UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-20660
DIRECT INSITE CORP.
(F/K/A COMPUTER CONCEPTS CORP.)
(Exact name of registrant as specified in its charter)
Delaware 11-2895590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Orville Drive, Bohemia, N.Y. 11716
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (631) 244-1500
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12 (g) of the Act:
Title of each class Name of each exchange on which registered
-------------------- -----------------------------------------
Common Stock, par value $.0001 NASDAQ
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. [X]
As of March 26, 2001, there were 21,381,937 shares of the registrant's Common
Stock outstanding. The aggregate market value of the Common Stock held by
non-affiliates was approximately $6,014,000 based on the closing sale price of
the Common Stock as quoted on the NASDAQ on such date.
DOCUMENTS INCORPORATED BY REFERENCE
None
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
- ---------------------------------------------------------------
Directors and Executive Officers
As of April 26, 2001, the names, ages and positions of the directors and
executive officers of the Company are as follows:
Name Age Position Committee Member
- ---- --- -------- ----------------
James A Cannavino 56 Chairman of the Board of Directors Audit,Compensation
Charles Feld 59 Member of the Board of Directors Compensation
Dennis Murray 55 Member of the Board of Directors Audit
Carla Stovall 44 Member of the Board of Directors Audit
Warren Wright 41 Chief Executive Officer
Anthony Coppola 46 President
George Aronson 52 Chief Financial Officer, Secretary
Lawrence York 31 Vice-President
Arnold Leap 33 Executive Vice-President, C.T.O.
James A. Cannavino has been our Chairman of the Board since March 2000. Mr.
Cannavino is also the Chief Executive Officer and Chairman of the Board of
Directors of CyberSafe, Inc., a corporation specializing in network security. He
was the President and Chief Operating Officer of Perot Systems Corporation
through July 1997, and prior to that was a Senior Vice President at IBM,
responsible for strategy and development. Mr. Cannavino's career worked over
thirty years at IBM beginning in 1964. Mr. Cannavino led IBM's restructuring of
its $7 billion PC business to form the IBM PC Company. He also served on the IBM
Corporate Executive Committee and Worldwide Management Council, and on the board
of IBM's integrated services and solutions company. Mr. Cannavino serves on the
boards of National Center for Missing and Exploited Children, 7th Level, Inc.,
Opus360 Corporation, Verio, Inc., NetWolves and Marist College. Mr. Cannavino
will serve on the Board until the next annual meeting of Shareholders.
Charles Feld founded the Feld Group in 1992 to offer Fortune 500 and
emerging companies the technology leadership they need to transform themselves
into category leaders. As CEO and President of the Dallas-based firm, Mr. Feld
currently serves as acting CIO at First Data Resources. His earlier Feld Group
engagements include working transformational change as CIO and e-Leader at Delta
Air Lines by building the framework to place the airline at the forefront of
Global 1000 companies that understand and embrace the new economy. The Delta
Technology team received the Smithsonian Award for Technology Excellence in
1998. As CIO of Burlington Northern, Charlie spearheaded the merger of the
railroad's technologic systems and organization with those of the Santa Fe
Railroad. Before launching The Feld Group in 1992, he was Vice President/CIO at
Frito-Lay, Inc., where he played a pivotal role in streamlining the data network
and developing the hand-held computer network for Frito-Lay's sales force. His
team at Frito-Lay won the Smithsonian Award for Technology Excellence in 1998.
Mr. Feld has been a member of the Board of Directors since March 2000, and will
serve in such capacity until the next annual meeting of the shareholders.
Dr. Dennis J. Murray has been President of Marist College since 1979. Early
in his tenure, he identified the importance of technology in higher education
and made it one of the central themes of his administration. He developed an
innovative joint study with the IBM Corporation, which resulted in Marist
becoming one of the nations most technologically advanced liberal arts colleges.
Marist was one of the first colleges or universities in the country to have a
fully networked campus, and currently operates on an IBM G5 S/390 system. Dr.
Murray has been a strong supporter of the Linux operating system and recently
initiated a Linux Research and Development Center at Marist. Dr. Murray serves
on the boards of the Franklin and Eleanor Roosevelt Institute, McCann
Foundation, and the Greenway Conservancy for the Hudson River Valley, which
oversees the National Heritage Area. He is also the author of two books on
nonprofit management, editor of three books on government and public affairs,
and co-author of a guide to corporate- sponsored university research in
biotechnology. Mr. Murray has been a member of the Board of Directors since
March 2000, and will serve in such capacity until the next annual meeting of the
shareholders.
Carla J. Stovall has been a member of the Board of Directors since April
2000, and will serve in such capacity until the next annual meeting of the
shareholders. Ms. Stovall has been the Attorney General for the State of Kansas
since 1994. Attorney General Stovall also currently serves as Vice President of
the National Association of Attorneys General and will become the Association's
president in 2001. She is also a member of the Board of Directors of the
American Legacy Foundation, the national Center for Missing and Exploited
Children, the National Crime Prevention Council and the Council of State
Governments. In addition, she is a member of the Board of Governors of the
University of Kansas School of Law and a member of the Kansas Children's
Cabinet. Attorney General Stovall recently was honored with the Distinguished
Service to Kansas' Children Award.
Warren Wright was appointed CEO effective December 2000 after serving as a
sales and marketing consultant to the Company. Mr. Wright has been a marketing
consultant based in New York for the past four years, providing consulting
services to several e-commerce and technology companies including Voyant Corp.,
Direct Media Networks and Laguna Corporation. Prior to consulting, Mr. Wright
was Sr. Vice president - Sales and Marketing for King Products, a Canadian based
manufacturer of advanced multi-media telecommunication products and software.
Mr. Wright was responsible for strategic alliances and the expansion of
distribution internationally. Prior to his tenure at King products, Mr. Wright
developed and sold a direct media advertising publication and also served as
Marketing Manager for Westcan Electrical Manufacturing (a division of Siemens
AG). Mr. Wright holds a degree in Economics from the University of Western
Ontario and completed graduate work at Ohio University.
Anthony Coppola was appointed President in March, 2000. From January, 1999
until his appointment as President, Mr. Coppola was Executive Vice President in
charge of development, marketing and sales of our d.b.Express based
telecommunications Electronic Bill Presentment Payment Analysis and Reporting
software. Beginning in 1994, Mr. Coppola worked with us in various capacities
related to sales and marketing management. His responsibilities included the
management and direction of the design and programming for the
telecommunications applications, as well as direct involvement with the sales
and marketing of our applications and services to IBM and our other primary
customers. Prior to joining us , Mr. Coppola was President of America Multimedia
Corp., a firm active in consulting and the development and marketing of industry
specific training software.
George Aronson, CPA, has been the Chief Financial Officer of the Company
since August, 1995. From March, 1989, to August, 1995, he was the Chief
Financial Officer of Hayim & Co., an importer/distribution organization. Mr.
Aronson graduated from Long Island University with a major in accounting in 1972
receiving a Bachelor of Science degree and is a Certified Public Accountant.
Lawrence York has been our Vice President and directs our
Telecommunications Solutions product offering since June 2000. Mr.York began his
career in telecommunications with Sprint in 1995 in the marketing and business
analysis division. This position led to his recruitment and promotion by MCI
Worldcom to the position of senior analyst for business development. From 1998
to his employment with us, Mr. York was Vice President of Telwares, Inc., a
telecommunications company.
Arnold Leap Mr. Leap has been Executive vice president and Chief Technology
Officer since November, 2000. From March, 1998 until November 2000 he held the
position of Chief Information Officer. Mr. Leap originally was hired in
February, 1997 as the Company's Director of Development and Engineering and held
the position until March, 1998. Prior to his joining Direct Insite, Mr. Leap was
the MIS Manger/Director of AMP Circuits, Inc., and a subsidiary of AMP, Inc.
from1993 to February 1997. His responsibilities at AMP Circuits, Inc. included
day-to-day information systems operation as well as the development and
implementation of a consolidated ERP and financial systems.
Item 11. EXECUTIVE COMPENSATION
-----------------------------------
The following table sets forth the annual and long-term compensation with
respect to the Chief Executive Officers and each of the other executive
officers of the Company who earned more than $100,000 for services rendered
for the years ended December 31, 2000, 1999, and 1998. Directors are not
contractually compensated for their services, however, the Directors
elected post the Company's restructure receive various fees for attending
meetings and serving on committees.
Summary Compensation Table
Annual Compensation
--------------------------------------------
Other All
Name and Fiscal Annual Other
Principal Position Year Salary Bonus Compensation Compensation
- -------------------------------------------------------------------------------------------
James A. Cannavino (1) 2000 $ - $ - $ - $19,000
Chairman of the Board 1999 - - - -
Chief Executive Officer 1998 - - - -
Warren Wright, (1) 2000 90,000 - - -
Chief Executive Officer 1999 19,500 - - -
1998 - - - -
Daniel DelGiorno, Jr (2,6) 2000 - - - 4,106,720
Chief Executive Officer 1999 - 1,354,000 - -
Director / Treasurer 1998 - 1,291,000 - -
Anthony Coppola (3,5,6) 2000 154,000 95,000 - -
President 1999 136,000 418,000 - -
1998 125,000 98,000 - -
George Aronson (3,4,6) 2000 175,000 500,000 - -
Chief Financial Officer 1999 170,000 532,000 - -
1998 157,000 456,000 - -
Arnold Leap (3,7) 2000 126,000 31,000 - -
Executive Vice President 1999 112,000 52,000 - -
Chief Technology Office 1998 91,000 29,000 - -
All Officers as a Group 2000 $545,000 $ 626,000 $ - $4,125,720
1999 437,500 2,356,000 - -
1998 373,000 1,874,000 - -
<FN>
Footnotes
----------
(1) Mr. Cannavino was the CEO from March, 2000 through November 30, 2000, at
which time Mr Wright was appointed.
(2) Mr. D. Del Giorno, Jr., served as CEO until his retirement effective March
14, 2000. The amount shown as "other compensation" in 2000, represents the
negotiated settlement of his retirement package. Significant components
include $1,500,000 in the form of 75,000 shares of Netwolves which was
valued at $20 per share at the time of grant, $2,300,000 cash and other
assets valued at $306,000.
(3) The Company granted cash bonuses in 1999, to Messrs. Aronson and Coppola in
the amounts of $150,000 and $200,000, respectively. Mr. Coppola received
$218,000 in the form of the Company's common stock. The remainer of Mr.
Aronson's 1999 bonus consists of restricted shares of Softworks common
stock. Mr. Leap received 3000 shares of Softworks in 1999.
(4) In February 2000, Mr. Aronson received 25,000 shares of Netwolves which was
valued at $20 per share at the time of grant.
(5) Mr. Coppola was appointed President in March, 2000.
(6) Bonuses granted in 1998 for Messrs. DelGiorno, Jr., Aronson and Coppola
were in the form of restricted shares of Softworks common stock.
(7) Mr. Leap was appointed Executive Vice-President and Chief Technology
Officer in November, 2000.
</FN>
Option/SAR Grants in Last Fiscal Year
- -------------------------------------
During 2000 the following options grants were made to the named executive
officers:
The hypothetical value of the options as of their date of grant has been
calculated using the Black-Scholes option-pricing model, as permitted by SEC
rules, based upon various assumptions, which include: expected volatility of
70.6% to 73.1%, risk free interest rate of 5.8% and expected lives of 1.80 to
5.00 years. The approach used in developing the assumptions upon which the
Black-Scholes valuations were calculated is consistent with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." It should be noted that this model is only one method of valuing
options, and the Company's use of the model should not be interpreted as an
endorsement of its accuracy. The actual value of the options may be
significantly different, and the value actually realized, if any, will depend
upon the excess of the market value of the common stock over the option exercise
price at the time of exercise.
% of Total Options
Number of Granted to Employees Expiration Hypothetical Value
Name Options Granted in Fiscal Year Exercise Price Date at Grant Date
---- --------------- -------------------- -------------- ---------- ------------------
James A. Cannavino 350,000 21.03% $ 0.75 5/31/05 $ 148,000
Warren Wright 10,000 0.60% 2.09 12/31/01 8,000
Anthony Coppola 114,000 6.85% 0.75 5/31/05 48,000
Anthony Coppola 20,000 1.20% 2.09 12/31/01 17,000
George Aronson 100,000 6.00% 0.75 5/31/05 42,000
Arnold Leap 135,000 8.11% 0.75 5/31/05 57,000
Arnold Leap 10,000 0.60% 2.09 12/31/01 8,000
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Value
- --------------------------------------------------------------------------------
The following table set forth certain information with respect to stock option
exercises by the named executive officers during the fiscal year ended December
31, 2000, and the value of unexercised options held by them at fiscal year-end.
Number of Value of
Unexercised Unexercised
Options at In-the-Money
Fiscal Year Options at
End Fiscal Year End (1)
----------------------- -------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
James Cannavino - - 267,000 233,000 $ - $ -
Warren Wright - - 20,000 - - -
Anthony Coppola - - 223,750 76,000 - -
George Aronson - - 325,000 75,000 - -
Arnold Leap - - 101,700 101,250 - -
<FN>
Footnotes
- ---------
(1) Market Value of the Company's Common stock on December 31, 2000, was $0.31.
There were no in - the money options at year end.
</FN>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The following table sets forth certain information as of April 26, 2001,
with respect to the beneficial ownership of the Company's Common Stock by all
persons known by the Company to be the beneficial owners of more than 5% of its
outstanding shares of Common Stock, by directors who own Common Stock and all
officers and directors as a group:
Common Stock Rights to Acquire Total Beneficially
Beneficially Beneficial Ownership Through Owned as % of
Name of Beneficial Owner Owned exercise of Options Within 60 Days Outstanding Shares (2)
- ----------------------------------------------------------------------------------------------------------------
Bo-Tel LLC (3) 2,220,000 - 10.4%
James Cannavino (1) 165,000 383,334 2.5
Charles Feld (1) -- 66,667 *
Dennis Murray (1) -- 66,667 *
Carla Stovall (1) 6,600 66,667 *
Warren Wright (1) 10,000 0 *
Anthony Coppola (1) 203,875 261,750 2.2
George Aronson (1) 103,000 350,000 2.1
Arnold Leap (1) 17,500 135,450 *
All Officers and Directors as a
Group (8 persons) 505,975 1,350,535 8.2
* = Less than 1%
<FN>
Footnotes
- ---------
(1) The address of the holder is 80 Orville Drive, Suite 200, Bohemia, New York
11716.
(2) Based upon 21,381,937 outstanding as of April 26, 2001, plus outstanding
options exercisable within 60 days owned by above named parties.
(3) Includes 320,000 shares of the Company's common stock owned by a party
,which has a financial interest in Internet Tracking & Security Ventures,
LLC. The address of the beneficial holder is: 220 East 42 St., NY, NY
</FN>
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------------------------
The former Chief Executive Officer and the former Chairman of the Board of
directors as well as the current Chief Financial Officer of the Company had
received advances from time to time, with such advances being payable upon
demand and bearing interest at the rate of 7% per annum. In the first
quarter of 2000, , $1,706,000 of these advances, consisting of $783,000 in
cash and 410,179 shares of Company common stock valued at $923,000 had been
repaid. The Chief Financial Officer repaid his entire balance and as part
of the retirement packages for the former Chief Executive Officer and
former Chairman, their combined remaining balance of approximately $279,000
was forgiven and accounted for as income to them.
During the first quarter of 2000, the newly elected board of directors
approved the retirement package with the out-going chairman. The retiring
chairman of the board of directors received $3,000,000 cash and $328,500
primarily debt forgiveness and life insurance.
During the first quarter of 2000, the newly elected board of directors
negotiated / settled the retirement package with the out-going Chief
Executive Officer, wherein the retiring Chief Executive Officer received
$2,300,000 cash, 75,000 restricted shares of Netwolves values at $20 per
share and approximately $306,000 consisting primarily life and health
insurance and other assets.
The Company granted 25,000 shares of common stock, valued at $2.00 per
share, to Jack Beige, an outside Director, (who resigned in March 2000) for
legal and consulting services provided to the Company. In 2000, the Company
also granted 20,000 options with an exercise price of $2.09 per share,
which were valued at $17,000 and fully vested at December 31, 2000.
Additionally, the Company paid to such director, consulting fees of
$52,000.
In 2000, the Company granted 25,000 shares of common stock (valued at $2.00
per share) for consulting expenditures incurred in connection with the
restructuring plan to Agustin Medina, an outside Director (who resigned in
March 2000). The Company paid such Director consulting fees of $13,000.
In 2000, the Company granted to Russell Pellicano, an outside Director (who
resigned in March 2000) 25,000 shares of common stock (valued at $2.00 per
share) for consulting expenditures incurred in connection with the
restructuring plan. In addition, the Company granted 20,000 options with an
exercise price of $2.09 for consulting services, which were valued at
approximately $21,000, and were fully vested at December 31, 2000.
In the first quarter 2000, the Company entered into a multi-year agreement
with a consultant that is a family member of one of the former officers.
Subsequently, the Company incurred a $524,000 restructuring charge for
terminating this agreement. At December 31, 2000, approximately $18,000 of
this settlement remains unpaid.
In 2000, the Company's former general counsel received 25,000 shares of
NetWolves common stock, valued at $20.00 per share (Note 3), to pay legal
fees with respect to the NetWolves transaction and 62,500 shares of the
Company's common stock (valued at $2.00 per share) for consulting expenses
incurred in connection with the restructuring plan (Note 13). In addition,
the general counsel received $1,000,000 of cash compensation as part of a
retirement arrangement. In 1999, the Company's general counsel received
cash compensation of $689,000, and 75,000 shares of Softworks common stock
and 150,000 Company stock options valued at $395,000, for business and
financial consulting services rendered. In 1998, the Company's general
counsel received cash compensation of $207,000 and 180,000 Company stock
options (which were subsequently cancelled) valued at $171,000. Also in
1998 (in addition to the shares of Softworks and Company common stock as
discussed in Notes 3 and 10), related entities received 266,000 shares of
Softworks common stock, valued at $541,000, for business and financial
consulting services rendered.
The Company has entered into various agreements with S.J. & Associates,
Inc. (including its affiliates are collectively referred to as "SJ") for
various services that provide for the following compensation:
- -- In 2000, the Company issued 125,000 shares (valued at $2 per share), for
consulting fees related to the creation and execution of the restructuring
plan.
- -- In 2000, the Company incurred $1,060,000 of consulting expenses with SJ.
The consulting expense was paid in the form of $274,000 in cash, 375,000
shares of Company common stock (valued at $2.00 per share) and 150,000
stock options with an exercise price of $.75 per share, resulting in a
charge of approximately $36,000.
- -- Commencing in December 1999, SJ was to receive minimum annual compensation
pursuant to two agreements aggregating $316,000 per annum. The agreements
expire in November 2004; however, one of the agreements was settled as part
of the 2000 Restructuring Plan for $1,276,000 (as discussed in Note 13 to
the Consolidated Financial Statements).
- -- In 1999, the Company entered into an agreement with SJ to provide
assistance to the Company in locating, negotiating and ultimately closing a
transaction for the sale of the Company's entire remaining holdings of
Softworks, the sale of the Company's ComputerCOP technology and related
investment in NetWolves Corporation (Note 3 to the Consolidated Financial
Statements). The Company agreed to pay SJ 4.0% of the value of the
transactions. Accordingly, in the first quarter 2000, SJ earned $2,458,000
with respect to the Softworks transaction and $1,420,000 with respect to
the transaction with NetWolves Corporation.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 30th day of
April, 2001.
DIRECT INSITE CORP.
By: /s/ Warren Wright
______________________________________
Warren Wright, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on April 30 , 2001 the following persons in the
capacities indicated:
/s/ James A. Cannavino
__________________ Chairman of the Board
James A. Cannavino
/s/ Warren Wright
__________________ Chief Executive Officer
Warren Wright
/s/ George Aronson
__________________ Chief Financial Officer
George Aronson
/s/ Charles Feld
__________________ Director
Charles Feld
/s/ Dennis J. Murray
__________________ Director
Dennis J. Murray
/s/ Carla J. Stovall
__________________ Director
Carla J. Stovall