UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1995
Commission file number 0-18160
Surgical Technologies, Inc.
(Exact name of registrant as specified in charter)
Delaware 87-0468225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 South Decker Lake Lane
Salt Lake City, Utah 84119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(801) 974-5555
Securities registered pursuant to section 12(b) of the Act:
Title of Class Name of each exchange on which registered
None None
Securities registered pursuant to section 12(g) of the Act:
Common Stock, Par Value $0.01
(Title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K.
As of July 5, 1995, there were 4,218,687 shares of the Registrant's common
stock,par value $0.01, issued and outstanding. The aggregate market value of
the Registrant's voting stock held by non affiliates of the Registrant was
approximately $7,064,437 computed at the closing price for the Registrant's
common stock on the Nasdaq National Market System on July 5, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
part of the form 10-K (e.g., part I, part II, etc.) into which the document is
incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to rule 424(b) or
(c) under the Securities Act of 1933: Proxy statement relating to the 1995
annual meeting of shareholders.
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age, and position of each
executive officer and director of the Company:
<TABLE>
<CAPTION>
Name Age Office
---- --- ------
<S> <C> <C>
Rex Crosland 71 Chief Executive Officer, President,
Chairman
Rockwell D. Schutjer 49 Vice-President-Operations,
Treasurer, Director
Todd B. Crosland 35 Vice-President-Finance, Director
Reed Fogg 57 Director
Donald A. Spring 57 Director
</TABLE>
Rex Crosland, a co-founder of the Company, has served as chairman, chief
executive officer, and president of the Company since its inception. Mr.
Crosland was also founder and chairman of Mountain States Insulation & Supply
Company and Rocmont Industrial Corporation, two of the Company's subsidiaries
that discontinued operations in early 1992. Mr. Crosland has also been the
chairman and president of R.C. Enterprises, a real estate investment company
since 1975. Mr. Crosland's current term of office as a director continues
until the 1995 annual meeting.
Donald A. Spring was elected a director in September 1992. Dr. Spring is
president and medical director of Sierra Heart Institute at Washoe Medical
Center, Reno, Nevada, and director of the cardiac laboratory at Sparks Family
Hospital, Sparks, Nevada. Dr. Spring's current term of office as a director
continues until the 1995 annual meeting.
Reed Fogg became a director of the Company at the 1992 annual meeting held
in August 1992. Dr. Fogg specializes in orthopedics related to the lumbar
spine. For in excess of the past five years he has served as the chairman of
the Department of Orthopedic Surgery at Cottonwood Hospital and Medical
Director of the Intermountain Spine Institute, both in Salt Lake City, Utah.
Dr. Fogg graduated from the University of Utah School of Medicine in 1962. Dr.
Fogg's current term of office as a director continues until the 1997 annual
meeting.
Rockwell D. Schutjer, a co-founder of the Company, has served as an officer
and director of the Company since its inception. Mr. Schutjer currently serves
as vice-president-operations, director, and treasurer. From 1983 until January
1992, Mr. Schutjer was co-founder and president of Rocmont Industrial
Corporation, a Company subsidiary discontinued in early 1992. Mr. Schutjer
received his B.S. degree in business finance from the University of Utah. Mr.
Schutjer's current term of office as a director continues until the 1996 Annual
Meeting.
Todd B. Crosland, a co-founder of the Company, was executive vicepresident-
operations of the Company from inception until December 1989. In December 1989,
Mr. Crosland was appointed to vice-president-finance and in December 1992,
became a director of the Company. From 1984 through 1988 he owned an auto
import dealership, Autobahn Imports, of Salt Lake City, Utah. Mr. Crosland
received a B.A. degree in business finance from the University of Utah. Mr.
Crosland's current term of office as a director continues until the 1996 Annual
Meeting.
Rex Crosland is the father of Todd B. Crosland and the father-in-law of
Rockwell D. Schutjer.
The Company's Restated Certificate of Incorporation provides that the board
of directors shall be divided into three classes, with each class as equal in
number as practicable. One class is elected each year for a three-year term.
<PAGE>
BOARD MEETINGS AND COMMITTEES
The board of directors had one formal meeting during the 1995 fiscal year,
at which all of the directors were in attendance. The directors also met
informally on several occasions throughout the year and discussed the business
and affairs of the Company. Additionally, the board of directors took several
actions through unanimous written consent in lieu of a meeting. Directors who
are not employees received $1,000 for each of the meetings they attended, plus
reimbursement of direct expenses incurred in attending the meetings. Directors
who are employees of the Company receive no compensation for services as
directors.
The board of directors has standing audit, compensation, and option
committees.
Members of the audit committee for the 1995 fiscal year were Rockwell D.
Schutjer, Reed Fogg, and Donald A. Spring. These three individuals will
continue to serve as members of the audit committee for the 1996 fiscal year,
provided that Mr. Spring is elected to the board of directors at the 1995
annual meeting. The audit committee met once during the fiscal year ended
March 31, 1995. The audit committee is responsible for assuring that, in all
material respects, management shall cause the Company's financial statements
to comply with applicable laws and regulations and to make fair and accurate
disclosure of the Company's financial position and its results of operations.
The audit committee meets with the Company's financial officers and
employees and independent public accountants to review the Company's financial
statements and reporting practices, the system of internal accounting controls,
and the scope, results, and fees associated with services performed by the
independent public accountants.
Members of the compensation committee for the 1995 fiscal year were Rex
Crosland and Reed Fogg. These two individuals will continue to serve as members
of the compensation committee for the 1996 fiscal year, provided that Mr.
Crosland is elected to the board of directors at the 1995 annual meeting. The
compensation committee met once during the fiscal year ended March 31, 1995.
The compensation committee recommends to the board of directors compensation of
the officers of the Company and the board of directors and its committees,
except the compensation committee.
The Company also has an option committee which determines the number, if
any, and terms of any options granted by the Company, except to members of such
committee. Members of the option committee for the 1995 fiscal year were Reed
Fogg and Donald A. Spring. These two individuals will continue to serve as
members of the option committee for the 1996 fiscal year, provided Mr. Spring is
elected to the board of directors at the 1995 annual meeting. The option
committee met once during the fiscal year ended March 31, 1995.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year or
prior fiscal years, except that one report covering one 1994 transaction was
not timely filed by Rex Crosland, one report covering a sale of 500 shares of
common stock by the spouse of Rockwell D. Schutjer in 1992 was not filed and
one report filed in 1992 by Mr. Schutjer contained a coding error that
reported he had sold 1,000 shares of common stock that were actually sold
by his spouse.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation
awarded to, earned by, or paid to the chief executive officer of the Company,
Rex Crosland, as of the end of the fiscal year ended March 31, 1995. None of
the Company's other four most highly compensated executive officers as of the
end of the last fiscal year received a total annual salary and bonuses in
excess of $100,000 for all services rendered in all capacities to the
Company, including its subsidiaries.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Annual Securities
Compen-sation Restric Underlying All Other Year
Compen-
Name and Ended Salary Bonus Stock SARs Payouts sation
Principal Position Mar. 31 ($) ($) Award(s) (#) ($) ($)
($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rex Crosland 1995 $50,000 -- $3,698(1) -- -- -- --
Chief Executive Officer 1994 50,000 -- 3,698(1) -- 50,000 -- --
1993 50,000 -- 3,698(1) -- 55,000 -- --
<FN>
(1) Consists of reimbursement of automobile expenses.
</TABLE>
Effective September 1, 1989, the Company entered into five year employment
agreements with Rex Crosland and other executive officers. The annual
compensation to Mr. Crosland under such agreements, subject to increase at
the discretion of the board of directors, was $100,000. For the 1995, 1994,
and 1993 fiscal years, Mr. Crosland's salary was reduced to $50,000. Mr.
Crosland's employment agreement provided for incentive compensation as
determined by the board of directors based on his contributions to the
Company and other factors deemed relevant by the board or compensation
committee. The agreement included a covenant not to compete for one year
after termination of employment in certain limited geographical areas. Mr.
Crosland also receives reimbursement for certain automobile expenses and pays
for life insurance and medical benefits on the same terms as provided to
other employees.
Since expiration of the employment agreements on September 1, 1994, Mr.
Crosland and the other executive officers of the Company have continued to be
employees of the Company on a month-to-month basis. Such employment is on
the same terms and conditions as contained in the employment agreements.
During the last completed fiscal year, the Company did not grant options
and stock appreciation rights ("SARs") to the chief executive officer of the
Company.
The following table set forth information respecting the exercise of
options and SARs during the last completed fiscal year by the chief executive
officer of the Company and the fiscal year end values of unexercised options and
SARs.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexercised Value of Unexercised Options/SARs
(#) Options/S
Exercisable/
Unexercisable Exercisable/ Shares Acquired o
Unexercisable
Name Exercise (#) Value Realized ($)
<S> <C> <C> <C> <C>
Rex Crosland -- -- 105,000/-- --/--
</TABLE>
1992 DIRECTORS' STOCK OPTION PLAN
In June 1992, the board of directors adopted the 1992 Directors' Stock
Option Plan (the "1992 Directors' Plan"), pursuant to which stock options are
automatically awarded to those directors who are not officers or employees of
the Company (the "Outside Directors"). It is anticipated there will be two or
three outside directors eligible each year under the 1992 Directors' Plan. Under
the terms of the 1992 Directors' Plan, starting at the 1992 annual meeting of
shareholders, each Outside Director who is elected for the first time to the
board of directors receives options to purchase 10,000 shares of Common
Stock. Thereafter, options to purchase 5,000 shares of Common Stock will be
issued to each Outside Director every fiscal year 10 days after the year end
results of operations are released to the public. Under this plan, on August
10, 1993, the Company issued options to purchase at $4.25 per share a total
of 10,000 shares to the Company's two Outside Directors. All options
have an exercise price equivalent to the market price of the Common Stock at the
time of grant. The 1992 Directors' Plan will terminate in 1997 after options,
if any, are issued after the release of operating results for the fiscal year
ended March 31, 1997. The 1992 Directors' Plan was adopted to increase
participation by the directors in the equity ownership of the Company and to
aid the Company in recruiting and retaining directors who will continue to
use their best efforts to promote the success of the Company's business.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information as to each person owning of record
or who was known by the Company to own beneficially more than 5% of the
4,328,741 shares of issued and outstanding Common Stock of the Company as of
July 24, 1995, and information as to the ownership of the Company's Common Stock
by each of its directors and executive officers and by the directors and
executive officers as a group. Except as otherwise indicated, all shares are
owned directly, and the persons named in the table have sole voting and
investment power with respect to shares shown as beneficially owned by them.
<TABLE>
NAME AND ADDRESS NATURE OF NUMBER OF
OF BENEFICIAL OWNERS OWNERSHIP SHARES OWNED PERCENT
<S> <C> <C> <C>
PRINCIPAL SHAREHOLDER
Rex Crosland(1) Common Stock 1,300,003 30.0%
2801 South Decker Lake Options 105,000 2.4%
-----------
Lane
Salt Lake City, Utah 84119 Total 1,405,003 31.7%
DIRECTORS
Rex Crosland - - - - - - - See Above - - - - - - - - -
Rockwell D. Schutjer(1)(2) Common Stock 93,724 2.2%
Options 70,000 1.6%
-----------
Total 163,724 3.7%
Todd B. Crosland(1) Common Stock(3) 123,439 2.9%
Options 55,000 1.3%
-----------
Total 178,439 4.1%
Reed Fogg Options(4) 20,000 0.5%
Donald A. Spring Options(4) 20,000 0.5%
ALL EXECUTIVE OFFICERS AND Common Stock 1,517,166 35.1%
DIRECTORS AS A GROUP (5 Options 270,000 5.9%
PERSONS) -----------
Total 38.9%
1,787,166
<FN>
(1) Todd B. Crosland is the adult son and Rockwell D. Schutjer is the
son-in-law of Rex Crosland. Rex Crosland disclaims any beneficial
ownership in the shares held by such persons.
(2) Includes shares held in the name of spouse of which the person is
deemed a beneficial owner.
(3) Includes shares held by TBC Limited, a family partnership of which
Todd B. Crosland is the general partner.
(4) See "EXECUTIVE COMPENSATION: 1992 Directors' Stock Option Plan."
</TABLE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1993, the Company's president, Rex Crosland, purchased an
approximately 43,000 square foot office, manufacturing, research, and
warehouse facility, including certain office and manufacturing equipment,
located at 2801 South Decker Lake Lane, Salt Lake City, Utah, from an
unrelated seller at a purchase price of $2,200,000. The Company subsequently
leased the property from Mr. Crosland and incurred total rental
expenses during the fiscal year ended March 31, 1994, of approximately $25,500.
In February 1994, the Company purchased the facilities and related machinery and
equipment from Mr. Crosland in consideration of a $1,570,600 promissory note and
$1,076,000 paid by issuing 400,000 shares of its restricted common stock. The
400,000 shares were valued at $2.69 per share, an approximate 14% discount from
the market price of $3.124 on the date the transaction was approved by the board
of directors. This discount was based on the restricted status of the
securities and the fact that such a large block of thinly traded stock could
not be readily sold. The promissory note was issued bearing interest at 7.25%
per annum with monthly payments through July 1, 1994. At the time of
completing the purchase of the facility, the Company also purchased certain
office equipment from Mr. Crosland for $71,600, the approximate fair market
value of such items as of the date of purchase.
On April 22, 1994, the Company refinanced its $1,576,000 note to Mr.
Crosland by issuing a long-term note payable in the amount of $1,000,000 to
an insurance company and a short-term note payable in the amount of $570,600
to a bank. The long-term $1,000,000 note payable bears interest at 8.5% with
monthly principal and interest payments of $8,521 through May 1, 1999, at
which time the remaining balance is due, and is secured by the property and
building. The $570,600 note payable was paid in full by the Company in August
1994 from proceeds from the sale of common stock and the refinancing of the
Company's revolving line of credit.
Effective March 31, 1995, the Company sold the facilities and related
machinery and equipment, excluding 5.3 acres of contiguous unimproved
property (see below), to an unrelated purchaser for $2,100,000 paid by
issuing to the Company a promissory note in the amount of $981,375.32 on the
same terms as the Company's long-term note payable, and paying the remaining
purchase price in cash to the Company in April 1995. The Company rents a
portion of the facilities for its offices and operations for monthly payments
of $8,521.
On May 8, 1995, the Company sold approximately 5.3 acres of contiguous
unimproved property previously purchased from Mr. Crosland, but excluded in
the sale referred to in the preceding paragraph, for $397,350 in cash.
The foregoing transactions with Mr. Crosland were not the result of arm's
length negotiations, but in the opinion of management, are on terms as
favorable to the Company as could be obtained in arm's length transactions.
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this amended
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 29,1995
SURGICAL TECHNOLOGIES, INC.
/s/ Todd B. Crosland
By Todd B. Crosland, Director,
Vice-President
(Principal Financial and Accounting
Officer)
