SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
Amendment No. 1
(Mark One)
(x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended September 30, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-13550
HAUPPAUGE DIGITAL, INC.
(Name of small business issuer in its charter)
Delaware 11-3227864
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
91 Cabot Court, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (516) 434-1600
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
$.01 par value Common Stock
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the past twelve
(12) months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to the filing requirements for the past
ninety (90) days.
YES X NO
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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 registrant's revenues for its most recent fiscal year: $38,757,443
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 18, 1998 was approximately $29,788,038. Non-affiliates
include all shareholders other than officers, directors and 5% shareholders of
the Company. Market value is based upon the price of the Common Stock as of the
close of business on December 18, 1998 which was $9.00 per share as reported by
NASDAQ.
As of December 18, 1998, the number of shares outstanding of the Common Stock
was 4,304,202 shares (exclusive of treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors and Executive Officers
The following persons are the Directors and executive officers of the
Company.
<TABLE>
<CAPTION>
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Name Age(1) Officer and Positions Held
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kenneth R. Aupperle 41 President, Chief Operations Officer and
Director
- --------------------------------------------------------------------------------------------------------------------------
Kenneth Plotkin 47 Chairman of the Board of Directors,
Chief Executive Officer, Vice-
president, Secretary and Director
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Gerald Tucciarone 43 Chief Financial Officer and Treasurer
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John Casey 42 Vice-President - Technology
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Bernard Herman 71 Director
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Steven J. Kuperschmid 38 Director
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</TABLE>
(1) Age as of January 28, 1999.
Kenneth R. Aupperle is a co-founder of the company. He has been the Company's
President and Chief Operations Officer since the Company's incorporation. Mr.
Aupperle holds a BS in Electrical Engineering and an MS in Computer Science from
Polytechnic University, along with additional work toward a Ph.D.
Kenneth Plotkin is a co-founder of the Company. He has been the Company's
Chairman of the Board of Directors and Chief Executive Officer since the
Company's incorporation. Mr. Plotkin is presently Secretary of the Company and
is Vice-President in charge of marketing. He holds a BS and an MS in Electrical
Engineering from the State University of New York at Stony Brook.
Gerald Tucciarone, prior to his employment with the Company in January, 1995,
served as a vice-president of finance from 1985 to 1992 with
Walker-Telecommunications, Inc., a manufacturer of phones and voice-mail
equipment and from 1992 to 1995, as assistant controller with Chadbourne and
Parke. Mr. Tucciarone is a certified public accountant.
John Casey has been the Company's Vice-President - Technology for more than the
past five years.
Bernard Herman, from 1979 to 1993, was Chief Executive Officer of Okidata Corp.
of Mount Laurel, New Jersey, a distributor of computer peripheral products.
Since then he has served as a
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consultant with reference to computer products.
Steven J. Kuperschmid has been practicing law since 1986 and has been a partner
with Certilman Balin Adler & Hyman, LLP, counsel to the Company, since January
1, 1994. Mr. Kuperschmid received his BA from New York University and JD from
Fordham University School of Law.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Securities Exchange Act of 1934, as amended
("Section 16"), requires that reports of beneficial ownership of capital stock
and changes in such ownership be filed with the Securities and Exchange
Commission (the "SEC") by Section 16 "reporting persons," including directors,
certain officers, holders of more than 10% of the outstanding Common Stock and
certain trusts of which reporting persons are trustees. The Company is required
to disclose in this Annual Report on Form 10-KSB each reporting person whom it
knows to have failed to file any required reports under Section 16 on a timely
basis during the fiscal year ended September 30, 1998. To the Company's
knowledge, based solely on a review of copies of Forms 3, 4 and 5 furnished to
it and written representations that no other reports were required, during the
fiscal year ended September 30, 1998, the Company's officers, Directors and 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them except: Mr. Plotkin failed to file three reports relative to three
transactions. Mr. Aupperle failed to file one report relative to one
transaction. Mr. Tucciarone failed to file two reports relative to three
transactions. Mr. Herman failed to file one report relative to one transaction.
Mr. Kuperschmid failed to file one report relative to one transaction.
Item 10. Executive Compensation
Summary Compensation Table
The following table sets forth certain information for the fiscal years
ended September 30, 1998, 1997 and 1996 concerning the compensation of Kenneth
Plotkin, Chairman of the Board and Chief Executive Officer of the Company,
Kenneth R. Aupperle, President and Chief Operating Officer of the Company and
John Casey, Vice President - Technology of the Company. No other executive
officer of the Company had a combined salary and bonus in excess of $100,000 for
the fiscal year ended September 30, 1998.
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<TABLE>
<CAPTION>
===================================================================================================================================
Annual Compensation Long Term Compensation
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Other Annual Common Stock Underlying
Name and Principal Position Year Salary Compensation Options Granted
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kenneth Plotkin 1998 $120,412 $ 5,500(1) 75,000
Chairman of the Board and Chief
Executive Officer
- ------------------------------------------------------------------------------------------------------------------------------------
1997 $ 94,016 $ 4,800(1)
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1996 $ 62,746(2) $ 4,800(1) 15,000
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Kenneth R. Aupperle President 1998 $ 120,412 $ 5,500 75,000
and Chief Operations Officer
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1997 $ 94,016 $ 4,800
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1996 $ 62,746(2) $ 4,800 15,000
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John Casey 1998 $110,888 15,500
Vice President of Technology
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1997 $103,574 4,500
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1996 $ 96,346 10,000
===================================================================================================================================
</TABLE>
- -------------------
(1)Represents non-cash compensation in the form of the use of a car and related
expenses.
(2)Does not include compensation deferred as of September 30, 1996 in the amount
of $12,331.
Option Grants in Last Fiscal Year
The following table sets forth certain information concerning
individual grants of stock options during the fiscal year ended September 30,
1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Shares of Percentage of Total
Common Stock Underlying Options Granted to
Name Options Granted Employees in Fiscal Year Exercise Price Expiration Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kenneth Plotkin 45,000 (ISO) 17 5.0875 January 20, 2008
30,000 (NQ) 12 4.6250 January 20, 2008
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Kenneth R. Aupperle 45,000 (ISO) 17 5.0875 January 20, 2008
30,000 (NQ) 12 4.6250 January 20, 2008
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John Casey 15,500 6 4.50 February 1, 2008
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</TABLE>
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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Table
The following table sets forth certain information concerning the value
of options unexercised as of September 30, 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Shares of
Common Stock Underlying Value of Unexercised In-
Number of Shares of Unexercised Options at the-Money Options at
Common Stock September 30, 1998 September 30, 1998
Name Acquired on Exercise Realized Value Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth Plotkin -0- -0- 135,000/120,000 $565,417.50/$516,435
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth R. Aupperle -0- -0- 135,000/120,000 $565,417.50/$516,435
- ------------------------------------------------------------------------------------------------------------------------------------
John Casey -0- -0- 6,000/24,000 $ 27,248/$97,537
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</TABLE>
Compensation of Directors
Directors of the Company are not compensated solely for being on the Board of
Directors. However, during the fiscal year, 5,000 non-qualified options were
issued to each of Messrs. Neuhaus (who served as a director until July 2, 1998)
and Herman. See "1996 Non-Qualified Stock Option Plan". It is the intention of
the Company to issue non-qualified options in the future to non-employee
directors.
Employment Contracts; Termination of Employment and Change-in-Control
Arrangements
On January 10, 1995, Kenneth R. Aupperle and Kenneth Plotkin each
entered into a three year employment agreement (the "1995 Employment
Agreements") with the Company to serve as President, and Chief Operations
Officer, Chief Executive Officer, Vice-President in charge of marketing and
Secretary, respectively. The 1995 Employment Agreements provided for an annual
salary of $60,000 during the first year, $80,000 during the second year and
$100,000 during the third year. Each of the 1995 Employment Agreements provided
for disability benefits, a car allowance of $400 per month, reasonable
reimbursements for automobile expenses and also medical insurance as is standard
for the employees of the Company. The 1995 Employment Agreements expired on
December 31, 1997.
As of January 10, 1998, Kenneth R. Aupperle and Kenneth Plotkin each
entered into new employment agreements (the "1998 Employment Agreements") with
the Company to serve as President and Chief Operations Officer, and Chief
Executive Officer, Vice-President in charge of marketing and Secretary,
respectively. The 1998 Employment Agreements each provide for at three year term
which term is automatically renewable each year unless otherwise terminated by
the Board of Directors or employee. The 1998 Employment Agreements provide for
an annual base salary of $125,000 during the first year, $150,000 during the
second year, and $180,000 during the third year. For each Annual Period (as
defined in the 1998 Employment Agreements) thereafter, the 1998 Employment
Agreements provide that compensation shall be as mutually determined, but not
less than that for the preceding Annual period. In addition, the 1998 Employment
Agreements provide for a bonus to be paid as
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follows: an amount equal to 2% of the Company's earnings, excluding earnings
that are not from operations, before reduction for interest and income taxes
("EBIT"), for each fiscal year starting with the year ended September 30, 1998,
provided that the Company's EBIT for the applicable fiscal year exceeds 120% of
the prior fiscal year's EBIT and if not, then 1% of the Company's EBIT. The
determination of EBIT shall be made in accordance with the Company's audited
filings with the Securities and Exchange Commission on its Form 10-KSB or Form
10-K. The 1998 Employment Agreements further provide for disability benefits,
term life insurance in the amount of $500,000 each for the benefit of the
executives' families and the Company, a car allowance of $500 per month,
reasonable reimbursement for automobile expense, and medical insurance as is
standard for executives of the Company. In the event of a Change in Control in
the Company (as defined in the 1998 Employment Agreements), a one-time bonus
shall be paid equal to three times the about of the executive's average annual
compensation (including salary, bonus and benefits) received by him for the
thirty-six month period preceding the date of the Change of Control.
1994 Incentive Stock Option Plan
On August 2, 1994, the Company adopted an Incentive Stock Option Plan
("ISO"), as defined in section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). 200,000 shares of Common Stock of the Company have been
reserved for issuance under the ISO. Pursuant to the ISO, options may be granted
for up to ten years with exercise prices (A) during the first two years after
January 10, 1995, of no less than the greater of $3.15, or the fair market value
of the Common Stock on the date of grant, or (B) thereafter, of no less than
fair market value of the Common Stock on the date of grant. On August 6, 1997,
the ISO was registered with the Securities and Exchange Commission under Form
S-8. Pursuant to the 1998 Employment Agreements, on January 21, 1998, options to
acquire a total of 32,500 shares of Common Stock of the Company were granted to
Kenneth R. Aupperle and Kenneth Plotkin, in equal shares, exercisable in
increments of 33 1/3% per year at $5.0875 per share, for a period of five years
form the date the options first become exercisable. Options to acquire a total
of 18,500 shares have been granted to Gerald Tucciarone, the Company's Chief
Financial Officer, and 14,500 to John Casey, the Company's Vice President of
Technology. As of January 28, 1999, options to purchase an aggregate of 196,800
shares of Common Stock of the Company have been granted under the 1994 Incentive
Stock Option Plan.
1996 Non-Qualified Stock Option Plan
On December 14, 1995, the Board of Directors authorized the adoption of
the 1996 NonQualified Option Plan (the "1996 Non-Qualified Plan") which was
approved by the Company's stockholders on March 15, 1996. The 1996 Non-Qualified
Plan authorizes the grant of 250,000 shares of Common Stock of the Company
subject to adjustment as provided therein. The 1996 Non-Qualified Plan
terminates ten (10) years after stockholder approval. Options granted shall
specify the exercise price, the duration of the option, the number of shares to
which the option applies and such other terms and conditions not inconsistent
with the 1996 Non-Qualified Plan as the Board of Directors or committee
administering the 1996 Non-Qualified Plan shall determine. Payment of the
exercise price for options under the 1996 Non-Qualified Plan is to be made in
cash, by the exchange of Common
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Stock having equivalent value or through a "Cashless Exercise." If a participant
elects to utilize a Cashless Exercise, he shall be entitled to a credit equal to
the amount of that equity by which the current fair market value exceeds the
option price on that number of options surrendered and to utilize that credit to
exercise additional options held by him that such equity could purchase. There
shall be canceled that number of options utilized for the credit and for the
options exercised for such credit. In the event of any change of the outstanding
Common Stock of the Company by reason of a stock split, stock dividend,
combination, reclassification or exchange of shares, recapitalization, merger,
consolidation or other similar event, the number of shares available for options
and the price thereof shall be proportionately adjusted.
Pursuant to the 1998 Employment Agreements, on January 21, 1998, options
to acquire 30,000 shares of Common Stock of the Company were granted to each
Kenneth R. Aupperle and Kenneth Plotkin, exercisable for a period of ten years
at $4.625 per share. On March 15, 1996, options to acquire 15,000 shares each
were granted to Kenneth R. Aupperle and Kenneth Plotkin, exercisable for a
period of ten years at $3.00 per share. On March 5, 1997, options to acquire
5,000 shares of Common Stock of the Company each were granted to Bernard Herman
and Leonard Neuhaus, exercisable for a period of five years at $2.69 per share.
On February 2, 1998, options to acquire 5,000 shares of Common Stock of the
Company each were granted to Bernard Herman and Leonard Neuhaus (a Director
until July 2, 1998), exercisable for a period of five years at $4.50 per share.
As of January 28, 1998, options to purchase an aggregate of 110,000 shares of
Common Stock of the Company have been granted under the 1996 Non-Qualified Stock
Option Plan.
1998 Incentive Stock Option Plan
On December 17, 1997 the Company's Board of Directors authorized the
adoption of the 1998 Incentive Stock Option Plan (the "1998 Incentive Plan")
which was approved by the Company's stockholders on March 12, 1999, under
Section 422 of the Code. The 1998 Incentive Plan authorizes the grant of 350,000
shares of Common Stock of the Company, subject to adjustment as provided in the
plan. Pursuant to the 1998 Employment Agreements, on January 21, 1998, options
to acquire a total of 57,500 shares of Common Stock of the Company were granted
to Kenneth R. Aupperle and Kenneth Plotkin, in equal shares, exercisable in
increments of 33 1/3% per year at $5.0875 per share, for a period of five years
from the date the options first become exercisable. Eligibility to participate
in the 1998 Incentive Plan is limited to key employees of the Company and its
subsidiaries. The 1998 Incentive Plan terminates December 16, 2007. The term of
each option may not exceed ten years. Options will not be transferable except
upon death and, in such event, transferability will be effected by will or by
the laws of descent and distribution. Options under the 1998 Incentive Plan may
not be granted at less than 100% of fair market value at the time of the grant.
Options granted to employees who own more than 10% of the Company's outstanding
Common Stock will be granted at not less than 110% of fair market value for a
term of five years. The aggregate market value of stock for which Incentive
Stock Options are exercisable during any calendar year by an individual is
limited to $100,000, but the value may exceed $100,000 for which options may be
granted to an individual. Payment of the exercise price for options under the
1998 Incentive Plan are to be made in cash or by the exchange of Common Stock
having equivalent value. For purposes of the 1998 Incentive Plan, fair market
value is the last price for
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the Company's Common Stock as quoted by NASDAQ. No disposition of Common Stock
received upon exercise of options shall be made within two (2) years from the
date of grant of the Option nor within one (1) year after the exercise. In the
event of any future recapitalization, split-up or consolidation of shares, the
number of shares and exercise price shall be proportionately adjusted. As of
January 28, 1999, options to purchase an aggregate of 148,150 shares of Common
Stock of the Company have been granted under the 1998 Incentive Stock Option
Plan.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Common Stock
The following table sets forth, to the knowledge of the Company based
solely upon records available to it, certain information as of January 28, 1999
regarding the beneficial ownership of the Company's Common Stock (i) by each
person who the Company believes to be the beneficial owner of more than 5% of
its outstanding shares of Common Stock, (ii) by each current Director, (iii) by
each person listed in the Summary Compensation Table under "Executive
Compensation" and (iv) by all current executive officers and Directors as a
group:
Name of Management Person
and Name and Address
of Beneficial Owne Number Percent
Kenneth Plotkin(1)(2) 443,150(3) 9.9%
91 Cabot Court
Hauppauge, NY 11788
Kenneth R. Aupperle(1)(2) 437,610(3) 9.8%
91 Cabot Court
Hauppauge, NY 11788
Laura Aupperle(1)(2) 302,550(2) 7.0%
23 Sequoia Drive
Hauppauge, NY 11788
Dorothy Plotkin(1)(2) 305,950(2) 7.1%
21 Pine Hill Drive
Hauppauge, NY 11788
LCO Investments Limited 215,000 5.0%
c/o Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
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John Casey 53,100(4) 1.2%
Bernard Herman 13,000(5) *
Steven J. Kuperschmid -0- *
Directors and executive officers
as a group (6 persons) 962,860(6) 20.8%
- ---------------------------------
* Less than one (1%) percent.
(1) Laura Aupperle, wife of Kenneth R. Aupperle, beneficially owns 302,550
shares, or 7.0% of the outstanding shares of Common Stock of the
Company. Dorothy Plotkin, wife of Kenneth Plotkin, beneficially owns
305,950 shares or 7.1% of the outstanding shares of Common Stock of the
Company. Ownership of shares of Common Stock by each individual does
not include ownership by that person's spouse which is disclaimed by
the named individual.
(2) One presently exercisable warrant has been issued for 60,000 shares to
Laddok Realty Co. ("Laddok"), of which Kenneth R. Aupperle and Kenneth
Plotkin, and their wives, Laura Aupperle and Dorothy Plotkin, are
partners. Each individual expressly disclaims any percentage interest
in the warrant other than that which represents such partner's
percentage interest in the partnership, which is equal to 15,000
shares.
(3) Includes 60,000 shares of Common Stock issuable upon the exercise of
currently exercisable non-qualified stock options granted on January
10, 1995 and exercisable until January 9, 2005, which options were part
of an overall grant of a non-qualified stock option to purchase 150,000
shares of Common Stock at $3.15 per share. Also includes 45,000 shares
of Common Stock issuable upon the exercise of currently exercisable
non-qualified options and 45,000 shares of Common Stock issuable upon
the exercise of currently exercisable incentive stock options. Does not
include 90,000 shares of Common Stock issuable upon the exercise of
currently unexercisable non-qualified stock options. Also does not
include 15,000 shares of Common Stock issuable upon the exercise of
currently unexercisable incentive stock options.
(4) Includes 6,000 shares of Common Stock issuable upon the exercise of
currently exercisable incentive stock options. Does not include 20,000
shares of Common Stock issuable upon the exercise of currently
unexercisable incentive stock options.
(5) Includes 10,000 shares of Common Stock issuable upon the exercise of
currently exercisable non-qualified stock options.
(6) Includes an aggregate of 328,000 shares of Common Stock issuable upon
the exercise of currently exercisable incentive and non-qualified stock
options.
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Item 12. Certain Relationships and Related Transactions
The Company occupies a 25,000 square foot facility at 91 Cabot Court,
Hauppauge, New York which it uses as its executive offices and for the testing,
storage, and shipping of its products. The Company considers the premises to be
suitable for all its needs. The building is owned by Laddok, a partnership
consisting of Messrs. Aupperle and Plotkin and their wives and is leased to the
Company under a lease agreement expiring on January 31, 2006 with an option of
the Company to extend the lease for an additional three years. Rent is currently
at the annual rate of $338,058 and will increase to $354,959 per year on
February 1, 1999. The rent is payable in equal monthly installments and
increases at a rate of 5% per year on February 1, of each year thereafter
including during the option period. The premises are subject to two mortgages
which have been guaranteed by the Company upon which the outstanding principal
amount due as of September 30, 1998 was $1,038,782. The Company pays the taxes
and operating costs of maintaining the premises.
On December 17, 1996 the Board of Directors approved the issuance of
warrants to Laddok in consideration of Laddok's agreement to cancel the last
three years of the company's lease and to grant an option to the Company to
extend the lease for three years. The Stock Option Committee authorized the
grant of a warrant to Laddok to acquire 60,000 shares at an exercise price of $3
13/16, which is exercisable for a term of ten years.
For a discussion regarding the employment agreements of, and stock options
granted to, Messrs. Plotkin and Aupperle, see "Item 10. Executive Compensation",
above.
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SIGNATURES
Pursuant to the requirement 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.
HAUPPAUGE DIGITAL, INC.
By: /s/ Gerald Tucciarone
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Chief Financial Officer
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