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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-KSB/A
(Amendment No. 1)
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended December 31, 1995
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
Commission file number 1-14076
ALLEGRO NEW MEDIA, INC.
(Name of Small Business Issuer in its Charter)
Delaware 22-3270045
State of other jurisdiction (I.R.S. Employer
of incorporation or organization Identification Number)
16 Passaic Avenue, Unit 6, Fairfield, NJ 07004
(Address of Principal executive offices) (Zip Code)
(201) 808-1992
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of regulation S-B 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. [ ]
State issuer's net revenues for its most recent fiscal year. $1,410,962.
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $9,116,850 at February 29, 1996, based on the closing market
price of the Common Stock on such date of $4.875, as reported by NASDAQ. As of
February 29, 1996 there were a total of 3,444,477 shares of registrant's Common
Stock outstanding.
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<PAGE>
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's Common Stock was listed and started trading on the NASDAQ
Small Cap market and the Boston Stock Exchange, under the symbol ANMI, on
December 7, 1995. Prior to December 7, 1995 there was no public market for the
Company's stock. The following table sets forth, for the quarters indicated, the
quarterly high and low closing bid for the Common Stock, as reported by NASDAQ:
<TABLE>
<CAPTION>
Year 1995 High Bid Low Bid
<S> <C> <C>
First Quarter * *
Second Quarter * *
Third Quarter * *
Fourth Quarter 7 5/8 6 1/4
Year 1994 High Bid Low Bid
First Quarter * *
Second Quarter * *
Third Quarter * *
Fourth Quarter * *
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<FN>
* Not Applicable. Prior to December 7, 1995 there was no public market for
the Company's stock.
</FN>
</TABLE>
The bid prices set forth above reflect inter-dealer prices, without retail
mark-up, mark-down, or commission, and may not represent actual transactions. As
of December 31, 1995, there were approximately 1,770 stockholders of record of
the Common Stock.
The Company has not paid any dividends on its Common Stock and does not
presently intend to do so. Future dividend policy will be determined by its
Board of Directors on the basis of the Company's earnings, capital requirements,
financial condition and other factors deemed relevant.
Item 10. Executive Compensation.
The following table sets forth the cash and other compensation paid in
1995, 1994 and in 1993 to the Company's chief executive officer. No executive
officer of the Company has earned in excess of $100,000 in any fiscal year.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Securities All
Other Annual Underlying Other
Name & Principal Position Year Salary Bonus Compensation(1) Options Compensation
- ------------------------- ---- ------ ----- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Barry A. Cinnamon 1995 $46,822 $26,992 -- -- --
Chairman of the Board 1994 50,269 6,441 -- 39,744(2) --
and President (Chief 1993 50,000 -- -- -- --
Executive Officer)
- ----------
<FN>
(1) The value of all perquisites provided did not exceed the lesser of
$50,000 or 10% of the officer's salary and bonus.
(2) Represents options to purchase 39,744 shares of Common Stock granted to
Lori Kramer Cinnamon, Mr. Cinnamon's wife, as to which Mr. Cinnamon disclaims
beneficial ownership. See "1994 Incentive Plan".
</FN>
</TABLE>
<PAGE>
Employment Agreements
The Company has entered into employment agreements with each of Barry A.
Cinnamon, Richard Bergman, Lori Kramer Cinnamon and James Tsonas.
The employment agreement with Barry A. Cinnamon provides for him to serve
as the President and Chief Executive Officer of the Company for a term expiring
in December 1999, and provides for an annual base salary of not more than
$100,000, bonuses of 5% of the Company's net income before taxes and
extraordinary items, .15% of the Company's net sales and .75% of the Company's
gross profits. Under terms of this Agreement, the Board of Directors may
increase Mr. Cinnamon's base salary by not more than 15% per year.
The employment agreement with Richard Bergman provides for him to serve as
a Vice President of Product Development of the Company for a term expiring in
December 1998, and provides for an annual base salary of not more than $90,000,
a bonus of 1% of the Company's net income before taxes and extraordinary items,
and .45% of the Company's gross profit. Under the terms of this employment
agreement, the Board of Directors may increase Mr. Bergman's base salary by not
more than 15% per year. Pursuant to the terms of this employment agreement, Mr.
Bergman has agreed that in the event
the Company puts him on disability status: (a) thereafter, the Company will pay
to Mr. Bergman compensation equal to one-half ( 1/2) of his base salary for a
period of three (3) months, plus a pro rated hourly amount to the extent he
works more than twenty (20) hours in any week; (b) to the extent his
compensation pursuant to clause (a) above is less than the stated compensation
called for by his employment agreement, Mr. Bergman will sell to a purchaser or
purchasers designated by Barry A. Cinnamon such number of shares of Common
Stock, valued at the market price thereof, as will equal such difference. Mr.
Bergman has further agreed that in the event of his death, Barry A. Cinnamon or
his nominees or designees shall have the option to purchase all shares of Common
Stock owned by Mr. Bergman at a price equal to the fair market value thereof,
payable in equal monthly installments over a three-year period. In addition, Mr.
Bergman has granted to Barry A. Cinnamon the right of first refusal to purchase
his shares of Common Stock on substantially the same terms as may be proposed in
writing by a third party.
The employment agreement with Lori Kramer Cinnamon provides for her to
serve as a Vice President of Marketing of the Company for a term expiring in
December 1999, and provides for an annual base salary of not more than $40,000,
a bonus of 1% of the Company's net income before taxes and extraordinary items
and .75% of the Company's gross profit. Under the terms of this Agreement, the
Board of Directors may increase Ms. Kramer Cinnamon's base salary by not more
than 15% per year.
The employment agreement with James Tsonas provides for him to serve as
Vice President of Sales of the Company for a term expiring in December 1998, and
provides for an annual base salary of not more than $60,000, a bonus of 1% of
the Company's net income before taxes and extraordinary items, .5% of the
Company's net sales and 2% of the Company's gross profit.
Each of the above-described agreements contains restrictions on the
employee engaging in competition with the Company for the term thereof and for
up to one year thereafter and provisions protecting the Company's proprietary
rights and information. Each agreement also provides for the payment of three
times the employee's previous year's cash compensation, less $1.00, upon his
termination in the event of a change in control of the Company, which is defined
therein to mean (a) a change in control as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (b) a person
(as such term is defined in Sections 13(d) and 14(d) of the Exchange Act) other
than a current director or officer of the Company becoming the beneficial owner,
directly or indirectly, of 20% of the voting power of the Company's outstanding
securities or (c) the members of the Board of Directors at the beginning of any
two-year period ceasing to constitute at least a majority of the Board of
Directors unless the election of any new director during such period has been
approved in advance by two-thirds of the directors in office at the beginning of
such two-year period.
<PAGE>
1994 Long Term Incentive Plan
The Company has adopted the Allegro New Media, Inc. 1994 Long Term
Incentive Plan (the "1994 Incentive Plan") in order to motivate qualified
employees of the Company, to assist the Company in attracting employees and to
align the interests of such persons with those of the Company's stockholders.
The 1994 Incentive Plan provides for the grant of
"incentive stock options" within the meaning of the Section 422 of the Internal
Revenue Code of 1986, as amended, "non-qualified stock options," stock
appreciation rights, restricted stock, performance grants and other types of
awards to officers, key employees, consultants and independent contractors of
the Company and its affiliates.
The 1994 Incentive Plan, which is administered by the Long Term Incentive
Plan Administrative Committee of the Board of Directors (currently comprised of
Barry A. Cinnamon and Richard Bergman), authorizes the issuance of a maximum of
400,000 shares of Common Stock which may be either newly issued shares, treasury
shares, re-acquired shares, shares purchased in the open market or any
combination thereof. Incentive stock options generally may be granted at an
exercise price of not less than the fair market value of shares of Common Stock
on the date of grant, and non-qualified stock options may be granted at an
exercise price of not less than 85% of such fair market value. If any award
under the 1994 Incentive Plan terminates, expires unexercised, or is canceled,
the shares of Common Stock that would otherwise have been issuable pursuant
thereto will be available for issuance pursuant to the grant of new awards. The
Company has an aggregate of 354,737 options to purchase shares of Common Stock
outstanding under the 1994 Incentive Plan, after giving effect to the
cancellation of options to purchase 20,600 shares. Options to purchase 61,800
shares have been granted to James Tsonas, options to purchase 39,744 shares have
been granted to Lori Kramer Cinnamon, options to purchase 12,333 shares have
been granted to Ross Bergman, the son of Richard Bergman and a contractor of the
Company, and options to purchase 5,000 shares have been granted to Marc E.
Jaffe, a director of the Company. Each of these options is exercisable for ten
years for prices of $2.00 to $2.50 per share. With respect to 33,000 of the
options granted to Jim Tsonas and 20,000 of the options granted to Lori
Cinnamon, one-third of each of these options may be exercised commencing on
December 27, 1996, two-thirds are exercisable commencing on December 27, 1997
and all of these options are exercisable commencing December 27, 1998; with
respect to options to purchase 28,800 shares of Common Stock granted to James
Tsonas 10,000 shares vested on the date of grant (November 1, 1994) with an
additional 10,000 shares vesting on the first anniversary thereof and 8,800
shares vesting on the second anniversary thereof; with respect to 19,744 shares
granted to Lori Cinnamon, the 12,333 shares granted to Ross Bergman and the
5,000 shares granted to Marc E. Jaffe, one-third of each of these options may be
exercised commencing on November 1, 1997, two-thirds are exercisable commencing
on November 1, 1998 and all of these options are exercisable commencing November
1, 1999; and options to purchase 20,000 shares of Common Stock granted to Mark
E. Leininger vest one-third on each of the date of grant (July 21, 1995), the
first anniversary thereof and the second anniversary thereof.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Number of % of Total Options Exercise or
Name of Securities Underlying Granted to Employees Base Price Expiration
Beneficial Owner Options Granted in Fiscal Year ($/Sh) Date
<S> <C> <C> <C> <C>
Mark E. Leininger 20,000 57% $3.75 July 20, 2005
All others 15,000 43% $3.75 August 13, 2005
</TABLE>
<PAGE>
Outside Director and Advisor Stock Option Plan
The Company adopted the Outside Director and Advisor Stock Option Plan (the
"Director and Advisor Plan") as of August 2, 1995. The primary purposes of the
Director and Advisor Plan are to attract and retain well-qualified persons for
service as directors of and advisors to the Company and to provide such persons
with the opportunity to increase their proprietary interest in the Company, and
thereby to increase their personal interest in the Company's continued success
and further align their interests with the interests of the stockholders of the
Company through the grant of options to purchase shares of the Company's Common
Stock. All directors of the Company who are not employees of the Company, of
which there are presently three, and all members of the Company's Advisory
Committee, of which there are presently four, who are not directors of the
Company, are eligible to participate in the Director and Advisor Plan. None of
the non-employee directors who are eligible to participate in the Director and
Advisor Plan participate in any of the other compensation plans of the Company,
except that Marc E. Jaffe currently owns options to purchase 5,000 shares of
Common Stock granted under the 1994 Incentive Plan. Up to 300,000 shares of
Common Stock may be issued under the Director and Advisor Plan.
Under the Director and Advisor Plan, each non-employee Director of the
Company and each member of the Advisory Committee of the Company (each referred
to herein as an "Outside Director or Advisor") other than George Lauro, received
on August 2, 1995 options to purchase 25,000 shares of Common Stock at a price
of $3.75 per share (the fair market value thereof as determined by the Board of
Directors), and henceforth, on August 1 of each subsequent year, each Outside
Director or Advisor will be granted options to purchase 10,000 shares of Common
Stock at a price equal to the closing price of the Common Stock on a national
securities exchange upon which the Company's stock is listed or the average of
the mean between the last reported "bid" and "ask" prices if the Common Stock is
not so listed for the five business days immediately preceding the date of
grant. Options awarded to each Outside Director or Advisor shall vest over a
period of two years, subject to forfeiture under certain conditions and shall be
exercisable by the Outside Director or Advisor upon vesting. George Lauro
received options to purchase 25,000 shares at an exercise price of $4.25 per
share upon his election to the Board of Directors on February 20, 1996.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the beneficial ownership of shares of
voting stock of the Company, as of February 29, 1996, of (i) each person known
by the Company to beneficially own 5% or more of the shares of outstanding
Common Stock, (ii) each of the Company's executive officers and directors, and
(iii) all of the Company's executive officers and directors as a group. Except
as otherwise indicated, all shares are beneficially owned, and investment and
voting power is held by, the persons named as owners.
<TABLE>
<CAPTION>
Amount and Nature Amount of Class B Percentage
Name and Address of of Common Stock Voting Preferred Stock of Common Stock Percentage of
Beneficial Owner(1) Beneficially Owned Beneficially Owned(2) Ownership Voting Power
- ------------------- ------------------ ---------------------- --------------- -------------
<S> <C> <C> <C>
Barry A. Cinnamon 982,266 (3) 60,520 28.5% 39.2% (12)
Martin F. Schacker 241,883 (4) -- 7.0 6.0
Richard F. Bergman 136,665 (7) -- 4.0 (8) 2.3 (8)
Lori K. Cinnamon 982,266 (9) 60,520 (13) 28.5 39.2 (12)
James Tsonas 20,000 (10) -- * *
Mark E. Leininger 6,666 (11) -- * *
Marc E. Jaffe 8,333 (5)(6) -- * *
George L. Lauro 8,333 (5) -- * *
Eng Chye Low 8,333 (5) -- * *
M.S. Farrell & Co.,
Inc. 241,883 (4) -- 7.0 6.0
All officers and directors
as a group(8 persons) 1,170,596 60,520 33.5% 43.3%
- ----------
<FN>
* Less than 1%.
(1) The address for Barry A. Cinnamon, Richard F. Bergman, Lori Kramer
Cinnamon, Mark E. Leininger and James Tsonas is 16 Passaic Avenue, #6,
Fairfield, New Jersey 07004. The address for Martin Schacker and M.S. Farrell &
Co., Inc. is 67 Wall Street, New York, New York 10005. The address for Eng Chye
Low is 587 Fifth Avenue, New York, New York 10017. The address for Marc E. Jaffe
is 6 West 20th Street, 11th Floor, New York, New York 10011. The address for
George L. Lauro is 9 Colonel Thomas Lane, Bedford, New York 10506.
(2) Each share of Class B Voting Preferred Stock is entitled to cast ten
(10) votes on all matters subject to a vote of stockholders.
(3) Includes (a) an aggregate of 500,000 shares of Common Stock which are
held in escrow pending the attainment of certain financial targets, which Barry
A. Cinnamon has the right to vote, and (b) 31,636 shares held by Mr. Cinnamon as
custodian for his children under the New Jersey Uniform Gifts to Minors Act.
Does not include (a) 60,520 shares of Class B Voting Preferred Stock or
(b) options to purchase 39,744 shares of Common Stock granted to Lori Kramer
Cinnamon under the 1994 Incentive Plan, as to which Mr. Cinnamon disclaims
beneficial ownership.
(4) Includes 241,883 shares of Common Stock owned of record by M.S.
Farrell & Co., Inc. ("MSF"), of which Mr. Schacker is Chairman and the
controlling person. Does not include 60,471 shares of Common Stock owned by a
managing director of MSF.
<PAGE>
(5) Includes 8,333 shares of Common Stock obtainable within 60 days upon
the exercise of options granted under the Company's Outside Director and
Advisor Stock Option Plan.
(6) Does not include options to purchase 5,000 shares of Common Stock
granted to Mr. Jaffe pursuant to the 1994 Incentive Plan, which are not
exercisable within sixty (60) days.
(7) Includes 42,500 shares of Common Stock which are held in escrow
pending the attainment of certain financial targets, which Barry A. Cinnamon
has the right to vote. Does not include options to purchase 12,333 shares
of Common Stock granted to Ross Bergman, Mr. Bergman's son and a former
employee of the Company, under the 1994 Incentive Plan, as to which Mr. Bergman
disclaims beneficial ownership.
(8) Does not include 42,500 Escrow Shares issued in Mr. Bergman's name,
which are voted at the direction of Barry A. Cinnamon.
(9) Includes the same shares referred to above with respect to Barry A.
Cinnamon, Mrs. Cinnamon's husband. Does not include options to purchase
39,744 shares of Common Stock granted under the 1994 Incentive Plan, which
are not exercisable within 60 days.
(10) Represents options to purchase 20,000 shares of Common Stock which
are exercisable within sixty (60) days.
(11) Represents options to purchase 6,666 shares of Common Stock
which are exercisable within sixty (60) days.
(12) Includes all 542,500 Escrow Shares, which are voted at the direction
of Barry A. Cinnamon and the 60,520 Shares of Class B Voting Preferred Stock
owned of record by Mr. Cinnamon.
(13) Represents 60,520 shares of Class B Voting Preferred Stock owned by
Barry A. Cinnamon, as to which Mrs. Cinnamon disclaims beneficial ownership.
</FN>
</TABLE>
Escrow Shares
Barry A. Cinnamon and Richard Bergman have placed into escrow an aggregate
of 542,500 shares of Common Stock of the Company (the "Escrow Shares"), 500,000
of which shares have been placed in escrow by Barry A. Cinnamon and 42,500 of
which shares have been placed in escrow by Richard Bergman. The Escrow Shares
represent 16.3% of the outstanding shares of Common Stock.
Three hundred thousand (300,000) Escrow Shares issued to Barry A. Cinnamon
and 22,500 Escrow Shares issued to Richard Bergman will be released to them from
escrow if: (i) the Company has net revenue of $25,000,000 or more in any fiscal
year ending on or prior to December 31, 1998; (ii) a majority of any warrants to
purchase shares of Common Stock issued to purchasers of the Company's capital
stock in a public offering (of which there are none) are exercised at exercise
prices not less than the initial exercise price thereof; or (iii) the closing
price per share of the Common Stock (or any securities convertible into or
exchangeable for common stock) of the Company on any national securities
exchange or the NASD Automated Quotation System (National Market System or Small
Cap Market but not the OTC Bulletin Board) equals or exceeds $15.00 for any
period of thirty or more consecutive trading days.
Two hundred thousand (200,000) Escrow Shares issued to Barry A. Cinnamon
and 20,000 Escrow Shares issued to Richard Bergman will be released to them from
escrow if: (i) the Company has net revenue of $19,000,000 or more for any
audited 12-month period ending on or prior to June 30, 1999; or (ii) the closing
price per share of the Common Stock or any securities convertible into or
exchangeable for Common Stock on any national securities exchange or the NASD
Automated Quotation System (National Market System or Small Cap Market but not
the OTC Bulletin Board) equals or exceeds $12.50 for any period of twenty or
more consecutive days.
In addition, notwithstanding the foregoing, (a) in the event that a
transaction causing a Change in Control occurs in connection with which all
issued and outstanding securities of the Company owned as of the date hereof and
all securities underlying options owned by MSF or any of its assignees, officers
or directors and all shares of Common Stock obtained upon conversion of the
Company's Class A Preferred Stock have the right to be sold in their entirety at
a price per share payable in cash or marketable securities which are listed
("Listed") on the New York Stock Exchange, the American Stock Exchange or the
NASD Automated Quotation System (excluding the OTC Bulletin Board) equal to or
<PAGE>
exceeding the per share prices set forth above, as adjusted from time to time,
all of the applicable Escrow Shares shall be released from escrow; and (b) the
net revenue and closing price per share amounts set forth above may be reduced
if MSF or its assignee consents thereto in its sole discretion. Barry A.
Cinnamon, Richard Bergman and MSF have entered into an agreement pursuant to
which Messrs. Cinnamon and Bergman have agreed not to vote any shares of stock
of the Company owned by them in favor of any amendment to the above-described
Escrow Share provisions, cause a meeting of the Company's stockholders to be
held seeking to reverse any action by the Company's Board of Directors taken to
amend the foregoing provisions and to vote such shares for the removal of any
director of the Company who votes in favor of any such amendment, in each case
if MSF has not consented to such change.
The earnings and revenue levels and other targets set forth above were
determined by negotiation between the Company and MSF and should not be
construed to imply or predict any future earnings by the Company or any increase
in the market price of its securities.
While Escrow Shares are in escrow, they will be voted in accordance with
the directions of Barry A. Cinnamon. The Escrow Shares are not assignable or
transferable, except through the laws of inheritance, guardianship, legal
representation or trusteeship for the benefit of the holder or the holder's
immediate family. Any money, securities, rights or property distributed in
respect of the Escrow Shares, including any property distributed as dividends or
pursuant to any stock split, merger, recapitalization, dissolution, or total or
partial liquidation of the Company, shall be held in escrow until release of the
related Escrow Shares. If the applicable targets are not attained, 322,500 and
220,000 of the Escrow Shares, as well as any dividends or other distributions
made with respect thereto, will be forfeited and contributed to the capital of
the Company on June 30, 1999 and December 31, 1999, respectively. The Escrow
Shares relating to each employee generally will be returned to the Company if
such person's employment is terminated by the Company or if such person resigns
from the Company at any time during the period of such escrow arrangement prior
to the achievement of events which trigger release of the Escrow Shares.
In the event Escrow Shares are released, the aggregate fair market value of
the released Escrow Shares on the date of release of the Escrow Shares will be
treated, for financial reporting purposes, as compensation expense to the
Company.
<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 on the 14th day of
June, 1996.
ALLEGRO NEW MEDIA, INC.
By:/s/Barry A. Cinnamon
Barry A. Cinnamon
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
Chairman of the Board, President, Chief June 14, 1996
/s/Barry A. Cinnamon Executive Officer and Director
Barry A. Cinnamon (Principal Executive Officer)
/s/Richard Bergman Vice President and Director June 14, 1996
Richard Bergman
/s/Lori Kramer Cinnamon Vice President, Secretary and Director June 14, 1996
Lori Kramer Cinnamon
/s/Mark E. Leininger Vice President - Finance, Treasurer and June 14, 1996
Mark E. Leininger Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/Marc E. Jaffe Director June 14, 1996
Marc E. Jaffe
/s/Eng Chye Low Director June 14, 1996
Eng Chye Low
Director June __, 1996
George L. Lauro
/s/Neil R. Austrian,Jr.Director June 14, 1996
Neil R. Austrian, Jr.
