UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
(Amendment
No. 1)
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended September 30, 2007
OR
o TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Commission
file number: 0-643
Corning
Natural Gas Corporation
(Exact
name of registrant as specified in its charter)
|
New
York
|
|
16-0397420
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
employer
Identification
no.)
|
330
W. William St.
Corning,
New York 14830
(Address
of principal executive offices, including zip code)
(607)
936-3755
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock, par value $5.00 per share
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer as defined
in
Rule 405 of the Securities Act.
YES
o
NO
þ
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. Yes o
No
þ
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 þ
NO
o
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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer.
Large
accelerated Filer o
Accelerated
Filer o
Non-Accelerated Filer þ
Indicate
by check mark whether the registrant is a shell company. YES ¨
NO
þ
The
aggregate market value of the 431,852 shares of the Common Stock held by
non-affiliates of the Registrant at the $16.30 average of bid and asked prices
as of December 1, 2006 was
$6,477,780.
Number
of
shares of Common Stock outstanding as of the close of business on December
1,
2007 - 809,550.
EXPLANATION
OF AMENDMENT
Corning
Natural Gas Corporation is filing this Form 10-K/A as Amendment No. 1 (the
“Amendment”) to its Annual Report on Form 10-K for the year ended September 30,
2007 (the “Annual Report”), filed with the Securities and Exchange Commission on
December 28, 2007, for the purpose of including the following portions of
Corning’s Annual Report that were incorporated by reference to the Annual
Report:
Item
10 —
Directors, Executive Officers and Corporate Governance
Item
11 —
Executive Compensation
Item
12 —
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item
13 —
Certain Relationships and Related Transactions, Director
Independence
Item
14 —
Principal Accountant Fees and Services
In
addition, the Amendment includes Corning’s Performance Graph, which was omitted
from the Annual Report.
Except
as
described above, no other amendments are being made to the Annual Report. This
Amendment does not reflect events occurring after the December 28, 2007 filing
of the Annual Report, or modify or update the disclosure contained in the Annual
Report in any way other than as required to reflect the additions discussed
above and reflected below.
2
PART
II
ITEM
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
Performance
Graph.
PART
III
ITEM
10. Directors, Executive Officers and Corporate Governance
Board
of Directors. Certain
information regarding each member of the board of directors is set forth below.
Henry
B. Cook, Jr.,
60,
has
served as a director since May 2007.
He is
the president of Triple Cities Acquisition, LLC, a heavy truck parts and vehicle
dealer, and Roadwolf Transportation Products, LLC, an importer of heavy duty
truck parts.
Michael
I. German,
57, has
served as our chief executive officer, president and director since November
2006. Prior to joining Corning, he was senior vice president, utility operations
for Southern Union Company where he was responsible for gas utility operations
in Missouri, Pennsylvania, Rhode Island and Massachusetts. From 1994 to 2005,
Mr. German held several senior positions at Energy East Corporation, a
publicly-held energy services and delivery company, including president of
several utilities.
3
Richard
M. Osborne,
62, is
our chairman of the board of directors and has served as a director since
November 2006. Mr. Osborne is president and chief executive officer of OsAir,
Inc., a company he founded in 1963, which operates as a property developer
and
manufacturer of industrial gases for pipeline delivery. He also serves as
chairman of the board, chief executive officer and a director of John D. Oil
and
Gas Company, a publicly-held oil and gas exploration company, and Energy West
Incorporated, a publicly-held natural gas utility.
Ted
W. Gibson,
65, has
been a director since November 2006. He serves as the chief executive officer
of
Classic City Mechanical, an underground utility business. Mr. Gibson is also
a
corrosion specialist in the National Association of Corrosion Engineers and
a
graduate of the Georgia Institute of Technology - Mechanical Engineer. Mr.
Gibson previously served as Captain in the Marine Corps.
Stephen
G. Rigo,
61, has
served as a director since May 2007. He is executive vice president of two
Ohio
regulated intrastate gas pipeline companies, Orwell-Trumbell Pipeline Co.,
LLC
and Cobra Pipeline Co., Ltd., and three unregulated natural gas marketing
companies. Mr. Rigo’s responsibilities include new business acquisitions,
commodity pricing and purchasing, management of regulatory affairs, and
corporate administration. His business career spans over 25 years in the energy
industry including upper management positions with The Standard Oil Company
and
BP America.
Thomas
J. Smith,
63, has
served as a director since December 2006. Mr. Smith serves as president of
Orwell Natural Gas and North East Ohio Natural Gas, local natural gas
distribution companies. Mr. Smith has served as vice president and chief
financial officer of Energy West Incorporated, a publicly-held natural gas
utility, since November 2007 and was interim president of Energy West from
August 2007 until November 2007. Mr. Smith is also a director of Energy West.
From 1998 through April 2006, Mr. Smith was president and chief operating
officer of John D. Oil and Gas Company, a publicly-held oil and gas exploration
company. Mr. Smith remains a director of John D. Oil and Gas.
George
J. Welch,
62, has
served as a director since May 2007. He is a partner in the law firm of Welch
& Zink in Corning, New York. Mr. Welch’s practice concentrates on business
transactions and real estate. He is currently an active director or member
in
many community organizations, including a local economic development
organization, a community foundation and PaneLogic, Inc., a provider of control
system integration services.
4
Executive
Officers.
Below
are the names, ages, positions and certain other information concerning our
current executive officers.
Michael
I. German.
Biographical information for Mr. German can be found under “Board of
Directors.”
Firouzeh
Sarhangi, 49, was
appointed as chief financial officer of Corning in 2006. From February 2004
until her appointment as CFO, she served as vice president - finance of Corning.
Previously, she was president of Corning’s Tax Center International (TCI),
subsidiary, a company she founded and operated until Corning purchased TCI
in
1998. Ms. Sarhangi has had twenty-four years of public accounting experience.
Stanley
G. Sleve,
58,
serves as our vice president - administration and secretary. He joined Corning
in January 1998 and has overseen a variety of corporate operations. He is
currently responsible for customer service, facilities management, human
resources, information technology, gas supply and community relations.
Section
16(a) Beneficial Ownership Reporting Compliance. Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who own more than 10% of our common stock,
to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of our common stock. Our officers, directors
and greater than 10% shareholders are required by the SEC to furnish us with
copies of all Section 16(a) forms they file. In the last fiscal year, Joel
Moore, our former vice president of operations, and Firouzeh Sarhangi, our
chief
financial officer, each filed one Form 4 late reporting a purchase of investment
units in Corning’s rights offering. In addition, George Welch, a director,
failed to timely report shares owned on a Form 3. All forms were subsequently
filed. Based solely on review of copies of reports furnished to us or written
representations that no reports were required, we believe that all other Section
16(a) filing requirements were met timely during the most recent fiscal year.
Code
of Business Conduct and Ethics.
Corning
has a Code of Business Conduct and Ethics that applies to all employees,
including our chief executive officer and our chief financial officer who also
serves as our principal accounting officer. This code is available on our
website at www.corninggas.com. Any amendments or waivers to the code that apply
to our chief executive officer or chief financial officer will be promptly
disclosed to our shareholders.
Audit
Committees. The
audit
committee is comprised of Mr. Smith, Mr. Cook, Mr. Gibson and Mr. Rigo. The
function of the audit committee is to recommend the selection of independent
auditors, review the plan and results of the independent audit and approve
each
professional service provided by the independent auditors. The audit committee
operates under a written charter that was approved and adopted by our board.
The
members of the audit committee meet the independence standards of Sections
303.01(B) (2) (a) and (3) of the New York Stock Exchange’s listing standards.
The board of directors has determined that Mr. Smith meets the qualifications
for designation as a financial expert as defined in SEC rules.
5
ITEM
11. Executive Compensation.
Compensation
Discussion and Analysis.
The
Compensation Committee. Our
compensation committee oversees Corning’s executive compensation program. In
this role, the committee reviews and approves, or recommends for approval by
the
full board, the compensation that is paid or awarded to our executive officers.
The committee also administers our 2007 Stock Plan. The goal of our compensation
committee is to ensure that the total compensation paid to our executive
officers is fair, reasonable and competitive.
Compensation
Philosophy and Objectives. Our
compensation philosophy is to reward our executive officers for management
that
advances the interests of our shareholders and provides dependable and
economically priced natural gas service for our customers. The primary objective
of our compensation program is to attract and retain highly qualified executive
officers to successfully lead Corning and improve shareholder
value.
To
achieve these objectives, we believe that we must provide a compensation package
for our executives that is competitive with compensation offered by comparable
companies in the Corning and Hammondsport, New York areas. In addition, our
company is regulated by the New York Public Service Commission and we seek
to
set compensation within the rate parameters imposed by the
commission.
Role
of Executive Officers in Our Compensation Program. In
the
last year, the compensation committee, with the input of our president and
CEO,
Michael I. German, established the salary for each executive based on his or
her
performance and current compensation level. Mr. German reviewed the performance
of our executive officers and solicited their views on their own compensation
levels. Mr. German then presented his recommendations, based on these reviews
and discussions, to the committee for review and approval or modification.
The
compensation committee can exercise its discretion in modifying any
recommendation made by Mr. German.
Elements
of Our Compensation Program. We
subscribe to a total compensation program composed primarily of base salary
and
retirement and welfare benefits. We do not have a bonus program and none of
our
executives received a bonus in 2007, although we may consider annual cash
incentive compensation in the future tied to specific performance goals. Mr.
German’s employment agreement provides for a bonus based on net after tax income
targets. Because these targets were not met in 2007, Mr. German did not receive
a bonus. See “Mr. German’s Employment Agreement” below.
Base
Salary. To
attract and retain qualified executive officers, base salary is the primary
element in our compensation program. The base salary of our executive officers
is designed to fairly compensate them for:
|
·
|
delivering
safe, reliable and cost effective service to our customers;
and
|
6
|
·
|
providing
reasonable earnings growth to our
shareholders.
|
We
believe that these are complimentary objectives and linked to our overall
success. To attract and retain qualified executives we believe that base
salaries must be competitive with those offered by comparable companies in
the
Corning and Hammondsport, New York areas. In addition, our company is regulated
by the New York Public Service Commission and we seek to set compensation within
the rate parameters imposed by the commission. There is no specific, quantified
relationship between the company’s performance and individual executive’s
salaries.
The
compensation committee reviews the base salary adjustment, if any, for our
executive officers based on merit and prevailing rates and recommends these
adjustments to the board of directors. In 2007 the raise “pool” for our
employees was 3.5% based on our rate case and union agreements. Mr. German
decided to forgo any increase in his base salary to support the company in
its
rebuilding phase. Our other executive officers received modest increases in
base
salary for 2008 ranging from 1.4% to 3.5%.
Long-Term
Incentives. In
2007,
we adopted the 2007 Stock Plan which provides for the granting of stock options,
stock appreciation rights, or SARs, restricted stock awards and
performance-based awards. Long-term incentives are awarded in an effort to
attract and retain executive officers of outstanding ability and keep such
officers aligned with the long-term objectives of Corning. In order to attract
an executive of Mr. German’s caliber to lead Corning and to align his interests
with those of our shareholders, his employment agreement provided for the
issuance of 75,000 options to him, which he was awarded effective August 2007.
Currently, only Mr. German has been issued options under the plan. The
compensation committee intends to review the advisability of issuing additional
equity awards to Corning’s executives in the future.
An
aggregate
of 100,000 shares of our Class A common stock have been reserved for issuance
pursuant to the plan, subject to adjustment for stock splits, mergers and
similar transactions. In addition, beginning in 2008 and continuing for a period
of nine years, on the day of each annual meeting of shareholders, the total
maximum number of shares available for issuance will automatically be increased
to the number of shares equal to 15% of the shares outstanding. All
of
our officers, directors and employees are eligible to receive grants pursuant
to
the plan. The plan is administered by our compensation committee, which is
responsible for designating individuals to whom options, SARs or awards are
to
be granted and determining the terms and conditions of grants. In granting
options, SARs or awards, the committee considers the performance and anticipated
future contribution of the potential recipient and such other considerations
the
committee deems relevant. Options granted under the plan generally have a term
of ten years and are exercisable as determined by the committee. The plan
terminates on May 31, 2017. Awards outstanding on the termination date are
subject to their terms, but no further grants will be made following the
termination date. We estimate that on April 1, 2008, the date of this year’s
annual meeting, the number of shares available for future grants will be
increased to 46,433.
7
Benefit
Plans. We
provide competitive welfare and retirement benefits to our executive officers
as
an important element of their compensation packages. Our executives receive
medical and dental coverage, life insurance, disability coverage and other
benefits on the same basis as our other employees. Our executives are also
eligible to participate in our employee savings and pension plans.
Corning
Natural Gas Corporation Employees Savings Plan.
All
non-union employees of Corning who work for more than 1,000 hours per year
and
who have completed one year of service may enroll in the savings plan at the
beginning of each calendar quarter. Under the savings plan, participants may
contribute up to 50% of their wages. For non-union employees, Corning will
match
one-half of the participant’s contributions up to a total of 3% of the
participant’s wages. Matching contributions vest in the participants at a rate
of 20% per year and become fully vested after five years. All participants
may
select one of ten investment plans, or a combination thereof, for their account.
Distribution of amounts accumulated under the savings plan occurs upon the
termination of employment or death of the participant. The savings plan also
contains loan and hardship withdrawal provisions.
Pension
Plan. We
maintain a defined benefit pension plan, the
Retirement Plan for Salaried and Non-Union Employees of Corning Natural Gas
Corporation, that covers substantially all of our employees. We make annual
contributions to the plan equal to amounts determined in accordance with the
funding requirements of the Employee Retirement Security Act of 1974. The
benefit payable under the pension plan is calculated based upon the employee’s
average salary for the four years immediately preceding his retirement. The
compensation covered by the pension plan includes only base salary, identified
in the summary compensation table as “salary.”
Mr.
German’s Employment Agreement. Pursuant
to his employment agreement, Michael I. German will serve as president and
chief executive officer of Corning for a period of three years, with an
automatic renewal for successive one year periods thereafter. Mr. German
received 75,000 options to purchase common stock of Corning for a price of
$15.00 per share under the 2007 Stock Plan pursuant to the terms of the
agreement. The employment agreement provides termination payments to
Mr. German in the event of a change in control of Corning or other
termination of Mr. German’s employment for cause, as are defined in the
employment agreement. The employment agreement also contains standard
confidentiality, non-competition and non-solicitation provisions for a period
including Mr. German’s employment and the twelve months immediately
following the date of the termination of his employment.
None
of
our other executive officers have employment, termination or change-in-control
agreements.
Stock
Ownership Guidelines.
In
order to link the interests of management and shareholders, executive officers
are encouraged to purchase shares of Corning to maintain or to establish a
significant level of direct stock ownership. For example, all of our executive
officers purchased shares in our rights offering last year.
8
Accounting
and Tax Considerations.
In
designing our compensation program, we take into consideration the accounting
and tax effect that each element will or may have on Corning and our executive
officers.
Effective
November, 2007, in accordance with Statement of Financial Accounting Standard
No. 123(R), “Share-Based Payment” (FAS 123(R)), we began to record compensation
expense under the “fair-value-based” method of accounting for stock options
granted to employees and directors. We adopted FAS 123(R) using the “modified
prospective application.” The modified prospective transition method requires
that compensation cost be recognized in the financial statements for all awards
granted after the date of adoption as well as for existing awards for which
the
requisite service has not been rendered as of the date of adoption.
Executive
Compensation.
Summary
Compensation Table. The
following table summarizes the compensation paid by us to our chief executive
officer, chief financial officer, and our most highly compensated executive
officers.
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compensation(1)
($)
|
Total
($)
|
|||||||||||||||
|
Michael
I. German, President and Chief Executive Officer
|
2007
|
118,269
|
—
|
39,367
|
—
|
—
|
157,636
|
|||||||||||||||
|
Firouzeh
Sarhangi, Chief Financial Officer
|
2007
|
111,320
|
—
|
—
|
16,192
|
3,340
|
130,852
|
|||||||||||||||
|
Stanley
G. Sleve, Vice President - Administration and Corporate
Secretary
|
2007
|
97,290
|
—
|
—
|
19,163
|
2,919
|
119,372
|
|||||||||||||||
|
Joel
D. Moore, former Vice President - Operations
|
2007
|
146,399
|
—
|
—
|
11,686
|
4,392
|
162,477
|
|||||||||||||||
|
Thomas
K. Barry, former President and Chief Executive Officer
|
2007
|
57,418
|
—
|
—
|
12,481
|
170,797
|
(2)
|
240,696
|
(1)
The
amounts reported include the following 401(k) matching contributions by Corning
in fiscal 2007: (i) Ms. Sarhangi - $3,340; (ii) Mr. Sleve - $2,919; (iii) Mr.
Moore - $4,392; and (iv) Mr. Barry - $1,705.
(2)
Amounts include: (i) $93,936 paid to Mr. Barry pursuant to his consulting
agreement; (ii) $63,140 in payments pursuant to his deferred compensation
agreement; and (iii) $11,516 in taxes payable by Mr. Barry on compensation
paid
to him pursuant to his deferred compensation agreement that was reimbursed
by
Corning.
9
Grants
of Plan-Based Awards.
The
following table summarizes information with respect to grants of non-equity
and
equity plan-based awards to our most highly compensated executive officers
in
the last fiscal year.
|
Estimated
Future Payouts Under Non-Equity Incentive Plan
Awards
|
Equity
Plan Awards
|
||||||||||||||||||||||||
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
All
Other Option Awards: Number of Shares Underlying
Options
|
Exercise
or Base Price of Option Awards
($)
|
Closing
Market Price on the Date of Grant (1)
($)
|
Grant
Date Fair Value of Stock and Option Awards (2)
($)
|
|||||||||||||||||
|
Michael
I. German
|
8/6/07
|
(1)
|
—
|
—
|
—
|
75,000
|
15.00
|
16.50
|
118,100
|
||||||||||||||||
(1)
Mr.
German’s employment agreement dated as of November 30, 2006 provided for the
grant of non-qualified stock options at the exercise price of $15.00 per share
upon Corning’s adoption of a stock option plan. The plan was adopted on May 31,
2007. Mr. German’s option agreement was not executed until November 5, 2007.
However, the grant date of August 6, 2007 was used for Corning’s financial
statement accounting purposes.
(2)
The
fair value of stock options is based on the FAS 123(R) compensation expense
recognized as of August 6, 2007. We use the Black-Scholes option pricing model
to estimate compensation cost for stock option awards. Please see the table
regarding the assumptions used in this calculation in Note R - “Stock Based
Compensation” to our consolidated financial statements in our Form 10-K for the
fiscal year ended September 30, 2007 filed with the SEC on December 28,
2007.
Option
Exercises and Stock Vested. None
of
our most highly compensated officers exercised options in the last fiscal year.
Our executive officers did not hold any stock awards as of the past fiscal
year.
Outstanding
Equity Awards at Fiscal Year End. The
following table summarizes information with respect to the stock options held
by
our most highly compensated executive officers as of the end of the past fiscal
year.
|
Name
|
Number
of Securities Underlying
Unexercised
Options
Exercisable
|
Number
of Securities Underlying Unexercised Options
Unexercisable
|
Option
Exercise Price
($)
|
Option
Expiration Date*
|
|||||||||
|
Michael
I. German
|
25,000
|
50,000
|
$
|
15.00
|
11/05/2001
|
||||||||
*
The
option is exercisable as follows: 25,000 shares on 11/5/2007, 25,000 shares
on
11/5/2008 and 25,000 shares on 11/5/2009.
10
Pension
Benefits
The
following table shows the present value of accumulated pension benefits payable
to each of our most highly compensated executive officers, including the number
of years of service credited to each officer.
|
Name
|
|
Plan
Name
|
|
Number
of Years Credited Service
|
|
Present
Value of Accumulated Benefit
($)
|
|
Payments
Made During Last Fiscal Year
($)
|
|||||
|
Firouzeh
Sarhangi
|
Retirement
Plan for Salaried and Non-Union Employees
|
9.4
|
81,209
|
—
|
|||||||||
|
Stanley
G. Sleve
|
Retirement
Plan for Salaried and Non-Union Employees
|
9.8
|
128,798
|
—
|
|||||||||
|
Joel
D. Moore
|
Retirement
Plan for Salaried and Non-Union Employees
|
2.1
|
19,628
|
—
|
|||||||||
|
Thomas
K. Barry
|
Retirement
Plan for Salaried and Non-Union Employees
|
30.0
|
1,210,684
|
84,685
|
|||||||||
|
Supplemental
Executive Retirement Benefit*
|
30.0
|
6,781
|
441
|
||||||||||
*
Annual
excess pension benefit payable pursuant to Mr. Barry’s consulting agreement.
Severance
Compensation . We
do not
have a general severance policy applicable to all employees, including our
most
highly compensated executive officers. However, Mr. German’s employment
agreement requires us to make payments in the event of termination of his
employment, including a change of control. Mr. Barry’s survivor benefit deferred
compensation agreement provides for death benefit coverage payable to his
beneficiaries upon his death. Corning’s pension committee is investigating
whether Mr. Barry violated terms of his deferred compensation agreement and
the
company has suspended all payments under the agreement. As the pension committee
has not made a final determination regarding future payment to Mr. Barry under
the deferred compensation agreement, the amount shown in the table below
represents the full amount payable to Mr. Barry under the agreement.
For
purposes of the description of the potential payments to Mr. German and Mr.
Barry, we have assumed that the triggering event occurred as of September 28,
2007, the last business day of our last fiscal year. The actual amounts of
any
payments to these executive officers can only be determined at the time of
a
change in control or termination of Mr. German or upon the death of Mr. Barry.
For additional information regarding Mr. German’s employment agreement, see “Mr.
German’s Employment Agreement.”
|
|
|
|
|
|
|
Death
Pursuant
|
|
|||
|
|
|
|
|
|
|
to
Survivor
|
|
|||
|
|
|
|
|
|
|
Benefit
|
|
|||
|
|
|
Termination
within
|
|
|
|
Deferred
|
|
|||
|
|
|
one
year after a
|
|
Termination
|
|
Compensation
|
|
|||
|
|
|
“Change
in Control”
|
|
“Without
Cause”
|
|
Agreement
|
|
|||
|
Estimated
Potential Payment*
|
|
($)
|
|
($)
|
|
($)
|
||||
|
Michael
I. German
|
||||||||||
|
Compensation
Payments
|
450,000
|
150,000
|
—
|
|||||||
|
Thomas
K. Barry
|
||||||||||
|
Deferred
Compensation Payments
|
—
|
—
|
1,078,420
|
|||||||
11
Following
termination of employment, our executive officers may receive payment of
retirement benefits under our pension plan. The value of this benefit as of
September 29, 2007 is set forth in “Pension Benefits” section on page 19. There
are no special or enhanced benefits under the pension plan for our most highly
compensated executive officers.
Compensation
Committee Report. The
compensation committee is comprised of Ted W. Gibson, Richard M. Osborne and
Stephen G. Rigo. The compensation committee did not meet in the last fiscal
year. The board of directors determined that Mr. Gibson and Mr. Rigo are
independent as required by applicable law and regulations and the listing
standards of the New York Stock Exchange.
Our
compensation committee does not have a written charter. The compensation
committee has reviewed and discussed compensation discussion and analysis for
our fiscal year ended September 30, 2007 with our management and based on this
review has recommended to the board that compensation discussion and analysis
be
included in this proxy statement.
The
foregoing report was submitted by the compensation committee and shall be deemed
to be “furnished” rather than “filed” with the SEC and, therefore, not subject
to Regulation 14A promulgated by the SEC or Section 18 of the Exchange
Act.
COMPENSATION
COMMITTEE
TED
W.
GIBSON
RICHARD
M.
OSBORNE
STEPHEN
G.
RIGO
Director
Compensation. On
January 24, 2007, the board of directors agreed to change the compensation
for
all board members. Directors who are not also officers will receive 50 shares
of
our restricted common stock for each quarter of service as a director. Directors
who also serve as officers of Corning will not be compensated for their service
as directors. In fiscal 2007, the directors did not receive these compensatory
shares, or any other compensation for service as directors. Corning expects
to
issue the shares earned in fiscal 2007 to the directors in early 2008.
Compensation
Committee Interlocks and Insider Participation.
Not
applicable.
ITEM
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
Equity
Compensation Plan Information. The
Corning Natural Gas Corporation 2007 Stock Plan provides for the issuance of
100,000 shares of our common stock. Beginning in 2008 and continuing for a
period of nine years, on the day of each annual meeting of shareholders, the
total maximum number of shares available for issuance will automatically be
increased to the number of shares equal to 15% of the shares outstanding. As
of
September 30, 2007, there were 75,000 options outstanding and the maximum number
of shares available for future grants under the plan was 25,000. We estimate
that on April 1, 2008, the date of this year’s annual meeting, the number of
shares available for future grants will be increased to 46,433.
|
Plan
category
|
|
Number
of
securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
|
Weighted-average
exercise
price of
outstanding
options, warrants and rights
|
|
Number
of
securities
remaining
available
for
future issuance
under
equity
compensation
plans (excluding securities reflected in the first
column
|
||||
|
Equity
compensation plans approved by security holders
|
75,000
|
$
|
15.00
|
25,000
|
||||||
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||
|
Total
|
75,000
|
$
|
15.00
|
25,000
|
||||||
12
Principal
Shareholders.
The
following table sets forth, as of January 24, 2008, information regarding the
beneficial ownership of our common stock, by each shareholder known by us to
be
the beneficial owner of more than 5% of our stock, each director, each executive
officer, and all our directors and executive officers as a
group.
|
Common
Stock
|
|||||||||||||
|
Names
and Address (1)
(2)
|
Shares
|
|
|
Right
to Acquire (3)
|
|
|
Total
|
|
|
Percentage
|
|
||
|
Richard
M. Osborne (4)
|
119,132
|
14,000
|
133,132
|
16.2
|
%
|
||||||||
|
Michael
I. German (5)
|
117,752
|
67,064
|
184,816
|
21.1
|
%
|
||||||||
|
The
Gabelli Group (6)
One
Corporate Center
Rye,
NY 10580
|
150,000
|
52,293
|
202,293
|
23.5
|
%
|
||||||||
|
Mitchell
Partners, L.P. (7)
3187-D
Airway Avenue
Costa
Mesa, CA 92626
|
47,852
|
29,976
|
77,828
|
9.3
|
%
|
||||||||
|
Ted
W. Gibson (8)
|
25,000
|
17,500
|
42,500
|
5.1
|
%
|
||||||||
|
Henry
B. Cook, Jr. (9)
|
5,270
|
3,549
|
8,819
|
1.1
|
%
|
||||||||
|
Firouzeh
Sarhangi (10)
|
4,776
|
1,672
|
6,448
|
*
|
|||||||||
|
George
J. Welch (11)
|
3,062
|
1,072
|
4,134
|
*
|
|||||||||
|
Stanley
G. Sleve (12)
|
2,614
|
1,020
|
3,634
|
*
|
|||||||||
|
Joel
D. Moore (13)
|
1,010
|
707
|
1,717
|
*
|
|||||||||
|
Stephen
G. Rigo
|
—
|
—
|
— |
—
|
|||||||||
|
Thomas
J. Smith
|
—
|
—
|
— |
—
|
|||||||||
|
All
directors, director nominees and executive officers as a group (10
individuals)
|
278,616
|
106,584
|
385,200
|
42.0
|
%
|
||||||||
*
Less
than 1 percent
|
(1)
|
Unless
otherwise indicated, we believe that all persons named in the table
have
sole investment and voting power over the shares of capital stock
owned.
|
13
|
(2)
|
Unless
otherwise indicated, the address of each beneficial owner is c/o
Corning
Natural Gas Corporation, 330 West William Street, Corning, New York
14830.
|
|
(3)
|
Shares
of common stock the beneficial owner has the right to acquire through
stock options or warrants that are or will become exercisable within
60
days.
|
|
(4)
|
Includes
warrants to purchase 14,000 shares of stock. All shares and warrants
are
owned by the Richard M. Osborne Trust, an Ohio trust of which Mr.
Osborne
is the sole trustee.
|
|
(5)
|
Includes
75,000 options to purchase common stock and warrants to purchase
42,064
shares of common stock. 10,000 shares and warrants to purchase 7,000
shares of common stock are owned jointly by Mr. German and two other
individuals. Mr. German disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest
therein.
|
|
(6)
|
Includes
120,000 shares and 41,790 warrants held by Gabelli Funds, LLC and
30,000
shares and 10,503 warrants held by Gabelli Advisors, Inc. Each of
Gabelli
Funds and Gabelli Advisors has sole voting and dispositive power
over the
shares held by it. Based solely on information in the Schedule 13D
filed
with the SEC on January 24, 2008.
|
|
(7)
|
Includes
warrants to purchase 29,976 shares of common stock. Based solely
on
information in the Schedule 13D filed with the SEC on September 13,
2007
|
|
(8)
|
Includes
warrants to purchase 17,500 shares of common
stock.
|
|
(9)
|
Includes
warrants to purchase 3,549 shares of common
stock.
|
|
(10)
|
Includes
warrants to purchase 1,672 shares of common
stock.
|
|
(11)
|
Includes
warrants to purchase 1,072 shares of common stock. Shares and warrants
are
beneficially owned by Vincent J. Welch Trust, of which Mr. Welch
is one of
three trustees having voting and investment
powers.
|
|
(12)
|
Includes
warrants to purchase 1,020 shares of common
stock.
|
|
(13)
|
Includes
warrants to purchase 707 shares of common
stock.
|
ITEM
13. Certain Relationships and Related Transactions, and Director
Independence.
Certain
Relationships and Related Transactions.
Not
applicable.
Director
Independence. The
board
of directors has determined and confirmed that each of Mr. Cook, Mr. Gibson,
Mr.
Rigo, Mr. Smith and Mr. Welch do not have a material relationship with Corning
that would interfere with the exercise of independent judgment and are
independent as defined by the
ITEM
14. Principal Accountant Fees and Services. The
following is a summary of the aggregate fees billed to us for the fiscal years
ended September 30, 2007 and 2006, by our independent registered public
accounting firm, Rotenberg & Co. LLP, Certified Public Accountants of
Rochester, New York.
|
|
2007
|
|
2006
|
||||
|
Audit
Fees
|
$
|
84,000
|
$
|
85,100
|
|||
|
Audit-Related
Fees
|
—
|
—
|
|||||
|
Tax
Fees
|
$
|
16,000
|
$
|
30,500
|
|||
|
All
Other Fees
|
$
|
11,000
|
—
|
||||
|
Total
|
$
|
111,000
|
$
|
115,500
|
|||
14
Audit
Fees. These
are
fees for professional services rendered by Rotenberg & Co. for the audit of
our annual consolidated financial statements, the review of financial statements
included in our quarterly reports on Form 10-Q, and services that are typically
rendered in connection with statutory and regulatory filings or
engagements.
Audit-Related
Fees. There
were no fees billed by Rotenberg & Co. for audit-related fees for the fiscal
years ended September 30, 2007 and 2006.
Tax
Fees. These
are
fees for professional services rendered by Rotenberg & Co. with respect to
tax compliance, tax advice and tax planning. These services include the review
of tax returns and consulting on tax planning matters.
All
Other Fees. In
fiscal
2007, these are fees for the audit of our pension plan and the review of our
internal controls and corporate governance. There were no fees billed by
Rotenberg & Co. for other services not described above for fiscal
2006.
The
audit
committee authorized the payment by us of the fees billed to us by Rotenberg
& Co. in fiscal 2007 and 2006. The decision to engage Rotenberg & Co.
LLP was approved by the audit committee. The audit committee has considered
whether the provision of non-audit services is compatible with maintaining
Rotenberg & Co. LLP’s independence. Rotenberg & Co. has no direct or
indirect financial interest in Corning in the capacity of promoter, underwriter,
voting director, officer or employee.
PART
IV
ITEM
15. Exhibits and Financial Statement Schedules
(a)
Exhibits
|
31.1*
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act - Michael I.
German
|
|
31.2*
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act - Firouzeh
Sarhangi
|
| 32.1* | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
*
Filed
herewith
15
SIGNATURES
In
accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
| CORNING NATURAL GAS CORPORATION | ||
|
(Registrant)
|
||
| |
|
|
| Date January 28, 2008 | By: | /s/ Michael I. German |
|
Michael
I. German, President and Chief Executive
Officer
|
||
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
|
Date
January 28, 2008
|
/s/
Fi Sarhangi
Fi
Sarhangi, Chief Financial Officer
|
|
|
Date
January 28, 2008
|
/s/
Michael I. German
Michael
I. German, President, Chief Executive
|
|
|
Officer
and Director
|
||
|
Date
January 28, 2008
|
/s/
Henry B. Cook, Jr.
Henry
B. Cook, Jr., Director
|
|
|
Date
January 28, 2008
|
/s/
Richard M. Osborne
Richard
M. Osborne, Director
|
|
|
Date
January 28, 2008
|
/s/
Stephen G. Rigo
Stephen
G. Rigo, Director
|
|
|
Date
January 28, 2008
|
/s/
Thomas J. Smith
Thomas
J. Smith, Director
|
|
|
Date
January 28, 2008
|
/s/
George J. Welch
George
J. Welch, Director
|
16