SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Mark One)
|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 0-26284
Milestone Scientific Inc.
-------------------------
(Name of Small Business Issuer in its Charter)
Delaware 11-309811
-------- ---------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
220 South Orange Avenue, Livingston Corporate Park, Livingston, NJ 07039
------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number (973) 716-0087
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange
------------------- on Which Registered
-------------------
Common Stock, par value $.001 per share American Stock Exchange
Securities Registered under Section 12(g) of the Exchange Act:
None
----
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 there is 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 the registrant's knowledge, in definitive proxy of
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|
<PAGE>
For the year ended December 31, 1997, the revenues of the registrant were
$2,854,271.
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant, based on the closing price on the American
Stock Exchange on April 29, 1998 of $15 1/2 was approximately
$99,857,448.
As of April 24, 1998, the registrant has a total of 8,793,588 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
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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 current executive officers and directors of the Company and their
respective ages as of December 31, 1997 are as follows:
Director
Name Age Position Since
- ------------------------- --- ---------------------------------------- --------
Leonard A. Osser ....... 50 Chairman and Chief Executive Officer of 1991
the Company
Daniel R. Martin ....... 60 President, Chief Operating Officer and 1998
Director of the Company
Gregory Volok .......... 48 Executive Vice President and Director of 1996
the Company and Chief Operating Officer
of Spintech
Joel Warady ............ 41 Vice President of the Company and
President of Wisdom
Michael J. McGeehan .... 30 Vice President and Director of the 1995
Company
Giovanni Montoncello ... 51 Director of the Company 1995
David Sultanik(1)(2) ... 41 Director of the Company 1996
Stephen A. Zelnick(1) .. 60 Director of the Company 1996
Paul Gregory ........... 63 Director of the Company 1997
Louis I. Margolis(1)(2) 54 Director of the Company 1997
Leonard M. Schiller(2) . 56 Director of the Company 1997
Larry Haimovitch ....... 52 Director of the Company 1997
- ----------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
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Leonard A. Osser has been President, Chief Executive Officer and a
director of the Company since July 1991. From such date until July 1997, he also
served as the Chief Financial Officer of the Company. From 1980 until the
consummation of the Company's public offering in November 1995, he had been
primarily engaged as the principal owner and Chief Executive of U.S. Asian
Consulting Group, Inc., a New Jersey based provider of consulting services in
"work-out" and "turnaround" situations for publicly and privately owned
companies in financial difficulty. During his career, Mr. Osser has provided
consulting services for, or with respect to, companies in such related
industries as medical devices, resource recovery and reprocessing and waste
disposal and a wide variety of other industries including fashion accessories,
entertainment, telecommunications, wood processing and securities. While
consulting for, or serving as an executive in, the securities industry, Mr.
Osser structured and arranged for financing and evaluated a large number of
companies in diverse industries.
Daniel R. Martin has been President, Chief Operating Officer and a
director of the Company since March 1998. From January 1990 to October 31, 1997,
Mr. Martin was the President, Chief Operating Officer and director, and later
Chief Executive Officer of E-Z-EM, Inc., a manufacturer of medical devices and
pharmaceuticals for diagnostic imaging. Earlier in his career he was Vice
President of Sterling Drug, Inc., Managing Director of various Merck & Company
overseas subsidiaries and a management consultant with McKinsey & Company, Inc.
Gregory Volok has been Executive Vice-President, Chief Operating Officer
and a director of the Company since December 1996. He initially joined the
Company in March 1996 as the President of Princeton PMC, Inc., a wholly owned
subsidiary of the Company. For more than ten years prior thereto, Mr. Volok
served in various sales and marketing executive positions of increasing
responsibility with Dentsply International, Inc. (the world's largest
distributor or dental supplies and equipment), including serving as the
executive responsible for launching its caulk endodontics line and the executive
responsible for domestic sales of its Cavitron Division.
Joel Warady has been Vice President of the Company since January 1997 and
President of Wisdom for more than five years.
Michael J. McGeehan has been a Vice-President of the Company since January
1997 and a director of the Company since June 1995. From July 1994 through March
1997, he was the managing Director of Forefront Information Strategies, a New
Jersey based company specializing in business process re-engineering and the
design and implementation of computer database systems. In addition, from August
1994 to January 1995, he was a manager for American International Group, a
world-wide property and casualty insurer, where he managed a staff of 12
database administrators. From January 1991 through July 1994, he held positions
with Microsoft Corporation, first as a database specialist and network systems
engineer and then as a product manager for Microsoft Access.
Giovanni Montoncello has been a director of the Company since June 1995.
He has been self-employed as an Interior Designer in Milan, Italy for more than
five years. He has also served during such period as a part-time instructor in
interior design at the G. Cova Art School in Milan, Italy.
David Sultanik has been a director of the Company since January 1996. He
has been the managing/administrative partner of the Certified Public Accounting
firm Sultanik and Krumholz, LLC since June 1994. For more than five years prior
to that he was a principal at the accounting firm Perelson, Johnson & Rones,
P.C.
4
<PAGE>
Stephen A. Zelnick has been a director of the Company since January 1996.
He has been a partner in the law firm Morse, Zelnick, Rose & Lander, LLP since
its inception in August 1995. For more than five years prior to that he was of
counsel to the law firm Dreyer and Traub, LLP and has been practicing for more
than 30 years.
Paul Gregory has been a director of the Company since April 1997. Mr.
Gregory has been a business and insurance consultant at Innovative Programs
Associates Inc. and Paul Gregory Associates Inc. since January 1995 and January
1986, respectively, where he services, among other entities, foreign and
domestic insurance groups, law and accounting firms and international
corporations. From January 1992 to January 1993, Mr. Gregory served as an
appointed Advisor to the Commissioner of Insurance of the state of Louisiana in
the areas of liquidations, rehabilitations, insurance policy risk transfers and
reinsurance.
Louis I. Margolis has been a director of the Company since April 1997. Mr.
Margolis has been a General Partner of Pine Street Associates, L.P., a private
investment partnership that invests in other private limited partnerships, since
January 1994. In January 1997, Mr. Margolis formed and is the President and sole
shareholder of Chapel Hill Capital Corp., a financial services company. From
1991 through 1993 he was a Member of the Management Committee of Nomura
Securities International. From 1993 through 1995 he was Chairman of Classic
Capital Inc., a registered investment advisor. Mr. Margolis has been a member of
the Financial Products Advisory Committee of the Commodity Futures Trading
Commission since its formation in 1986, a Trustee of the Futures Industry
Institute since 1991 and a Trustee of Saint Barnabas Hospital in Livingston, New
Jersey since 1994.
Leonard M. Schiller has been a director of the Company since April 1997.
Mr. Schiller has been a partner in the law firm of Schiller, Klein & McElroy,
P.C. since 1977 and has practiced law in the State of Illinois for over 25
years. He is also President of The Dearborn Group, a residential property
management and real estate acquisition company. Mr. Schiller is a member of the
Board of Directors of AccuMed International, Inc., a laboratory diagnostic
company.
Larry Haimovitch has been a director of the Company since October 1997.
Mr. Haimovitch has been the President of Haimovitch Medical Technology
Consultants, a San Francisco-based health care consulting firm, since he formed
the firm in 1990. His firm, whose current area of emphasis includes
minimally-invasive surgical technologies, specializes in the analysis of the
medical device industry with emphasis on the current trends and future outlook
for emerging medical technology. Mr. Haimovitch also serves as a director of two
other publicly-owned medical device companies, Cardiac Control Systems, Inc. and
Electropharmacology, Inc., and one privately-owned medical device company,
ORBTEK, Inc.
All directors hold office until the next annual meeting of stockholders
and until their successors are duly elected and qualified. Officers are elected
to serve, subject to the discretion of the Board of Directors, until their
successors are appointed.
5
<PAGE>
The Company's Board of Directors has established compensation and audit
committees. The Compensation Committees reviews and recommends to the Board of
Directors the compensation and benefits of all the officers of the Company,
reviews general policy matters relating to compensation and benefits of
employees of the Company, and administers the issuance of stock options to the
Company's officers, employees, directors and consultants. The Company has agreed
with the placement agent in a March 1997 private placement that until March 13,
2000, all compensation arrangements between the Company and its directors,
officers and affiliates shall be reviewed by a compensation committee, the
majority of which is made up of independent directors. The Audit Committee meets
with management and the Company's independent auditors to determine the adequacy
of internal controls and other financial reporting matters.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than ten percent (10%)
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
To the best of the Company's knowledge, based solely on review of the
copies of such forms furnished to the Company, or written representations that
no other forms were required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten percent
(10%) shareholders were complied with during 1997, except that Giovanni
Montoncello was late in filing his Form 5, which reported one transaction.
6
<PAGE>
Item 10. Executive Compensation.
The following Summary Compensation Table sets forth all compensation
earned, in all capacities, during the fiscal years ended December 31, 1997, 1996
and 1995 by (i) the Company's Chief Executive Officer and (ii) the most highly
compensated executive officers, other than the CEO, who were serving as
executive officers at the end of the 1997 fiscal year and whose salary as
determined by Regulation S-B, Item 402, exceeded $100,000 (the individuals
falling within categories (i) and (ii) are collectively referred to as the
"Named Executives").
Summary Compensation Table
Long-Term Compensation
---------------------------------
Annual
Compensation Awards Payouts
---------------- -------------- --------------
Common Stock
Name and Underlying All Other
Principal Salary Options Compensation
Position Year ($) (#) ($)
- ------------------ ----- ---------------- -------------- --------------
Leonard A. Osser 1997 267,768 (1) 150,000
Chief Executive 1996 265,719 (2)
Officer and CFO 1997 35,257 (3)
Gregory Volok 1997 120,000 50,000 2,126,670 (4)
Executive Vice 1996 20,000
President
Joel Warady 1997 105,000
President of 1996 2,019
Wisdom
- -----------
(1) Does not include $41,538 paid by the Company to Marilyn Elson, a certified
public accountant who was employed by the Company to render accounting
services prior to the hiring by the Company of a Chief Financial Officer.
Ms. Elson is the wife of Mr. Osser.
(2) Includes $170,000 earned as President, Chief Executive Officer and Chief
Financial Officer of Milestone and $95,719 earned as President and Chief
Executive Officer of Spintech. Does not include $56,514 paid by the
Company to Marilyn Elson, a certified public accountant who was employed
by the Company to render accounting services.
(3) Includes $22,885 earned as President, CEO and COO of Milestone and $12,372
earned as President and CEO of Spintech. Does not include $4,600 paid by
Milestone to Marilyn Elson for bookkeeping services rendered as
Comptroller of Milestone and $4,000 paid by Milestone and $2,250 paid by
Spintech to the accounting firm of Sultanik and Krumholz, LLC, one of
whose partners was Ms. Elson.
(4) In December 1997, pursuant to the purchase agreement between the Company
and Mr. Volok for Mr. Volok's outstanding shares of common stock of
Princeton PMC, the Company paid to Mr. Volok 159,900 shares of the
Company's Common Stock. See Note C to the Company's Financial Statements.
7
<PAGE>
Stock Options
The following tables show certain information with respect to incentive
and non-qualified stock options granted in 1997 to Named Executives under the
Company's 1997 Stock Option Plan and the aggregate value at December 31, 1997 of
such options. The per share exercise price of all options is equal to the fair
market value of a share of Common Stock on the date of grant. No options granted
to Named Executives have been exercised.
Option Grants in 1997
- --------------------------------------------------------------------------
Individual Grants of Options
- --------------------------------------------------------------------------
Percent
Number of of Total
Shares of Options
Common Granted
Stock to Exercise
Underlying Employees Price Expiration
Name Option # in 1997 ($/Sh) Date
- ------------------ ----------- ----------- ---------- -------------
Leonard A. Osser.. 106,500 (1) 27.40% $ 7.00 7/31/02
43,500 (1) 11.18% $ 7.56 7/31/02
Gregory Volok..... 50,000 (2) 12.85% $5.375 4/1/02
- -----------
(1) Options vest on August 1, 1998.
(2) Options vest in three equal annual installments beginning April 2l, 1997.
Aggregated 1997 Year End Options Values
- --------------------------------------------------------------------------------
Number of Shares of
Common Stock Value of Unexercised
Underlying Unexercised In-The-Money Options
Options at 12/31/97 At 12/31/97 (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------- ------------------------ ------------------------
Leonard A. Osser........... 0/150,000 $0/$1,419,390
Gregory Volok.............. 33,333/16,667 $374,996.25/$187,503.75
- ----------
(1) Based on the closing price of $16.625 as quoted on the Nasdaq National
Market.
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<PAGE>
Employment Contracts
As of January 1, 1998 the Company entered into an Employment Agreement
with Mr. Osser which provides for an initial term expiring on December 31, 2002,
with a two-year non-competition period at the end of the term. The term is
automatically increased for successive one-year periods unless prior to December
1 of any year either party notifies the other of its election not to extend the
term. Under the Agreement Mr. Osser serves as Chief Executive Officer and is
required to work on a full-time basis. Under the Employment Agreement Mr. Osser
receives annual base pay of $350,000, increasing to reflect cost of living
adjustments commencing on January 1, 2001. In addition, during January 1998 and
each of the next four Januarys the Company shall grant Mr. Osser an option to
purchase 50,000 shares of Common Stock exercisable only during the last 30 days
of the option term unless the Company achieves certain financial goals to be
specified annually by the Compensation Committee. Additionally, as soon as
financial statements for each year commencing with 1998 are completed, the
Company shall grant the executive an additional option to purchase up to 50,000
shares depending upon the achievement of specified performance goals. Further,
Mr. Osser shall receive the opportunity to earn cash bonuses of up to $200,000
per year depending upon the achievement of performance targets to be specified
by the Option Committee.
In November 1996, the Company entered into five-year employment agreement
with Gregory Volok, providing for his employment as Executive Vice President.
The agreement provides for an annual base salary of $120,000 and an 18 month
non-competition period at the expiration of the term.
In December 1996, the Company entered into an employment agreement with
Joel D. Warady providing for his employment as President and Chief Operating
Officer of Wisdom Toothbrush Co., a wholly owned subsidiary of the Company
("Wisdom"), for a three-year term at an annual base salary of $105,000. If the
income before Federal income taxes of Wisdom meets certain levels in the years
1997, 1998, and 1999, Mr. Warady will receive stock bonuses of 5,000, 7,000 and
10,000 shares of the Common Stock of the Company, respectively. The agreement
also provides for non-competition at the end of the term for six months or one
year, depending upon the reason the employment has terminated.
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<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table, together with the accompanying footnotes, sets forth
information, as of April 24, 1998, regarding stock ownership of all persons
known by the Company to own beneficially more than 5% of the Company's
outstanding Common Stock, certain executive officers, all directors, and all
directors and officers of the Company as a group:
Shares of
Common Stock
Beneficially Percentage of
Name of Beneficial Owner (1) Owned (2) Ownership
--------------------------------- -------------------------------
Executive Officers and Directors
Leonard Osser................... 1,845,000 (3) 20.98%
Gregory Volok................... 183,266 (4) *
Giovanni Montoncello............ 17,611 (5) *
Michael J. McGeehan............. 30,506 (6) *
David Sultanik.................. 20,000 (7)
Stephen A. Zelnick.............. 401,000 (8) 4.40%
Paul Gregory.................... 20,150 (9) *
Louis I. Margolis............... 84,000 (10) *
Leonard M. Schiller............. 70,594 (11) *
Larry Haimovitch................ 17,356 (12) *
Daniel R. Martin................ 100 *
Joel D. Warady.................. 25,150 *
All Directors and Officers as a
group
(12 persons)................. 2,714,733 (13) 29.20%
5% and Greater Shareholders
Parker Quillen, Inc.
c/o Quilcap Corp.
375 Park Avenue, Suite 1404
New York, NY 10152.......... 577,966 6.57%
Gintel Asset Management, Inc.
6 Greenwich Office Park
Greenwich, CT 06831......... 946,600 10.76%
- -----------
* Less than 1%
(1) The addresses of the persons named in this table are as follows: Leonard
Osser, 44 Kean Road, Short Hills, New Jersey 07078; Gregory Volok, 172
Laurie Lane, Philadelphia, PA 19115; Giovanni Montoncello, Via Agostino
Bertani 2, Milan Italy 20154; Michael J. McGeehan, 125 Middlesex Avenue,
Piscataway, New Jersey 08854; David Sultanik, Sultanik and Krumholz, LLC,
154 South Livingston Avenue, Livingston, New Jersey 07039; Stephen A.
Zelnick, Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York,
New York 10022; Paul Gregory, 300 Mercer Street, New York, New York 10003;
Louis I. Margolis, 12 Chapel Hill Road, Short Hills, New Jersey 07078;
Leonard M. Schiller, 33 North Dearborn Street, Suite 1030, Chicago,
Illinois 60602; Larry Haimovitch,
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111 Highland Lane, Mill Valley, CA 94941; Daniel R. Martin, 2 Dolma Road,
Scarsdale, New York 10583; Joel Warady, 108 South Boulevard, Evanston,
Illinois 60202.
(2) A person is deemed to be a beneficial owner of securities that can be
acquired by such person within 60 days from the filing of this report upon
the exercise of options and warrants or conversion of convertible
securities. Each beneficial owner's percentage ownership is determined by
assuming that options, warrants and convertible securities that are held
by such person (but not held by any other person) and that are exercisable
or convertible within 60 days from the filing of this report have been
exercise or converted. Except as otherwise indicated, and subject to
applicable community property and similar laws, each of the persons named
has sole voting and investment power with respect to the shares shown as
beneficially owned. All percentages are determined based on 8,793,588
shares outstanding on March 26, 1998
(3) Includes 500,000 held in the name of U.S. Asian Consulting Group, Inc., an
affiliate of Mr. Osser, and 9,000 shares held by Guarantee and Trust
Company for the benefit of U.S. Asian Consulting Group Profit Sharing
Plan.
(4) Includes 16,666 shares subject to stock options, exercisable within 60
days of the date hereof at $5.375 per share.
(5) Includes 10,000 shares subject to stock options exercisable within sixty
(60) days of the date hereof at $5.375 per share.
(6) Includes 600 shares held by Mr. McGeehan's wife, 20,000 shares subject to
stock options exercisable within 60 days of the date hereof at $5.375 per
share and 8,332 shares subject to stock options exercisable within 60 days
of the date hereof at $5.125 per share.
(7) Includes 15,000 shares subject to stock options, exercisable within 60
days of the date hereof at $5.375 per share.
(8) Includes (i) an aggregate of 70,000 shares issuable upon exercise of stock
options within 60 days of the date hereof, 50,000 of which are exercisable
at $5.125 per share and 20,000 of which are exercisable at $5.375 per
share, (ii) 55,000 shares held in the name of Cowen & Co. as Custodian for
the Stephen A. Zelnick Profit Sharing Trust ("Cowen & Co."), (iii) 18,000
shares beneficially owned through Erewhon Holdings Company, a partnership
in which Mr. Zelnick is a general partner ("Erewhon"), (iv) 50,000 shares
issuable upon exercise of warrants within 60 days of the date hereof held
in the name of Cowen & Co., (v) 18,000 shares issuable upon exercise of
warrants within 60 days of the date hereof beneficially owned through
Erewhon, (vi) 166,666 shares issuable upon exercise of immediately
exercisable warrants to purchase units comprised of 83,333 shares and
warrants to purchase an additional 83,333 shares registered in the name of
Morse, Zelnick, Rose & Lander, LLP, a limited liability partnership
("MZRL") in which Mr. Zelnick is a general partner. MZRL or partners in
MZRL share beneficial ownership in the securities listed in (i), (iii),
(v) and (vi), above.
(9) Includes 150 shares held by Mr. Gregory's wife and 17,000 shares subject
to stock options, exercisable within 60 days of the date hereof at $5.125
per share.
(10) Includes 20,000 shares subject to stock options, exercisable within 60
days of the date hereof at $5.125 per share and 32,000 shares subject to
stock purchase warrants, exercisable within 60 days of the date hereof at
$9.00 per share.
(11) Includes 45,000 shares subject to stock options, exercisable within 60
days of the date hereof at $5.125 per share and 5,297 shares subject to
stock purchase warrants, exercisable within 60 days of the date hereof at
$4.72 per share.
(12) Includes 10,000 shares subject to stock options, exercisable within 60
days of the date hereof at $6.875 per share.
(13) Includes 211,998 shares subject to stock options and 291,963 shares
subject to warrants all of which are exercisable within sixty (60) days of
the date hereof.
11
<PAGE>
Item 12. Certain Relationships and Related Transactions
During 1995 Leonard Osser provided demand loans to the Company amounting
to $119,000, bearing interest at 6% per annum. This loan was repaid in November
1995.
From April 1995 until February 28, 1997, Spintech leased its corporate and
administrative offices from LenRon Realty, Inc. ("LenRon"), pursuant to a lease
expiring March 31, 2000. The premises consisted of 1,500 sq. ft. on the first
and second floors of a two-story frame building. According to the terms of the
lease, annual rentals were to increase from $12,600 in the first year to $28,000
in the year 2000 and Spintech was to pay increases in real estate taxes and
certain maintenance costs. Spintech leased additional warehouse and
manufacturing space from LenRon on a month-to-month basis at $1,000 per month.
Leonard Osser founded, is the President and since December 1996 the sole owner
of LenRon. On February 28, 1997, LenRon released Spintech from its continuing
obligations under the lease in anticipation of Spintech's relocation to the
Company's corporate headquarters in New Jersey.
In March 1996, the Company organized Princeton PMC to market and sell
dental products. Initially, Princeton PMC was a joint venture between the
Company and Gregory Volok. In December 1996, it became a wholly owned subsidiary
when the Company acquired Mr. Volok's one-third interest in Princeton PMC in
exchange for 100 shares of Common Stock and an earnout of up to an additional
159,900 shares based on the Company's future earnings. At such time, Mr. Volok
became Executive Vice President, Chief Operating Officer and a Director of
Milestone.
From January 1, 1994 through March 1997, Spintech rented from Ronald
Spinello, DDS, on a month-to-month basis, at the rate of $200 per month,
laboratory space located in his home.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly authorized and caused the undersigned to sign this Report on
the Registrant's behalf.
Milestone Scientific Inc.
By: /s/ Leonard A. Osser
----------------------------
Leonard A. Osser,
Chairman and Chief Executive Officer
Dated: April 30, 1998
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