UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 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 March 31, 2000
[ ] 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 0-16172
COMPUTONE CORPORATION
----------------------------------------------
(Name of small business issuer in its charter)
Delaware 23-2472952
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1060 Windward Ridge Parkway, Suite 100, Alpharetta, Georgia 30005
----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number: (770) 625-0000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0l par value
----------------------------
(Title of class)
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 no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is 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 ended March 31, 2000 were $11,198,000.
On July 27, 2000, the aggregate market value (based on the closing sales price
on that date) of the voting stock held by non-affiliates of the registrant was
$40,800,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 12,118,308 shares of Common
Stock outstanding on July 27, 2000.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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<PAGE>
COMPUTONE CORPORATION
Items Amended in this Form 10-KSB/A Annual Report:
Part III
Page
----
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act................ 3
Item 10. Executive Compensation........................................... 5
Item 11. Security Ownership of Certain Beneficial Owners and
Management....................................................... 9
Item 12. Certain Relationships and Related Transactions................... 11
Signatures....................................................... 12
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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.
(a) Identification of Directors.
The following information regarding the Company's directors is based, in
part, on information furnished by these individuals.
Name Age Director Since
----------------- --- --------------
Richard A. Hansen 59 1992
John D. Freitag 71 1992
Perry J. Pickerign 36 1998
Erik Monninkhof 38 1999
Mr. Freitag, a private investor, who has been Chairman of the Board of the
Company since February 1999, served as the Acting President and Chief Executive
Officer of the Company during May, June and July 1998. He was Chairman of the
Board and Chief Executive Officer of the Company from November 1992 until April
1996. He is Chairman of the Board of Leopard Industries, Inc., a corporation
engaged in private investing.
Mr. Hansen has been an executive officer, director and principal
stockholder of Pennsylvania Merchant Group ("PMG"), an investment banking firm,
since November 1986 and is a director and executive officer of PMG Investors,
Inc. ("PMGI"), a wholly owned subsidiary of PMG, and various other entities
owned by PMG Group Inc., the holding company for PMG. He also served as the
Company's Chairman of the Board from April 1996 to February 1999. Mr. Hansen is
also a director of Ultra-Life Batteries, Inc., a manufacturer of lithium
batteries, and of a number of private companies.
Mr. Pickerign became President, Chief Executive Officer and a director of
the Company in August 1998. Mr. Pickerign was self-employed as a high technology
consultant from September 1997 to July 1998, was Director of Marketing for
Comtrol Corporation from June 1993 to September 1997, was a strategic planning
and marketing consultant from March 1991 to June 1993 and previously held
management positions with ITT Financial Services and 3M Company.
Mr. Monninkhof, a private investor and a director since May 13, 1999,
served as Managing Director of Dupaco B.V., a distributor of high-end computer
products, from 1985 to 1996. Since 1996, Mr. Monninkhof has been principally
engaged as a director of Monninkhof Holding B.V., a corporation engaged in
private investing.
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<PAGE>
The Board of Directors and Its Committees
The Board of Directors met four times during the Company's fiscal year
ended March 31, 2000. The Board of Directors currently does not have an
Executive Committee, a Nominating Committee or a Compensation Committee. The
Audit Committee of the Company's Board of Directors currently consists of
Richard A. Hansen, John D. Freitag and Erik Monninkhof. The Audit Committee
reviews the Company's selection and retention of independent auditors, audit
reports and management recommendations made by the Company's independent public
accountants.
Compensation of Directors
The Company's directors currently serve without compensation. Each director
of the Company is eligible to receive non-qualified stock options to purchase
shares of the Company's Common Stock in an amount determined by the Company's
Board of Directors from time to time under equity incentive plans maintained or
to be maintained by the Company. No such options were granted during the
Company's fiscal year ended March 31, 2000 or from that date to the date of this
Form 10-KSB/A Report.
(b) Identification of Executive Officers.
Reference is made to the information set forth under "Identification of
Directors" above with regard to Mr. Pickerign who is the Company's President and
Chief Executive Officer.
Keith H. Daniel, age 47, has served as the Company's Chief Financial
Officer since February 1999. From August 1998 to February 1999, Mr. Daniel
served as a financial consultant to the Company and others. From September 1996
until August 1998, Mr. Daniel was Chief Financial Officer of Space Master
International, Inc. and prior thereto held financial management positions with
Sivaco Wire Group and Keystone Consolidated Industries, Inc.
Darrin S. Sherrill, age 39, has served as the Company's Chief Operating
Officer since June 28, 2000 when the Company acquired Multi-User Solutions, Ltd.
("Multi-User"). For nine years prior thereto, Mr. Sherrill served as President
and Chief Executive Officer of Multi-User, a technology support and integration
company specializing in providing operating system support, systems integration
and on-site hardware maintenance for turn-key systems providers.
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<PAGE>
(c) Compliance with Section 16(a) of the Securities Exchange Act.
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the officers and directors of the Company, as well as persons who
own more than 10% of a class of equity securities of the Company, file reports
of their ownership of the Company's securities, as well as monthly statements of
changes in such ownership, with the Company, the Securities and Exchange
Commission (the "SEC") and any stock exchange on which the Company's equity
securities are then traded. Based upon written representations received by the
Company from its officers, directors and more than 10% stockholders, and the
Company's review of the monthly statements of ownership changes filed with the
Company by its officers, directors and more than 10% stockholders during the
Company's fiscal year ended March 31, 2000, the Company believes that all such
filings required during such fiscal year ended were made on a timely basis,
except for (i) a late Form 5 filing by Mr. Pickerign in which he reported
employee stock options granted to him by the Company in August 1998 and a late
Form 5 filing in which he reported four Form 4 transactions for the purchase of
an aggregate of 25,000 shares in June 1999 and July 1999 by his spouse and (ii)
a late Form 4 by John D. Freitag to report stock options granted to him by the
Company in September 1996, warrants granted to him by the Company in January
1994 and January 1999 and two purchases from the Company of an aggregate of
149,547 shares in February 1999 and June 2000.
Item 10. Executive Compensation.
The following table sets forth the compensation paid by the Company during
each of the three fiscal years ended March 31, 2000, April 2, 1999 and April 3,
1998 for services rendered in all capacities by the Chief Executive Officer of
the Company and the other most highly compensated executive officers of the
Company whose compensation exceeded $100,000 in the fiscal year ended March 31,
2000.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Awards
Annual ---------------------------
Compensation(1) Restricted Securities
Name and Fiscal ---------------------- Stock Underlying All Other
Principal Position Year Salary($) Bonus($) Awards($) Options(#) Compensation($)
------------------ ------ --------- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Perry J. Pickerign 2000 150,000 52,212 -- -- --
President and Chief 1999 100,000(1) -- -- 300,000 --
Executive Officer 1998 -- -- -- -- --
Keith H. Daniel 2000 110,000 5,000 -- -- --
Chief Financial Officer 1999 18,333(2) -- -- 85,000 --
1998 -- -- -- -- --
</TABLE>
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<PAGE>
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(1) Mr. Pickerign became the Company's President and Chief Executive Officer on
August 2, 1998.
(2) Mr. Daniel became the Company's Chief Financial Officer on February 1,
1999.
See "Employment Agreements." Mr. Daniel is currently being paid at the
annual rate of $126,500.
Report of the Compensation Committee of Computone Corporation
During the Company's fiscal year ended March 31, 2000, the Company's Board
of Directors as a whole established the compensation of the executive officers
of the Company, and there was not a separate Compensation Committee of the
Company's Board of Directors. The Company's Board of Directors followed
compensation policies for its executive officers intended to enhance the
Company's earnings and facilitate securing, retaining and motivating management
employees of high caliber and potential. The Company's executive compensation
consists of three components: base salary, cash bonuses based on the Company's
performance and long-term incentive awards in the form of stock options. The
persons eligible to receive awards under these policies are the officers and
other employees of the Company who are in positions in which their decisions,
actions and counsel significantly impact upon the short- and long-term goals and
strategies of the Company.
The Company establishes base salaries for its officers that are within the
range paid by technology companies in the Company's peer group. The Company pays
incentive bonuses on a formula basis to its Chief Executive Officer and its
Chief Financial Officer depending upon the Company's achievement of specified
performance goals. The Company also grants stock options to its officers,
including its Chief Executive Officer, based on their level of responsibility
and support for the Company's long-term strategic objectives. By providing its
officers with an opportunity to benefit from a long-term increase in the value
of the Company's Common Stock, the Company believes it will align the interests
of its officers and employees with the interests of the Company's stockholders
and tie a significant portion of the Company's executive compensation to
stockholder returns.
See "Employment Agreements" for further information regarding the
compensation of Mr. Pickerign as the Company's Chief Executive Officer and Mr.
Daniel as its Chief Financial Officer and, commencing in the current fiscal
year, Mr. Sherrill as the Company's Chief Operating Officer.
Employment Agreements
The Company entered into an employment agreement with Mr. Pickerign dated
as of August 2, 1998. The employment agreement provides for the employment of
Mr. Pickerign
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<PAGE>
as President and Chief Executive Officer of the Company for a period of three
years and for the automatic renewal of Mr. Pickerign's employment for successive
periods of one year, subject to prior written notice of termination by Mr.
Pickerign or the Company, in each case not later than 180 days prior to the
expiration of the then current term. Under the employment agreement, Mr.
Pickerign receives an annual salary of $150,000, and is entitled to a quarterly
bonus in an amount equal to 10% of the Company's earnings before interest and
taxes in the preceding quarter. On the date of the employment agreement, the
Company granted Mr. Pickerign non-qualified stock options to purchase 300,000
shares of the Company's Common Stock at an exercise price of $1.50 per share, of
which 50,000 shares vested immediately, 50,000 shares vested on August 2, 1999,
100,000 shares will vest on August 2, 2000 and 100,000 shares will vest on
August 2, 2001. Pursuant to the employment agreement, the Company provides Mr.
Pickerign with an automobile at the Company's sole cost and expense.
The Company entered into an employment agreement with Mr. Daniel dated
February 1, 1999. The employment agreement provides for the employment of Mr.
Daniel as Chief Financial Officer of the Company for a period of two years and
for the automatic renewal of Mr. Daniel's employment for successive periods of
one year, subject to prior written notice of termination by Mr. Daniel or the
Company, in each case not later than 180 days prior to the expiration of the
then current term. Under the employment agreement, Mr. Daniel receives an annual
salary of $110,000, and is entitled to a quarterly bonus of $5,000 for each
quarter ending during the term of the employment agreement if the Company's
earnings before income and taxes for such quarter exceeds $100,000 and an annual
bonus of $10,000 for each fiscal year ending during the term of the employment
agreement if the Company's earnings before income and taxes for such calendar
year exceeds $1,000,000. If, during Mr. Daniel's employment, Mr. Daniel's duties
and responsibilities are materially increased as a result of his financial
reporting duties with respect to a new subsidiary of the Company, Mr. Daniel's
base salary shall increase to $126,500. On the date of the employment agreement,
the Company granted Mr. Daniel non-qualified stock options to purchase 75,000
shares of the Company's Common Stock at an exercise price of $1.88 per share, of
which 25,000 shares vested immediately, 25,000 shares vested on February 1, 2000
and 25,000 shares will vest on February 1, 2001. If the Company terminates Mr.
Daniel's employment for any reason other than for Cause (as defined in the
employment agreement) or on account of Mr. Daniel's death or Permanent
Disability (as defined in the employment agreement) and such termination occurs
as of a date that is within 180 days preceding or within 180 days after the
consummation of a Change in Control (as defined in the employment agreement),
the Company shall pay to Mr. Daniel within 30 days after the event giving rise
to such payment occurs an amount equal to the sum of (x) (1) Mr. Daniel's base
salary accrued through the date of termination of Mr. Daniel's employment and
(2) any bonus required to be paid to Mr. Daniel and (y) a severance payment
equal to one-half of Mr. Daniel's annual base salary as of the effective date of
termination of Mr. Daniel's employment.
On June 28, 2000, as previously reported, the Company acquired Multi-User
from its two shareholders, Darrin S. Sherrill and John H. Gardner, Jr., by the
merger of Multi-User into a subsidiary of the Company. The merger consideration
initially paid to Messrs. Sherrill
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<PAGE>
and Gardner consisted in the aggregate of $4,000,000 in cash and 800,000 shares
of Common Stock. The merger consideration is subject to increase by up to
$1,500,000 (the "Additional Payment"), depending upon Multi-User's satisfaction
of specified performance criteria during the first two years following the
acquisition.
On June 28, 2000 the Company also entered into an employment agreement with
Mr. Sherrill. The employment agreement provides for the employment of Mr.
Sherrill as Chief Operating Officer of the Company and as President of
Multi-User for a period of three years and for the automatic renewal of Mr.
Sherrill's employment for successive periods of one year, subject to prior
written notice of termination by Mr. Sherrill or the Company, in each case not
later than 180 days prior to the expiration of the then current term. Under the
employment agreement, Mr. Sherrill receives an annual salary of $150,000. In
addition, if the maximum Additional Payment is earned prior to the second
anniversary of the Multi-User acquisition, Mr. Sherrill is also entitled to a
bonus of 6.5% of the Gross Profit (as defined) of Multi-User for the period
beginning with the date on which the maximum Additional Payment is earned and
ending on the second anniversary of the Multi-User acquisition. Mr. Sherrill is
also entitled to a bonus of $100,000 for each quarter during the twelve-month
period following the second anniversary of the Company's acquisition of
Multi-User in which the Gross Profit of Multi-User exceeds by 7% or more the
Gross Profit of Multi-User in the immediately preceding quarter. On the date of
the employment agreement, the Company granted Mr. Sherrill non-qualified stock
options to purchase 50,000 shares of the Company's Common Stock at an exercise
price of $4.625 per share, all of which vest on June 28, 2003. Pursuant to the
employment agreement, the Company provides Mr. Sherrill with an automobile
allowance of $1,200 per month.
During the Company's fiscal year ended March 31, 2000, no options were
granted to Mr. Pickerign or to Mr. Daniel.
The following table sets forth information with respect to options
exercised during the fiscal year ended March 31, 2000 and held on March 31, 2000
by Mr. Pickerign and Mr. Daniel.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION> Number of Securities Value of Unexercised
Shares Underlying In-the-Money
Acquired Options at Fiscal Year End Options at Fiscal Year End
on Value ----------------------------- ---------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------ -------- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Perry J. Pickerign -- -- 200,000 100,000 $ 737,500 $368,750
Keith H. Daniel -- -- 60,000 25,000 197,500 82,812
</TABLE>
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of July 27, 2000 the amount and
percentage of the Company's outstanding Common Stock beneficially owned by (i)
each person who is known by the Company to own beneficially more than 5% of its
outstanding Common Stock, (ii) each director, (iii) each executive officer named
in the Summary Compensation Table and (iv) all executive officers and directors
of the Company as a group.
<TABLE>
<CAPTION>
Shares Percent of
Name of Individual Beneficially Outstanding
or Identity of Group Owned (1) Common Stock (2)
-------------------- ------------ ----------------
<S> <C> <C>
5% Holders (Exclusive of Directors):
Thomas J. Anderson....................................... 720,000 5.94%
Roswell, Georgia
Directors:
Richard A. Hansen........................................ 2,038,309(3) 16.66
Four Falls Corporate Center
West Conshohocken, PA 19428-2961
John D. Freitag.......................................... 607,401(4) 4.90
9304 Belle Terre Way
Potomac, MD 20854-4642
Perry J. Pickerign....................................... 225,000(5) 1.83
Suite 100
1060 Windward Ridge Parkway
Alpharetta, GA 30005-3992
Erik Monninkhof.......................................... 33,256 --
Koningin Julianaweg 20
3791 VB Achterveld
The Netherlands
Executive Officers (6):
Keith H. Daniel.......................................... 72,000(7) --
Suite 100
1060 Windward Ridge Parkway
Alpharetta, GA 30005-3992
Darrin S. Sherrill....................................... 514,150(8) 4.24
Suite E
4350 International Boulevard
Norcross, GA 30093
</TABLE>
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<TABLE>
<S> <C> <C>
All directors and executive officers
as a group (6 persons)................................. 3,490,116 27.34
</TABLE>
----------
(1) Information furnished by each individual named. This table includes shares
that are owned jointly, in whole or in part, with the person's spouse, or
individually by his spouse.
(2) Less than 1% unless otherwise indicated.
(3) Excludes 102,878 shares owned by PMG, of which Mr. Hansen is an executive
officer, a director and a principal stockholder, and PMG's wholly owned
subsidiary, PMGI, of which Mr. Hansen is an executive officer and a
director. Mr. Hansen disclaims beneficial ownership of the 102,878 shares
owned by PMG and PMGI. Includes 120,000 shares Mr. Hansen has the right to
purchase at a price of $2.10 per share pursuant to a warrant exercisable
until January 14, 2004 and 4,167 shares owned by Mr. Hansen's spouse.
(4) Includes 100,000 shares which Mr. Freitag may purchase pursuant to a
currently exercisable stock option at a price of $2.00 per share, 140,000
shares that Mr. Freitag has the right to purchase at a price of $2.10 per
share pursuant to a warrant exercisable until January 14, 2004 and 25,000
shares that Mr. Freitag has the right to purchase at a price of $1.125 per
share pursuant to a warrant exercisable until January 3, 2002.
(5) Includes 100,000 shares which Mr. Pickerign may purchase at a price of
$1.50 per share pursuant to a currently exercisable stock option, and
100,000 shares which Mr. Pickerign may purchase at a price of $1.50 per
share pursuant to a stock option which will become exercisable within 60
days of the date of this Form 10-KSB/A. Also includes 25,000 shares owned
by Mr. Pickerign's spouse.
(6) Excludes Executive Officers listed under "Directors."
(7) Includes 50,000 shares which Mr. Daniel may purchase at a price of $1.88
per share pursuant to a currently exercisable stock option and 10,000
shares which Mr. Daniel may purchase at a price of $2.00 per share pursuant
to a currently exercisable stock option.
(8) These shares are owned jointly with Mr. Sherrill's spouse. Excludes an
option held by Mr. Sherrill to purchase 50,000 shares at a price of $4.625
per share which becomes exercisable on or after June 28, 2003.
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<PAGE>
Item 12. Certain Relationships and Related Transactions.
Duane, Morris & Heckscher LLP, a law firm of which Frederick W. Dreher,
Secretary of the Company since March 1994, is a partner, serves as the Company's
general counsel and charges customary fees to the Company for legal services
rendered. In December 1999, the Company issued 325,000 shares of its Common
Stock to Duane, Morris & Heckscher LLP in payment of $691,000 in fees due for
legal services rendered to the Company between September 1997 and December 1999.
The shares issued were not registered under the Securities Act of 1933, as
amended (the "1933 Act") and may not be sold absent such registration or an
exemption therefrom.
On June 28, 2000, the Company completed (i) the sale in a private placement
of 1,249,671 shares of the Company's Common Stock at a price of $3.25 per share
to a group of accredited investors and realized gross proceeds of $4,000,000
(the "Private Placement") (ii) the private placement of an 11% promissory note
in the principal amount of $2,500,000 due December 28, 2001 to an accredited
investor (the "Secured Debt Transaction") together with a warrant to purchase
392,577 shares of the Company's Common Stock exercisable until June 28, 2003 at
$3.25 per share.
The purchasers of the Company's Common Stock in the Private Placement
included John D. Freitag, a director of the Company, who purchased 30,500 shares
of Common Stock for $99,125, Richard A. Hansen, a director of the Company, who
purchased 100,000 shares of Common Stock for $325,000 and Erik Monninkhof, a
director of the Company, who purchased 30,769 shares of Common Stock for
$100,000.
PMG, an investment banking firm, of which Mr. Hansen is an executive
officer, director and a principal stockholder, acted as the Company's agent for
the Private Placement and the Secured Debt Transaction. For its services in
connection with the Private Placement, PMG received a commission of $324,915, or
8% of the purchase price of the Common Stock sold in the Private Placement, and
was issued a warrant to purchase 24,993 shares of the Company's Common Stock,
exercisable until June 28, 2003 at $3.25 per share. For its services in
connection with the Secured Debt Transaction, PMG received a commission of
$175,000, or 7.0% of the proceeds of the Secured Debt Transaction.
The Company believes the foregoing transactions were made on terms no less
favorable to the Company than could have been otherwise obtained from
unaffiliated third parties under prevailing circumstances.
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<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.
COMPUTONE CORPORATION
By: /s/ Perry J. Pickerign
----------------------
Perry J. Pickerign
President and Chief Executive Officer
(principal executive officer)
Date: July 31, 2000
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