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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended SEPTEMBER 30, 1998
or
[ ] 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: 0-21142
NEMATRON CORPORATION
(Name of small business issuer in its charter)
MICHIGAN 38-2483796
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5840 INTERFACE DRIVE, ANN ARBOR, MICHIGAN 48103
(Address of principal executive offices) (Zip Code)
(734) 214-2000
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, NO PAR VALUE
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the 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. [X] Yes [ ] No
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $16,829,334
The aggregate market value of the voting stock held by non-affiliates
as of December 21, 1998, computed by reference to the closing price of such
stock on such date as quoted on the Nasdaq Stock Market National Market, was
approximately $2,856,000. For purposes of this computation only, all executive
officers, directors and beneficial owners of more than 5% of the outstanding
Common Stock are assumed to be affiliates.
The number of shares outstanding of the issuer's Common Stock on December
21, 1997 was 5,353,316.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT [ ] Yes [X] No
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The Registrant hereby amends its Form 10-KSB for the fiscal year ended September
30, 1998 to add Items 9, 10, 11 and 12 as set forth below:
PART II
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
DIRECTORS OF THE COMPANY
Certain information relating to the persons who are the directors of the Company
is set forth below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION SINCE EXPIRES
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hugo E. Braun 40 Partner with Access Ventures, an 1996 1999
investment fund manager, and a Director
- -------------------------------------------------------------------------------------------------------------
Joseph J. Fitzsimmons 63 Retired Executive of Bell & Howell Company 1997 2000
and its subsidiary, University Microfilms
International, a provider of technology
services to libraries and other
organizations
- -------------------------------------------------------------------------------------------------------------
Matthew S. Galvez 43 President and COO of the Company, and a 1998 1999
Director
- -------------------------------------------------------------------------------------------------------------
Stephen E. Globus 52 Chairman of the Board of Globus Growth 1998 2000
Group, a venture capital company, a
director of Plasmaco, Inc., and a
Director
- -------------------------------------------------------------------------------------------------------------
Garnel F. Graber 67 Chairman of the Board of Directors of 1993 2001
Applied Dynamics International, a computer
manufacturing Company, and of Interface
Systems, Inc., and a Director
- -------------------------------------------------------------------------------------------------------------
Michael L. Hershey 60 President and Chairman of the Board of 1995 2001
Directors of Landis Associates, Inc., an
investment management company, and a
Director
- -------------------------------------------------------------------------------------------------------------
James A. Nichols 53 President and sole owner of Nichols & 1998 2000
Associates, P.C., attorneys practicing in
the area of international commercial law,
and a Director
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Hugo E. Braun became a director in March 1996. Mr. Braun is a partner
with Access Ventures, an investment fund manager, where he has been employed
since 1989.
Joseph J. Fitzsimmons became a director in March 1997. Mr. Fitzsimmons
is a retired executive of Bell & Howell Company and University Microfilms
International ("UMI"), a subsidiary of Bell & Howell. From January 1994 through
June 1995 when he retired, Mr. Fitzsimmons was Corporate Vice President of Bell
& Howell and Chairman of UMI. From March 1987 through December 1993, Mr.
Fitzsimmons was Corporate Vice President of Bell & Howell and President and
Chief Executive Officer of UMI, a leading provider of technology services to
libraries and other organizations regarding acquiring, preserving and
distributing literature. Mr. Fitzsimmons is a member of the Board of Directors
of First of America Bank Corporation, a Midwest bank holding company owned by
National CityBank. Mr. Fitzsimmons is a past Chairman of the Information
Industry Association and was the Vice-Chairman of the White House Conference on
Libraries and Information Services in 1991.
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Matthew S. Galvez became a director in August 1998 upon his joining the
Company as its Chief Operating Officer. On October 1, 1998, Mr. Galvez was
appointed to the office of the President of the Company. Mr. Galvez served as
Chief Executive Officer of ISDA & Co., a privately held apparel company, from
June 1994 until June 1998. From 1990 until June 1994, Mr. Galvez was a director
and Chief Financial Officer of Manufacturers Products Corporation, a supplier of
plastic products to the automotive industry. In 1994 he became Chief Executive
Officer of that company as well. Prior to 1990, Mr. Galvez was Executive Vice
President - Corporate Operations and General Counsel to General CAD/CAM, Inc.
("GCI") in Schenectady, New York. GCI is a developer and supplier of graphics
translation software for the industrial marketplace.
Stephen E. Globus became a director in December 1998. He has been
Chairman of the Board of Globus Growth Group, Inc., a Manhattan - based venture
capital company specializing in providing startup and seed capital, since 1984.
He is also a director of Plasmaco, Inc., a flat computer screen manufacturer
owned by Matsushita (Panasonic). Mr. Globus is the founder of several privately
held biotechnology companies, including Kimeragen, Inc., NuGene Technologies,
Inc., Thermaphore Sciences, Inc. and Genitope, Inc.
Garnel F. Graber became a director in February 1993 at the time of the
Company's spin-off from Interface Systems, Inc. and served as Chairman of the
Board of Nematron until March 1996. Mr. Graber is a retired executive of, and is
the current Chairman of the Board of Directors of, Applied Dynamics
International, a computer firm specializing in high-speed simulation. Mr. Graber
served as Chief Executive Officer of Applied Dynamics for more than five years
prior to his retirement in 1994. Mr. Graber also serves as Chairman of the Board
of Interface Systems, Inc.
Michael L. Hershey became a director in March 1995 at the time the
Company merged with Imagination Systems, Inc. Mr. Hershey had served as a member
of the Board of Directors and Secretary of Imagination Systems, Inc. Mr. Hershey
has been the President and Chairman of the Board of Directors of Landis
Associates, Inc., an investment management company, since its formation in 1986.
James A. Nichols a retired executive of Ford Motor Company, became a
director in December 1998. From 1981 to 1991, Mr. Nichols was a Senior Attorney
in the Corporate Transactions Department of Ford's Office of the General
Counsel. From 1991 to the present, Mr. Nichols has been the founder and the
Chairman of the Board of Surgical Instrument Repair Service, Inc., a partnership
with Allegiance Healthcare Corporation, a public company, that engages in the
repair and management of surgical instruments and equipment at health care
providers in North America. From 1993 to 1998, Mr. Nichols served as corporate
secretary and a director of Liberty BIDCO Investment Corporation, a
Michigan-based mezzanine finance company. Mr. Nichols was president and sole
owner of Sterilization Management Group, LLC, a provider of reusable sterile
products to hospitals, from 1997 to 1998 when the company was sold to Teleflex
Corporation, a public company. From 1991 to the present, Mr. Nichols has been
president and sole owner of Nichols & Associates, P.C., attorneys practicing in
the area of international commercial law.
Messrs. Nichols and Globus were appointed to the Board in connection
with their purchase on December 1, 1998 of certain convertible promissory notes
from the Company.
EXECUTIVE OFFICERS
The executive officers of the Company are listed and described below.
Executive officers of the Company serve at the pleasure of the Board of
Directors.
<TABLE>
<CAPTION>
Name Offices Age
- ---- ------- ---
<S> <C> <C>
Matthew S. Galvez President and Chief Operating Officer 43
David P. Gienapp Vice President - Finance and Administration,
Secretary and Treasurer 50
</TABLE>
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See "Directors of the Company" for further information concerning Mr.
Galvez.
David P. Gienapp has been the Vice President - Finance and
Administration and Treasurer of the Company since joining the Company in
September 1994 and has served as Secretary since March 1996. Mr. Gienapp served
as a director of the Company from March 1995 until August 1998. Prior to joining
the Company, Mr. Gienapp spent over 20 years with Deloitte & Touche LLP, a
certified public accounting firm.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Act of 1934 requires all Company
executive 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 their
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) reports they
file. Specific due dates for these reports have been established and the Company
is required to report any delinquent filings and failures to file such reports.
Based solely on its review of the copies of such reports received by it
and written representations of its executive officers and incumbent directors,
the Company believes that during the year ended September 30, 1998, all filing
requirements under Section 16(a) applicable to its executive officers, directors
and greater than ten percent beneficial owners were complied with except that
Messrs. Galvez, Globus and Nichols did not file a Form 3 within the prescribed
time period.
ITEM 10 EXECUTIVE COMPENSATION
SUMMARY
The following table sets forth information concerning the aggregate
compensation paid by the Company and its subsidiaries to the Company's former
President and Chief Executive Officer, its current President and Chief Operating
Officer and to its Executive Vice President - Finance and Administration, the
Company's only other executive officer whose salary and bonus exceeded $100,000
in fiscal 1998 (the "Named Executives"), for the periods indicated.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE (1)
-------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ----------------------
AWARDS
---------------------- ALL OTHER
NAME AND PRINCIPAL FISCAL SECURITIES COMPEN-
POSITION YEAR SALARY ($) BONUS ($) UNDERLYING OPTIONS SATION ($) (2)
(#)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Matthew S. Galvez, 1998 $ 13,538 $ -0- -0- $ -0-
President and Chief
Operating Officer (3)
-------------------------------------------------------------------------------------------------------------
Frank G. Logan, III, 1998 $ 165,467 $ -0- -0- $ 49,226
-------------------------------------------------------------------------------------
President and Chief 1997 $ 168,043 $200,000 120,000 $ 5,113
-------------------------------------------------------------------------------------
Executive Officer(4) 1996 $ 154,531 $ 25,000 50,000 $ 4,305
-------------------------------------------------------------------------------------------------------------
David P. Gienapp, 1998 $ 110,552 $ -0- -0- $ 3,268
-------------------------------------------------------------------------------------
VP - Finance and 1997 $ 103,005 $ 50,000 36,000 $ 5,746
-------------------------------------------------------------------------------------
Administration 1996 $ 95,384 $ 15,000 20,000 $ 2,286
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts reflected in the table do not include other compensation or
personal benefits which did not exceed in the aggregate the lesser of
either $50,000 or 10% of the total of annual salary and bonus for the
Named Executives.
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(2) All Other Compensation shown for Mr. Logan represents (i) amounts paid
by the Company for life insurance for Mr. Logan of $1,560, $1,560, and
$956 for 1998, 1997 and 1996, respectively, (ii) 401(k) Plan
contributions by the Company of $2,666, $3,553, and $3,349 for 1998,
1997 and 1996, respectively and (iii) $45,000 of consulting fees
accrued by the Company for the three month period following Mr. Logan's
termination as an employee. All Other Compensation shown for Mr.
Gienapp represents 401(k) Plan contributions by the Company.
(3) Mr. Galvez was appointed Chief Operating Officer on August 15, 1998 and
President on October 1, 1998.
(4) Mr. Logan resigned as President and CEO of the Company effective
September 30, 1998.
OPTIONS
The Named Executives were not granted and did not exercise any options
in the year ended September 30, 1998. The following table provides information
with respect to unexercised options held by the Named Executives as of September
30, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Matthew S. Galvez -0- / -0- $-0- / $-0-
------------------------------------------------------------------------------------------------------
Frank G. Logan, III 140,000 / 80,000 $-0- / $-0-
------------------------------------------------------------------------------------------------------
David P. Gienapp 74,000 / 12,000 $-0- / $-0-
------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company is
eligible to receive for his services as such a fee of $1,000 per meeting
attended, $500 for each committee meeting attended, and an additional $250 for
each committee meeting attended by the chairman of the committee. Director fees
were suspended in April 1998 for the remaining meetings held in fiscal 1998, and
will not resume until after the Company returns to profitability. Directors who
are officers or employees of the Company receive no additional compensation for
their service as a director, although they are reimbursed for their reasonable
travel expenses when meetings are held in a location other than the metropolitan
area in which they reside.
In addition, the Company has a 1993 Directors Stock Option Plan (the
"Directors Plan"). No grants were made under the Directors Plan in the year
ended September 30, 1998.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 26, 1999 with
respect to the beneficial ownership of Common Stock by each nominee, each
current director, each executive officer named in the Summary Compensation Table
under "Executive Compensation", all current directors and executive officers as
a group and all other persons known by the Company to beneficially own more than
5% of its outstanding Common Stock (each, a "5% Owner"). Except as noted below,
each shareholder exercises sole voting and investment power with respect to the
shares beneficially owned.
The table includes shares which may be acquired upon conversion of certain
convertible promissory notes dated as of December 1, 1998 (the "Notes") and
provisions in certain of the Notes permitting the holder to acquire additional
Notes (the "Note Options"). The Notes are convertible into Common Stock at the
request of the holder, but the issuance of all but 1,070,000 of the shares into
which the Notes may be converted is subject to shareholder approval.
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The issuance of shares upon exercise of the Note Options is also subject to
shareholder approval. The Company and the holders of the Note Options have
agreed (subject to documentation) to amend the Note Options to provide that the
Note Options are exercisable for shares of Common Stock rather than Notes, to
increase the exercise price from $.25 per share to $1.00 per share and to extend
the exercise period to the earlier of April 30, 1999 and the fifth business day
after receipt of shareholder approval of the issuance of shares upon exercise of
the Note Options. The Company currently intends to seek shareholder approval of
such issuances at the 1999 Annual Meeting of Shareholders, expected to be held
in late March 1999. Although receipt of shareholder approval is not assured and
may not occur within 60 days, the table assumes that such approval will be
received within 60 days.
<TABLE>
<CAPTION>
Name Number of Shares Percent of Class(11)
- ---- ---------------- --------------------
<S> <C> <C>
James A. Nichols 2,199,667 (1) 29.19%
Michael L. Hershey 1,787,540 (2) 26.90%
J. Eric May, Trustee Under
Declaration of Trust 1,744,505 (3) 26.33%
Stephen E. Globus 1,489,712 (4) 22.48%
Frank G. Logan, III 234,552 (5) 4.38%
Hugo E. Braun 146,893 (6) 2.67%
David P. Gienapp 108,460 (7) 2.00%
Garnel F. Graber 64,110 (8) 1.19%
Joseph J. Fitzsimmons 20,664 (9) 0.38%
Matthew S. Galvez 0 0.00%
All Current Directors and Executive
Officers as Group (9 persons) 5,817,046 (10) 56.01%
</TABLE>
(1) Mr. Nichols. The shares represented in the table include (i) 17,000
shares owned outright; (ii) 1,228,000 shares which may be acquired upon
conversion of Notes owned by Mr. Nichols; (iii) 204,667 shares which may be
acquired upon conversion of Notes owned by an investment club of which Mr.
Nichols is a member; and (iv) 750,000 shares which he has the right to acquire
upon exercise of the Note Option granted to him in connection with his
acquisition of the Notes. Mr. Nichols business address is 3707 West Maple Road,
Bloomfield Hills, MI 48301.
(2) Mr. Hershey. The shares represented in the table include (i) the
471,172 shares owned by J. Eric May, Trustee Under Declaration of Trust, over
which Mr. Hershey may exercise voting and investment power; (ii) 1,023,333
shares which may be acquired by Mr. May as Trustee upon conversion of Notes;
(iii) 250,000 shares which may be acquired by Mr. May as Trustee upon exercise
of the Note Option granted to him in connection with his acquisition of the
Notes; (iv) 25,371 shares owned outright by Mr. Hershey; and (v) options to
purchase 17,664 shares of Common Stock under the Directors Option Plan which are
currently exercisable or are exercisable within sixty days. Mr. Hershey's
address is c/o Landis Associates, Inc., 400 West Ninth Street, Suite 100,
Wilmington, DE 19801.
(3) Mr. May. The shares represented in the table include (i)
471,172 shares owned by Mr. J. Eric May, Trustee Under Declaration of Trust,
over which Mr. Hershey may exercise voting and investment power; (ii) 1,023,333
shares which may be acquired by Mr. May as Trustee upon conversion of Notes; and
(iii) 250,000 shares which may be acquired by Mr. May as Trustee upon exercise
of the Note Option granted to him in connection with his acquisition of the
Notes. Mr. May's address is c/o Wilmington Trust Company, 1100 North Market
Street, Wilmington, DE 19890.
(4) Mr. Globus. The shares represented in the table include (i) 8,973
shares owned outright by Mr. Globus; (ii) 120,180 shares owned by partnerships
over which Mr. Globus exercises voting and investment power; (iii) 87,226 shares
owned by certain relatives of Mr. Globus over which Mr. Globus exercises
beneficial ownership; (iv) 255,833 shares which may be acquired by Mr. Globus
upon conversion of Notes and 62,500 shares which he has the right to acquire
upon exercise of the Note Option granted to him in connection with his
acquisition of the Notes; (v) 511,667 shares which may be acquired by a
partnership upon conversion of Notes and 125,000 shares which it has the right
to acquire upon exercise of the Note Option granted to it in connection with its
acquisition of the Notes, with respect to which shares Mr. Globus will have
voting and investment power; and (vi) 255,833 shares which may be acquired by
Mr. Globus' brother upon conversion of Notes and 62,500 shares which he has the
right to acquire upon exercise of the Note Option granted to him in connection
with his acquisition of the Notes, with respect to
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which shares Mr. Globus will have beneficial ownership. Mr. Globus' address is
44 West 24th Street, New York, New York 10010.
(5) Mr. Logan. The shares represented in the table include (i)
208,588 shares owned outright; and (ii) 25,964 shares owned by Mr. Logan as
custodian of certain trusts for his children. Mr. Logan has resigned as a
director and officer of the Company.
(6) Mr. Braun. The shares represented in the table include (i)
options to purchase 15,108 shares under the Directors Stock Option Plan which
are currently exercisable or are exercisable within sixty days; and (ii)
currently exercisable warrants to purchase 131,785 shares of Common Stock
pursuant to a Term Loan and Warrant Purchase Agreement dated November 7, 1995
between the Company and Onset BIDCO, Inc., of which Mr. Braun is an officer, and
others. If such warrants were exercised, Mr. Braun would have sole voting rights
and shared investment power with respect to the underlying shares.
(7) Mr. Gienapp. The shares represented in the table include (i) 34,460
shares owned outright; and (ii) options to purchase 74,000 shares under the 1993
Stock Option Plan which are currently exercisable or are exercisable within
sixty days.
(8) Mr. Graber. The shares represented in the table include (i) 16,002
shares owned outright; and (ii) options to purchase 48,108 shares of Common
Stock under the Directors Stock Option Plan and special option awards which are
currently exercisable or are exercisable within sixty days.
(9) Mr. Fitzsimmons. The shares in the table include (i) 4,000 shares of
Common Stock owned outright; and (ii) options to purchase 16,664 shares of
Common Stock under the Directors Stock Option Plan which are currently
exercisable or are exercisable within sixty days.
(10) All Current Directors and Executive Officers as a Group. The shares
represented in the table include the shares described in footnotes (1), (2), (4)
and (6) through (9).
(11) For purposes of calculating the percentage of Common Stock beneficially
owned by each person, the shares issuable upon exercise of options and warrants
held by such person and upon conversion of Notes held by such person are
considered outstanding and added to the shares of Common Stock actually
outstanding.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leased its two-story office building in Virginia Beach,
Virginia, which the Company used for its software development and applied
systems businesses, from LPS Management, a partnership of which Mr. Logan is a
partner. Mr. Logan is a former director, President and Chief Executive Officer
of the Company. Lease payments were $6,994 per month. The lease term extends to
February 1999, but the building was vacated by the Company on October 1, 1999
and is now occupied by a company formed by Mr. Logan after his resignation from
the Company. Total lease expense for the office building was approximately
$82,600 and $79,600 for fiscal 1998 and fiscal 1997, respectively.
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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 this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEMATRON CORPORATION
By: /s/ DAVID P. GIENAPP Dated: January 26, 1999
---------------------------------------
David P. Gienapp,
Executive Vice President - Finance and
Administration, Secretary and Treasurer
8
