sec document

10KSB/A 1 form10ksba03701_07312002.htm FORM 10-KSBA sec document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.

FORM 10-KSBA

ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JULY 31, 2002

THE MILLBROOK PRESS INC.
(Name of Small Business Issuer in its Charter)

DELAWARE 06-1390025
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

2 OLD NEW MILFORD ROAD
BROOKFIELD, CT 06804
(Address of principal executive offices)
(203) 740-2220
(Issuer's telephone number)

Securities Registered under Section 12 (b) of the Exchange Act: Common Stock

Securities Registered under Section 12 (g) of the Exchange Act: None

Check whether the issuer: (1) 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 __

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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. / /

Revenues for the Fiscal year ended July 31, 2002 were $18.6 million.

The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the price of the Common Stock on November 27, 2002,
was approximately $2,858,000. As of July 31, 2002, the Registrant had
outstanding 2,869,887 shares of Common Stock.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT

The names of the Company's directors and certain information concerning
them are set forth below:

First Year
Name Age Became Director
---- --- ---------------

Howard Graham 72 1989
Frank J. Farrell 66 1989
Hannah Stone 37 1997
Bruno A. Quinson 64 1999
Joseph Kanon 56 1999

HOWARD GRAHAM, one of the Company's founders, has been a director of the
Company since its inception in 1989, served as a Vice-President since the
Company's inception in 1989 until December 1997 and has been Chairman of the
Board of the Company since October 1997. From 1970 to 1988, Mr. Graham served in
various senior management positions at Grolier, Inc. ("Grolier") and its
subsidiaries, including President of Grolier International and executive Vice
President of Grolier. He also served on Grolier's board of directors from 1983
to 1988.

FRANK J. FARRELL, one of the Company's founders, has been a director of the
Company since its inception and served as a Vice President and Secretary since
its inception until December 1996. From 1978 to 1989, Mr. Farrell served in
various senior management positions with Grolier and its subsidiaries, including
President of Grolier Educational Corporation and President of Grolier Electronic
Publishing, Inc. and Group Vice President of Grolier's domestic reference
materials operations. He also served on Grolier's board of directors from 1988
to 1989.

HANNAH STONE has served as a director of the Company since June 1997. Ms.
Stone is Managing Director of Sandler Capital Management, which she joined in
1993. Sandler Capital Management, through affiliates, is involved in the
management of 21st Partners, 21st T-E and 21st Foreign. Ms. Stone also serves as
a director of several private companies and Penton Media.

BRUNO A. QUINSON has served as a director of the Company since November
1999. Mr. Quinson served as Chief Executive Officer of Henry Holt and Co., Inc.
Prior to that Mr. Quinson was President of the General Books Division at the
Macmillan Publishing Co. Currently Mr. Quinson serves as a consultant to the
Publishing Industry.

JOSEPH KANON has served as a director of the Company since November 1999.
Mr. Kanon served as Executive Vice President for Trade and Reference Publishing
at Houghton Mifflin Inc. from 1987 to 1995. Prior to that Mr. Kanon was Chief
Executive Officer of E.P. Dutton. Mr. Kanon is currently an author and has
published two best-selling novels.

OTHER EXECUTIVE OFFICERS

DAVID ALLEN, 47, has been Vice President and Chief Financial Officer of the
Company since February 1999. On June 1, 2002, Mr. Allen was appointed President
of the Company and he became Chief Executive Officer in October 2002. Prior
thereto, Mr. Allen was (i) Vice President of JDM, Inc. from December 1996 to
December 1998, and (ii) Vice President, Atlas Editions, Inc. formerly GMH
Marketing, from June 1985 to December 1996. On June l, 2000, Mr. Allen was named
Executive Vice President and Chief Operating Officer of the Company.

JEAN E. REYNOLDS, 60, one of the Company's founders, has served as Senior
Vice President-Publisher since October 1996 and as President of the Company from
its inception in 1989 to October 1996. From 1970 to 1981, Ms. Reynolds served in
various management positions at Grolier, including the editor-in-chief of Young
People's Publications and of The New Book of Knowledge. Ms. Reynolds is a
director of the Book Industry Study Group and chairs its Juvenile Interest
Group, which monitors industry statistics. She is a director of the industry
trade organization, The Children's Book Council. She also serves as a director
of Kiper Enterprises, Inc., a private company specializing in first aid
materials and Wellington Leisure Products, Inc., a private company specializing
in the manufacturing of rope, craft and watersports material. On June 1, 2000,
Ms. Reynolds was elected Executive Vice President and Publisher of the Company.

RICHARD McCULLOUGH, 52, has served as Vice President of Trade Sales for the
Company since July 1999. Previously, Mr. McCullough was (i) an independent
consultant from July 1997 to July 1999, (ii) Director Trade Sales and Marketing
for McGraw Hill from 1993 to 1997, and (iii) Vice President Sales for John Wiley
& Sons from 1980 to 1993. On June 1, 2001, Mr. McCullough was named Senior
Vice President of Sales and Marketing.

SIMON BOUGHTON, 41, joined the Company in October 2000 as Vice President
& Publisher Roaring Brook Press to establish and run the new trade/fiction
imprint named Roaring Brook Press, which launched in Spring 2002. He was
previously Vice President & Publishing Director, Alfred A. Knopf & Crown
Books for Young Readers, a division of Random House and also held editorial
positions at Simon & Schuster Books for Young Readers and Kingfisher Books
(London).

COMPLIANCE WITH SECTION 16(A)

In connection with the redemption of the warrants held by Howard Graham, a
director of the Company, the Form 4 relating to such redemption was not filed.

ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth, for the Company's 2002 fiscal year, all
compensation awarded to, earned by or paid to David Allen, the Company's
President, Chief Operating Officer and Chief Financial Officer, and the most
highly compensated executive officers of the Company other than Mr. Allen who
were executive officers of the Company at the end of the fiscal year

ended July 31, 2002 and whose salaries and bonus exceeded $100,000 (two
individuals) with respect to the fiscal year ended July 31, 2002.

SUMMARY COMPENSATION TABLE

Long Term
Annual Compensation Compensation
------------------------------------- ------------------------
Other Annual Number All other
Name and Compensation of Compensation
Principal Position Year Salary(s) Bonus($) ($)(1) Options ($)
------------------ ---- --------- -------- ------------ ------- ------------

David Allen, 2002 $153,000 -- - 55,000 --
President, Chief 2001 161,000 -- - 10,000 --
Operating Officer, 2000 153,000 15,000 - 25,000 --
Chief Financial
Officer and
Secretary

Jean E. Reynolds, 2002 $146,000 -- - 25,000 --
Executive Vice 2001 145,000 -- - -- --
President and 2000 137,500 7,000 - 10,000 --
Publisher

Richard McCullough, 2002 $138,000 -- - 20,000 --
Senior Vice 2001 129,000 20,000 - -- --
President Sales and 2000 125,000 20,000 - -- --
Marketing

Simon Boughton, 2002 $150,000 25,000 - 40,000 --
Vice President and 2001 133,000 20,000 - 10,000 --
Publisher(3)

(1) Perquisites and other personal benefits, securities or property to each
executive officer did not exceed the lesser of $50,000 or 10% of such
executive officer's salary and bonus.

(2) Mr. McCullough's employment with the Company commenced July 1999.

(3) Mr. Boughton's employment with the Company commenced October 2000.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

During the fiscal year ended July 31, 2002, no named executive officer
exercised options. The following table provides information related to the
number of options held by the named

executive officers at fiscal year end. No options held by any such executive
officer was in the money at fiscal year-end.

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FY-END (#)
------------------------------------

Exercisable Unexercisable
----------- -------------

Jean E. Reynolds 38,833 28,333

David Allen 30,000 60,000

Richard McCullough 6,667 23,333

Simon Boughton 3,333 46,667

EQUITY COMPENSATION PLAN INFORMATION

Number of securities
remaining available
for future issuance
under equity
Number of Securities Weighted compensation plans
to be issued upon Average (excluding securities
exercise of Exercise price of reflected in column
Outstanding options Outstanding (a))
------------------- ----------------- ----------------------------

Plan Category (a) (b) (c)
-------------

Equity compensation
plans approved by
security holders(1) 587,900 $ 2.74 87,100

Equity compensation
plans not approved by
security holders - - -

Total 587,900 $ 2.74 87,100

(1) Consists of the Company's 1994 Stock Option Plan.

EMPLOYMENT CONTRACTS WITH EXECUTIVE OFFICERS

The Company has entered into an employment agreement with Jean E. Reynolds
pursuant to which she is employed on a full-time basis as the Company's
Executive Vice President - Publisher. The term of the employment agreement
expires in September 2003. Ms. Reynolds annual base cash compensation under the
employment agreement is $145,000. Ms. Reynolds' base salary will be reviewed
annually by the Board of Directors. Ms. Reynolds has agreed not to compete with
the Company during the term of her employment agreement and for a period of two
years thereafter.

On February l, 2001, the Company renewed the employment agreement with
David Allen pursuant to which he is employed on a full-time basis as the
Company's Chief Operating and Financial Officer. The term of the employment
contract expires February 1, 2003. Mr. Allen's annual base compensation under
the employment agreement is $160,000. For the fiscal year ended July 31, 2002,
Mr. Allen received no bonus. Mr. Allen has agreed not to compete with the
Company during the term of his employment agreement and for a period of one year
thereafter.

On June 1, 2001, the Company entered into an employment agreement with
Richard McCullough pursuant to which he is employed on a full-time basis as the
Company's Senior Vice President of Sales and Marketing. The term of the
employment contract expired June l, 2002 and Mr. McCullough is currently
employed by the Company without an employment agreement. Mr. McCullough's annual
base compensation under the employment agreement was $140,000. For the fiscal
year ended July 31, 2002, Mr. McCullough did not receive a bonus. Mr. McCullough
has agreed not to compete with the Company during the term of his employment
agreement and for a period of one year thereafter.

On October 1, 2000, the Company entered into an employment agreement with
Simon Boughton pursuant to which he is employed on a full-time basis as the
Company's Vice President and Publisher of Roaring Brook Press. The term of the
employment contract expired October 1, 2002, and Mr. Boughton is currently
employed by the Company without an employment agreement. The Company and Mr.
Boughton are in the process of renegotiating his contract. Mr. Boughton's base
compensation is $150,000 with a guaranteed bonus of $25,000.

CHANGE OF CONTROL

The Company has entered into an agreement with David Allen which provides
that in the event of a sale or change of control of the Company, Mr. Allen will
receive a payment of $150,000.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

NAME AND ADDRESS SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS(1)
------------------- ------------------ -----------

Barry Fingerhut 1,066,035 (2)(18) 37.1%
767 Fifth Avenue, 45th Floor
New York, NY 10153

NAME AND ADDRESS SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS(1)
------------------- ------------------ -----------

Irwin Lieber 1,041,535 (3)(18) 36.3%
767 Fifth Avenue, 45th Floor
New York, NY 10153

Barry Rubenstein 1,037,536 (4)(18) 36.2%
68 Wheatley Road
Brookville, NY 11545

John Kornreich 973,917 (5)(18) 33.9%
767 Fifth Avenue, 45th Floor
New York, NY 10153

Michael J. Marocco 968,917 (6)(18) 33.8%
767 Fifth Avenue, 45th Floor
New York, NY 10153

Andrew Sandler 953,988 (7)(18) 33.2%
767 Fifth Avenue, 45th Floor
New York, NY 10153

21st Century Communications 943,678 (8)(18) 32.9%
Foreign Partners, L.P.
c/o Fiduciary Trust (Cayman) Limited
P.O. Box 1062
Grand Cayman, B.W.I.

21st Century Communications 943,678 (9)(18) 32.9%
Partners, L.P.
767 Fifth Avenue, 45th Floor
New York, NY 10153

21st Century Communications 943,678 (10)(18) 32.9%
T-E Partners, L.P.
767 Fifth Avenue, 45th Floor
New York, NY 10153

Shufro, Rose & Co., LLC 234,000 (11) 8.2%
745 Fifth Avenue
New York, NY 10151

Frank J. Farrell 152,705 (12) 4.8%

NAME AND ADDRESS SHARES PERCENTAGE
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS(1)
------------------- ------------------ -----------

Howard Graham 222,975 (13) 7.0%

Jean E. Reynolds 53,339 (14) 1.7%

David Allen 30,000 (15) *

Simon Boughton 3,333 (15) *

Richard McCullough 10,000 (15) *

Hannah Stone 948,764 (16) (18) 32.9

Bruno A. Quinson 2,500 (15) *

Joseph Kanon 2,500 (15) *

All directors and executive officers 1,426,116 (17) 44.4%
as a group (9 persons)

---------
*Less than 1%

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes
voting or investment power with respect to securities, shares of Common
Stock upon the exercise of options, warrants currently exercisable, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for computing the percentage
ownership of any other person.

(2) Represents (i) 108,357 shares of Common Stock owned by Mr. Fingerhut, (ii)
an aggregate of 943,678 shares of Common Stock owned by 21st Century
Communications Partners, L.P. ("21st Partners"), 21st Century
Communications T-E Partners, L.P. ("21st T-E") and 21st Century
Communications Foreign Partners, L.P. ("21st Foreign") and (iii) 14,000
shares owned by Pamela Fingerhut, the wife of Mr. Fingerhut. By virtue of
being a shareholder, officer and director of InfoMedia Associates, L.P.
("InfoMedia") which is a general partner of 21st Partners, 21st T-E and
21st Foreign, and the husband of Pamela Fingerhut, Mr. Fingerhut may be
deemed to have shared power to vote and to dispose of 957,678 shares of
Common Stock owned by such recordholders, of which Mr. Fingerhut disclaims
beneficial ownership, except to the extent of his equity interest in such
recordholders.

(3) Represents (i) 97,857 shares owned by Mr. Lieber and (ii) 943,678 shares of
Common Stock owned by 21st Partners, 21st T-E and 21st Foreign. By virtue
of being a shareholder, officer and director of InfoMedia which is a
general partner of 21st Partners, 21st T-E and 21st Foreign, and a general
partner of Wheatley, Mr. Lieber may be deemed to have shared power to vote
and dispose of the shares of Common Stock owned by 21st Partners, 21st T-E
and 21st Foreign and Wheatley. Mr. Lieber disclaims beneficial ownership of
the securities owned by 21st Partners, 21st T-E and 21st Foreign and
Wheatley, except to the extent of his equity interest in such
recordholders.

(4) Represents (i) an aggregate of 943,678 shares of Common Stock owned by 21st
Partners, 21st T-E and 21st Foreign, (ii) 89,858 shares of Common Stock
owned by Woodland Partners ("Woodland") and (iii) 4,000 shares owned by
Brian Rubenstein, the son of Barry Rubenstein. By virtue of being a
shareholder, officer and director of InfoMedia which is a general partner
of 21st Partners, 21st T-E and 21st Foreign and a general partner of
Woodland, Mr. Rubenstein may be deemed to have shared power to vote and
dispose of the securities owned by 21st Partners, 21st T-E and 21st
Foreign, and Woodland and the father of Brian Rubenstein. Mr. Rubenstein
disclaims beneficial ownership of all of the above securities except to the
extent of his equity interest in such recordholders.

(5) Represents (i) 30,239 shares of Common Stock owned by Mr. Kornreich and
(ii) 943,678 shares of Common Stock owned by 21st Partners, 21st T-E and
21st Foreign. By virtue of being the majority shareholder and director of
an entity which is a general partner of an entity which is the general
partner of another entity which is a general partner of 21st Partners, 21st
T-E and 21st Foreign, Mr. Kornreich may be deemed to have shared power to
vote and to dispose of the securities owned by 21st Partners, 21st T-E and
21st Foreign, of which Mr. Kornreich disclaims beneficial ownership.

(6) Represents (i) 25,239 shares of Common Stock owned by Mr. Marocco and (ii)
an aggregate of 943,678 shares of Common Stock owned by 21st Partners, 21st
T-E and 21st Foreign. By virtue of being the sole shareholder, officer and
director of an entity which is a general partner of an entity which is the
general partner of another entity which is a general partner of 21st
Partners, 21st T-E and 21st Foreign, Mr. Marocco may be deemed to have
shared power to vote and to dispose of the securities owned by 21st
Partners, 21st T-E and 21st Foreign, of which Mr. Marocco disclaims
beneficial ownership.

(7) Represents (i) 10,310 shares of Common Stock owned by Mr. Sandler and (ii)
an aggregate of 943,678 shares of Common Stock owned by 21st Partners, 21st
T-E and 21st Foreign. By virtue of being the majority shareholder and
director of an entity which is a general partner of an entity which is the
general partner of another entity which is a general partner of 21st
Partners, 21st T-E and 21st Foreign, Mr. Sandler may be deemed to have
shared power to vote and to dispose of the securities owned by 21st
Partners, 21st T-E and 21st Foreign, of which Mr. Sandler disclaims
beneficial ownership.

(8) Represents (i) 86,142 shares of Common Stock owned by 21st Foreign and (ii)
639,840 shares of Common Stock and 217,696 shares of Common Stock owned by
21st Partners and 21st T-E, respectively, of which 21st Foreign disclaims
beneficial ownership. The

general partners of 21st Foreign are Sandler Investment Partners, L.P., a
New York limited partnership ("Sandler General Partner") and InfoMedia. The
general partner of the Sandler General Partner is Sandler Capital
Management, a New York general partnership ("SCM"). The general partners of
SCM are corporations that are affiliates of John Kornreich, Michael
Marocco, Andrew Sandler and Hannah Stone. Infomedia's shareholders are
Irwin Lieber, Barry Fingerhut and Barry Rubenstein.

(9) Represents (i) 639,840 shares of Common Stock owned by 21st Partners, (ii)
217,696 shares of Common Stock and 86,142 shares of Common Stock owned by
21st T-E and 21st Foreign, respectively, of which 21st Partners disclaims
beneficial ownership. The general partners of 21st Partners are the Sandler
General Partner and InfoMedia. The general partner of the Sandler General
Partner is SCM. The general partners of SCM are corporations that are
affiliates of one or more of John Kornreich, Michael Marocco, Andrew
Sandler and Hannah Stone. Infomedia's shareholders are Irwin Lieber, Barry
Fingerhut and Barry Rubenstein.

(10) Represents (i) 217,696 shares of Common Stock owned by 21st T-E, (ii)
639,840 shares of Common Stock and 86,142 shares of Common Stock owned by
21st Partners and 21st Foreign, respectively, of which 21st T-E disclaims
beneficial ownership. The general partners of 21st Partners are the Sandler
General Partner and InfoMedia. The general partner of the Sandler General
Partner is SCM. The general partners of SCM are corporations that are
affiliates of one or more of John Kornreich, Michael Marocco, Andrew
Sandler and Hannah Stone. Infomedia's shareholders are Irwin Lieber, Barry
Fingerhut and Barry Rubenstein.

(11) Such information is derived from a Schedule 13G filed with the Commission
by such entity on February 14, 2002.

(12) Includes 83,196 shares of Common Stock issuable upon presently exercisable
options.

(13) Represents 143,196 shares of Common Stock issuable upon presently
exercisable options and 79,779 shares of Common Stock which are owned by
Mr. Graham and his wife as joint tenants.

(14) Includes 38,883 shares of Common Stock issuable upon presently exercisable
options.

(15) Consists of shares issuable upon presently exercisable options.

(16) Represents (i) 2,586 shares of Common Stock owned by Ms. Stone, (ii) 2,500
shares of Common Stock issuable upon the exercise of options and (iii) an
aggregate of 943,678 shares of Common Stock owned by 21st Partners, 21st
T-E and 21St Foreign. By virtue of being the sole shareholder and
controlling person of an entity which is a general partner of an entity
which is the general partner of another entity which is a general partner
of 21st Partners, 21st T-E and 21st Foreign, Ms. Stone may be deemed to
have shared power to vote and dispose of the securities owned by 21st
Partners, 21st T-E and 21st Foreign, of which Ms. Stone disclaims
beneficial ownership.

(17) Includes options and other shares of Common Stock described in footnotes
12-16 above.

(18) With respect to Barry Rubenstein, Irwin Lieber, and Barry Fingerhut, the
foregoing information is derived from a Schedule 13D filed with the
Commission by such individuals or entities on July 18, 2002. With respect
to 21st Partners, 21st T-E, 21st Foreign, Michael J. Marocco, John
Kornreich, Andrew Sandler and Hannah Stone, the foregoing information is
derived from a Schedule 13D filed with the Commission by such individuals
or entities on July 18, 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 16, 1999, the Company purchased 595,113 shares of Common Stock
in a private transaction from Wheatley, the beneficial owner of more than 5% of
the outstanding shares of Common Stock of the Company, for an aggregate price of
$967,000 or $1.625 per share. Upon consummation of the transaction, the
repurchased shares of Common Stock were placed in treasury. The following
persons, or entities, who may be deemed to be the beneficial owners of more than
5% of the outstanding shares of Common Stock, are general partners or are
affiliated with general partners of Wheatley: Barry Fingerhut, Irwin Lieber,
Barry Rubenstein, Applewood Capital, Jonathan Lieber and Seth Lieber.

The Company has signed a consulting agreement with (Graham International
Publishing & Research, Inc.), one of the principals of whom is Howard
Graham, a Director of the Company. In fiscal year ended July 31, 2002, the
Company paid such entity $96,000.

There were no other transactions involving the Company and its subsidiaries
and its executive officers and/or Directors from August 1, 1999 which exceeded
$60,000.

SIGNATURES

In accordance with 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 MILLBROOK PRESS INC.

Dated: November 26, 2002 By: /s/ David Allen
------------------------------------------
David Allen
President,
Chief Operating Officer and
Chief Financial Officer