SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission File Number: 1-13760
THE NETWORK CONNECTION, INC.
1324 Union Hill Road
Alpharetta, Georgia 30201
(770-751-0889)
A Georgia Corporation IRS Employer ID No. 58-1712432
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.001 par value per share Registered on The
Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(b) of
the Securities Exchange Act of 1934 during the preceding 12
months, 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-KSB or any amendment of this Form 10-KSB. [ ]
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant,
based on the closing sale price of the Common Stock on April
15, 1999, in the over-the-counter market as reported by The
Nasdaq SmallCap Market tier of The Nasdaq Stock Market, was
approximately $12.7 million. Shares of Common Stock held by
each officer and director and by each person who owns 5% or
more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As of April 15, 1999, the registrant had outstanding
5,179,646 shares of its Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
This filing amends the Report on Form 10-KSB for the fiscal
year ended December 31, 1998, filed on April 15, 1999, by
adding Part III which was omitted from the original filing.
PART III
Item 9. Directors and Executive Officers of the
Registrant
The following table sets forth information with respect
to directors, executive officers and
key employees of the Company as of April 30, 1999.
Name Age Position
Wilbur Riner(1)(2)(3)(4) 71 Chief Executive Officer and
Chairman of the Board of
Directors since 1986; President
since 1997
James Riner(3) 34 Vice President - Research and
Development and Engineering;
Director since 1986
Bryan Carr(3) 44 Vice President-Finance; Chief
Financial Officer; Chief
Operating Officer; Treasurer;
Director since 1996
(1) Member of the Employee Stock Option Committee.
(2) Member of the Audit Committee.
(3) Member of the Director Stock Option Committee.
(4) Member of the Compensation Committee.
Wilbur Riner - Chairman, President and Chief Executive
Officer. Mr. Riner co-founded the Company with his son,
James Riner, in 1986, at which time he became Chairman and
Chief Executive Officer. He is responsible for the overall
direction of the Company and its operating divisions. Prior
to joining the Company, from 1984 to 1986, Mr. Riner was the
CEO of Asher Technologies, which was a manufacturer of
telecommunications products. Prior to that, Mr. Riner had
served as Executive Vice President for OKI Telecom's
operations in the United States (1981-1984), Vice President
/United States Sales and Marketing for Mitel Corp. (1979 to
1981), and General Manager of ITT North Microsystems for ITT
Telecommunication (1975 to 1979). In all of these positions,
Mr. Riner has combined technical expertise in
telecommunications engineering with sales and marketing
business acumen. Mr. Riner is the husband of Barbara Riner
and the father of James Riner.
James Riner-Vice President-Research and Development and
Engineering, Secretary and Director. Mr. Riner co-founded
the Company in 1986, joining the Company on a full-time
basis as Vice President - Engineering and Research and
Development, Secretary and Treasurer in 1987. In that
capacity he is responsible for all product technical
support, as well as all new product development. Mr. Riner
co-developed the Company's TRIUMPH family of servers,
including the TRAC asymmetric I/0 processor to provide RAID
level protection (1992). Mr. Riner is the son of Wilbur
Riner and the stepson of Barbara Riner.
Bryan Carr-Vice President-Finance, Chief Financial
Officer, Chief Operating Officer, Treasurer and Director.
Mr. Carr joined the Company in July 1995 as Chief Financial
Officer and was appointed Vice President - Finance in
November 1995. Mr. Carr was appointed a director of the
Company in April of 1996, Treasurer of the Company in
November of 1996 and Chief Operating Officer in August of
1997. He is responsible for the Company's overall financial
and operational management and policy making and conduct of
the Company's relationship with creditors, shareholders and
the financial community. Prior to joining the Company, from
1988 to 1995, Mr. Carr was Director of Business
Administration for LXE, Inc., a public company providing
wireless data communications products worldwide. From 1981
to 1988 he was Controller for UTL Corporation, a public
company providing advanced communications systems for
Government and commercial applications internationally.
Prior to 1981 he was a senior auditor with Coopers &
Lybrand.
Director's Terms
The Company has a classified Board of Directors. Messr.
James Riner currently serves as director under a three-year
term ending at the date of the 2001 Annual Meeting of
Shareholders. Messrs. Wilbur Riner and Bryan Carr currently
serve as directors under three-year terms ending at the date
of the 1999 Annual Meeting of Shareholders.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and officers, and persons
who own beneficially more than ten percent (10%) of the
Common Stock of the Company, to file reports of ownership
and changes of ownership with the Securities and Exchange
Commission. Copies of all reports are required to be
furnished to the Company pursuant to Section 16(a). Based
solely on the reports received by the Company and on written
representations from reporting persons, the Company believes
that persons subject to the reporting requirements complied
with all applicable Section 16(a) filing requirements during
the fiscal year ended December 31, 1998.
PART III
Item 10. Executive Compensation
The following table sets forth certain information, for
the years ended December 31, 1998, 1997 and 1996, with
respect to compensation paid or accrued by the Company to
the Company's Chief Executive Officer and to each of the
most highly compensated other executive officers whose
combined salary and bonus compensation for 1998 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Long Term
Compensation
Securities
Name and Other Underlying
Principal Yea Salary Bonu Annual Options/SAR
Position r s Compensat s (#)
ion
Wilbur Riner, 199 $156,00 -0- $22,900(1 100,000
Chairman, 8 0 -0- )
President and 199 104,322 -0- 23,400(1) 100,000
Chief Executive 7 101,414 24,375(1) 20,000
Officer 199
6
Bryan Carr, Vice 199 $120,00 -0- $10,501(1 50,000
President - 8 0 -0- ) 80,000
Finance and Chief 199 101,667 -0- 30,171(1) 99,000
Financial Officer 7 95,625 18,888(1)
199
6
(1) Consists of the following:
Automobile
Allowance Commissio Total
ns
Wilbur Riner - 1998 $22,900
$5,400 $17,500
Wilbur Riner - 1997 5,400 18,000 23,400
Wilbur Riner - 1996 5,625 18,750 24,375
Bryan Carr - 1998 $4,800 $10,501
$15,301
Bryan Carr - 1997 5,000
25,171 30,171
Bryan Carr - 1996 4,800 14,088
18,888
Mr. Riner and Mr. Carr, from time to time, provided
significant assistance to the Company's sales and marketing
staff in effecting sales of the Company's products, for
which sales they received commission compensation.
Option/SAR Grants in Last Fiscal Year
The following table sets forth certain information with
respect to individual grants of stock options and
freestanding SARs made to the named executive officer during
the year ended December 31, 1998.
Individual Grants
% of Total
Number of Options/
Securities SARs Exercise
Underlying Granted to of Base
Options/ Employees Price Expirat
Name SARs in Fiscal ($/Sh) ion
Granted Year Date
Wilbur 100,000 27.4% $2.00 9/10/08
Riner
Bryan 50,000 13.7% $2.00 9/10/08
Carr
Aggregated Option/SAR Exercises in Last Fiscal Year and
FY-End Option/SAR Values
The following table sets forth certain information with
respect to the exercise of stock options and freestanding
SARs by each of the named executive officers during the last
completed fiscal year, and the fiscal year-end value of
unexercised options and SARs for the last completed fiscal
year.
Number of
Securities
Underlying Value of
Unexercised Unexercised
Options/SARs In -the-Money
Shares Value at FY-End (#) Options/SARs
Acquired on Realized Exercisable/ at FY-
Name Exercise (#) ($) Unexercisable End ($)
Exercisable/
Unexercisable
Wilbur 38,100 $39,429 21,900/81,900 $14,875/$62,50
Riner 0
Bryan -0- -0- 132,000/197,00 $31,250/$62,50
Carr 0 0
Compensation of Directors
Directors who are employees of the Company receive no
remuneration for their service as directors of the Company.
Pursuant to the Company's 1995 Stock Option Plan for Non-
Employee Directors, directors who are not employees of the
Company receive for their services, on the date first
elected as a member of the Board and on each anniversary
thereafter if they continue to serve on the Board of
Directors, an automatically granted option to acquire 5,000
shares of the Company's common stock at its fair market
value on the date of grant; such options become exercisable
in two equal annual installments if the individual continues
at that time to serve as a director, and once exercisable
remain so until the fifth anniversary of the date of grant.
The Company reimburses directors for travel and lodging
expenses, if any, in connection with attendance at Board
meetings.
Employment and Consulting Arrangements
All of the Company's executive officers are employed
under contracts approved by the Board of Directors.
Wilbur L. Riner serves as Chief Executive Officer and
President of the Company pursuant to the terms of a
three-year employment agreement that terminates on October
31, 2001. Mr. Riner receives a minimum annual base salary of
$156,000 per year. The employment agreement provides for a
severance payment in the event of termination due to certain
events; including a change-in-control or the disposition of
substantially all of the business and/or assets of the
Company and any event which has the effect of significantly
reducing the duties or authority of Mr. Riner. The severance
payment amount would equal the greater of the present value
of his base annual salary for one year or the remainder of
his term. The employment agreement also provides for payment
of bonuses and for such other fringe benefits as are paid to
other executive officers of the Company. Such fringe
benefits take the form of medical coverage and an automobile
expense allowance of $450 per month, the aggregate value of
which is estimated at approximately $5,400 per year.
James E. Riner serves as Vice President of Research and
Development and Engineering and Secretary of the Company
pursuant to the terms of a three-year employment agreement
that terminates on October 31, 2001. Mr. Riner receives a
minimum annual base salary of $86,790 per year. The
employment agreement provides for a severance payment in the
event of termination due to certain events; including a
change-in-control or the disposition of substantially all of
the business and/or assets of the Company and any event
which has the effect of significantly reducing the duties or
authority of Mr. Riner. The severance payment amount would
equal the greater of the present value of his base annual
salary for one year or the remainder of his term. The
employment agreement also provides for payment of bonuses
and for such other fringe benefits as are paid to other
executive officers of the Company. Such fringe benefits take
the form of medical coverage and an automobile expense
allowance of $300 per month, the aggregate value of which is
estimated at approximately $3,600 per year.
Bryan Carr serves as Vice President - Finance,
Treasurer, Chief Financial Officer and Chief Operating
Officer of the Company pursuant to the terms of an
employment agreement that terminates on October 31, 2001.
Mr. Carr receives a minimum annual base salary of $120,000
per year. Mr. Carr also receives commissions of .5% for net
sales that exceed $500,000 in any calendar month. The
employment agreement provides for a severance payment in the
event of termination due to certain events; including a
change-in-control or the disposition of substantially all of
the business and/or assets of the Company and any event
which has the effect of significantly reducing the duties or
authority of Mr. Carr. The severance payment amount would
equal the greater of, the present value of his base annual
salary for one year or the remainder of his term. The
employment agreement also provides for payment of bonuses
and for such other fringe benefits as are paid to other
executive officers of the Company. Such fringe benefits
take the form of medical coverage and an automobile expense
allowance of $400 per month, the aggregate value of which is
estimated at approximately $4,800 per year.
Item 11. Security Ownership of Certain Beneficial Owners
and Management
The following table sets forth certain information
concerning shares of the Company's Common Stock beneficially
owned as of April 30, 1999 by the Company's directors and
named officers, and as of December 31, 1998 by persons who
beneficially own more than 5% of the Common Stock. Except as
otherwise indicated, the named person has sole voting power
and sole investment power of the securities.
Name and Address of Beneficial Owner Numbe Perce
r nt
Shares
Benefi
cially
Owned
Wilbur Riner (2)(3) 21,90 *
0
Barbara Riner (2)(4) 514,5 9.8
43
James Riner (2)(5) 31,94 *
8
Bryan Carr (2)(6) 166,0 3.1
00
Officers and Directors as a Group 734,3 14.0
(3 Persons) (7) 91
(1) As used herein, the term beneficial ownership with
respect to a security is defined by Rule 13d-3 under the
Securities Exchange Act of 1934 as consisting of sole or
shared voting power (including the power to vote or direct
the vote) and/or sole or shared investment power (including
the power to dispose or direct the disposition of) with
respect to the security through any contract, arrangement,
understanding, relationship or otherwise, including a right
to acquire such power(s) within 60 days of April 30, 1999.
Unless otherwise noted, beneficial ownership consists of
sole ownership, voting and investment power with respect to
all shares shown as beneficially owned by them.
(2) The business address for the named person is 1324 Union
Hill Road, Alpharetta, Georgia 30004.
(3) Does not include 490,120 shares held by Barbara Riner,
the wife of Wilbur Riner. Also does not include options
exercisable to purchase an aggregate of 24,443 shares held
by Barbara Riner. Mr. Riner has disclaimed all beneficial
interest in the shares held by his wife. Includes options
currently exercisable to acquire 21,900 shares of the
Company's common stock.
(4) Includes options currently exercisable to acquire
24,443 shares. Barbara Riner is the wife of Wilbur Riner.
Does not include options to acquire 21,900 shares of the
Company's common stock held by Wilbur Riner. Ms. Riner has
disclaimed beneficial interest in the shares held by her
husband.
(5) Includes options currently exercisable to acquire
31,948 shares of the Company's common stock.
(6) Includes options currently exercisable to acquire
132,000 shares of the Company's common stock.
(7) Includes options, which are exercisable to acquire
178,848 shares of the Company's common stock by officers and
directors of the Company.
* Less than 1%.
Certain Relationships and Related Transactions
None
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 hereto duly authorized, in the city of
Alpharetta, State of Georgia.
THE NETWORK CONNECTION, INC.
Dated: April 30, 1999 By: /s/ Wilbur R.
Riner___________________
Wilbur L. Riner
Chairman and Chief
Executive Officer
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.
Signature Title
Date
/s/ Wilbur L. Riner________________ Chairman, Chief
Executive Officer April 30, 1999
Wilbur L. Riner and Director
/s/ Bryan R. Carr_________________ Vice President - Finance,
Chief Financial April 30, 1999
Bryan R. Carr and Principal Accounting
Officer and
Director
/s/ James E. Riner________________ Vice President -
Engineering, Secretary April 30, 1999
James E. Riner and Director
