgage on the Corporation's real estate. The Corporation also issued 15,000
shares of Common Stock to EPI Corporation when the loan was originally made in
1992, and an additional 1,000 shares of common stock per $100,000 outstanding
principal balance upon each renewal of the loan for an additional 90-day term.
John P. Snyder, a director of the Corporation, is President, a director and the
largest shareholder of EPI Corporation. In March 1997, the Company paid off
this $800,000 note payable to EPI with proceeds from its Common Stock offering.
On June 30, 1996, the Corporation issued a total of 64,546 shares of newly
authorized Series AA Preferred and a warrant to purchase one share of Common
Stock ("New Preferred Warrants") in connection with a plan to restructure
certain of its current obligations to founding shareholders and preferred
shareholders, including directors of the Corporation, EPI Corporation and
certain of EPI's directors. The Corporation issued one share of Series AA
Preferred and a New Preferred Warrant in payment of each $10.00 in outstanding
principal and interest due on loans made in 1985 by founding shareholders, or
a total of 23,427 shares in payment of $234,344 in principal and interest on
the shareholder loans. The interest rate on the retired shareholder loans was
10% per year. The Corporation also issued one share of Series AA Preferred
and a New Preferred Warrant to holders of Series A Preferred Stock ("Series A
Preferred") in payment of each $10.00 of accrued, unpaid dividends payable on
the Series A Preferred, or a total of 6,952 shares in payment of dividend
obligations totaling $69,552 as of June 30, 1996. In addition, the
Corporation issued one share of Series AA Preferred and one new Preferred
Warrant in exchange for each of the 34,167 shares of Series A Preferred
outstanding as of June 30, 1996 and the warrant to purchase one share of Common
Stock that was originally issued with each Series A Preferred share (an "Old
Preferred Warrant").
By restructuring its preferred stock and shareholder loans, the Corporation
eliminated its outstanding obligations for accrued, unpaid dividends, reduced
the principal balance of loans from shareholders, and reduced the rate of
dividends and interest payable to shareholders in the future. As a result of
these transactions, the Corporation's preferred shareholders, who have
provided capital necessary for the expansion of the Corporation's business in
past years, effectively extended the period for converting their preferred
stock and exercising their warrants, and reduced the current exercise price
per share on their warrants. The Series AA Preferred provides for an annual
dividend of 8%, compared to 11.5% on the Series A Preferred. The Series AA
Preferred, like the Series A Preferred, is convertible into 4 shares of Common
Stock for 5 years after issuance. However, the conversion rights of the
Series A Preferred would have expired during December 1996 and January 1997,
while the conversion rights of the Series AA Preferred continue until June 30,
2001. The limitations, preferences, and relative rights of the Series AA
Preferred are otherwise identical to those of the Series A Preferred. The New
Preferred Warrant issued with each share of Series AA Preferred, like the Old
Preferred Warrant accompanying the Series A Preferred, has initial exercise
price of $2.50 per share of Common Stock, which increases by $.50 per year to
$4.50 per share during the fifth year after issuance. However, the Old
Preferred Warrants would have expired at December 31, 1996, compared to the
June 30, 2001 expiration date of the New Preferred Warrant, and the current
exercise price was reduced from $4.50 to $2.50 per share.
In September and October 1996, the Corporation issued a total of 500,000 units
comprised of one share of Common Stock and a warrant to purchase one share of
Common Stock at a price of $3.75 per share (the "1996 Warrants") in a private
placement. The offering price was $2.50 per unit, and placement proceeds
totaled $1,250,000. Directors, five percent beneficial owners of Common Stock
and their affiliates who purchased units in the placement included John P.
Snyder (5,097 units), EPI Corporation (126,106 units), directors of EPI
Corporation other than Mr. Snyder (12,409 units) and H. Joseph Schutte (37,967
units).
Effective as of July 1996, Twinsys began offering disaster recovery and other
services to users of Unix-based computer systems in France through Twin-X SA,
a newly organized subsidiary. Twinsys holds a 59.9% interest in Twin-X, and
Roland Esnis and Francois Domine, Directeur Generale and Sales Manager of
Twinsys, respectively, each holds an approximate 20% interest in Twin-X.
Twinsys and Messrs. Esnis and Domine made proportional cash contributions to
Twin-X for their respective interests in Twin-X.
James P. Buren, a director of the Corporation, entered into a consulting and
non-competition agreement with the Corporation upon his retirement as
Executive Vice President-Technology on October 24, 1997. The agreement
provides that Mr. Buren will provide consulting services to the Corporation,
including technical product development, quality control and marketing, for
a term through March 31, 2000. For his consulting services, Mr. Buren is paid
a fixed daily rate based on services actually performed, subject to minimum
weekly compensation based on his availability for service. The agreement
provides that an option for 64,631 shares granted to Mr. Buren in 1996 will
become exerciseable in eight equal installments from April 1998 to January
2000. Mr. Buren also agreed to certain restrictions on the timing of any
sale by him of shares of common stock currently subject to options and
warrants and is entitled to certain rights to have his shares registered in
an underwritten offering of Common Stock by the Company. Mr. Buren has
agreed to continue to serve as a director of the Corporation so long as he
is nominated and elected each year and to resign as a director upon the
request of the other members of the Board of Directors. The agreement also
contains certain non-competition and confidentiality covenants.
It is the Corporation's policy that all material affiliated transactions and
loans will be made or entered into on terms that are no less favorable to the
Corporation than those that can be obtained from unaffiliated third parties.
All future material affiliated transactions and loans must be approved by a
majority of the independent directors who do not have an interest in the
transactions.
SIGNATURES
Pursuant to the requirements 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.
STRATEGIA CORPORATION
Date: April 30, 1998
By /s/ Richard W. Smith
Richard W. Smith,
President
