10-K/A 1 ka2.txt FORM 10-K/AMENDMENT NO. 2 DATED 9/30/02 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A Amendment No. 2 (Mark One) (x) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2002 ( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission file number 1-13550 ----------------------- HAUPPAUGE DIGITAL INC. (Name of small business issuer in its charter) Delaware 11-3227864 (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification No.) 91 Cabot Court, Hauppauge, New York 11788 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number (516) 434-1600 -------------------------- Securities registered pursuant to Section 12 (b) of the Act: None Securities registered pursuant to Section 12 (g) of the Act: $.01 par value Common Stock Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the past twelve (12) months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past ninety (90) days. YES X NO --- --- Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K 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-K or any amendment to this Form 10-K: [ ] State registrant's revenues for its most recent fiscal year: $42,796,726 The aggregate market value of the voting stock held by non-affiliates of the registrant as of December 19, 2002 was approximately $7,361,431. Non-affiliates include all shareholders other than officers, directors and 5% shareholders of the Company. Market value is based upon the price of the Common Stock as of the close of business on December 19, 2002 which was $1.15 per share as reported by NASDAQ. As of December 11, 2002, the number of shares outstanding of the Common Stock was 8,854,758 shares (exclusive of treasury shares). DOCUMENTS INCORPORATED BY REFERENCE None. Explanatory Note This Form 10-K/A is being filed solely for the purpose of correcting certain information in the Summary Compensation Table, the Option Grants in Last Fiscal Year Table and the Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value Table in Item 11. The accurate information is set forth in the tables below. This Form 10-K/A does not reflect events occurring after the filing of the original Form 10-K, or modify or update the disclosures therein in any way other than as required to reflect the amendment set forth below. PART III Item 11. Executive Compensation. Summary Compensation Table The following table sets forth certain information for the fiscal year ended September 30, 2002, 2001 and 2000 concerning the compensation of Kenneth Plotkin, Chairman of the Board, Chief Executive Officer, Vice President of Marketing, and Director of the Company, Dean Cirielli, President and Chief Operating Officer, John Casey, Vice President of Technology of the Company and Gerald Tucciarone, Chief Financial Officer and Treasurer of the Company. No other Executive Officer of the Company had a combined salary and bonus in excess of $100,000 for the fiscal year ended September 30, 2002.
Annual Compensation Long Term Compensation ------------------------------------------- ------------------------------ Other Annual Common Shares Underlying Name and Principal Position Year Salary Bonus Compensation Options Granted --------------------------------- ---------- -------------- ------------ ---------------- ------------------------------ Kenneth Plotkin 2002 $180,100 -0- $6,000(1) 10,000 Chairman of the Board, Chief ---------- -------------- ------------ ---------------- ------------------------------- Executive Officer, Vice 2001 $180,000 -0- $6,000(1) -0- President of Marketing, and ---------- -------------- ------------ ---------------- ------------------------------- Director 2000 $172,500 $89,055 $6,000(1) 50,000 --------------------------------- ---------- -------------- ------------ ---------------- ------------------------------ Dean Cirielli (2) 2002 $ 70,000 -0- -0- 50,000 President, Chief Operating Officer --------------------------------- ---------- -------------- ------------ ---------------- ------------------------------ John Casey 2002 $130,000 $ 5,000 -0- 10,000 Vice President of Technology ---------- -------------- ------------ ---------------- ------------------------------ 2001 $128,365 -0- -0- -0- ---------- -------------- ------------ ---------------- ------------------------------ 2000 $110,000 $13,163 -0- 500 --------------------------------- ---------- -------------- ------------ ---------------- ------------------------------ Gerald Tucciarone 2002 $124,866 -0- -0- 10,000 Chief Financial Officer and ---------- -------------- ------------ ---------------- ------------------------------ Treasurer 2001 $123,231 -0- -0- -0- ---------- -------------- ------------ ---------------- ------------------------------ 2000 $100,000 $ 9,872 -0- -0- ================================= ========== ============== ============ ================ ==============================
(1) Represents non-cash compensation in the form of the use of a car and related expenses. (2) Mr Cirielli joined the Company on May 1, 2002 Option Grants in Last Fiscal Year The following table sets forth certain information concerning individual grants of stock options granted during the fiscal year ended September 30, 2002:
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------ Number of Common Percentage of Exercise Price Expiration Date Grant Present Shares Total Options Value $ Underlying Granted to Option Granted Employees in Fiscal Year --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ Kenneth Plotkin 10,000 8.13% $1.155 September 30, 2011 $5,900 --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ John Casey 10,000 8.13% $1.05 September 30, 2011 $5,400 --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ Gerald Tucciarone 10,000 8.13% $1.05 September 30, 2011 $5,400 --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ Dean Cirielli 50,000 40.60% $1.95 April 30 , 2011 $50,000 --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value Table The following table sets forth certain information concerning the value of stock options unexercised as of September 30, 2002:
-------------------------- ------------------ ---------------- ------------------------------- --------------------------- Number of Common Number of Common Shares Value of Unexercised Shares Acquired Underlying Unexercised In-the-Money Options at on Exercise Options at September 30, 2002 September 30, 2002 Name Realized Value Exercisable/Unexercisable Exercisable/Unexercisable -------------------------- ------------------ ---------------- ------------------------------- --------------------------- Kenneth Plotkin -0- -0- 401,350/138,650 -0-/11,500 -------------------------- ------------------ ---------------- ------------------------------- --------------------------- Dean Cirielli. -0- -0- -0-/50,000 -0-/-0- -------------------------- ------------------ ---------------- ------------------------------- --------------------------- John Casey -0- -0- 36,500/26,000 -0-/$10,500 -------------------------- ------------------ ---------------- ------------------------------- --------------------------- Gerald Tucciarone -0- -0- 18,000/26,000 -0-/$10,500 -------------------------- ------------------ ---------------- ------------------------------- ---------------------------
Compensation of Directors Directors of the Company are not compensated solely for being on the Board of Directors. On October 17, 2001 each of Mr. Herman, Mr. Holmes and Mr. Kuperschmid was granted an option to purchase 10,000 shares of Common Stock of the Company, at an exercise price of $1.08 per share (for the purposes of the Company's 1996 Non-Qualified Stock Option Plan, the fair market value of the Company's Common Stock as of the date thereof), all of such options to be exercisable immediately over a ten-year period commencing October 17, 2002; and that such options are not intended to qualify as incentive stock options, as defined in section 422 of the of the Internal Revenue Code of 1986, as amended. See "Security Ownership of Certain Beneficial Owners and Management". It is the intention of the Company to issue non-qualified options in the future to non- employee Directors. The By-Laws of the Company provide that Directors of the Company may, by resolution of the Board, be paid a fixed sum and expenses for attendance at each regular or special meeting of the Board. No Director's fees have been paid to date. The Certificate of Incorporation also provides, to the extent permitted by law, for certain indemnification of its Directors. Employment Contracts; Termination of Employment and Change-in-Control Arrangements As of January 10, 1998, after the expiration of a prior employment agreement with the Company, Kenneth Plotkin entered into an employment agreement (the "1998 Employment Agreement") with the Company to serve in certain offices of the Company. The 1998 Employment Agreement provided for a three year term, which term automatically renews from year to year thereafter unless otherwise terminated by the Board of Directors or the executive. The 1998 Employment Agreement provided for an annual base salary of $125,000 during the first year, $150,000 during the second year, and $180,000 during the third year. For each Annual Period (as defined in the 1998 Employment Agreement) thereafter, the 1998 Employment Agreement provided that compensation shall be as mutually determined between the Company and the executive, but not less than that for the preceding Annual Period. In addition, the 1998 Employment Agreement provides for a bonus to be paid as follows: an amount equal to 2% of the Company's earnings, excluding earnings that are not from operations and before reduction for interest and income taxes ("EBIT"), for each fiscal year starting with the year ended September 30, 1998, provided that the Company's EBIT for the applicable fiscal year exceeds 120% of the prior fiscal year's EBIT, and if not, then 1% of the Company's EBIT. The determination of EBIT shall be made in accordance with the Company's audited filings with the Securities and Exchange Commission on its Form 10-KSB or Form 10-K. Pursuant to the 1998 Employment Agreement, on January 21, 1998, incentive stock options to acquire a total of 90,000 Common Shares each were granted to Mr. Plotkin, exercisable, beginning on January 21, 1999, in increments of 33 1/3% per year at $2.544 per share. Each increment of these options expires five (5) years after it first becomes exercisable. Also on January 21, 1998, pursuant to the 1998 Employment Agreement, non-qualified options to acquire a total of 60,000 Common Shares each were granted to Mr. Plotkin, exercisable immediately for a period of ten (10) years. These options expire as of January 20, 2008. The 1998 Employment Agreement further provides for disability benefits, the obligation of the Company to pay the premiums on a term life insurance policy or policies in the amount of $500,000 on the life of Mr. Plotkin owned by Mr. Plotkin or his spouse, or a trust for his respective benefit or for the benefit of his family, a car allowance of $500 per month, reasonable reimbursement for automobile expenses, and medical insurance as is standard for executives of the Company. The 1998 Employment Agreement further provides that the Company may apply for and own life insurance on the life of Mr. Plotkin for the benefit of the Company, in such amounts as the Board of Directors of the Company may from time to time determine. As set forth in the 1998 Employment Agreement, the Company shall pay the premiums as they become due on any such insurance policies, and all dividends and any cash value and proceeds on such insurance policies shall belong to the Company. In the event of a termination of employment associated with a Change in Control of the Company (as defined in the 1998 Employment Agreements), a one-time bonus shall be paid to the executive equal to three times the amount of the executive's average annual compensation (including salary, bonus and benefits, paid or accrued) received by him for the thirty-six month period preceding the date of the Change of Control. As of May 1, 2002, Dean Cirielli entered into an Employment Agreement with the Company (the "Cirielli Employment Agreement"). The Cirielli Employment Agreement provides for a two-year term, unless terminated earlier by either Mr. Cirielli or the Company. The Cirielli Employment Agreement provides that Mr. Cirielli shall be paid an annual salary of $175,000 for the first year of the Cirielli Employment Agreement, with annual performance evaluations and upward adjustments as determined by the Compensation Committee of the Board of Directors, based on his performance. In addition, the Cirielli Employment Agreement provides that he shall also receive a yearly bonus totaling one percent of the operating income of the Company, provided that earnings are at least 120% of the prior fiscal year's earnings. Mr. Cirielli shall also receive a reasonable stock option package. Pursuant to the Cirielli Employment Agreement, the Company and Mr. Cirielli entered into a Relocation Package Agreement providing for, amongst other things, a relocation reimbursement of no more than $100,000. Such relocation reimbursement shall be paid as follows: (i) 50% of the Relocation Costs (as defined in his Relocation Package Agreement) or $50,000 (whichever is the lower) on or before he physically and permanently relocates to Long Island, NY, such date to be the date of signing a definitive sale and purchase agreement to either sell his existing residence or buy a house in the Long Island area, NY, whichever is the earlier (the "Relocation Date"), (ii) 25% of the Relocation Costs or $25,000 (whichever is the lower) on the first anniversary of the Relocation Date and (iii) 25% of the Relocation Costs or $25,000 (whichever is the lower) on the second anniversary of the Relocation Date. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on our behalf by the undersigned, thereunto duly endorsed. HAUPPAUGE DIGITAL INC. By: /s/ Gerald Tucciarone Date: July 17, 2003 ----------------------- GERALD TUCCIARONE Treasurer and Chief Financial Officer CERTIFICATIONS I, KENNETH PLOTKIN, certify that: 1. I have reviewed this annual report on Form 10-K/A of HAUPPAUGE DIGITAL, INC.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ Kenneth Plotkin Date: July 17, 2003 ------------------------ KENNETH PLOTKIN Chief Executive Officer and Director I, GERALD TUCCIARONE, certify that: 1. I have reviewed this annual report on Form 10-K/A of HAUPPAUGE DIGITAL, INC.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. . By: /s/ Gerald Tucciarone Date: July 17, 2003 ------------------------- GERALD TUCCIARONE Treasurer and Chief Financial Officer