SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/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, 1999
-------------------
( ) 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-K 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-K or any
amendment to this Form 10-K: [ ]
State registrant's revenues for its most recent fiscal year: $58,601,611
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 17, 1999 was approximately $86,248,337. 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 17, 1999 which was $23.50 per share as reported by
NASDAQ.
As of December 17, 1999, the number of shares outstanding of the Common Stock
was 4,349,002 shares (exclusive of treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART III
Item 10. 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.
Name Age(1) Officer and Positions Held
Kenneth R. Aupperle 42 President, Chief Operations
Officer and Director
Kenneth Plotkin 48 Chairman of the Board of Directors,
Chief Executive Officer, Vice-
President in charge of Marketing,
Secretary and Director
Gerald Tucciarone 44 Chief Financial Officer and Treasurer
John Casey 43 Vice-President in charge of Technology
Bernard Herman 72 Director
Steven J. Kuperschmid 39 Director
(1) Age as of January 28, 2000.
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 in charge of Technology for
more than the past five years.
Bernard Herman, from 1979 to 1993, was Chief Executive Officer of Okidata Corp.
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of Mount Laurel, New Jersey, a distributor of computer peripheral products.
Since then he has served as a 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-K 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, 1999 or prior fiscal years.
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, 1999, 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 two reports
relative to two transactions. Mr. Aupperle failed to file one report relative to
one transaction. Mr. Tucciarone failed to file one report relative to one
transaction. Mr. Casey 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.
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 two reports
relative to four transactions. Mr. Aupperle failed to file one report relative
to three transactions. Mr. Tucciarone failed to file three reports relative to
two transactions. Mr. Casey failed to file one report relative to two
transactions. Mr. Herman failed to file one report relative to one transaction.
Mr. Kuperschmid failed to file one report relative to one transaction.
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, 1996, 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 one report
relative to one transaction. Mr. Aupperle failed to file one report relative to
one transaction. Mr. Tucciarone failed to file one report relative to one
transaction.
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Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth certain information for the fiscal years
ended September 30, 1999, 1998 and 1997 concerning the compensation of Kenneth
Plotkin, Chairman of the Board, Chief Executive Officer, Vice-President in
charge of Marketing, Secretary and Director of the Company, Kenneth R. Aupperle,
President , Chief Operating Officer and Director of the Company, John Casey,
Vice President in charge of Technology of the Company and Gerald Tucciarone,
Chief Financial Officer and Treasurer 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, 1999.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Annual Common Stock Underlying
Name and Principal Position Year Salary Bonus Compensation Options Granted
- --------------------------- ---- ------ ----- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Kenneth Plotkin 1999 $ 142,145 $ 41,848 $ 6,000(1) -0-
Chairman of the Board, Chief
Executive Officer, Vice- 1998 $ 120,412 -0- $ 5,500(1) 75,000
President in charge of
Marketing and Director 1997 $ 94,016 -0- $ 4,800(1) -0-
Kenneth R. Aupperle 1999 $ 142,145 $ 41,848 $ 6,000(1) -0-
President, Chief Operations
Officer and Director 1998 $ 120,412 -0- $ 5,500(1) 75,000
1997 $ 94,016 -0- $ 4,800(1) -0-
John Casey 1999 $ 110,000 $ 8,471 -0- 4,000
Vice President in charge of
Technology 1998 $ 110,888 -0- -0- 15,500
1997 $ 103,574 -0- -0- 4,500
Gerald Tucciarone 1999 $ 100,193 $ 8,471 -0- 8,000
Chief Financial Officer and
Treasurer 1998 $ 95,600 -0- -0- 9,500
1997 $ 86,554 -0- -0- 3,500
</TABLE>
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(1) Represents non-cash compensation in the form of the use of a car and
related expenses.
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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, 1999:
<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>
Kenneth Plotkin -0- -0- N/A N/A
Kenneth R. Aupperle -0- -0- N/A N/A
John Casey 4,000 2% $7.88 March 22, 2009
Gerald Tucciarone 8,000 4% $7.88 March 22, 2009
</TABLE>
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, 1999:
<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, 1999 September 30, 1999
Name Acquired on Exercise Realized Value Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Kenneth Plotkin -0- -0- 123,000/117,000 $2,813,625/$2,676,375
Kenneth R. Aupperle -0- -0- 123,000/117,000 $2,813,625/$2,676,375
John Casey 4,000 $ 22,640 8,000/22,000 $183,000/$503,250
Gerald Tucciarone 10,000 $217,300 2,000/20,000 $45,750/$457,500
</TABLE>
Compensation of Directors
Directors of the Company are not compensated solely for being on the Board
of Directors. However, during the fiscal year ended September 30, 1999, 5,000
non-qualified options were issued to each of Messrs. Herman and Kuperschmid. See
"Security Ownership of Certain Beneficial Owners and Management". 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
As of January 10, 1998, after the expiration of their prior employment
agreements with the Company, Kenneth R. Aupperle and Kenneth Plotkin each
entered into employment agreements (the "1998 Employment Agreements") with the
Company to serve as President and Chief Operations
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Officer, and Chief Executive Officer, Vice-President in charge of Marketing and
Secretary, respectively. The 1998 Employment Agreements each provide for a three
year term which term is automatically renewable each year unless otherwise
terminated by the Board of Directors or the executive. 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 between the Company and the executive, but not less than that for the
preceding Annual Period. In addition, the 1998 Employment Agreements provide for
a bonus to be paid as 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. 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 Messrs. Aupperle and Plotkin, in equal shares,
exercisable, beginning on January 21, 1999, in increments of 33 1/3% per year at
$5.0875 per share. This option expires as of January 20, 2003. Also on January
21, 1998, pursuant to the 1998 Employment Agreements, options to acquire a total
of 60,000 shares of Common Stock of the Company were granted to Messrs. Aupperle
and Plotkin, in equal shares, exercisable, beginning on January 21, 1999, in
increments of 20% per year at $4.625 per share. This option expires as of
January 20, 2008. Additionally on January 21, 1998, pursuant to the 1998
Employment Agreements, options to acquire a total of 57,500 shares of Common
Stock of the Company were granted to Messrs. Aupperle and Plotkin, in equal
shares, exercisable, beginning on January 21, 1999, in increments of 33 1/3% per
year at $5.0875 per share. This option expires as of January 20, 2003. 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 expenses, 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
to the executive equal to three times the amount 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.
Item 12. 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, 2000
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:
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Name of Management Person
and Name and Address
of Beneficial Owner Number Percent
- ------------------- ------ -------
Kenneth Plotkin(1)(2) 451,150(3) 10.4%
91 Cabot Court
Hauppauge, NY 11788
Kenneth R. Aupperle(1)(2) 442,610(4) 10.2%
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) 7.0%
21 Pine Hill Drive
Hauppauge, NY 11788
LCO Investments Limited 235,000 5.4%
c/o Richards & O'Neil, LLP
885 Third Avenue
New York, NY 10022
John Casey 59,100(5) 1.4%
Bernard Herman 18,000(6) *
Gerald Tucciarone 9,000(7) *
Steven J. Kuperschmid 5,000(8) *
Directors and executive officers
as a group (6 persons) 984,860(9) 22.6%
- ---------------------------------
* 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 7.0% 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.
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(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 90,000 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 27,000 shares of Common Stock
issuable upon the exercise of currently exercisable non-qualified options
and 30,000 shares of Common Stock issuable upon the exercise of currently
exercisable incentive stock options. Does not include 78,000 shares of
Common Stock issuable upon the exercise of currently unexercisable
non-qualified stock options and 15,000 shares of Common Stock issuable upon
the exercise of currently unexercisable incentive stock options.
(4) Includes 90,000 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 21,000 shares of Common Stock
issuable upon the exercise of currently exercisable non-qualified options
and 30,000 shares of Common Stock issuable upon the exercise of currently
exercisable incentive stock options. Does not include 78,000 shares of
Common Stock issuable upon the exercise of currently unexercisable
non-qualified stock options and 15,000 shares of Common Stock issuable upon
the exercise of currently unexercisable non-qualified stock options.
(5) Includes 12,000 shares of Common Stock issuable upon the exercise of
currently exercisable incentive stock options. Does not include 18,000
shares of Common Stock issuable upon the exercise of currently unexercisable
incentive stock options.
(6) Includes 15,000 shares of Common Stock issuable upon the exercise of
currently exercisable non-qualified stock options.
(7) Includes 6,000 shares of Common Stock issuable upon the exercise of
currently exercisable incentive stock options. Does not include 16,000
shares of Common Stock issuable upon the exercise of currently unexercisable
incentive stock options.
(8) Includes 5,000 shares of Common Stock issuable upon the exercise of
currently exercisable non-qualified stock options.
(9) Includes an aggregate of 326,000 shares of Common Stock issuable upon the
exercise of currently exercisable incentive and non-qualified stock options.
Also includes the interests of Messrs. Plotkin and Aupperle (30,000 shares
of Common Stock in the aggregate) in the presently exercisable warrant
described in note 2.
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Item 13. 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 $354,959 and will increase to $372,707 per year on
February 1, 2000. 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, 1999 was $978,655. 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 warrant 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 "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
------------------------------------
Gerald Tucciarone,
Chief Financial Officer and Treasurer
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