SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
Commission File Number 1-13427
STRATESEC INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 22-2817302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14360 Sullyfield Circle, Ste. B
Chantilly, Virginia 20151
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 995-2121
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of Exchange
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
State issuer's revenue for most recent fiscal year: $9,077,330.
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of March 31, 2002 (computed by reference to
the closing price of such stock on the American Stock Exchange) was $6,136,867.
As of March 31, 2002 there were 10,401,471 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART III
Item 10. Directors and Executive Officers
The following sets forth certain information regarding each of the
Company's Directors and Executive Officers:
Wirt D. Walker, III, age 56, has served as Chief Executive Officer of
the Company since January 1999; he has served as a director of the Company since
1987, and as Chairman of the Board of Directors since 1992. Since 1982, Mr.
Walker has served as a director and the Managing Director of KuwAm Corporation,
a private investment firm. He is the Chairman and Chief Executive Officer of
Aviation General, Incorporated, a publicly traded holding company with two
wholly-owned subsidiaries: Commander Aircraft Company, which manufactures,
markets and provides support services for its line of single engine, high
performance Commander aircraft and provides consulting, brokerage and
refurbishment services for piston aircraft, and Strategic Jet Services, Inc.,
which provides consulting, brokerage and refurbishment services for jet
aircraft.
Kamran Hashemi, age 48, has served as a consultant of the Company and
as a director since December 2000. Prior to joining the Company, Mr. Hashemi
served as President of Security Systems Integration, Incorporated from 1998 to
2000. From 1983 to 1998, he was employed by Radian, Inc., as Director, Physical
Security Equipment Group, from 1988 to 1998, and as Project Engineer, from 1983
to 1987.
Barry W. McDaniel, age 53, has served as President/Chief Executive
Officer of the Company since December 2000, and as a director since January
1999. Prior to joining the Company, Mr. McDaniel was employed by BDM
International from 1989 to 1996, most recently as Vice President of Material
Distribution and Management Systems. From 1989 to 1992 he was Vice President,
Business Development and Operations for the Systems and Communications Group.
Mr. McDaniel was previously employed, from 1988 to 1989, by Proxim, a real-time
systems integration company as Vice President, Government Systems Integration.
From 1970 to 1987, he was employed by the U.S. Government with his last
assignment as a member of the Senior Executive Service (SES), serving as Deputy
Director of Readiness for the United States Army Materiel Command.
Charles W. Archer, age 56, has served as a director since March 1998.
Mr. Archer has been Vice President, Strategic Development for Litton/PRC since
January 1999. Mr. Archer served as the Company's President and Chief Executive
Officer from March 1998 to January 1999. Prior to 1998, Mr. Archer was employed
for twenty-seven years by the Federal Bureau of Investigation. During his tenure
with the F.B.I., Mr. Archer held a variety of management positions involving
large integrated technology projects and finance. From 1996 to 1997, he was an
Assistant Director of the F.B.I., in charge of its Criminal Justice Information
Services Division, the F.B.I.'s largest division.
Lt. General James A. Abrahamson, USAF (Retired), age 68, has served as
a director of the Company since December 1997. General Abrahamson is the
Chairman and CEO of International Air Safety, LLC. He served as Chairman of the
Board of Directors of Oracle Corporation from 1992 to 1995 and held various
executive positions and served as a member of the board of Hughes Aircraft
Company from 1989 to 1992. General Abrahamson was formerly Commissioner of the
White House Commission on Aviation Safety and Security (Gore Commission). Prior
to 1989, General Abrahamson served in the United States Air Force. During his
tenure with the Air Force he held a variety of positions, including Director of
Development of the F-16 International Fighter, Director of NASA's Space Shuttle
Program and Director of President Reagan's Strategic Defense Initiative ("Star
Wars" Program).
Emmit J. McHenry, age 58, has served as a director of the Company since
March 2000. Mr. McHenry is the founder, President and CEO of NetCom Solutions
International, Inc., an international telecommunications, engineering,
consulting, and technical services company. Prior to founding NetCom Solutions
International in 1995, Mr. McHenry was a founder of Network Solutions, Inc., the
internet domain services provider. In the past, Mr. McHenry has held management
positions with IBM, Connecticut General, Union Mutual, and Allstate Insurance
Company. He is an active member of the State Department's Advisory Committee for
International Communications and Information Policy and serves as a Commissioner
for the Fairfax County Economic Development Authority. He is also a director of
James Martin Government Intelligence and Global Technology, L.L.C.
Director Compensation
Directors are normally paid an annual fee of $10,000, payable in equal
quarterly installments, for services as a director. Such fees are prorated when
a director does not serve for a full year. Directors receive no additional
compensation for committee participation or attendance at committee meetings,
other than reimbursement of travel and lodging expenses. In 2001, Directors were
issued common stock in lieu of their compensation, in the amount of 14,286
shares each.
The 1997 Stock Option Plan provides for the automatic annual grant of a
stock option to purchase 15,000 shares of Common Stock to each eligible
non-employee and employee director of the Company; non-employee directors will
automatically receive a non-statutory stock option and employee directors will
automatically receive an incentive stock option.
Board Meetings and Committees
The Board of Directors held a total of four meetings during the fiscal
year ended December 31, 2001. The Board has two committees: the Audit Committee
and the Compensation Committee.
The Audit Committee, comprised of Directors Abrahamson and Archer,
recommends the selection of the Company's independent accountants and approves
the scope of the audit to be conducted. The Committee is primarily responsible
for reviewing and evaluating the Company's accounting practices and its systems
of internal accounting controls. The Audit Committee held one meeting during
fiscal year 2001.
The Compensation Committee recommends the amount and type of
compensation to be paid to the Company's executive officers, reviews the
performance of the Company's key employees and administers and determines
distributions under the Company's Profit Sharing Plan. The Compensation
Committee will also determine the number of shares, if any, to be granted each
employee under such plan and the terms of such grants. The Compensation
Committee held one meeting during fiscal year 2001. The members of the
Compensation Committee are Messrs. Abrahamson and Archer.
No director attended fewer than 75% of all meetings of the Board of
Directors held during fiscal 2001 or of all meetings of any committee upon which
such director served during fiscal 2001.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is comprised of Messrs. Abrahamson and
Archer; neither are employees of the Company. They are not eligible to
participate in the Company's Profit Sharing Plan. All receive compensation for
services as a director (see "Director Compensation").
Other Officers
R. Michael Lagow, age 43, has served as Executive Vice President since
January 2000. Mr. Lagow served in various executive positions with the company
from 1993 through 1999. Prior to joining the Company, Mr. Lagow was employed as
National Sales Manager of Control Systems International, a security systems
company, from 1991 to 1993. Prior to 1993, Mr. Lagow served as Vice President,
Network Security Corporation, developing and managing new markets for that
company.
Albert V. Graves, age 38, has served as Vice President of Finance since
June 1998. Prior to joining the Company, Mr. Graves was employed by Anadac
Corporation, most recently as its Corporate Controller. Previously, Mr. Graves
was employed from 1994 to 1998 as Accounting Manager at Titan Corporation, a
government contractor, and from 1991 to 1994 as Accounting Supervisor at
Technical Resources, Inc., a bio-medical and environmental consulting firm. Mr.
Graves has also served as an Accountant for Electronic Data Systems (EDS), and
Crestar Bank.
Item 11. Executive Compensation
Summary Compensation Table
The following table shows certain information concerning the
compensation of each of the Company's most highly compensated executive officers
for services rendered in all capacities to the Company for the fiscal years
ended 2001, 2000 and 1999 (the "Named Executive Officers").
Annual Compensation Long-Term Compensation
Securities
Underlying Other Annual
Awarded Options Compensation
Year Salary Bonus (in shares) (1)
Wirt D. Walker, III.......................... 2001 -- -- 115,000 $101,769 (2)
Chairman and Chief Executive Officer 2000 -- -- 35,000 $133,500 (2)
and Director 1999 -- -- 65,000 $136,000 (2)
Barry W. McDaniel............................ 2001 $130,962 -- 215,000 --
President, Chief Executive Officer, 2000 $150,000 -- 60,000 $7,500
Commercial Services Division 1999 $150,000 -- 90,000 $7,500
and Director
R. Michael Lagow............................. 2001 $142,870 -- -- --
Executive Vice President 2000 $125,000 -- 40,000 --
1999 $105,000 $21,000 65,000 --
Albert V. Graves......................... 2001 $111,616 -- 100,000 --
Chief Financial Officer 2000 $ 92,060 -- -- --
1999 $ 85,000 -- 95,000 --
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(1) Amounts paid as director fees unless otherwise indicated.
(2) Includes consulting fees paid.
Option Grants in Last Fiscal Year
The Committee approved the following stock option grants for the
executive officers during fiscal year 2001.
Potential Realizable Value
Percent of at Assumed Annual Rates of
Number of Total Options Stock Price Appreciation for
Securities Granted to Option Term
Underlying
Options Employees in
Granted (1) Fiscal Year Exercise Expiration
Price Date 5% 10%
------------------------------------------------------------------------------------------------------------------
Wirt D. Walker, III 115,000 12% $0.70 9/15/04 $12,689 $26,646
Barry W. McDaniel 215,000 23% $0.70 9/15/04 $23,723 $49,816
Albert V. Graves 100,000 11% $0.70 9/15/04 $11,034 $23,170
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(1) Each option is non-transferable; vests as to 33% of the shares covered
by such option over three years, commencing on the first anniversary of
the date of issuance; is canceled prior to vesting in the event the
holder either resigns from the Company or is terminated for justifiable
cause; and is void after the date listed under the heading "Expiration
Date." The exercise price of the stock subject to options was equal to
the market value on the date of grant. The number of shares issuable
upon exercise of each option is subject to adjustment subsequent to any
stock dividend, split-up, re-capitalization or certain other
transactions.
During 2001, Messrs. Walker, Hashemi and McDaniel were each granted an
option to purchase 15,000 shares of Common Stock for their services as
a director, pursuant to the 1997 Stock Option Plan.
Aggregated Option Exercises in Last Fiscal Year and Option Values as of
December 31, 2001
The following table shows the options exercised during fiscal 2001, the
number of shares of Common Stock represented by outstanding stock options held
by each executive officer as of December 31, 2001 and the value of such options
based on the closing price of the Company's Common Stock on December 31, 2001,
which was $0.58.
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Number of Options at FY End (#) (1) Money Options at FY End ($)(2)
------------------------- ------------------------------
Shares Acquired Value Exercisable/
Name On Exercise (#) Realized(3) Unexercisable Exercisable/Unexercisable
Wirt D. Walker, III --- --- 26,667/138,333 $0/0
Barry W. McDaniel --- --- 35,000/255,000 $0/0
Albert V. Graves --- --- 53,333/126,667 $0/0
R. Michael Lagow --- --- 30,000/35,000 $0/0
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(1) Represents the total number of shares subject to stock options held by
each executive officer. These options were granted on various dates
during fiscal years 1999 through 2001 and are exercisable on various
dates beginning in 2001 and expiring in 2004.
(2) Represents the difference between the exercise price and $0.58, which
was the closing price on December 31, 2001. Stock option exercise
prices range from $0.70 to $2.75, therefore no options were in the
money at December 31, 2001.
(3) No options were exercised in 2001.
Employment and Consulting Agreements
The Company has entered into a consulting agreement with Mr. Walker, to
provide strategic and corporate development services through March 31, 2002 for
an annual fee of $126,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 30, 2002 certain information
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to be the beneficial owner of more than 5% of
the Company's voting securities, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers, and (iv) all executive officers and
directors of the Company as a group.
Number Percent
of Shares (5) of Total
NetCom Solutions International, Inc. 700,000 6.7%
Wirt D. Walker, III (1)(2) 684,043 6.6%
Kamran Hashemi (2)(3) 2,066,667 19.9%
Barry W. McDaniel (2) 87,000 *
Albert Van Graves (2) 66,667 *
R. Michael Lagow (2) 38,334 *
Emmit J. McHenry (2)(4) 710,000 6.8%
James A. Abrahamson (2) 25,000 *
Charles W. Archer (2) 25,000 *
All Officers and Directors as a
Group (8 persons) (5) 3,702,711 35.6%
-----------------------
* Less than one percent
(1) Consists of 429,010 shares held by Mr. Walker, 39,500 shares held by Mr.
Walker's son, 50,000 shares owned by a trust for the benefit of Mr.
Walker's son, of which Mr. Walker is the trustee, and 127,000 shares owned
by a trust for the benefit of Mr. Walker's mother, of which Mr. Walker is
also a trustee. Does not include 204,562 shares held by an entity of
which Mr. Walker is a minority shareholder and a managing director.
(2) Includes shares issuable upon exercise of options that are exercisable
within 60 days, as follows: Mr. Walker, 38,333 shares; Mr. Hashemi, 66,667
shares; Mr. McDaniel, 55,000 shares; Mr. McHenry, 10,000 shares; Lt. Gen.
Abrahamson, 25,000 shares; Mr. Archer, 25,000 shares; Mr. Graves, 66,667
shares; and Mr. Lagow, 38,334 shares.
(3) Includes 2,000,000 shares acquired by Mr. Hashemi through the Company's
acquisition of Security Systems Integration, Incorporated, of which Mr.
Hashemi was the founder, President and CEO.
(4) Includes shares held by NetCom Solutions International, Inc., of which Mr.
McHenry is the founder, President and CEO.
(5) At April 30, 2002, executive officers and directors of the Company as a
group held options to purchase an aggregate of 1,035,000 shares of Common
Stock, representing approximately 62.9% of outstanding options at that
date. The numbers set forth in this table include an aggregate of 325,001
shares underlying options that are exercisable within 60 days of such date.
Item 13. Related Party Transactions
During 2000, the Company sold 175,688 shares of common stock in a
private placement at a price of $1.50 per share to one related party.
During 2000, the Company entered into a non-cancelable lease agreement
with a stockholder for office space in Springfield, Virginia. The lease
agreement provides for payments of $10,000 per month through December 31, 2005
and has been included in the operating lease commitment schedule in note 17.
During 2001, the Company issued warrants for the purchase of 400,000
shares of its common stock to its financing company.
During 2001, the Company paid consulting fees of $516,414 to Kamran
Hashemi, one of its directors.
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.
STRATESEC INCORPORATED
By: /s/BARRY W. MCDANIEL
Barry W. McDaniel
President/Chief Executive Officer