<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 Commission File No. 0-26206
NORLAND MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1387931
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
106 CORPORATE PARK DRIVE, SUITE 106, WHITE PLAINS, NY 10604
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 694-2285
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.0005 PER SHARE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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
--- ---
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-K
or any amendment to this Form 10-K [ ]
The aggregate market value of the registrant's Common Stock, par
value $0.0005 per share, held by non-affiliates of the registrant as of March
21, 1997 was $23,555,584 based on the price of the last reported sale on the
NASDAQ National Market.
As of March 21, 1997 there were 7,148,531 shares of the registrant's
Common Stock, par value $0.0005 per share, outstanding.
<PAGE>
This Form 10-K/A Report amends the Form 10-K Report filed by the
Registrant with the Securities and Exchange Commission on March 31, 1997 (the
"Original Report"). Items 10, 11, 12 and 13 of Part III of the Original Report
were incorporated by reference to the Registrant's definitive Proxy Statement
for its 1997 annual Meeting of Stockholders to be filed with the Commission by
April 30, 1997. Registrant has filed preliminary proxy material with the
Commission. The preliminary proxy material is being reviewed by the Commission
staff, and the definitive Proxy Statement will not be filed by April 30, 1997.
Accordingly, Registrant is filing this amendment to the Original Report to
provide the information required by Items 10, 11, 12 and 13 of Part III of Form
10-K. THE STATEMENTS CONTAINED IN THE INTRODUCTION ON PAGE 1 OF THE ORIGINAL
REPORT ARE HEREBY INCORPORATED BY REFERENCE HEREIN.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The members of the Company's Board of Directors are as follows:
REYNALD G. BONMATI, age 49, has served as a Director of the Company since its
formation in December 1993 and has served as Chairman of the Board, President
and Treasurer of the Company since January 1994. Mr. Bonmati has served since
January 1992 as a Managing Director of Norland Medical Systems B.V. ("NMS BV"),
a holding company that owns Norland Corporation ("Norland Corp.") and Stratec
Medizintechnik GmbH ("Stratec"), manufacturers of bone densitometers marketed by
the Company. He has served as a Director and President of Norland Corp. since
June 1990 and July 1993, respectively. He has also served as President and
Chairman of the Board of The EICON Group, Inc., an environmental and
infrastructure service company, since March 1991, as President of Novatech
Resource Corporation, a private investment firm, since 1981 and as President of
Novatech Management Corporation, a private investment firm, since 1990. Mr.
Bonmati received BS and MS degrees from the Institute National Superieur de
Chimie Industrielle, an MS degree from the Ecole Nationale Superieure du Petrole
et des Moteurs and an MBA from the University of Paris.
JAMES J. BAKER, age 64, has served as a Director of the Company since May 1995.
He has been a private investor for over twelve years, specializing in start-up
venture capital. He is Vice President of Flight Landata, Inc., a company
involved in multi-spectral remote sensing. Previously, Mr. Baker spent twelve
years at Cullinet Software Corporation serving initially as Vice President in
charge of technical development and later as Senior Vice President in charge of
Customer Support. He holds a BS in Mathematics from the Massachusetts Institute
of Technology.
MICHAEL W. HUBER, age 69, has served as a Director of the Company since May
1995. He is retired Chairman and Chief Executive Officer and is currently a
Director of J.M. Huber Corporation, a diversified family-owned company engaged
in natural resource development, and specialty chemical and specialty equipment
and wood product manufacturing. He is also a Director of Crompton and Knowles
Corporation, a specialty chemical and equipment manufacturing company.
ROBERT L. PICCIONI, age 51, has served as a Director of the Company since May
1996. He has served as Chief Technical Officer of the Company's subsidiary, Dove
Medical Systems, Inc. since July 1, 1996. From April 2, 1996 to June 30, 1996,
he was a consultant to the Company. Dr. Piccioni was a consultant to OnTrak
Systems, Inc. from March 1996 to June 1996. From June 1995 to March 1996, he was
Chief Operating Officer of OnTrak Systems, Inc. From October 1993 to January
1995, Dr. Piccioni was President of the Thermco Systems Division of Silicon
Valley Group. From December 1992 to October
2
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1993 he was President of Dove Medical Systems, the company which was acquired by
the Company in April 1996. Prior to founding Dove Medical Systems, Dr. Piccioni
served first as Chief Operating Officer and then as President and CEO of Osteon,
Inc. Osteon, Inc. filed a petition in bankruptcy in November 1992. Dr. Piccioni
and others purchased certain assets of Osteon, Inc. in such bankruptcy
proceeding and licensed them to Dove Medical Systems until such assets were
purchased by the Company in April 1996. Dr. Piccioni received a BS degree in
Physics from California Institute of Technology and a Ph.D. degree in Physics
from Stanford University.
ALBERT S. WAXMAN, age 55, has served as a Director of the Company since January
1994. Dr. Waxman has served as a Director of Norland Corp. since June 1990 and
as a Managing Director of NMS BV since January 1992. He has also served as a
Director of The EICON Group, Inc. since December 1994. Since 1993, Dr. Waxman
has been Chairman and Chief Executive Officer of Merit Behavioral Care
Corporation, the parent company of American Biodyne, Inc., which he co-founded
in 1985 and for which he served as Chairman and Chief Executive Officer from
1988 to 1993. From 1983 to 1988, Dr. Waxman served as Chairman and Chief
Executive Officer of Diasonics, Inc., which he founded. Dr. Waxman received a
BSEE degree from City College of New York and MA and Ph.D. degrees from
Princeton University. He serves on the Advisor Council of Princeton University's
School of Engineering and Applied Sciences.
EXECUTIVE OFFICERS
Information concerning the executive officers of the Company is set
forth following Item 4 in Part I of the Original Report under the caption
"Executive Officers of the Registrant".
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons holding more than 10 percent
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission and the Nasdaq National Market initial
reports of ownership, reports of changes in ownership and annual reports of
ownership of Common Stock and other equity securities of the Company. Such
directors, executive officers and ten-percent stockholders are also required to
furnish the Company with copies of all such filed reports.
Based solely upon review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
the 1996 fiscal year, the Company believes that all Section 16(a) reporting
requirements related to the Company's directors and executive officers were
timely fulfilled during 1996, with the exception of one late filing by Hans
Schiessl.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides, for the periods indicated, certain
summary information concerning the cash and non-cash compensation earned by or
awarded to the Company's President (the chief executive officer) and each of the
four other most highly compensated executive officers who were serving as
executive officers as of December 31, 1996 (collectively, the "named executive
officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS (#)(1) COMPENSATION($)
<S> <C> <C> <C> <C> <C>
Reynald G. Bonmati ............ 1996 $156,000 $ 0 30,000 $ 0
Chairman of the Board, 1995 100,000 100,000 0 0
President and Treasurer 1994 100,000 0 750,000 0
Kurt W. Streams ............... 1996 96,000 0 0 0
Vice President, Finance,
and Secretary
Lewis N. Harrold .............. 1996 81,085 0 0 0
Vice President, Product
Development and Assistant
Secretary
Thomas P. Regan ............... 1996 107,704 0 0 0
Vice President, U.S. Sales 1995 155,529 0 0 0
1994 113,409 0 75,000 0
James A. Sperlazza ............ 1996 257,674 0 0 0
Vice President, Latin America and 1995 326,602 0 0 0
Pacific Rim Sales 1994 271,241 0 75,000 0
</TABLE>
(1) Represents shares of Common Stock issuable upon exercise of options granted
to the named executive officers.
EMPLOYMENT AGREEMENTS
The Company does not have employment agreements with any of the named executive
officers.
4
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OPTION GRANTS/EXERCISES IN 1996
The following table sets forth certain information concerning grants
of stock options made during the fiscal year ended December 31, 1996 to the
named executive officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- --------------------------------------------------------------------------------------------------------------------
Percentage Potential Realizable
of Total Value at Assumed Annual
Number of Options Rates of Stock Price
Securities Granted to Appreciation For Option
Underlying Employees Term (2)
-------------------------
Options in Exercise or
Granted Fiscal Year Base Price Expiration
Name (#) (%) ($/sh) Date 5% ($) 10% ($)
- ---- -------- ----------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Reynald G. Bonmati ... 30,000(1) 14% $15.00 1/2 /2006 $283,003 $717,184
Kurt W. Streams ...... 0 - - - - -
Lewis N. Harrold ..... 0 - - - - -
Thomas P. Regan ...... 0 - - - - -
James A. Sperlazza ... 0 - - - - -
</TABLE>
- ---------------
(1) Options were granted as incentive stock options. Options become
exercisable on each January 3, following the date of grant in four
equal installments.
(2) Amount shown represents the potential realizable value, net of the
option exercise price, assuming that the underlying market price of the
Common Stock appreciates in value from the date of grant to the end of
the option term at annualized rates of 5% and 10%. These amounts
represent certain assumed rates of appreciation only. Actual gains, if
any, on stock option exercises are dependent upon the future
performance of the Common Stock and overall market conditions. There
can be no assurance that the amounts reflected in this table will be
achieved.
The following tables set forth certain information concerning the
exercise of options to purchase Common Stock of the Company during 1996 and the
value at December 31, 1996 of outstanding options held by each of the named
executive officers.
5
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<TABLE>
<CAPTION>
OPTION EXERCISES IN 1996 AND VALUE OF OPTIONS AT DECEMBER 31, 1996
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT FISCAL IN-THE-MONEY(1) OPTIONS AT
YEAR END (#) FISCAL YEAR END ($)(2)
---------------------- --------------------------
SHARES
ACQUIRED ON VALUE EXERCIS-
--------
NAME EXERCISE (#)(3) REALIZED($)(4) ABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ---- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Reynald G. Bonmati 562,500 $7,499,813 0 217,500 $ 0 $1,467,995
Kurt W. Streams 0 0 7,500 22,500 0 0
Lewis N. Harrold 0 0 7,500 22,500 0 0
Thomas P. Regan 52,500 953,733 3,750 18,750 25,311 126,553
James A. Sperlazza 56,250 1,059,356 0 18,750 0 126,553
</TABLE>
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options.
(2) The value of unexercised options represents the difference between the
exercise price of such options and $6.75, the closing market price of
the Company's Common Stock on December 31, 1996
(3) Represents the number of shares received upon exercise or, if no shares
were received, the number of shares with respect to which the options
were exercised.
(4) The value of exercised options represents the difference between the
exercise price of such options and the closing market price of the
Company's Common Stock on the date of exercise.
DIRECTORS' REMUNERATION
During the year ended December 31, 1996, fees for all directors aggregated
$8,000. Each director of the Company who is not an employee of or consultant to
the Company or any subsidiary (a "Non-Employee Director") receives $1,000 for
each regular Board meeting attended and is reimbursed for all expenses relating
to attendance at meetings. Under the Amended and Restated 1994 Plan described
below, each Non-Employee Director receives options to acquire 30,000 shares of
Common Stock, vesting in four equal annual installments, commencing on the first
anniversary of the date of grant, at an exercise price per share equal to the
market value on the date of grant. For Messrs. Baker, Huber and Waxman, such
options were granted on January 3, 1996. The exercise price for such options is
$15.00 per share. For any Non-Employee Director who first becomes a director
after January 3, 1996, such options will be deemed granted on the date such
person becomes a Board member. Directors who are employees of or consultants to
the Company do not receive additional compensation for serving as directors. No
member of the Board of Directors was paid compensation during the 1996 fiscal
year for his service as a director of the Company other than pursuant to the
standard compensation arrangements described above.
6
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Company's Compensation Committee is composed of three
independent, Non-Employee Directors. The Committee and the Board of Directors
believe that compensation must be competitive, but that it should be directly
and materially linked to the Company's performance. The compensation program is
designed to attract and retain executive talent, to motivate executives to
maximize operating performance, to provide an opportunity to measure performance
on an individual basis, as well as on an overall Company-wide basis, and to link
executive and stockholder interests through the grant of stock options.
The key components of the Company's executive compensation program consist
of salary, bonuses and stock options. The Committee's policy with respect to
each of these elements, including the basis of the compensation awarded to Mr.
Bonmati, the Company's President, are discussed below. Through these programs, a
very significant portion of the Company's executive compensation is linked to
performance and the alignment of executive interests with those of stockholders.
The long-term compensation of all Company executive officers consists of stock
options; the short term compensation consists of base salary and, in certain
cases, bonuses.
BASE SALARY. The Company has established base salary levels based upon
competitive market pay rates, each executive's role in the Company and each
executive's performance over time (including, where relevant, executives'
performance prior to joining the Company). Base salaries for executives are
reviewed annually based on a variety of factors, including individual
performance, market salary levels for comparable positions within comparable
companies and the Company's overall financial results, and may be adjusted to
reflect such factors. In the case of Mr. Sperlazza, a significant amount of his
compensation is based upon commissions.
BONUSES. At the end of each year, bonuses for executive officers may be
recommended by the Company and reviewed and approved by the Committee. Any such
bonuses will be payable out of a bonus pool determined by the Board of Directors
or the Compensation Committee, and will be determined by measuring such
officer's performance, the performance of the operations for which officer has
primary responsibility and the Company's overall performance against target
performance levels to be established by the Compensation Committee. No bonuses
were awarded to any executive officer with respect to 1996.
STOCK OPTIONS. The Committee believes that aligning management's
interest with those of stockholders is an important element of the Company's
executive compensation plan. Stock options align the interests of employees and
stockholders by providing value to the executive through stock price
appreciation only. At the time of the Company's initial public offering in
August 1995, the Company had granted options to purchase 1,002,000 shares of
Common Stock to certain officers and employees of the Company. The Company has
also granted options to purchase an aggregate of 605,500 shares of Common Stock
to employees and directors since completion of the initial public offering,
primarily to people who have joined the Company since the initial public
offering. In all cases, the exercise price of the options granted was not less
than the fair market value of the Common Stock on the dates of such grants.
Future awards of stock options will be made periodically at the
discretion of the Compensation Committee, in certain cases based upon
recommendations of the Company's President. The size of such grants, in general,
will be evaluated by regularly assessing competitive market practices, the
individual's position and level of responsibility within the Company, and the
overall performance of the Company, including its historic financial success and
its future prospects. The Company believes that stock options
7
<PAGE>
are the single most important element in providing incentives for management
performance and intends to continue to plan to award significant stock options
to officers and key employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Compensation Committee
considers several factors in establishing the President's compensation package,
including market pay practices, performance level, experience, contributions
toward achievement of strategic goals and the overall financial and operations
success of the Company.
Mr. Bonmati's base salary was increased in 1996 from $100,000 to
$150,000. In light of the increase, no bonus was paid to Mr. Bonmati for 1996.
On February 21, 1997, Mr. Bonmati was granted options for an additional 100,000
shares at an exercise price of $6.63 per share. These options vest in four equal
annual installments commencing February 21, 1998.
On January 3, 1994, Mr. Bonmati received, as a long-term incentive,
options to purchase 750,000 shares of Common Stock at an exercise price of
$0.0006 per share, a price which was not less than the fair market value of the
Company's Common Stock at such date. Mr. Bonmati has exercised all of these
options. On January 3, 1996, Mr. Bonmati was granted options for an additional
30,000 shares at an exercise price of $15.00 per share. These options vest in
four equal annual installments commencing on January 3, 1997.
COMPENSATION COMMITTEE:
Albert S. Waxman
James J. Baker
Michael W. Huber
8
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STOCK PERFORMANCE GRAPH
The following graph compares, from August 2, 1995, the date that the
Company's Common Stock began trading on The Nasdaq National Market following its
initial public offering, through December 31, 1996, the percentage change in the
Company's Common Stock to the cumulative total return of the NASDAQ Composite
Index ("NASDAQ Composite") and the Standard & Poor's Midcap 400 Medical Products
and Supplies Index ("S&P Medical Products"). The graph plots the growth in value
of an initial $100 investment over the indicated time period, assuming the
reinvestment of dividends.
[GRAPH OMITTED]
Aug. 2, Dec. 31, Dec. 31,
1995 1995 1996
------- -------- --------
Norland Medical Systems, Inc. $100 $221 $ 96
NASDAQ Composite 100 104 130
S&P Medical Products 100 118 125
The performance of the Company's Common Stock reflected above is not
necessarily indicative of future performance of the Common Stock. The
performance graph which appears above shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement by
reference into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, and shall not be deemed filed under either of
such Acts except to the extent that the Company specifically incorporates this
information by reference.
9
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the period from June 6, 1995 through December 31, 1996 the
Compensation Committee of the Board of Directors consisted of James J. Baker,
Michael W. Huber and Albert S. Waxman. None of these individuals has ever served
as an officer or an employee of the Company. Except as described below, no
executive officer of the Company has ever served as (i) a member of the
compensation committee or equivalent of another entity, one of whose executive
officers served on the Company's Compensation Committee, (ii) a director of
another entity, one of whose executive officers served on the Company's
Compensation Committee, or (iii) a member of the compensation committee or
equivalent of another entity, one of whose executive officers served as a
director of the Company. Dr. Waxman is a director of Norland Corp. and The EICON
Group, Inc., and Reynald G. Bonmati is a director of Norland Corp. and a member
of the Compensation Committee of the Board of Directors of The EICON Group, Inc.
Mr. Bonmati is also an executive officer of Norland Corp. and The EICON Group,
Inc. Mr. Bonmati is President and a director of Novatech Management Corporation,
the general partner of Norland Partners, L.P. As described below in Item 13, Dr.
Waxman is also a Managing Director of NMS BV, and the Chairman, a director and
50% stockholder of Novatech Management Corporation. Mr. Baker's wife and Mr.
Huber are limited partners of Novatech Ventures, L.P., which is a limited
partner in Norland Partners, L.P. Norland Partners, L.P. owns 41.2% of the
outstanding stock of NMS BV.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1997 (except as
otherwise indicated) by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Company's Common Stock, (ii) each
director, (iii) each named executive officer and (iv) all directors and
executive officers as a group. Except as otherwise indicated below, each of the
persons named in the table has sole voting and investment power with respect to
the shares set forth opposite such person's name.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP (1)
----------------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ------ -------
<S> <C> <C>
Reynald G. Bonmati (2) .................................. 2,182,500 30.5%
Albert S. Waxman (3) .................................... 793,500 11.1
Kurt W. Streams (4) ..................................... 7,500 *
Lewis N. Harrold (4) .................................... 7,500 *
Thomas P. Regan ......................................... 75,000 1.0
James A. Sperlazza ...................................... 18,750 *
James J. Baker (4) ...................................... 7,500 *
Michael W. Huber (4) ................................... 7,500 *
Robert L. Piccioni (5) .................................. 130,845 1.8
All directors and officers of the Company as a group (11 2,438,595 33.9
persons) (2), (3), (4), (5) .............................
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP (1)
----------------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
- ------------------------ ------ -------
<S> <C> <C>
Novatech Ventures, L.P. ................................. 264,000 3.7
Premium Point
New Rochelle, NY 10801
Norland Partners, L.P. .................................. 786,000 11.0
Premium Point
New Rochelle, NY 10801
Hans Schiessl ........................................... 1,125,000 15.7
Markgrafenstrasse 8
75117 Pforzheim
Germany
Oppenheimer Funds, Inc. (6) ............................. 570,000 8.0
Two World Trade Center, Suite 3400
New York, NY 10048-0203
Scudder, Stevens & Clark, Inc. (7) ...................... 631,550 8.8
Two International Plaza
Boston, MA 02110-4103
</TABLE>
- ----------------------
* Less than 1%.
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Under Rule 13d-3(d), shares not
outstanding that are subject to options, warrants, rights or conversion
privileges exercisable within 60 days are deemed outstanding for the
purpose of calculating the number and percentage owned by such person, but
not deemed outstanding for the purpose of calculating the percentage owned
by any other person.
(2) Includes 7,500 shares issuable pursuant to stock options exercisable
within 60 days. Includes 786,000 shares held of record by Norland Partners,
L.P. and 264,000 shares held of record by Novatech Ventures, L.P. that Mr.
Bonmati may be deemed to beneficially own due to his relationship with such
entities. Mr. Bonmati is President and a principal stockholder of (i)
Novatech Management Corporation, the general partner of Norland Partners,
L.P., and (ii) Novatech Resource Corporation, the general partner of
Novatech Ventures, L.P. Mr. Bonmati is also a limited partner of Novatech
Ventures, L.P. Such beneficial ownership is disclaimed by Mr. Bonmati,
except to the extent of his proportionate interest in such limited
partnerships. Mr. Bonmati's address is 106 Corporate Park Drive, Suite 106,
White Plains, New York 10604.
(3) Includes 7,500 shares issuable pursuant to stock options exercisable within
60 days. Includes 786,000 shares held of record by Norland Partners, L.P.
that Dr. Waxman may be deemed to beneficially own due to his relationship
with such entity. Dr. Waxman is Chairman of the Board and a principal
stockholder of Novatech Management Corporation, the general partner of
Norland Partners, L.P. Such beneficial ownership is disclaimed by Dr.
Waxman, except to the extent of his proportionate interest in such limited
partnership. Dr. Waxman's address is 59 Wooster Street, New York, New York
10022.
(4) Consists of shares issuable pursuant to stock options exercisable within
60 days.
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<PAGE>
(5) Includes 7,500 shares issuable pursuant to stock options exercisable
within 60 days. Includes 123,345 shares owned by Robert L. Piccioni and
Joan Piccioni, his wife. Excludes 9,375 shares issuable pursuant to stock
options granted to Joan Piccioni exercisable within 60 days.
(6) Information is as of December 31, 1996 based on Schedule 13G filed with
the Securities and Exchange Commission. OppenheimerFunds, Inc. reported
shared dispositive power with respect to 570,000 shares, and Oppenheimer
Discovery Fund reported sole voting power and shared dispositive power
with respect to 480,000 shares.
(7) Information as of December 31, 1996 based on Schedule 13G filed with the
Securities and Exchange Commission. Scudder, Stevens & Clark reported sole
voting power with respect to 271,150 shares, shared voting power with
respect to 279,300 shares and sole dispositive power with respect to
631,550 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS INVOLVING NORLAND CORP. AND STRATEC
The Company is a distributor of bone densitometers manufactured by
Norland Corporation ("Norland Corp.") and Stratec Medizintechnik GmbH
("Stratec"), wholly-owned subsidiaries of Norland Medical Systems B.V. ("NMS
BV"). Certain officers and directors of the Company, and certain other persons
who have significant relationships with the Company have direct and indirect
material interests in or relationships with Norland Corp. and Stratec and/or NMS
BV. The Company has no ownership interest in NMS BV. See Item 1 for a discussion
of the February 26, 1997 Stock Purchase Agreement in which the Company agreed to
purchase all of the outstanding stock of Norland Corp. from NMS BV, subject to
approval by the Company's stockholders. The following table sets forth the
relationships that certain directors and stockholders of the Company have with
Norland Corp. and NMS BV:
<TABLE>
<CAPTION>
PERSON RELATIONSHIP TO COMPANY RELATIONSHIP TO NMS BV/ NORLAND CORP.
- ------ ----------------------- -------------------------------------
<S> <C> <C>
Norland Partners, L.P. - Owner of 11.0% of the - Owner of 41.2% of outstanding
Company's Common Stock. capital stock of NMS BV.
- Novatech Management Corporation
("Novatech Management")
is the sole general partner.
Novatech Ventures, L.P. - Owner of 3.7% of the - Limited partner of Norland
Company's Common Stock. Partners.
- Novatech Resource Corporation
("Novatech Resource") is the sole
general partner.
- Limited partner of Norland
Partners, L.P. ("Norland Partners").
Reynald G. Bonmati - President (Chief Executive - One of three Managing
Officer), Director and Treasurer. Directors of NMS BV.
- Direct owner of 15.7% of the - President and a Director of
Company's Common Stock. Norland Corp.
- President, Director and 50% - President, Director and 50%
stockholder of Novatech Management. stockholder of Novatech Management.
- President, Director and principal
stockholder of Novatech Resource.
- Limited partner of Novatech Ventures.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
PERSON RELATIONSHIP TO COMPANY RELATIONSHIP TO NMS BV/ NORLAND CORP.
- ------ ----------------------- -------------------------------------
<S> <C> <C>
Albert S. Waxman - Director. - One of three Managing
- Chairman, Director and 50% Directors of NMS BV.
stockholder of Novatech Management. - Director of Norland Corp.
- Chairman, Director and 50%
stockholder of Novatech Management.
Hans Schiessl - Owner of 15.7% of outstanding - One of three Managing
Common Stock. Directors of NMS BV.
- Owner of 50% of outstanding
capital stock of NMS BV.
- President of Stratec.
James J. Baker - Director. - Wife is limited partner of
- Wife is limited partner of Novatech Novatech Ventures.
Novatech Ventures.
Michael W. Huber - Director. - Limited partner of Novatech Ventures.
- Limited partner of Novatech
Ventures.
</TABLE>
Under the Company's Distribution Agreement with Norland Corp. and Stratec,
the Company has rights to exclusive worldwide distribution of all current and
future medical diagnostic products developed or manufactured by Norland Corp. or
Stratec. The Company's purchases from Norland Corp. and Stratec in 1996 were
$13,138,280 and $3,163,964, respectively. Sales of Norland Corp. products and
services by the Company to Stratec in 1996 were $210,785.
The Company is party to a Product Development Loan Agreement with Norland
Corp. and Stratec, under which the Company intends to make loans to Norland
Corp. and Stratec in installments up to an aggregate amount of $3.5 million
during the period ending July 31, 1997. The proceeds of any such loans are to be
used by Norland Corp. and Stratec for specific new product development involving
enhancements of existing products and the application of QCT technology to new
products. The loans bear interest at the rate of 10% per annum, and the
principal will be payable in twenty equal quarterly installments commencing
September 30, 1997. At December 31, 1996, there were outstanding loans of
$289,785 from the Company to Norland Corp. under the Product Development Loan
Agreement. If a new product covered by the Product Development Loan Agreement is
introduced into the marketplace, the Company will be entitled to receive a
royalty equal to 5% of the sales proceeds received by Norland Corp. and Stratec
with respect to such product. Norland Corp. and Stratec have also granted the
Company rights of first refusal with respect to any additional financing of
research and development work by Norland Corp. and Stratec.
The Company leases approximately 18,000 square feet of space in Fort
Atkinson, Wisconsin. The Company sublets approximately 14,000 square feet of
this space to Norland Corp. Rent is prorated on a square footage basis. The
lease and sublease expire on August 31, 2006.
In February 1996, Mr. Bonmati made a $1,000,000 loan to Stratec. This loan
was fully repaid in December 1996. Mr. Bonmati and Mr. Schiessl are the owners
of a building in Pforzheim, Germany, part of which is leased to Stratec.
LOANS AND ADVANCES
In September 1996, the Company made an $80,000 loan to Kurt W. Streams,
Vice President, Finance of the Company, to assist with relocation of his
residence. The loan bears interest at 6% per annum and is
13
<PAGE>
payable in full in September 1997, subject to rights which Mr. Streams has to
extend the maturity date. The outstanding balance of the loan, including
interest, was $81,704 at December 31, 1996.
In August 1996, the Company agreed to lend up to $2,500,000 to Reynald G.
Bonmati, President of the Company, on a revolving credit basis during the period
ending December 31, 1997, to assist in the payment of tax liabilities incurred
in connection with stock option exercises. The loans bear interest at 6% per
annum and are payable on demand. The maximum principal amount of loans
outstanding in 1996 was $1,025,000. The outstanding loan balance was reduced to
$500,000 at December 31, 1996.
OTHER TRANSACTIONS
The Company leases its principal executive offices at 106 Corporate Park
Drive, Suite 106, White Plains, New York 10604. The Company sublets a portion of
the leased office space to an affiliate of The EICON Group, Inc. ("EICON"). Both
the lease and sublease expire on August 31, 2000. The Company also subleased
office space in New Haven, Connecticut, from other affiliates of EICON. The New
Haven sublease terminated on March 31, 1997. The White Plains rent is and will
be allocated between the EICON affiliate and the Company on a pro rata basis
(based on square footage used). Mr. Bonmati, President and a Director of the
Company, is President, a Director and 11% owner of EICON. Dr. Waxman, a Director
of the Company, is a Director and 3% owner of EICON. Novatech Ventures, L.P.,
which owns 3.7% of the outstanding Common Stock of the Company and is a limited
partner in Norland Partners, L.P. (the owner of 11% of the Company's outstanding
Common Stock), is the owner of 24% of the outstanding stock of EICON.
In the year ended December 31, 1996, purchases by Nissho Iwai Corporation
accounted for approximately 22% of the Company's revenues. Nissho Iwai received
volume discounts and extended payment terms for its purchases of systems in
1996.
On April 2, 1996, Dove Medical Systems, a California corporation ("Dove
California") which manufactured, marketed and sold the OsteoAnalyzer line of
bone densitometers, was merged into a newly formed wholly-owned subsidiary of
the Company (the "Merger"). Pursuant to the Merger all of the issued and
outstanding stock of Dove Medical Systems was exchanged for an aggregate of
161,538 shares of the Company's Common Stock. Following the Merger, the
Company's subsidiary changed its name to Dove Medical Systems, Inc. At the time
of the Merger, approximately 76% of the stock of Dove California was owned by
Robert L. Piccioni and Joan Piccioni, his wife.
On April 2, 1996, the Company also entered into a Purchase Agreement with
Dr. and Mrs. Piccioni, CHC, Inc. and Mirella Monti Belshe (the "Purchase
Agreement") pursuant to which the Company purchased a patent and rights to
technology and other property rights which were licensed to Dove California in
its business. The purchase price paid by the Company for such assets was
$3,600,000 cash. The Company transferred the purchased assets to Dove Medical
Systems, Inc.
Robert L. Piccioni became a director of the Company in May 1996. Joan
Piccioni is President, and Robert L. Piccioni Chief Technical Officer, of Dove
Medical Systems, Inc. Dr. and Mrs. Piccioni received 123,345 of the 161,538
shares of the Company's Common Stock issued in connection with the Merger. They
also received an aggregate of $3,001,846 of the $3,600,000 paid by the Company
pursuant to the Purchase Agreement.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to its Annual Report
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of White Plains, New York, on the 29th day of April, 1997.
NORLAND MEDICAL SYSTEMS, INC.
By: /s/ Reynald G. Bonmati
------------------------
Name: Reynald G. Bonmati
Title: President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment to Annual Report has been signed below by the following persons on
behalf of the Registrant, Norland Medical Systems, Inc., in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Capacity In
Signature Which Signed Date
--------- ------------ ----
<S> <C> <C>
/s/ Reynald G. Bonmati Chairman of the Board and April 29, 1997
----------------------- President (Principal Executive
Reynald G. Bonmati Officer); and Director
/s/ Kurt W. Streams Vice President, Finance April 29, 1997
----------------------- (Principal Financial Officer and
Kurt W. Streams Principal Accounting Officer)
* Director April 29, 1997
-----------------------
James J. Baker
* Director April 29, 1997
-----------------------
Michael W. Huber
* Director April 29, 1997
-----------------------
Robert L. Piccioni
* Director April 29, 1997
-----------------------
Albert S. Waxman
</TABLE>
* By:/s/ Kurt W. Streams
----------------------
Kurt W. Streams
Attorney-in-Fact
15
