<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Amendment No. 1)
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended March 31, 1996.
Commission file number: 33-89384-LA
PROLOGIC MANAGEMENT SYSTEMS, INC.
(Name of small business issuer in its charter)
Arizona 86-0498857
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2731 East Elvira Road, #151, Tucson, Arizona 85706
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (520) 741-1001.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock and Warrants to Purchase Common Stock
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 disclosure of delinquent filers pursuant to Item 405 of
Regulations S-B is not contained in this form, and no disclosure will be
contained, to the best of the 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. / /
Issuer's revenue for its most recent fiscal year: $2,624,000.
As of March 31, 1996, the aggregate market value of voting stock held by
non-affiliates of the issuer: $7,850,147 based on Common Stock of 1,794,319.
This calculation does not reflect a determination that certain persons are
affiliates of the registrant for any other purposes.
Number of shares of common stock outstanding on March 31, 1996 was 3,328,070.
Transitional Small Business Disclosure Format:
Yes ; No X .
------ ------
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART III.
The Registrant hereby amends in their entirety Items 9, 10, 11 and 12 of Part
III of the Registrant's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 1996.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Information concerning the names, ages, terms, positions with the
Company, and business experience of directors and executive officers of the
Company is set forth below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James M. Heim 44 President, Chief Executive Officer, and Director
Richard E. Metz 49 Executive Vice President, Chief Operating Officer
and Director
William E. Wallin 51 Vice President, Finance, Chief Financial Officer,
Secretary and Treasurer
Joseph A. Sisneros 40 Vice President, Sales and Marketing, Director
John W. Barrett 51 Director
Herbert F. Day 51 Director
Luke V. McCarthy 40 Director
Sharon O'Reilly 40 Director
</TABLE>
JAMES M. HEIM, President, Chief Executive Officer and Director. Mr.
Heim is a co-founder of the Company and has served as President and as a
Director of the Company since its inception in 1984. In addition, Mr. Heim
served as the Chief Financial Officer of the Company from 1984 through 1994. Mr.
Heim holds both a Juris Doctorate from the College of Law and a Bachelor of
Science in Business Administration from the University of Arizona.
RICHARD E. METZ, Executive Vice President, Chief Operating Officer and
Director. Mr. Metz, who became Chief Operating Officer in January of 1995, is a
co-founder of the Company and has served as a director since its inception in
1984. Mr. Metz has over twenty-five years of successful business management and
investment experience, including ten years as a computer hardware and software
VAR prior to his affiliation with the Company. Since 1982, Mr. Metz has owned
and managed The Metz Group, a business management consulting and investment firm
specializing in contract negotiations and dispute avoidance and resolution. Mr.
Metz is a member of the American Arbitration Association and serves on its
regional Advisory Council, and is an Associate of the American Bar Association,
Dispute Resolution and Intellectual Property Sections .
WILLIAM E. WALLIN, Vice President, Finance, Chief Financial Officer,
Secretary and Treasurer. Mr. Wallin, who became Chief Financial Officer,
Secretary and Treasurer of the Company in February of 1995, has over twenty-four
years of experience in accounting and financial management, serving in positions
ranging from auditor to Chief Financial Officer. From 1989 to 1991, and from
1991 to 1994, Mr. Wallin was the Corporate Controller and Chief Financial
Officer, respectively, of AlphaGraphics, Incorporated, a large international
franchising company. Mr. Wallin holds a Bachelors Degree in accounting from
Southern Illinois University.
JOSEPH A. SISNEROS, Vice President, Sales and Marketing and Director.
Mr. Sisneros has served with the Company since June of 1985. Mr. Sisneros has
served as Vice President of Sales and Marketing and as a Director since 1988.
Mr. Sisneros is primarily responsible for the Company's Sales and Marketing
activities. Mr. Sisneros holds a Bachelor of Business Administration in
Marketing Management from the University of New Mexico. Mr. Sisneros has over
twelve years experience in the computer/software industry.
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JOHN W. BARRETT, Director. Mr. Barrett, who became a Director in 1994,
has over twenty-five years of experience in the financial services industry, and
has held management and sales positions in Southern California and New York
City. Mr. Barrett was Senior Managing Principal of Yaeger Securities, a regional
investment banking firm, from 1988 through 1991. Mr. Barrett received his
Bachelors Degree from California State University Los Angeles, and has completed
additional graduate work at the University of California, Los Angeles. He has
operated his own merchant banking firm, J.W. Barrett & Company from 1991 to the
present, and provides consulting services to a wide range of financial
enterprises. Mr. Barrett serves on the Board of Directors of several private
companies and non-profit groups.
HERBERT F. DAY, Director. Mr. Day, who became a Director in 1995, has
over twenty-five years of experience in the computer industry with IBM
Corporation. He has held professional and management positions in sales,
marketing, product management and product and business planning. Specific
responsibilities have included developing strategic plans for key hardware and
software products, to achieve a variety of business objectives. Mr. Day received
his Bachelors of Science degree in Electrical Engineering from the University of
Maryland. He is currently employed as a Program Director by the IBM Corporation.
LUKE V. McCARTHY, Director. Mr. McCarthy has over twenty-five years
experience in management, investments and the legal profession. He has been the
CEO of several companies, ranging from real estate development to investment
advisors for tax exempt pension funds. He has managed asset portfolios as large
as $850 million. Since 1989, Mr. McCarthy has been the President of MacWest
Capital Corporation, a real estate management, mortgage banking and investment
firm, of which he was a founder. MacWest has served as court appointed trustee
for the disposition of failed real estate entities with assets in excess of $250
million. In addition, from 1991 to 1995, Mr. McCarthy maintained a private law
practice specializing in mergers and acquisitions, securities and corporate
finance. He holds a B.S. in Finance and Accounting, a Juris Doctorate and is a
CPA.
SHARON O'REILLY, Director. Ms. O'Reilly, who became a Director in 1995,
is a co-founder of Great River Systems, Inc., and has served as President and as
a Director of Great River Systems since its inception in 1984. Ms. O'Reilly has
over sixteen years of experience in small business development and management,
software installation and training, accounting and higher education. Ms.
O'Reilly has been a member of the accounting faculty at the University of
Wisconsin LaCrosse and an auditor for Price Waterhouse. Ms. O'Reilly holds a CPA
certificate in the state of Wisconsin. Ms. O'Reilly is a Magna cum laude
graduate of the University of Wisconsin-Eau Claire and has received her MBA from
the University of Wisconsin in Madison, WI.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and change in ownership with the
Securities and Exchange Commission (the "SEC") and the National Association of
Securities Dealers Automated Quotation System. Such reports are filed on Form 3,
Form 4 and Form 5 under the Exchange Act. Officers, directors and greater than
ten percent shareholders are required by Exchange Act regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year ended
March 31, 1996 all officers, directors, and greater than ten percent beneficial
owners complied with the applicable Section 16(a) filing requirements.
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ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended March
31, 1996 certain information respecting compensation earned by the Company's
Chief Executive Officer. No officer of the Company received compensation in
excess of $100,000 during the fiscal year.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------- ----------------------
Name and All Other
Principal Position Year Salary Bonus Stock Options/SARs(#) Compensation
- ------------------ ---- ------ ----- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James M. Heim 1996 $40,000 $24,333 0 0
President and Chief
Executive Officer
</TABLE>
During the fiscal year ended March 31, 1996, no stock options were
granted to or exercised by Mr. Heim.
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements ("Agreements"), with
Mr. James M. Heim, its President and Chief Executive Officer, and Mr. Joseph A.
Sisneros, its Vice President of Sales and Marketing. The terms of these
agreements are substantially identical and provide for employment by the Company
for a term of three years, from March 31, 1994. Since April 1, 1995, Messrs.
Heim and Sisneros' annual base salaries were increased to $72,000 and 60,000,
respectively, per fiscal year. The Agreements provide that the Board of
Directors may, at its discretion, increase the amount of base salary or approve
additional compensation in the form of bonuses during the contract period. The
Company may terminate employment for cause on thirty days written notice, and
the terminated employee shall be barred for a period of three years from
directly or indirectly engaging in any employment or other competition with the
Company. Furthermore, for a period of five years, the terminated employee will
be barred from soliciting or calling on any customers of the Company. However,
under the terms of each of these Agreements, the terminated employee shall not
be bound by these non-competition and non-solicitation clauses if the holders of
the common stock of the Company exercise the right to choose a majority of the
Board of Directors, and this majority votes to terminate the employment, where
the employee has performed or complied with all material terms and conditions of
the Agreement. In the event of termination by the death or permanent disability
of the employee, the Company shall have the right to terminate the Agreement
after ninety days, but the Company has agreed to pay his full salary until this
termination occurs. The Agreement also restricts the employee from disclosing
proprietary information or competing with the Company during the term of the
Agreement.
In July of 1995, the Company's subsidiary Great River Systems, Inc.
(the "Subsidiary") entered into an Employment Agreement ("Agreement"), with
Sharon O'Reilly, President of the Subsidiary. The Agreement provides for
employment by the Subsidiary for a term of 33 months ending on March 31, 1998,
with an annual base salary of $60,000. The Agreement provides that the Board of
Directors may, at its discretion, increase the amount of base salary or approve
additional compensation in the form of bonuses during the contract period. The
Agreement provides additional incentives based on sales and profit performance.
The Agreement includes a stock purchase option for 40,000 shares of the
Company's common stock, at an exercise price of $5.00 per share. The options
become exercisable in equal monthly increments over the term of the Agreement.
The Subsidiary may not terminate the Agreement other than for cause.
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DIRECTOR COMPENSATION
Since January 1, 1996, the Company has compensated its outside
directors for attendance at meetings of the Board of Directors at the rate of
$500 per meeting. Directors who are also employees of the Company receive no
additional compensation for serving as a director. The Company reimburses its
directors for travel and out-of-pocket expenses in connection with their
attendance at meetings of the Board of Directors.
INCENTIVE COMPENSATION
The Company intends, at some point in the future, to institute an
incentive bonus plan for all of its employees, including its officers, based
upon performance. The terms of such a plan have not yet been defined and the
plan has not been presented to the Board of Directors for consideration. The
Company believes that this practice is prevalent within its industry and is a
necessary component in the recruiting and retaining of qualified employees. As
such, it is anticipated that the Company's plan will be substantially similar to
the incentive bonus plans of other companies within its industry.
STOCK OPTION PLAN
The Company's Board of Directors adopted a 1994 Stock Option Plan (the
"Plan"). Under the Plan, the Company has reserved 500,000 shares of Common Stock
for issuance pursuant to the exercise of options. Options may be granted to
selected employees, directors, officers, consultants or advisors.
The Plan is administered by a committee appointed by the Board of
Directors. Options may be granted only to such employees, officers, directors,
consultants and advisors of the Company or any Parent or majority owners, as the
committee shall select from time to time in its sole discretion, provided,
however, that only employees of the Company may be granted Incentive Stock
Options (ISOs).
Under the Plan, the Company may grant either ISOs or options which are
not qualified as incentive stock options (NQSOs). The committee determines the
number of shares for which the option shall be granted, the exercise price of
the option, the periods during which the option may be exercised, and all terms
and conditions of the option. The exercise price of an option shall not be less
than the fair market value of the Common Stock on the date of the grant. The
exercise price of any ISO granted to a person owning more than 10% of the total
combined voting power of all classes of stock of the Company shall be equal to
at least 110% of the fair market value of the shares at the time of the grant.
The term of these options may not exceed ten years.
In the event that the number of outstanding shares of Common Stock is
changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or similar change in the capital structure of the Company
without consideration, the number of shares available under the Plan, the number
of shares subject to outstanding options, and the exercise price per share of
such options shall be proportionately adjusted, subject to any required action
by the Board or shareholders of the Company. Upon a change in control of the
Company, the committee shall be permitted to take any actions it deems
appropriate with regard to stock options outstanding under the Plan. Such
actions may include, without limitation, accelerating exercisability of options
and requiring the optionee to surrender options held for certain consideration
described in the Plan. In the event of a recapitalization or reorganization
after which the Company is not the surviving corporation, the Committee may
adjust the number, type or price of options to reflect the restructuring event.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
AND SHAREHOLDINGS OF MANAGEMENT
The following table sets forth information, as of July 15, 1996,
concerning the Common Stock beneficially owned by (i) each director of the
Company, (ii) the Company's Chief Executive Officer, (iii) each person known to
the Company to own beneficially more than 5% of the Outstanding Common Stock,
and (iv) all of the Company's directors and executive officers as a group.
Except as otherwise noted, the named beneficial owner has sole investment and
voting power.
<TABLE>
<CAPTION>
Name (1) Shares Beneficially Owned Percent of Class
- -------- ------------------------- ----------------
<S> <C> <C>
James M. Heim & Marlene Heim (2) 1,089,060 32.67%
Joseph A. Sisneros 216,320 6.49%
Richard E. Metz 169,200 5.08%
Herbert F. Day ---------- ---------
Luke V. McCarthy ---------- ---------
Sharon O'Reilly (3) 85,340 2.56%
John W. Barrett 50,000 1.50%
All directors and executive 1,609,920 48.30%
officers as a group (7 persons)
</TABLE>
- ----------------
(1) Except as otherwise noted below, the persons named in the table have
sole voting and investment power with respect to all shares of the
Common Stock shown as beneficially owned by the person named, subject
to applicable community property law. The shareholdings include,
pursuant to rules of the Securities and Exchange Commission, shares of
Common Stock which a person has a right to acquire as of July 15, 1996
or within 60 days thereafter. Except as otherwise noted, the addresses
for the persons named in the table is 2731 East Elvira, Tucson, Arizona
85706.
(2) Includes 697,320 shares owned by HFG Ltd. Properties, an Arizona
limited partnership of which Mr. Heim is the sole general partner. In
addition, James M. Heim and Marlene Heim own an aggregate of 391,740
shares of Common Stock.
(3) Includes (5,340) shares subject to options which are currently
exercisable or which will become exercisable prior to September 14,
1996.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1993 and 1994, Dr. Delmer J. Heim and Mildred A. Heim, the parents
of James M. Heim, the Company's Chief Executive Officer and President, made two
loans to the Company, in the form of eight (8%) percent simple interest bearing
loans, both due and payable on or before March 31, 1998. The first of these
loans was made on December 29, 1993, and was in the amount of $43,282, and the
second loan was made on February 10, 1994, in the amount of $10,000, which
amounts are outstanding as of December 31, 1995.
In June 1994, in consideration of present and future financial
consulting services, including financial statement analysis, market trends,
management strategies and related topics, Mr. Barrett acquired 50,000
non-redeemable Warrants to purchase Common Stock at a price $0.40 per share,
which price was in excess of the fair market value of the Common Stock at that
time.
Prior to 1994, HFG Properties, Ltd., a limited partnership comprised of
members of the Heim family, James and Marlene Heim and Delmer and Mildred Heim
(the "Lending Parties") loaned to the Company, in the aggregate, the sum of
$526,144, for which the Company executed a series of promissory notes in favor
of the Lending Parties. Subsequent to the making of the loans, the Lending
Parties forgave $397,391 of the obligations in exchange for the issuance by the
Company of Common Stock to the Lending Parties, including Mr. James M. Heim,
who is an officer and director of the Company and to eight additional persons,
including Mr. Joseph A. Sisneros, an officer and director of the Company. The
shares were issued at a per share price of $0.375, which was determined by the
Board of Directors to be the fair value of the Common Stock as of that date.
In connection with the issuance of shares of Common Stock, the eight
persons assumed, in the aggregate, $112,500 of the obligations of the Company to
the Lending Parties. As security for these obligations, these shareholders
placed their shares in escrow with a third party escrow holder who, in the event
of default under the terms of the notes, may sell such shares and pay off the
indebtedness. The entire principal amount remains outstanding and the notes
executed by these shareholders are all current.
In September of 1995, the Company completed the acquisition of Great
River Systems, Inc. (GRSI). All of the outstanding common stock of GRSI was
acquired for 100,000 shares of common stock of the Company, valued at $40,000,
$100,000 in cash and promissory notes totaling $150,000, bearing interest at
eight (8%) percent, payable on or before July 31, 1996. The settling
shareholders were Sharon O'Reilly and Michael Lowther whose ownership was 80%
and 20%, respectively. These notes are secured by the assets of GRSI. The entire
amount is outstanding as of December 31, 1995. Ms. O'Reilly and Mr. Lowther are
both parties to employment contracts with the Company that expire on March 31 of
1998. Ms. O'Reilly and Mr. Lowther were also granted anti-dilution rights
pursuant to which they have the right to acquire from the Company 5,340 and
1,335 shares of Common Stock, respectively, at $2.20 per share. Ms. O'Reilly and
Mr. Lowther have agreed not to sell any of the Company's securities held by them
without the prior written consent of the underwriter in the Company's initial
public offering of shares of Common Stock before September 14, 1997.
In January of 1996, the Company completed the purchase of SYMRP
Scheduler software from Symetrix, Inc., a Massachusetts based consulting firm.
The purchase included the software, the underlying patent, copyright and trade
secrets regarding the scheduling technology. The consideration includes $50,000
in cash and a Promissory Note for $150,000, bearing interest at ten (10%)
percent, amortized quarterly with final payment on or before January 1, 1997. In
addition, the Company has agreed to pay ten (10%) percent royalties for a period
of five years ending December 31, 2000, with minimum royalty payments of
$250,000. In order to secure the promissory note and minimum royalty payment
thereon, the Company has provided a security interest to Symmetrix in the
technology as well as reversion rights in the technology.
The Board of Directors has adopted a policy that all transactions
and/or loans between the Company and its officers, directors and/or 5%
shareholders will be on terms no less favorable than could be obtained from
independent third parties and will be approved by a majority of the independent
disinterested directors of the Company.
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In Accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this amendment to the report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROLOGIC MANAGEMENT SYSTEMS, INC.
DATED: July 31, 1996 By: /s/ James M. Heim
--------------------
James M. Heim
President and Chief Executive
Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
James M. Heim,
President and Chief Executive Officer
/s/ James M. Heim (Principal Executive Officer) and Director July 31, 1996
- -----------------------
Richard E. Metz,
Executive Vice President, Chief Operating
/s/ Richard E. Metz Officer and Director July 31, 1996
- -----------------------
William E. Wallin,
Vice President, Chief Financial Officer,
Secretary and Treasurer (Principal
/s/ William E. Wallin Financial and Accounting Officer) July 31, 1996
- ------------------------
</TABLE>
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