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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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 (NO FEE REQUIRED)
For the fiscal year ended December 31, 2005
Commission File Number 01-15739
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REUNION INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 06-1439715
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(State of Incorporation) (I.R.S. Employer Identification No.)
11 STANWIX STREET, SUITE 1400, PITTSBURGH, PENNSYLVANIA 15236
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(Address of principal executive offices, including zip code)
(412) 281-2111
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class: COMMON STOCK, $.01 par value
Name of Each Exchange on Which Registered: AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes No X
----- -----
Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act. Yes No X
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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 the 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 a
Large accelerated filer Accelerated filer Non-accelerated filer X
--- --- ---
Indicate by check mark whether the Registrant is a shell company Yes No X
--- ---
At March 15, 2006, 16,656,519 shares of common stock were issued and
outstanding. As of June 30, 2005, the aggregate market value of the voting
stock held by non-affiliates of the registrant (computed by reference to the
average of the high and low sales prices on the American Stock Exchange) was
$1,155,333.
DOCUMENTS INCORPORATED BY REFERENCE: None
Reunion Industries, Inc. ("Reunion Industries", "Reunion" or the
"Company")is filing this Amendment No. 1 to its Annual Report on Form 10-K for
the year ended December 31, 2005, as filed with the Securities and Exchange
Commission on April 17, 2006, to provide certain information previously
omitted from such report. The following are the four items previously
omitted:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by such items is provided herein as follow:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
As of April 28, 2006, the following individuals were directors and/or
named executive officers of the Company.
Principal Position with
Name Reunion Industries, Inc. Age Director Since
----------------------- -------------------------- --- --------------
Thomas N. Amonett(1)(2) Director 62 1992
Charles E. Bradley, Sr. Director, 76 1995
Kimball J. Bradley Director, Chairman & CEO 40 2000
Thomas L. Cassidy(1)(2) Director 77 1995
David E. Jackson(1)(2) Director 47 2003
Joseph C. Lawyer Director and Vice Chairman 60 2000
John G. Poole Director 63 1996
(1) Member, Compensation Committee of the Board of Directors
(2) Member, Audit Committee of the Board of Directors
THOMAS N. AMONETT has served as a director of Reunion Industries since
July 1, 1992 and served as its President and Chief Executive Officer from
July 1, 1992 until October 26, 1995. He also served as the President of
Reunion Energy Company, then a wholly-owned subsidiary of Reunion Industries
in the oil and gas operating business, from July 1, 1992 until May 24, 1996.
Mr. Amonett is President and Chief Executive Officer of Champion Technologies,
Inc., a manufacturer and distributor of specialty chemicals and related
services, primarily to the oil and gas industry. From November 1998 to
June 1999, he was President, Chief Executive Officer and a director of
American Residential Services, Inc., a company providing equipment and
services relating to residential heating, ventilating, air conditioning,
plumbing, electrical and indoor air quality systems and appliances. From July
1996 until June 1997, Mr. Amonett was Interim President and Chief Executive
Officer of Weatherford Enterra, Inc., an energy services and manufacturing
company. Mr. Amonett serves as a director of Petro Corp. Incorporated, a
Houston-based oil and gas company, and Stelmar Shipping Ltd., an international
provider of petroleum product and crude oil transportation services.
CHARLES E. BRADLEY, SR. became a director of Reunion Industries on
June 20, 1995 and was appointed President and Chief Executive Officer of
Reunion Industries on October 26, 1995. He became Chairman effective March
16, 2000 and served in that capacity until March 2, 2006 when he resigned his
officership as Chairman and CEO. He continues to serve as a director of the
Company. Mr. Bradley, Sr. was a co-founder of Stanwich Consulting Corp.,
formerly known as Stanwich Partners, Inc. ("SPI"), in 1982 and has served as
its President since that time. SPI is a private investment company. He was a
director of Chatwins Group, Inc. ("Chatwins Group") from 1986 until its merger
with Reunion Industries on March 16, 2000 and was Chairman of the Board of
Chatwins Group from 1988 until the merger. Mr. Bradley, Sr. is currently the
President and a director of Sanitas, Inc. and Texon Energy Corporation, both
inactive companies. Since May 1997, he has been President and sole director
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of Stanwich Financial Services Corp. ("SFSC"), which, on June 25, 2001, filed
a voluntary petition in the United States Bankruptcy Court for the District of
Connecticut for reorganization under Chapter 11 of the United States
Bankruptcy Code. SFSC was in the structured settlement business. Mr. Bradley
is the father of Kimball J. Bradley.
KIMBALL J. BRADLEY became President and Chief Operating Officer of
Reunion Industries effective May 1, 2000. Effective March 2, 2006, the Board
of Directors elected him Chairman of the Board and Chief Executive Officer.
Mr. Bradley continues to serve as President of the Company. He was Executive
Vice President of Operations of Reunion Industries following the Chatwins
Group merger and was a Senior Vice President of Chatwins Group from
August 1998 until the merger and a Vice President of Chatwins Group from
January 1996 to August 1998. From November 1995 until August 1998, Mr.
Bradley was President of the Auto-Lok division of Chatwins Group, having
served as acting President of Auto-Lok beginning in August 1995. Prior to
assuming that position, he managed various special projects at Chatwins
Group's corporate office beginning in November 1993 and at Chatwins Group's CP
Industries division from February 1993 to November 1993. Mr. Bradley is the
son of Charles E. Bradley, Sr.
THOMAS L. CASSIDY became a director of Reunion Industries on June 20,
1995. He was a Managing Director of Trust Company of the West, an investment
management firm, from 1984 until his retirement in 1999. Mr. Cassidy is a
Partner of TCW Capital, an affiliate of Trust Company of the West. Mr.
Cassidy was a director of Chatwins Group from March 1993 to June 1997.
DAVID E. JACKSON became a director of Reunion Industries on June 26,
2003. He is the CEO of Bingo Country Holdings, Ltd. in Toronto, Canada. He
has over fifteen years experience as a portfolio manager investing in
distressed securities having worked as a portfolio manager with Avenue Capital
Management, Oppenheimer & Co. Inc., EBF & Associates and Cargill, Inc.
JOSEPH C. LAWYER became Vice Chairman of Reunion Industries effective May
1, 2000. He was President and Chief Operating Officer of Reunion Industries
following the Chatwins Group merger and was President, Chief Executive Officer
and a director of Chatwins Group from 1988 until the merger. Mr. Lawyer is a
director of Respironics, Inc., a company engaged in design, manufacture and
sale of home and hospital respiratory medical products.
JOHN G. POOLE became a director of Reunion Industries on April 19, 1996.
Mr. Poole is a private investor. He was a co-founder of SPI with Charles E.
Bradley, Sr. in 1982 and served as its Vice President until 2001. Mr. Poole
was a director of Chatwins Group from 1988 until the merger. He is also a
director of Consumer Portfolio Services, Inc., engaged in the business of
purchasing, selling and servicing retail automobile installment sales
contracts.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Reunion's directors and officers and persons who own beneficially
more than 10% of the common stock of Reunion Industries to file with the
Securities and Exchange Commission and the American Stock Exchange initial
reports of beneficial ownership and reports of changes in beneficial ownership
of the common stock of Reunion Industries. Directors, officers and persons
owning more than 10% of the common stock of Reunion Industries are required to
furnish Reunion Industries with copies of all such reports. Based solely on
Reunion's review of the copies of such forms it has received and
representations from certain persons that they were not required to file
reports on Form 5 during 2005, Reunion Industries believes that all its
officers, directors and greater than 10% beneficial owners complied with all
filing requirements applicable to them with respect to transactions during
2005, except that Mr. Bradley, Sr. and Mr. Kimball J. Bradley each filed a
Form 4 late for one transaction.
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Audit Committee
The audit committee, comprised of Messrs. Amonett, Cassidy and Jackson
(chairman), assists the board in assuring that the accounting and reporting
practices of the Company are in accordance with all applicable requirements.
Each member of the audit committee meets the independence and financial
experience requirements under the rules of both the Securities and Exchange
Commission (SEC) and American Stock Exchange (AMEX), where the Company's stock
is listed. In addition, the Board has determined that David E. Jackson is an
"audit committee financial expert" as defined by SEC rules. Mr. Jackson's
business experience is described above. The audit committee reviews with the
auditors the scope of the proposed audit work and meets with the auditors to
discuss matters relating to the audit and any other matter which the committee
or the auditors may wish to discuss. In addition, the audit committee
recommends the appointment of auditors to the board of directors each year and
would recommend the appointment of new auditors if future circumstances were
to indicate that such action is desirable.
Code of Ethics
In 2004, the Board of Directors adopted a Code of Business Ethics and
Conduct that applies to the Company's executive officers as well as all other
employees of the Company. Accountability for adherence to the Code primarily
rests with the Audit Committee. Reunion Industries will furnish a copy of its
Code of Business Ethics to stockholders upon written request and upon payment
of a fee limited to Reunion's reasonable expenses in furnishing such document.
Written requests may be directed to Reunion Industries, Inc., attn: Investor
Relations, 11 Stanwix Street, Suite 1400, Pittsburgh, PA 15222.
ITEM 11. EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to
the Company's executive officers for the last three completed fiscal years.
There was no other annual compensation for any executive of the Company in the
last three completed fiscal years.
Long-Term
Compensation
------------
Annual Compensation Shares
Name and Position as ------------------- Underlying All Other
of December 31,2005 Year Salary Bonus(1) Stock Option Compensation
----------------------- ---- -------- -------- ------------ ------------
Charles E. Bradley, Sr. 2005 $308,352 $ 0 100,000 $ 900(2)
Chairman and Chief 2004 $377,107 $ 0 0 $ 930(2)
Executive Officer 2003 $400,024 0 100,000 1,020(2)
Joseph C. Lawyer 2005 77,083 0 0 900(3)
Vice Chairman 2004 143,750 0 0 930(3)
2003 200,000 0 0 1,020(3)
Kimball J. Bradley 2005 371,349 0 300,000 30,201(4)
President and Chief 2004 372,884 0 0 30,147(4)
Operating Officer 2003 366,819 0 400,000 25,285(4)
John M. Froehlich 2005 219,064 0 100,000 11,275(5)
Executive Vice 2004 219,064 0 0 11,305(5)
President of Finance 2003 210,001 0 0 8,801(5)
and Chief Financial
Officer
Jack T. Croushore 2005 209,000 0 100,000 6,900(6)
President,CPI Division 2004 209,000 0 0 7,020(6)
2003 209,000 0 50,000 7,020(6)
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(1) There have been no bonuses awarded in the periods presented.
(2) Consists solely of healthcare benefit credits.
(3) Consists solely of healthcare benefit credits.
(4) Includes payments of life insurance premiums of $19,496, $19,412 and
$14,460 in 2005, 2004 and 2003, respectively, car allowances of $9,805 in each
of those same years and healthcare benefit credits of $900, $930 and $1,020 in
those same years, respectively.
(5) Includes payments of life insurance premiums of $10,375, $10,375 and
$7,781 in 2005, 2004 and 2003, respectively, and healthcare benefit credits of
$900, $930 and $1,020 in those same years, respectively.
(6) Includes a car allowance of $6,000 in 2005, 2004 and 2003 and healthcare
benefit credits of $900 in 2005, $930 in 2004 and $1,020 in 2003.
Option Grants
During the year ended December 31, 2005, the Company granted options to
employees to purchase 760,000 shares of the Company's common stock and options
to non-employee directors to purchase 40,000 such shares. The Company did not
grant any options in the year ended December 31, 2004. During the year ended
December 31, 2003, the Company granted options to employees to purchase
550,000 shares of the Company's common stock and an option to a non-employee
director to purchase 20,000 such shares. The following table shows all options
to acquire Reunion Industries common stock granted to the named executive
officers during the fiscal year ended December 31, 2005.
Individual Grants(1) Projected
------------------------------------- Realizable Value
% of Total at Rates of
Number of Options Stock Price
Shares Granted to Exercise Appreciation for
Underlying Employees Price Option Term(2)
Options in Fiscal Per ----------------
Name Granted Year Share Expires 5% 10%
-------------------- ---------- ---------- ------- -------- ----------------
Charles Bradley, Sr. 100,000(3) 13.16% $0.200 6/21/10 $ 3,000 $ 9,000
Kimball J Bradley 300,000(3) 39.47% $0.200 6/21/10 $ 9,000 $27,000
John M. Froehlich 100,000(4) 13.16% $0.180 6/21/15 $11,300 $28,700
Jack T. Croushore 50,000(4) 13.16% $0.180 6/21/15 $11,300 $28,700
(1) Options granted to Charles E. Bradley, Sr. and Kimball J. Bradley have an
exercise price equal to 110% of the fair market value of Reunion Industries'
common stock on the grant date. The remaining options have an exercise price
of 100% of the fair market value on the grant date. Reunion Industries has
not issued any stock appreciation rights.
(2) As required by SEC rules, these columns show potential gains that may
exist for the respective options, assuming that the market price for Reunion's
common stock appreciated from the grant date to the end of the option terms at
rates of 5% and 10%, respectively. The amounts are not estimates of Reunion's
future stock price performance and are not necessarily indicative of Reunion's
future stock performance. If the price of Reunion's common stock does not
increase above the exercise price, no value will be realized from these
options.
(3) These options were granted on June 21, 2005. Assuming continued
employment with Reunion, these options have a 5-year term. These options vest
one-third at grant date and in one-third increments on the first and second
anniversary dates of their issuance.
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(4) These options were granted on June 21, 2005. Assuming continued
employment with Reunion, these options have a 10-year term. These options
vest one-third at grant date and in one-third increments on the first and
second anniversary dates of their issuance.
Option Exercises and Year-End Values
There were no options exercised in the year ended December 31, 2005.
Equity Compensation Plan Information
The following table summarizes information with respect to options under
Reunion's equity compensation plans on December 31, 2005:
Equity Compensation Plans
---------------------------
Approved by Not Approved
Security by Security
Holders Holders
------------ ------------
Number of common stock shares to be issued
Upon exercise of outstanding options 1,370,000 -
========= =========
Weighted-average exercise price per share
of outstanding options $0.25 -
========= =========
Number of common stock shares remaining available
for future issuance under equity
compensation plans (excluding outstanding
options) 354,600 -
========= =========
Long-Term Incentive Plan or Defined Benefit Plan
The Company has no long-term incentive plan and has no defined benefit
plan applicable to any of its executive officers.
Compensation of Directors
Directors not otherwise compensated by the Company receive annual
retainers of $18,000 for service on the board and $500 for each board or
committee meeting attended. Compensation paid to non-employee directors
during 2005 for service in all board capacities aggregated $60,000. Directors
are reimbursed for the actual cost of any travel expenses incurred. In
addition to his director's fees, Mr. Poole received $42,000 for consulting
services during 2005.
Non-employee directors of Reunion Industries are eligible for awards
under the 1998 and 2004 Stock Option Plans. During the year ended December
31, 2005, the Company granted options to purchase 40,000 shares of the
Company's common stock to non-employee directors.
Compensation Committee Report
The compensation committee is responsible for the formulation and
adoption of all executive compensation, benefit and insurance programs,
subject to full board approval where legally required or in those instances
where the underlying benefit philosophy might be at variance with preexisting
board policies. The compensation committee also supervises the administration
of all executive compensation and benefit programs, including the
establishment of any specific criteria against which all annual performance
based benefits are to be measured.
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Each year the compensation committee reviews the compensation levels of
the Company's executive officers and other key employees as deemed appropriate
by the committee. The compensation level of the CEO is determined based on a
variety of factors that, due to the financial difficulties that the Company
has experienced, are more skewed toward qualitative and not quantitative
results. Such qualitative factors included, but were not limited to,
relationships with independent sources in the financial arena, knowledge and
experience in the acquisition and divestiture of companies and debt
restructurings and overall tax and accounting expertise. Compensation levels
paid to executive officers in the year 2005 were deemed to be appropriate for
the circumstances in which the Company operates.
Members of the Compensation Committee
Thomas N. Amonett, Chairman
Thomas L. Cassidy,
David E. Jackson
Compensation Committee Interlocks and Insider Participation
Messrs. Amonett, Cassidy and Jackson are members of the Compensation
Committee. Mr. Amonett served as Reunion Industries' President and Chief
Executive Officer from July 1, 1992 until October 26, 1995. He also served as
the President of Reunion Energy Company, then a wholly-owned subsidiary of
Reunion Industries in the oil and gas operating business, from July 1, 1992
until May 24, 1996.
Common Stock Performance Graph
The following graph illustrates the yearly percentage change in the
cumulative total stockholder return on Reunion Industries' common stock,
compared with the cumulative total return on the American Stock Exchange
(AMEX) Composite Index and the Industrial Manufacturing Index published by The
Center for research in Security Prices at the University of Chicago, published
by the AMEX for use by AMEX listed companies:
Fiscal Year Ending
----------------------------------------------
2000 2001 2002 2003 2004 2005
------ ------ ------ ------ ------ ------
Reunion Industries, Inc. 100.00 22.46 10.87 41.30 26.09 24.64
AMEX Composite Index 100.00 93.08 76.08 102.98 119.00 128.79
Industrial Manufacturing
Index 100.00 79.89 60.23 106.40 113.24 159.98
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(1) Tabular data assumes that the value of the investment in Reunion
Industries' common stock and each index was $100.00 at December 31, 2000 and
that all dividends, if any, were reinvested. The Company paid no dividends in
any period presented.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Reunion Industries had 16,656,519 shares of common stock outstanding as
of April 28, 2006. The following table sets forth information regarding the
beneficial ownership of our common stock by (i) each stockholder known to us
to own 5% or more of our common stock, (ii) each director of Reunion, (iii)
each of the chief executive officer and the other named executives, and (iv)
all current directors and executive officers as a group. Except as set forth
in the footnotes to the following table, each stockholder has sole dispositive
and voting power with respect to the shares of our common stock shown as owned
by such stockholder.
% of
Outstanding
Beneficial Owner and Address Shares Owned Shares
-------------------------------- ------------------------- -----------
Kimball J. Bradley 6,629,802 (1) 38.6%
c/o Reunion Industries, Inc.
11 Stanwix Street, suite 1400
Pittsburgh, PA 15222
The Charles E. Bradley, Sr.
Family Limited Partnership 4,310,813 (2) 25.9%
c/o Stanwich Consulting Corp.
62 Southfield Ave.
One Stamford Landing
Stamford, CT 06902
Stanwich Financial Services Corp. 1,651,697 (3) 9.9%
c/o Melissa Neier, Esq.
Ivey, Barnum & O'Mara
170 Mason Street
Greenwich, CT 06830
The John Grier Poole Family
Limited Partnership 1,499,747 (2)(4) 9.0%
One Rye Road
Portchester, NY 10573
Amanda Poole, David Poole and
Jesse Poole 1,499,747 (4) 9.0%
c/o John G. Poole
One Rye Road
Portchester, NY 10573
LCC Capital Master Fund, Ltd. 1,714,093 (5) 9.3%
c/o Lampe Conway 7 Co., LLC
730 Fifth Avenue
New York, NY 10019
John G. Poole 839,428 (6) 5.0%
Charles E. Bradley, Sr. 478,810 (7)(8)(9) 2.9%
Joseph C. Lawyer 712,131 (10) 4.3%
Thomas N. Amonett 88,000 (11) <1.0%
Thomas L. Cassidy 100,167 (12) <1.0%
David E. Jackson 45,464 (13) <1.0%
John M. Froehlich 145,626 (14) <1.0%
Jack T. Croushore 311,855 (15) 1.9%
All Officers and Directors as
a group (9 individuals) 9,351,283 (16) 52.9%
(1) Includes (a) 4,310,813 shares owned by The Charles E. Bradley, Sr.
Family Limited Partnership (the "Bradley Partnership") of which Kimball J.
Bradley is general partner and in which he holds a 14.17% interest and (b)
500,000 shares subject to options exercisable currently or within 60 days.
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(2) Pursuant to the Securities Pledge Agreement dated as of May 1, 1993
among the Charles E. Bradley, Sr. Family Limited Partnership, the John Grier
Poole Family Limited Partnership, and U.S. Bank, National Association, as
successor Collateral Agent to State Street Bank and Trust Company and the
First National Bank of Boston, the Bradley Partnership pledged 4,145,247
shares and the Poole Partnership pledged 552,703 shares to secure the
obligations of Reunion Industries under the Indenture, dated as of May 1,
1993, between Reunion and the Collateral Agent relating to certain Senior
Notes issued by Reunion Industries in 1993.
(3) The voting and dispositive powers as to these shares are held by the
Liquidating Agent and the Executive Committee (subject to court oversight)
appointed in the bankruptcy proceeding of Stanwich Financial Services Corp.
(4) These shares are owned by the John Grier Poole Family Limited
Partnership. Amanda Poole, David Poole and Jesse Poole are co-general
partners (and limited partners) of such partnership. As such, they share
voting and dispositive powers as to such shares with each other and with such
partnership.
(5) Represents shares subject to currently exercisable warrants.
(6) Includes 139,808 shares as to which Mr. Poole has voting rights, but not
dispositive rights, 71,990 currently exercisable warrants and 10,000 shares
subject to options exercisable currently or within 60 days.
(7) Mr. Bradley, Sr. and his wife own, respectively, a 28% and a 1% limited
partnership interest in the Bradley Partnership, which in turn beneficially
owns 4,310,813 shares of common stock. Because Mr. Bradley, Sr. and his wife
have no voting or dispositive power as to the shares owned by the Bradley
Partnership, he disclaims any beneficial ownership thereof, and none of such
shares are included as being beneficially owned by him in the table above.
(8) Excludes 1,651,697 shares owned by Stanwich Financial Services Corp.,
with which Mr. Bradley, Sr. is the indirect sole shareholder. He has no
voting or dispositive powers as to these shares.
(9) Includes 100,000 shares owned by Hanna Investment Corporation, with
which Mr. Bradley, Sr. shares voting and dispositive power. Mr. Bradley, Sr.
is the controlling stockholder of the parent company of Hanna Investment
Corporation and may be deemed to be the beneficial owner of these shares.
Also includes 133,333 shares subject to options exercisable currently or
within 60 days.
(10) Includes 3,698 shares beneficially owned by Mr. Lawyer's wife, as to
which he has no voting or dispositive power. Mr. Lawyer may be deemed to be
the beneficial owner of these shares. Also includes 380 currently exercisable
warrants and 10,000 shares subject to options exercisable currently or within
60 days.
(11) Includes 10,000 shares subject to options exercisable currently or
within 60 days.
(12) Includes 27,805 currently exercisable warrants and 10,000 shares subject
to options exercisable currently or within 60 days.
(13) Includes 15,464 currently exercisable warrants and 30,000 shares subject
to options exercisable currently or within 60 days.
(14) Includes 4,951 currently exercisable warrants and 66,667 shares subject
to options exercisable currently or within 60 days.
(15) Includes 116,667 shares subject to options exercisable currently or
within 60 days.
(16) Includes 120,590 currently exercisable warrants and 820,000 shares
subject to options exercisable currently or within 60 days.
- 9 -
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Parties
Reunion Industries, Inc. - Reunion is a publicly traded Delaware
corporation headquartered in Pittsburgh, Pennsylvania. Charles E. Bradley,
Sr. (Mr. C. Bradley) was chairman of the board and Chief Executive Officer of
Reunion until March 2, 2006. Kimball Bradley (Mr. K. Bradley) was President,
Chief Operating Officer, a director of Reunion and son of Mr. Bradley until
March 2, 2006. On March 2, 2006, Mr. C. Bradley resigned as chairman of the
board and CEO and Mr. K. Bradley was elected chairman of the board and CEO.
Mr. K. Bradley also retained his office of President.
Stanwich Financial Services Corp.("SFSC") - SFSC is a privately held,
currently inactive, corporation that was formerly in the structured settlement
business. SFSC is owned 100% by Mr. C. Bradley. Prior to May 10, 2004, this
company was a related party to Reunion. On that date, management control of
SFSC was vested in a liquidating trustee and an executive committee, of which
Mr. Bradley is not a member, in accordance with SFSC's plan of reorganization
in its proceeding under Chapter 11 of the Bankruptcy Code. Accordingly, SFSC
is no longer a related party.
Transactions and Balances
SFSC Indebtedness
Pursuant to a settlement that became effective on May 10, 2004 (the "SFSC
Settlement"), the Company is indebted in the amount of $4.29 million, plus
interest that accrues on that amount after May 10, 2004 at the rate of 10% per
annum. The settlement, which represents a compromise of the Company's
indebtedness to SFSC and SFSC's indebtedness to the Company, resulted in a
gain on debt extinguishment of $3.3 million for the Company in 2004. This
settlement amount is payable on December 31, 2006, but may be prepaid without
penalty. It is unsecured and is subordinate to the Company's indebtedness to
Wachovia. In March 2006, the Company entered into an agreement with SFSC to
settle this obligation for $1.125 million, subject to final approval of the
bankruptcy court before which SFSC's chapter 11 proceeding is pending. For a
description of the settlement agreement, the 2006 settlement and the
indebtedness to which the SFSC Settlement relates, see PART IV of this Form
10-K, NOTES 3 AND 7 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS under the
captions "Note Payable Settlements" and "SFSC Judgment," respectively. As of
December 31, 2005, the Company had made no payment of principal or interest to
SFSC on the restructured note payable.
Cash Surrender Value of Life Insurance Policies
The Company pays the premiums on life insurance policies covering Mr. C.
Bradley and two directors, Mr. Joseph C. Lawyer (Mr. Lawyer) and Mr. John G.
Poole (Mr. Poole). Pursuant to these arrangements, the Company will be
reimbursed for the premiums it pays for such policies from either the death
benefit of the policy or their cash surrender value. The covered individuals
have agreed with the Company that if the policy proceeds are insufficient to
reimburse the Company for the full amount of the premiums paid, they will
cover the shortfall. As of December 31, 2005 and 2004, premiums paid by the
Company in excess of the cash surrender values of the policies totaled
$891,000 and $919,000, respectively, and are included in due from related
parties in the Company's consolidated balance sheets.
Mr. C. Bradley Note Payable
In January 2003, Mr. C. Bradley made a $500,000 payment on behalf of the
Company to Shaw NapTech, Inc. This payment was applied to reduce by $500,000
the Company's indebtedness to Shaw NapTech, Inc. To evidence this loan by Mr.
C. Bradley, the Company issued to him its unsecured $500,000 10% note payable.
The note payable became due on October 31, 2004. No principal or interest
payments have been made on this note. In June 2005, Mr. C. Bradley agreed to
forgive $98,400 of the interest payable to him and to convert an additional
$21,600 of such interest payable to him into 120,000 shares of the Company's
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common stock. At December 31, 2005 and 2004, accrued and unpaid interest
related to this note totaled $30,000 and $100,000, respectively, and are
included in due to related parties in the Company's consolidated balance
sheets. Mr. C. Bradley's rights under this note are subordinate to the
Company's indebtedness to Wachovia Bank.
Mr. C. Bradley Guarantees
To facilitate the closing of the Wachovia refinancing in December 2003,
Mr. C. Bradley provided a personal guarantee of $1.5 million of the revolving
credit portion of the Wachovia Loan Facility. In exchange for his guarantee,
the Board of Directors approved a 2% per annum guarantee fee to be paid to Mr.
C. Bradley during the time period such guarantee is in place. Amounts payable
under this arrangement were offset against an employee advance previously
received by Mr. C. Bradley and owed to the Company. Such advance totaled
$58,000 at the time of the refinancing, which advance has now been fully
recovered by offsets of $25,699, $29,917 and $2,384 in years ended December
31, 2005, 2004 and 2003, respectively. As of December 31, 2005, $4,219 is
included in Due to related party in the Company's consolidated balance sheet.
Mr. K. Bradley Guarantees
To facilitate obtaining new financing with two private investment funds
and the closing of the refinancing of the Company's bank debt with Wachovia in
December 2003, Mr. K. Bradley provided personal guarantees totaling $9.2
million, including guarantees of two notes payable totaling $7.7 million and
$1.5 of the revolving credit portion of the new Wachovia facilities. In
exchange for his guarantees, the Board of Directors approved 2% per annum
guarantee fees to be paid to Mr. K. Bradley during the time period such
guarantees are in place. In June 2005, Mr. K. Bradley agreed to forgive
$211,560 of the guarantee fees payable to him and to convert an additional
$46,440 of such guarantee fees payable to him into 278,000 shares of the
Company's common stock. At December 31, 2005 and 2004, $105,351 and $184,841,
respectively, of such fees are included in Due to related parties in the
Company's consolidated balance sheets.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Mahoney Cohen & Company, CPA, P.C. have been the Company's auditors for
the more than two years. Fees paid by the Company for professional services
rendered by Mahoney Cohen & Company, CPA, P.C. for the years ended December
31, 2005 and 2004 totaled $194,000 and $181,000, respectively. Such fees
related solely to audit fees for professional services rendered for the audit
of Reunion Industries' consolidated financial statements and review of the
interim consolidated financial statements included in quarterly reports and
services that are normally provided in connection with statutory and
regulatory filings or engagements.
All services provided by Mahoney Cohen & Company, CPA, P.C. are subject
to pre-approval by the Audit Committee. The Audit Committee may authorize the
Committee chairman to approve services in the event there is a need for such
approval prior to the next full Audit Committee meeting. However, the Audit
Committee must review such approval at its next scheduled meeting. The Audit
Committee gives due consideration to whether approval of any proposed service
will have a detrimental impact on the auditor's independence.
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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.
Date: May 1, 2006 REUNION INDUSTRIES, INC.
--------------
By: /s/ Kimball J. Bradley
----------------------------
Kimball J. Bradley
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K/A has been signed by the following persons in the
capacities and on this 1st day of May, 2006.
Signature Title
--------- -----
/s/ John M. Froehlich Executive Vice President, Chief
--------------------------- Financial Officer, Treasurer and
John M. Froehlich Secretary (chief financial
and accounting officer)
/s/ Thomas N. Amonett Director
---------------------------
Thomas N. Amonett
/s/ Charles E. Bradley, Sr. Director
---------------------------
Charles E. Bradley, Sr.
/s/ Thomas L. Cassidy Director
---------------------------
Thomas L. Cassidy
/s/ David E. Jackson Director
---------------------------
David E. Jackson
/s/ Joseph C. Lawyer Vice Chairman and Director
---------------------------
Joseph C. Lawyer
/s/ John G. Poole Director
---------------------------
John G. Poole
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