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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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ............. TO .............
COMMISSION FILE NUMBER 0-19705
LINKON CORPORATION
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
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<S> <C>
NEVADA 13-3469932
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
140 SHERMAN STREET, FAIRFIELD, CT 06430
- --------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(203) 319-3175
(ISSUER TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, $.001 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 PAST 90 DAYS. YES X NO
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained
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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.
State issuer's revenues for its most recent fiscal year. $4,243,996
As of May 6, 1999 the aggregate market value of the voting stock held
by non-affiliates was $6,368,365
Number of shares outstanding of the issuer's common stock, as of May 6,
1999 was 13,659,478
DOCUMENTS INCORPORATED BY REFERENCE
The issuer's definitive proxy statement to be filed with the Securities
and Exchange Commission within 120 days after January 31, 1999 is incorporated
by reference into Part III of this Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The Company's Board of Directors currently consists of four members. Unless a
director has been elected by the Board of Directors to fill a vacancy on the
Board, all of the directors are elected annually and hold office until the next
succeeding Annual Meeting of Stockholders or until their respective successors
are duly elected and qualified. The Board may increase the size of the Board in
the future in accordance with the Company's Bylaws.
The following table sets forth the name, age, business experience for the past
five years and other directorships of each of the Company's directors:
Joao M. Carvalho(57) Mr. Carvalho has served as a director of the Company
since June, 1990. Mr. Carvalho has been the President
of Union Commercial Services, Ltd., an offshore
investment company with holdings in the United
States, Africa and Europe since April, 1990. He is
also the President of Unicar Industrial e Commercial,
Lda. (also known as Uniao Commercial de Automoveis,
Ltd.), a distributor and service provider for
American and European automotive, motorcycle,
agricultural and industrial machine manufacturers and
finance companies. Mr. Carvalho has held this
position since April, 1990. He is also the President
of Joao Carvalho, Lda., a real estate investment and
development company and operations management company
since 1978. For the past three years, Mr. Carvalho
has also served as President of Unicom International
of Florida, Inc.
Charles Castelli(54) Mr. Castelli founded Linkon Delaware, Inc. ("Linkon
Delaware"), which was engaged in consulting and
research and development of computer hardware and
software products for the telecommunications industry
and which merged with the Company in June, 1990. He
is presently the Company's Chief Technology Officer
("CTO") and Chairman of the Board of Directors. He
has served as Chairman and as a Director since June,
1990. He served as the Company's President from June,
1990 until March, 1993, when be became CTO.
Lee W. Hill (54) Mr. Hill currently serves as the Company's President
and Chief Executive Officer, and has served as such
since March, 1993. Mr. Hill also serves as a Director
of the Company, a position he has held since
September, 1996. From December, 1990 until joining
the Company, Mr. Hill was the founder and sole
principal of Affluence, Inc., a management consulting
firm located in Greenwich, Connecticut.
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Daniel Zwiren (42) Mr. Zwiren has served as a director of the Company
since June, 1996. From January 1997 to May 1998 Mr.
Zwiren served as a derivative products consultant to
Eurobrokers, Inc., a brokerage firm located in New
York City. From May 1998 to present and during the
period from and prior to April 1993 until December
1996, Mr. Zwiren served as Chief Executive
Officer--Money Market Products of Lasser Marshall
Inc., an investment banking firm located in New York
City, New York.
BOARD AND COMMITTEE MEETINGS
The Board of Directors has established one committee. The Management
Compensation and Option Committee is comprised of Messrs. Carvalho and Zwiren,
and is responsible for the review and approval of executive officers' salary
levels and adjustments, options and other incentive compensation awards and
other financial arrangements, including bonus awards and fringe benefits. The
Management Compensation and Option Committee did not meet during fiscal 1999;
however, it acted by unanimous written consent on several occasions.
Linkon does not have a standing nominating committee. Instead, the Board of
Directors selects nominees for directors.
The Board of Directors held 1 regularly scheduled meeting during fiscal 1999.
Each director except Mr. Carvalho attended the meeting.
EXECUTIVE OFFICERS
Thomas V. Cerabona (47) Mr. Cerabona has served as the Company's Senior Vice
President, Operations since March, 1996. From 1994
through 1995, Mr. Cerabona served as the Vice
President of Operations of Paragon Networks, a data
communications equipment company located in
Southbury, Connecticut. From 1986 through 1994 Mr.
Cerabona held various management positions, including
Vice President and General Manager, with Cobotyx
Corporation, a voice processing equipment company
located in Danbury, Connecticut. Mr. Cerabona was
responsible for the financial operations of such
corporation and in such capacity was responsible for
commencing a reorganization of Cobotyx Corporation
pursuant to Chapter 11 of the Bankruptcy Code of
1986, as amended. This bankruptcy proceeding was
commenced on May 5, 1993 and culminated in a
successful reorganization and a subsequent sale of
Cobotyx's operating assets.
James E. Linley (45) Mr. Linley currently serves as the Company's Vice
President of Engineering, a position he has held
since March, 1991. In such capacity, he manages the
research
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and development, software development and technical
support areas for the Company.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth the compensation for the years ended January 31,
1999, 1998 and 1997 paid to the Company's Chief Executive Officer and the other
named executive officers whose compensation is required to be disclosed pursuant
to Item 402(a)(2) of Regulation S-B promulgated under the Securities Exchange
Act of 1934, as amended:
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ANNUAL COMPENSATION(1) AWARDS
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NAME AND UNDERLYING FISCAL SALARY OTHER ANNUAL SHARES
PRINCIPAL POSITION YEAR ($) BONUS ($) COMPENSATION ($) OPTIONS
- ------------------ ------ -------- --------- ---------------- -------
<S> <C> <C> <C> <C> <C>
Lee W. Hill.................................. 1999 $166,499 $ 45,000 $ 8,400(2) 150,000
President and 1998 $150,000 $ 45,000 $ 8,040(2) 50,000
Chief Executive Officer 1997 $150,000 $ 25,000 $ 7,349(2) 150,000
Charles Castelli............................. 1999 $140,750 $ 54,000 $ 8,400(3) 100,000
Chairman, 1998 $ 96,000 $ 19,000 $ 8,640(3) 7,000
Chief Technology 1997 $ 96,000 -- $ 8,400(3) 162,000
Officer
Thomas V. Cerabona........................... 1999 $122,474 $ 36,500 $ 6,000(4) 75,000
Vice President of 1998 $102,000 $ 34,500 $ 6,000(4) 30,000
Operations 1997 $ 89,250 $ 11,500 $ 6,000(4) 75,000
</TABLE>
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(1) Columns entitled "Restricted Stock Award(s)", "LTIP Payouts", and "All
Other Compensation" have been excluded because they are not applicable
to any fiscal year covered by this table.
(2) Mr. Hill has received an automobile allowance from the Company of $670,
$670 and $612 per year for fiscal years 1999, 1998 and 1997,
respectively.
(3) Mr. Castelli has received an automobile allowance from the Company of
$700, $720 and $700 per month for fiscal years 1999, 1998 and 1997,
respectively.
(4) Mr. Cerabona has received an automobile allowance from the Company for
the last three fiscal years of $500 per month.
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information concerning grants of stock
options to each of the Company's named executive officers during the
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fiscal year ended January 31, 1999.
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<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE OR EXPIRATION
NAME OPTIONS GRANTED FISCAL 1999(2) BASE PRICE DATE
- ---- --------------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Lee W. Hill ................................ 150,000 26.2% $ 1.50 5/19/08
Charles Castelli ........................... 100,000 3.7% $ 1.50 5/19/03
Thomas V. Cerabona ......................... 75,000 15.7% $ 1.50 5/19/08
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(1) Each of these options was granted pursuant to the Plan and is subject
to the terms of such plan. These options were granted at an exercise
price equal to the fair market value of the Company's Common Stock on
the date of grant.
(2) An aggregate 598,500 options were granted to employees, officers and/or
directors and consultants of the Company during fiscal year 1999.
----------------
AGGREGATE OPTION EXERCISES IN FISCAL YEAR ENDED JANUARY 31, 1999
AND FISCAL YEAR END OPTION VALUES
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VALUE OF
UNEXERCISED OPTIONS (#) UNEXERCISED IN-THE-MONEY
AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
Lee W. Hill ........................... 600,000/0 $0
Charles Castelli ...................... 269,000/0 $0
Thomas V. Cerabona .................... 180,000/0 $0
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EMPLOYMENT AGREEMENTS
On May 19, 1998, the Company and Mr. Lee W. Hill, the Company's President and
Chief Executive Officer, entered into a three year employment agreement. The
agreement provides that Mr. Hill will receive a base salary of $150,000 which
will be reviewed annually and a performance bonus of $25,000 which is to be paid
annually based upon the achievement of certain defined corporate goals. In
addition, Mr. Hill will, subject to approval of the Plan Amendment, receive
150,000 immediately vested options to purchase Common Stock as a signing bonus,
which options will have an exercise price equal to $1.50 (the fair market value
of a share of Common Stock on the date of grant). Mr. Hill is also entitled to
participate in Company benefit plans and will receive a one month paid vacation
per year and an automobile allowance of $700 per month over the term of the
agreement.
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On May 19, 1998, the Company and Mr. Charles Castelli, the Company's Chairman
and CTO, entered into a three year employment agreement. The agreement provides
that Mr. Castelli will receive a monthly base salary of $150,000, which will be
reviewed annually and a performance bonus of $25,000 which is to be paid
annually based upon the achievement of certain defined corporate goals. In
addition, Mr. Castelli, subject to approval of the Plan Amendment, will receive
100,000 fully vested options to purchase Common Stock as a signing bonus, which
options will have an exercise price equal to $1.65 (110% of the fair market
value of a share of Common Stock on the date of grant). Mr. Castelli is also
entitled to participate in Company benefit plans and will receive a one month
paid vacation per year and an automobile allowance of $700 per month over the
term of the agreement.
On May 19, 1998, the Company and Mr. Thomas V. Cerabona, the Company's Senior
Vice President--Operations and Corporate Secretary, entered into a two year
employment agreement. The agreement provides that Mr. Cerabona will receive a
base salary of $125,000, which will be reviewed annually and a performance bonus
of $25,000 which is to be paid annually based upon the achievement of certain
defined corporate goals. In addition, Mr. Cerabona will, subject to approval of
the Plan Amendment, receive 75,000 fully vested options to purchase Common Stock
as a signing bonus, which options will have an exercise price equal to $1.50
(the fair market value of a share of Common Stock on the date of grant). Mr.
Cerabona is also entitled to participate in Company benefit plans and will
receive one month paid vacation per year and an automobile allowance of $500 per
month over the term of the agreement.
COMPENSATION OF DIRECTORS
Non-Employee Directors are granted each quarter shares of Common Stock of the
Company having an aggregate fair market value equal to $3,750 as of the last day
of each such fiscal quarter. Board members are reimbursed for all reasonable
out-of-pocket expenses, including travel expenses, incurred in connection with
their services as directors of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of May 31, 1999, the number of outstanding
shares of the common stock of Linkon beneficially owned by each of the directors
and executive officers individually, and by all directors and executive officers
as a group. Except as otherwise indicated, each of the following persons has
sole voting and investment power with respect to the shares beneficially owned
by him.
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<CAPTION>
NAME AND ADDRESS APPROX.
OF BENEFICIAL BENEFICIAL PERCENT
OWNER OWNERSHIP OF CLASS
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<S> <C> <C>
Joao M. Carvalho ............................................................ 130,996(1) 96 %
Charles Castelli ............................................................ 2,069,000(2) 15.16%
Thomas V. Cerabona .......................................................... 180,000(3) 1.32%
Lee W. Hill ................................................................. 600,000(4) 4.40%
James E. Linley ............................................................. 741,600(5) 5.43%
Daniel Zwiren ............................................................... 202,662(6) 1.49%
</TABLE>
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<CAPTION>
NAME AND ADDRESS APPROX.
OF BENEFICIAL BENEFICIAL PERCENT
OWNER OWNERSHIP OF CLASS
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<S> <C> <C>
Executive Officers and Directors as a Group
(6 persons) ............................................................... 3,924,258(7) 28.76%
Total Shares Outstanding as of May 31, 1999 ................................. 13,645,228
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(1) Comprised of (i) 80,996 shares of Common Stock held by Mr. Carvalho and (ii)
50,000 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $.75 per share.
(2) Comprised of (i) 1,800,000 shares of Common Stock held by Mr. Castelli, (ii)
162,000 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.83 per share, (iii) 7,000 shares
currently acquirable upon the exercise of options to purchase Common Stock at an
exercise price equal to $0.62 per share and (iv)100,000 shares currently
acquirable upon the exercise of options to purchase Common Stock at an exercise
price equal to $1.65 per share.
(3) Comprised of (i) 75,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.75 per share,
(ii) 30,000 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.56 per share and (iii) 75,000
shares currently acquirable upon the exercise of options to purchase Common
Stock at an exercise price equal to $1.50 per share.
(4) Comprised of (i) 400,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.75 per share,
(ii) 50,000 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.56 per share and (iii) 150,000
shares currently acquirable upon the exercise of options to purchase Common
Stock at an exercise price equal to $1.50 per share.
(5) Comprised of (i) 600,000 shares of Common Stock held by Mr. Linley, (ii)
9,600 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.75 per share (3,100 of which
options are held by Anna Linley, Mr. Linley's wife, who is also an employee of
the Company), (iii) 24,000 shares currently acquirable upon the exercise of
options to purchase Common Stock at an exercise price equal to $0.56 per share
(4,000 of which options are held by Anna Linley) and (iv) 108,000 shares
currently acquirable upon the exercise of options to purchase Common Stock at an
exercise price equal to $1.50 per share (10,000 of which options are held by
Anna Linley).
(6) Comprised of (i) 94,329 shares of Common Stock held by Mr. Zwiren, (ii)
33,333 shares currently acquirable upon the exercise of 33,333 Warrants to
purchase Common Stock at an exercise price equal to $1.50 per share, and (iii)
75,000 shares currently acquirable upon the exercise of options to purchase
Common Stock at an exercise price equal to $0.75 per share.
(7) Comprised of (i) 2,575,325 shares currently held by executive officers and
directors as a group, (ii) 1,348,933 shares currently acquirable upon the
exercise of warrants or options to purchase Common Stock at exercise prices
ranging from $0.56 to $1.50 per share.
<PAGE> 9
To the knowledge of Linkon, the following table lists those parties (other than
Messrs. Castelli and Linley each of whose beneficial ownership is disclosed in
the immediately preceding table) who beneficially owned more than 5% of the
Common Stock outstanding as of May 31, 19998:
<TABLE>
<CAPTION>
AMOUNT OF APPROX.
NAME AND ADDRESS BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------- --------- --------
<S> <C> <C>
Mr. James Scibelli .................. 2,680,000(1) 8.71%
Mr. Piers M. MacDonald .............. 913,000(2) 6.85%
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(1) Comprised of (i) 1,680,000 shares of Common Stock held by RG Capital Fund,
LLC and (ii) 1,000,000 shares of Common Stock issuable upon the exercise of
Warrants held by Roberts & Green, Inc. Mr. Scibelli, by virtue of the fact that
he is the sole shareholders, sole director and sole officer of Roberts & Green,
Inc. has sole power to vote and dispose of shares of Common Stock held by
Roberts & Green, Inc. Mr. Scibelli, by virtue of the fact that he is the sole
shareholder, sole director and sole officer of RG Capital Corp., the Managing
Director of RG Capital Fund, LLC, has the shared power to vote and sole power to
dispose of the shares of Common Stock held by RG Capital Fund, LLC. As such, Mr.
Scibelli beneficially owns 2,680,000 shares of the Company's Common Stock.
Excludes 720,000 shares of Common Stock held by certain investors designated by
RG Capital Fund LLC pursuant to a Subscription and Stock Purchase Agreement
between the Company and RG Capital Fund, LLC.
(2) Comprised of (i) 538,000 shares of Common Stock owned by Gulfstream
Partners, L.P. ("Gulfstream"), a limited partnership of which Mr. MacDonald is
managing general partner, (ii) 120,000 shares of Common Stock held by Mr.
MacDonald, and (iii) 255,000 shares of Common Stock held by Bonner MacDonald,
Mr. MacDonald's wife.
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, no director, executive officer or beneficial owner of 10% or more of the
Company's Common Stock failed to make a requisite filing on a timely basis.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 6, 1998, the Company consummated an equity and debt financing
transaction with RG Capital Fund LLC (the "RG Fund"). The equity financing part
of the transaction involved the sale to the RG Fund and certain investors
designated by it, pursuant to the terms of a Subscription and Stock Purchase
Agreement (the "RG Subscription Agreement") between the Company and the RG Fund,
of an aggregate of 2,400,000 shares of the Company's Common Stock for
anaggregate consideration of $1,800,000.
The debt portion of the RG Fund financing consisted of a loan to the Company by
the RG Fund in the principal amount of $1,000,000. The loan is evidenced by a
promissory note issued by the Company to the RG Fund in like principal amount
bearing interest at an annual rate of 8%. The RG Fund promissory note is
unsecured and payable in one lump sum on April 5, 2000.
<PAGE> 10
On April 6, 1998, the Company also issued to Roberts & Green, Inc. ("R&G")
warrants to purchase 1,000,000 shares of the Company's Common Stock at a price
of $1.50 per share in connection with its entry into an investment banking
financial advisory services agreement with R&G.
On November 17, 1998, the Company completed a debt financing in the amount of
$200,000, securred by a 6 month Promissory Note in favor of James Scibelli. As a
part of the transaction, the Company issued 40,000 Warrants at an exercise price
of $0.50.
On December 9, 1998, the Company completed a debt financing in the amount of
$300,000, securred by a 6 month Promissory Note in favor of Woodland Partners.
As a part of the transaction, the Company issued 60,000 Warrants at an exercise
price of $0.50.
During the period of 2/1/99 and 4/30/99, the Company has raised approximately
$380,000 through a combination of stock option and warrant exercises and short
term debt financing.
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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 executed on this 1st day of June, 1999.
LINKON CORPORATION
By: /s/ Lee W. Hill
--------------------------------------
Lee W. Hill, Chief Executive
Officer, President and Director
By: /s/ Thomas V. Cerabona
--------------------------------------
Thomas V. Cerabona
Senior Vice President of Operations,
Chief Accounting Officer and Secretary
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant in the capacities and on
the dates indicated.
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<CAPTION>
Signature Title Date
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<S> <C> <C>
/s/Charles Castelli Chairman of the June 1, 1999
- -------------------------- Board of Directors
Charles Castelli
/s/Daniel Zwiren Director June 1, 1999
- --------------------------
Daniel Zwiren
Director June 1, 1999
- --------------------------
Joao Carvalho
/s/ Lee Hill Chief Executive June 1, 1999
- -------------------------- Officer, President
Lee W. Hill and Director
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