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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-13524
TIMELINE, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
WASHINGTON 91-1590734
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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3055 112TH AVENUE N.E., STE. 106
BELLEVUE, WA 98004
(Address of principal executive offices)
(206) 822-3140
(Issuer's telephone number)
Securities registered under Section 12(b)
of the Exchange Act: COMMON STOCK, $.01 PAR VALUE
WARRANTS TO PURCHASE COMMON STOCK
Securities registered under Section 12(g)
of the Exchange Act: (none)
DOCUMENTS INCORPORATED BY REFERENCE
(1) Issuer's registration statement on Form SB-2, as amended and declared
effective on January 18, 1995 (No. 33-85320)(the "Form SB-2"); and (2) final
prospectus dated January 18, 1995 and filed with the Commission pursuant to
Rule 424(b)(the "Prospectus").
PURPOSE OF AMENDMENT
Items 9, 10, 11 and 12 of Part III of Issuer's report on Form 10-KSB for the
fiscal year ended March 31, 1996 are amended to read in their entirety as set
forth herein, and all references in such Form 10-KSB to information
incorporated by reference from the Proxy Statement relating to Issuer's
July 15, 1996 Annual Meeting of Shareholders are hereby deleted.
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This filing consists of one document.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
EXECUTIVE OFFICERS, INCLUDING DIRECTORS WHO ARE OFFICERS
For information pertaining to executive officers, including executive
officers who are directors of the Registrant, see "Executive Officers" in Item
1 of Part I of this Form 10-KSB.
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RECENT DEVELOPMENTS. At the Company's annual meeting of shareholders on
July 15, 1996, Mr. Osenbaugh was re-elected as a Director to serve for an
additional three-year term expiring at the 1999 annual meeting of the Company's
shareholders.
In July 1996, Mr. Mooradian resigned as the Company's Vice President
of North American Sales, and the Company has no plans to fill this position in
the near future.
In June 1996, as a part of management's ongoing analysis of the
effectiveness of the research and development efforts, Product Management and
Development were merged as a single department, and Mr. Dean, Vice President of
Product Management, assumed management of the combined department. In addition,
Mr. Kouchi resigned as Vice President of Development and left the Company as
an employee, but is providing management services to the Company under a
separate agreement.
DIRECTORS NOT EMPLOYEES
KENT L. JOHNSON has been a Director of the Company since inception;
his term expires at the 1997 annual meeting of the Company's shareholders. He
is President of Alexander Hutton Capital, L.L.C., a Seattle-based investment
banking firm that he co-founded in October 1994 and that specializes in equity
capital formation for emerging growth companies. From April 1989 to June 1994,
he served as Senior Vice President and Chief Operating Officer of Brazier Forest
Industries, Inc., a Seattle-based forest products company. From 1987 to 1989, he
was President and Chief Executive Officer of OverDrive Systems, Inc., an
electronic publishing software company based in Cleveland, Ohio, and from 1982
to 1987, was President and Chief Executive Officer of Microrim, Inc., a database
software company located in Bellevue, Washington. Prior to entering the software
industry, Mr. Johnson was Chief Financial Officer of Fiberchem, Inc., a
wholesale distributor, from 1977 to 1982. Following his military career as an
officer in the U.S. Army, Mr. Johnson began his professional career as a
management consultant with Arthur Andersen & Co., where he was employed from
1970 to 1977. Mr. Johnson currently serves as a director of several private
companies, and devotes considerable time to private investment activities. Mr.
Johnson has a B.B.A. degree in Business Administration from the University of
Washington and an M.B.A. degree from Seattle University, where he serves on the
Business Advisory Board. He received his CPA certificate in 1970.
MICHAEL R. HALLMAN has been a Director of the Company since inception;
his term expires at the 1998 annual meeting of the Company's shareholders. Since
November 1993, he has served as Chairman of the Board of Information Optics
Corporation, an optical computer memory and storage company located in Issaquah,
Washington. Mr. Hallman is also the founder and President of the Hallman Group,
a management consulting firm that focuses on marketing, sales, organizational
development and operations for the computer industry. From February 1990 to
March 1992, he was President and Chief Operating Officer of Microsoft
Corporation. From February 1987 to February 1990, Mr. Hallman served as Vice
President of the Boeing Company and as President of Boeing Computer Services,
Inc. Mr. Hallman started his career with the IBM Corporation, where he last held
the position of Vice President of Field Operations. He now serves as a director
of several public and private companies, including Intuit, Inc., InFocus
Systems, Inc., Amdahl, Network Appliance Corp., and Keytronics Corporation. Mr.
Hallman holds a B.B.A. degree in Business Administration and an M.B.A. degree,
both from the University of Michigan.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and change in
ownership with the SEC and with the National Association of Securities Dealers,
Inc. Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all forms they file pursuant
to Section 16(a).
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5
disclosing delinquently reported transactions were required for those persons,
the Company believes that, during the year ended March 31, 1996, all filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except for the following: (1) No Form 3
Initial Statement of Beneficial Ownership of Securities was filed by February
10, 1996 for Michael Mooradian. Mr. Mooradian's beneficial ownership of Timeline
Securities has been reported on a Form 5 filed on May 15, 1996. (2) No Form 5
was filed by May 15, 1996 to reflect the termination of Kent Johnson's indirect
ownership of Timeline Securities owned by his former spouse. A Form 5 was filed
on or about June 14, 1996.
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ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the years ended March 31, 1996 and 1995,
respectively, certain compensation awarded or paid to, or earned by, the Named
Executive Officers:
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SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES ALL OTHER
BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) ($) OPTION (1) ($)(2)
- --------------------------- ---- ---------- ----- ---------- ------
<S> <C> <C> <C> <C> <C>
John Calahan, President & Chief 1996 $183,035 -- 10,000 $10,515
Executive Officer 1995 111,702 -- 6,600(3) 5,665
Charles R. Osenbaugh, Executive 1996 145,030 -- 9,000 6,000
Vice President and Chief 1995 100,000 -- 17,325(3) 6,732
Financial Officer --
Frederick W. Dean, Vice 1996 106,869 -- 12,000 4,549
President -- Product 1995 106,367 -- 6,600(3) 8,548
Management
Robert B. Wallace, Vice President 1996 128,813 -- 26,000 --
-- Educational Services 1995 113,918 -- -- 2,023
Donald K. Babcock, Senior 1996 124,390 -- -- 2,613
Technologist 1995 104,836 -- -- 3,959
</TABLE>
(1) All referenced options granted are exercisable at prices equal to the
fair market value of the Common Stock on the respective dates of grant.
(2) Represents dollar value of medical, disability, and life insurance
premiums paid by the Company for the benefit of the respective named
officers.
(3) Represents warrants to purchase the indicated number of shares of
Common Stock, at an exercise price of $3.64 per share, as consideration
for certain personal guarantees of loans incurred by the Company.
STOCK OPTION GRANTS AND EXERCISES
For the fiscal year ended March 31, 1996, no options were exercised by
the Named Executive Officers. The following table shows, for the fiscal year
ended March 31, 1996, certain information regarding options granted to the Named
Executive Officers:
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<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SHARES PERCENTAGE OF OF STOCK PRICE
UNDERLYING TOTAL OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO PRICE PER EXPIRATION OPTION TERM
NAME GRANTED (#1) EMPLOYEES SHARE DATE 5% 10%
- ---- ------------ --------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
John Calahan 10,000 5.4% $3.93 4/30/05 $24,900 $62,700
Charles Osenbaugh 9,000 4.8% 3.57 4/30/05 20,340 51,930
Frederick Dean 12,000 6.4% 3.57 4/30/05 27,120 69,240
Robert Wallace 6,000 3.2% 3.57 4/30/05 13,560 34,610
20,000 10.7% 6.75 8/03/05 45,200 115,400
</TABLE>
The following table shows, for the fiscal year ended March 31, 1996,
certain information regarding options held at year end by the Named Executive
Officers.
FISCAL YEAR-END 1996 OPTION VALUES
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<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT FISCAL YEAR ENDED (1)
-------------------------- ------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John Calahan, President & Chief Executive
Officer ................................. 17,876 7,500 $64,228 $18,375
Charles R. Osenbaugh, Executive Vice
President and Chief Financial Officer.... 28,351 6,750 93,812 18,968
Frederick W. Dean, Vice President --
Product Management ...................... 11,250 10,650 31,035 29,811
Robert B. Wallace, Vice President --
Educational Services .................... 13,875 36,875 38,123 39,153
Donald K. Babcock, Senior Technologist ...... 8,776 - 0 - 40,019 - 0 -
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(1) Value of unexercised in-the-money options is calculated based on the
market value of the underlying securities, minus the exercise price,
and assumes sale of the underlying securities on March 31, 1996 at the
fair market value of $6.38 per share.
COMPENSATION OF DIRECTORS
During the year ended March 31, 1996, the Company did not compensate
its directors for their service as directors. Pursuant to the terms of the
Company's Directors' Non-Qualified Stock Option Plan, the non-employee directors
of the Company were each granted options to purchase 3,000 shares of Common
Stock on May 1, 1995. These options are also to be automatically granted to any
new non-employee director 90 days after he or she becomes a director.
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EMPLOYMENT AGREEMENTS
Messrs. Calahan, Kouchi and Babcock have entered into employment
agreements with the Company, each of which became effective February 1, 1995.
Mr. Calahan's five-year agreement provides for an annual salary of
$150,000, with an annual bonus of up to $75,000 based on achievement of net
income goals to be established by the Board of Directors. In the event of
termination of Mr. Calahan's employment by the Company during the initial 24
months of the agreement, except in the case of termination for cause, he will
continue to receive the remaining portion of his salary until expiration of such
24-month period. Under terms of a noncompete agreement with the Company, Mr.
Calahan has agreed not to compete with the Company for two years following
termination of his employment. If there is a change of control in the Company
which results in removal of Mr. Calahan as an executive officer or director of
the Company, the agreement provides that the Company will pay Mr. Calahan
$250,000.
Mr. Babcock's five-year agreement provides for an annual salary of
$127,000, and permits Mr. Babcock to defer up to $25,000 of his salary each
year. In the event of involuntary termination of Mr. Babcock's employment,
except in the case of termination for cause as specified in the agreement, he
will continue to receive $70,000 annually for each year remaining on his
employment contract from the date of termination. He has agreed not to compete
with the Company for a period of 10 years following the termination of his
employment.
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ITEM 11. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of May 31, 1996 by: (i) each
director; (ii) the Company's Chief Executive Officer and each of its other four
most highly compensated executives (collectively, the "Named Executive
Officers") for the year ended March 31, 1996; and (iii) all directors and
executive officers of the Company as a group. The Company is not aware of any
person who is a beneficial owner of more than 5% of its Common Stock other than
certain of its executive officers who are identified below.
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SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
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NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF TOTAL
---------------- --------- --------
<S> <C> <C>
John W. Calahan (2) 413,876 14.6%
c/o Timeline, Inc.
3055 112th Avenue N.E., Suite 106
Bellevue, WA 98004
Charles R. Osenbaugh (3) 254,787 9.0
c/o Timeline, Inc.
3055 112th Avenue N.E., Suite 106
Bellevue, WA 98004
Donald K. Babcock (4) 187,175 6.6
c/o Timeline, Inc.
3055 112th Avenue N.E., Suite 106
Bellevue, WA 98004
Frederick W. Dean (5) 149,650 5.3
c/o Timeline, Inc.
3055 112th Avenue N.E., Suite 106
Bellevue, WA 98004
Michael R. Hallman (6) 85,273 3.0
600 Skyline Tower
10900 N.E. 4th Street
Bellevue, WA 98004
Kent L. Johnson (7) 51,998 1.8
c/o Alexander Hutton Capital, L.L.C.
1325 4th Avenue, Suite 535
Seattle, WA 98101
Robert B. Wallace (8) 17,505 0.6
c/o Timeline, Inc.
3055 112th Avenue N.E., Suite 106
Bellevue, WA 98004
All directors and executive officers as a group 1,175,299 41.0
(nine persons) (9)
</TABLE>
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(1) This table is based upon information supplied by executive officers,
directors and principal shareholders. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, each of the shareholders named in this table has sole
voting and investment power with respect to the shares shown as
beneficially owned by him or her.
(2) Includes (i) 11,276 shares issuable upon exercise of vested options
held by Mr. Calahan and (ii) 6,600 shares issuable upon exercise of
warrants granted to Mr. Calahan in connection with certain Company loan
guarantees.
(3) Includes (i) 11,026 shares issuable upon exercise of vested options
held by Mr. Osenbaugh and (ii) 17,325 shares issuable upon exercise of
warrants granted to Mr. Osenbaugh in connection with certain Company
loan guarantees. Does not include 15,015 shares held in an individual
retirement account belonging to Mr. Osenbaugh's spouse; Mr. Osenbaugh
disclaims any beneficial interest in such shares.
(4) Includes 8,776 shares issuable upon exercise of vested options held by
Mr. Babcock.
(5) Includes (i) 6,600 shares issuable upon exercise of warrants granted to
Mr. Dean in connection with certain Company loan guarantees and (ii)
4,650 shares issuable upon exercise of vested options held by Mr. Dean.
(6) Includes (i) 42,098 shares issuable upon exercise of vested options
held by Mr. Hallman and (ii) 4,125 shares issuable upon exercise of
warrants granted to Mr. Hallman in connection with a loan he made to
the Company.
(7) Includes 42,098 shares issuable upon exercise of vested options held by
Mr. Johnson
(8) Includes 13,875 shares issuable upon exercise of vested options held by
Mr. Wallace.
(9) Consists of Messrs. Calahan, Osenbaugh, Babcock, Dean, Wallace, Kouchi,
Hallman, Johnson, Carton, Evans, and Mooradian.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has granted warrants in connection with various loans made
to the Company and personal guarantees of third-party debt incurred by the
Company. The number of shares subject to each such warrant, and the exercise
price of each, was negotiated at the respective times each such warrant was
granted. In August 1993, Mr. Hallman was granted a warrant to purchase 4,125
shares of Common Stock, at an exercise price of $3.64 per share, in connection
with a loan he made to the Company. In July 1994, Messrs. Calahan, Osenbaugh and
Dean were granted warrants to purchase 6,600, 17,325 and 6,600 shares of Common
Stock, respectively, each at an exercise price of $3.64 per share, as
consideration for certain personal guarantees of loans incurred by the Company.
Mr. Osenbaugh is a 50% shareholder of SoftForce Inc., an Iowa-based
distributor of software which currently employs six persons. The remaining
shares of SoftForce, Inc. are owned by a brother of Mr. Osenbaugh. SoftForce
Inc. distributes Company products pursuant to a standard Company distribution
agreement. The Company believes its distribution agreement with SoftForce Inc.
was made on terms no less favorable to the Company than could have been obtained
from unaffiliated third party distributors.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this amendment to be signed on its behalf by the undersigned, thereunto
duly authorized.
Timeline, Inc.
By: /s/ John W. Calahan
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John W. Calahan, President
Dated: September 5, 1996
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Capacities Date
--------- ---------- ----
<S> <C> <C>
/s/ John W. Calahan Director September 5, 1996
- -------------------------------------------- President
John W. Calahan Chief Executive Officer
/s/ Donald K. Babcock Director September 5, 1996
- -------------------------------------------- Senior Technologist
Donald K. Babcock
/s/ Charles R. Osenbaugh Director September 5, 1996
- -------------------------------------------- Chief Financial Officer
Charles R. Osenbaugh Executive Vice President
Treasurer and Secretary
(principal accounting officer)
Director September __, 1996
- --------------------------------------------
Michael R. Hallman
Director September __, 1996
- --------------------------------------------
Kent L. Johnson
</TABLE>
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