UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended Commission File Number
March 31, 2001 0-22920
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NUMEREX CORP.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 11-2948749
- ----------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Parkwood Circle, Suite 200
Atlanta, Georgia 30339-2119
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(Address of principal executive offices)
(770) 693-5950
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(Registrant's telephone number, including area code)
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
--- ---
As of May 14, 2001, an aggregate of 10,394,464 shares of the registrant's Class
A Common Stock, no par value (being the registrant's only class of common stock
outstanding), were outstanding.
NUMEREX CORP. AND SUBSIDIARIES
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets at March 31, 2001 (unaudited) and December 31, 2000 4
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited) for
the three-month periods ended March 31, 2001 and 2000 5
Condensed Consolidated Statements of Cash Flows (unaudited) for the three-month
periods ended March 31, 2001 and 2000 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risks 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature Page 15
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FORWARD-LOOKING STATEMENTS
THIS DOCUMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. THESE STATEMENTS INCLUDE, AMONG OTHER
THINGS, STATEMENTS REGARDING TRENDS, STRATEGIES, PLANS, BELIEFS, INTENTIONS,
EXPECTATIONS, GOALS AND OPPORTUNITIES. FORWARD-LOOKING STATEMENTS ARE
TYPICALLY IDENTIFIED BY WORDS OR PHRASES SUCH AS "BELIEVE," "EXPECT,"
"ANTICIPATE," "INTEND," "ESTIMATE," "ASSUME," "STRATEGY," "PLAN," "OUTLOOK,"
"OUTCOME," "CONTINUE," "REMAIN," "TREND," AND VARIATIONS OF SUCH WORDS AND
SIMILAR EXPRESSIONS, OR FUTURE OR CONDITIONAL VERBS SUCH AS "WILL," "WOULD,"
"SHOULD," "COULD," "MAY," OR SIMILAR EXPRESSIONS. ALL STATEMENTS AND
INFORMATION HEREIN AND INCORPORATED BY REFERENCE HEREIN, OTHER THAN
STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS THAT ARE BASED
UPON A NUMBER OF ASSUMPTIONS CONCERNING FUTURE CONDITIONS THAT ULTIMATELY MAY
PROVE TO BE INACCURATE. MANY PHASES OF THE COMPANY'S OPERATIONS ARE SUBJECT
TO INFLUENCES OUTSIDE ITS CONTROL. THE COMPANY CAUTIONS THAT THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS ASSUMPTIONS, RISKS AND
UNCERTAINTIES, WHICH CHANGE OVER TIME. THESE FORWARD-LOOKING STATEMENTS SPEAK
ONLY AS OF THE DATE OF THIS REPORT, AND THE COMPANY ASSUMES NO DUTY TO UPDATE
FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AND FUTURE RESULTS COULD
DIFFER MATERIALLY FROM HISTORICAL PERFORMANCE.
ANY ONE OR ANY COMBINATION OF FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT ON
THE COMPANY'S RESULTS OF OPERATIONS OR COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM FORWARD-LOOKING STATEMENTS OR HISTORICAL PERFORMANCE. THESE
FACTORS INCLUDE: THE PACE OF TECHNOLOGICAL CHANGE, VARIATIONS IN QUARTERLY
OPERATING RESULTS, DELAYS IN THE DEVELOPMENT, INTRODUCTION AND MARKETING OF NEW
WIRELESS PRODUCTS AND SERVICES; CUSTOMER ACCEPTANCE OF PRODUCTS AND SERVICES;
ECONOMIC CONDITIONS; THE INABILITY TO ATTAIN REVENUE AND EARNINGS GROWTH;
CHANGES IN INTEREST RATES; INFLATION; THE INTRODUCTION, WITHDRAWAL, SUCCESS AND
TIMING OF BUSINESS INITIATIVES AND STRATEGIES; COMPETITIVE CONDITIONS; THE
EXTENT AND TIMING OF TECHNOLOGICAL CHANGES; CHANGES IN CUSTOMER SPENDING, THE
LOSS OF INTELLECTUAL PROPERTY PROTECTION, GENERAL ECONOMIC CONDITIONS AND
CONDITIONS AFFECTING THE CAPITAL MARKETS. ACTUAL EVENTS, DEVELOPMENTS AND
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN UNCERTAINTIES SET FORTH ABOVE
AND ELSEWHERE IN THIS DOCUMENT. SUBSEQUENT WRITTEN OR ORAL STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS IN THIS REPORT AND
THOSE IN THE COMPANY'S REPORTS PREVIOUSLY AND SUBSEQUENTLY FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
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NUMEREX CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS U.S. DOLLARS)
MARCH 31, DECEMBER 31,
2001 2000
(UNAUDITED)
--------- ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,662 $ 10,567
Accounts receivable, net 6,648 7,153
Inventory 3,844 4,117
Prepaid taxes 19 16
Prepaid expenses 646 450
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TOTAL CURRENT ASSETS 20,819 22,303
PROPERTY AND EQUIPMENT, NET 2,706 2,917
GOODWILL, NET 10,636 10,789
INTANGIBLE ASSETS, NET 9,662 9,845
OTHER ASSETS 113 88
-------- --------
TOTAL ASSETS $ 43,936 $ 45,942
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,283 $ 3,316
Income taxes 0 10
Other current liabilities 2,086 2,065
Obligations under capital leases, current portion 38 36
-------- --------
TOTAL CURRENT LIABILITIES 5,407 5,427
LONG TERM LIABILITIES
Obligations under capital leases 90 102
-------- --------
MINORITY INTEREST 2,629 3,511
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock - no par value; authorized 3,000,000; issued 30,000
at March 31, 2001 and December 31, 2000 3,000 3,000
Class A, common stock - no par value; authorized 30,000,000; issued
12,160,864 at March 31, 2001 and 12,157,504 December 31, 2000 32,064 32,064
Additional paid-in-capital 370 370
Treasury stock, at cost, 1,766,400 shares at March 31, 2001 and 1,766,400 at
December 31, 2000 (9,222) (9,222)
Accumulated other comprehensive income (27) (20)
Retained earnings 9,625 10,710
-------- --------
35,810 36,902
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 43,936 $ 45,942
======== ========
See accompanying notes to condensed consolidated financial statements
-4-
NUMEREX CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTH
PERIOD ENDED MARCH 31,
2001 2000
(UNAUDITED) (UNAUDITED)
---------- ----------
Net sales $ 5,302 $ 5,139
Cost of sales
3,254 2,354
Research and development expenses
860 786
Selling, general, administrative and other expenses 3,459 3,271
-------- --------
Operating profit (loss) (2,271) (1,272)
Interest and other income, net 364 309
Gain on disposition of assets and business 0 0
Minority interest 882 581
-------- --------
Earnings (loss) before income taxes (1,025) (382)
Provision for income taxes
0 0
-------- --------
Net earnings (loss) (1,025) (382)
Preferred stock dividend 60 60
-------- --------
Net earnings (loss) applicable to common shareholders (1,085) (442)
======== ========
Other comprehensive income (loss), net of income taxes
Foreign currency translation adjustment (7) (17)
-------- --------
Comprehensive earnings (loss) $ (1,092) $ (459)
======== ========
Basic earnings (loss) per common share $ (0.10) $ (0.04)
Diluted earnings (loss) per common share (0.10) (0.04)
-------- --------
Number of shares used in per share calculation
Basic 10,391 10,434
Diluted 10,391 10,434
-------- --------
See accompanying notes to condensed consolidated financial statements
-5-
NUMEREX CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS U.S. DOLLARS)
FOR THE THREE
MONTH PERIOD ENDED
MARCH 31,
2001 2000
(UNAUDITED) (UNAUDITED)
----------- ----------
Cash flows from operating activities:
Net earnings (loss) $ (1,025) $ (382)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 744 698
Minority interest (882) (581)
Gain on disposition of assets 0 0
Gain on disposition of business 0 0
Changes in assets and liabilities which provided (used) cash:
Accounts receivable 505 1,326
Inventory 273 (448)
Prepaid expenses and interest receivable (196) 70
Accounts payable (33) (701)
Income taxes (13) (150)
Other assets and liabilities 21 (679)
-------- --------
Net cash provided by (used in) operating activities (606) (847)
-------- --------
Cash flows from investing activities
Proceeds from disposition of assets 0 0
Proceeds from disposition of business 0 0
Purchase of property and equipment (152) (56)
Purchase of intangible and other assets (43) (11)
Investment in business (22) (29)
-------- --------
Net cash provided by (used in) investing activities (217) (96)
-------- --------
Cash flows from financing activities
Proceeds from exercise of stock options 0 986
Principal payment on capital lease obligations (9) (8)
Dividend payments (60) (60)
Purchase of treasury stock 0 0
-------- --------
Net cash provided by (used in) financing activities (69) 918
-------- --------
Effect of exchange differences on cash (13) (27)
-------- --------
Net increase (decrease) in cash and cash equivalents (905) (52)
Cash and cash equivalents, beginning of period 10,567 21,490
-------- --------
Cash and cash equivalents, end of period $ 9,662 $ 21,438
======== ========
See accompanying notes to condensed consolidated financial statements
-6-
NUMEREX CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31, 2001
may not be indicative of the results that may be expected for the year
ending December 31, 2001. For further information, reference is also made
to the Company's Annual Report on Form 10-K for the year ended December 31,
2000 and the consolidated financial statements contained therein.
2. REPORTING CURRENCY
The condensed consolidated financial statements and the notes thereto are
stated in U.S. Dollars for all periods presented.
3. RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the current
period presentation.
4. INVENTORY
($'000's omitted) MARCH 31, 2001 DECEMBER 31,2000
-------------- ----------------
Raw materials $1,278 $1,275
Work-in-progress 33 174
Finished goods 2,533 2,668
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$3,844 $4,117
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5. SHAREHOLDERS' EQUITY
Shareholders' Equity decreased by $1,092,000 in the three-month period
ending March 31, 2001. The decrease in Shareholders' Equity is attributable
to the net loss recorded of $1,085,000 and a loss on foreign currency
translation of $7,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The following tables set forth, for the periods indicated the amounts and
percentages of net sales represented by selected items in the Company's
Condensed Consolidated Statements of Operations.
THREE-MONTH PERIOD ENDED MARCH 31,
----------------------------------
(in thousand, except per share data)
2001 2000
---- ----
Net sales:
Digital Multimedia and Networking $ 3,016 $ 2,161
Wireline Security 248 1,671
Wireless Data Communications 2,038 1,307
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Total net sales 5,302 5,139
Cost of sales 3,254 2,354
-------- --------
Gross profit (loss) 2,048 2,785
Research and development expenses 860 786
Selling, general, administrative and other expenses 3,459 3,271
-------- --------
Operating profit (loss) (2,271) (1,272)
Net earnings (loss) (1,025) (382)
-------- --------
Basic earnings per share (0.10) (0.04)
Weighted average shares outstanding 10,391 10,434
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THREE-MONTH PERIOD ENDED MARCH 31,
AS A PERCENTAGE OF NET SALES
2001 2000
---- ----
Net sales:
Digital Multimedia and Networking 56.9% 42.1%
Wireline Security 4.7% 32.5%
Wireless Data Communications 38.4% 25.4%
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Total net sales 100.0% 100.0%
Cost of sales 61.4% 45.8%
----- -----
Gross profit (loss) 38.6% 54.2%
Research and development expenses 16.2% 15.3%
Selling, general, administrative and other expenses 65.2% 63.7%
----- -----
Operating profit (loss) (42.8%) (24.8%)
Net earnings (loss) (19.3%) (7.4%)
----- -----
RESULTS OF OPERATIONS
Net sales increased 3.2% to $5,302,000 for the three-month period ended March
31, 2001 as compared to $5,139,000 in the comparable period in 2000.
The 3.2% increase in net sales in the three-month period ended March 31, 2001 as
compared to the comparable period in 2000 embodies an increase of 10.6% in
product revenues predominantly derived from increased sales from Digital
Multimedia and Wireless Data Communications and a decrease of 12.9% in service
revenues predominantly derived from reduced service revenues from Networking,
respectively.
-8-
Digital Multimedia and Networking product and service sales and revenues
increased 39.6% to $3,016,000 in the three-month period ended March 31, 2001 as
compared to $2,161,000 in the comparable period in 2000.
The principal reason for the increase in sales and revenues in the three-month
period ended March 31, 2001 as compared to the comparable period in 2000 was a
159.3% increase in Digital Multimedia product and service sales and revenues
resulting from the transition from the marketing and sale of analog based
product to the marketing and sale of the new digital hardware and software based
product platform, PowerPlay(TM). In addition, product and service sales and
revenues were positively impacted by continued growth in network or data
solution product sales and related services. The increase in sales and revenues
was partially offset by a 27.8% decrease in Networking product and service sales
and revenues in its core business activities.
Wireline Security product and service sales and revenues decreased 85.2% to
$248,000 in the three-month period ended March 31, 2001 as compared to
$1,671,000 in the comparable period in 2000.
The principal reason for the decrease in sales and revenues in the three-month
period to March 31, 2001 as compared to the comparable period in 2000 resulted
from one-time product and service contract sales and revenues earned in
Australia in the three-month period ended March 31, 2000. Excluding the
Australian one-time product and services contract sales and revenues, residual
Derived Channel Wireline Security product and service sales and revenues
decreased 54.9%.
Wireless Data Communications product and service sales and revenues increased
55.9% to $2,038,000 in the three-month period ended March 31, 2001 as compared
to $1,307,000 in the comparable period in 2000.
The principal reason for the increase in sales and revenues in the three-month
period ended March 31, 2001 as compared to the comparable period in 2000 was the
continued growth in product and service sales and revenues resulting from the
marketing and sales effort to establish the Company as a recognized national and
international wireless data communications service provider.
Cost of sales increased 38.2% to $3,254,000 in the three-month period ended
March 31, 2001 as compared to $2,354,000 for the comparable period in 2000.
The principal reason for the increase in cost of sales in the three-month period
ended March 31, 2001 as compared to the comparable period in 2000 resulted
primarily from the impact of the Wireline Security one-time product and service
contract sales and revenues earned in Australia in the three-month period ended
March 31, 2000.
Gross profit as a percentage of net sales decreased to 38.6% in the three-month
period ended March 31, 2001 as compared to 54.2% for the comparable period in
2000. Excluding the impact of the Wireline Security one-time product and service
contract sales and revenues earned in Australia in the three-month period ended
March 31, 2000, gross profit increased to 38.6% in the three-month period ended
March 31, 2001 as compared to 30.7% for the comparable period in 2000.
The principal reason for the increase in gross profit exclusive of the impact of
the Wireline Security one-time product and service contract sales and revenues
earned in Australia in the three-month period ended March 31,
-9-
2000 resulted from the increase in Company product and service sales and
revenues from both Digital Multimedia and Networking and Wireless Data
Communications and a decrease in cost of sales expense.
Research and development expenses increased 9.4% to $860,000 in the three-month
period ended March 31, 2001 as compared to $786,000 for the comparable period in
2000.
The principal reason for the increase in research and development expenses in
the three-month period ended March 31, 2001 as compared to the comparable period
in 2000 resulted primarily from increased Wireless Data Communications
expenditures.
Selling, general, administrative and other expenses increased 5.8% to $3,459,000
in the three-month period ended March 31, 2001 as compared to $3,271,000 for the
comparable period in 2000.
The principal reason for the increase in selling, general, administrative and
other expenses in the three-month periods ended March 31, 2001 as compared to
the comparable periods in 2000 resulted primarily from an increase in
administration, management and organizational expenses.
Interest and other income in the three-month period ended March 31, 2001
increased 17.8% to $364,000 as compared to $309,000 in the comparable period in
2000.
The increase in interest and other income was primarily related to interest
income earned on cash balances.
Minority interest in the three-month period ended March 31, 2001 increased 51.8%
to $882,000 as compared to $581,000 in the comparable period in 2000. The gain
represents that portion of the losses of the Company's Wireless Data
Communications business that is not accounted for by the Company.
The Company, due to the loss position from operations, did not record a tax
provision in the three-month periods ended March 31, 2001 and 2000,
respectively.
The Company recorded a net loss of $1,025,000 in the three-month period ended
March 31, 2001 as compared to net loss of $382,000 in the comparable period in
2000.
The principal reason for the increase in the net loss for the three-month period
ended March 31, 2001 as compared to the comparable period in 2000 was primarily
the result of the impact of the Wireline Security one-time product and service
contract sales and revenues earned in Australia in the three-month period ended
March 31, 2000 partially off-set by increased product and service sales and
revenues and associated gross profit thereon and decreased cost of sales
expenses.
The weighted average and diluted shares outstanding increased to 10,391,104 for
the period ended March 31, 2001 as compared to weighted average and diluted
shares outstanding of 10,434,130 in the comparable period in 2000.
-10-
LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY
The Company has been able to fund its operations and working capital
requirements from cash flow generated by operations, the proceeds from a public
offering completed in April 1995 and the proceeds from the sale of its Derived
Channel technology in November 1999.
Net cash used in operating activities decreased 28.5% to $606,000 for the
three-month period ended March 31, 2001 as compared to $847,000 in the
comparable period in 2000. The decrease in cash used was primarily due to
changes in working capital.
Net cash used in investing activities increased 126.0% to $217,000 in the
three-month period ended March 31, 2001 as compared to $96,000 in the comparable
period in 2000. The increase in cash used was the result of increased investment
in tangible and intangible assets.
Net cash used in financing activities increased 107.5% to $69,000 in the
three-month period ended March 31, 2001 as compared to net cash provided by
financing activities of $918,000 in the comparable period in 2000.
The increase in cash used was primarily accounted for by the receipt of $986,000
of proceeds from the exercise of stock options which resulted in the issue of an
additional 437,784 shares of the Company's Class A Common Stock in the
three-month period ended March 31, 2000.
The Company had working capital balances of $15,412,000 and $16,876,000,
respectively, as of March 31, 2001 and December 31, 2000.
The Company's business has not been capital intensive and, accordingly, capital
expenditures have not been material. To date, the Company has funded all capital
expenditures from working capital, proceeds from the public offering and the
proceeds from the sale of its Derived Channel technology in November 1999.
The Company is obligated under the First Amendment to the Operating Agreement of
Cellemetry LLC ("Cellemetry") to fund the operations of Cellemetry to an amount
of $5,500,000 by way of interest bearing debt financing to be available to fund
the operations of Cellemetry and its wholly owned subsidiary Uplink Security,
Inc.
The Company has provided the full amount of the facility to Cellemetry and the
Company may, but is not obligated, to continue to fund Cellemetry with
additional interest bearing debt financing. All borrowings carry the Prime Rate
of interest. At March 31, 2001 the Company had provided total interest bearing
debt financing amounting to $12,353,000.
Expansion of the Company's Digital Multimedia business in fiscal 2001, including
the establishment and increased market penetration of PowerPlay(TM), may require
greater capital investments than in the past.
-11-
The Company believes that its cash and cash equivalents, including funds
available from the divestment of its Derived Channel technology will be
sufficient to finance its operating and capital requirements in fiscal 2001.
Cash requirements for future expansion of the Company's operations will be
evaluated on an as-needed basis and may involve external financing. The Company
does not expect that such expansion, should it occur, will have a materially
negative impact on the Company's ability to fund its existing operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
At March 31, 2001 the Company was not invested in any material balances of
market risk sensitive instruments held for either trading purposes or for
purposes other than trading. As a result, the Company is not subject to interest
rate risk, foreign currency rate risk, commodity price risk, or other relevant
market risks, such as equity price risk.
The Company invests cash balances in excess of operating requirements. At March
31, 2001 the Company had no outstanding borrowings payable except for
obligations under capital leases. The Company believes that the effect, if any,
of reasonably possible near-term changes in interest rates or foreign currency
exchange rates on the Company's financial position, results of operations and
cash flows should not be material.
-12-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As previously reported in the Company's Form 10-K for the years-ended
December 31, 2000 and October 31, 1999 and Form 10 - Q for the periods
ended July 31, 1999, December 31, 1999, January 31, 2000, June 30,
2000 and September 30, 2000, respectively, in connection with the
Company's acquisition of the entire equity interest in Uplink
Security, Inc. ("Uplink") a petition was filed by Uplink in the
Superior Court of Fulton County, Georgia seeking an appraisal of the
value of a minority stockholders shares. The minority stockholder has
alleged that the acquisition of Uplink was procedurally improper and
should be set aside and that Uplink and certain of its officers
(together with the Company and certain of its officers) conspired to
oppress the minority stockholder of Uplink and acted fraudulently in
effectuating the acquisition. The case is in the discovery phase.
Neither the Company nor its officers are parties to the litigation.
The Company believes, however, that the value the minority stockholder
is claiming for the shares is in excess of the fair value of those
shares. The Company also believes that the minority stockholder's
other claims are without merit, and Uplink intends to vigorously
defend the litigation.
ITEM 2. CHANGES IN SECURITIES.
None - not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None - not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders of the Company was held on May 4,
2001 (the "Meeting"). Three proposals were presented for a vote at the
Meeting.
Proposal 1 - The election of six directors, George Benson, Matthew J.
Flanigan, Allan H. Liu, Stratton J. Nicolaides, John G. Raos and
Andrew J. Ryan, each to serve as a director of the Company for a
one-year term expiring at the annual meeting of shareholders to be
held in 2002 and until the election and qualification of each
successor.
Proposal 1 - To elect a Board of Directors consisting of six
persons to serve until the next annual meeting of shareholders
and until their respective successors have been duly elected and
qualified.
The proposal was approved as follows:
For Withheld
--------- --------
George Benson 8,842,264 9,270
Matthew J. Flanigan 8,842,264 9,270
-13-
Allan H. Liu 8,842,264 9,270 0
Stratton J. Nicolaides 8,842,264 9,270 0
John G. Raos 8,842,264 9,270 0
Andrew J. Ryan 8,842,264 9,270 0
Proposal 2 - The approval of the Company's 2001 Employee Stock
Purchase Plan
Proposal 2 - To approve the Company's 2001 Employee Stock
Purchase Plan.
The proposal was approved as follows:
For Against Abstain
--------- ------- -------
8,717,684 95,350 38,500
Proposal 3 - The ratification of the appointment of Grant Thornton
LLP as the Company's independent public accountants for the current
fiscal year ending December 31, 2001.
Proposal 3 - To consider and vote upon the ratification of the
selection by the Board of Directors of Grant Thornton LLP as
independent accountants to the Company for the current fiscal
year ending December 31, 2001.
The proposal was approved as follows:
For Against Abstain
--------- ------- -------
8,841,234 10,170 130
ITEM 5. OTHER INFORMATION.
None - not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
None - not applicable.
-14-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NUMEREX CORP.
-------------
(Registrant)
Date: May 15, 2001 By: /s/ Stratton J. Nicolaides
------------ -------------------------------------------
STRATTON J. NICOLAIDES
Chairman and Chief Executive Officer
Date: May 15, 2001 By: /s/ PETER J. QUINN
------------ -------------------------------------------
PETER J. QUINN
Executive Vice President,
Chief Financial Officer, and
Principal Financial and Accounting Officer
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