SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
Commission File Number 0-21816
INFINITE MACHINES CORP.
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 52-1490422
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
300 Metro Center Boulevard, Warwick, R.I. 02886
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (401) 737-7900
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Securities registered under Section 12(b) of the Exchange Act:
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Title of each class Name of each exchange on which registered
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None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
(Title of class)
Common Stock Purchase Warrants
(Title of class)
The Issuer hereby amends its Annual Report on Form 10-KSB for the year ended
December 31, 1996 to include the information required by Part III, Items 10, 11
and 12.
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ITEM 10
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Summary Compensation Table below includes, for each of the fiscal
years ended December 31, 1996, 1995 and 1994, individual compensation for
services to the Company and its subsidiaries paid to: (1) the Chief Executive
Officer, and (2) the other most highly paid executive officers of the Company in
Fiscal 1996 whose salary and bonus exceeded $100,000 (together, the "Named
Executives").
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Long-Term
Annual Compensation Compensation
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Name and Principal Securities All Other
Position Year Actual Deferred Underlying Options Compensation
-------- ---- ------ -------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Carle C. Conway 1996 $ 150,000 --- 8,654 ---
Chairman of the 1995 $ 150,000 --- 75,000 ---
Board and Chief 1994 $ 150,000 --- --- ---
Executive Officer
Clifford G. 1996 $ 157,500 $75,000 310,096 ---
Brockmyre 1995 $ 140,000 --- 115,000 ---
President and 1994 $ 70,000* --- --- ---
Chief Operating
Officer
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* Mr. Brockmyre joined the Company in July 1994.
Employment Agreements
The Company has an employment agreement with Carle C. Conway, its Chairman
and Chief Executive Officer, for a term expiring on May 31, 1998 which provides
for an annual base salary of $150,000 and various benefits. The agreement also
provides, among other things, that, if Mr. Conway is terminated other than for
cause (which is defined to include conviction of a crime involving moral
turpitude, engaging in activities competitive with the Company, divulging
confidential information, dishonesty or misconduct detrimental to the Company or
breach of a material term of the agreement), the Company will pay to him a lump
sum amount equal to the greater of $150,000 or the salary payable over the
unexpired term of the employment agreement. The Company owns a key-man life
insurance policy in the amount of $1 million on the life of Mr. Conway.
The Company has an employment agreement with Clifford G. Brockmyre, its
President and Chief Operating Officer, for a term expiring on June 30, 2000,
which provides for an annual base salary of $175,000 and various benefits. In
addition to the compensation provided under the agreement, Mr. Brockmyre is
eligible to participate in the Company's bonus plan and is eligible for other
bonuses as determined in the sole discretion of the Board of Directors. The
agreement also provides, among other things, that, if Mr. Brockmyre is
terminated other than for cause (which is defined to include conviction of a
crime involving moral turpitude, engaging in activities competitive with the
Company, divulging confidential information, dishonesty or misconduct
detrimental to the Company or breach of a material term of the agreement), the
Company will pay to him a lump sum payment equal to the product of the sum of
(i) the highest annual rate of salary paid to Mr. Brockmyre, and (ii) the
highest annual bonus paid to or accrued to the benefit of Mr. Brockmyre during
the Employment Term (as defined in the agreement) multiplied by 2.99. The
agreement also provides for payments to Mr. Brockmyre in the event of his death
or permanent disability. The Company owns a key-man life insurance policy in the
amount of $1.6 million on the life of Mr. Brockmyre.
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Stock Options
The following tables show certain information with respect to stock
options granted in 1996 to Named Executives and the aggregate value at December
31, 1996 of all stock options granted to such executives. No Options granted to
Named Executives were exercised in 1996.
Option Grants in 1996
Individual Grants of Options
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Number of Securities Percent of Total
Underlying Options/Granted
Name Options/Granted(#) to Employees in Fiscal 1996 Exercise Price ($/Sh) Expiration($/Sh)
---- ------------------ --------------------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Carle C. Conway 8,654(1) 2.6% $1.56 12/02/06
Clifford G. 300,000(2) 91.04% $1.375 10/28/06
Brockmyre 10,096(1) 3.06% $1.56 12/02/06
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(1) The Options vest in three equal annual installments beginning December 31,
1996.
(2) One third of such options will vest on or after April 28, 1997 if the
average closing price of the Company's Common Stock on Nasdaq over any
thirty consecutive day period, prior to December 31, 1999, exceeds $7.00
per share. An additional one third of such options will vest on or after
April 28, 1997 if the average closing price of the Company's Common Stock
on Nasdaq over any thirty consecutive day period, prior to December 31,
1999, exceeds $10.00 per share. An additional one third of such options
will vest on or after April 28, 1997 if the average closing price of the
Company's Common Stock on Nasdaq over any thirty consecutive day period,
prior to December 31, 1999, exceeds $13.00 per share. Notwithstanding the
foregoing, all such options will vest on August 14, 2005.
Aggregate 1996 Year End Option Values
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Number of Shares of
Common Stock
Underlying Unexercised Value of Unexercised
Options In-The-Money Options at
At 12/31/96 (#) 12/31/96 (1) ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
Carle C. Conway 52,885/30,770 $875/$552
Clifford G. Brockmyre 80,031/345,064 $28,225/$42,214
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(1) Based on closing price on Nasdaq of $1.5625.
Stock Option Plans
In December 1991, the Board of Directors and stockholders of the Company
adopted a stock option plan, which was amended in April 1993 (the "1993 Stock
Option Plan"). In April 1994, the Board of Directors adopted the 1994 Stock
Option Plan which was approved and adopted by the Company's stockholders at the
1994 Annual Meeting of Stockholders. In June 1995 the Board of Directors adopted
the 1995 Stock Option Plan which was approved by the Company's stockholders at
the 1995 Annual Meeting of Stockholders. In December 1996 the Board of Directors
adopted the 1996 Stock Option Plan which was approved and adopted by the
Company's stockholders at the 1996 Annual Meeting of
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Stockholders. The 1993, 1994, 1995 and 1996 Stock Option Plans are collectively
referred to herein as the "Option Plans". The 1993, 1994, 1995 and 1996 Option
Plans provide for the grant to employees, officers and consultants of options to
purchase up to 250,000, 225,000, 255,000 and 400,000 shares of Common Stock,
respectively, consisting of both "incentive stock options" within the meaning of
Section 422 of the United States Internal Revenue Code of 1986 (the "Code") and
non-qualified options. The Option Plans are intended to qualify under Rule 16b-3
of the Securities Exchange Act of 1934. Incentive stock options are issuable
only to employees of the Company, while non-qualified options may be issued to
non-employees, consultants, and others, as well as to employees of the Company.
The Option Plans are administered by the Compensation Committee of the
Board of Directors, which determines those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of shares of Common Stock that may be purchased under each
option, and the option price. The members of this committee are ineligible to
receive options under the Option Plans.
The per share exercise price of an incentive or non-qualified stock option
may not be less than the fair market value of the Common Stock on the date the
option is granted. The aggregate fair market value (determined as of the date
the option is granted) of the shares of Common Stock for which incentive stock
options are first exercisable by any individual during any calendar year may not
exceed $100,000. No person who owns, directly or indirectly, at the time of the
granting of an incentive stock option to him, more than 10% of the total
combined voting power of all classes of stock of the Company shall be eligible
to receive any incentive stock options under the Option Plans unless the option
price is at least 110% of the fair market value of the Common Stock subject to
the option, determined on the date of grant. Non-qualified options are not
subject to this limitation.
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which to exercise the option.
Upon termination of employment of an optionee by reason of death or permanent
total disability, the option remains exercisable for one year thereafter to the
extent it was exercisable on the date of such termination. No similar limitation
applies to non-qualified options.
In April 1993, the Board of Directors and stockholders of the Company
adopted a non-discretionary non-employee directors' stock option plan (the
"Directors' Plan") that provides for the grant to non-employee directors of
non-qualified options to purchase up to 50,000 shares of Common Stock. Pursuant
to the Directors' Plan, each new non-employee director of the Company is
automatically granted, upon becoming a director, an option to purchase 2,500
shares of Common Stock at the fair market value of such shares on the grant
date. Each option vests one year from the date of grant. In addition, each
non-employee director shall automatically be granted an option to purchase 2,500
shares at the fair market value of such shares on the date of grant, on the last
day of each fiscal year during which he serves as a director of the Company.
Such options shall vest one year from the date of grant.
Options under the Option Plan and Directors' Plan must be granted within
10 years from the effective date of each respective plan. Incentive stock
options granted under the plans cannot be exercised more than 10 years from the
date of grant, except that incentive stock options issued to greater than 10%
stockholders are limited to five year terms. All options granted under the plans
provide for the payment of the exercise price in cash or by delivery to the
Company of shares of Common Stock already owned by the optionee having a fair
market value equal to the exercise price of the options being exercised, or by a
combination of such methods of payment. Therefore, an optionee may be able to
tender shares of Common Stock to purchase additional shares of Common Stock and
may theoretically exercise all of his stock options without making any
additional cash investment.
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Any unexercised options that expire or that terminate upon an optionee's
ceasing to be affiliated with the Company become available once again for
issuance. As of April 27, 1997, the Company had outstanding incentive stock
options to purchase 892,344 shares of Common Stock to four individuals under the
Option Plan and non-qualified options to purchase an aggregate of 12,500 shares
of Common Stock to Robert J. Sherwood and 2,500 shares of Common Stock to
Michael S. Smith under the Directors' Plan. These options are exercisable at
prices ranging from $1.88 to $2.75 per share.
Director Compensation
Directors receive 2,500 Stock Options at the end of each year of service
as a director. The Company does not pay a fee to directors for services rendered
as directors. Each director is reimbursed for travel expenses incurred in
connection with attendance at meetings of the Board of Directors and its
committees.
ITEM 11
BENEFICIAL OWNERSHIP OF COMMON STOCK
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 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 shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Company, or written representations that no Forms 5 were
required, the Company believes that all Section 16(a) filing requirements
applicable to its officers and directors were complied with.
The following table, together with the accompanying footnotes, sets forth
information, as of April 24, 1997, regarding stock ownership of all persons
known by the Company to own beneficially 5% or more of the Company's outstanding
Common Stock, all directors, and all directors and executive officers of the
Company as a group.
Name of Shares of Common Stock Percentage
Beneficial Owner(1) Beneficially Owned(2) of Class(3)
------------------- --------------------- -----------
Carle C. Conway 2,197,701(4) 22.4%(5)
Clifford G. Brockmyre 620,329(6) 6.63%(5)
Robert J. Sherwood 48,334(7) * (5)
Michael S. Smith 833(8) * (5)
All executive officers 2,993,378(9) 29.95%(10)
and directors as a
group (6 persons)
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* less than 1%
(1) The mailing address for Carle C. Conway and Clifford G. Brockmyre is
P.O. Box 8219, Incline Village, Nevada 89452 and 300 Metro Center
Boulevard, Warwick, RI 02886, respectively.
(2) Unless otherwise indicated below, each director, executive officer and
each 5% stockholder has sole voting and investment power with respect to
all shares beneficially owned.
(3) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants or upon the
conversion of securities are deemed to be outstanding for the purpose of
computing the
5
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percentage ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table.
(4) Includes (i) 53,719 shares issuable upon exercise of a currently
exercisable outstanding warrant, (ii) 104,258 shares owned by Mr. Conway's
daughter, as to which he disclaims beneficial ownership, (iii) 501,383
shares issuable upon conversion of outstanding promissory notes of the
Company held by Mr. Conway, (iv) 66,489 owned by a trust established for
Mr. Conway's daughter of which Mr. Conway's wife is the trustee, which
shares Mr. Conway disclaims beneficial ownership of, (v) 750,000 shares
held in escrow pursuant to the terms of an Escrow Agreement between Mr.
Conway and H.J. Meyers & Co., Inc. and (vi) 52,885 shares subject to
currently exercisable stock options.
(5) Assumes that all currently exercisable options or warrants or convertible
notes owned by this individual have been exercised.
(6) Includes 57,143 shares issuable upon conversion of an outstanding
promissory note of the Company held by Mr. Brockmyre's wife as to which
shares Mr. Brockmyre disclaims beneficial ownership and 80,031 shares
subject to currently exercisable options. Does not include an aggregate of
300,000 shares issuable upon exercise of options which vest if certain
performance criteria are met.
(7) Includes 8,334 shares subject to currently exercisable options.
(8) Consists of 833 shares subject to currently exercisable options.
(9) Includes 776,251 shares subject to currently exercisable options,
warrants or convertible notes.
(10) Assumes that all currently exercisable options or warrants owned by
members of the group have been exercised.
ITEM 12
CERTAIN TRANSACTIONS
In April 1997, the Company issued to Carle C. Conway, a stockholder,
officer and director of the Company, an aggregate of 161,943 shares of Common
Stock in consideration for Mr. Conway's payment to Moller International, Inc. of
a $250,000 portion of the settlement of a judgment against the Company. The
shares, which are unregistered, were valued at $1.544, the fair market value of
the Company's Common Stock on the date the judgment was entered.
Between December 1994 and January 1997, the Company borrowed an aggregate
of $898,671 for working capital from Carle C. Conway, a stockholder, officer and
director of the Company. The loans are evidenced by three-year promissory notes
which mature from December 1997 through June 1999, and bear interest at the rate
of 10% per annum. The notes are convertible at the discretion of the holder into
shares of Common Stock at a conversion price ranging from $1.13 to $2.00 per
share.
In April 1995, the Company borrowed $100,000 for working, capital from
Sheila Brockmyre, the wife of Clifford G. Brockmyre an officer director and
principal stockholder of the Company. The loan is evidenced by a three-year
promissory note which matures in April 1998 and bears interest at the rate of
10% per annum. The note is convertible at the discretion of the holder into
shares of Common Stock at the conversion price of $1.75 per share, subject to
adjustment.
In March 1995, the Company borrowed $125,000 for working capital from a
trust established for Mr. Conway's daughter, of which Mr. Conway's wife is the
trustee. The loan was evidenced by a three-year promissory note which matures in
March 1998 and bears interest at the rate of 10% per annum. The note was
converted into 66,489 shares of Common Stock on March 27, 1996.
The Company believes the foregoing transactions which involved affiliates
were on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. As a matter of policy, in order to reduce the
risks of self-dealing or a breach of the duty of loyalty to the Company, all
transactions between the Company and any of its officers, directors or principal
stockholders are for bona fide purposes and are approved by a majority of the
disinterested members of the Board of Directors.
6
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly authorized and caused the undersigned to sign this
Report on the Registrant's behalf.
INFINITE MACHINES CORP.
By: /s/Daniel Landi
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Daniel Landi, Chief Financial and Accounting Officer
Dated: April 28, 1997
