<PAGE>
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A
AMENDMENT NO. 3
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended August 31, 1998
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from __________________ to _____________________.
COMMISSION FILE NO.: 0-27928
____________________
NICOLLET PROCESS ENGINEERING, INC.
(Name of small business issuer in its charter)
MINNESOTA 41-1528120
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
420 NORTH FIFTH STREET, FORD CENTRE, SUITE 1040,
MINNEAPOLIS, MINNESOTA 55401
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (612) 339-7958
Securities registered under Section 12(b) of the Exchange Act: NONE.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, NO PAR VALUE
____________________
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. /X/
State issuer's revenues for its most recent fiscal year. $1,122,579
As of November 20, 1998, 6,211,861 shares of Common Stock of the Registrant
were deemed outstanding, and the aggregate market value of the Common Stock of
the Registrant (based upon the average of the closing bid and asked prices of
the Common Stock at that date as reported by the OTC Bulletin Board), excluding
outstanding shares beneficially owned by directors and executive officers, was
approximately $2,621,000.
Transitional Small Business Disclosure Format (check one): YES / / NO /X/
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THIS FORM 10-KSB CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR THIS
PURPOSE, ANY STATEMENTS CONTAINED IN THIS FORM 10-KSB THAT ARE NOT STATEMENTS
OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT
LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT," "BELIEVE,"
"ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS
THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND
UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A
VARIETY OF FACTORS, INCLUDING THOSE DESCRIBED UNDER THE CAPTION "IMPORTANT
FACTORS TO CONSIDER."
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
(A) DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
COMPANY
The following persons are directors of the Company, as of December 15,
1998.
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR NOMINEE AGE PRINCIPAL OCCUPATION
- --------------------------- --- ---------------------------------
<S> <C> <C>
Pierce A. McNally 50 Chairman of the Board of the
Company
Robert A. Pitner 55 Chief Executive Officer and Interim
Chief Financial Officer of the
Company
Thomas W. Bugbee (1) 47 President of Bugbee and Associates,
LLC
Benton J. Case, Jr. (1) 63 President of Rainy River Resources,
Inc.
Andrew K. Boszhardt, Jr. 42 Chief Executive Officer of Oscar
Capital Management, LLC
John van Leeuwen 40 Chairman of the Board of
TECHinspirations, Inc.
Frank van Luttikhuizen 44 Chief Financial Officer of
TECHinspirations, Inc.
</TABLE>
(1) Member of the Audit Committee and Compensation Committee.
PIERCE A. MCNALLY has served as the Director of Corporate Development of
the Company from October 1, 1996 to December 1998, the Chairman of the Board
since May 1995 and has been a director since 1992. He also currently serves as
Chairman of the Board and Chief Executive Officer of Minnesota American, Inc., a
Minnetonka, Minnesota based holding company which owns LockerMate Corporation, a
developer of locker memory organizational products. From January 1992 until
October 1994, he was President and Co-Chief Executive Officer of Minnesota
American, Inc. Prior to that time, Mr. McNally was an officer and director of
Midwest Communications, Inc., a communications company. He also serves on the
board of directors of Imaging Institute, Inc., Rainy River Resources, Inc.
("Rainy
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River"), Minnesota American, Inc. and Viacom Incorporated. Mr. McNally
is not standing for reelection.
ROBERT A. PITNER has served as Chief Executive Officer and director of
the Company since April 1991, as Interim Chief Financial Officer since May
1997 and as President from April 1991 to November 1998. From April 1991 to
May 1995, Mr. Pitner also served as the Company's Chief Financial Officer.
From June 1989 to April 1991, Mr. Pitner was a Vice President at Wiken
Advertising and Promotion, a consulting firm specializing in "high tech"
industries. From 1988 to 1989, he was President and Chief Operating Officer
of Springboard Software, Inc., a software company. Prior to 1988, Mr. Pitner
spent twenty years in the banking industry in various executive positions,
most recently as a senior executive at First Bank System (now U.S. Bank).
THOMAS W. BUGBEE, joined the Company's Board of Directors in 1988. Mr.
Bugbee has been the President of Bugbee and Associates, LLC, a corporate
finance advisory services company, since January 1996 when he founded the
company. From November 1991 through January 1996, Mr. Bugbee was the
President of Bugbee, Anton and Associates, Inc., a corporate finance advisory
services company. During that time, Mr. Bugbee has served as Chief Financial
Officer of several high-tech companies along with his responsibilities at
Bugbee and Associates, LLC. From 1989 to 1991, he was a Senior Manager for
Ernst & Young LLP and managed the Corporate Finance/Debt Restructuring Group
for the Twin Cities.
BENTON J. CASE, JR., joined the Company's Board of Directors in 1988.
Since May 1978, Mr. Case has been employed by Rainy River, a company engaged
in oil and gas exploration. Mr. Case has served as President of Rainy River
since February 1991 and prior to that time, held the position of Treasurer.
Mr. Case has also served as Vice President of Future Care Systems, Inc. since
1994. From October 1990 until March 1994, he was a general partner of
Skylark II, a venture capital firm. Skylark II was sold to Rainy River in
1994. Mr. Case is also a member of the Board of Directors of Future Care
Systems, Inc.
ANDREW K. BOSZHARDT, JR., joined the Company's Board of Directors in
November 1997. Mr. Boszhardt currently serves as the Chief Executive Officer
of Oscar Capital Management, LLC, an investment advisory firm, which he
co-founded in December 1996. From 1980 through November 1996, Mr. Boszhardt
was employed by Goldman Sachs & Co. where he served as a Vice President and
was active in securities brokerage and asset management.
JOHN VAN LEEUWEN, joined the Company's Board of Directors in December
1998. Mr. Leeuwen currently serves as Chairman of the Board of
TECHinspirations, Inc., a venture capital investment firm which he co-founded
in June 1996. From October 1992 to June 1996, Mr. van Leeuwen was the
President and General Manager of Baan Company Canada, a European software
company. In September 1987, Mr. van Leeuwen founded STROHN Systems Inc., a
computer systems integration and engineering services business.
FRANK VAN LUTTIKHUIZEN, joined the Company's Board of Directors in
December 1998. Since September 1996, Mr. van Luttikhuizen has been the Chief
Financial Officer of TECHinspirations, Inc., a venture capital investment
firm. From June 1993 to March 1996, Mr. van Luttikhuizen was the Director of
Finance and Administration of Baan Company Canada, a European software
company. Mr. van Luttikhuizen was an independent consultant from August 1990
to June 1993. From July 1985 to July 1990, Mr. van Luttikhuizen held various
positions in administration and finance at Victoria Hospital. From June 1983
to July 1985, he held various positions in administration and finance at
Union Gas and from August 1979 to June 1983, Mr. van Luttikhuizen was an
accountant at Coopers & Lybrand. Mr.
3
<PAGE>
van Luttikhuizen was elected to the Board of Directors of the Company on
December 15, 1998 and is not standing for reelection.
Information concerning executive officers of the Company is included in
this Report under Item 4A, "Executive Officers of the Company."
(B) SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and all persons who beneficially
own more than 10% of the outstanding shares of the Company's Common Stock to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of the Company's Common Stock. Executive
officers, directors and greater than 10% beneficial owners are also required to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based upon a review of the copies of such reports furnished
to the Company and written representations that no other reports were required,
during the year ended August 31, 1998, none of the Company's directors or
officers or beneficial owners of greater than 10% of the Company's Common Stock
failed to file on a timely basis the forms required by Section 16 of the
Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION AND OTHER BENEFITS.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
of the Company and the three other most highly compensated executive officers of
the Company whose salary and bonus exceeded $100,000 in the last fiscal year
(the "Named Executive Officers"). Other than Mr. Pitner, no other executive
officer of the Company had salary and bonus which exceeded $100,000 in the
fiscal year ended August 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($)(1) OPTIONS (#)
- --------------------------- ---- --------- ----------- ------------
<S> <C> <C> <C> <C>
Robert A. Pitner 1998 $108,000 $ 0 263,500 (2)
PRESIDENT, CHIEF EXECUTIVE 1997 $108,000 $34,000 26,000
OFFICER AND INTERIM CHIEF 1996 $108,000 $50,000 7,500
FINANCIAL OFFICER
</TABLE>
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(1) Cash bonuses for services rendered have been included as compensation for
the year earned, even though such bonuses were actually paid in the following
year.
(2) Mr. Pitner was granted options to purchase an aggregate of 263,500 shares
of Common Stock during fiscal 1998. Of this amount, an aggregate of 248,500
shares represented options originally granted in December 1993, July 1994,
August 1994, August 1995, September 1995 and October 1996,
4
<PAGE>
respectively, that were canceled and reissued in June 1998. See "Board of
Directors Report on Repricing of Options."
OPTION GRANTS AND EXERCISES
The following tables summarize option grants and exercises during the year
ended August 31, 1998 to or by the Named Executive Officers and the potential
realizable value of the options held by such persons at August 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF OPTIONS GRANTED TO
SECURITIES UNDERLYING EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED(#)(1) FISCAL YEAR PRICE ($/Sh) DATE
- ---- --------------------- ------------------ ---------------- ----------
<S> <C> <C> <C> <C>
Robert A. Pitner 15,000 (2)(10) 3.0% $0.3125 08/31/00
100,000 (3)(10) 20.2% $0.3125 07/31/04
50,000 (4)(10) 10.1% $0.3125 08/31/04
16,000 (5)(10) 3.2% $0.3125 10/07/01
10,000 (6)(10) 2.0% $0.3125 08/01/99
50,000 (7)(10) 10.1% $0.3125 08/31/00
7,500 (8)(10) 1.5% $0.3125 09/01/00
15,000 (9) 3.0% $0.5000 04/23/03
</TABLE>
- --------------------
(1) The options listed above were granted under the 1995 Plan. Options become
exercisable under the 1995 Plan so long as the executive remains in the
employ of the Company or one of its subsidiaries. To the extent not
already exercisable, options granted under the 1995 Plan become immediately
exercisable in full upon certain changes in control of the Company,
provided that, upon such a change in control, the Compensation Committee
may determine that holders of options granted under the 1995 Plan will
receive cash in an amount equal to the excess of the fair market value of
such shares immediately prior to the effective date of such change in
control of the Company over the exercise price of such options. See
"Proposal to Amend the Amended and Restated 1995 Stock Incentive Plan."
(2) These options were granted on December 1, 1993 and were subsequently
canceled and reissued on June 1, 1998. See Note (10) below.
(3) This option was granted on July 31, 1994 and was subsequently canceled and
reissued on June 1, 1998. See Note (10) below.
(4) This option was granted on August 31, 1994 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(5) This option was granted on October 7, 1996 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
5
<PAGE>
(6) This option was granted on August 1, 1994 and was subsequently canceled and
reissued on June 1, 1998. See Note (10) below.
(7) This option was granted on August 31, 1995 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(8) This option was granted on September 1, 1995 and was subsequently canceled
and reissued on June 1, 1998. See Note (10) below.
(9) This option was granted on April 23, 1998 and is exercisable in full.
(10) These options were granted on June 1, 1998 during the repricing program and
replaced a like number of previously granted options.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#)(1) AT FY-END ($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Pitner 0 $0 273,500/0 $18,767/$0
</TABLE>
- ----------------
(1) The exercise price of options granted under the Company's 1995 Plan may be
paid in cash or in shares of the Company's Common Stock valued at fair
market value on the date of exercise. In addition, the exercise price of
options granted may be paid pursuant to a cashless exercise procedure under
which the executive provides irrevocable instructions to a brokerage firm
to sell the purchased shares and to remit to the Company, out of the sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes. Under the 1995 Plan, the Compensation Committee also
has the discretion to grant a supplemental cash bonus to an optionee in
connection with the grant or exercise of an option or both the grant and
exercise of an option. See "Proposal to Amend the Amended and Restated
1995 Stock Incentive Plan."
(2) Value is based on the difference between the fair market value of the
Common Stock on August 29, 1998 and the exercise price of the options. The
fair market value of the Common Stock as of August 29, 1998, was calculated
as the average of the bid and asked prices as quoted in the local
over-the-counter market ($.4063). The exercise price of outstanding
options range from approximately $0.3125 to $0.72 per share.
STOCK OPTION PLANS
The Company's 1995 Amended and Restated Stock Incentive Plan (the "1995
Plan"), which was approved by the Company's shareholders in January 1996,
replaced the Company's 1990 Stock Option Plan (the "1990 Plan"). The 1995 Plan
provides for the grant to participating eligible recipients of the Company of
options to purchase Common Stock, restricted stock awards, performance units,
stock bonuses and stock appreciation rights. See "Proposal to Amend the Amended
and Restated 1995 Stock Incentive Plan" for a description of the 1995 Plan,
including terms related to a change in control of the Company.
6
<PAGE>
The terms of the 1990 Plan are substantially similar to those of the 1995
Plan, although the 1990 Plan does not provide for the grant of performance
units, restricted stock awards or stock bonuses. Also, under the 1990 Plan, in
the event of a dissolution or liquidation of the Company, a merger (other than a
merger effecting a reincorporation of the Company in another state) or
consolidation in which the Company is not the surviving corporation, or a
transaction in which another corporation becomes the owner of 50% or more of the
total combined voting power of all classes of stock of the Company, all
outstanding options and stock appreciation rights will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms; provided, however, that such acceleration of exercisability shall not
apply to a given option or stock appreciation right if any surviving or
acquiring corporation agrees to assume such option or stock appreciation right
in connection with the merger, consolidation, or transaction or agrees to
substitute a new option satisfying the requirements of Section 425(a) of the
Internal Revenue Code of 1986, as amended, or to substitute a new stock
appreciation right.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company entered into a new employment agreement with its Chief
Executive Officer, Robert A. Pitner (the "Pitner Employment Agreement") with an
effective date of September 1, 1998 that provides for an annual base salary of
$120,000, which amount may be increased by the Board of Directors, and a
discretionary bonus, payable in cash, stock options or any other manner, with
the amount and terms to be determined by the Board of Directors. Under the
terms of the Pitner Employment Agreement, Mr. Pitner was granted stock options
for the purchase of 351,834 shares of Common Stock at an exercise price of $.25
per share exercisable until September 1, 2004. The Pitner Employment Agreement
contains provisions providing for the assignment of inventions by Mr. Pitner,
the maintenance of confidential information of the Company and is subject to a
one-year non-competition clause in the event of termination of employment. The
Pitner Employment Agreement may be terminated (i) by either party upon six
month's notice for whatever reason; and (ii) by the Company immediately in the
event Mr. Pitner defaults or does not perform. Upon termination, if Mr. Pitner
does not obtain employment consistent with his training and education because of
the non-competition clause, the Company must compensate Mr. Pitner until he
secures employment at a rate of 100% of his current base salary for the first
twelve months of separation from the Company.
On May 1, 1995, the Company entered into an agreement with Pierce A.
McNally providing for Mr. McNally's services as Chairman of the Board of the
Company on an as needed, up to full time basis. For Mr. McNally's services, he
currently receives compensation of $52,500 per year plus a bonus payable at the
discretion of the Board of Directors. As part of the agreement, on September 1,
1995, Mr. McNally was granted options to purchase 10,000 shares of Common Stock
at an exercise price of $3.00 for five years. These options were immediately
vested and remain exercisable until September 1, 2000. On October 26, 1995, the
Company amended this agreement to provide for the future grant of additional
options to purchase 15,000 shares should the Board of Directors so determine.
The Board of Directors granted such options to Mr. McNally on October 7, 1996.
These options have an exercise price of $2.63 and are fully exercisable until
October 7, 2001. Effective as of June 1, 1998, all of the foregoing option
exercise prices were repriced at $.3125 per share. Mr. McNally will resign as a
director and Chairman of the Board effective April 7, 1999.
On June 18, 1998, the Company entered into a letter agreement with Evros
Psiloyenis providing for his employment on an "at will" basis as the Company's
President. Mr. Psiloyenis began employment on November 1, 1998. Mr. Psiloyenis
is paid an annual base salary of $120,000, which amount may be increased by the
Board of Directors, and a discretionary bonus, payable on completion of
quarterly financial statements. In December 1998, Mr. Psiloyenis was granted an
option to purchase 500,000
7
<PAGE>
shares of Common Stock at an exercise price of $0.25 per share which vests
with respect to 200,000 shares after two years and 100,000 after each of the
next three years.
BOARD OF DIRECTORS REPORT ON REPRICING OF OPTIONS
On July 13, 1998, the Board of Directors of the Company ratified the
repricing of existing stock options held by employees and directors that had an
exercise price of $1.00 or more. The repricing was effective June 1, 1998. The
repriced options are identical to the original options except for the exercise
price, which was changed to $.3125 per share, the fair market value of one share
of Common Stock on the effective date. The vesting and exercise dates of the
options were not changed. Robert A. Pitner, the Company's Chief Executive
Officer and a director, held options to purchase an aggregate of 263,500 shares,
which were repriced to an exercise price of $.3125 per share. Non-employee
directors held options to purchase an aggregate of 155,500 shares, which were
repriced to an exercise price of $.3125 per share. In approving the option
repricing, the Board of Directors acknowledged that the retention of employees
and the directors is critical to the Company's success and its ability to
continue to meet its performance objective and that stock options constitute one
of the primary components of the Company's compensation structure and therefore
serve as a significant factor in the Company's ability to continue to attract
and retain the services of highly qualified personnel.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS AND BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
the Common Stock of the Company as of February 24, 1999 unless otherwise noted
(a) by each shareholder who is known by the Company to own beneficially more
than 5% of the outstanding Common Stock, (b) by each director and nominee, (c)
by each executive officer named in the Summary Compensation Table and (d) by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
-----------------------
PERCENT OF
NAME AMOUNT CLASS (2)
---- ------- -----------
<S> <C> <C>
Oscar Capital Management Group (3) . . . . . . . . 2,308,833 36.4%
David R. Chamberlin (4). . . . . . . . . . . . . . 765,500 12.2%
Pierce A. McNally (5)(6) . . . . . . . . . . . . . 1,025,662 14.7%
Robert A. Pitner (6)(7). . . . . . . . . . . . . . 1,025,662 14.7%
Benton J. Case, Jr. (8). . . . . . . . . . . . . . 176,265 2.8%
Thomas W. Bugbee (9) . . . . . . . . . . . . . . . 127,790 2.0%
Andrew K. Boszhardt, Jr. (10). . . . . . . . . . . 2,308,833 36.4%
Frank van Luttikhuizen (11). . . . . . . . . . . . 0 0%
John van Leeuwen (12). . . . . . . . . . . . . . . 0 0%
Evros Psiloyenis (13). . . . . . . . . . . . . . . 0 0%
Manuel Schiappa Pietra . . . . . . . . . . . . . . 0 0%
All executive officers and directors as a
group (8 persons) (14) . . . . . . . . . . . . . . 3,638,550 50.6%
</TABLE>
___________________________
8
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(1) Except as otherwise indicated in the footnotes to this table, the
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60
days are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person.
(2) Based on 6,245,861 shares of Common Stock outstanding as of February
24, 1999.
(3) Includes 233,333 shares of Common Stock held by Oscar Capital
Management, LLC ("Oscar Capital"); 1,804,833 shares of Common Stock
held by Andrew K. Boszhardt, Jr.; 104,000 shares of Common Stock
issuable upon the exercise of outstanding warrants held by Mr.
Boszhardt; and 166,667 shares of Common Stock held by Anthony
Scaramucci. Does not include 732,500 shares of Common Stock held by
David R. Chamberlin or 33,000 shares of Common Stock issuable upon the
exercise of outstanding warrants held by Mr. Chamberlin. Mr.
Boszhardt and Mr. Scaramucci are the sole members of Oscar Capital.
Mr. Chamberlin is a former co-worker and long-time friend of Mr.
Boszhardt and is not otherwise affiliated with Oscar Capital or Mr.
Boszhardt. The address for Oscar Capital is 900 Third Avenue, New
York, NY 10022.
(4) Includes 33,000 shares of Common Stock issuable upon the exercise of
outstanding warrants. Does not include 233,333 shares of Common Stock
held by Oscar Capital; 1,804,833 shares of Common Stock held by Andrew
K. Boszhardt, Jr.; 104,000 shares of Common Stock issuable upon the
exercise of outstanding warrants held by Mr. Boszhardt; or 166,667
shares of Common Stock held by Anthony Scaramucci. The address for
Mr. Chamberlin is 260 Wrights Road, Aspen, Colorado 81612.
(5) Includes 92,500 shares of Common Stock beneficially owned by Robert A.
Pitner who shares voting power with Mr. McNally regarding the election
of a director of the Company. See footnote (6). Also includes: (i)
89,000 shares of Common Stock issuable to Mr. McNally upon the
exercise of outstanding stock options; (ii) 640,334 shares of Common
Stock issuable to Mr. Pitner upon the exercise of outstanding stock
options; and (iii) an aggregate of 16,000 shares of Common Stock held
by Mr. McNally's wife as custodian for the benefit of their daughters
as to which Mr. McNally disclaims any beneficial interest. Mr.
McNally's address is 420 North Fifth Street, Ford Centre, Suite 1040,
Minneapolis, MN 55401. Mr. McNally will resign as a director and
Chairman of the Board effective April 7, 1999.
(6) Messrs. McNally and Pitner are parties to a Letter Agreement dated
November 7, 1997 (the "Letter Agreement") whereby they agreed to vote
all shares of Common Stock of the Company held by them "FOR" the
election of Andrew K. Boszhardt, Jr., or his nominee, as director of
the Company. Under the rules of the Securities and Exchange
Commission, Messrs. Pitner and McNally may be deemed to share voting
power over each other's shares of Common Stock. Messrs. Pitner and
McNally disclaim any beneficial interest in the other person's shares
of Common Stock.
(7) Includes 187,828 shares of Common Stock beneficially owned by Pierce
A. McNally who shares voting power with Mr. Pitner regarding the
election of a director of the Company. See footnote (6). Also
includes: (i) 640,334 shares of Common Stock issuable to Mr. Pitner
upon the exercise of outstanding stock options; (ii) 89,000 shares of
Common Stock issuable to Mr. McNally upon the exercise of outstanding
options; and (iii) an aggregate of 16,000 shares of Common Stock held
by Mr. McNally's wife as custodian for the benefit of their daughters
as to which Mr. McNally
9
<PAGE>
disclaims any beneficial interest. The address for Mr. Pitner is 420
North Fifth Street, Ford Centre, Suite 1040, Minneapolis, MN 55401.
(8) Includes 60,000 shares of Common Stock issuable upon the exercise of
outstanding stock options; 46,501 shares of Common Stock held by Mr.
Case's wife, as to which Mr. Case disclaims any beneficial interest;
17,430 shares of Common Stock held by Rainy River Resources, Inc.
("Rainy River"); and 4,000 shares of Common Stock held by FCSI
Business Development Corp. ("FCSI"). Mr. Case is an executive of
Rainy River and the Vice President of FCSI. Mr. Case disclaims
beneficial ownership of shares held by Rainy River and FCSI except to
the extent of his pecuniary interest therein.
(9) Includes 47,500 shares of Common Stock issuable upon the exercise of
outstanding stock options.
(10) Includes 104,000 shares of Common Stock issuable upon the exercise of
outstanding warrants; 233,333 shares of Common Stock held by Oscar
Capital; and 166,667 shares of Common Stock held by Anthony
Scaramucci. Does not include 732,500 shares of Common Stock held by
David R. Chamberlin or 33,000 shares of Common Stock issuable upon the
exercise of outstanding warrants held by Mr. Chamberlin.
(11) The address for Mr. van Luttikhuizen is 2275 No. 8 Side Road, R.R. #2,
Milton, Ontario, Canada. Does not include any shares of Common Stock
issuable upon exercise of options to be issued to TECH under the TECH
Letter of Intent.
(12) The address for Mr. van Leeuwen is 2275 No. 8 Side Road, R.R. #2,
Milton, Ontario, Canada. Does not include any shares of Common Stock
issuable upon exercise of options to be issued to TECH under the TECH
Letter of Intent.
(13) The address for Mr. Psiloyenis is 420 North Fifth Street, Ford Centre,
Suite 1040, Minneapolis, MN 55401.
(14) Includes 836,834 shares of Common Stock issuable upon exercise of
outstanding options; 250,598 shares of Common Stock held by directors'
spouses, a director's spouse as custodian for the benefit of their
children, and certain affiliates of directors, as to which such
directors disclaim any beneficial interest except to the extent of
their pecuniary interest therein; and 104,000 shares of Common Stock
issuable upon exercise of outstanding warrants held by a director.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On November 7, 1997, the Company entered into Subscription Agreements (the
"Subscription Agreements") with certain investors (collectively, the
"Investors"), including Andrew K. Boszhardt, Jr., a member of the Company's
Board of Directors, pursuant to which the Investors agreed to purchase an
aggregate of 1,166,667 shares of Common Stock at purchase price of $0.60 per
share. As a condition to the Investors' purchase of such shares, members of the
Company's Board of Directors, were required to purchase an aggregate of 100,000
shares of Common Stock (the "Director Shares") at a purchase price of $0.60 per
share. In connection with the Subscription Agreements, the Company agreed to
allow Mr. Boszhardt, or his designee, to nominate one director (such nominee,
the "Boszhardt Nominee") for election as a member of the Board of Directors of
the Company at each annual meeting of shareholders or any other meeting at which
directors are elected (such director, the "Boszhardt Director"). The Company
agreed to use its good faith, reasonable efforts to ensure that the Boszhardt
Director will continue as a member of the Board of Directors for such period as
the Investors and/or any affiliates of
10
<PAGE>
Mr. Boszhardt own, in the aggregate, beneficially and of record not less than
500,000 shares of Common Stock of the Company (the "Minimum Holding Period").
Additionally, in connection with the Subscription Agreements, Messrs.
McNally and Pitner entered into a Letter Agreement dated as of November 7,
1997 with Mr. Boszhardt, pursuant to which Messrs. McNally and Pitner agreed
to vote all of the shares of Common Stock beneficially held by them to elect
Mr. Boszhardt, or his nominee, as a member of the Board of Directors of the
Company for such Minimum Holding Period.
On December 31, 1997, the Company entered into a termination agreement
with Richard Koontz, a former officer of the Company, providing for
termination of his employment. Mr. Koontz was paid an aggregate of $50,000
under this agreement.
On February 26, 1998, the Company sold 450,000 shares of Common Stock at a
price of $0.50 per share, for an aggregate purchase price of $225,000, to Andrew
K. Boszhardt, Jr., a director and shareholder of the Company. On March 12,
1998, the Company sold an additional 450,000 shares of Common Stock, at a price
of $0.50 per share, for an aggregate purchase price of $225,000, to Andrew K.
Boszhardt, Jr. (400,000 shares) and Anthony Scaramucci (50,000 shares).
In May 1998, Andrew K. Boszhardt and David R. Chamberlin each advanced
$50,000 to the Company, with the understanding that such funds would be used to
acquire securities of the Company on the same terms as the securities issued in
the Financing to be arranged by TECH. The Company subsequently issued 333,333
shares of Common Stock at a price of $.15 per share for an aggregate purchase
price of $100,000 to Mr. Boszhardt and Mr. Chamberlin.
On June 3, 1998, Norwest Business Credit, Inc. assigned all of its right,
title and interest in the Company's credit facilities with Norwest Business
Credit, Inc. to TECH. The loan documents underlying the credit facility
consisted of a revolving promissory note, dated May 28, 1997, in the principal
amount of $800,000, a credit and security agreement which, among other things,
granted the lender a security interest in all of the Company's assets. The
outstanding balance at the time of the assignment was approximately $142,000.
TECH has continued to make advances available to the Company under these loan
documents. The advances bear interest at the rate of 1% in excess of the prime
rate. As of November 30, 1998, the principal outstanding balance was
$1,955,000.
On December 15, 1998, the Company agreed to pay TECH a fee of $25,000 per
month and to grant to TECH a warrant to purchase an aggregate of 4,750,000
shares of Common Stock, at an exercise price of $.15 per share, in connection
with the Financing, which has been arranged by TECH. Mr. van Luttikhuizen, Mr.
van Leeuwen and Mr. Pietra are principals of TECH. See "Proposal to Amend the
Articles of Incorporation to Increase the Authorized Capital Stock of the
Company - Proposed Financing" for a description of the TECH letter of Intent and
participation in the Financing by certain directors of the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K .
(a) EXHIBITS
The exhibits to this Report are listed on the Exhibit Index on pages E-1 to
E-4 below. A copy of any of the exhibits listed or referred to above will be
furnished at a reasonable cost to any person who was a shareholder of the
Company as of February 24, 1999, upon receipt from any such person of a written
request for any such exhibit. Such request should be sent to Nicollet Process
Engineering, Inc., 420 North Fifth Street, Suite 1040, Ford Centre, Minneapolis
Minnesota, 55401; Attn.: Shareholder Information.
11
<PAGE>
The following is a list of each management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Annual Report on Form
10-KSB pursuant to Item 14(c):
A. 1990 Stock Option Plan (incorporated by reference to Exhibit 10.1 to the
Company's Registration Statement on Forms SB-2 (File No. 333-00852C)).
B. 1995 Amended and Restated Stock Indenture Plan (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form SB-2 (File
No. 333-00852C)).
C. Employment Agreement between the Company and Robert A. Pitner, dated
September 1, 1998 (filed herewith).
D. Agreement between the Company and Pierce A. McNally, dated June 1, 1995
(incorporated by reference to Exhibit 10.5 to the Company's Registration
Statement on Form SB-2 (File No. 333-00852C)).
E. Amendment No. 1, dated effective October 26, 1995 to Agreement between the
Company and Pierce A. McNally, dated June 1, 1995 (incorporated by
reference to Exhibit 10.6 to the Company's Registration Statement on Form
SB-2 (File No. 333-00852C)).
F. Form of Indemnification Agreement by and between the Company and the
Officers and Directors of the Company (incorporated by reference to Exhibit
10.15 to the Company's Registration Statement on Form SB-2 (File No.
333-00852C)).
G. Termination Agreement, dated December 31, 1997 by and between Richard
Koontz and the Company (filed herewith).
H. Employment Proposal Agreement dated July 20, 1998 between the Company and
Evros Psiloyenis (filed herewith).
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended August 31, 1998.
12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this Amendment to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: March 8, 1999 NICOLLET PROCESS ENGINEERING, INC.
By: /s/ Robert A.Pitner
-------------------------------------
Robert A. Pitner
Chief Executive Officer and Interim
Chief Financial Officer
(principal executive officer)
13
<PAGE>
NICOLLET PROCESS ENGINEERING, INC.
Exhibit Index to Annual Report On
Form 10-KSB
For Fiscal Year Ended August 31, 1998
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- --------- ----------- ----------------
<S> <C> <C>
3.1 Articles of Incorporation, as amended................... (3)
3.2 Bylaws, as amended...................................... (2)
4.1 Specimen Form of the Company's Common Stock Certificate. (1)
4.2 Warrant for Purchase of Shares of Common Stock of the
Company issued to Anelise Sawkins dated August 9, 1993.. (1)
4.3 Form of Warrant for Purchase of Shares of Common
Stock of the Company issued in connection with
November 1993 private placement........................ (1)
4.4 Warrant for Purchase of Shares of Common Stock of
the Company issued to Charlie Phelps dated May 5, 1994. (1)
4.5 Form of Warrant for Purchase of Shares of Common
Stock of the Company issued in connection with
advertising design services............................ (1)
4.6 Form of Warrant for Purchase of Shares of Common
Stock of the Company issued in connection with
January 1995 private placement......................... (1)
4.7 Form of Warrant for Purchase of Shared of Common
Stock of the Company issued in connection with
February 1995 private placement........................ (1)
4.8 Warrant for Purchase of Shares of Common Stock of
the Company issued to Tuschner & Company, Inc. dated
February 7, 1995....................................... (1)
4.9 Form of Warrant for Purchase of Shares of Common
Stock of the Company issued in connection with
March 1995 private placement........................... (1)
4.10 Warrant for Purchase of Shares of Common Stock
of the Company issued to Tuschner & Company dated
March 2, 1995.......................................... (1)
4.11 Form of Warrant for Purchase of Shares of Common
Stock of the Company issued in connection with
March 1995 bridge financing............................ (1)
4.12 Form of Warrant for Purchase of Shares of
Common Stock of the Company issued in connection
with repayment of March 1995 bridge financing.......... (1)
4.13 Form of Warrant for Purchase of Shares of Common
Stock of the Company issued in connection with
January 1996 bridge financing.......................... (1)
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- --------- ----------- ----------------
<S> <C> <C>
4.14 Warrant for Purchase of Shares of Common Stock
of the Company issued to Dillon Advertising
dated July 31, 1997.................................... (7)
4.15 Warrant for Purchase of Shares of Common Stock
of the Company issued to Dillon Advertising dated
August 31, 1997........................................ (7)
4.16 Registration Rights Agreement Dated as of
November 7, 1997 among the Company and certain
Investors.............................................. (6)
10.1 1990 Stock Option Plan.................................. (1)
10.2 1995 Amended and Restated Stock Incentive Plan.......... (1)
10.3 Agreement between the Company and Pierce A.
McNally, dated June 1, 1995............................. (1)
10.4 Amendment No. 1, dated effective October 26, 1995
to Agreement between the Company and
Pierce A. McNally, dated June 1, 1995................... (1)
10.5 Settlement Agreement between the Company and
John W. Mickowski, dated October 1, 1995................ (1)
10.6 Form of Indemnification Agreement by and
between the Company and the Officers and
Directors of the Company................................ (1)
10.7 Lease Agreement by and between Hillcrest
Development and the Company, dated January 11, 1993..... (1)
10.8 Agreement for the First Amendment to a Lease between
Hillcrest Development and the Company, dated June 8,
1993.................................................... (1)
10.9 Agreement for the Second Amendment to a Lease between
Hillcrest Development and the Company, dated July 20,
1993.................................................... (1)
10.10 Agreement for the Third Amendment to a Lease between
Hillcrest Development and the Company, dated
November 12, 1993....................................... (1)
10.11 Agreement for the Sixth Amendment to a Lease
between Hillcrest Development and the Company,
dated October 7, 1994................................... (1)
10.12 Agreement for the Seventh Amendment to a Lease
between Hillcrest Development and the Company
dated September 3, 1996................................. (2)
10.13 Agreement for the Eighth Amendment to a Lease
between Hillcrest Development and the Company
dated October 18, 1996.................................. (2)
10.14 Software Purchase Agreement between Larry D.
Glendenning, dba LDG Software Solutions and the
Company dated effective August 1, 1995.................. (1)
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- --------- ----------- ----------------
<S> <C> <C>
10.15 Promissory Note and Security Agreement in favor of
Larry D. Glendenning, dba LDG Software Solutions dated
effective August 1, 1995................................ (1)
10.16 Termination Agreement dated December 31, 1997 between
the Company and Richard A. Koontz....................... (8)
10.17 Credit and Security Agreement dated as of
May 28, 1997 by and between Norwest Business Credit, Inc.
and the Company......................................... (4)
10.18 Credit and Security Agreement dated as of
May 28, 1997 by and between Norwest Bank Minnesota,
National Association and the Company..................... (4)
10.19 Subscription Agreement dated as of November 7, 1997
among the Company and certain Investors.................. (5)
10.20 First Amendment dated as of November 24, 1997 to
Credit and Security Agreement dated as of May 28, 1997
by and between Norwest Business Credit, Inc. and the
Company.................................................. (7)
10.21 Nonrecourse Assignment dated as of June 8, 1998 by
and between Norwest Business Credit Inc. and
TECHinspirations, Inc.................................... (8)
10.22 Employment Proposal Agreement dated June 18, 1998
between the Company and Evros Psiloyenis................. (8)
10.23 Employment Agreement between the Company and
Robert A. Pitner, dated September 1, 1998................ (10)
23.1 Consent of Ernst & Young LLP............................. (9)
27.1 Financial Data Schedule.................................. (9)
</TABLE>
____________________________________
(1) Incorporated by reference for the Company's Registration Statement on
Form SB-2 (File No. 333-00852C).
(2) Incorporated by reference for the Company's Annual Report on Form
10-KSB for the fiscal year ended August 31, 1996 (File No. 0-27928).
(3) Incorporated by reference for the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended February 28, 1997 (File No.
0-27928).
(4) Incorporated by reference for the Company's Quarterly Report on Form
10-QSB for the fiscal quarter ended May 31, 1997 (File No. 0-27928).
(5) Incorporated by reference for a Schedule 13D/A dated November 12,
1997, filed on behalf of Pierce A. McNally and Robert A. Pitner.
E-3
<PAGE>
(6) Incorporated by reference for the Company's Current Report on Form 8-K
as filed with the Securities and Exchange Commission on November 17,
1997 (File No. 0-27928).
(7) Incorporated by reference for the Company's Annual Report on Form
10-KSB for the year ended August 31, 1997 (File No. 0-27928).
(8) Incorporated by reference for the Company's Annual Report on Form
10-KSB for the year ended August 31, 1998 (File No. 0-27928).
(9) Incorporated by reference to Amendment No. 1 for the Company's Annual
Report on Form 10-KSB for the year ended August 31, 1998 (File No.
0-27928).
(10) Incorporated by reference to Amendment No. 2 for the Company's Annual
Report on Form 10-KSB for the year ended August 31, 1998 (File No.
0-27928).
E-4
