UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1997
Commission file number 0-22212
IVI PUBLISHING, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1686038
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
808 Howell Street, Suite 400
Seattle, Washington 98101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206) 292-6247
------------------------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------ -------------------------------------------
Common Stock, $.01 Par Value N/A
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of April 8, 1998 was $74,113,657.
The number of shares outstanding of the issuer's classes of common stock as
of April 8, 1998: Common stock, $.01 Par Value: 10,135,201
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<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(a) Directors of the Registrant.
Name Age Principal Occupation
- --------------------- ---- ---------------------------------------------------
Michael A. Brochu 44 President and Chief Executive Officer of Primus
Robert N. Goodman 45 President and Chief Executive Officer of the Company
Ronald E. Eibensteiner 47 President of Wyncrest Capital
Alan D. Frazier 46 Managing Partner of Frazier and Company
Timothy I. Maudlin 47 Managing Partner of Medical Innovation Partners
Ann Kirschner 47 Vice President of NFL Interactive for NFL Enterprises
Ram Shriram 41 Vice President of Netscape Communications
Rick Thompson 38 Vice President Hardware Group, Microsoft Corp.
MICHAEL A. BROCHU Mr. Brochu was appointed as a member of the Company's
Board of Directors in April 1997 and has also served as Chairman of the Company
since October 1997. Mr. Brochu has served as President and Chief Executive
Officer of Primus since November 1997. From October 1995 to October 1997, he
served as President and Chief Operating Officer of Sierra On-Line, Inc. and as
its Chief Financial Officer and Executive Vice President from July 1994 to
October 1995. From 1987 to July 1994, Mr. Brochu served in the positions of
Senior Vice President, Chief Financial Officer and Chief Operating Officer of
Burlington Environmental.
ROBERT N. GOODMAN Mr. Goodman has served as the Company's President and Chief
Executive Officer and as a Director of the Company since December 1997. From
April 1997 to November 1997, Mr. Goodman served as Director, Business
Development of MSNBC Interactive News LLC, an internet content provider. From
December 1995 to April 1997, Mr. Goodman provided consulting services to
Microsoft Corp., a software company. Mr. Goodman served as Assistant General
Counsel of The 300 Company from November 1993 to October 1995 and as General
Counsel of Asymetrix Corporation from April 1993 to November 1993, both of which
are software companies.
RONALD E. EIBENSTEINER Mr. Eibensteiner has been a Director of the Company
since October 1997. He also served as Director of the Company from February 1991
to June 1997. Mr. Eibensteiner has served as President of Wyncrest Capital,
Inc., a venture capital firm, since he founded it in January 1992. Mr.
Eibensteiner is also independent consultant. Mr. Eibensteiner is a director of
OneLink Communications, Inc., Reality Interactive, Inc. and Intranet Solutions,
Inc.
ALAN D. FRAZIER Mr. Frazier has been a Director of the Company since
January 1994. He has been managing partner of Frazier & Company LP, a venture
capital firm, since 1991. In addition, Mr. Frazier is a Director of NeoPath,
Inc., InControl, Inc. and Integrated Medical Resources, Inc.
TIMOTHY I. MAUDLIN Mr. Maudlin was appointed as a member of the Company's
Board of Directors in August 1991. Mr. Maudlin also served as the Company's
Acting President and Chief Executive Officer from October 1997 to November 1997
and as Chairman from August 1996 to October 1997. Mr. Maudlin has been Managing
Partner of Medical Innovation Partners, a medical venture capital firm, since
December 1988 and has also served as an officer of an affiliated management
company. Mr. Maudlin also serves as a director of Curative Health Services, Inc.
ANN KIRSCHNER Ms. Kirschner was elected as a Director of the Company on February
23, 1998. She has served as Vice President of NFL Interactive for NFL
Enterprises, Inc. since December 1994, prior to which, she served as President
of Comma Communications for more than two years.
RAM SHRIRAM Mr. Shriram was elected as a Director of the Company on
February 23, 1998. Mr. Shriram has served as Vice President of Netscape
Communications Corp., an internet company, since November 1994. Mr. Shriram
served as Director, Channel Sales of Network Computing Devices from October 1990
to November 1994.
RICK THOMPSON Mr. Thompson was elected as a Director of the Company on
February 23, 1998. Mr. Thompson has served as Vice President of Microsoft
Corporation's Hardware Division since October 1987.
(b) Executive officers of the Registrant.
Information concerning Executive Officers of the Company is included in
the original Form 10-K Report previously filed, at the end of Part I, "Executive
Officers and Key Employees of the Registrant."
(c) Compliance with 16 (a) of the Securities Exchange Act of 1934.
Based on the Company's review of copies of forms filed with the
Securities and Exchange Commission or written representations from certain
reporting persons that no Forms 5 were required for those persons, in compliance
with Section 16(a) of the Securities Exchange Act of 1934, the Company believes
that during fiscal year 1997, all officers, directors, and greater than
ten-percent beneficial owners complied with the applicable filing requirements,
except that a Form 3 for Nicholas Bluhm, a former director, was not timely
filed.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash compensation paid or to be paid
by the Company, as well as certain other compensation paid or accrued, during
each of the Company's last three fiscal years to each person who served as Chief
Executive Officer during fiscal 1997 and the only other executive officer who
earned more than $100,000 in salary and bonuses in 1997.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------
Awards Payouts
----------------------- --------
Annual Compensation Restricted LTIP All Other
Name and Principal Fiscal ------------------------------------ Stock Awards Payouts Compensation
Position Year Salary ($) Bonus ($) Other ($) ($) Options ($) ($)
- ------------------ ------ ---------- --------- --------- ------------ ------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert N. Goodman 1997 53,548 -- -- -- 450,000 -- --
President and Chief
Executive Officer
Timothy I. Maudlin 1997 0 -- -- -- 65,000 -- --
Former President and
Chief Executive
Officer(1)
Joy A. Solomon 1997 180,000 -- -- -- 45,000(2) -- --
Former President and 1996 171,000 21,000 -- -- 180,000 -- --
Chief Executive 1995 171,000 45,000 -- -- 60,000 -- 1,000
Officer
Timothy J. Walsh 1997 113,300 11,330 -- 84,212 -- --
Vice President of 1996 27,659 22,729 -- -- 30,000 -- --
Sales(3)
</TABLE>
- --------------
(1) Mr. Maudlin, a director of the Company, served as an interim President
and Chief Executive Officer of the Company from October 1997 to
November 1997, for which he received a stock option to purchase 60,000
shares of the Company's Common Stock and no cash compensation.
(2) Does not include options to purchase 265,000 shares of the Company's
Common Stock which were amended as of December 31, 1997 (see Employment
Contracts and Termination of Employment Arrangements below).
(3) Mr. Walsh joined the Company in October 1996.
Option Grants During 1997 Fiscal Year
The following table provides information regarding stock options
granted during fiscal 1997 to the named executive officers in the Summary
Compensation Table. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
Percent of Potential Realizable Value at
Total Options Assumed Annual Rates of
Number of Shares Granted to Exercise or Stock Price Appreciation for
Underlying Employees Base Price Expiration Stock Appreciation for
Name Options Granted in Fiscal Year Per Share(1) Date Option Term(2)
- --------------------- --------------- -------------- ------------ ---------- -----------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert N. Goodman 450,000 (3) 37.3% $2.50 12/10/07 $707,506 $1,792,960
Timothy I. Maudlin 5,000 (4) 0.4% $3.22 02/28/07 $10,125 $25,659
60,000 (5) 5.0% $2.31 10/08/07 $87,165 220,893
Joy A. Solomon 45,000 (6) 3.7% $3.25 02/18/07 $91,976 $233,085
Timothy J. Walsh 30,000 (6) 2.5% $3.25 02/18/07 $61,317 $155,390
50,000 (5) 4.1% $2.31 10/08/07 $72,637 $184,077
4,212 (7) 0.3% $2.69 10/13/07 $7,126 $18,058
</TABLE>
- ------------------
(1) The exercise price is equal to the fair market value of the Common Stock on
the date of each grant.
(2) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the option following termination of
employment, nontransferability or vesting over periods of up to five years.
(3) The option was granted on December 11, 1997 and will become exercisable to
the extent of 37,500 shares on November 10, 1998, 3,125 shares on the tenth
day of each month from December 10, 1998 through November 10, 2001 and,
subject to acceleration if the Company's stock price reaches certain
targets, 300,000 shares on November 10, 2002.
(4) The option was granted on March 1, 1997 and became exercisable to the
extent of 1,250 shares on each of September 2, 1997 and March 1, 1998 and
will become exercisable to the extent of 1,250 shares on each of March 1,
1999 and 2000.
(5) The option was granted on October 8, 1997 and will become exercisable in
full on October 8, 2002, subject to acceleration if the Company's stock
price reaches certain targets.
(6) The option was granted on February 19, 1997 and will become exercisable in
full on February 19, 2002, subject to acceleration if the Company's stock
price reaches certain targets.
(7) The option was granted on October 13, 1997 and became exercisable to the
extent of 1,053 shares immediately and, subject to acceleration if the
Company's stock price reaches certain targets, will become exercisable to
the extent of 3,159 shares on October 13, 2004.
<PAGE>
Option Exercises During 1997 Fiscal Year and Fiscal Year-End Option Values
The following table provides information as to options exercised by the
named executive officers in the Summary Compensation Table during fiscal 1997
and the number and value of all outstanding options at December 31, 1997. The
Company has no outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, 1997 December 31, 1997
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable(1)
- ---- ----------- -------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert N. Goodman -- -- 0 exercisable $0
450,000 unexercisable $28,350
Timothy I. Maudlin -- -- 1,250 exercisable $0
63,750 unexercisable $138,600
Joy A. Solomon -- -- 135,000 exercisable $137,500
175,000 unexercisable $357,500
Timothy J. Walsh -- -- 16,053 exercisable $0
98,159 unexercisable $12,650
</TABLE>
(1) Value is calculated on the basis of the difference between the option
exercise price and $2.563, the closing sale price for the Company's
Common Stock at December 31, 1997 as quoted on the Nasdaq SmallCap
Market, multiplied by the number of shares underlying the option.
Compensation of Directors
Directors' Fees. The Company's directors receive no fees for attendance
at meetings of the Board of Directors, but they are reimbursed for out-of-pocket
expenses relating to attendance at the meetings; provided, however, Mr. Brochu
is paid an annual fee of $30,000 for his services as Chairman of the Board, as
well as out-of-pocket expenses.
Stock Option Grants to Non-Employee Directors. The Director Option Plan
has provided for the automatic option grants to each director who is not an
employee of the Company (a "Non-Employee Director") as follows: (i) 25,000 share
option upon initial election and (ii) 5,000 share option on March 1 of each year
thereafter. The per share option price is equal to 100% of the fair market value
of the Common Stock on the date of grant. The options vest to the extent of
one-fourth of the shares immediately and on each of the first three anniversary
dates of the date of grant; provided, however, that the option may be exercised
as to the vested shares during the term of the option beginning six months and
one day after the date of grant. The options expire on the earlier of (i) 10
years after the date of grant (provided, however, that options granted to a
Non-Employee Director who is a party to a partnership or other agreement
requiring a reduction in compensation pursuant to such agreement based on the
value of options granted under the Plan, shall have a five-year term) and (ii)
one year after the Non-Employee Director ceases to be a director for any reason.
On December 11, 1997, the Board adopted, subject to shareholder
approval, the 1997 Stock Option Plan, which provides for similar automatic
grants to Non-Employee Directors.
Employment Contracts and Termination of Employment Arrangements
In August 1996, the Company entered into a two-year employment
agreement with Joy Solomon, former President and Chief Executive Officer,
pursuant to which Ms. Solomon received an annual base salary of $171,000 and
certain other benefits. Pursuant to a Separation Agreement and Release of Claims
("Separation Agreement") entered into between the Company and Ms. Solomon, Ms.
Solomon's employment with the Company terminated on December 31, 1997. Under the
Separation Agreement, Ms. Solomon will receive her base salary as in effect on
December 31, 1997 for the period January 1, 1998 through June 30, 1999. In
addition, the Separation Agreement amended Ms. Solomon's stock options to
provide that such options shall continue to vest according to their respective
vesting schedules until June 30, 1999 and shall be exercisable to the extent
vested until the options expire in accordance with the terms of the option
agreements. The Separation Agreement contains mutual releases and is subject to
confidentiality provisions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's
Common Stock and Preferred Stock beneficially owned by (i) each director of the
Company; (ii) each of the named executive officers in the Summary Compensation
Table; (iii) all directors and executive officers as a group; and (iv) to the
best of the Company's knowledge, all beneficial owners of more than 5% of the
outstanding shares of the Company's Common Stock as of April 27, 1998. Unless
otherwise indicated, the shareholders listed in the table have sole voting and
investment power with respect to the shares indicated.
<TABLE>
<CAPTION>
Common Shares
Name (and Address of 5% Beneficially Percent of
Holder) or Identity of Group(1) Owned(2) Class(2)
- ------------------------------- ------------- -----------
<S> <C> <C>
Robert N. Goodman 0 --
Michael A. Brochu 12,500 (3) *
Timothy I. Maudlin 762,620 (4) 7.5%
Alan D. Frazier 251,135 (5) 2.5%
Ronald E. Eibensteiner 327,062 (6) 3.2%
Ann Kirschner 0 --
Ram Shriram 0 --
Rick Thompson 0 --
Timothy J. Walsh 66,053 (7) *
Joy A. Solomon 182,500 (8) 1.8%
Perkins Group 1,765,925 (9) 17.4%
Medical Innovation Partners 707,922 (10) 6.9%
Wayne W. Mills 529,500 (11) 5.2%
All Directors and Executive 1,283,517 (12) 12.2%
Officers as a Group (9 persons)
</TABLE>
- ---------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) The addresses of the more than 5% holders are: Perkins Group (Perkins
Capital Management, Inc. and Perkins Opportunity Fund) - 730 East Lake
Street, Wayzata, MN 55391; Medical Innovation Partners and Timothy I.
Maudlin - 421 Opus Center, 9900 Bren Road East, Minneapolis, MN 55343; Alan
D. Frazier - Two Union Square, 601 Union Street, Suite 2110, Seattle, WA
98101; Wayne W. Mills - 5500 Wayzata Boulevard, Suite 290, Minneapolis, MN
55416.
(2) Under the rules of the Securities and Exchange Commission, shares not
actually outstanding are nevertheless deemed to be beneficially owned by a
person if such person has the right to acquire the shares within 60 days.
Pursuant to such SEC rules, shares deemed beneficially owned by virtue of a
person's right to acquire them are also treated as outstanding when
calculating the percent of class owned by such person and when determining
the percentage owned by a group.
(3) Includes 12,500 shares which may be purchased by Mr. Brochu upon exercise
of currently exercisable options.
(4) Includes 487,376 shares held by Medical Innovation Fund ("MIF"), 135,853
shares held by Medical Innovation Fund II ("MIF II") and 909 shares held by
MICI Limited Partnership ("MLP"); 25,150 shares held by or for family
members; 83,784 shares which may be purchased by MIF upon the exercise of a
currently exercisable warrant; and 15,000 shares which may be purchased by
Mr. Maudlin upon exercise of currently exercisable options. Mr. Maudlin is
the (i) Managing General Partner of Medical Innovation Partners ("MIP"),
which is the General Partner of MIF, (ii) Managing General Partner of
Medical Innovation Partners II ("MIP II"), which is the General Partner of
MIF II and (iii) General Partner of MLP and an officer and principal
shareholder of Medical Innovation Capital, Inc., which is the Managing
General Partner of MLP.
(5) Includes 160 shares held by Frazier & Company, Inc., 2,260 shares held by
Frazier Management LLC, 224,349 shares which may be purchased by Frazier &
Company, L.P. upon exercise of a currently exercisable warrant and 15,000
shares which may be purchased by Mr. Frazier upon exercise of currently
exercisable options. Mr. Frazier is the sole stockholder of Frazier &
Company, Inc., which is the managing member of Frazier Management, LLC and
the managing member of Frazier & Company, L.P. Mr. Frazier may be deemed to
share voting and investment power with respect to such shares. Mr. Frazier
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest in such shares arising from his interest in the entities
referred to herein.
(6) Includes 135,853 shares held by MIF II, 33,750 shares which may be
purchased by Mr. Eibensteiner upon exercise of currently exercisable
options and 11,217 shares which may be purchased by Mr. Eibensteiner upon
exercise of a currently exercisable warrant. Mr. Eibensteiner is a limited
partner of MIP II, which is a General Partner of MIF II. Mr. Eibensteiner
disclaims beneficial ownership of such shares.
(7) Includes 16,053 shares which may be purchased by Mr. Walsh upon exercise of
currently exercisable options.
(8) Includes 182,500 shares which may be purchased by Ms. Solomon upon exercise
of currently exercisable options.
(9) Of the shares, 1,181,550 shares are owned by clients of Perkins Capital
Management, Inc. ("Perkins Capital") and 584,375 shares are owned by
Perkins Opportunity Fund ("Perkins Fund"). Perkins Capital has the sole
power to vote 1,061,675 shares, including 584,375 shares held by Perkins
Fund, and no power to vote 703,620 shares. Perkins Capital has the sole
investment power for all of the shares, including the 584,375 shares held
by Perkins Fund. The Company has relied on information contained in a
Schedule 13G Amendment filed with the Securities and Exchange Commission on
February 11, 1998 by Perkins Capital and Perkins Fund as a group.
(10) Includes 487,376 shares held by MIF, 135,853 shares held by MIF II and 909
shares held by MLP and 83,784 shares which may be purchased by MIF upon
exercise of a currently exercisable warrant. MIP is the General Partner of
MIF, MIP II is the General Partner of MIF II and Timothy I. Maudlin is the
General Partner of MLP.
(11) The Company has relied on information contained in a Schedule 13D Amendment
dated September 10, 1997 filed with the Securities and Exchange Commission
by Mr. Mills.
(12) Includes 103,520 shares which may be purchased upon exercise of currently
exercisable options and 308,133 shares which may be purchased upon exercise
of currently exercisable warrants.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alan D. Frazier, a director of the Company, is a principal of Frazier &
Company, L.P. In 1997, the Company paid Frazier & Company, L.P. a total of
$7,230 for financial consulting services.
On November 22, 1996, the Company issued convertible debentures in the
principal amount of $3,500,250, which were convertible into the Company's Common
Stock at a conversion price of $3.25 per share. On October 1, 1997, primarily to
meet maintenance requirements for continued listing on the Nasdaq SmallCap
Market and to improve its balance sheet as the Company sought various financing
alternatives, the Company reduced the conversion price to $2.00 per share to
provide an incentive for conversion. On October 28, 1997, all of the debentures
were converted into 1,750,125 shares of the Company's Common Stock. Certain
officers, directors and principal shareholders purchased debentures in the
aggregate principal amount of $897,500, which debentures were converted into an
aggregate of 448,750 shares of the Company's Common Stock on October 28, 1997,
including (i) 50,000 shares acquired by Ronald E. Eibensteiner, a director of
the Company, (ii) 100,000 shares acquired by Medical Innovation Fund, a more
than 5% holder and of which Timothy I. Maudlin, a director of the Company, is an
affiliate, (iii) 125,000 shares acquired by Frazier Healthcare Investments,
L.P., of which Alan D. Frazier, a director of the Company, is an affiliate, (iv)
50,000 shares by Timothy J. Walsh, Vice President of Sales of the Company, (v)
10,000 shares acquired by Joy A. Solomon, Former President and Chief Executive
Officer of the Company, and (vi) 113,750 shares acquired by Wayne W. Mills, a
more than 5% holder.
<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 Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in Minneapolis,
Minnesota, on the 30th day of April, 1998.
IVI PUBLISHING, INC.
By: /s/ Robert N. Goodman
Robert N. Goodman
President and Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert N. Goodman President, Chief Executive April 30, 1998
Officer and Director
(Principal Executive Officer)
/s/ Michael D. Conway Chief Financial Officer and April 30, 1998
Secretary
(Principal Financial and
Accounting Officer)
* Chairman of the Board
- -------------------------
Michael A. Brochu
* Director
- -------------------------
Alan D. Frazier
* Director
- -------------------------
Ronald E. Eibensteiner
* Director
- -------------------------
Timothy I. Maudlin
* Director
- --------------------------
Ann Kirschner
* Director
- --------------------------
Ram Shriram
* Director
- --------------------------
Rick Thompson
/s/ Robert N. Goodman April 30, 1998
Robert N. Goodman, As
Attorney-in-Fact pursuant to
Power of Attorney filed with Form
10-K for year ended December 31,
1997
