sec document

10KSB/A 1 form10ksba05190_05312002.htm AMENDMENT TO FORM 10KSB sec document

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB/A

( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2002
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to

Commission File No. 0-5622

PUROFLOW INCORPORATED
---------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 13-1947195
---------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)

10616 Lanark Street, Sun Valley, California 91352
---------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (818) 504-4000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $0.15

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-KSB or any amendment to
this Form 10-KSB. [X]

Registrant's revenues for the fiscal year ended January 31, 2002 were
approximately $7,236,000.

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant was approximately $2,500,583 as of March 31, 2002, based upon the
closing price on the NASDAQ Electronic Bulletin Board System reported for such
date. Shares of Common Stock held by each Officer and Director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such person may under certain circumstances be deemed to be affiliates. The
determination of an affiliate status is not necessarily a conclusive
determination for other purposes.

Number of shares of Common Stock outstanding as of March 31, 2002: 494,306

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding the directors and
the executive officers of the Company:

Name Age Positions with the Company
---- --- --------------------------
Michael H. Figoff 59 Director, CEO and President
Travis Bradford 30 Director, Chairman of the Board
Warren G. Lichtenstein 37 Director
Glen Kassan 58 Director
Dr. Tracy Kent Pugmire 71 Director
Josh Schechter 29 Director
Robert A. Smith 61 Director
Wayne Conner 54 Vice President of Engineering
Dale Livingston 63 Vice President of Operations

The business experience of each of the persons listed above for at least
five years is as follows:

Michael H. Figoff has served as President and Chief Executive Officer and
Director of the Company since May 1995. Mr. Figoff joined the Company in 1988
and has previously served as its Executive Vice President and Director of
Marketing. Prior to joining the Company, Mr. Figoff served in various capacities
with Lockheed Martin, Textron, Fairchild and Ferranti International. Mr. Figoff
received his B.S. degree in Business Administration from Woodbury University in
1973.

Travis Bradford has been a Director of the Company since February 1, 2001
and Chairman of the Board of Directors since August 28, 2001. Mr. Bradford has
been a strategic and operational consultant for over 10 years. He has been a
Vice President of Steel Partners Services, Ltd., a management and advisory
company that provides services to Steel Partners II, L.P. ("Steel"), since June
1999. From March 1997 to May 1999 he was a member of Holding Capital Group, LLC,
an equity investment group. Mr. Bradford received his B.B.A. degree in Finance
from Georgia State University in 1992 and his M.B.A. degree in Finance and
Management from Stern School of Business at New York University in 1996. He also
attended the Ph.D. program at the University of Chicago studying finance and
economics.

Warren G. Lichtenstein has served as a Director of the Company since
September 16, 1999. Mr. Lichtenstein has served as the Chairman of the Board,
Secretary and the Managing Member of Steel Partners, L.L.C., the general partner
of Steel, since January 1, 1996. Prior to such time, Mr. Lichtensten was the
Chairman and a Director of Steel Partners, Ltd., the general partner of Steel
Partners Associates, L.P., which was the general partner of Steel from 1993
until prior to January 1, 1996. Mr. Lichtenstein was the acquisition/risk
arbitrage analyst at Ballantrae Partners, L.P., a private investment partnership
formed to invest in risk arbitrage, special situations and undervalued
companies, from 1988 to 1990. Mr. Lichtenstein has served as a Director of
WebFinancial Corporation, a consumer and commercial lender, since 1996 and as
its President and Chief Executive Officer since December 1997. He served as a
Director and the Chief Executive Officer of Gateway Industries, Inc., a provider
of database development and Web site design and development services, since 1994
and as the Chairman of the Board since 1995. Mr. Lichtenstein has served as a
Director and the President and Chief Executive Officer of CPX, Corp., a
financial advisory and management company since June 1999 and as its Secretary
and Treasurer since May 2001. He has also served as Chairman of the Board of
Directors of Caribbean Fertilizer Group Ltd., a private company engaged in the
production of agricultural products in Puerto Rico and Jamaica, since June 2000.
Mr. Lichtenstein is a Director of SL Industries, Inc., a manufacturer and
marketer of Power and Data Quality systems and equipment. Mr. Lichtenstein has
served as Chairman of the Board and as Chief Executive Officer of SL Industries,
Inc. since January 24, 2002 and February 4, 2002, respectively. Mr. Lichtenstein
is also a Director of the following publicly held companies: TAB Products Co., a
document management company; Tandycrafts, Inc., a manufacturer of picture frames
and framed art; United Industrial Corporation, a designer and producer of
defense, training, transporation and energy systems; ECC International Corp., a
manufacturer and marketer of computer-controlled simulators for training
personnel to perform maintenance and operator procedures on military weapons;
and US Diagnostic Inc., an operator of outpatient medical diagnostic imaging and
related facilities.

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Glen Kassan has been a Director of the Company since August 28, 2001. Mr.
Kassan has served as Executive Vice President of Steel Partners Services, Ltd.,
a management and advisory company, since June 2001 and Vice President since
October 1999. Steel Partners Services, Ltd. provides management services to
Steel and other affiliates of Steel. Mr. Kassan has served as Vice President,
Chief Financial Officer and Secretary of Gateway Industries, Inc., a provider of
database development and Web site design and development services, since June
2000. He has also served as Vice President, Chief Financial Officer and
Secretary of WebFinancial Corporation, a commercial and consumer lender, since
June 2000. Mr. Kassan has served as Vice Chairman of the Board of Directors of
Caribbean Fertilizer Group Ltd., a private company engaged in the production of
agricultural products in Puerto Rico and Jamaica, since June 2000. Mr. Kassan is
a Director and has served as President of SL Industries, Inc., a manufacturer
and marketer of Power and Data Quality systems and equipment for industrial,
medical, aerospace and consumer applications, since January 2002 and February
2002, respectively. From 1997 to 1998, Mr. Kassan served as Chairman and Chief
Executive Officer of Long Term Care Services, Inc., a privately owned healthcare
services company which Mr. Kassan co-founded in 1994 and initially served as
Vice Chairman and Chief Financial Officer. Mr. Kassan is currently a Director of
Tandycrafts, Inc., a manufacturer of picture frames and framed art and the
Chairman of the Board of US Diagnostic Inc., an operator of outpatient
diagnostic imaging.

Dr. Tracy Kent Pugmire has served as a Director of the Company since June
1991. Since April 1992, Dr. Pugmire has served as an independent technical
consultant. Dr. Pugmire currently provides consulting services to Spincraft, a
Division of Standex International, and is involved with the design and
fabrication of the X-33 and X-34 rocket vehicles. Previously, Dr. Pugmire was
Executive Vice President of ARDE Inc. and worked as a Program Manager for
several companies including TRW Space Systems Division, Technion Inc., AVCO
Missile and Space Systems (now a division of Textron), General Electric Space
Sciences Laboratory, and Boeing Propulsion and Mechanical Systems Department.

Josh Schechter has been a Director of the Company since August 28, 2001.
Mr. Schechter has served as an Associate of Steel Partners Services, Ltd. since
July 2001. From March 1998 to June 2001, Mr. Schechter was an Associate in the
corporate finance group at Imperial Capital, LLC, an investment banking firm.
From August 1997 to February 1998, he was a Senior Analyst at Leifer Capital,
Inc., an investment banking firm. From January 1996 to June 1997, Mr. Schechter
was a Tax Consultant with Ernst & Young LLP. Mr. Schechter received his B.B.A.
and M.A. in Professional Accounting from the University of Texas at Austin in
1995.

Robert A. Smith has served as a Director of the Company since July 1994.
Mr. Smith had been President of Microsource Incorporated, a subsidiary of
Giga-tronics, from October 1998 until May 2001 and currently serves as
Microsource's Vice Chairman. Previously, Mr. Smith served as President of the
Industrial Products Group of Haskel International Inc. from February 1995 to
January 1998; President and Chief Executive Officer of Industrial Tools Inc.
from January 1994 to February 1995; President of Engineered Filtration Company
from October 1992 to January 1994; President of Puroflow Corporation, a
wholly-owned subsidiary of the Company, from February 1991 to October 1992; and
President of RTS Systems Incorporated from May 1988 to February 1991, when the
company was acquired by Telex Communications, Inc. Mr. Smith served as President
of Purolator Technologies Inc. from 1980 to 1988 and served as the General
Manager of the Filter Division of HR Textron Inc. from 1964 to 1980.

Wayne Conner has over 30 years of filtration experience and has been the
Vice President of Engineering of the Company since July 1997. From 1990 to 1994,
Mr. Conner served as Senior Project Engineer - New Product Development for the
Hydraulic Filter Division of Parker Hannifin Corporation. Mr. Conner also served
in various capacities with Purolator Technologies Inc. Mr. Conner received his
B.S. degree in Mechanical Engineering from Wayne State University in 1971.

Dale Livingston has been the Vice President of Operations of the Company
since February 1998. From August 1995 until February 1998, Mr. Livingston served
as Director of Operations of the Company, and from October 1989 until August
1995, he served as Production Manager of the Company. Mr. Livingston previously
served in various capacities with Parker Hannifin Corporation, Hydraulic
Research/Textron, Talley Corporation, The Marquardt Company and Teleflex Control
Systems.

Director Compensation

Each outside director of the Company receives a $2,500 annual fee, plus
$300 for each formal meeting attended. Directors are also reimbursed for
reasonable expenses actually incurred in connection with attending each formal
meeting of the Board of Directors or any committee thereof. The Company's
outside directors are currently Messrs. Bradford, Lichtenstein, Kassan,
Schechter and Smith and Dr. Pugmire.

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Compliance With Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who beneficially own more than 10% of the
Company's Common Stock (collectively, the "Reporting Persons") to file with the
Commission (and, if such security is listed on a national securities exchange,
with such exchange), various reports as to ownership of such Common Stock. Such
Reporting Persons are required by Commission regulations to furnish the Company
with copies of all Section 16(a) reports they file. Based solely upon a review
of copies of Section 16(a) reports and representations received by the Company
from Reporting Persons, and without conducting any independent investigations of
its own, the Company believes that no Reporting Person failed to timely file
Forms 3, 4, and 5 with the Commission during the fiscal year ended January 31,
2002.

ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation Table

The following summary compensation table sets forth, for the fiscal years
indicated, the aggregate compensation paid to or earned by the President and
Chief Executive Officer of the Company and the four most highly compensated
executive officers of the Company (other than the President and Chief Executive
Officer) whose total annual salaries and bonuses exceeded $100,000 for the
fiscal years ended January 31, 2002, 2001 and 2000. Please note that the
executive officers identified are collectively referred to as the "Named
Executive Officers".

Long-Term
Compensation
Annual Compensation Awards
Securities
Name and Fiscal Underlying All Other
Principal Position Year Salary ($) Bonus ($) Options/SARs Compensation $ (1)
------------------ ---- ---------- --------- ------------ -------------------

Michael H. Figoff 2002 165,000 - - 28,657
President and Chief 2001 165,000 - - 27,101
Executive Officer 2000 165,000 - - 22,894

Wayne Conner 2002 113,990 - - 8,215
Vice President of 2001 106,391 - - 7,813
Engineering 2000 103,858 - - 7,849

Dale Livingston 2002 108,544 - - 6,828
Vice President of 2001 102,400 - - 6,554
Operations 2000 99,542 - - 6,590

(1) Represents Company-reimbursed automobile expenses of such executive and
life and disability insurance premiums paid by the Company.

Option/SAR Grants in Fiscal Year

No options were granted to any of the Named Executive Officers during the
fiscal year ended January 31, 2002.

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values

The following table provides certain information regarding stock option
ownership and exercises by the Named Executive Officers, as well as the number
and assumed value of exercisable and unexercisable options held by those persons
at January 31, 2002.

Number of Securities Value of Unexercised In
Underlying Unexercised The Money Options/SARs
Name Options/SARs at 01/31/02 at 01/31/02($)(1)
---- ------------------------ ----------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Michael Figoff 3,667 - - -
Wayne Conner 1,400 133 $816 -
Dale Livingston 734 266 - -

(1) Value of unexercised "in-the-money" options is equal to the difference
between the closing bid price per share of the Common Stock on the OTC
Bulletin Board at January 31, 2002 ($6.20) and the option exercise price
per share multiplied by the number of shares subject to options.

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Senior Executive Bonus Plan

The Compensation Committee developed and approved a senior executive bonus
plan on April 4, 2002. The senior executive bonus plan has specific performance
targets. Bonuses are to be paid under the bonus plan only if performance goals
that were set at the beginning of the fiscal year are achieved by the end of the
fiscal year. Accordingly, the actual bonuses paid will vary depending on actual
performance. In general, the performance goals set at the beginning of the
fiscal year were linked to factors such as annual revenue, earnings before
interest, taxes, depreciation and amortization (EBITDA) and equity. There was no
such senior executive bonus plan in fiscal year 2002.

2001 Incentive Stock Option Plan

In August 2001, the Board of Directors adopted and the stockholders
approved the 2001 Incentive Stock Option Plan (the "2001 Option Plan"). The 2001
Option Plan was authorized to issue options to purchase a maximum of 33,333
shares of Common Stock. The maximum number of shares may be adjusted in certain
events, such as a stock split, reorganization or recapitalization. Employees
(including officers and Directors who are employees) of the Company or its
subsidiaries are eligible to receive incentive stock options. In the event
incentive stock options are granted, the aggregate fair market value of the
Common Stock issuable under such options for each optionee during any calendar
year cannot exceed $100,000. This limit does not apply to non-qualified options.
To the extent that an incentive stock option exceeds the $100,000 threshold, the
excess will be treated as a non-qualified option.

The Company will receive no monetary consideration for the grant of options
under the 2001 Option Plan. In the case of an incentive stock option, the
exercise price cannot be less than the fair market value (as defined in the 2001
Option Plan) of the Common Stock on the date the option is granted. If the
optionee is a stockholder who beneficially owns 10% or more of the outstanding
Common Stock, the exercise price of incentive stock options may not be less than
110% of the fair market value of the Common Stock. The term of an option cannot
exceed ten years; provided, however, that the term of options granted to owners
of 10% or more of the outstanding shares of Common Stock cannot exceed five
years.

The 2001 Option Plan will terminate automatically and no options may be
granted after July 19, 2011 (the "Termination Date"); provided, however, that
the 2001 Option Plan may be terminated by the Board of Directors at any time
prior to the Termination Date. Termination of the 2001 Option Plan will not
affect options that were granted prior to the Termination Date.

As of January 31, 2002, there were no options granted under the 2001 Option
Plan.

1991 Incentive Stock Option Plan

In 1991, the Board of Directors adopted and the stockholders approved the
1991 Incentive Stock Option Plan (the "1991 Option Plan"). Under the 1991 Option
Plan, the maximum number of shares of Common Stock that may be subject to
options may not exceed an aggregate of 33,333 shares. The maximum number of
shares may be adjusted in certain events, such as a stock split, reorganization
or recapitalization. Employees (including officers and directors who are
employees) of the Company or its subsidiaries are eligible to receive incentive
stock options, but may receive nonqualified options. Options may also be granted
to other persons, provided that such options shall be non-qualified options. In
the event of incentive options, the aggregate fair market value of the Common
Stock with respect to which such options become first exercisable by the holder
during any calendar year cannot exceed $100,000. This limit does not apply to
non-qualified options. To the extent an option that otherwise would be an
incentive option exceeds this $100,000 threshold, it will be treated as a
non-qualified option.

This plan was terminated upon consummation of the 2001 Option Plan. As of
January 31, 2002, there were options for 12,507 shares held and options for
10,868 shares available for exercise.

Employment Agreements

On March 1, 1993, the Company entered into an employment agreement with
Michael Figoff pursuant to which Mr. Figoff agreed to serve as the Executive
Vice President of the Company for a term of five years at an annual base salary
of $95,000. Effective February 14, 1994, Mr. Figoff's annual base salary was
increased to

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$104,500. Mr. Figoff was appointed President of the Company in February 1995,
and was appointed President and Chief Executive Officer in May 1995. In April
1997, Mr. Figoff's annual base salary was increased to $165,000. On June 9,
1998, the Company extended Mr. Figoff's employment agreement for a term of five
years at an annual base salary of $165,000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of May 15, 2002
regarding the beneficial ownership of Common Stock by (A) each person known by
the Company to own beneficially more than five percent of the Common Stock, (B)
each director and director nominee of the Company, (C) each of the "Named
Executive Officers" (as defined in "Executive Compensation - Summary
Compensation Table"), and (D) all executive officers, directors and director
nominees of the Company as a group. Unless otherwise indicated, the address of
each person named in the table below is c/o Puroflow Incorporated, 10616 Lanark
Street, Sun Valley, California 91352.

Number of Shares Percentage
Beneficially Beneficially
Name Owned(1) Owned
---------- ------------
Steel Partners II, L.P. 175,840(2) 35.6%
Warren G. Lichtenstein 175,840(2) 35.6%
David S. Nagelberg 30,623(3) 6.2%
Michael H. Figoff 18,534(4) 3.7%
Robert A. Smith 1,033(5) *
Dale Livingston 6,453(6) 1.3%
Dr. Tracy Kent Pugmire 3,201(7) *
Wayne Conner 4,733(8) *
Travis Bradford -(2) *
Glen Kassan -(2) *
Joshua Schechter -(2) *
All directors and executive officers
as a group (nine persons) 209,794 41.3%

* Less than 1 %
(1) As used in this table, a beneficial owner of a security includes any
person who, directly or indirectly, through contract, arrangement,
understanding, relationship or otherwise has or shares (i) the power to
vote, or direct the voting of, such security or (ii) investment power
which includes the power to dispose, or to direct the disposition of,
such security. In addition, a person is deemed to be the beneficial owner
of a security if that person has the right to acquire beneficial
ownership of such security within 60 days of the date shown above.
(2) Based upon a Form 4, filed with the Securities and Exchange Commission
(the "Commission") by the Steel Parties. The business address of Steel
Partners and Messrs. Lichtenstein, Bradford, Kassan and Schechter is 150
East 52nd Street, 21st Floor, New York, New York 10020.
(3) Based upon a Schedule 13G filed with the Commission by Mr. Nagelberg.
Includes 6,617 shares owned by The Nagelberg Family Trust over which Mr.
Nagelberg and his spouse, as trustees, share voting and dispositive
power. The business address of Mr. Nagelberg is c/o M.H. Meyerson & Co.,
Inc., P.O. Box 2142, Rancho Santa Fe, California 92067-2142.
(4) Includes (a) options to purchase 5,667 shares of Common Stock, all of
which are fully vested, and (b) 533 shares of Common Stock owned by Mr.
Figoff's spouse. Mr. Figoff disclaims beneficial ownership of the shares
owned by his spouse.
(5) Includes (a) options to purchase 667 shares of Common Stock, all of which
are fully vested, and (b) 366 shares of Common Stock owned jointly by Mr.
Smith and his spouse.
(6) Includes options to purchase 3,000 shares of Common Stock, of which 1,000
are fully vested.
(7) Includes options to purchase 534 shares of Common Stock, all of which are
fully vested.
(8) Includes options to purchase 3,666 shares of Common Stock, of which 1,666
are fully vested.

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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On February 17, 2000, the Board of Directors announced a plan to retire
61,333 shares of Common Stock in exchange for the cancellation of Notes received
by Puroflow from certain members of the Board of Directors, officers and
employees. The Company cancelled Notes in the aggregate amount of $548,272 in
exchange for 48,735 shares of Common Stock.

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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.

PUROFLOW INCORPORATED

By: /s/Michael H. Figoff May 30, 2002
-------------------------------------------
Michael H. Figoff
President/Chief Executive Officer
Director

Pursuant to the requirement 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 date indicated.

By: /s/Michael H. Figoff May 30, 2002
-------------------------------------------
Michael H. Figoff
President/Chief Executive Officer
Director

By: /s/Travis Bradford May 30, 2002
-------------------------------------------
Travis Bradford
Chairman of the Board

By:
-------------------------------------------
Glen Kassan
Director

By: /s/Warren Lichtenstein May 30, 2002
-------------------------------------------
Warren Lichtenstein
Director

By:
-------------------------------------------
Dr. Tracy K. Pugmire
Director

By: /s/Josh Schechter May 30, 2002
-------------------------------------------
Josh Schechter
Director

By:
-------------------------------------------
Robert A. Smith
Director

By: /s/Craig S. Montesanti May 30, 2002
-----------------------------------------------------
Craig S. Montesanti
Vice President of Finance (Principal Accounting Officer)

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