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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
For the fiscal year ended October 31, 1999
Commission file number 0-22920
Numerex Corp.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Pennsylvania 11-2948749
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(State of Incorporation) (I.R.S. Employer Identification No.)
1600 Parkwood Circle, Suite 200, Atlanta, Georgia 30339-2119
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 693-5950
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Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Number of Shares Outstanding as of 1/20/00
------------------- ------------------------------------------------
Class A Common Stock, no par value 10,343,092
</TABLE>
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
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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 [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant is $68,888,704. (1)
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(1) The aggregate dollar amount of the voting stock set forth equals the
number of shares of the Company's Common Stock outstanding, reduced by
the amount of Common Stock held by officers, directors and shareholders
owning 10% or more of the Company's Common Stock, multiplied by
$11.875, the last reported sale price for the Company's Common Stock on
January 20, 2000. The information provided shall in no way be construed
as an admission that any officer, director or 10% shareholder in the
Company may be deemed an affiliate of the Company or that such person
is the beneficial owner of the shares reported as being held by him,
and any such inference is hereby disclaimed. The information provided
herein is included solely for recordkeeping purposes of the Securities
and Exchange Commission.
<PAGE>
EXPLANATORY NOTE:
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This Amendment No. 1 to the Form 10-K for the fiscal year ended October
31, 1999 is filed to add Part III of Form 10-K, which was omitted in reliance on
General Instruction G(3) thereto.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of the
executive officers, key employees and directors of the Company as of February
28, 2000:
NAME AGE POSITION
- ---- --- --------
George Benson (1) (2) (3) 64 Director
Edward I. Comer 52 Chief Technology Officer
Matthew J. Flanigan (1) (2) 53 Director
Geoff W. Girdler 39 Executive Vice President, Business
Development
Allan H. Liu 43 Director
Robert M. Madonna 46 Executive Vice President, Sales &
Marketing
Kenneth F. Manser 65 Director
Stratton J. Nicolaides (3) 46 Chairman of the Board and Chief
Operating Officer
John G. Raos 50 Director
Peter J. Quinn 43 Chief Financial Officer
Andrew J. Ryan (3) 41 Director and General Counsel
- -------------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Steering Committee
George Benson has served as a Director of the Company since June 1995.
From September 1992 until July 1999, Mr. Benson served as Chairman and Chief
Executive Officer of Wisconsin Wireless Communications Corporation and Airadigm
Communications Inc.
Edward I. Comer has served as Chief Technology Officer of the Company
since December 1999 and of Cellemetry L.L.C. since May 1998. Prior to joining
the Company in 1998, Mr. Comer worked in various capacities with BellSouth
Mobility with product development responsibilities in network and marketing.
Matthew J. Flanigan has served as a Director of the Company since July
1994. Since April 1994, Mr. Flanigan has been the President of the
Telecommunication Industry Trade Association, a trade association for
telecommunication companies.
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<PAGE>
Geoff W. Girdler has been the Executive Vice President, Business
Development of the Company since December 1999. From 1994 to 1997, Mr. Girdler
was sales director for Digital Audio Limited, a then wholly owned subsidiary of
the Company. From 1998 until 1999, Mr. Girdler served as Managing Director of
Versus Technology Limited, a then indirect, wholly owned subsidiary of the
Company, with operational responsibility for derived channel technology
worldwide.
Allan H. Liu has served as a Director of the Company since January
2000. Since 1997, Mr. Liu has been the President and a member of the Board of
Directors of The China Retail Fund, LDC, a direct investment private equity fund
sponsored by American International Group in conjunction with the Ministry of
Internal Trade of the People's Republic of China.
Robert M. Madonna has been the Executive Vice President, Sales &
Marketing of the Company since December 1999. From 1996 until 1999, Mr. Madonna
served as an officer for various Company subsidiaries. Prior to 1996, Mr.
Madonna was employed by Bell Atlantic Corporation with responsibility in
customer service, product development and project management.
Kenneth F. Manser has been a Director of the Company since 1994. Mr.
Manser served as the Managing Director of the Company's Bronzebase Limited
subsidiary from December 1990 until February 1999. From February 1994 until
July 1998, Mr. Manser also served as Chairman of the Board of the Company.
Stratton J. Nicolaides has served as Chief Operating Officer since
April 1999 and as Chairman of the Board since December 1999. From July 1994
until April 1999, Mr. Nicolaides managed a closely held investment partnership
and provided consulting services to Dominion Group Limited.
Peter J. Quinn has been the Chief Financial Officer of the Company
since December 1999. From 1987 to 1997, Mr. Quinn served as Chief Financial
Officer, Secretary, Treasurer, and Board Member of Europlex Holdings Limited.
From July 1997 until December 1999, Mr. Quinn served as Vice President, Chief
Financial Officer, Secretary and Treasurer of Uplink, a subsidiary of the
Company. From 1998 until December 1999, Mr. Quinn also held the position of
Chief Financial Officer and Treasurer at Cellemetry L.L.C.
John G. Raos has served as a Director of the Company since February
2000. From June 1995 until January 2000, Mr. Raos served as President and Chief
Operating Officer of US Industries, Inc. From February 1999 until January 2000,
Mr. Raos also was Chairman and Chief Operating Officer of Strategic Industries,
Inc., a US Industries subsidiary. Prior to June 1995, Mr. Raos served as
President and Chief Operating Officer of Hanson Industries, Inc. Mr. Raos is
currently a director of US Industries.
Andrew J. Ryan has served as a Director of the Company since May 1996.
Mr. Ryan has practiced law with the law firm of Salisbury & Ryan from August
1994 to present and serves as the Board designee of Gwynedd Resources, Ltd.
("Gwynedd").
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<PAGE>
Involvement in Certain Legal Proceedings
In March 1993, the Resolution Trust Corporation ("RTC"), as receiver
for Nassau Savings and Loan Association ("Nassau"), filed a complaint for
damages against Mr. Nicolaides arising out of five loans ("Loans") made by
Nassau between 1982 and 1983 to five partnerships of which Mr. Nicolaides was
one of the general partners. Mr. Nicolaides also was a guarantor of such Loans.
On November 22, 1995, without admitting liability for the claims asserted, Mr.
Nicolaides settled the RTC action for $2,125,000. On March 10, 1997, in a
separate criminal action arising out of the Loans, which was filed in the United
States District Court for the District of New Jersey, Mr. Nicolaides agreed to
plead guilty to one count of bank fraud. The court sentenced Mr. Nicolaides to
three-years probation and required payment of a $250,000 fine. Mr. Nicolaides is
in compliance with the terms of his probation.
Neither the RTC action nor the criminal action included any ban on Mr.
Nicolaides engaging in any type of business activity.
Mr. Nicolaides is the spouse of Maria E. Nicolaides, who may be deemed
the indirect beneficial owner of approximately 30.1% of the Company's
outstanding Common Stock. See "Security Ownership of Certain Beneficial Owners
and Management."
On July 28, 1999, Airadigm Communications Inc. filed for chapter 11
bankruptcy protection. Mr. Benson served as Chairman and Chief Executive Officer
of Airadigm Communications Inc. until his retirement on July 13, 1999.
Arrangements with Respect to the Board of Directors
The Company has entered into an agreement providing Gwynedd the right
to designate one director to the Board. Additionally, in the event the Board
consists of more than seven directors, Gwynedd, at its option, may designate one
additional director. Any designee's appointment will be subject to the exercise
by the Board of Directors of its fiduciary duties and the approval of the
Company's shareholders upon the expiration of any appointed term at the next
annual meeting of shareholders. Gwynedd's right to designate directors will
cease at such time as Gwynedd's equity interest in the Company drops below ten
percent of the outstanding shares of the Company's Common Stock. Mr. Ryan
currently serves as Gwynedd's designee.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and officers and persons who are the beneficial owners of
more than 10% of the Common Stock are required to report their beneficial
ownership of Common Stock and any changes in that ownership to the Securities
and Exchange Commission (the "SEC"). Specific due dates for these reports have
been established, and the Company is required to report any failure to file by
these dates during 1999. The Company believes that all of these filing
requirements were satisfied by its directors and officers and by the beneficial
owners of more than 10% of the common stock, except that Mr. Ryan was late in
filing one report relating to his indirect pecuniary interest in an option
granted to the law firm of which he is a partner, and Messrs. Benson and
Flanigan were each late in filing one report relating to two exempt stock option
grants and one exempt stock option grant, respectively. In making the foregoing
statements, the Company has relied on copies of the reporting forms received by
it or the written representations from certain reporting persons that no Forms 5
(Annual Statements of Changes in Beneficial Ownership) were required to be filed
under the applicable rules of the SEC.
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<PAGE>
Item 11. EXECUTIVE COMPENSATION
Compensation of Directors
Each director of the Company who is not also an employee of the Company
or a Gwynedd designated director receives an annual fee of $12,000 and a fee of
$250 for each meeting (except telephonic meetings, in which case the fee is
$125) of the Board or a committee thereof attended plus reimbursement of
expenses incurred in attending meetings. During the fiscal year ended October
31, 1999, Mr. Ray, as Chairman of the Board, received an additional $5,000 per
month in directors' fees. No additional fee is paid for committee meetings held
the same day as Board meetings.
Under the Company's Non-Employee Director Stock Option Plan (the
"Director Plan"), each director who is not also an employee of the Company or a
Gwynedd designated director automatically is granted annual options covering
4,000 shares of Common Stock under the Director Plan. On each anniversary of the
initial option granted hereunder, such person shall be granted an option to
purchase 4,000 shares of the Common Stock, or such lower number of shares as
shall be equal to the number of shares as shall then be available (if any) for
grant under this Director Plan divided by the number of persons who are to
receive an option on such anniversary.
In June 1999, in recognition of extraordinary service, the Company
granted Mr. Benson a stock option covering 25,000 shares of Common Stock
exercisable at $3.50 per share, the then fair market value on the date of grant.
The option has a term of 10 years and is fully vested and exercisable.
Compensation of Executive Officers
The following summary compensation table sets forth all cash
compensation paid to the Company's current Chief Operating Officer, former Chief
Executive Officer, and former Chief Financial Officer during the Company's
fiscal years ended October 31, 1999, 1998 and 1997.
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<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
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Annual Other Annual Securities All Other
Fiscal Salary Bonus Compensation Underlying Compensation
Name and Principal Position Year ($) ($) ($) Options ($)
<S> <C> <C> <C> <C> <C> <C>
Stratton J. Nicolaides (1) 1999 81,250 ---- ---- ---- ----
Chairman and Chief
Operating Officer
Gordon T. Ray (2) 1999 51,000 ---- 100,000 ----
Former Chairman, 1998 76,364 ---- ---- 104,000 10,250
President and 1997 ---- ---- ---- 2,500 9,500
Chief Executive Officer
Charles L. McNew (3) 1999 145,274 ---- ---- ---- 3,433
Former Vice President, 1998 160,208 ---- ---- 50,000 5,000
Chief Operating Officer and 1997 133,500 32,827 ---- 25,000 4,713
Chief Financial Officer
</TABLE>
(1) Mr. Nicolaides returned to the Company in April 1999 as Chief Operating
Officer, serving concurrently as Chairman of the Board since December
1999.
(2) Mr. Ray resigned as President and Chief Executive Officer of the
Company in April 1999 and as Chairman of the Board and a director in
December 1999.
(3) Mr. McNew resigned as Chief Financial Officer of the Company in July
1999.
Employment and Related Agreements
In connection with the termination of his employment in July 1999 and
pursuant to the terms of his employment agreement, Mr. McNew will receive as
severance his base salary of $185,000, payment of which will be made at the time
provided for in the agreement as though employment had not been terminated. In
addition, Mr. McNew is entitled to receive reimbursement for out-placement
related expenses incurred by him, not to exceed $25,000. Additionally, all
options granted to Mr. McNew under any of the Company's stock option plans have
been amended to become non-qualified stock options and such options will remain
outstanding until their expiration date. Mr. McNew is subject to certain
non-competition, non-disclosure and confidentiality provisions.
Mr. Ray resigned as Chairman of the Board and a director in December
1999 and received an additional $20,000 in termination payments. In connection
with his resignation, the options granted to Mr. Ray on November 25, 1998 have
been amended to become fully vested and exercisable. However, options covering
100,000 shares granted to Mr. Ray on September 4, 1998 have been terminated in
their entirety and surrendered.
- 6 -
<PAGE>
Stock Option Plans
The following table sets forth certain information concerning stock
options granted under the Employee Stock Option Plan during the fiscal year
ended October 31, 1999 to the executive officers of the Company named in the
Summary Compensation Table.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
Individual Grants(1)
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Percent of
Number of Total Options
Securities Granted to
Underlying Employees In Grant Date
Options Fiscal Year Exercise Expiration Present
Name Granted Year Price Date Value(2)
---- ----------- --------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Gordon T. Ray 100,000 15.2% $2.625 November 25, 2008 $205,000
Former Chairman, President
and Chief Executive Officer
</TABLE>
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(1) Generally, options become exercisable at cumulative annual rates of 20%,
commencing one year from the date of grant, and expire ten years from the
date of grant. Notwithstanding the foregoing, options are fully exercisable
in the event of a change of control of the Company. Options generally will
terminate three months after the date employment with the Company or a
subsidiary terminates. During such three-month period, options may be
exercised only for the number of shares eligible to be exercised on the
date employment terminates.
(2) The Grant Date Present Value on the date of grant was estimated using the
Black-Scholes options pricing model with the following weighted average
assumptions: no dividend yield; expected volatility of 83%; risk-free
interest rate of 6.33%; expected option life of 7 years; and a forfeiture
rate of 2%.
The following table sets forth certain information concerning the
number of unexercised options and the value of unexercised options at the end of
the fiscal year ended October 31, 1999 held by the executive officers of the
Company named in the Summary Compensation Table. No options were exercised by
such executive officers in fiscal 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND OCTOBER 31, 1999 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at October 31, 1999 (#) Options at October 31, 1999($)(1)
---------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gordon T. Ray 29,000(2) 80,000 47,500 190,000
Charles L. McNew 20,000 130,000 0 0
</TABLE>
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(1) On October 31, 1999 the fair market value of a share was $5.00. In
addition, options covering 125,000 shares held by Mr. McNew may not be
exercised until the earlier of (i) the closing price of NumereX Common
Stock exceeds certain per share thresholds ranging between $7.50-$15.00
for 60 consecutive days, or (ii) five years from February 27, 1997 or
such later date of grant.
(2) Includes 9,000 shares subject to options granted under the plan for
directors when Mr. Ray was eligible to participate therein.
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<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of February 26, 2000, by
(i) each person known by the Company to be the beneficial owner of five percent
or more of the Common Stock, (ii) each director of the Company, (iii) each
executive officer of the Company named in the Summary Compensation Table and
(iv) all directors and executive officers of the Company as a group. Except as
otherwise indicated below, the beneficial owners of the Common Stock listed
below have sole investment and voting power with respect to such shares.
Shares Beneficially Owned (1)(2)
Name of Beneficial Owner --------------------------------
or Identity of Group Number Percent
- ---------------------------------------------- --------------- -------------
Gwynedd Resources, Ltd.
900 Market Street
Suite 200
Wilmington, DE 19801 3,207,280(3) 30.1%
Elizabeth Baxavanis, Trustee
Dominion Holdings #5
Revocable Trust for the
Benefit of Maria E. Nicolaides
900 Market Street
Suite 200
Wilmington, De 19801 3,207,280(4) 30.1%
Maria E. Nicolaides
4193 Las Palmas Way
Sarasota, FL 34238 3,207,280(5) 30.1%
Douglas Holsclaw, MD
42 Llanberries Road
Bala Cynwyd, PA 19004 752,382(6) 7.1%
Kenneth F. Manser 1,334,658 12.5%
George Benson 18,000 *
Edward I. Comer - 0 - *
Matthew J. Flanigan 17,700 *
Geoff W. Girdler 17,000 *
Allan H. Liu - 0 - *
Robert M. Madonna 40,000 *
Charles L. McNew 41,000 *
Stratton J. Nicolaides - 0 -(7) *
Peter J. Quinn 1,806 *
John G. Raos - 0 - *
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<PAGE>
Shares Beneficially Owned (1)(2)
Name of Beneficial Owner --------------------------------
or Identity of Group Number Percent
- ---------------------------------------------- --------------- -------------
Gordon T. Ray 126,397 1.2%
Andrew J. Ryan 19,000 (7) *
All Current Directors and Executive Officers
as a group (11 persons) 1,448,164 13.6%
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* Less than 1%.
(1) The shares "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations of the Securities and Exchange Commission. Accordingly,
they may include shares owned by or for, among other things, the wife,
minor children or certain other relatives of such individual, as well
as other shares as to which the individual has or shares voting or
investment power or has the right to acquire within 60 days after
February 26, 2000.
(2) Includes shares subject to options or warrants in the following
amounts: Mr. Benson, 13,000 shares; Mr. Flanigan, 14,700 shares; Mr.
Girdler, 17,000 shares; Mr. Madonna, 25,000 shares; Mr. McNew, 40,000
shares; Mr. Quinn, 1,806 shares; and Mr. Ray, 109,000 shares.
(3) The shareholders of Gwynedd include various trusts for the benefit of
Maria E. Nicolaides and her children (for which Mrs. Baxavanis is
trustee) and Dr. Holsclaw. Gwynedd has the same shareholders as
Dominion Group Limited, a Member Company of Dominion Holdings. See
"Certain Relationships and Related Transactions." See footnotes (4),
(5), (6) and (8).
(4) Represents the shares of Common Stock owned by Gwynedd. Trusts for the
benefit of Maria E. Nicolaides and her children, of which Mrs.
Baxavanis, Maria E. Nicolaides' mother-in-law, is trustee, own
approximately 89.8% and 0.9%, respectively, of the outstanding stock of
Gwynedd. Mrs. Baxavanis disclaims beneficial ownership of all shares of
Common Stock owned by Gwynedd. See footnote (5) below.
(5) Represents the shares of Common Stock owned by Gwynedd. Trusts for the
benefit of Maria E. Nicolaides and her children, of which Mrs.
Baxavanis, Maria E. Nicolaides' mother-in-law, is trustee, own
approximately 89.8% and 0.9%, respectively, of the outstanding stock of
Gwynedd. Maria E. Nicolaides disclaims beneficial ownership of 325,651
shares of Common Stock owned by Gwynedd which may be deemed to be
beneficially owned by the other shareholders of Gwynedd, including
trusts for the benefit of her children. See footnote (4) above.
(6) Does not include any shares of Common Stock owned by Gwynedd. Dr.
Holsclaw is the owner of approximately 9.3% of the outstanding stock of
Gwynedd.
(7) Mr. Nicolaides disclaims beneficial ownership of the 3,207,280 shares
of Common Stock owned by Gwynedd.
(8) Mr. Ryan disclaims beneficial ownership of the 3,207,280 shares of
Common Stock owned by Gwynedd. Mr. Ryan's address is: Salisbury & Ryan,
1325 Avenue of the Americas, Seventh Floor, New York, NY 10019-6026.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company had, in prior fiscal years, entered into various
transactions and arrangements with Dominion Group Limited, a Member Company of
Dominion Holdings or a corporation which previously carried on certain
activities of such entity (collectively, "Dominion"). Dominion was an investment
and merchant banking firm which had in prior fiscal years provided financial
advisory and investment banking services to the Company. Gwynedd owns
approximately 30.1% of the outstanding Common Stock of the Company. The
shareholders of Dominion are also the shareholders of Gwynedd. See "Security
Ownership of Management and Certain Beneficial Owners."
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<PAGE>
During fiscal 1995 the Company's subsidiary, Digital Audio Limited,
manufactured certain products for CellTel Data Services, Inc. ("CellTel"), a
company in which Dominion owns a controlling interest. In October 1996 Numerex
invested $375,000 in Digital Audio Limited in return for an initial 10% equity
interest in CellTel. In 1999, Numerex had the right to put its initial equity
interest to Dominion and Dominion could call this interest for $500,000. In
October 1999 the parties exercised this right, and the Company received $500,000
from Gwynedd.
Mr. Ryan is a partner in the law firm of Salisbury & Ryan. Salisbury &
Ryan provided legal services to the Company in 1999 and will continue to provide
such services during 2000. As partial consideration for such legal services, the
Company granted a stock option to Salisbury & Ryan covering 100,000 shares at an
exercise price of $3.50, the then fair market value of a share of stock on the
date of grant. The option has a term of ten years and was exercisable with
respect to 50% of the shares upon issuance. The option will be exercisable with
respect to the remaining 50% of the shares on the first anniversary of the date
of grant. In addition, Salisbury & Ryan charged the Company legal fees of
approximately $275,637.
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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 Amendment to its
Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
NUMEREX CORP.
Date: February 28, 2000 By: /s/ Stratton J. Nicolaides
-------------------------------------
Stratton J. Nicolaides, Chairman and
Chief Operating Officer
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