SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One):
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
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: 0-22945
THE A CONSULTING TEAM, INC.
(Exact Name of Registrant as Specified in Its Charter)
New York 13-3169913
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
200 Park Avenue South (212) 979-8228
New York, New York 10003 (Registrant's Telephone Number,
(Address of Principal Executive Offices) Including Area Code)
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 $.01 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 Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
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. / /
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
--- ---
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 21, 2004 was approximately $4,448,792 based on the
average of the bid and asked prices of the registrant's Common Stock on The
Nasdaq SmallCap Stock Market SM on such date.
As of April 21, 2004, there were 2,107,967 shares of the registrant's Common
Stock, $.01 par value per share, outstanding.
..
EXPLANATORY NOTE
This Amendment No. 1 to Annual Report on Form 10-K is filed with the
Securities and Exchange Commission solely for the purpose of revising and
restating the following items in their entirety (other than as expressly set
forth to the contrary herein). Such revisions include the information required
to be provided under Items 11 and 12 of Part III, which the Company planned to
incorporate by reference to its definitive proxy statement for the 2004 Annual
Meeting of Stockholders.
This Annual Report on Form 10-K contains forward-looking statements. Additional
written and oral forward-looking statements may be made by the Company from time
to time in Securities and Exchange Commission ("SEC") filings and otherwise. The
Company cautions readers that results predicted by forward-looking statements,
including, without limitation, those relating to the Company's future business
prospects, revenues, working capital, liquidity, capital needs, interest costs,
and income are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward-looking
statements due to risks and factors identified from time to time in the
Company's filings with the SEC including those discussed in this Report.
PART III
Item 11. Executive Compensation.
The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Chairman, Chief Executive Officer and President during
the years ended December 31, 2003, 2002 and 2001, and the Company's Chief
Financial Officer and Secretary for the year ended December 31, 2003, 2002 and
2001. No other executive officer of the Company received a total salary and
bonus of $100,000 or more for the year ended December 31, 2003. Accordingly, no
information is reported for such persons. No options were granted in 2003, 2002
and 2001 to the Company's Chief Executive Officer. No options were granted to
the Company's Chief Financial Officer in 2003. Options were granted to the
Company's Chief Financial Officer in 2002 and 2001.
Summary of Compensation Table
Long-Term
Compensation
Annual Compensation Awards
---------------------------------------------------- ----------------
Securities
Fiscal Other Annual Underlying
Name and Principal Position Year Salary Bonus Compensation (1) Options
- ------------------------------------------------------------------------------------------------------------------------------
Shmuel BenTov
Chairman, Chief Executive Officer 2003 $240,000 $ - $ 7,601 -
2002 $240,000 $ - $26,343 -
2001 $300,000 $ - $ 4,601 -
- ------------------------------------------------------------------------------------------------------------------------------
Richard D. Falcone 2003 $180,000 $21,000 $ - -
Chief Financial Officer 2002 $186,000 $ - $ - 7,500
2001(2) $182,000 $ - $ - 17,500
- ------------------------------------------------------------------------------------------------------------------------------
(1) Includes payments with respect to life insurance, car allowance and health
insurance.
(2) Mr. Richard D. Falcone, Chief Financial Officer of the Company as of
December 31, 2001, was an advisor to the Company from January 1, 2001 to
March 31, 2001. On April 1, 2001, Mr. Falcone became an employee of the
Company. On July 1, 2001, Mr. Falcone became the Chief Financial Officer
of the Company. This information includes his total compensation from
January 1, 2001 through December 31, 2001.
Aggregated Option Exercises In the Year Ended December 31, 2003 and
Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options Held at the-Money Options at
Acquired on Value December 31, 2003 December 31, 2003
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
Shmuel BenTov - - 7,500/0 $0/$0
- ---------------------------------------------------------------------------------------------------------------------
Richard D. Falcone - - 22,500/2,500 $81,900/$9,100
- ---------------------------------------------------------------------------------------------------------------------
Neither Mr. BenTov nor Mr. Falcone exercised any options in the year
ended December 31, 2003.
Director Compensation
All of the outside directors of the Company are compensated for their
services provided as a director. Beginning January 1, 2002 until November 6,
2002, each outside director was paid $1,000 per quarter. Starting November 6,
2002, each outside director is paid $2,000 per quarter and in addition all
reasonable expenses relating to the business of the Company are paid by the
Company. Pursuant to the Company's stock option plan, each non-director is
automatically granted stock options to purchase 250 shares of Common Stock on
the date of initial appointment or election as a non-employee director and stock
options to purchase an additional 250 shares of Common Stock on each date of
re-election, in each case at fair market value on the date of grant. If the Plan
Restatement is approved, the Board of Directors in its discretion may grant
stock options to purchase up to 5,000 shares of Common Stock per calendar year
to each non-employee director at fair market value on the date of grant.
Employment Agreements
On August 7, 1997, the Company and Shmuel BenTov entered into a
two-year employment agreement providing for his employment as the Company's
Chairman of the Board, President and Chief Executive Officer with an annual base
salary of $250,000. Mr. BenTov and the Company agreed during the two-year term
of his employment agreement not to (i) increase Mr. BenTov's compensation
(including base salary and bonus) or (ii) otherwise amend the terms of Mr.
BenTov's employment agreement. The employment agreement provides that in the
event of termination: (i) without cause, Mr. BenTov will receive a lump sum
severance allowance in an amount equal to 2.00 times his then annual base
salary; (ii) as a result of the disability or incapacity of Mr. BenTov, Mr.
BenTov will be entitled to receive his then annual base salary during the two
years following the termination notice; and (iii) as a result of the death of
Mr. BenTov, Mr. BenTov's estate will be entitled to receive a lump sum payment
equal to his then annual base salary. The agreement includes a two-year
non-compete covenant commencing on the termination of employment. In August
1999, a new employment agreement was entered into by the Company and Mr. BenTov.
This agreement expired on December 31, 2001. The agreement has essentially
identical items to the prior employment agreement, with the exception of an
increase in Mr. BenTov's annual salary to $300,000. In January, 2002, a new
employment agreement was entered into by the Company and Mr. BenTov. This
agreement expires on December 31, 2004. The agreement has essentially identical
items to the prior employment agreements.
Effective September 11, 2001, the Company and Richard D. Falcone
entered into an employment agreement providing for his employment as the
Company's Chief Financial Officer at an initial base salary of $200,000. The
employment agreement provides that in the event of termination without cause,
Mr. Falcone will receive a severance allowance in an amount equal to three
months of his then annual base salary. The agreement also provides that in the
event of termination due to a change of control, Mr. Falcone will receive a
severance allowance in an amount equal to six months of his then annual base
salary. The agreement includes a one-year non-compete covenant commencing on the
termination of employment. Pursuant to the employment agreement, Mr. Falcone
received the option to purchase an aggregate of 36,000 shares of Common Stock at
$.33 per share. The options expire in ten years from the date of grant. Mr.
Falcone's employment agreement provides for annual automatic renewal unless
cancelled within 60 days prior to the end of the renewal term.
Compensation Committee Interlocks and Insider Participating
Shmuel BenTov, Chairman of the Board and Chief Executive Officer of
TACT, served as a member of the Compensation Committee during 2002. No other
interlocks or insider participation required to be disclosed under this caption
occurred during 2002. Mr. BenTov resigned from the Compensation Committee in
November 2002.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee of the Board of Directors has responsibility
for establishing and monitoring compensation programs of the Company's executive
officers, which include the Company's Chief Executive Officer and Chief
Financial Officer. The Compensation Committee is composed of Reuven Battat and
Steven S. Mukamal. Robert E. Duncan served on the committee from May 2002 until
April 22, 2003, when he resigned from the Board of Directors. Shmuel BenTov
served on the Committee through August 2002 and William Miller served on the
Compensation Committee from August 2002 through February 2003 when he resigned
from the Compensation Committee. Compensation arrangements for the Company's
executive officers are usually negotiated on an individual basis between the
Chief Executive Officer and each executive. Compensation arrangements for the
Company's Chief Executive Officer are negotiated between the other members of
the Board of Directors and Mr. BenTov. Although these arrangements are, by and
large, subjective, objective measurements such as industry comparisons,
compensation history and other significant factors were also taken into account.
From the Company's point of view, these compensation arrangements are invariably
designed to attract talented executives to a challenging and demanding
environment and to retain such executives for the long-term benefit of the
Company. In furtherance of such goals and to provide incentives to enhance
stockholder value, the Company's compensation arrangements with its executive
officers often provide for equity participation in the Company. The Company
believes the interests of its shareholders are well served if part of the
compensation of the Company's executives is tied to the performance of the
Company.
The compensation packages of the Chief Executive Officer and Chief
Financial Officer are set forth in employment agreements with the Company. See
"Employment Agreements." The Company's executive officers are entitled to
participate in a bonus program that is administered by the non-employee
directors of the Compensation Committee.
In determining bonus compensation, the Compensation Committee seeks to
create a direct link between the bonus payable to each executive officer and the
financial performance of the Company as a whole. The factors which may be
considered in determining the amount of individual bonus awards include earnings
per share targets and individual performance compared to predetermined
strategic, financial and operational objectives. For the year ended December 31,
2003, there was a $21,000 cash bonus paid to the Chief Financial Officer and
there was no cash bonus paid to the Chief Executive Officer. For the year ending
December 31, 2004, the Chief Executive Officer may be entitled to receive a cash
bonus not to exceed one percent of the Company's total revenues for the year
subject to approval by the non-employee directors of the Compensation Committee
and further subject to the Company meeting certain financial performance
criteria.
The Compensation Committee:
Steven S. Mukamal, Chairman
Reuven Battat
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Equity Compensation Plan Information
The information presented in the table below is as of December 31, 2003.
- ------------------------------------------------------------------------------------------------------------
Number of securities
Number of securities remaining available for
to be issued Weighted-average future issuance under
upon exercise of exercise price of equity compensation plans
Plan outstanding options, outstanding options, (excluding securities
Category warrants and rights warrants and rights reflected in column (a) )
- -------- ------------------- ------------------- -------------------------
( a ) ( b ) ( c )
- ------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security
holders 158,521 $3.27 141,479
- ------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders 0 $0.00 0
- ------------------------------------------------------------------------------------------------------------
Total 158,521 $3.27 141,479
- ------------------------------------------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 31, 2004, certain
information regarding the beneficial ownership of our Common Stock, Series A
Preferred Stock and Series B Preferred Stock by (i) each of the Company's
directors, (ii) each of the executive officers named in the Summary Compensation
Table, (iii) all directors and officers of the Company as a group and (iv) each
person known by the Company to own beneficially more than 5% of the Common
Stock. As of March 31, 2004, 2,107,967 shares of Common Stock, 530,304 shares of
Series A Preferred Stock and 41,311 shares of Series B Preferred Stock were
outstanding. Unless otherwise indicated in the table below, each person or
entity named below has an address in care of the Company's principal office. All
share amounts are rounded to the nearest whole share.
- ---------------------------------------------------------------------------------------------------------------
Amount and Nature
of Beneficially Percentage
Title of Class Name of Shareholder Ownership (1) of Class
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Shmuel BenTov, Chairman, Chief Executive 1,032,198(2) 45.9%
Officer and President
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Sanjeev Welling 137,104(3) 6.5%
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Piotr Zielczynski 136,770(4) 6.5%
- ---------------------------------------------------------------------------------------------------------------
Common Mr. William P. Miller, Director 24,476(5) 1.2%
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Richard D. Falcone, Chief Financial Officer 23,000(6) 1.1%
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Steven S. Mukamal, Director 7,750(7) *
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Robert Duncan, Director 4,525(8) *
- ---------------------------------------------------------------------------------------------------------------
Common Mr. Reuven Battat, Director 1,500(9) *
- ---------------------------------------------------------------------------------------------------------------
Common All current directors and executive officers as a 1,093,449(10) 48.1%
group (6 persons)
- ---------------------------------------------------------------------------------------------------------------
Series A Preferred Mr. Shmuel BenTov, Chairman, Chief Executive 530,304 100%
Stock Officer and President
- ---------------------------------------------------------------------------------------------------------------
Series A Preferred All directors and executive officers as a group (1 530,304 100%
Stock person
- ---------------------------------------------------------------------------------------------------------------
Series B Preferred Mr. Yosi Vardi (11) 41,311 100%
Stock
- ---------------------------------------------------------------------------------------------------------------
(1) As used in the tables above, "beneficial ownership" means the sole or
shared power to vote or direct the voting or to dispose or direct the
disposition of any security. A person is deemed to have "beneficial
ownership" of any security that such person has a right to acquire within
60 days of March 31, 2004. Any security that any person named above has
the right to acquire within 60 days is deemed to be outstanding for
purposes of calculating the ownership of such person but is not deemed to
be outstanding for purposes of calculating the ownership percentage of any
other person. Unless otherwise noted, each person listed has the sole
power to vote, or direct the voting of, and power to dispose, or direct
the disposition of, all such shares.
(2) Includes: (i) an aggregate of 27,454 shares of common stock owned by Mr.
BenTov's two minor children, for whom he acts as custodian; (ii) 3,750
shares of common stock owned by Mr. BenTov's spouse; (iii) 7,500 shares of
common stock issuable upon exercise of currently exercisable options and
(iv) 132,576 shares of common stock currently issuable upon conversion of
530,304 shares of Series A Preferred Stock.
(3) Includes 2,917 shares of common stock issuable upon exercise of currently
exercisable options. Based upon a Schedule 13G filed with the SEC on
August 21, 2002. Mr. Welling's address is 31 Winding Brook Way, Edison,
New Jersey 08820.
(4) Includes 2,583 shares of common stock issuable upon exercise of currently
exercisable options. Based upon a Schedule 13G filed with the SEC on
August 21, 2002. Mr. Zielczynski's address is 33 Glen Rock Road, Cedar
Grove, New Jersey 07009.
(5) Includes (i) 20,201 shares owned by a corporation of which Mr. Miller
serves as an officer and a director, over which Mr. Miller may be deemed
to have voting and/or investment power and of which Mr. Miller disclaims
beneficial ownership and (ii) 250 shares of common stock issuable upon
exercise of currently exercisable options.
(6) Includes 22,500 shares of common stock issuable upon exercise of currently
exercisable options.
(7) Consists of 1,500 shares of common stock issuable upon exercise of
currently exercisable options and 6,250 shares of common stock over which
Mr. Mukamal exercises investment power.
(8) Includes 500 shares of common stock issuable upon exercise of currently
exercisable options. Mr. Duncan resigned from the Board of Directors
effective April 22, 2004.
(9) Consists of 1,500 shares of common stock issuable upon exercise of
currently exercisable options.
(10) Includes 33,762 shares of common stock issuable upon exercise of currently
exercisable options and 132,576 shares of common stock issuable upon
conversion of 530,304 shares of Series A Preferred Stock.
(11) Mr. Vardi's address is 12 Shamir Street, Tel Aviv 69693, Israel.
*Indicates less than 1%.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Exhibit
Number Description of Exhibits
- ------ -----------------------
31.1 Certification of Chief Executive Officer pursuant to Section 302
of Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302
of Sarbanes-Oxley Act of 2002.
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.
THE A CONSULTING TEAM, INC.
By: /s/ Shmuel BenTov
---------------------
Shmuel BenTov,
Chief Executive Officer
Date: April 21, 2004
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.
Signature Title Date
- --------------------------------------- -------------------------------------------------- ------------------------
/s/ Shmuel BenTov Chief Executive Officer and Director April 21, 2004
- --------------------------------- (Principal Executive Officer)
Shmuel BenTov
/s/ Richard D. Falcone Chief Financial Officer April 21, 2004
- --------------------------------- (Principal Financial and Accounting Officer)
Richard D. Falcone
/s/ Reuven Battat Director April 21, 2004
- ---------------------------------
Reuven Battat
/s/ Steven Mukamal Director April 21, 2004
- ---------------------------------
Steven Mukamal
/s/ William Miller Director April 21, 2004
- ---------------------------------
William Miller