UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
(Mark
One)
x
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Annual
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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For
the fiscal year ended September 30, 2007
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OR
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o
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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Commission
file number 0-15935
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ENTERPRISE
INFORMATICS INC.
(Exact
name of registrant as specified in its charter)
California
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95-3634089
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(State
or other jurisdiction of incorporation or
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(IRS
Employer Identification No.)
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organization)
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10052
Mesa Ridge Court, Suite 100
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San
Diego, CA
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92121
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(Address
of principal executive offices)
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(Zip
Code)
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(858)
625-3000
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12 (b) of the Act:
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Name
of each exchange on
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Title
of each class
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which registered
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None
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None
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Securities
registered pursuant to Section 12 (g) of the Act:
Common
Stock
(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 x
Indicate
by check mark if the registrant is not required to file reports pursuant
to
Section 13 or Section 15(d) of the Act. Yes o No x
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No 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. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):
Large
accelerated filer o Accelerated
filer o Non-accelerated
filer x
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No x
The
aggregate market value of the voting and non-voting common equity on
March 31,2007, (the last business day of the Registrant’s most recently
completed second fiscal quarter) held by non-affiliates* of the Registrant,
based upon the last price reported on the OTC Bulletin Board on such date
was
$2,600,115.
The
number of shares outstanding of the Registrant’s Common Stock at the close of
business on January 25, 2008 was 58,696,089.
*
Without acknowledging that any individual director of Registrant is an
affiliate, all directors have been included as affiliates with respect to
shares
owned by them.
EXPLANATORY
NOTE:
The
registrant hereby amends its Annual
Report on Form 10-K for the year ended September 30, 2007 to include Part
III of
Form 10-K, to the extent such information was not previously included in
the
Annual Report on Form 10-K, as set forth below. This amendment also attaches
Exhibit 31.1, 31.2, 32.1 and 32.2. Items in the Annual Report on Form 10-K
not
referenced below are not amended, and this amendment does not reflect events
occurring after the original filing of the Annual Report on Form 10-K, or
modify
or update those disclosures as presented in the Form 10-K except to the extent
set forth herein. Items referenced herein are amended as set forth
below.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Directors
The
following table and
discussion set forth certain information with regard to the Company’s current
directors.
In
accordance with the Stock Purchase
Agreement dated as of January 14, 2000 between the Company
and Spescom Limited, which Spescom Limited assigned to ERP2 Holdings,
LLC. as of October 10, 2007, the Company has covenanted to include two nominees
of ERP2 Holdings, LLC in management’s slate of nominees to be elected to the
Board of Directors at each election of directors and to recommend to the
shareholders the election of such nominees for as long as ERP2 Holdings,
LLC or
any affiliate of ERP2 Holdings, LLC holds at least thirty-three percent (33%)
of
the 16,242,381 shares
of
the Company’scommon stock
sold to Spescom Limitedpursuant to such agreement.
Mr. Lee
and
Mr. Shorten were the nominees designated by ERP2 Holdings,
LLC.
Name
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Age
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Position
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Alan
Kiraly
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46
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Chief
Executive Officer and
Director
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Michael
L.
Silverman
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63
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Chairman
and
Director
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Kyong
K. “Steve”
Lee
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36
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Director
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D.
Ross
Hamilton
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69
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Director
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Richard
Shorten,
Jr.
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40
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Director
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Larry
D.
Unruh
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57
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Director
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Mr.
Kiraly
was appointed Chief
Executive Officer and a Director of the Company in January 2007, after having
served as Interim Chief Executive Officer since August 2006. Mr. Kiraly
joined the Company as Vice President of Product Development in
August 2004. From October 2000 until joining the Company, he was
the Chief Executive Officer of Lascom Solutions Inc., the United States
subsidiary of Lascom, SA, a French software developer. Mr. Kiraly was Vice
President, Product Management and Development from November 1999 to
October 2000 at Motiva Software Inc. Prior to Motiva he held a
variety of management positions in product marketing, development and project
services at various companies in the software industry. Mr. Kiraly earned a
B.S. degree in Mechanical Engineering from Michigan State University in 1983,
and Masters of Science in Mechanical Engineering from the University of Dayton
in 1986.
Mr. Silverman
has been a Director
of the
Company since April 2004. He was appointed Chairman of the Board of
the Company in September 2004. Since 2001 Mr. Silverman has been
a director of Island Pacific, Inc., a publicly held software company in the
retail industry and in February 2004 was appointed its Chairman.
Mr. Silverman founded Advanced Remote Communications Solutions, Inc.
(formerly known as Boatracs, Inc.) in 1990 and serves on its board of
directors. He previously served as its Chairman until May 2002, and as
Chief Executive Officer and President until October 1997, and from
November 1999 to May 2002. Mr. Silverman is a Chartered
Accountant (South Africa) and received M.B.A. from Stanford University in
1969.
Mr.
Lee was
appointed to the Board in October 2007 as a designee of ERP2 Holdings,
LLC where
he is a Manager.
Mr. Lee is a
Director at The Bank
Street Group LLC, a boutique investment bank in Stamford
Connecticut. Mr. Lee began his employment at Bank Street in January
of 2005 as an investment banker responsible for origination and execution
of
mergers and acquisitions and financing transactions for its corporate clients
with a primary focus on technology, media and telecommunications
sectors. Prior to Bank Street, Mr. Lee founded FTC Trinity LLC in
April of 2004, a distribution company focusing on the specialty chemicals
industry. Mr. Lee was an independent consultant between January of
2003 to April of 2004, providing corporate and financial advisory services
to
corporate and financial clients, including The Carlyle Group. Prior
to January of 2003, Mr. Lee was a Senior Associate at Banc of America Securities
LLC in its High Yield Syndication Group. Mr. Lee graduated
fromHarvard
Law School in
1997 and University of California at Berkeley with a Bachelor of Arts
degree
in
Political Science in 1994.
Mr. Hamilton
has been a Director
of the
Company since June 1994. He served as Chairman of the Board of the
Company from January 1997 through June 1997. Since 1983
Mr. Hamilton has served as President of Hamilton Research, Inc., a
financial consulting firm. Mr. Hamilton received a B.S. degree in
Economics from Auburn University in 1961.
Mr.
Shorten was appointed to
the Board in October 2007 as a designee of ERP2 Holdings, LLC where he is
Administrative Manager. Mr. Shorten also has served as Managing
Director for Silvermine Capital Resources, a financial advisory, strategic
consulting and merchant-banking firm since he formed the firm in 2001. Prior
to
forming Silvermine Capital Resources, Mr. Shorten was Executive Vice President
and Director of Graphnet, Inc., from 1999 to 2000 where he had broad-based
operating responsibilities for development, finance, marketing, legal affairs
and human resources. Mr. Shorten spent two years with Destia Communications,
where he was involved in the planning and execution of that company’s initial
public offering in 1999. Destia was acquired in 2001 by Viatel Inc., where
Mr.
Shorten was appointed as Senior Vice President, Data Services. Mr. Shorten
has
served since 2002 as a Board member of Abovenet, Inc, a publicly-held
telecommunications company. In addition Mr. Shorten has served on the Board
of
Directors of Infinia Corporation, privately-held alternative energy company,
since 2003 and of Norwood Promotional Products, Inc., a privately-held
wholesales supplier, since 2007. Mr. Shorten graduated with honors
from Rutgers Law School in 1992 and earned a Bachelor of Arts degree in
Economics and French from Colgate University in 1989.
Mr. Unruh
has served as a Director
of
the Company since May 1988. Since January 2003 he has been Managing
Partner of Hein & Associates LLP, certified public accountants, as well
as its Managing Tax Partner since 1982. Mr. Unruh has served as a
director of Advanced Laser Technology, Inc. since 1999 and also has served
as a director since 2006 of Enerplus U.S.A., a wholly owned subsidiary of
a
Canadian oil and gas royalty trust. Mr. Unruh received a B.S. degree in
Accounting from the University of Denver in 1973.
All
directors are elected annually and
serve until the next annual meeting of shareholders and until their successors
have been elected and qualified.
Executive
Officers
The
following table and discussion set
forth certain information with regard to the Company’s current executive
officers.
Name
|
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Age
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Position
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Alan
Kiraly
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46
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Chief
Executive
Officer
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Glenn
Cox
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51
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Vice
President, Marketing and
Sales
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John
W. Low
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51
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Chief
Financial Officer and
Secretary
|
Pierre
de
Wet
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|
44
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Vice
President,
Operations
|
Biographical
information for
Mr.
Kiraly is set forth
above under Directors.
Mr. Cox
was appointed Vice
President, Marketing and Sales in October 2005. Previously
Mr. Cox served as Vice President Business Development of the Company from
April 1998. Mr. Cox joined the Company in January 1997 as
Vice President Customer Care. Prior to joining the Company Mr. Cox
was with Northeast Utilities for 15 years holding various management positions
within the information technology group. Mr. Cox earned a B.S.E.
degree from University of Connecticut in 1982.
Mr. Low
has served as the Company’s
Chief Financial Officer and Secretary since June 1990. Mr. Low
served as Corporate Controller from the time he joined the Company in
August 1987 until June 1990. Prior to joining the Company,
Mr. Low was with PricewaterhouseCoopers LLP, as a Manager working with
middle-market and growing companies. Mr. Low, a certified public
accountant, earned a B.A. degree in Economics from the University of California,
Los Angeles in 1978.
Mr. De
Wet was appointed Vice
President of
Operations in September 1999. Previously, Mr. De Wet served as
Director of Operations from April 1998 to September 1999 and Director
of Projects from May 1997 to April 1998. Prior to joining the
Company, Mr. De Wet was a Technical Marketing Manager at Paradigm System
Technology from June 1995 to April 1997 where he was
responsible for establishing relationships with technical partners in Europe
and
North America. From April 1991 to June 1995, Mr. De Wet was
with PQ Africa, a division of Comparex Holdings. Mr. De Wet earned a B.S.
degree from the University of Pretoria in 1989.
Section
16(a) Beneficial Ownership
Reporting Compliance
Section
16(a) of the Securities Exchange
Act of 1934, as amended, requires the Company’s directors and executive
officers, and persons who beneficially own more than ten percent of a registered
class of the Company’s equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors and greater than
ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
To
the Company’s knowledge, based solely
on a review of the copies of such reports furnished to the Company, during
the
fiscal year ended September 30, 2007, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with.
Code
of Ethics
The
Company has adopted a Code of Ethics
to provide standards for ethical conduct, which applies to the Board of
Directors, officers, and all Company employees, including our Chief Executive
Officer and Chief Financial Officer. The Code of Ethics covers topics including,
but not limited to, the expected standards of employee conduct, conflicts
of
interest, compliance with securities laws, confidentiality of information,
insider trading, and compliance with other laws.
Any
waiver of a provision of the Code of
Ethics with respect to a director or executive officer may only be made by
the
Board. The Company will file with the SEC on Form 8-K or post on its website
all
amendments to the Code of Ethics and waivers of its provisions made with
respect
to any director or executive officer in accordance with the applicable SEC
rules.
The
Code of Ethics has been posted on
the Company’s website at www.enterpriseinformatics.com
under the heading
“Investors.”
No
material changes have been made to
the procedures disclosed in
the Definitive Proxy Statement for our 2007Annual Meeting of
Stockholders by which
security holders may recommend nominees to our Board of Directors.
Audit
Committee
The
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, that makes recommendations regarding the
selection of independent public accountants and reviews with them the scope
and
results of the audit engagement. The Audit Committee is comprised of Messrs.
Hamilton, Silverman and Unruh. Mr. Unruh is Chairman of the Audit Committee,
and
the Board of Directors has determined that Mr. Unruh is an Audit Committee
Financial Expert. Messrs. Hamilton, Silverman and Unruh are independent
directors, in accordance with the definition of independence for audit committee
members set forth in the NASDAQ listing standards.
ITEM
11. EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
General
Philosophy/Objectives
The
Company’s overall philosophy with regards to executive compensation is to
provide a compensation package that enables it to attract and retain highly
qualified individuals whose abilities are critical to its long-term success,
and
to motivate these executives to achieve superior performance. The Company’s
compensation program for our Named Executive Officers (NEOs) is based upon
the
following underlying principles:
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•
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|
The
NEOs’ total direct compensation (consisting of salary, bonus and long-term
equity incentive opportunities) should be competitive;
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•
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Each
NEO’s bonus should be tied
to the Company’s achievement of financial performance goals and the NEO’s
contribution to the achievement of those goals; and
|
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•
|
|
Our
compensation program should align each NEO’s interests with the interests
of stockholders by providing executives with long-term equity incentive
compensation opportunities and promoting stock ownership.
|
Role
of the Compensation
Committee
Our
executive compensation program is administered by the Compensation Committee
of
the Board of Directors. During fiscal 2007 the members of the committee were
Hilton Isaacman, James Myers, Larry Unruh and D. Ross Hamilton, each a
non-employee director. Both Mr. Unruh and Mr. Hamilton, who served as Chairman,
are independent directors. Mr. Isaacman and Mr. Myers resigned from the Board
On
October 10, 2007 and their positions on the Compensation Committee were not
replaced.
Under
the
terms of its charter, the
Compensation Committee is responsible for setting compensation policies
applicable to the Company’s executive officers. The Committee’s fundamental
policy is to offer the Company’s executive officers competitive compensation
opportunities based upon the overall performance of the Company, the individual
contribution of such officers to the financial success of the Company and
market
rates of compensation of executive officers at similarly situated technology
companies. It is the Committee’s objective to have a substantial portion of each
officer’s total compensation potential contingent upon the Company’s
performance, as well as upon the officer’s own level of performance.
Accordingly, each executive officer’s compensation package is generally
comprised of three elements: (i) base salary, which is established
primarily on the basis of individual qualifications, performance and market
considerations, (ii) annual variable performance awards payable in cash and
tied to the Company’s achievement of financial performance goals and the
executive’s contribution to the achievement of those goals, and
(iii) long-term stock-based incentive awards that are intended to
strengthen the mutuality of interests between the executive officers and
the
shareholders.
In
fulfilling its role, the Compensation Committee meets to review and approve
corporate goals and objectives relevant to the compensation of the Company’s CEO
and other NEOs, evaluate the performance of the CEO and other NEOs in light
of
these goals and objectives, and determine and approve annual compensation
both
for the CEO and the other NEOs based on this evaluation. The CEO does not
have a
role in setting his own compensation.
The
Compensation Committee reviews and determines the compensation of our CEO
and
our other NEOs based, in part, on its evaluation of a variety of criteria
such
as comparable and market compensation data, executive performance and potential,
and other information determined by the Compensation Committee to be important.
The Compensation Committee also considers the recommendations of the CEO
when
determining annual compensation for our other NEOs. On at least an annual
basis,
the Compensation Committee or Board also approves stock option or other equity
or cash incentive awards for all our NEOs. In addition, the Compensation
Committee reviews and recommends to the Board of Directors severance
arrangements for our NEOs.
The
Compensation Committee has the authority to retain outside counsel, experts
and
other advisors and to obtain other data or resources as it determines
appropriate. During fiscal 2007, the Compensation Committee did not elect
to use
its authority to utilize additional resources beyond those made available
by the
Company.
Compensation
Program
In
line
with the principles noted above, our executive compensation program generally
is
comprised of three elements: (i) base salary, which is established
primarily on the basis of individual qualifications, performance and market
considerations, (ii) annual variable performance awards payable in cash and
tied to the Company’s achievement of financial performance goals and the
executive’s contribution to the achievement of those goals, and
(iii) long-term stock-based incentive awards that are intended to
strengthen the mutuality of interests between the executive officers and
the
stockholders.
Base
Salary. Individual officer salaries
are determined based on individual experience, performance and breadth of
responsibility within the Company. The Compensation Committee reviews these
factors for each executive officer each year. In addition, the Compensation
Committee considers executive officers’ salaries for relative competitiveness
with similarly-situated companies.
Bonuses.
Individual bonuses are
determined at the discretion of the Compensation Committee based on its
subjective assessment of the contribution of each officer to and the achievement
of overall financial goals of the Company.
Equity
Plans. The 2007 Stock Incentive
Plan is a long-term incentive plan for the Company’s employees, executive
officers and directors. The plan is intended to align shareholder and employee
interests by creating a direct link between long-term rewards and the value
of
the Company’s common stock. The Compensation Committee believes that ownership
of long-term stock options by executive officers and employees is an important
factor in retaining valued personnel and in achieving growth in share value.
The
options awarded utilize vesting periods that encourage executive officers
and
employees to continue in the employ of the Company. Because the value of
an
option bears a direct relationship to the Company’s stock price, the
Compensation Committee believes that options motivate executive officers
and
employees to manage the Company in a manner which will benefit all
shareholders.
Stock
options may be awarded to
executive officers and employees at any time. The exercise price per share
of
each stock option is generally equal to the prevailing market price of a
share
of the Company’s common stock on the date the option is granted. The size of
stock option grants is determined by a number of factors, including comparable
grants to executive officers and employees of similarly situated companies,
as
well as the executive officer’s relative position and responsibilities with the
Company, the individual performance of the executive officer over the previous
fiscal year, the anticipated contribution of the executive officer to the
attainment of the Company’s long-term strategic performance goals, and the
dilutive effect of the option grant. The Committee views stock option grants
as
an important component of its long-term, performance-based compensation
philosophy.
Executive
Compensation Tables
2007
FISCAL YEAR SUMMARY COMPENSATION
TABLE
The
following table sets forth the
compensation paid during
the last fiscal year to the Company’schief executive officer,
chief financial
officer and
other two
executive
officers
who served asexecutive
officers during fiscal 2007 and as of
September 30, 2007(collectively, the
“named executive
officers”).
Name
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)(1)
|
|
|
Non-Equity
Incentive Plan
Compensation ($)
|
|
|
All
Other Compensation
($)
|
|
|
|
|
|
Total ($)
|
|
Alan
Kiraly
|
|
$ |
217,426 |
|
|
$ |
29,500 |
|
|
|
-0- |
|
|
$ |
40,745 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
$ |
287,671 |
|
Chief
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
W. Low
|
|
$ |
207,569 |
|
|
$ |
26,500 |
|
|
|
-0- |
|
|
$ |
12,768 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
$ |
246,837 |
|
Chief
Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
Cox
|
|
$ |
159,412 |
|
|
$ |
15,000 |
|
|
|
-0- |
|
|
$ |
9,200 |
|
|
|
-0- |
|
|
$ |
51,102 |
|
(2) |
|
|
|
$ |
234,714 |
|
Vice
President Marketing and
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pierre
De
Wet
|
|
$ |
160,201 |
|
|
$ |
15,000 |
|
|
|
-0- |
|
|
$ |
8,150 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
|
|
$ |
183,351 |
|
Vice
President
Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The
amounts in this column represent the dollar amount recognized for
financial statement reporting purposes with respect to the fiscal
year in
accordance with SFAS 123(R). These amounts may reflect options
granted in
years prior to fiscal 2007. See Note 1 to the financial statements
in the
Company’s Form 10-K for the year ended September 30, 2007 for more
information about how the Company account for stock based
compensation.
|
|
|
|
(2)
|
|
The
payment of $51,102 to Mr. Cox
related to commissions earned on
sales.
|
GRANTS
OF PLAN-BASED AWARDS IN FISCAL
2007
The
following table sets forth certain information with respect to the grant
of
awards under our 2007 Stock Incentive Plan Executive.
|
|
|
|
|
Estimated
Future Payouts
Under
Equity
Incentive Plan
Awards
|
|
All
other Option Awards:
Number of Securities
Underlying Options
(#)
|
Exercise
or Base Price of Option
Awards
|
Grant
Date Fair Value of Stock and
Option
Awards
|
|
|
|
|
Grant
|
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
|
|
Name
|
|
Date
|
|
|
($)
|
|
($)
|
|
($)
|
|
($/Sh)
|
($)
|
|
|
Alan
Kiraly
|
|
8/22/07
|
|
|
—
|
|
—
|
|
—
|
|
750,000
|
$0.14
|
$105,000
|
|
|
John
W. Low
|
|
8/22/07
|
|
|
—
|
|
—
|
|
—
|
|
150,000
|
$0.14
|
$21,000
|
|
|
Glenn
Cox
|
|
8/22/07
|
|
|
—
|
|
—
|
|
—
|
|
100,000
|
$0.14
|
$14,000
|
|
|
Pierre
de
Wet
|
|
8/22/07
|
|
|
—
|
|
—
|
|
—
|
|
100,000
|
$0.14
|
$14,000
|
|
|
With
respect to each grant of options reflected in the above table, 25% of the
options granted can be exercised immediately from the date of grant, and
thereafter, the options vest and become exercisable in additional cumulative
annual installments of 25% commencing on the first anniversary of the grant
date. The expiration date of each such option is the date that is 10
years from the grant date.
OUTSTANDING
EQUITY AWARDS AT FISCAL
YEAR-END 2007
The
following table sets forth for the
Named Executive Officers information with respect to unexercised options
to
purchase shares of common stock at September 30, 2007:
|
|
Number
of Securities Underlying
Unexercised Options
(#)
|
|
|
Number
of Securities Underlying
Unexercised Options
(#)
|
|
|
Option
Exercise
Price
|
|
Option
Expiration
|
Name
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
($)
|
|
Date
|
Alan
Kiraly
|
|
|
187,500 |
|
|
|
562,500 |
|
|
$ |
0.14 |
|
8/22/17
|
|
|
|
100,000 |
|
|
|
100,000 |
|
|
$ |
0.13 |
|
3/31/16
|
|
|
|
30,000 |
|
|
|
— |
|
|
$ |
0.33 |
|
8/11/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
W. Low
|
|
|
37,500 |
|
|
|
112,500 |
|
|
$ |
0.14 |
|
8/22/17
|
|
|
|
75,000 |
|
|
|
75,000 |
|
|
$ |
0.13 |
|
3/31/16
|
|
|
|
400,000 |
|
|
|
— |
|
|
$ |
0.21 |
|
8/15/13
|
|
|
|
50,000 |
|
|
|
— |
|
|
$ |
0.14 |
|
4/24/13
|
|
|
|
36,000 |
|
|
|
— |
|
|
$ |
0.53 |
|
4/4/11
|
|
|
|
15,000 |
|
|
|
— |
|
|
$ |
1.06 |
|
5/15/10
|
|
|
|
27,000 |
|
|
|
— |
|
|
$ |
0.56 |
|
11/15/09
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
0.50 |
|
8/5/09
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
0.25 |
|
9/14/08
|
|
|
|
8,000 |
|
|
|
— |
|
|
$ |
0.63 |
|
6/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
Cox
|
|
|
25,000 |
|
|
|
75,000 |
|
|
$ |
0.14 |
|
8/22/17
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
$ |
0.13 |
|
3/31/16
|
|
|
|
40,000 |
|
|
|
— |
|
|
$ |
0.35 |
|
5/4/14
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
0.14 |
|
4/24/13
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
0.53 |
|
4/4/11
|
|
|
|
18,000 |
|
|
|
— |
|
|
$ |
0.56 |
|
11/15/09
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
0.50 |
|
8/5/09
|
|
|
|
2,000 |
|
|
|
— |
|
|
$ |
0.63 |
|
6/30/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pierre
de
Wet
|
|
|
25,000 |
|
|
|
75,000 |
|
|
$ |
0.14 |
|
8/22/17
|
|
|
|
50,000 |
|
|
|
50,000 |
|
|
$ |
0.13 |
|
3/31/16
|
|
|
|
120,000 |
|
|
|
— |
|
|
$ |
0.21 |
|
5/4/14
|
|
|
|
22,000 |
|
|
|
— |
|
|
$ |
0.14 |
|
4/24/13
|
|
|
|
30,000 |
|
|
|
— |
|
|
$ |
0.53 |
|
4/4/11
|
|
|
|
32,000 |
|
|
|
— |
|
|
$ |
0.56 |
|
11/15/09
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
0.50 |
|
8/5/09
|
|
|
|
15,000 |
|
|
|
— |
|
|
$ |
0.25 |
|
9/14/08
|
|
|
|
8,000 |
|
|
|
— |
|
|
$ |
0.63 |
|
6/30/08
|
(1)
Options reflected in this column were granted on the date 10 years prior
to the
applicable expiration date and, with respect to each grant of options, 25%
of
the options can be exercised immediately from the date of grant, and thereafter,
the options vest and become exercisable in additional cumulative annual
installments of 25% commencing on the first anniversary of the grant
date.
OPTION
EXERCISES DURING FISCAL YEAR 2007
The
following table sets forth certain information with respect to options exercised
by each Named Executive Officer during the fiscal year ended September 30,
2007.
|
|
|
|
|
|
Option
Awards
|
|
|
Number of
Shares
Acquired on
Exercise
(#)
|
|
Value
Realized
Upon
Exercise ($)
|
|
Alan
Kiraly—Chief Executive Officer
|
None
|
|
|
— |
|
John
W. Low—Chief Financial Officer and Secretary
|
None
|
|
|
— |
|
Glenn
Cox—Vice President Marketing and Sales
|
None
|
|
|
— |
|
Pierre
De Wet—Vice President Operations
|
None
|
|
|
— |
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
AND
EMPLOYMENT CONTRACTS
The
information below describes
certain arrangements
to
which the Company is party that provide for payments to Named Executive Officers
in connection with termination of employment or a change in control of the
Company. The Company has not entered into any employment contracts
with its Named Executive Officers other than the retention agreements described
below.
Based
on the recommendation of the
Compensation Committee,on
November
14, 2002the Board of Directors
approved severance
arrangement whereby, upon
terminationby the Company
without cause,the Company’s
Chief Executive Officer would receive severancepayments equal to six
months of base
salary, the Company’s Chief Financial Officer would receive severance payments
equal to three months of base salary, and each other executive officer would
receive severance payments equal to one month of base
salary.
On
May
15, 2006, the Company entered
into retention
agreements with Alan Kiraly, Glenn Cox, John W. Low and Pierre de Wet, each
of
which contains the following terms and conditions: If, at the time of a
change in control of the Company, the executive officer party to the agreement
has not voluntarily terminated his employment or been terminated by the Company
for cause, the officer shall be entitled to a retention bonus, payable in
cash
and/or securities of the entity acquiring the Company (the “Acquiror”),
allocated to him from a bonus pool with the approval of the Compensation
Committee. The bonus pool shall be equal to seven percent of the net
acquisition proceeds received by the Company in connection with the change
in
control, provided that the minimum amount of such pool shall be $450,000
and the
maximum amount shall be $675,000. The officer shall be entitled to receive
at least 50% of the retention bonus in cash. If the officer is not
employed by the Company or the Acquirer after the change in control, the
Company
agrees to, within 12 months after the change in control, redeem, or cause
the
redemption of, for cash any non-marketable securities of the Acquirer that
were
paid as part of the retention bonus. The redemption shall be at fair
market value, as determined by the Acquirer. In addition to the retention
bonus, the Company agrees, subject to the officer’s execution of a release and
separation agreement, to pay the officer severance benefits equal to his
base
salary for a certain period, which in each case is six or nine months, and
a
portion of the COBRA premiums under the Company’s or the Acquirer's health plan
for the same period, when (i) the officer does not remain employed with the
Company or the Acquirer immediately following the change in control and certain
other conditions are satisfied (which conditions are identified in note (1)
to
the table immediately below) or (ii) the officer accepts employment with
the
Company or the Acquirer following the change in control and is terminated
without cause within 12 months.
Spescom
Ltd’s sale of all its interest
in the Company to ERP2 Holdings, LLC on October 10, 2007 constituted a change
in
control under the retention agreements and triggered the retention bonuses
for
the Named Executive Officers. On January 28, 2008, the Board of
Directors, on the
recommendation of the Compensation Committee, approved
bonuses to the Named Executive
Officers pursuant to the retention agreements in the aggregate amount of
$232,000, of which $85,000is
payable to Mr. Kiraly, $67,000is
payable to Mr.
Low, $35,000 is
payable to Mr. Cox, and $45,000 is
payable to Mr. De Wet.
Based
on the recommendation of the
Compensation Committee, on January 28, 2008 the Board of Directors approved
certain severance arrangements, effective October 10, 2008. Upon
termination by the Company without cause, the Company’s Chief Executive Officer
and Chief Financial Officer would receive severance payments equal to six
months
of base salary and, if such termination is in connection with a change in
control, such payments would increase to twelve months of base
salary. For other Named Executive Officers, upon termination by the
Company without cause, the Named Executive Officer would be entitled to
severance payments equal to three months of base salary, which payments would
increase to six months of base salary if in connection with a change in
control.
Each
stock option agreement applicable to grants of stock options to Named Executive
Officers under our 1996 Stock Incentive Plan and 2007 Stock Incentive Plan
provides that, in the event of the termination of the option holder’s employment
for any reason within one year after a change in control (i) any portion
of an
option that has not vested on or prior to the date of such termination will
be
fully vested and exercisable on such date and (ii) the option will terminate
upon the earlier of its expiration date and the first anniversary of the
date of
such termination. In addition, pursuant to the terms of our 2007
Stock Incentive Plan, in the event that a change in control occurs and the
surviving or acquiring entity declines to assume any stock awards outstanding
under the plan or to substitute similar stock awards for them, then, with
respect to stock awards held by persons whose continuous service to the Company
has not terminated, the Board of Directors may (i) provide for the payment
of a
cash amount in exchange for the cancellation of any such stock award equal
to
its fair value, which, in the case of stock options, equals the excess, if
any,
of the market value of the Company’s common stock over the exercise price of the
option, multiplied by the number of shares then subject to the option, (ii)
continue any such stock award, or (iii) notify the holders of certain stock
awards that such stock awards will terminate if not exercised or redeemed
upon
or prior to consummation of the change in control transaction.
The
table
below sets forth the estimated value of the potential payments to each Named
Executive Officers, in each of the following circumstances: (i) the
officer’s employment is terminated by the Company without cause on September 30,
2007 other than in connection with a change in control, and (ii) a change
in
control occurs on September 30, 2007 and (A) the officer’s employment is not
terminated within the following 12 months, (B) the officer’s employment is
terminated concurrently with the change in control and any of certain conditions
(set forth in note (1) to the table) are satisfied, (C) the officer’s employment
is terminated concurrently with the change in control and none of such
conditions are satisfied, (D) the officer’s employment is not terminated
concurrently with the change in control but is terminated by the Company
or the
acquiring entity without cause within the following 12 months, or (E) the
officer’s employment is not terminated concurrently with the change in control
but is terminated within the following 12 months other than by the Company
or
the acquiring entity without cause.
Name
|
|
Termination
Without Cause; No Change in Control
|
|
|
Change
in Control; No Termination within 12 Months
|
|
|
Change
in Control; Qualifying Concurrent Termination (1)
|
|
|
Change
in Control; Non-Qualifying Concurrent Termination (2)
|
|
|
Change
in Control; No Concurrent Termination; Termination Without Cause
Within 12
Months
|
|
|
Change
in Control; No Concurrent Termination; Termination Within 12 Months
Other
than Termination Without Cause
|
|
Alan
Kiraly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retention
Bonus (3)
|
|
$ |
- |
|
|
$ |
85,000 |
|
|
$ |
85,000 |
|
|
$ |
85,000 |
|
|
$ |
85,000 |
|
|
$ |
85,000 |
|
Cash
Severance (4)
|
|
$ |
107,016 |
|
|
$ |
- |
|
|
$ |
107,016 |
|
|
$ |
- |
|
|
$ |
107,016 |
|
|
$ |
- |
|
Payment
of COBRA Premiums (5)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,804 |
|
|
$ |
- |
|
|
$ |
3,804 |
|
|
$ |
- |
|
Vesting
of Stock Options (6)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
John
W. Low
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retention
Bonus (3)
|
|
$ |
- |
|
|
$ |
67,000 |
|
|
$ |
67,000 |
|
|
$ |
67,000 |
|
|
$ |
67,000 |
|
|
$ |
67,000 |
|
Cash
Severance (4)
|
|
$ |
52,475 |
|
|
$ |
- |
|
|
$ |
157,424 |
|
|
$ |
- |
|
|
$ |
157,424 |
|
|
$ |
- |
|
Payment
of COBRA Premiums (5)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
8,019 |
|
|
$ |
- |
|
|
$ |
8,019 |
|
|
$ |
- |
|
Vesting
of Stock Options (6)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Glenn
Cox
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retention
Bonus (3)
|
|
$ |
- |
|
|
$ |
35,000 |
|
|
$ |
35,000 |
|
|
$ |
35,000 |
|
|
$ |
35,000 |
|
|
$ |
35,000 |
|
Cash
Severance (4)
|
|
$ |
13,500 |
|
|
$ |
- |
|
|
$ |
80,999 |
|
|
$ |
- |
|
|
$ |
80,999 |
|
|
$ |
- |
|
Payment
of COBRA Premiums (5)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
281 |
|
|
$ |
- |
|
|
$ |
281 |
|
|
$ |
- |
|
Vesting
of Stock Options (6)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Pierre
De
Wet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retention
Bonus (3)
|
|
$ |
- |
|
|
$ |
45,000 |
|
|
$ |
45,000 |
|
|
$ |
45,000 |
|
|
$ |
45,000 |
|
|
$ |
45,000 |
|
Cash
Severance (4)
|
|
$ |
13,433 |
|
|
$ |
- |
|
|
$ |
80,600 |
|
|
$ |
- |
|
|
$ |
80,600 |
|
|
$ |
- |
|
Payment
of COBRA Premiums (5)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,804 |
|
|
$ |
- |
|
|
$ |
3,804 |
|
|
$ |
- |
|
Vesting
of Stock Options (6)
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
(1)
“Qualifying
Concurrent Termination”
means any termination concurrent with a change in control that results from
the
occurrence of any of the following: (A) the officer is not offered employment
at
the Company or with the acquiring entity after the change in control, (B)
the officer
is notoffered employment
at the Company
or with the acquiring
entity after the change in control in a position
with duties and
responsibilities thatare
comparable to those of the officer’s current position and the
officerdeclinesthe
offered position, or (C) relocation
that increases the officer’scommute
by more than 25miles is required to
ensure continued
employment following a change in control and
the
officerdeclinesto
relocate thus terminating
the officer’semployment.
(2)
“Non-Qualifying Concurrent Termination” means any termination concurrent with a
change in control that is not a Qualifying Concurrent Termination.
(3)
Estimates are based on the actual retention bonuses approved by the Board
of
Directors for payment to each Named Executive Officer pursuant to the retention
agreement of such Named Executive Officer in connection with the
change in control that resulted from the sale by Spescom Ltd. of its interests
in the Company to ERP2 Holdings, LLC on October 10, 2007.
(4)
Amounts set forth under the heading “Termination Without Cause; No Change in
Control” reflect severance payments approved by the Board of Directors on
November 14, 2002, and amounts set forth under each other heading reflect
severance payments contemplated by the retention agreement of the applicable
Named Executive Officer.
(5)
Amounts reflect COBRA premium payments contemplated by the retention agreement
of the applicable Named Executive.
(6)
No
amounts are included with respect to the vesting of stock options because,
on
September 30, 2007, the exercise price of each unvested stock option held
by a
Named Executive Officer exceeded the closing market price of the Company’s
common stock.
COMPENSATION
OF
DIRECTORS
The
directors of the Company are paid a
meeting fee of $1,250 per Board or Audit Committee meeting attended and $1,000
per Compensation Committee meeting attended. In addition
Mr. Silverman as Chairman of the Board of Directors receives an annual fee
of $25,000 payable quarterly. Mr. Unruh as Chairman of the Audit
Committee receives an annual fee of $10,000 payable
quarterly.
The
table below shows compensation paid
in fiscal year 2007 to each non-employee director.
Name
|
|
Fees
Earned or Paid in Cash
($)
|
|
|
Stock
Awards ($)(1)
|
|
|
Option
Awards ($)(2)(3)
|
|
|
Non-Equity
Incentive Plan
Compensation ($)
|
|
|
Change
in Pension Value and
Nonqualified Deferred Compensation Earnings
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
D.
Ross
Hamilton
|
|
$ |
18,250 |
|
|
|
-0- |
|
|
$ |
3,150 |
(4) |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
21,400 |
|
Hilton
Isaacman (5)
|
|
$ |
7,000 |
|
|
|
-0- |
|
|
$ |
2,127 |
(6) |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
9,127 |
|
James
P. Myers(5)
|
|
$ |
6,000 |
|
|
|
-0- |
|
|
$ |
3,248 |
(6) |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
9,248 |
|
Michael
Silverman
|
|
$ |
48,750 |
|
|
|
-0- |
|
|
$ |
3,150 |
(4) |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
51,900 |
|
Larry
Unruh
|
|
$ |
29,500 |
|
|
|
-0- |
|
|
$ |
3,150 |
(4) |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
$ |
32,650 |
|
(1)
|
At
fiscal year end, there were no outstanding stock awards held by
any
director.
|
|
|
(2)
|
The
amounts in this column represent the dollar amount recognized for
financial statement reporting purposes with respect to the fiscal
year in
accordance with SFAS 123(R). These amounts may reflect options
granted in
years prior to fiscal 2007. See Note 1 to the financial statements
in the
Company’s Form 10-K for the year ended September 30, 2007 for more
information about how the Company accounts for stock based
compensation.
|
|
|
(3)
|
At
fiscal year end, Mr. Hamilton held 210,000 outstanding options,
Mr.
Isaacman held 325,000 outstanding options, Mr. Myers held 170,000
outstanding options, Mr. Silverman held 95,000 outstanding options,
and
Mr. Unruh held 210,000 outstanding options. All of such options
were for the purchase of shares of the Company’s common
stock.
|
|
|
(4)
|
Each
of Messrs. Hamilton, Silverman and Unruh received a grant of an
option to
purchase 25,000 shares of the Company’s common stock on August 22,
2007 at an exercise price of $0.14 per share. The grant date fair
value of
each such option, based on the Black Sholes model and the closing
price of
the Company’s Common Stock on August 22, 2007 of $0.14, was
approximately $3,500.
|
|
|
(5)
|
Messrs.
Isaacman and Meyers, as nominees designated by Spescom Ltd., resigned
from
the Board of Directors of the Company on October 10, 2007 upon
the sale by
Spescom Ltd. of its interests in the Company to ERP2 Holdings,
LLC.
|
|
|
(6)
|
Neither
Mr. Issacman nor Mr. Myers received any grant of option awards
during
fiscal 2007.
|
Compensation
Committee Interlocks and
Insider Participation
During
the fiscal year ended September
30, 2007 the Compensation Committee was comprised of Messrs. Hamilton,
Isaacman, Myers and Unruh. None of the committee members is or was an
employee or officer of the Company during the fiscal year ended
September 30, 2007. Duringthe
fiscal year ended September 30,
2007,no
executive officer of the Company
served as a member of the Board of Directors or Compensation Committee of
any
entity in which any member of the Compensation Committee of the Company or
any
other member of the Board of Directors of the Company is an executive
officer. On October 10, 2007 Messrs. Isaacman and Myers resigned from
the Board and their positions on the Compensation Committee were not
replaced.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis contained herein with management of the Company. Based on the
Compensation Committee’s review and discussion of the Compensation Discussion
and Analysis with management, the Compensation Committee recommended to the
Board of the Directors of the Company that the Compensation Discussion and
Analysis be included herein for the fiscal year ended September 30, 2007.
|
D.
Ross Hamilton –
Chair
|
|
|
|
Larry
D.
Unruh
|
ITEM
12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
The
following table sets forth
information as to shares of the Common Stock owned as of January 25, 2008
by
(i) each director, (ii) all individuals who served as the Company’s
Chief Executive Officer during the fiscal year ended September 30, 2007,
(iii) the other three individuals who served as executive officers during
the fiscal year ended September 30, 2007, (iv) all directors and
executive officers as a group and (v) each person who, to the extent known
to the Company, beneficially owned more than 5% of the outstanding shares
of
Common Stock. Unless otherwise indicated in the footnotes following the
table, the persons as to whom the information is given have sole voting and
investment power over the shares shown as beneficially owned, subject to
community property laws where applicable.
Name
|
|
Number of Shares (1)
|
|
Percent of Class (1)
|
|
ERP2
Holdings, LLC (2)
|
|
69,220,705
|
(3)
|
75.7
|
%
|
M.A.G.
Capital, LLC (4)
|
|
36,861,747
|
(5)
|
39.1
|
%(6)
|
Forest
Securities Limited
(7)
|
|
3,141,910
|
|
5.4
|
%
|
D.
Ross
Hamilton
|
|
188,100
|
|
*
|
|
Kyong
K. “Steve”
Lee
|
|
—
|
|
—
|
|
Richard
Shorten
|
|
—
|
|
—
|
|
Larry
D.
Unruh
|
|
178,047
|
|
*
|
|
Michael
Silverman
|
|
58,750
|
|
*
|
|
Alan
Kiraly
|
|
317,500
|
|
*
|
|
John
W. Low
|
|
742,000
|
|
1.2
|
|
Glenn
Cox
|
|
231,400
|
|
*
|
|
Pierre
de
Wet
|
|
323,600
|
|
*
|
|
All
Current Directors and
Executive Officers as a Group (9 persons)
|
|
2,039,397
|
|
3.4
|
%
|
(1)
|
Amounts
and
percentages include shares of the Company’s common stock that may be
acquired within 60 days of January 25, 2008 through the exercise
of stock
options as follows: 322,000 shares for Mr. De Wet, 317,500
shares for Mr. Kiraly, 195,000 shares for Mr. Cox, 688,500
shares for Mr. Low, 173,750 shares for Mr. Hamilton, 173,500
shares for Mr. Unruh, 58,750 shares for
Mr. Silverman, and 1,929,250 shares for all directors and executive
officers as a group.
|
(2)
|
The
business
address of ERP2 Holdings, LLC is 694 Weed Street, New Canaan, CT
06840 c/o
Richard
Shorten.
|
|
As
disclosed in the Schedule 13D filed with the Securities and Exchange
Commission on behalf of ERP2 Holdings, LLC and the other entities
and
individuals referenced in the following clauses (i) through (v)
on October
10, 2007, as amended by amendments thereto filed on January 23,
2008 and
January 25, 2008, (i) a majority of the interests in ERP2 Holdings,
LLC
are held by Southpaw Credit Opportunity Master Fund LP, a Cayman
Islands
limited partnership (the “Fund”) and a separate account managed by
Southpaw Asset Management LP, a Delaware limited partnership (“Southpaw
Management”), (ii) Southpaw Management serves as the investment manager of
the Fund and of such account, (iii) Southpaw Holdings LLC, a Delaware
limited liability company (“Southpaw Holdings”), is the general partner of
Southpaw Management, (iv) Kevin Wyman is the Majority Manager of
ERP2
Holdings, LLC and a principal of Southpaw Holdings, and (v) Howard
Golden
is a principal of Southpaw Holdings. By reason of such
relationships, the Fund, Southpaw Management, Southpaw Holdings,
Mr. Wyman
and Mr. Golden may be deemed to have shared voting and investment
power
with respect to the 69,220,705 shares of common stock of the Company
beneficially owned by ERP2 Holdings, LLC and to be indirect beneficial
owners of such shares. The Fund, Southpaw Management, Southpaw
Holdings, Mr. Wyman and Mr. Golden each disclaims beneficial ownership
of
such securities, except to the extent of their respective pecuniary
interest therein. The business address of each of the Fund,
Southpaw Management, Southpaw Holdings, Mr. Wyman and Mr. Golden
is Four
Greenwich Office Park, Greenwich, CT 06831.
|
(3)
|
Amount
includes (i) 15,561,765
shares of the Company’s common stock issuable upon conversion of the
Series F Preferred Stock held by ERP2 Holdings, LLC. at an adjusted
conversion price of $.34 per share and (ii) 17,175,971
sharesof the Company’s common
stock issuable
uponexercise
of a warrantat an exercise
price of
$0.08.
|
(4)
|
The
shares of the Company’s common
stock beneficially owned by M.A.G. Capital, LLC (“MAG”), as detailed in
items (ii) and (iii) of note (5), include certain shares beneficially
owned by MAG’s affiliates Monarch Pointe Fund, Ltd. (“Monarch”) and
Mercator Momentum Fund III, L.P (“MMF”). MAG controls the
investments of Monarch and MMF. David F. Firestone is the Managing
Member of MAG and, in such capacity, holds the right to vote and
the right
to dispose of the shares beneficially owned by MAG, Monarch and
MMF.
The primary business address of MAG is 555 South Flower Street,
Suite
4200, Los Angeles, CA 90071, and the primary business address of
each of
Monarch and MMF is c/o M.A.G. Capital, LLC, 555 South Flower Street,
Suite
4200, Los Angeles, CA 90071.
|
|
(i)
925,926 shares of the
Company’s common stock beneficially owned by MAG issuable upon exercise
of
warrants at an exercise price of $0.27 per
share;
|
|
(ii)
34,003,309 shares of the
Company’s common stock beneficially owned by Monarch, of which (A)
1,197,753 are outstanding, (B) up to 32,000,000 are issuable upon
conversion of the Series I Preferred Stock at a conversion price
equal to
85% of the market price (the volume weighted average price of the
Company’s common stock during the 5 trading days prior to conversion,
subject to adjustment), provided that in no event shall the conversion
price exceed a ceiling price of $0.21 per share, or be less than
a floor
price of $0.0725 per share; and (C) 805,556 are issuable upon exercise
of
warrants at an exercise price of $0.27 per share;
and
|
|
(iii)
1,932,512 shares of the
Company’s common stock beneficially owned by MMF, of which (A) 19,039 are
outstanding, (B) up to 1,793,103 are issuable upon conversion of
the
Series I Preferred Stock at a conversion price equal to 85% of
the market
price (the volume weighted average price of the Company’s common stock
during the 5 trading days prior to conversion, subject to adjustment),
provided that in no event shall the conversion price exceed a ceiling
price of $0.21 per share, or be less than a floor price of $0.0725
per
share, and (C) 120,370 are issuable upon exercise of a warrant
at an
exercise price of $0.27 per
share.
|
(6)
|
Under
the Certificate of
Determination of Series I Preferred Stock and the terms of each
warrant
for the purchase of shares of the Company’s common stock held by MAG,
Monarch and MMF, each of those entities may not convert any shares
of
Series I Convertible Preferred Stock or exercise any such warrant
if doing
so would cause the aggregate beneficial ownership of the Company’s common
stock of MAG, Monarch and MMF to exceed 9.99% of the Company’s common
stock then outstanding.
|
(7)
|
The
primary business address of
Forest Securities Limited is Polygon Hall, P.O. Box 135, Le Marchant
Street, St. Peter Port, Guernsey, GY1
4EL.
|
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 all of the Company’s equity compensation plans as of September 30,
2007. The table includes the 1996 Stock Incentive Plan and 2007 Stock
Incentive Plan.
|
|
|
|
|
|
Number of securities
|
|
|
|
Number of securities to be
|
|
|
|
remaining available for future
|
|
|
|
issued upon exercise of
|
|
Weighted-average exercise
|
|
issuance under equity
|
|
|
|
outstanding options, warrants
|
|
price of outstanding options,
|
|
compensation plans (excluding
|
|
|
|
and rights
|
|
warrants and rights
|
|
securities reflected in column a)
|
|
Plan category
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity
compensation plans approved
by security holders
|
|
5,768,000
|
|
$
|
0.24
|
|
5,809,000(1)
|
|
Equity
compensation plans not
approved by security holders
|
|
1,300,000
|
(2)(3)
|
$
|
0.33
|
|
—
|
|
Total
|
|
7,068,000
|
|
$
|
0.25
|
|
5,809,000
|
|
(1)
|
Represents
the number of
shares of
the
Company’s common stockremaining
available for future
issuance pursuant
to
awards under the
2007
Stock Incentive Plan (excluding sharesreflected
in column
(a)).
|
(2)
|
A
warrant underlying 1,000,000 of
these option shares was granted in 2004 to a public relations firm.
The exercise price under the warrant is $0.40 per share. The warrant
expired on November 3, 2007.
|
(3)
|
A
warrant underlying 300,000 of
these option shares was granted on March 31, 2006 to a public relations
firm. The exercise price under the warrant is $0.10 per share.
The warrant expires on the third anniversary of its date of
issuance.
|
Transactions
Involving ERP2 Holdings,
LLC
Certain
transactions involving ERP2
Holdings, LLC (“ERP2”) and the Company are described
below. Richard
Shorten and Kyong K. "Steve" Lee are members of the
board of directors of
the Company. Mr. Shorten is Administrative Manager of ERP2 and Mr.
Lee is Manager of ERP2. In addition, each of
Mr. Shorten and Mr. Lee
hasan ownership
interest
ina separate minority
member of
EPR2. Each
such minority memberis
entitled to receive distributions
from ERP2after the majority
memberof ERP2receives
a 10% preferred
return. Through
his ownership interest in a
minority member, Mr. Shortenholds
a 5% indirect interest in
ERP2. Through
his ownership interest in a
minority member, Mr. Leeholds a 3.75%
indirect interest in
ERP2.
Acquisition
by ERP2 Holdings, LLC of
theInterests
in the Company of Spescom
Limited
On
October 10, 2007, pursuant to a
Securities Purchase Agreement (the “Agreement”), dated as of September 30, 2007,
between Spescom Limited, a South African corporation (“Spescom SA”), and its
wholly owned subsidiary Spescom Ltd. UK, a United Kingdom corporation
(collectively, “Spescom”), on the one hand, and ERP2 Holdings, LLC (“ERP2”), on
the other hand, Spescom sold to ERP2, for aggregate consideration of $2,500,000,
all shares of the capital stock of the Company held by Spescom, two demand
notes
payable by the Company to Spescom, and certain contract rights and other
interests held by Spescom in connection with its ownership of such shares
and
notes (the “Transaction”).
The
shares of capital stock sold to ERP2
in the Transaction consist of 15,650,471 shares of the Company’s common stock
and 5,291 shares of the Company’s Series F Convertible Preferred
Stock. As of January 25, 2008,15,561,765 shares of
the Company’s
common stockwere issuable
upon conversion of such 5,291 shares ofSeries F Convertible
Preferred
Stock at an adjusted
conversion price of $.34 per share. The terms of the Series
F
Convertible Preferred Stock are described in greater detail under “Transactions
Involving Spescom
Limitedand Its United
Kingdom Subsidiary”
below.
The
two demand notes sold to ERP2 in the
Transaction consist of the demand notes in the original principal amounts
of
$400,000 and $500,000 issued by the Company to Spescom as of March 15, 2002 and
April 19,
2002, respectively, which
bear interest at the rate is 10% per annum and are collateralized by a
security interest in
respect of all of the
Company’s
assets. As of
January 25, 2008, the aggregate amount of principal outstanding under such
notes
was $475,010 and the aggregate amount of interest outstanding under such
notes
was $222,907. The
largest aggregate amount
of principal
outstandingunder such
notes between
October 10, 2007 and January 25,
2008was $475,010, and no
amounts of principal or interest outstanding under such notes were paid during
such period.
The
contract rights sold to the ERP2 in
the Transaction include the rights of Spescom SA under the Stock Purchase
Agreement, dated as of January 14, 2000, between the Company and Spescom
SA. By virtue of the sale to ERP2 of such rights of Spescom SA, the
Company is obligated to include two nominees of ERP2 in management’s slate of
nominees to be elected to the board of the directors of the Company (the
“Board”) and recommend to its shareholders the election of such nominees for as
long as ERP2 or any of its affiliates holds at least 33% of the 16,242,381
shares of the Company’s common stock sold to Spescom SA pursuant to such
agreement.
The
Agreement provides that Spescom SA,
immediately prior to the closing of the Transaction, shall cause the resignation
of the two directors of the Company that were nominated pursuant to the rights
of Spescom SA under the Stock Purchase Agreement referenced in the preceding
paragraph. The two directors so nominated were James P. Myers and
Hilton Isaacman. Mr. Myers and Mr. Isaacman resigned from the Board
effective October 10, 2007. ERP2 proposed to the Board that the Board elect
Richard Shorten and Kyong K. "Steve" Lee to fill the vacancies on the Board
resulting from the resignation of Mr. Myers and Mr. Isaacman and, effective
October 22, 2007, the Board elected Mr. Shorten and Mr. Lee to fill such
vacancies.
Extension
of Demand Notes Held by ERP2 Holdings, LLC
On October 22, 2007, the Company and ERP2, entered into a letter agreement
by
which ERP2 agreed to forbear from seeking repayment prior to December 21,
2007
of the two secured demand notes acquired by ERP2 from Spescom, and the Company,
in exchange, agreed to (i) pay a forbearance fee of $25,000 to ERP2 or its
designees not later than October 24, 2007 and (ii) reimburse ERP2 for expenses,
including legal fees, incurred by it in connection with a due diligence process
to be commenced immediately in an amount up to $25,000.
Execution
of Term Sheet with ERP2 Holdings, LLC, and Associated Issuance of Common
Stock
Warrant and Issuance of Common Stock in Payment of Series F Convertible
Preferred Stock Dividend
On
January 14, 2008, the Company entered
into a term sheet (the “Term Sheet”) with ERP2 that provides, among other
things, for the concurrent consummation (the “ERP2 Closing”) of the following
transactions: (i) the extension of the maturity date of the two secured demand
notes acquired by ERP2 from Spescom (the “Old Notes”) to the date that is two
years from the date of the ERP2 Closing, (ii) the agreement of ERP2 not to
call
such demand notes following an event of default, prior to September 30, 2008;
and (iii) the issuance by the Company to ERP2 of additional secured
promissory notes (the “New Notes”) in the aggregate principal amount of
$1,500,000 with a maturity date two years from the date of the ERP2
Closing. Disbursement of $300,000 of such aggregate principal amount
is subject to delivery at the ERP2 Closing of definitive transaction documents
pursuant to the Term Sheet. Disbursement of the remaining $1,200,000
of such amount is subject to completion of all actions required to be completed
by the Company in order to effectuate a 1000-to-1 reverse split of the Company’s
common stock and the deregistration of the Company’s common stock under the
Securities Exchange Act of 1934(the “Borrower Actions”). The
interest rate for the extended Old Notes and the New Notes will be 10% per
annum
(provided that, upon an event of default, the interest rate will increase
to 13%
per annum). The Old Notes and New Notes will be subject to customary
events of default, including any failure of the Company to complete the Borrower
Actions by April 30,
2008. In addition, the Term Sheet provides for customary
affirmative
and negative covenants, including a quarterly EBITDA
covenant.
Upon
execution of the Term Sheet,
the Company issued to ERP2 a warrant exercisable for 17,175,971 shares of
the
Company’s common stock, which warrant has a per share exercise price of $0.08
and a 10-year termand
contains certain “cashless exercise” and anti-dilution provisions. The Term Sheet provides
that, upon the above-referenced $1,200,000 disbursement, the Company will
issue
to ERP2 warrants for the purchase of the number of shares of common stock
equal
to the greater of (i) 26,735,508 shares of common stock and (ii) 20% of the
fully diluted outstanding common stock as of the issuance date. Such
warrants will have a per share exercise price of $0.08 and a 10-year
term, and contain customary
“cashless exercise” and anti-dilution provisions.
Under
the Term Sheet, so long as the
New Notes or the
Old Notes are outstanding, the Company will procure management consulting,
strategic and financial advisory services from ERP2, the aggregate cost of
which
will not exceed $60,000 in
any quarter. The Term Sheet provides for the
payment by the
Company to ERP2 of all reasonable fees and expenses of ERP2 in connection
with
the provision of the New Note and the extension of the Old Notes, in addition
to
a $75,000 closing fee. Such closing fee includes
up to $25,000
offees and expenses that
the Company is required to reimburse to ERP2 pursuant to the letter agreement
between the Company and ERP2 dated October 22, 2007.
Upon
execution of the Term Sheet, the
Company declared a dividend payable to ERP2 in the amount of 20,832,498 shares
of common stock, in satisfaction of the entire amount of accrued and unpaid
dividends (together with interest through January 21, 2008) on the shares
of the
Company’s Series F Convertible Preferred Stock held by ERP2, which shares of
common stock were issued to ERP2 on January 21, 2008.
As
of January 25, 2008, ERP2, by virtue of
its ownership
ofshares of thecommon
stock and Series F Convertible Preferred
Stock of the
Company, was entitled to
52,044,734
or 70% of the total number
of votes eligible to
be cast on all matters submitted to the vote of the holders common
stockand, consequently,
wasentitled to elect a
majority of the Board. In addition, as of
such date, ERP2, by virtue of its ownership of such shares and of the
above-referenced warrant to purchase 17,175,971shares
of common stock, was the
beneficial owner of 69,220,705shares
or 75.7% of the common stock of
the Company.
Transactions
Involving Spescom Limited
and Its United Kingdom Subsidiary
On
September 30, 2003, the Company
issued 5,291 shares of its Series F Convertible Preferred Stock (the
“Series F Preferred Shares”) to Spescom Limited, a
South African corporation (“Spescom
SA”), and its wholly
owned
subsidiary Spescom
Ltd., a United Kingdom
corporation(“Spescom UK”
and, together with
Spescom SA, “Spescom”) in consideration of the cancellation
of $5,291,000 of its debt owed to Spescom.
The
Series F Preferred Shares were
convertible into the Company’s common stock at an initial conversion price of
$0.45 per share (which, in accordance with certain anti-dilution provisions
contained in the Certificate of Determination for the Series F Preferred
Shares,
had been lowered to $0.39 per share as of September 30, 2007 and to $0.34
per
shares as of January 25, 2008). Such conversion is based on the
stated value of $1,000.00
per shareand on the amount
of any unpaid accrued dividends and interest thereon related the Series F
Preferred Shares as of the date of conversion. Such conversion may
occur at the option of the holder until September 30, 2008. On that
date, any outstanding Series F Preferred Shares not previously converted
are to
be converted automatically. The Series F Preferred Shares are
entitled to receive dividends of 5% of the stated value of $1,000.00 per
share
per annum, payable on a quarterly basis in cash or common stock (valued on
the
basis of the average per share market value on the 30 trading days immediately
prior to the date on which such dividend is declared by the Board of
Directors). Unpaid dividends accrue interest at the rate of 8% per annum
compounded annually
from
the date of accrual. The Series F Preferred
Shares are also entitled to a liquidation preference equal to $1,000.00 per
share, plus accrued but unpaid dividends per share and interest on all accrued
but unpaid dividends. The holder of each
Series
F Preferred Share is
entitled
to a number of votes
equal to the number of
shares of common stock into
which such share would be converted on all matters submittedto the vote of the
holders of common
stock and tovote
as
a class with the holders
of common stock. In
connection with the
issuance of the Series F Preferred Shares, Spescom received certain demand
and
piggyback registration rights with respect to the common stock underlying
such
shares.
As
of September 30, 2007, the Series F
Preferred Shares were convertible at the adjusted conversion price of $0.39
then
in effect into (i) 13,566,667 shares of
the Company’s
common stock based
on
the stated value of the
Series F Preferred Stockand
(ii) 3,160,926shares
of the Company’s common stock
based on the $1,233,000 of unpaid accrued dividends and interest thereon
related
to the Series F Preferred Stock as of such date. As described under
“Transactions Involving
ERP2 Holdings, LLC” above,
however, all accrued
dividends and interest there on related
tothe Series F Preferred
Shares were satisfied as of
January 21, 2008 by the issuance of certain shares of the Company’s
common stock to ERP2 Holdings, LLC, the holder of the Series F Preferred
Shares
as of such date.
As
of September 30, 2007,
Spescom,
by virtue of its ownership of shares
of the common stock and Series F Convertible Preferred Stock of the
Company,(i) was
entitled to vote
32,379,064 or 59.7%
of the total number of votes eligible
to be cast on all matters submitted to the vote of the holders of common
stock and, consequently, was
entitled to elect a majority of the board of directors
of the Company, and
(ii) was the beneficial owner of the same number of shares and percentage
of the
common stock of the Company.
On
October 10, 2007,Spescom
sold all of its interest in
the Company to ERP2 Holdings,
LLC., including the Series
F Preferred Shares, certain shares of common stock of the Company, certain
secured demand notes, and certain associated contract rights, as further
described under “Transactions Involving
ERP2 Holdings,
LLC” above.
Transactions
Involving M.A.G. Capital,
LLC and Certain of Its Affiliates
As of January 25, 2008 M.A.G. Capital, LLC (“MAG”) and its affiliates Monarch
Pointe Fund, Ltd. (“Monarch”) and Mercator Momentum Fund III., L.P. (“MMF”)
owned approximately 39.2% of the outstanding common shares of the Company
assuming the conversion of all shares of the Company’s preferred stock held by
those three entities and the exercise of all warrants for the purchase of
the
Company’s common stock held by them. Under the applicable Certificate of
Determination of Preferred Stock and the terms of the warrants, however,
none of
MAG, Monarch and MMF may convert any shares of preferred stock or exercise
any
warrant if doing so would cause those three entities’ aggregate beneficial
ownership of the Company’s common stock to exceed 9.99% of the Company’s common
stock then outstanding.
During
fiscal 2005 and fiscal 2006, the
Company issued in three private placements certain shares of its preferred
stock
and certain warrants for the purchase of shares of its common stock to MAG,
Monarch and MMF. As part of each private placement, the Company undertook
certain obligations to register the common stock underlying the preferred
stock
and warrants issued therein. These three private placements are described
in greater detail in the paragraphs that follow.
On
November 5, 2004, the Company issued
(1) to Monarch 2,200 shares of Series G Convertible Preferred Stock (“Series G
Preferred Stock”) and (2) to Monarch and MAG (which was then named Mercator
Advisory Group, LLC) warrants, which expire November 5, 2007, to purchase,
subject to certain adjustments, an aggregate of 2.75 million shares of common
stock at $0.44 per share. The aggregate consideration received by the
Company for the Series G Preferred Stock and warrants was $2.2 million.
During fiscal 2005, 750 shares of this preferred stock was converted into
2,428,000 shares of common stock.
On
October 25, 2005, the Company entered
into a definitive agreement relating to a private placement with Monarch
and
MAG. Pursuant to the agreement, on October 25, 2005, the Company issued (1)
to
Monarch 1,950 shares of Series H Convertible Preferred Stock (“Series H
Preferred Stock”) and (2) to Monarch and MAG warrants, which expire October 25,
2008, to purchase, subject to certain adjustments, an aggregate of 925,926
shares of common stock at $0.27 per share. The aggregate consideration received
by the Company for the Series H Preferred Stock and warrants consisted of
$500,000 and the remaining 1,450 shares of the Series G Preferred Stock,
which
were cancelled by the Company. The agreement contemplated the issuance by
the
Company at a second closing of 500 shares of Series H Preferred Stock and
warrants, expiring on the third anniversary of the second closing, to purchase
925,926 shares of common stock at $0.27 per share, in exchange for aggregate
consideration of $500,000. The obligations of the investors to consummate
that
second closing were subject to certain conditions, including that the closing
price of the Company’s common stock would be $0.16 or greater for 20 consecutive
trading days. This stock price condition was not satisfied and the second
closing was not completed.
On
March 10, 2006, the Company completed
a private placement with MAG, Monarch and MMF. Under the terms of the financing,
the Company issued (i) to Monarch and MMF an aggregate of 2,450 shares of
Series
I Convertible Preferred Stock (“Series I Preferred Stock”) and (ii) to MAG,
Monarch and MMF warrants, expiring March 10, 2009, to purchase, subject to
certain adjustments, an aggregate of 925,926 shares of common stock at $0.27
per
share. The Company received aggregate consideration for the Series I
Preferred Stock and warrants issued in the private placement consisting of
$500,000 and the 1,950 shares of Series H Preferred Stock issued by the Company
in October 2005, which have been cancelled.
Each
share of Series I Preferred Stock
is convertible into a number of shares of common stock determined by dividing
$1,000 by the conversion price per share in effect at the time of conversion,
provided that a holder of Series I Preferred Stock may at any given time
convert
only that number of shares of Series I Preferred Stock so that, upon conversion,
the aggregate beneficial ownership of the Company’s common stock of such holder
and all persons affiliated with such holder is not more than 9.99% of the
Company’s common stock then outstanding. The conversion price per share, which
is subject to certain adjustments, is equal to 85% of the market price (the
volume-weighted average price of the Company’s common stock during the 5
immediately preceding trading days, subject to adjustment), provided that
in no
event shall the conversion price exceed a ceiling price of $0.21 per share,
or
be less than a floor price of $0.0725 per share. Consequently,
the Series I Preferred
Stock is convertible into no fewer than 11,666,667 shares of common stock
and
into no more than 33,793,104 shares of common stock. Each holder of Series
I
Preferred Stock is entitled to a liquidation preference equal to the greater
of
(i) $1,000 per share plus declared but unpaid dividends per share and (ii)
the
amount such holder would be entitled to receive had such holder’s shares been
converted into shares of common stock immediately prior to the distribution
in
accordance with the terms of the Series I Preferred Stock. The Series I
Preferred Stock accrued dividends of 6.75% of the stated value of $1,000
per
share per annum between the date of issuance and July 10, 2006, the date
on
which the registration statement for the common stock underlying the Series
I
Preferred Stock was declared effective by the Securities and Exchange
Commission. On October 26, 2007,
the Company issued 358,809 shares of
common stock to the holders of the Series I Preferred Stock in payment of
$55,000 in accrued dividends, thereby satisfying all accrued dividends on
the
Series I Preferred Stock.
Review
and Approval of Transactions
with Related
Persons
The
board of directors of the
Companyadopted,
as of January 28, 2008,a written policy for
approval of
transactions between the Company and its directors, director nominees, executive
officers, greater-than-5% beneficial owners, and their respective immediate
family members, where the amount involved in the transaction exceeds or is
expected to exceed $100,000 since the beginning
of the Company’s
last completed fiscal year. The
policy provides that the Audit
Committee reviews certain transactions subject to the policy and determines
whether or not to approve or ratify those transactions. In
doing so, the Audit Committee
takes into account, among
other factors it deems appropriate, whether the transaction is on terms that
are
no less favorable to the Company than terms generally available to an
unaffiliated third-party under the same or similar circumstances and the
extent
of the interests of the
related person or personsin
the transaction.
Although
the above-referenced written
policy had not been adopted at the time of any of the transactions described
in
this Item 13, (i) the transactions described under the heading “Transactions Involving
ERP2 Holdings,
LLC” and the subheading
“Execution of Term Sheet
with ERP2 Holdings, LLC, and Associated Issuance of Common Stock Warrant
and
Issuance of Common Stock in Payment of Series F Convertible Preferred Stock
Dividend” were reviewed and
approved in advance by a committee of independent directors (the “Independent
Committee”) appointed by the Board of Directors comprised of Messrs. Silverman,
Hamilton and Unruh (who are also the directors comprising the Audit Committee),
and (ii) the transactions described under the heading “Transactions Involving
ERP2
Holdings, LLC” and the subheading “Extension
of Demand Notes Held by ERP2
Holdings, LLC”, the heading
“Transactions
Involving
Spescom Limited and Its United Kingdom Subsidiary”, and the heading “Transactions
Involving M.A.G. Capital,
LLC and Certain of Its Affiliates” were reviewed and approved
in advance
by the Board of Directors. In each case, the Independent
Committeeor
the Board of Directors, as
applicable, tookinto
account, among other
factors it deemedappropriate,
whether the transaction was on
termsno less favorable to
the Company than terms generally available to an unaffiliated third-party
under
the same or similar circumstances and the extent of the interests
of the related person or
persons in the transaction. The transactions described
under the heading
“Transactions Involving
ERP2 Holdings, LLC” and the subheading “Acquisition by
ERP2 Holdings, LLC of the Interests in the Company of Spescom
Limited” were not subject
to the review or approval of the board of directors of the Company or of
any
committee thereof because the Company was not party to the transfer to ERP2
Holdings, LLC of the interests in the Company of Spescom Limited and its
United
Kingdom subsidiary.
Director
Independence
The
Board of Directors has determined
that Messrs. Silverman,
Hamilton and Unruhare
independent underthe
definition of independence set forth
in the NASDAQ listing standards. In
making such determination, the Board
of Directors considered all relevant facts and circumstances in accordance
with
such definitionand
did not consider any
transactions, relationships or
arrangements.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND
SERVICES
Fees
paid to Singer Lewak Greenbaum
& Goldstein LLP, the Company’s independent public accountants for services
provided for the fiscal years ended September 30, 2007 and 2006 are as
follows:
|
|
For
the year ended September
30,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Audit
Fees
|
|
$
|
221,769
|
|
$
|
197,034
|
|
Audit-Related
Fees(1)
|
|
10,580
|
|
14,498
|
|
Tax
Fees
|
|
—
|
|
—
|
|
All
other
fees
|
|
—
|
|
—
|
|
Total
|
|
$
|
232,349
|
|
$
|
211,532
|
|
(1)
The
audit-related fees were in
connection with discussions regarding the Company’s implementation plans
relating to Section 404 of the Sarbanes-Oxley Act of 2002 along with
consultations concerning certain financial and reporting
standards.
Pursuant
to the Audit Committee
charter, the Audit Committee must approve in advance all audit and permissible
non-audit services provided by the Company’s independent auditors.
Accordingly, all of the services described in the table immediately above
were
approved in advance by the Audit Committee. As the Audit Committee
has not
delegated any pre-approval authority, the Audit Committee has not adopted
any
specific pre-approval policies and procedures for delegates relating to the
engagement of its independent auditors. None of the services described in
the
table immediately above were approved by the Audit Committee pursuant to
Rule
2-01(c)(7)(i)(C) of Regulation S-X.
PART
IV
ITEM
15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES.
3.1
|
|
Restated
Articles of Incorporation
of Enterprise Informatics Inc. (incorporated by reference to Exhibit
3.1
to the Form 10-Q filed on May 15, 2007).
|
|
|
|
3.2
|
|
Registrant’s
Bylaws, as amended
(incorporated by reference from previous filings with the Securities
and
Exchange Commission).
|
|
|
|
4.1
|
|
Specimen
certificate of Common
Stock (incorporated by reference from previous filings with the
Securities
and Exchange Commission).
|
|
|
|
4.2
|
|
Certificate
of Determination of
Series F Convertible Preferred Stock of Altris Software, Inc.,
dated September 29, 2003 (incorporated by reference to Exhibit 99.3
to the Form 8-K filed on October 10, 2003).
|
|
|
|
4.3
|
|
Certificate
of Determination of
Series I Convertible Preferred Stock of Spescom Software Inc.,
dated March
9, 2006 (incorporated by reference to Exhibit 3.1 to the Form 8-K
filed on
March 16, 2006).
|
|
|
|
4.4
|
|
Registration
Rights Agreement by
and among Altris Software, Inc. and certain shareholders, dated
August 31, 2003 (incorporated by reference to Exhibit 99.3 to
the Form 8-K filed on October 1,
2003).
|
|
|
|
4.5
|
|
Registration
Rights Agreement by
and among Altris Software, Inc., Spescom Limited, and Spescom Ltd.,
dated September 30, 2003 (incorporated by reference to Exhibit 99.4
to the Form 8-K filed on October 10, 2003).
|
|
|
|
4.6
|
|
Registration
Rights Agreement by
and among the Company, Monarch Pointe Fund, Ltd. and Mercator Advisory
Group, LLC, dated November 5, 2004 (incorporated by reference to
Exhibit 10.2 to the Form 8-K filed on November 12,
2004).
|
|
|
|
4.7
|
|
Registration
Rights Agreement by
and among the Company, Monarch Pointe Fund, Ltd. and M.A.G. Capital,
LLC,
dated October 25, 2005 (incorporated by reference to Exhibit 10.2 to
the Form 8-K filed on October 31, 2005).
|
|
|
|
4.8
|
|
Registration
Rights Agreement by
and among the Company, Monarch Pointe Fund, Ltd., Mercator Momentum
Fund
III, L.P. and M.A.G. Capital, LLC, dated March 10, 2006 (incorporated
by reference to Exhibit 10.2 to the Form 8-K filed on March 16,
2006).
|
|
|
|
4.9
|
|
Warrant
to Purchase 550,000 shares
of Common Stock of Spescom Software Inc. issued to Cappello Capital
Corp
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed
on
January 28, 2005).
|
4.10
|
|
Warrant
to Purchase Common Stock
issued to M.A.G. Capital, LLC, dated October 25, 2005 (incorporated
by reference to Exhibit 10.4 to the Form 8-K filed on October 31,
2005).
|
|
|
|
4.11
|
|
Warrant
to Purchase Common Stock
issued to Monarch Pointe Fund, Ltd., dated October 25, 2005
(incorporated by reference to Exhibit 10.5 to the Form 8-K filed
on
October 31, 2005).
|
|
|
|
4.12
|
|
Warrant
to Purchase Common Stock
issued to M.A.G. Capital, LLC, dated March 10, 2006. (incorporated by
reference to Exhibit 10.3 to the Form 8-K filed on March 16,
2006).
|
|
|
|
4.13
|
|
Warrant
to Purchase Common Stock
issued to Monarch Pointe Fund, Ltd., dated March 10, 2006 (incorporated
by
reference to Exhibit 10.4 to the Form 8-K filed on March 16,
2006).
|
|
|
|
4.14
|
|
Warrant
to Purchase Common Stock
issued to Mercator Momentum Fund III, L.P., dated March 10, 2006
(incorporated by reference to Exhibit 10.5 to the Form 8-K filed
on March
16, 2006).
|
|
|
|
4.15
|
|
Warrant
to Purchase Common Stock
issued to Liolios Group, Inc., dated March 31, 2006
(incorporated by reference to Exhibit 4.22 to the Form S-1 filed
on April
7, 2006).
|
|
|
|
4.16
|
|
Warrant
to Purchase Common
Stock issued to ERP2 Holdings, LLC, dated January 14, 2008(incorporated
by reference to
Exhibit 4.16 to the Form 10-K filed on January 15, 2008).
|
|
|
|
10.1
|
|
10%
promissory note due upon
demand in principal amount of $400,000 issued by Altris
Software, Inc. to Spescom Limited, a United Kingdom corporation, on
March 15, 2002 (incorporated by reference to Exhibit 10.29 to the
Form 10-Q filed on May 15, 2002).
|
|
|
|
10.2
|
|
10.0%
promissory note due upon
demand in principal amount of $500,000 issued by Altris
Software, Inc. to Spescom Limited, a United Kingdom corporation, on
April 19, 2002 (incorporated by reference to Exhibit 10.34 to the
Form 10-Q filed on August 14, 2002).
|
|
|
|
10.3
|
|
Security
Agreement between Altris
Software, Inc. and Spescom Limited, a United Kingdom corporation, and
Spescom Limited, a South African corporation, dated February 15, 2002
(incorporated by reference to Exhibit 10.30 to the Form 10-Q filed
on May
15, 2002).
|
|
|
|
10.4
|
|
Security
Agreement dated
March 15, 2002 between Altris Software, Inc., a California
corporation, and Spescom Limited, a United Kingdom corporation
(incorporated by reference to Exhibit 10.32 to the Form 10-Q filed
on May
15, 2002).
|
|
|
|
10.5
|
|
Pledge
Agreement dated
March 15, 2002 by and between Altris Software, Inc., a
California corporation, Spescom Limited, a United Kingdom corporation,
and
Solomon Ward Seidenwurm & Smith, LLP (incorporated by reference
to Exhibit 10.33 to the Form 10-Q filed on May 15,
2002).
|
|
|
|
10.6
|
|
Debt
Conversion Agreement by and
between Altris Software, Inc., Spescom Limited, and Spescom Ltd.,
dated September 30, 2003 (incorporated by reference to Exhibit 99.2
to the Form 8-K filed on October 10, 2003).
|
10.7
|
|
Stock
Purchase Agreement, dated
January, 2000, by and between Altris, Inc. and Spescom Limited
(incorporated by reference to Annex A to the Schedule 14A filed
on March
13, 2000).
|
|
|
|
10.8
|
|
Subscription
Agreement by and
among the Company, Monarch Pointe Fund, Ltd. and Mercator Advisory
Group,
LLC, dated November 5, 2004 (incorporated by reference to
Exhibit 10.1 to the Form 8-K filed on November 12,
2004).
|
10.9
|
|
Subscription
Agreement by and
among the Company, Monarch Pointe Fund, Ltd. and M.A.G. Capital,
LLC,
dated October 25, 2005 (incorporated by reference to Exhibits 10.1 to
the Form 8-K filed on October 31,
2005).
|
|
|
|
10.10
|
|
Subscription
Agreement by and
among the Company, Monarch Pointe Fund, Ltd., Mercator Momentum
Fund III,
L.P. and M.A.G. Capital, LLC, dated March 10, 2006 (incorporated by
reference to Exhibit 10.1 to the Form 8 K filed on March 16,
2006).
|
10.11
|
|
Public
Relations Agreement Between
Liolios Group, Inc. and the Company dated November 15, 2005
(incorporated by reference to Exhibit 4.17 to the Form 10-K filed
on
January 4, 2006).
|
|
|
|
10.12
|
|
Letter
Amendment to Public
Relations Agreement between Liolios Group, Inc. and the Company,
dated March 31, 2006 (incorporated by reference to Exhibit 4.21 to
the Form S-1 filed on April 7, 2006).
|
|
|
|
10.13
|
|
Source
Code License between
Spescom Software Inc. and Aveva Solutions Limited, dated October
2, 2006
(incorporated by reference to Exhibit 10.13 to the Form 10-K filed
on
December 26, 2006).
|
|
|
|
10.14*
|
|
Amended
and Restated 1996 Stock
Incentive Plan (incorporated by reference to Exhibit 10.1 to the
Registration Statement on Form S-8 filed on April 5,
2004).
|
|
|
|
10.15*
|
|
Form of
Incentive
Stock-Option Agreement, Non-Statutory Stock-Option Agreement and
Restricted Stock Option Agreement under Amended and Restated 1996
Stock
Incentive Plan (incorporated by reference to Exhibit 10.6 to the
Form 10-K filed March 31, 1997).
|
10.16*
|
|
2007
Stock Incentive Plan
(incorporated by reference to Exhibit 10.1 to the Form S-8 filed
May 1,
2007).
|
|
|
|
10.17*
|
|
Form
of Notice of Stock Option
Grant under 2007 Stock Incentive Plan, including, as exhibits thereto,
the
associated form of Stock Option Agreement and form of Exercise
Notice
(incorporated by reference to Exhibit 10.2 to the Form S-8 filed
May 1,
2007).
|
|
|
|
10.18
|
|
Lease
between Rowlandson
Properties Limited and Spescom Software Limited, dated February 10,
2006 (incorporated by reference to Exhibit 10.20 to the Form S-1
filed on
April 7, 2006).
|
|
|
|
10.19
|
|
Second
Addendum to Lease between
Enterprise Informatics Inc. and Mesa Ridge Center, LLC, dated June
14,
2007 (incorporated by reference to Exhibit 10.1 to the Form 10-Q
filed
August 14, 2007).
|
|
|
|
10.20*
|
|
Retention
Agreement between the
Company and John W. Low, dated April 27, 2006 (incorporated by
reference
to Exhibit 10.9 to the Form 10-Q filed on May 15,
2006).
|
|
|
|
10.21*
|
|
Retention
Agreement between the
Company and Glenn Cox, dated April 25, 2006 (incorporated by reference
to
Exhibit 10.10 to the Form 10-Q filed on May 15,
2006).
|
|
|
|
10.22*
|
|
Retention
Agreement between the
Company and Pierre DeWet, dated April 26, 2006 (incorporated by
reference
to Exhibit 10.11 to the Form 10-Q filed on May 15,
2006).
|
|
|
|
10.23*
|
|
Retention
Agreement between the
Company and Alan Kiraly, dated April 25, 2006 (incorporated by
reference
to Exhibit 10.12 to the Form 10-Q filed on May 15,
2006).
|
|
|
|
10.24
|
|
Letter
agreement between
Enterprise Informatics Inc. and ERP2 Holdings, LLC, dated October
22, 2007
(incorporated by reference to Exhibit 10.1 to the Form 8-K filed
on
October 26, 2007).
|
|
|
|
10.25
|
|
Summary
of Terms between
Enterprise Informatics Inc. and ERP2 Holdings, LLC, dated January
14, 2008
(incorporated
by reference to Exhibit
10.25to the Form
10-K
filed on January 15, 2008).
|
|
|
|
21.1
|
|
Subsidiaries
of the Registrant
(incorporated
by reference to Exhibit
21.1to the Form
10-K
filed on January 15, 2008).
|
|
|
|
23.1
|
|
Consent
of Singer Lewak Greenbaum
& Goldstein LLP (previously filed with the Form 10-K filed on January
15, 2008)
|
|
|
|
31.1
|
|
Certification
by the Chief
Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the
Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification
by the Chief
Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the
Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of
2002.
|
32.1
|
|
Certification
by the Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.2
|
|
Certification
by the Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
*Indicates
a management contract or
compensatory plan or arrangement covering executive officers or directors
of the
Company.
SIGNATURES
Pursuant
to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on January 28, 2008.
|
|
Enterprise
Informatics
Inc.
|
|
|
|
|
|
By:
|
/s/
Alan
Kiraly
|
|
|
|
|
Alan
Kiraly
Chief
Executive
Officer
|
Pursuant
to the requirements of the
Securities Exchange Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the
dates
indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Alan
Kiraly
|
|
Director
and Chief Executive
Officer (Principal Executive Officer)
|
|
January
28,
2008
|
Alan
Kiraly
|
|
|
|
|
|
|
|
|
|
/s/
John W.
Low
|
|
Chief
Financial Officer and
Secretary (Principal Financial and Accounting
Officer)
|
|
January
28,
2008
|
John
W. Low
|
|
|
|
|
|
|
|
|
|
/s/
Kyong K. “Steve”
Lee
|
|
Director
|
|
January
28,
2008
|
Kyong
K. “Steve”
Lee
|
|
|
|
|
|
|
|
|
|
/s/
D. Ross
Hamilton
|
|
Director
|
|
January
28,
2008
|
D.
Ross
Hamilton
|
|
|
|
|
|
|
|
|
|
/s/
Richard
Shorten
|
|
Director
|
|
January
28,
2008
|
Richard
Shorten
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
January
28,
2008
|
Michael
Silverman
|
|
|
|
|
|
|
|
|
|
/s/
Larry D.
Unruh
|
|
Director
|
|
January
28,
2008
|
Larry
D.
Unruh
|
|
|
|
|
INDEX
TO EXHIBITS
31.1
|
|
Certification
by the Chief
Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the
Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification
by the Chief
Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the
Securities Exchange Act of 1934 as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification
by the Chief
Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.2
|
|
Certification
by the Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002.
|