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As filed with the Securities and Exchange Commission on January 29, 2001
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 On
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 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 number: 0-22693
SYSCOMM INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-2889809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 Precision Drive
Shirley, New York 11967
(631) 205-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
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]
At January 26, 2001, the aggregate market value of the voting and
non-voting stock held by non-affiliates of the registrant was approximately
$1,541,312.
At January 26, 2001, 4,694,183 shares of Common Stock were outstanding.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A amends the Registrant's Annual Report
on Form 10-K for the year ended September 30, 2000 filed with the Securities and
Exchange Commission on December 29, 2000. This amendment replaces the
information previously incorporated by reference in Part III of the Form 10-K
with the actual text for Part III of the Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
Name Age Position Position Held Since
- --------------------------------------------------------------------------------------------------------
Garrett A. Sullivan 66 Chairman of the Board of Directors December 2000
David A. Loppert 46 Director, Chief Executive Officer December 2000
Anat Ebenstein 37 Director, President and Chief Operating Officer December 2000
Michael Krawitz 31 Vice President, Secretary and General Counsel December 2000
J. Robert Patterson 43 Vice President, Chief Financial Officer and December 2000
Treasurer
John C. Spielberger 31 Vice President, Sales and Marketing December 2000
Following is a summary of the background and business experience of the
directors and executive officers:
Garrett A. Sullivan: Mr. Sullivan was named Chairman and appointed to the
Board of Directors of the Company in December 2000. He is Vice Chairman of and
was, until January 2001, President and Chief Operating Officer of Applied
Digital Solutions, Inc., positions he held since March 1995. He was elected to
the Board of Directors of Applied Digital Solutions, Inc. in August 1995. He was
acting secretary of Applied Digital Solutions, Inc. from March 1995 to March
1996 and acting Chief Financial Officer from March 1995 to February 1997. From
1993 to 1994 he was an Executive Vice President of Envirobusiness, Inc. From
1988 to 1993, he served as president and chief operating officer of two
companies in the electronics and chemical industries which were owned by Philips
North America. He was previously a partner in The Bay Group, a merger and
acquisition firm in New Hampshire, from 1988 to 1993. From 1981 to 1988, Mr.
Sullivan was President of Granada Hospital Group, Burlington, Massachusetts. He
earned a Bachelor of Arts degree from Boston University in 1960 and an MBA from
Harvard University in 1962
David A. Loppert: Mr. Loppert joined the Company as Chief Executive Officer
and was appointed to the Board of Directors of the Company in December 2000 . He
is Senior Vice President of, and prior to November 2000 was Vice President,
Chief Financial Officer and Assistant Secretary of, Applied Digital Solutions,
Inc. which he joined in February 1997. From 1996 to 1997, Mr. Loppert was Chief
Financial Officer of Bingo Brain, Inc. From 1994 to 1996, he was Chief Financial
Officer of both C.T.A. America, Inc., and Ricochet International, L.L.C. Prior
to that he was Senior Vice President, Acquisitions and Due Diligence, of
Associated Financial Corporation. Mr. Loppert started his financial career with
Price Waterhouse in 1978, in Johannesburg, South Africa, before moving to their
Los Angeles Office in 1980 where he rose to the position of Senior Manager. He
holds Bachelor degrees in both Accounting and Commerce, as well as a Higher
Diploma in Accounting, all from the University of the Witwatersrand,
Johannesburg. Mr. Loppert was designated a Chartered Accountant (South Africa)
in 1980.
2
Anat Ebenstein: Ms. Ebenstein, 37, joined the Company as President and
Chief Operating Officer and was appointed to the Board of Directors of the
Company in December 2000. Since 1999, Ms. Ebenstein has served as President of
Applied Digital Solutions' Network Division, an IT services solutions provider
comprised of computer hardware, system integration services and consulting
firms. She has served as President of Information Products Center, Inc.,
acquired by the Company on December 14, 2000, since 1992.
Michael Krawitz: Mr. Krawitz joined the Company as Vice President and
Secretary in December, 2000. He is also Senior Vice President and Assistant
Secretary of Applied Digital Solutions, Inc. Mr. Krawitz joined Applied Digital
Solutions as Assistant Vice President and General Counsel in April 1999, and was
appointed Vice President and Assistant Secretary in December 1999. From 1994 to
April 1999, Mr. Krawitz was an attorney with Fried, Frank, Harris, Shriver &
Jacobson in New York. Mr. Krawitz earned a Bachelor of Arts degree from Cornell
University in 1991 and a juris doctorate from Harvard Law School in 1994.
J. Robert Patterson: Mr. Patterson joined the Company as Vice President,
Chief Financial Officer and Treasurer in December 2000. Since 1999, Mr.
Patterson has served as Vice President, Finance, of Applied Digital Solutions'
Network Division, an IT services solutions provider comprised of computer
hardware, system integration services and consulting firms. Mr. Patterson has
served as Vice President of Information Products Center, Inc., acquired by the
Company on December 14, 2000, since 1990. Mr. Patterson earned a Bachelor of
Arts Degree in Business Administration form Western Sate College of Colorado in
1979.
John C. Spielberger: Mr. Spielberger was appointed Vice President of Sales
and Marketing in December 2000. Prior thereto, Mr. Spielberger served as Vice
President of the Company's wholly owned subsidiary, Information Technology
Services, Inc. or InfoTech, and served as a Director of the Company from May
1994 until December 2000. Mr. Spielberger joined InfoTech as a sales specialist
in October 1992. From February 1992 through October 1992, Mr. Spielberger was a
marketing support representative for Lexmark International. Mr. Spielberger
earned a Bachelor of Science in Marketing from the Wallace School of Management,
Boston College in 1991.
Directorships
Mr. Sullivan is a director of Applied Digital Solutions, Inc.(NASDAQ NM:
ADSX). Mr. Loppert is a Director of ATEC Group, Inc. (AMEX: TEC). No other
directors hold directorships in any other company which has a class of
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an investment company
under the Investment Company Act of 1940.
Board Committees and Meetings
The Company has standing Audit and Compensation Committees of the Board of
Directors. The members of the committees are identified with the list of Board
nominees on the preceding pages.
The Audit Committee held 1 meeting during the fiscal year ended September
30, 2000. The function of the Audit Committee is to recommend annually to the
Board of Directors the appointment of the independent accountants of the
Company, discuss and review the scope and the fees of the prospective annual
audit and review the results thereof with the independent accountants, review
and approve non-audit services of the independent accountants, review compliance
with existing major accounting and financial policies of the Company and review
management's procedures and policies relative to the adequacy of the Company's
internal accounting controls.
3
The Compensation Committee held 1 meeting and acted by written counsel once
during the fiscal year ended September 30, 2000. The function of the
Compensation Committee is to make recommendations to the Board of Directors
concerning salaries and incentive compensation for the Company's executives and
employees.
The Board of Directors held 2 meetings during the fiscal year ended
September 30, 2000. During the year, all Directors attended 75% or more of the
Board of Directors' meetings and the Board Committees to which they were
assigned.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the officers and directors of
the Company and persons who own more than 10% of the Company's Common Stock to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish copies of all such reports to the Company.
The Company believes, based on its stock transfer records and other information
available to it, that all reports required under Section 16(a) were timely filed
during 2000.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company during each of the three fiscal years ended September 30, 2000 to the
Company's Chief Executive Officer and the three most highly paid Executive
Officers whose total cash compensation for such periods exceeded $100,000 (the
"Named Executives"):
Summary Compensation Table
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
----------------------------------- ---------------------- -------
Name and Principal Year Salary Other Annual Restricted All
Position ($) Bonus ($) Compen- Stock Options/ LTIP Other
sation ($) Awards SAR's Payouts Compen-
($) (#) (#) sation($)
- ----------------------------------- ---- -------- -------- ------------ ----------- -------- ------- ---------
David A. Loppert (1) 2000 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Director, Chief Executive 1999 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Officer 1998 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Anat Ebenstein (1) 2000 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Director, President, 1999 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Chief Operating Officer 1998 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
John H. Spielberger (2) 2000 $140,000 $ 12,500 $ 26,427(3) $ 0 0 0 $ 0
Former Chairman, President 1999 $126,000 $ 42,219 $ 26,427(3) $ 0 0 0 $ 0
and Chief Executive Officer 1998 $157,333 $ 15,204 $ 30,069(4) $ 0 0 0 $ 0
Dennis R. Wilson (5) 2000 $ 2,146 $ 0 $ 0 $ 0 0 0 $ 0
Former Vice President, Chief 1999 $117,500 $ 15,000 $ 0 $ 0 0 0 $ 0
Financial Officer & Secretary 1998 $137,667 $ 0 $ 0 $ 0 0 0 $ 0
Thomas J. Baehr (6) 2000 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Former Vice President and 1999 $ 90,728 $ 42,219 $ 1,722 $ 0 0 0 $ 0
Director 1998 $160,000 $ 15,204 $ 0 $ 0 0 0 $ 0
Norman M. Gaffney (7) 2000 $ 0 $ 0 $ 0 $ 0 0 0 $ 0
Former Vice President and 1999 $136,813 $ 0 $ 0 $ 0 0 0 $ 0
Director 1998 $140,000 $112,225 $ 0 $ 0 0 0 $ 0
4
<FN>
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(1) Joined the Company on December 14, 2000.
(2) Resigned as an officer and director of the Company and its subsidiary
effective December 14, 2000.
(3) Consists of expenses for a Company car ($719) and life insurance premiums
($25,708).
(4) Consists of expenses for a Company car ($719), life insurance premiums
($28,300), and administration fees on pension plan ($1,050).
(5) Resigned as an officer and director of the Company and its subsidiary
effective September 24, 1999.
(6) Resigned as an officer and director of the Company and its subsidiary
effective May 28, 1999.
(7) Resigned as an officer and director of the Company and its subsidiary
effective May 25, 1999.
</FN>
Option Grants in Last Fiscal Year
The following table contains information concerning the Company's grant of
Stock Options under the Company's 1998 Stock Option Plan to the named executive
officers during 2000:
Option Grants In Last Fiscal Year
Individual Grants
Name Number of % of Total Exercise Expiration Date Grant Date Present
Securities Options Granted Price Value ($) (2)
Underlying Options to Employees in ($/Sh)
Granted (#) (1) 2000
- --------------------- ------------------ --------------- -------- --------------- ------------------
David A. Loppert 0 -- -- -- --
Anat Ebenstein 0 -- -- -- --
John H. Spielberger 0 -- -- -- --
Dennis R. Wilson 0 -- -- -- --
Thomas J. Baehr 0 -- -- -- --
Norman M. Gaffney 0 -- -- -- --
John C. Spielberger 10,000 6.5% $0.875 August 3, 2005 $5,900
<FN>
- ----------------------
(1) Options granted under the 1998 Non-Qualified Stock Option Plan were
granted at an exercise price equal to the fair market value of the
Company's common shares on the grant date. These options are exercisable
on the grant date.
(2) Based on the grant date present value of $0.59 per option share which was
derived using the Black-Scholes option pricing model in accordance with
rules and regulations of the Securities Exchange Commission and not
intended to forecast future appreciation of the Company's common share
price. The Black-Scholes model was used with the following assumptions:
dividend yield of 0%; expected volatility of 110%; risk-free interest rate
of 5.83% - 6.22%; and expected lives of 4.13 years - 4.84 years.
</FN>
Aggregated Option Exercises in Last Fiscal Year and Year-End Values
The following table sets forth information concerning the exercise of stock
options by the named executives during the Company's fiscal year ended September
30, 2000, the number of options owned by the named executives and the value of
any in-the-money unexercised stock options as of September 30, 2000.
AGGREGATED FISCAL YEAR-END OPTION VALUES
Value of Unexercised
Number of Unexercised In-the-Money
Options Options at
at Fiscal Year End (#) Fiscal Year End ($)(1)
Shares Acquired -------------------------- ---------------------------
Name (on Exercise(#)) Value Received ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ---------------- ------------------ ----------- ------------- ----------- -------------
David A. Loppert (2) 0 $0 0 $0 $0
Anat Ebenstein (2) 0 $0 0 $0 $0
John H. Spielberger (3) 0 $0 2,250 750 $0 $0
Dennis R. Wilson (4) 0 $0 0 0 $0 $0
Thomas J. Baehr (5) 0 $0 0 0 $0 $0
Norman M. Gaffney (6) 0 $0 0 0 $0 $0
John C. Spielberger (7) 0 $0 11,500 500 $0 $0
<FN>
- ---------------------------------
(1) The value of the unexercised in-the-money
options at September 30, 2000 assumes a fair market value of $0.72, the
closing price of the Company's Common Stock as reported on the Nasdaq Small
Cap Stock Market on September 30, 2000. The values shown are net of the
option exercise price, but do not include deduction for taxes or other
expenses associated with the exercise of the option or the sale of the
underlying shares.
(2) Joined the Company on December 14, 2000.
(3) Resigned as an officer and director of the Company and its subsidiary
effective December 14, 2000.
(4) Resigned as an officer and director of the Company and its subsidiary
effective September 24, 1999.
(5) Resigned as an officer and director of the Company and its subsidiary
effective May 28, 1999.
(6) Resigned as an officer and director of the Company and its subsidiary
effective May 25, 1999.
(7) Appointed Vice President, Sales and Marketing, effective December 14, 2000
</FN>
Compensation Pursuant to Plans
Other than as disclosed above or in the "Compensation Committee Report on
Executive Compensation" below, the Company has no plans pursuant to which cash
or non-cash compensation was paid or distributed during the last fiscal year, or
is proposed to be paid or distributed in the future, to the individuals
described above.
Compensation of Directors
Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board. Directors who are not employees of
the Company received options to purchase 10,000 shares of Common Stock for each
year served on the Board and reimbursement of expenses incurred in connection
with attendance of Board and Committee Meetings.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Prior to the Company's initial public offering in June 1997, the Company
did not have a Compensation Committee of its Board of Directors. In June 1997,
the Company formed a Compensation Committee. Prior to the formation of the
Compensation Committee, decisions regarding compensation were made by John H.
Spielberger, the Company's former Chairman, President and Chief Executive
Officer, including entering into a two (2) year employment agreement between
himself and the Company, which agreement became effective June 17, 1997 and
expired by its terms on September 30, 1999. No new employment agreements have
been entered into between the Company and any executive officer. During the
Company's fiscal years ended September 30, 1998, 1999 and 2000, the Compensation
Committee made all decisions concerning compensation of executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Ownership of Equity Securities in the Company
The following table sets forth information regarding beneficial ownership
of the Company's Common Stock by each director and by each executive officer and
by all the directors and executive officers as a group as of January 26, 2001:
Percent of
Aggregate Number of Shares Outstanding
Name Beneficially Owned Shares
- ----------------------------------------- ---------------------------------- -------------------
Garrett A. Sullivan (1) 25,000 (4) *
David A. Loppert (1) 44,100 (4) *
Anat Ebenstein (1) 0 *
Michael Krawitz (1) 0 *
J. Robert Patterson (1) 0 *
John C. Spielberger (2) 23,267 (4) *
John H. Spielberger (3) 2,250 (4) *
Cornelia Eldridge (2) 33,750 (4) *
Lee Adams (2) 99,850 (4) 2.1%
Lawrence S. Brochin (2) 25,000 (4) *
All Directors and Executive Officers as 253,217 (4) 5.4%
a Group (10)
- -----------------------------------------
<FN>
* Represents less than 1% of the issued and outstanding shares of Common
Stock of the Company.
(1) Appointed an officer and/or director on December 14, 2000.
(2) Resigned as a director effective as of December 14, 2000.
(3) Resigned as an officer and director effective as of December 14, 2000.
(4) This table includes presently exercisable options. The following directors
and executive officers hold the number of exercisable options, as of
December 31, 2000, set forth following their respective names: Garrett A.
Sullivan - 0; David A. Loppert - 0; Anat Ebenstein - 0; John C. Spielberger
- 11,500; John H. Spielberger - 2,250; Cornelia Eldridge - 33,750; Lee
Adams - 63,750; Lawrence S. Brochin - 25,000; and all directors and
executive officers as a group - 136,250.
</FN>
Principal Shareholders
Set forth in the table below is information as of January 26, 2001 with
respect to persons known to the Company (other than the directors and executive
officers shown in the preceding table) to be the beneficial owners of more than
five percent of the Company's issued and outstanding Common Stock:
Number of Shares
Name and Address Beneficially Owned Percent Of Class
- ---------------------------------- -------------------- ----------------
Applied Digital Solutions, Inc.
400 Royal Palm Way, Suite 410
Palm Beach, Florida 33480 2,570,000 (1) 54.7%
(1) Based on Schedule 13D filed with the Securities and Exchange Commission on
December 26, 2000. Applied Digital Solutions, Inc., a Missouri corporation,
has sole voting and dispositive power as to 2,570,000 shares.
On December 14, 2000, pursuant to the terms of a Stock Purchase Agreement
between the selling shareholders described below and Applied Digital Solutions,
Applied Digital Solutions acquired approximately 54.7% of the issued and
outstanding common shares of the Company, resulting in a change in control of
the Company. Shares of the Company's common stock were sold by John H.
Spielberger, Catherine Spielberger and Bearpen Limited Partnership for $4.5
million, consisting of approximately 1.7 million shares of Applied Digital
Solutions common stock, valued at approximately $2.75 million, and approximately
$1.75 million in cash.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Changes in Control
There are no arrangements, known to the Company, including any pledge by
any person of securities of the Company, the operation of which may at a
subsequent date result in a change of control of the Company.
7
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the city of Palm
Beach, State of Florida, on January 29, 2001.
SYSCOMM INTERNATIONAL CORPORATION
By: /S/ DAVID A. LOPPERT
-------------------------------------
David A. Loppert,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/ GARRETT A. SULLIVAN Chairman of the Board of January 29, 2001
- -------------------------------- Directors
(Garrett A. Sullivan)
/S/ DAVID A. LOPPERT Chief Executive Officer, January 29, 2001
- -------------------------------- Assistant Secretary and
(David A. Loppert) Assistant Treasurer (Principal
Executive Officer)
/S/ ANAT EBENSTEIN President and Director January 29, 2001
- -------------------------------- (Principal Operating Officer)
(Anat Ebenstein)
/S/ J. ROBERT PATTERSON Vice President, Treasurer and January 29, 2001
- -------------------------------- Chief Financial Officer
(J. Robert Patterson) (Principal Accounting
Officer)
8
LIST OF EXHIBITS
(Item 14 (c))
Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation (incorporated
herein by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1 (File No. 333-25593) filed with the
Commission on April 22, 1997)
3.2 Amended and Restated By-Laws (incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1
(File No. 333-25593) filed with the Commission on April 22, 1997)
10.1 Inventory and Working Capital Financing Agreement, dated September
24, 1996 between the Company's subsidiary, Information Technology
Services, Inc., and IBM Credit Corporation (incorporated herein by
reference to Exhibit 10.1. to the Company's Registration Statement
on Form S-1/A (File No. 333-25593) filed with the Commission on
June 12, 1997)
10.2 Agreement for Wholesale Financing (Security Agreement), dated
November 27, 2000 between the Company's subsidiary, Information
Technology Services, Inc., and IBM Credit Corporation
10.3* 1998 Incentive Stock Option Plan (incorporated herein by reference
to Exhibit 10.1 to the Company's Registration Statement on Form S-1
(File No. 333-25593) filed with the Commission on April 22, 1997)
10.4* 1998 Incentive Stock Option Plan, as Amended (incorporated herein
by reference to Exhibit 99 to the Company's definitive Proxy
Statement filed with the Commission on December 27, 1999)
10.5* 1999 Employee Stock Purchase Plan (incorporated herein by reference
to Exhibit A to the Company's definitive Proxy Statement filed with
the Commission on December 28, 1998)
12.1 Statement re Computation of Ratios **
21.1 List of Subsidiaries **
23.1 Consent of Albrecht, Viggiano, Zureck & Company, P.C.
27.1 Financial Data Schedule **
- ---------------------
* Management contract or compensatory plan.
** Previously filed.
9