UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB/A
(Amendment No. 1)
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(X)
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Annual
Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal
Year Ended December 31, 2007
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( )
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Transition Report Pursuant Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from ________ to ________
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Commission file number:
0-50019
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SECURITY WITH ADVANCED TECHNOLOGY, INC
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(Name of small business issuer in its charter)
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Colorado
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20-1978398
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.)
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1722 Boxelder St., Suite 101
Louisville, Colorado
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80027
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(Address of principal executive office)
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(Zip Code)
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Issuer's telephone
number, including area code:
(303) 439-0372
Securities Registered
Under Section 12(b) of the Exchange Act:
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Title of each Class
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Name of each
Exchange
on Which Registered
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None
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None
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Securities Registered
Under Section 12(g) of the Act:
No par value common
stock
(Title
of Class)
Common stock purchase
warrants exercisable at $9.00
(Title
of Class)
Check whether the Registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [X]
Check whether the Registrant (1)
filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [_] No [X]
Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of Registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [_]
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_]
No [X]
The Registrant had revenues of
$1,242,000 for its most recent fiscal year ended December 31, 2007.
The aggregate market value of the
voting stock held by non-affiliates of the Registrant based upon the closing price as of
April 23, 2008 was $2,529,000.
The number of shares outstanding of
the Registrant’s common stock on April 23, 2008 was 7,213,403.
The number of the Registrant’s SWATW
common stock purchase warrants outstanding on April 23, 2008 was 1,380,000.
Transitional Small Business
Disclosure Format (Check one): Yes [_] No [X]
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-KSB
(“Amendment”) amends our Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2007 originally filed on April 16, 2008 (the “Original Filing”). We
are filing this Amendment to include the information required by Part III and not included
in the Original Filing as we will not be filing our definitive proxy statement within 120
days of the end of our fiscal year ended December 31, 2007.
Except as described above, no other
changes have been made to the Original Fling. The Original Filing continues to speak as of
the date filed and we have not updated the disclosures contained therein to reflect any
events which occurred subsequent to the filing date of the Original Filing.
SECURITY WITH ADVANCED
TECHNOLOGY, INC.
INDEX TO ANNUAL REPORT ON
FORM 10-KSB / A
PART III
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Page
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Item 9.
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Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act
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2
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Item 10.
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Executive Compensation
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5
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Item 11.
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Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
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12
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Item 12.
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Certain Relationships and Related Transactions, and Director Independence
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15
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Item 13.
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Exhibits
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16
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Item 14.
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Principal Accountant Fees and Services
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18
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Signatures
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19
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Exhibit List
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20
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DISCLOSURE REGARDING
FORWARD-LOOKING STATEMENTS
The Company is including the
following cautionary statement in this Amendment No. 1 to its Annual Report on Form 10-KSB
to make applicable and take advantage of the safe harbor provision of the Private
Securities Litigation Reform Act of 1995 for any forward looking statements made by, or on
behalf of the Company. Forward looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and underlying assumptions and
other statements which are other than statements of historical facts. Certain statements
contained herein are forward looking statements and, accordingly, involve risks and
uncertainties which could cause actual results or outcomes to differ materially from those
expressed in the forward looking statements. The Company’s expectations, beliefs and
projections are expressed in good faith and are believed by the Company to have a
reasonable basis, including without limitation, management’s examination of
historical operating trends, data contained in the Company’s records and other data
available from third parties, but there can be no assurance that management’s
expectation, beliefs or projections will result or be achieved or accomplished. Actual
events or results may differ materially as a result of risks facing the Company. Such
risks include, but are not limited to, changes in business conditions, the general
economy, competition, changes in product offerings, as well as regulatory developments
that could cause actual results to vary materially from the future anticipated results
indicated, expressed or implied, in such forward-looking statements. The Company disclaims
any obligation to update any forward-looking statement to reflect events or circumstances
after the date hereof.
PART III
ITEM
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The
following individuals serve as our directors and/or executive officers, as indicated:
Name
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Age
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Position
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Gregory Pusey
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55
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Chairman of the Board of Directors and Secretary
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Jeffrey G. McGonegal
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57
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Chief Executive Officer and Chief Financial Officer
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Thomas R. Marinelli
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56
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Director
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Gail Schoettler
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64
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Director
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Robert J. Williams
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67
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Director
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David E. Welch
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61
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Director
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Gregory
Pusey
– Greg joined our board in 2002 and has served as Chairman of
the Board since October 2004. He became our Secretary in March 2006. Greg is also: (i)
the President, a principal shareholder and a director of Cambridge Holdings, Ltd., a
publicly-held business development firm, (ii) chairman of the board of directors and
director of AspenBio Pharma, Inc., a publicly-held biomedical company, and (iii)
President of Livingston Capital, Ltd., a private venture capital firm. He serves as a
director of Bactolac Pharmaceutical, Inc., a privately-held company engaged in
manufacturing and marketing of nutraceuticals. Greg has been associated with Bactolac
Pharmaceutical, Inc. and its predecessors since 1997. He holds a B.S. degree in finance
from Boston College.
Jeffrey
G. McGonegal
— Jeff became our Chief Executive Officer in October 2007
and has served as our Chief Financial Officer since late 2003. Jeff also serves as Senior
Vice President — Finance of Cambridge Holdings, Ltd. and as Chief Financial Officer
of AspenBio Pharma, Inc. Since 1997, he has served as Managing Director of McGonegal and
Co., a company engaged in providing accounting and business consulting services. From
1974 to 1997, Jeff was an accountant with BDO Seidman LLP. While at BDO Seidman LLP, Jeff
served as managing partner of the Denver, Colorado office. Mr. McGonegal was elected in
2005, and currently serves on the board of Imagenetix, Inc., a publicly-held company in
the nutritional supplements industry. He received a B.A. degree in accounting from
Florida State University. Mr. McGonegal is a Certified Public Accountant, licensed in the
state of Colorado.
Thomas
R. Marinelli
– Tom became a director in December 2004, and served as
our Chief Executive Officer from April 2005 to March 2007 and our President from July
2006 to December 2006. He had spent the previous 29 years in positions of increasing
responsibilities at DaimlerChryslerAG, including President of Chrysler Europe, and most
recently as Vice President of Chrysler and Jeep Brands. Since August 2004, Tom has been a
director of Bossier Automotive Group, a DaimlerChrysler dealer. He received a B.S. degree
in finance and marketing from Boston College and an M.B.A. degree from Michigan State
University.
Gail
Schoettler
– Dr. Gail Schoettler joined the board of directors of the
Company in April 2005. Ambassador Gail Schoettler serves on the boards of AspenBio
Pharma, Inc., Masergy Communications, Delta Dental of Colorado, The Colorado Trust
(Colorado’s largest foundation) and several non-profit organizations. She has served
as a U.S. Ambassador and as Colorado’s Lt. Governor and State Treasurer. In 1998,
she narrowly lost her bid for Governor of Colorado. She started two successful banks and
is involved in her family’s cattle ranch, vineyards and real estate enterprises. In
addition to being a Denver Post columnist, Dr. Schoettler and her husband own
eGlobalEducation, a custom travel company leading executive groups to countries around
the world. She earned a BA in economics from Stanford and MA and PhD degrees in African
History from the University of California at Santa Barbara. Among her numerous awards is
the French Legion of Honor (France’s highest civilian award) from President Jacques
Chirac of France.
Robert
J. Williams
– Bob became a director in July 2005. He is an
independent consultant to corporations pursuing government contract awards. He was
employed by Ford Motor Company from 1996 to 2001, serving in a wide variety of positions,
including Manager of Ford’s Government Sales Department, the department responsible
for sales to federal, state and local government agencies. In this position, Bob
established the Ford Police Advisory Board, a cooperative effort between police agencies
and Ford engineers. Bob graduated from Creighton University in Omaha, Nebraska with a
degree in economics and pursued post-graduate study in business administration. He served
in the United States Army from 1963 to 1965, earning a direct commission as a second
lieutenant.
David
E. Welch
–David became a director of in December 2006. Mr. Welch has
served as Vice President and Chief Financial Officer of American Millennium Corporation,
Inc., a public company located in Golden, Colorado, since April 2004. Mr. Welch also
serves as a director of AspenBio Pharma, Inc., Inc. He also is a self-employed financial
consultant. From July 1999 to June 2002, Mr. Welch served as Chief Financial Officer,
Secretary and Treasurer of Active Link Communications, Inc., another publicly traded
company. Active Link Communications filed for Chapter 7 bankruptcy protection in the U.S.
Bankruptcy Court for the Northern District of Illinois on September 25, 2003 and the
State of Colorado administratively dissolved the company in September 2004. During 1998
he served as Chief Information Officer for Language Management International, Inc., a
multinational translation firm located in Denver, Colorado. From 1996 to 1997, he was
Director of Information Systems for Mircromedex, Inc., an electronic publishing firm,
located in Denver, Colorado. Mr. Welch also serves on the Board of Directors of
Communication Intelligence Corporation, a publicly traded company. He received a B.S.
degree in accounting from the University of Colorado. Mr. Welch is a Certified Public
Accountant, licensed in the state of Colorado.
2
The following is biographical
information regarding other key personnel at SWAT:
Corey
Holland
— Corey is the Director of SWAT’s technology division,
Vizer Group. Prior to joining SWAT, Corey spent eight years in various management
positions at TimeCentre, Inc., a software development company, including director of
operations, business development manager and senior sales representative. Corey has
additional experience at software and service organizations where he sold, installed and
trained customers on new HR, payroll and time attendance software while building and
maintaining a sales pipeline. Corey has a bachelor’s of science degree in
electronics engineering from Denver Technical College and is completing his master’s
degree in business administration from Colorado State University.
Ben
Cook
— Ben is the Director of the Veritas Division and is responsible
for driving product development as well as serving as the chief instructor for the
Veritas Division’s training group, which provides training for military, law
enforcement and civilians. Prior to joining SWAT, Ben was the General Manager in
charge of all daily operations for BTB Inc., a sporting goods business generating $5.5
million in annual sales. Ben has more than 10 years of experience in the firearms
industry where he has held various management and sales consulting positions. As a
marketing consultant for Real Action Marker he tripled sales in less than one year. Ben
holds an MBA in Marketing from the University of Colorado at Denver, a Bachelor of Arts
degree in Behavioral Science from Metropolitan State College in Denver, Colorado, and a
Practitioner’s Certification in Project Management from the University of Colorado
at Denver.
Compliance with Section
16(a) of the Exchange Act
Except
as set forth below, based solely on the Company’s review of copies of Section 16(a)
reports filed by officers, directors and greater than 10% shareholders with the
Securities and Exchange Commission, which have been received by the Company, the Company
believes that all filing requirements applicable to those persons were complied with for
the fiscal year ended December 31, 2007. Each of our independent directors filed a Form 4
with the Securities and Exchange Commission on March 27, 2008 that should have been filed
on May 31, 2007 to report one transaction.
Board Committees and
Meetings
Our
board of directors has an Audit Committee (established in accordance with section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)),
a Compensation Committee and a Nominating and Corporate Governance Committee. All
committees are comprised solely of members who are independent directors.
Audit Committee
Our
current Audit Committee members are David E. Welch (chair), Gail Schoettler and Robert J.
Williams. The Audit Committee performs the following functions, among others:
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Directly
appoints, retains and compensates our independent auditor and pre-approves all auditing
and non-auditing services of the independent auditor;
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Evaluates
the independent auditor's qualifications, performance and independence;
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Discusses
the scope of the independent auditors' examination;
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Reviews
and discusses the annual audited financial statements and quarterly financial statements
with management and the independent auditor and the report of the
independent auditor thereon;
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Assesses
our accounting practices and policies;
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Reviews
and approves of all related-party transactions, including transactions between us and our
officers or directors or affiliates of officers or directors;
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Develops,
and monitors compliance with, a code of ethics for senior financial officers;
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Develops,
and monitors compliance with, a code of conduct for all our employees, officers and
directors;
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Establishes
procedures for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters; and
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Establishes
procedures for the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
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3
The
specific functions and responsibilities of the Audit Committee are set forth in the Audit
Committee Charter. We have determined that Mr. Welch, who chairs our Audit Committee,
qualifies as an “audit committee financial expert” pursuant to SEC regulations.
Mr. Welch is “independent” pursuant to Rule 10A-3 promulgated under the
Exchange Act and pursuant to Nasdaq rules and the other members of the Audit Committee
satisfy the financial literacy requirements for Audit Committee members under these rules
and regulations.
Compensation Committee
Our
current Compensation Committee, whose members are Robert Williams (chair), Gail
Schoettler and David E. Welch. The Compensation Committee performs the following
functions, among others:
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Develops
executive compensation philosophy and establishes and annually reviews and approves
policies regarding executive compensation programs and practices;
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Reviews
and approves corporate goals and objectives relevant to the Chief Executive Officer's
compensation, evaluates the Chief Executive Officer's performance in light
of those goals and objectives and sets the Chief Executive Officer's
compensation based on this evaluation;
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Reviews
the Chief Executive Officer's recommendations with respect to, and approves annual
compensation for, our other executive officers;
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Establishes
and administers annual and long-term incentive compensation plans for key executives;
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Recommends
to the board for its approval compensation of the board and the chairman of the board.
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Recommends
to the board for its approval and, where appropriate, submission to our shareholders,
incentive compensation plans and equity-based plans;
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Recommends
to the board for its approval changes to executive compensation policies and programs;
and
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Reviews
and approves all special executive employment, compensation and retirement arrangements.
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Nominating and Corporate
Governance Committee
Our
Nominating and Corporate Governance Committee is comprised of Gail Schoettler (chair),
Robert Williams and David E. Welch. The Nominating and Governance Committee performs the
following functions, among others:
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Reviews,
approves and recommends for board consideration director candidates and advises the board
with regard to nomination or election of director candidates;
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Determines
procedures for the review, approval and recommendation of director candidates, as
appropriate;
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Determines
procedures for the consideration of shareholder-recommended board candidates;
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Recommends
to board standards regarding the definition of "independence" as such term relates to
directors (taking into account, among other things, Nasdaq requirements and
any other laws and regulations applicable to us);
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Establishes
performance criteria/expectations for directors in areas of attendance, preparedness,
candor and participation; and
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Develops,
reviews and recommends to the board, as appropriate, principles and policies relating to
corporate governance; and monitors compliance with and the effectiveness of
such principles and policies, as appropriate.
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Underwriter’s Board
Rights
Pursuant
to the underwriting agreement in connection with our public offering, we have agreed, for
a period of no less than two years from the date of our public offering, to engage a
designee of the representatives of the underwriters as an advisor to our board of
directors. Such advisor may attend meetings of the board, receive all notices and other
correspondence and communications sent by us to members of our board of directors and
receive compensation equal to the highest compensation of other non-officer directors,
excluding the chairperson of our Audit Committee and Nominating and Corporate Governance
Committee. In addition, such advisor is entitled to receive reimbursement for all costs
incurred in attending such meetings including, food, lodging and transportation. The
advisor will have none of the duties, rights, or powers of a director. This right expired
in July 2007.
CODE OF ETHICS
Our
board of directors has adopted a Code of Ethics that applies to all of our officers and
employees, including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions. Our
Code of Ethics codifies the business and ethical principles that govern all aspects of
our business.
Our
Code of Ethics is available on our website at www.swat-systems.com and we will undertake
to provide a copy of the Code of Ethics to any person at no charge, upon written request.
All written requests should be directed to Security With Advanced Technology, Inc., 1722
Boxelder St., Suite 101, Louisville, CO 80027, Attention: Corporate Secretary.
4
ITEM 10.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
General
The
Compensation Committee of our board of directors establishes the salary and other
compensation of the chief executive officer, reviews and approves the salary and other
compensation of the other Named Executive Officers (as defined below), and provides
oversight of our compensation programs. The Compensation Committee consists entirely of
non-employee, independent members of our board. In 2007, the Compensation Committee did
not engage a consultant to assist it in carrying out its responsibilities with respect to
executive compensation.
Objectives of Our
Compensation Program
The
primary objective of our executive compensation program is to attract and retain highly
skilled executive officers who will motivate and inspire employee behavior that fosters a
high performance culture and who will manage us in a manner that promotes our growth and
profitability and advances the interests of our shareholders. Additional objectives of
our executive compensation program are to recognize individual initiative and
achievements, align executive pay with shareholders’ interests, and unite the entire
executive management team to a common objective.
Executive Compensation
Principles
Our
executive compensation program consists of base salaries, annual cash incentive payments
in the form of annual bonuses and long-term equity incentives generally in the form of
incentive stock option grants. These components of executive compensation are used
together to strike an appropriate balance between cash and stock compensation and between
short-term and long-term incentives.
How Executive Pay Levels
are Determined
The
Compensation Committee reviews our executive compensation program and its elements. All
decisions by the Compensation Committee relating to the compensation of our executive
officers are reported to the full board.
The
role of the chief executive officer in the compensation process is to recommend to the
Compensation Committee, the new annual base salary and annual bonus as well as any equity
compensation for the Named Executive Officers.
In
determining the compensation of our executive officers, the Compensation Committee
evaluates total overall compensation, as well as the mix of salary, cash bonus incentives
and equity incentives, using a number of factors including the following:
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our
financial and operating performance, measured by attainment of specific strategic
objectives and operating results;
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the
duties, responsibilities and performance of each executive officer, including the
achievement of identified goals for the year as they pertain to the areas
of our operations for which the executive is personally responsible and accountable;
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historical
cash and equity compensation levels; and
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comparative
industry market data to assess compensation competitiveness.
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With
respect to comparative industry data, the Compensation Committee reviews executive
officer salaries and evaluates compensation structures of comparable companies in a
compensation survey conducted by the Mountain States Employers Council.
The
following table sets out the compensation received for the fiscal years ended December
31, 2007 and 2006 with respect to each of the individuals who were the Company’s
chief executive officer and chief financial officer at any time during the last fiscal
year and the Company’s most highly compensated executive officers whose total salary
and bonus exceeded $100,000 (the “Named Executive Officers”).
5
SUMMARY COMPENSATION
TABLE
Name and
Principal Position /
Year
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Salary
($)
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Bonus
($)
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Stock
Awards
($)
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Option
Awards
($)
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Non-equity
incentive
plan comp-
nsation($)
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Change in
pension value
and
nonqualified
deferred
compensation
earnings ($)
(7)
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All Other
Compen-
sation
($) (8)
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Total
($)
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Jeffrey G. McGonegal(1)
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Chief Executive Officer and Chief Financial Officer
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2007
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$
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110,353
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$
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25,000
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$
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—
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$
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59,283
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$
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—
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$
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—
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$
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—
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$
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194,636
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2006
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$
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59,231
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$
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—
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$
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—
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$
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68,301
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$
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—
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$
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—
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$
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243
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$
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127,775
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Thomas Marinelli(2)
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Former Chief Executive Officer
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2007
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$
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14,000
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$
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—
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$
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—
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$
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63,659
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$
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—
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$
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—
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$
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—
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$
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77,659
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2006
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$
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117,846
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$
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—
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$
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—
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$
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71,990
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$
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—
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$
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—
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$
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243
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$
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190,079
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|
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Michael Cox(3)
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Former Vice President of Engineering
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2007
|
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$
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104,808
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$
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—
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$
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—
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$
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149,954
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$
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—
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$
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—
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$
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6,734
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$
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261,496
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2006
|
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$
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—
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|
$
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—
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|
$
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—
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|
$
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—
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|
$
|
—
|
|
$
|
—
|
|
$
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—
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|
$
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—
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|
|
|
|
|
|
|
|
|
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Scott G. Sutton(4)
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Former Chief Executive Officer and President
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|
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2007
|
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$
|
135,692
|
|
$
|
—
|
|
$
|
—
|
|
$
|
189,501
|
|
$
|
—
|
|
$
|
—
|
|
$
|
41,277
|
|
$
|
366,470
|
|
|
2006
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In
2006, Mr. McGonegal was granted 7,500 options, exercisable at $4.93 per common share and
vesting 33.3% annually in arrears. On January 15, 2008 Mr. McGonegal was
granted 200,000 options at $1.21 per share vesting in arrears over a three
year period and expiring in ten years. Mr. McGonegal's annual compensation
was increased to a rate of $150,000 effective February 1, 2008, with the
resulting increased cash payment deferred pending improved financial condition, at the
discretion of Mr. McGonegal. As of January 15, 2008, Mr. McGonegal was
awarded a cash bonus of $12,500, by the board of directors.
|
|
(2)
|
Under
the terms of Thomas Marinelli's employment agreement which commenced in 2005 and expired
as of March 31, 2007, $14,000 in 2007 and $72,000 in 2006 of the
compensation he received was paid for his service Company. In 2006, Mr. Marinelli was
granted 26,900 options, exercisable at $4.93 per common share and vesting
33.3% annually in arrears. On March 25, 2008, Mr. Marinelli was granted
10,000 options at $0.65 per share vesting in arrears over a three year period and
expiring in ten years. Mr. Marinelli's options continue to vest as a result
of his role with the Company as a board member.
|
|
(3)
|
Michael
Cox's employment with the Company terminated as of October 25, 2007. He joined the
Company effective as of December 31, 2006 upon the completion of the Vizer
merger. On February 5, 2007, Mr. Cox was granted 65,000 options at $4.83 per share
vesting in advance over a three year period and the non-vested options
expired upon his leaving the Company and the balance expired ninety days
thereafter. Mr. Cox's other compensation includes $6,653 of accumulated vacation and
paid time off that was paid upon his leaving the Company. Mr. Cox's
employment agreement, which terminated with his leaving the Company,
provided for annual compensation of $125,000.
|
6
|
(4)
|
Scott
G. Sutton's employment with the Company terminated upon his resignation effective
December 21, 2007. He joined the Company effective as of December 31, 2006
upon the completion of the Vizer merger. On February 5, 2007, Mr. Sutton was
granted 75,000 options at $4.83 per share vesting in advance over a three
year period and the non-vested options expired upon his leaving the Company
and the balance expired ninety days thereafter. Mr. Sutton's other compensation
includes $4,308 of accumulated vacation and paid time off that was paid
upon his leaving the Company and approximately $36,046 in payments made at
the direction of Mr. Sutton that the Company has become aware of and has taken the
position that such amounts were unsubstantiated and unauthorized. Such
amounts include $17,072 in Vizer acquisition professional fees which, under
the Vizer merger agreement, were not payable by the Company, $9,988 in car payments for
Mr. Sutton's personal car and $8,986 in miscellaneous expenses, including
Mr. Sutton's personal state income tax obligations, personal travel for his wife
and expenses for Mr. Sutton's bicycle, among other items. The Company is
seeking reimbursement of these amounts from Mr. Sutton. Mr. Sutton's
employment agreement which terminated with his leaving the Company, provided for annual
compensation of $140,000. Mr. Sutton and his wife filed suit against the
Company in 2008 claiming, among other items, that Mr. Sutton was
constructively discharged from the Company and, as a result, the Sutton's are entitled to
a payout under earn-out arrangements with the Company under the Vizer
merger agreement and his employment agreement. The Company is vigorously
defending itself in this matter and has countersued Mr. Sutton for damages.
|
|
(5)
|
Other
than for the exercise price, options are granted to executives at no cost basis.
|
|
(6)
|
Except
as noted, other annual compensation includes group medical and life insurance benefits
paid on behalf of the executive as part of our employee group medical plan.
|
The value of option awards is
calculated in accordance with the provisions of FASB 123R, as disclosed in the Company's
annual report.
7
OUTSTANDING EQUITY
AWARDS AT FISCAL YEAR-END
|
|
OPTION AWARDS
|
|
STOCK AWARDS
|
|
Name and
Principal
Position
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
Option
Exercise
Price ($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock
That Have
Not
Vested (#)
|
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested (#)
|
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey G. McGonegal
|
|
|
Chief Executive Officer and
Chief Financial Officer
|
|
|
|
5,761
|
|
|
—
|
|
|
—
|
|
$
|
18.40
|
|
|
9-19-08
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
61,142
|
|
|
20,380
|
|
|
—
|
|
|
3.50
|
|
|
10-19-14
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
5,435
|
|
|
—
|
|
|
—
|
|
|
3.50
|
|
|
3-25-15
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
5,000
|
|
|
2,500
|
|
|
—
|
|
|
4.93
|
|
|
5-5-16
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Marinelli
|
|
|
|
Former Chief Executive Officer
|
|
|
|
27,174
|
|
|
—
|
|
|
—
|
|
$
|
3.50
|
|
|
10-29-14
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
54,348
|
|
|
—
|
|
|
—
|
|
|
3.50
|
|
|
3-25-15
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
17,933
|
|
|
8,967
|
|
|
—
|
|
|
4.93
|
|
|
5-5-16
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Michael Cox(1)
|
|
|
|
Former Vice President of Engineering
|
|
|
|
21,666
|
|
|
—
|
|
|
—
|
|
$
|
4.83
|
|
|
1-23-08
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott G. Sutton(1)
|
|
|
Former Chief Executive Officer and
President
|
|
|
|
25,000
|
|
|
—
|
|
|
—
|
|
$
|
4.83
|
|
|
3-20-08
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Under
the terms of the 2004 Stock Incentive Plan, at the date of an individual’s
separation from the Company, all non-vested options expire at that date and any vested
options expire 90 days after separation, unless such vested options are exercised during
that subsequent 90 day period. For Mr. Cox, 65,000 options expired and for Mr. Sutton,
75,000 options expired in connection with their terminations.
|
Stock options granted generally vest
over a three year period from the date of grant, annually in arrears and expire in ten
years. The exercise price is based upon the fair market value of the common stock as of
the date of grant.
8
DIRECTOR COMPENSATION
Name
|
|
Fees Earned
or Paid
in Cash ($)
|
|
Stock
Awards
($)
|
|
Option
Awards ($)
|
|
Non-Equity
Incentive Plan
Compensation
|
|
All Other
Compensation
|
|
Total
|
|
|
|
Gregory Pusey(1)
|
|
|
$
|
100,000
|
|
—
|
|
|
$
|
67,787
|
|
—
|
|
|
—
|
|
|
$
|
167,787
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Gail Schoettler(2)
|
|
|
|
—
|
|
—
|
|
|
$
|
38,693
|
|
—
|
|
|
—
|
|
|
$
|
38,693
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Robert Williams(3)
|
|
|
|
—
|
|
—
|
|
|
$
|
41,973
|
|
—
|
|
|
—
|
|
|
$
|
41,973
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
David Welch(4)
|
|
|
|
—
|
|
—
|
|
|
$
|
45,999
|
|
—
|
|
|
—
|
|
|
$
|
45,999
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
Barry Loder(5)
|
|
|
|
—
|
|
—
|
|
|
$
|
38,693
|
|
—
|
|
|
—
|
|
|
$
|
38,693
|
|
|
Former Director
|
|
|
|
|
|
|
|
|
|
|
|
Scott Sutton(6)
|
|
|
$
|
135,692
|
|
—
|
|
|
$
|
189,501
|
|
—
|
|
$
|
41,277
|
|
|
$
|
366,470
|
|
|
Former Director
|
|
|
|
(1)
|
As
of December 31, 2007, Mr. Pusey held 96,087 stock options that were granted under our
2004 Stock Incentive Plan. As of January 15, 2008, Mr. Pusey was awarded a cash bonus of
$12,500 by the board of directors. Effective February 1, 2008, My Pusey’s
compensation was reduced to $60,000. On January 15, 2008 Mr. Pusey was granted 50,000
options at $1.21 per share vesting in arrears over a three year period and expiring in
ten years.
|
|
(2)
|
As
of December 31, 2007, Ms. Schoettler held 47,174 stock options that were granted under
our 2004 Stock Incentive Plan. On March 25, 2008 Ms. Schoettler was granted 10,000
options at $0.65 per share vesting in arrears over a three year period and expiring in
ten years.
|
|
(3)
|
As
of December 31, 2007, Mr. Williams held 47,000 stock options that were granted under our
2004 Stock Incentive Plan. On March 25, 2008 Mr. Williams was granted 10,000 options at
$0.65 per share vesting in arrears over a three year period and expiring in ten years.
|
|
(4)
|
As
of December 31, 2007, Mr. Welch held 37,000 stock options that were granted under our
2004 Stock Incentive Plan. On March 25, 2008 Mr. Welch was granted 10,000 options at
$0.65 per share vesting in arrears over a three year period and expiring in ten years.
|
|
(5)
|
As
of December 31, 2007, Mr. Loder held 47,174 stock options that were granted under our
2004 Stock Incentive Plan. Mr. Loder resigned as a director as of January
4, 2008. Upon his resignation his non-vested options expired immediately and his
vested options expired on April 4, 2008.
|
|
(6)
|
As
of December 31, 2007, Mr. Sutton held 25,000 stock options that were granted under our
2004 Stock Incentive Plan. Mr. Sutton resigned as of December 21, 2007.
Upon his resignation his non-vested options expired immediately and his vested
options expired on March 20, 2008.
|
9
The value of option awards is
calculated in accordance with the provisions of FASB 123R, as disclosed in the
Company’s annual report.
Agreements with Management
We
have entered into employment agreements with our Chief Executive Officer and Chief
Financial Officer, Jeffrey G. McGonegal, and our Secretary and Chairman of the board of
directors, Gregory Pusey. The agreements for Messrs. McGonegal and Pusey have a base term
through May 31, 2008 and automatically renew annually unless cancelled. Mr. McGonegal
receives a base annual salary of $110,000 (revised to $150,000 effective February 1,
2008, with the cash payment of the increase deferred by Mr. McGonegal until such time as
the Company is in a better financial position) and Mr. Pusey receives a base annual
salary of $60,000. The employment agreements for Messrs. McGonegal and Pusey provide that
each will devote substantial business time to our activities, but do not require that
they devote any specific percentage of their time to us. Each agreement provides that our
board of directors, based upon recommendations of the Compensation Committee, will create
a bonus plan for officers, which will include each of these persons. The terms and
objectives of the bonus plan will be determined by our board of directors. Each
employment agreement includes provisions for severance generally equivalent to six months’ salary
and benefits if the officer’s employment is terminated by us without “cause” or
by the officer for “good reason” (as such terms are defined in the employment
agreements), or upon the death or disability of the officer. Messrs. McGonegal’s and
Pusey’s employment agreements also provide that if the officer is terminated by us
without “cause” or by the officer for “good reason,” the officer may
elect to continue to be employed by us as a consultant through December 31, 2008 and
receive a salary of $500 per month. The officer would then be required to provide only
limited services not to exceed two hours per month on an as requested basis. The extended
term was included in the agreements to permit each of these officers to maintain
employment with us and to continue to qualify for the right to maintain their options to
acquire our common stock.
The
employment agreements with our former President and Chief Executive Officer, Scott
Sutton, our former Vice President of Engineering, Michael Cox, and our former Vice
President of Finance, Thomas Muenzberg, provided for base annual salaries of $140,000,
$125,000 and $100,000, respectively. These employment agreements expired upon the
employees’separation from the Company, which for Mr. Cox was October 2007; for Mr.
Sutton was December 2007 and for Mr. Muenzberg was March 2008. Mr. Sutton and his wife
filed suit against the Company in 2008 claiming, among other items, that Mr. Sutton was
constructively discharged from the Company and, as a result, the Sutton’s are
entitled to a payout under earn-out arrangements with the Company under the Vizer merger
agreement and his employment agreement. The Company is vigorously defending itself in
this matter and has countersued Mr. Sutton for damages.
In
addition to the employment agreements with Messrs. Sutton and Cox (the “Selling
Shareholders”), at the closing of the Vizer merger (“Closing”) we entered
into an agreement with the Selling Shareholders providing that, at certain times within a
defined period after the Closing, the Company shall pay to the Selling Shareholders
additional consideration based upon the Company achieving certain milestones as defined
in their employment agreements (the “Earn Out”), none of which milestones have
been achieved to date. The Earn-Out is subject to acceleration pursuant to the employment
agreements between the Company and each of the Selling Shareholders under certain
circumstances, none of which circumstances exist in the Company’s opinion (however,
this is one of Mr. and Mrs. Sutton’s claims in their lawsuit against the Company).
At
Closing the Company also entered into a registration rights agreement with the Selling
Shareholders whereby the Selling Shareholders received piggyback registration rights in
connection with any underwritten registration of securities of the Company. In addition,
in the event of a termination of the employment of Mr. Sutton or Mr. Cox without cause
(as defined in their employment agreements), Mr. Sutton or Mr. Cox, as the case may be,
shall have the right, exercisable once within six months of the date of termination, to
cause the Company to register the shares of common stock of the Company issued to Mr.
Sutton and Mr. Cox in connection with the merger (including any shares issued pursuant to
the Earn-Out). Mr. Sutton’s registration rights agreement include the shares of
common stock of the Company issued to Mr. Sutton’s wife, Sandy Sutton. All such
registration rights are subject to the approval of and cutback or elimination by the
Company based upon advice from the Company’s underwriters (based upon market
conditions). All shares issued and issuable to Scott and Sandy Sutton in connection with
the merger have been and will be issued to the Scott and Sandy Sutton Revocable Trust
dated January 31, 2006, for which Scott and his wife Sandy serve as trustees. Mr. Sutton
and his wife filed suit against the Company in 2008 claiming, among other items, that Mr.
Sutton was constructively discharged from the Company and, as a result, the Sutton’s
are entitled to the registration of their Earn-Out shares. The Company is vigorously
defending itself in this matter and has countersued Mr. Sutton for damages.
We
had an employment agreement with our former President and Chief Executive Officer, Thomas
R. Marinelli, which commenced on April 1, 2005 and ended on March 31, 2007. Mr. Marinelli
received an annual salary of $120,000. He devoted a majority of his business time to our
business activities.
10
Benefit Plans
2004 Stock Incentive Plan
The
Company’s 2004 Stock Incentive Plan (the “Plan”), as amended authorizes
the grant of restricted stock issuances or options to purchase an aggregate of 2,000,000
shares of our common stock. The purpose of the Plan is to promote our interests and the
interests of our shareholders by providing participants a significant stake in our
performance and providing an opportunity for the participants to increase their holdings
of our common stock. The Plan is administered by the Compensation Committee of our board
of directors. The Compensation Committee has the authority to select employees and
consultants (which may include directors) to receive awards, to determine the number of
shares of common stock covered by awards and to set the terms and conditions of awards.
In addition to stock options, we may also offer a participant the right to purchase
shares of common stock subject to such restrictions and conditions as the Compensation
Committee may determine at the time of grant. Such conditions may include continued
services to us or the achievement of specified performance goals or objectives. No common
stock has been issued pursuant to the Plan.
As
of December 31, 2007 we have outstanding options to purchase 1,375,172 shares. The
options are exercisable at prices ranging from $3.44 to $18.40 per share for a term of
ten years. In addition to stock options, we may also offer a participant a right to
purchase shares of common stock subject to such restrictions and conditions as the
Compensation Committee may determine at the time of grant. Such conditions may include
continued services to us or the achievement of specified performance goals or objectives.
No common stock has been issued pursuant to the plan. During 2007, the Company granted a
total of 1,141,000 options to employees, directors and consultants under the Plan,
generally vesting over three years in arrears, exercisable at an average of $4.33 per
share and expiring in ten years.
11
ITEM 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
PRINCIPAL SHAREHOLDERS
The
following table sets forth as of April 25, 2008 the beneficial ownership of our common
stock, by (i) each person or group of persons known to us to beneficially own more than
5% of the outstanding shares of our voting stock, (ii) each of our director and executive
officers; and (iii) all of our executive officers and directors as a group.
Except
as indicated in the footnotes to the table below, each shareholder named in the table has
sole voting and investment power with respect to the shares shown as beneficially owned
by such shareholder.
Beneficial
ownership is determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934. In computing the number of shares beneficially owned by a person or a group
and the percentage ownership of that person or group, shares of our common stock subject
to options or warrants currently exercisable or exercisable within 60 days after the
date hereof are deemed outstanding, but are not deemed outstanding for the purpose of
computing the percentage ownership of any other person. As of April 25, 2007 we had
7,213,403 shares of common stock outstanding. Unless otherwise indicated, the address of
each individual named below is the address of the Company, 1722 Boxelder St., Suite 101,
Louisville, CO 80027.
Name of Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
Percent
of Class
|
|
|
Executive Officers and Directors
|
|
|
Thomas R. Marinelli (1)
|
|
|
|
133,556
|
|
|
1.8%
|
|
|
Gregory Pusey (2)
|
|
|
|
549,515
|
|
|
7.4%
|
|
|
Jeffrey G. McGonegal (3)
|
|
|
|
134,732
|
|
|
1.8%
|
|
|
Gail Schoettler (4)
|
|
|
|
37,174
|
|
|
*
|
|
|
Robert J. Williams (5)
|
|
|
|
30,333
|
|
|
*
|
|
|
David E. Welch (6)
|
|
|
|
12,333
|
|
|
*
|
|
|
All executive officers and directors as a group (six persons) (7)
|
|
|
|
897,643
|
|
|
12.1%
|
|
|
|
|
|
|
5% Shareholders
|
|
|
The Peierls Foundation, Inc. (8)
|
|
|
|
2,438,935
|
|
|
32.0%
|
|
|
Vision Opportunity Master Fund, Ltd. (9)
|
|
|
|
714,127
|
|
|
9.9%
|
|
|
Lazarus Investment Partners LLLP (10)
|
|
|
|
632,258
|
|
|
8.3%
|
|
|
* Denotes less than 1%.
|
|
|
|
(1)
|
Includes
99,455 shares of common stock issuable upon the exercise of stock options. It does not
include stock options to purchase 8,967 shares of common stock which are exercisable in
May 2009, and 10,000 shares which are exercisable in installments commencing March 2009.
|
|
(2)
|
Includes
30,174 shares of common stock which may be acquired upon the conversion of convertible
preferred stock, 13,000 shares of common stock issuable upon the exercise of warrants and
75,833 shares of common stock issuable upon the exercise of stock options. Also includes
113,705 shares of common stock, 10,717 shares which may be acquired upon the conversion
of convertible preferred stock and 21,000 shares of which are issuable upon the exercise
of warrants, owned by his wife and daughter. This amount does not include stock options
to purchase 13,587 shares of common stock which are exercisable in October 2008, options
to purchase 3,667 shares of common stock which are exercisable in May 2009 and options to
purchase 50,000 shares of common stock which are exercisable in installments, commencing
in January 2009. Includes 6,007 shares of common stock and 5,000 shares of common stock
which may be acquired upon the exercise of outstanding warrants owned by Cambridge
Holdings, Ltd. Mr. Pusey disclaims beneficial ownership of the shares held by his wife,
his daughter and the shares held by or issuable to Cambridge Holdings, Ltd., except to
the extent of his pecuniary interest therein. Mr. Pusey is the president, principal
shareholder and a director of Cambridge Holdings, Ltd.
|
12
|
(3)
|
Includes
1,087 shares of common stock owned by the McGonegal Family Partnership. Mr. McGonegal
disclaims beneficial ownership of these shares except to the extent of his pecuniary
interest therein. Includes 77,338 shares of common stock issuable upon the exercise of
stock options. This amount does not include stock options to purchase 20,380 shares of
common stock which are exercisable in October 2008, options to purchase 2,500 shares of
common stock which are exercisable in May 2009 and options to purchase 200,000 shares of
common stock which are exercisable in installments commencing January 2009.
|
|
(4)
|
Includes
37,174 shares of common stock issuable upon the exercise of outstanding options. Does not
include stock options to purchase 3,333 shares of common stock which are exercisable in
March 2009, 6,667 shares of common stock which are exercisable in installments,
commencing in May 2009 and 10,000 shares of common stock which are exercisable in
installments, commencing in March 2009.
|
|
(5)
|
Includes
30,333 shares of common stock issuable upon the exercise of stock options. This amount
does not include stock options to purchase 10,000 shares of common stock which are
exercisable in March 2009, 6,667 shares of common stock which are exercisable in
installments, commencing in May 2009 and 10,000 shares of common stock which are
exercisable in installments, commencing in March 2009.
|
|
(6)
|
Includes
12,333 shares of common stock issuable upon the exercise of stock options. Does not
include stock options to purchase 18,000 shares of common stock which are exercisable in
installments commencing in December 2008, 6,667 shares of common stock which are
exercisable in installments, commencing in May 2009 and 10,000 shares of common stock
which are exercisable in installments, commencing in March 2009.
|
|
(7)
|
Includes
footnotes 1 to 6.
|
|
(8)
|
Includes
738,753 shares of common stock and 645,943 shares of common stock which may be acquired
upon conversion of convertible preferred stock. Includes 419,457 shares of common stock
beneficially owned by E. Jeffrey Peierls and 177,027 shares of common stock beneficially
owned by Brian Eliot Peierls, E. Jeffrey Peierls, brother. Also includes 214,444 shares
of common stock owned beneficially by the U.D. Ethel F. Peierls Charitable Lead Unitrust,
60,832 shares of common stock owned beneficially by the U.D.J.N. Peierls for E.J. Peierls
and 60,832 shares of common stock owned beneficially by the U.D.J.N. Peierls for E.J.
Peierls.
|
|
(9)
|
Includes
64,575 shares of common stock which may be acquired upon the conversion of convertible
preferred stock. Under the terms of an agreement with the Company, limiting Vision’s
right to convert its otherwise convertible rights into common stock, excludes a net of
6,525,800 shares of common stock which may be acquired upon conversion of convertible
preferred stock and 860,000 shares of common stock which may be acquired upon the
exercise of outstanding warrants. Under the terms of the investment agreements with the
Company except under certain defined conditions, the investor is precluded from owning
more than 9.99% of the Company’s common stock at any time.
|
|
(10)
|
Includes
429,000 shares of common stock which may be acquired upon the conversion of convertible
preferred stock.
|
13
Equity Compensation Plan
Information
The following table gives information
about the Company’s common stock that may be issued upon the exercise of options
under the Plan as of December 31, 2007.
Plan Category
|
|
(a) Number of
Securities to be
Issued Upon
Exercise
of Outstanding
Options, Warrants
and
Rights
|
|
(b) Weighted
Average Exercise
Price of
Outstanding
Options, Warrants
and Rights
|
|
(c) Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
|
|
(d) Total of
Securities
Reflected in
Columns
(a) and (c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approved by Stockholders
|
|
|
|
1,375,172
|
|
$
|
4.51
|
|
|
624,828
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
Equity Compensation Plans
|
|
|
|
Not Approved by
|
|
|
|
Stockholders
|
|
|
|
None
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
1,375,172
|
|
$
|
4.51
|
|
|
624,828
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
14
ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Our
board of directors’ independent members consist of Robert Williams, Gail Schoettler
and David E. Welch. The independent directors each serve on the Compensation Committee,
the Audit Committee and the Nominating and Corporate Governance committee.
In
December 2007, we temporarily reduced the exercise price of outstanding warrants issued
in our October 2006 and March / April 2007 offerings to an exercise price of $0.50 per
share which resulted in a total of 747,813 shares of Series B Preferred Stock being
issued generating total proceeds of $3,739,067. Gregory Pusey and members of his family
purchased 4,050 Series B Preferred Shares convertible into 40,500 shares of common stock
for proceeds of $20,250, E. Jeffrey Peierls and certain family members and affiliates
purchased 83,325 Series B Preferred Shares convertible into 833,250 shares of common
stock for proceeds of $416,625, Vision Opportunity Master Fund, Ltd., purchased 453,667
Series B Preferred Shares convertible into 4,536,667 shares of common stock for proceeds
of $2,268,334 and Lazarus Investment Partners LLLP, purchased 92,900 Series B Preferred
Shares convertible into 929,000 shares of common stock for proceeds of $464,500.
In
September 2007, we temporarily reduced the exercise price of the then outstanding “B” warrants
issued in our October 2006 offering to an exercise price of $3.20 per share and issued to
any parties that so exercised, new three year warrants to purchase shares of common stock
at $4.30 per share. This exercise resulted in a total of 294,258 common shares and
860,000 shares of Series A Preferred Stock being issued generating total proceeds of
$3,693,600. Vision Opportunity Master Fund, Ltd., purchased 860,000 Series A Preferred
Shares convertible into 860,000 shares of common stock for proceeds of $2,752,000.
During
March 2007, E. Jeffrey Peierls and certain family members and affiliates, exercised a
total of 12,229 warrants they held at an exercise price of $1.66 each and were issued a
total of 12,229 shares of common stock.
In
March 2007, we conducted a private placement of promissory note units pursuant to which
E. Jeffrey Peierls and certain family members and affiliates (including The Peierls
Foundation, Inc., which purchased 183,700 of the total units) purchased 333,300
promissory note units for a total purchase price of $999,900. The units consisted of
promissory notes convertible into 183,700 shares of our common stock and warrants
convertible into 551,100 shares of our common stock.
During
August 2006, Gregory Pusey, members of his family and Cambridge Holdings, Ltd., an
affiliated entity, exercised a total of 6,522 warrants they held at an exercise price of
$1.66 each and were issued a total of 10,827 shares of common stock.
In
October 2006, we conducted a private placement of common share units and promissory note
units pursuant to which Gregory Pusey and members of his family purchased 35,000
promissory note units for a total purchase price of $122,500. The units consisted of
5.13% promissory notes convertible into shares of our Series A Preferred Stock and
warrants convertible into 105,000 shares of our common stock. The promissory notes
converted into 35,000 shares plus shares representing accrued interest of our Series A
Preferred Stock upon shareholder approval of such conversion on December 28, 2006. The
Series A Preferred Stock is convertible into 35,000 shares of our common stock at any
time upon the election of the holder.
In
December 2006, we issued 678,942 common shares to the Scott and Sandy Sutton Revocable
Trust dated January 31, 2006, for which Scott and his wife Sandy serve as trustees, as
consideration in connection with the Vizer merger. The merger agreement also contains an
earn-out provision whereby, subject to achieving certain conditions, up to an additional
480,000 common shares may be issued to the trust. Prior to the Closing of the Vizer
merger we had advanced approximately $1,000,000 in cash under a 4% note as provided in
the merger agreement, to Vizer that was guaranteed by Scott G. Sutton, which guarantee
terminated as of Closing.
During
2003 and 2004, we raised funds pursuant to convertible note and warrant offerings. The
following officers, directors and 5% or greater shareholders participated in the
offerings in the amounts indicated: Michael Siemens and members of his family —$21,015;
Gregory Pusey and members of his family — $113,028; Jeffrey McGonegal —$14,010;
Thomas Marinelli — $114,400; Cambridge Holdings, Ltd. — $425,139; E. Jeffrey
Peierls — $230,050; Brian E. Peierls — $149,030; The Peierls Foundation, Inc.
—$585,175; and U.D. Ethel F. Peierls Charitable Lead Unitrust — $117,025.
Gregory Pusey and Jeffrey McGonegal are officers and directors of Cambridge Holdings,
Ltd., and Gregory Pusey, Jeffrey Peierls and Brian E. Peierls are principal shareholders
of Cambridge. We have no other relationship with Cambridge. In connection with those
offerings, we issued convertible notes and warrants. The notes in these offerings,
including the notes to these persons, were converted into our common stock concurrent
with the Company’s July 2005 public offering at the conversion rates specified in
the notes which range from $.64 per share to $1.84 per share. The shareholdings of these
persons are reflected in the “Principal Shareholders” section.
In
connection with these offerings, we issued warrants to purchase shares of our common
stock in the following amounts: Michael Siemens and members of his family – 1,632;
Gregory Pusey and members of his family –8,190; Jeffrey McGonegal – 1,087;
Thomas Marinelli – 16,305; Cambridge Holdings, Ltd. – 16,852; E. Jeffrey
Peierls –7,065; Brian E. Peierls – 4,348; The Peierls Foundation, Inc. – 24,457;
and U.D. Ethel F. Peierls Charitable Lead Unitrust – 6,794. Warrants to purchase
common stock at an exercise price of $.035 per share were exercised prior to the Company’s
July 2005 public offering in the following amounts: Michael Siemens and members of his
family – 1,632; Gregory Pusey and members of his family – 4,673; Jeffrey
McGonegal – 1,087; Cambridge Holdings, Ltd. – 11,417; E. Jeffrey Peierls – 5,435;
Brian E. Peierls –3,261; The Peierls Foundation, Inc. – 19,022; and U.D. Ethel
F. Peierls Charitable Lead Unitrust – 2,718.
We
have entered into employment agreements with certain of our officers and directors as
described in the section entitled “Executive Compensation.”
15
ITEM 13.
EXHIBITS.
Exhibit Index
|
3.1
|
Articles
of Incorporation (8)
|
|
3.2
|
Articles
of Amendment to Articles of Incorporation (8)
|
|
3.3
|
Articles
of Amendment to Articles of Incorporation (14)
|
|
3.4
|
Amended
and Restated Bylaws (8)
|
|
3.5
|
Amended
and Restated Certificate of Designation of the Preferences, Rights, Limitations,
Qualifications and Restrictions of the Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock. (13)
|
|
4.1
|
Specimen
Stock Certificate (8)
|
|
4.2
|
Form
of October 2006 Convertible Promissory Note (4)
|
|
4.3
|
Form
of March and April 2007 Convertible Promissory Note (7)
|
|
4.4
|
Form
of Warrant "A" to Purchase Shares of Common Stock at an exercise price of $4.75 per share
(4)
|
|
4.5
|
Form
of Warrant "B" to Purchase Shares of Common Stock at an exercise price of $5.00 per share
(7)
|
|
4.6
|
Warrant
Agreement by and between A4S Security, Inc. and Corporate Stock Transfer, Inc., as
Warrant Agent, entered into June 2005 and Warrant Certificate (8)
|
|
4.7
|
Warrant
Agreement by and between A4S Security, Inc. and Corporate Stock Transfer, Inc., as
Warrant Agent, entered into September 29, 2006 and Warrant Certificate(4)
|
|
4.8
|
Warrant
Agreement by and between Security With Advanced Technology, Inc. and Corporate Stock
Transfer, Inc., as Warrant Agent, entered into March 26, 2007 and Warrant
Certificate (7)
|
|
4.9
|
Warrant
Agreement by and between Security With Advanced Technology, Inc. and Corporate Stock
Transfer, Inc., as Warrant Agent, entered into April 12, 2007 and Warrant
Certificate (14)
|
|
10.1
|
Employment
Agreement between A4S Technologies, Inc. and Gregory Pusey dated March 25, 2005 (8)
|
|
10.2
|
Employment
Agreement between A4S Technologies, Inc. and Jeffrey McGonegal dated March 25, 2005 (8)
|
|
10.3
|
Employment
Agreement between Security With Advanced Technology, Inc. and Scott G. Sutton dated as of
December 31, 2006 (14)
|
|
10.4
|
A4S
Technologies, Inc. 2004 Stock Incentive Plan, as amended (8)
|
|
10.5
|
Securities
Purchase Agreement entered into September 29, 2006 by and between A4S Security, Inc. and
the investors set forth on Schedule I thereto (4)
|
|
10.6
|
Securities
Purchase Agreement entered into March 26, 2007 by and between Security With Advanced
Technology, Inc. and the investors set forth on Schedule I thereto (7)
|
|
10.7
|
Securities
Purchase Agreement entered into April 12, 2007 by and between Security With Advanced
Technology, Inc. and the investors set forth on Schedule I thereto (14)
|
|
10.8
|
Form
of Subscription Agreement and Letter of Investment Intent (4)
|
|
10.9
|
Registration
Rights Agreement entered into as of September 29, 2006 by and among A4S Security, Inc.
and the investors signatory thereto (4)
|
|
10.10
|
First
Amendment to Registration Rights Agreement dated December 15, 2006 by and among Security
with Advanced Technology and the investors signatory thereto (6)
|
|
10.11
|
Registration
Rights Agreement entered into as of March 26, 2007 by and among A4S Security, Inc. and
the investors signatory thereto (4)
|
|
10.12
|
Registration
Rights Agreement entered into as of April 12, 2007 by and among A4S Security, Inc. and
the investors signatory thereto (14)
|
|
10.13
|
Plan
of Merger by and among A4S Security, Inc., Vizer Merger Sub, Inc., Vizer Group, Inc.,
Avurt International, Inc., Sandy Sutton, Scott G. Sutton and Michael Cox,
dated September 3, 2006 (9)
|
|
10.15
|
Registration
Rights Agreement dated as of July 10, 2007 by and among Security With Advanced
Technology, Inc. and Gary E. Gibson, Roy Urban, Ron Urban and Thomas G.
Kotsiopoulos (10)
|
|
10.16
|
Asset
Purchase Agreement dated as of July 10, 2007 by and among Security With Advanced
Technology, Inc., PCP Acquisition, Inc., Perfect Circle Projectiles, LLC
and Gary E. Gibson (10)
|
|
10.17
|
Consulting
Agreement dated as of July 10, 2007 by and among PCP Acquisition, Inc., Perfect Circle
Projectiles, LLC and Gary E. Gibson (10)
|
|
10.18
|
Patent
License Agreement dated as of July 10, 2007 by and between PCP Acquisition, Inc. and
Perfect Circle Projectiles, LLC (10)
|
|
10.19
|
Royalty
Agreement dated as of July 10, 2007 by and between PCP Acquisition, Inc. and Perfect
Circle Projectiles, LLC (10)
|
16
|
10.20
|
Facilities
Agreement dated as of July 10, 2007 by and between PCP Acquisition, Inc. and Perfect
Circle Projectiles, LLC (10)
|
|
10.21
|
Confidentiality
and Non-Competition Agreement dated as of July 10, 2007 by Perfect Circle Projectiles,
LLC and certain key employees of Perfect Circle Projectiles, LLC party
thereto, for the benefit of PCP Acquisition, Inc. (10)
|
|
10.22
|
Warrant
Conversion Agreement from September 2007 warrant conversion (12)
|
|
10.23
|
Warrant
Conversion Agreement from December 2007 warrant conversion (13)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) - Certification of Chief Executive Officer (1)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) - Certification of Chief Financial Officer (1)
|
|
32
|
Section
1350 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the SARBANES-OXLEY ACT of 2002 (1)
|
|
99.1
|
Audit
Committee Charter (8)
|
|
99.2
|
Compensation
Committee Charter (8)
|
|
99.3
|
Nominating
and Corporate Governance Committee Charter (8)
|
|
99.4
|
Code
of Business Conduct and Ethics (8)
|
|
(2)
|
Incorporated
by reference to the Form 8-K filed on June 22, 2006.
|
|
(3)
|
Incorporated
by reference to the Form 8-K filed on September 5, 2006
|
|
(4)
|
Incorporated
by reference to the Form 8-K filed on October 3, 2006.
|
|
(5)
|
Incorporated
by reference to the Form 8-K filed on October 17, 2006.
|
|
(6)
|
Incorporated
by reference to the Registration Statement on Form S-3 filed on January 11, 2007.
|
|
(7)
|
Incorporated
by reference to the Form 8-K filed on March 27, 2007.
|
|
(8)
|
Incorporated
by reference to the Registration Statement on Form SB-2 (333-124238).
|
|
(9)
|
Incorporated
by reference to the Definitive Proxy Statement filed on November 30, 2006.
|
|
(10)
|
Incorporated
by reference to the Form 8-K filed on July 13, 2007.
|
|
(11)
|
Incorporated
by reference to the Registration Statement on Form S-3 filed on August 27, 2007.
|
|
(12)
|
Incorporated
by reference to the Form 8-K filed on October 4, 2007.
|
|
(13)
|
Incorporated
by reference to the Form 8-K filed on January 4, 2008.
|
|
(14)
|
Incorporated
by reference to the Form 10-KSB filed on April 17, 2007.
|
17
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the years ended December 31,
2007 and 2006, we retained our principal auditor, GHP Horwath, P. C., to provide services.
Aggregate fees were billed or expected to be billed in the following categories and
amounts:
|
|
Years Ended December 31,
|
|
|
|
2007
|
|
2006
|
|
|
Audit Fees
|
|
|
$
|
112,700
|
|
$
|
98,000
|
|
|
Audit Related Fees
|
|
|
|
400
|
|
|
0
|
|
|
Tax Fees
|
|
|
|
10,000
|
|
|
7,900
|
|
|
All Other Fees
|
|
|
|
0
|
|
|
5,300
|
|
Audit fees in 2007 and 2006 relate to
the financial statement audits, the quarterly reviews and assistance with the filing of
our registration statement on Form S-3 in connection with our October 2006 and March /
April 2007 private placements and the filing of our registration statement on Form S-8.
All of the services performed by the independent accountant were approved by the
Company’s audit committee prior to performance. The audit committee has determined
that the payments made to its independent accountants for these services are compatible
with maintaining such auditors’ independence.
Tax related fees in 2007 and 2006
relate to preparation of the Company corporate federal and state tax returns.
Pre-Approval Policies
and Procedures
The Company’s audit committee
currently has a policy in place that requires its review and pre-approval of all audit and
permissible non-audit services provided by its independent auditors. These services
requiring pre-approval by the audit committee may include audit services, audit related
services, tax services and other services.
18
In accordance with 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.
|
|
|
Date: April 29, 2008
|
SECURITY WITH ADVANCED TECHNOLOGY, INC.
A Colorado Corporation (Registrant)
By:
/s/ Jeffrey G. McGonegal
Jeffrey G. McGonegal
Its: 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.
|
|
|
By:
/s/ Jeffrey G. McGonegal
Jeffrey G. McGonegal
Chief Executive Officer and Director (Principal Executive Officer)
Chief Financial Officer (Principal Financial Officer)
By:
/s/ Gregory Pusey
Gregory Pusey
Chairman of the Board of Directors and Director
By:
/s/ Thomas R. Marinelli
Thomas R. Marinelli
Director
By:
/s/ Gail Schoettler
Gail Schoettler
Director
By:
/s/ Robert J. Williams
Robert J. Williams
Director
By:
/s/ David Welch
David Welch
Director
|
April 29, 2008
April 29, 2008
April 29, 2008
April 29, 2008
April 29, 2008
April 29, 2008
|
19
Exhibit Index
|
3.1
|
Articles
of Incorporation (8)
|
|
3.2
|
Articles
of Amendment to Articles of Incorporation (8)
|
|
3.3
|
Articles
of Amendment to Articles of Incorporation (14)
|
|
3.4
|
Amended
and Restated Bylaws (8)
|
|
3.5
|
Amended
and Restated Certificate of Designation of the Preferences, Rights, Limitations,
Qualifications and Restrictions of the Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock. (13)
|
|
4.1
|
Specimen
Stock Certificate (8)
|
|
4.2
|
Form
of October 2006 Convertible Promissory Note (4)
|
|
4.3
|
Form
of March and April 2007 Convertible Promissory Note (7)
|
|
4.4
|
Form
of Warrant "A" to Purchase Shares of Common Stock at an exercise price of $4.75 per share
(4)
|
|
4.5
|
Form
of Warrant "B" to Purchase Shares of Common Stock at an exercise price of $5.00 per share
(7)
|
|
4.6
|
Warrant
Agreement by and between A4S Security, Inc. and Corporate Stock Transfer, Inc., as
Warrant Agent, entered into June 2005 and Warrant Certificate (8)
|
|
4.7
|
Warrant
Agreement by and between A4S Security, Inc. and Corporate Stock Transfer, Inc., as
Warrant Agent, entered into September 29, 2006 and Warrant Certificate (4)
|
|
4.8
|
Warrant
Agreement by and between Security With Advanced Technology, Inc. and Corporate Stock
Transfer, Inc., as Warrant Agent, entered into March 26, 2007 and Warrant
Certificate (7)
|
|
4.9
|
Warrant
Agreement by and between Security With Advanced Technology, Inc. and Corporate Stock
Transfer, Inc., as Warrant Agent, entered into April 12, 2007 and Warrant
Certificate (14)
|
|
10.1
|
Employment
Agreement between A4S Technologies, Inc. and Gregory Pusey dated March 25, 2005 (8)
|
|
10.2
|
Employment
Agreement between A4S Technologies, Inc. and Jeffrey McGonegal dated March 25, 2005 (8)
|
|
10.3
|
Employment
Agreement between Security With Advanced Technology, Inc. and Scott G. Sutton dated as of
December 31, 2006 (14)
|
|
10.4
|
A4S
Technologies, Inc. 2004 Stock Incentive Plan, as amended (8)
|
|
10.5
|
Securities
Purchase Agreement entered into September 29, 2006 by and between A4S Security, Inc. and
the investors set forth on Schedule I thereto (4)
|
|
10.6
|
Securities
Purchase Agreement entered into March 26, 2007 by and between Security With Advanced
Technology, Inc. and the investors set forth on Schedule I thereto (7)
|
|
10.7
|
Securities
Purchase Agreement entered into April 12, 2007 by and between Security With Advanced
Technology, Inc. and the investors set forth on Schedule I thereto (14)
|
|
10.8
|
Form
of Subscription Agreement and Letter of Investment Intent (4)
|
|
10.9
|
Registration
Rights Agreement entered into as of September 29, 2006 by and among A4S Security, Inc.
and the investors signatory thereto (4)
|
|
10.10
|
First
Amendment to Registration Rights Agreement dated December 15, 2006 by and among Security
with Advanced Technology and the investors signatory thereto (6)
|
|
10.11
|
Registration
Rights Agreement entered into as of March 26, 2007 by and among A4S Security, Inc. and
the investors signatory thereto (4)
|
|
10.12
|
Registration
Rights Agreement entered into as of April 12, 2007 by and among A4S Security, Inc. and
the investors signatory thereto (14)
|
|
10.13
|
Plan
of Merger by and among A4S Security, Inc., Vizer Merger Sub, Inc., Vizer Group, Inc.,
Avurt International, Inc., Sandy Sutton, Scott G. Sutton and Michael Cox,
dated September 3, 2006 (9)
|
|
10.15
|
Registration
Rights Agreement dated as of July 10, 2007 by and among Security With Advanced
Technology, Inc. and Gary E. Gibson, Roy Urban, Ron Urban and Thomas G.
Kotsiopoulos (10)
|
|
10.16
|
Asset
Purchase Agreement dated as of July 10, 2007 by and among Security With Advanced
Technology, Inc., PCP Acquisition, Inc., Perfect Circle Projectiles, LLC
and Gary E. Gibson (10)
|
|
10.17
|
Consulting
Agreement dated as of July 10, 2007 by and among PCP Acquisition, Inc., Perfect Circle
Projectiles, LLC and Gary E. Gibson (10)
|
|
10.18
|
Patent
License Agreement dated as of July 10, 2007 by and between PCP Acquisition, Inc. and
Perfect Circle Projectiles, LLC (10)
|
|
10.19
|
Royalty
Agreement dated as of July 10, 2007 by and between PCP Acquisition, Inc. and Perfect
Circle Projectiles, LLC (10)
|
20
|
10.20
|
Facilities
Agreement dated as of July 10, 2007 by and between PCP Acquisition, Inc. and Perfect
Circle Projectiles, LLC (10)
|
|
10.21
|
Confidentiality
and Non-Competition Agreement dated as of July 10, 2007 by Perfect Circle Projectiles,
LLC and certain key employees of Perfect Circle Projectiles, LLC party
thereto, for the benefit of PCP Acquisition, Inc. (10)
|
|
10.22
|
Warrant
Conversion Agreement from September 2007 warrant conversion (12)
|
|
10.23
|
Warrant
Conversion Agreement from December 2007 warrant conversion (13)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) - Certification of Chief Executive Officer (1)
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) - Certification of Chief Financial Officer (1)
|
|
32
|
Section
1350 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the SARBANES-OXLEY ACT of 2002 (1)
|
|
99.1
|
Audit
Committee Charter (8)
|
|
99.2
|
Compensation
Committee Charter (8)
|
|
99.3
|
Nominating
and Corporate Governance Committee Charter (8)
|
|
99.4
|
Code
of Business Conduct and Ethics (8)
|
|
(2)
|
Incorporated
by reference to the Form 8-K filed on June 22, 2006.
|
|
(3)
|
Incorporated
by reference to the Form 8-K filed on September 5, 2006
|
|
(4)
|
Incorporated
by reference to the Form 8-K filed on October 3, 2006.
|
|
(5)
|
Incorporated
by reference to the Form 8-K filed on October 17, 2006.
|
|
(6)
|
Incorporated
by reference to the Registration Statement on Form S-3 filed on January 11, 2007.
|
|
(7)
|
Incorporated
by reference to the Form 8-K filed on March 27, 2007.
|
|
(8)
|
Incorporated
by reference to the Registration Statement on Form SB-2 (333-124238).
|
|
(9)
|
Incorporated
by reference to the Definitive Proxy Statement filed on November 30, 2006.
|
|
(10)
|
Incorporated
by reference to the Form 8-K filed on July 13, 2007.
|
|
(11)
|
Incorporated
by reference to the Registration Statement on Form S-3 filed on August 27, 2007.
|
|
(12)
|
Incorporated
by reference to the Form 8-K filed on October 4, 2007.
|
|
(13)
|
Incorporated
by reference to the Form 8-K filed on January 4, 2008.
|
|
(14)
|
Incorporated
by reference to the Form 10-KSB filed on April 17, 2007.
|
21
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