AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 2008
REGISTRATION NO. 333-147215
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Post-Effective Amendment No. 1
on
FORM S-1
to
FORM SB-2
and FORMS S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
IMAGEWARE
SYSTEMS, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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|
7372
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33-0224167
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(State
or other jurisdiction of
incorporation or organization)
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(Primary
Standard Industrial Classification
Code Number)
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(I.R.S. Employer Identification
Number)
|
10883 Thornmint Road
San Diego, CA 92127
(858) 673-8600
(Address,
including zip code, and telephone number, including area code, of registrants
principal executive offices)
S. James Miller, Jr.
Chief Executive Officer
ImageWare Systems, Inc.
10883 Thornmint Road
San Diego, CA 92127
(858) 673-8600
(Name,
address, including zip code, and telephone number, including area code, of
agent for service)
Copies to:
Carl Sanchez, Esq.
Paul, Hastings, Janofsky & Walker LLP
3579 Valley Centre Drive
San Diego, California 92130
(858) 720-2500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE
PUBLIC: From time to time after the
effective date of this registration statement, as determined by the selling
stockholder
.
If any of the securities
being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box.
x
If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
o
If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
o
If this Form is a
post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of large accelerated filer, accelerated filer, and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
Non-accelerated
filer
x
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Smaller
reporting company
o
|
(Do
not check if a smaller reporting company)
|
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|
CALCULATION OF REGISTRATION FEE
Title of each class of
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Proposed maximum
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Proposed maximum
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securities to be
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Amount to be
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offering price per
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aggregate offering
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Amount of
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registered
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registered (1)
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share (2)
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price (2)
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registration fee(3)
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Common
stock, par value $0.01 per share
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17,151,664
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$
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1.125
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$
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19,295,622
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$
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758.32
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(1)
Pursuant to Rule 416 under the Securities
Act of 1933, as amended (the Securities Act), the shares being registered
hereunder include such indeterminate number of shares of the Registrants
common stock that may become issuable with respect to the shares being
registered hereunder to prevent dilution resulting from stock dividends, stock
splits, or similar transactions.
(2)
Estimated solely for the purpose of
calculating the amount of the registration fee pursuant to Rule 457(c) of
the Securities Act. The proposed maximum offering price per share and
proposed maximum aggregate offering price are based upon the average of the
high ($1.15) and low ($1.10) sales prices of the Registrants common stock on April 9,
2008, as reported on the American Stock Exchange. It is not known how
many shares will be sold under this registration statement or at what price or
prices such shares will be sold.
(3)
This Registration Statement on Form S-1
carries forward the registration of (i) 6,005,445 shares of common stock
on Form SB-2, filed January 12, 2004 (Registration No. 333-111842),
as amended, (ii) 2,381,100 shares of common stock on Form S-3, filed June 9,
2004 (Registration No. 333-114613), as amended, (iii) 1,990,418
shares of common stock on Form S-3, filed August, 25, 2005 (Registration No. 333-127829),
as amended, (iv) 2,425,415 shares of common stock on Form S-3, filed December 29,
2006 (Registration No. 333-139735), as amended, (v) 848,676 shares of
common stock on Form S-3, filed April 23, 2007 (Registration No. 333-142295),
and (vi) 3,500,610 shares of common stock on Form S-3, filed November 7,
2007 (Registration No. 333-147215), as amended. Registration fees aggregating $4,406.78 were
previously paid to register these securities. As a result, no
additional registration fee is required.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS INCLUDED
IN THIS REGISTRATION STATEMENT RELATES TO SHARES OF COMMON STOCK OF THE
REGISTRANT PREVIOUSLY REGISTERED UNDER REGISTRATION STATEMENT ON FORM SB-2
NO. 333-111842 AND REGISTRATION STATEMENTS ON FORM S-3 NOS.
333-114613, 333-127829, 333-139735, 333-142295, AND 333-147215 AND CONSTITUTES
A POST-EFFECTIVE AMENDMENT TO SUCH REGISTRATION STATEMENTS. THESE POST EFFECTIVE AMENDMENTS SHALL HEREAFTER
BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS OF THIS REGISTRATION
STATEMENT IN ACCORDANCE WITH SECTION 8 OF THE SECURITIES ACT. PURSUANT TO RULE 401(B) UNDER THE
SECURITIES ACT, THE COMPANY IS FILING THIS POST-EFFECTIVE AMENDMENT ON FORM S-1,
AS IT IS CURRENTLY INELIGIBLE TO FILE A REGISTRATION STATEMENT ON FORM S-3.
This
Post-Effective Amendment No. 1 on Form S-1 to Registration Statement
on Form SB-2 and Forms S-3 shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to Section 8(c) of
the Securities Act may determine.
The
information in this preliminary prospectus is not complete and may be changed.
The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these
securities, and the selling stockholders are not soliciting offers to buy these
securities, in any jurisdiction where the offer or sale of these securities is
not permitted.
SUBJECT TO COMPLETION, DATED
APRIL 15, 2008
PROSPECTUS
17,151,664
SHARES
IMAGEWARE
SYSTEMS, INC.
COMMON
STOCK
This prospectus relates to the resale of up to
17,151,664
shares of common stock of ImageWare
Systems, Inc., a Delaware corporation, by the selling stockholders
identified in this prospectus. The selling stockholders acquired the shares
offered by this prospectus in various private placement and debt financings
that took place between May 2002 and September 2007.
We will not receive any of the proceeds from the sale
of the shares of our common stock by the selling stockholders.
The price or prices at which the selling stockholders
may sell the shares will be determined by the prevailing market price for the
shares or in negotiated transactions.
Our common stock is quoted on the American Stock
Exchange under the symbol IW. On April 9, 2008, the last reported sales
price of our common stock, as reported on the American Stock Exchange, was
$1.12 per share.
INVESTING
IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISKS.
SEE THE SECTION ENTITLED RISK FACTORS
BEGINNING ON PAGE
2
OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date
of this prospectus is , 2008.
TABLE OF
CONTENTS
You
should rely only on the information contained in this prospectus or any related
prospectus supplement, including the content of all documents now or in the
future incorporated by reference into the registration statement of which this
prospectus forms a part. We have not
authorized, and the selling stockholders may not authorize anyone to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the selling stockholders are
not, making an offer of the shares of our common stock to be sold under this
prospectus in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information contained in this prospectus or any
related prospectus supplement is accurate as of any date other than the date on
the front cover of this prospectus or the related prospectus supplement, or
that the information contained in any document incorporated by reference is
accurate as of any date other than the date of the document incorporated by
reference. Our business, financial
condition, results of operations and prospects may have changed since such
date. Other than as required under the
federal securities laws, we undertake no obligation to publicly update or
revise such information, whether as a result of new information, future events
or any other reason.
i
PROSPECTUS
SUMMARY
This summary highlights information contained elsewhere
in this prospectus. This summary does
not contain all the information that you should consider before investing in
our common stock. You should read this entire prospectus, including all
documents incorporated by reference, carefully, especially Risk Factors and
our financial statements and related notes incorporated by reference
herein. Please see the section entitled Where You Can Find More
Information on page 64 of this prospectus.
We use the terms we, us, our, the Company and ImageWare
in this prospectus to refer to ImageWare Systems, Inc. and its
consolidated subsidiaries.
Our
Business
ImageWare Systems, Inc. is a leader in the emerging market for
software-based identity management solutions, providing biometric, secure credential,
law enforcement and enterprise authorization.
Our flagship product is the IWS Biometric Engine. Scalable for small city business or worldwide
deployment, our biometric engine is a multi-biometric platform that is hardware
and algorithm independent, enabling the enrollment and management of unlimited
population sizes. Our identification
products are used to manage and issue secure credentials, including national
IDs, passports, driver licenses, smart cards and access control credentials.
Our law enforcement products provide law enforcement with integrated mug shot,
fingerprint LiveScan and investigative capabilities. We also provide
comprehensive authentication security software, as well as real-time voice
recognition, multilingual speech translation and voice analytics
technologies. Biometric technology is
now an integral part of all markets we address, and all of our products are
integrated into the Biometric Engine Platform.
Elements of the IWS Biometric Engine can be used as investigative tools
for law enforcement utilizing multiple biometrics and forensic data elements,
and to enhance security and authenticity of public and private sector
credentials.
Our biometric technology is a core software component of an
organizations security infrastructure and includes a multi-biometric identity
management solution for enrolling, managing, identifying and verifying the
identities of people by the physical characteristics of the human body. We
develop, sell and support various identity management capabilities within
government (federal, state and local), law enforcement, commercial enterprises,
and transportation and aviation markets for identification and verification
purposes. Our IWS Biometric Engine is a biometric identity management platform
for multi-biometric enrollment, management and authentication, managing
population databases of virtually unlimited sizes. It is also offered as a
Software Development Kit (SDK) based search engine, enabling developers and
system integrators to implement a biometric solution or integrate biometric
capabilities into existing applications without having to derive biometric
functionality from pre-existing applications.
The IWS Biometric Engine combined with our secure credential platform,
IWS EPI Builder, provides a comprehensive, integrated biometric and secure
credential solution that can be leveraged for high-end applications such as
passports, driver licenses, national IDs, and other secure documents. It can
also be utilized within our law enforcement systems to incorporate any number
of various multiple biometrics into one system.
We recently added next generation voice recognition, multilingual
speech translation and voice analytics capabilities to our suite of biometric
identity management solutions, enabling users to facilitate and improve
communication across major language groups globally. The ImageWare Mediator
products are offered standalone or integrated with our Biometric Engine
platform, providing an advanced multilingual communications capability. Government,
intelligence, defense, public safety and border control customers are able to
realize language translation and voice recognition capabilities whereby an
English-speaking user can understand and be understood in numerous languages
including Spanish, German, French, Korean, Arabic and Polish, among others.
ImageWare Mediator products support speech to speech translation, multilingual
collaboration, conversational environments, which are represented for both
voice and text and include biometric functionality for speaker identification
and voice analytics.
Our law enforcement solutions enable agencies to quickly capture,
archive, search, retrieve, and share digital images, fingerprints and criminal
history records on a stand-alone, networked, wireless or Web-based platform. We
develop, sell and support a suite of modular software products used by law
enforcement and public safety agencies to create and manage criminal history
records and to investigate crime. Our IWS Law Enforcement solution consists of
six software modules: a Capture and Investigative module, which provides a
criminal booking system and related database; a Facial Recognition module,
which uses biometric facial recognition to identify suspects; a Suspect ID
module, which facilitates the creation of full-color, photo-realistic suspect
composites; a wireless module, which provides access to centrally stored
records over the Internet in a connected or wireless fashion; a PDA add-on
module, which enables access to centrally stored records while in the field on
a handheld Pocket PC compatible device combined with central repository
services which allows for inter-agency data sharing on a local, regional,
and/or national level; and a LiveScan module, which incorporates LiveScan
capabilities into
1
IWS Law Enforcement providing integrated fingerprint and palm print
biometric management for civil and law enforcement use.
Our Secure Credential ID solutions empower customers to create secure
and smart digital identification documents with complete ID systems. We
develop, sell and support software and design systems which utilize digital
imaging in the production of photo identification cards and credentials and
identification systems. Our products in this market consist of IWS EPI Suite,
IWS EPI Builder (SDK), Identifier for Windows and ID Card Maker. These products allow for the production of
digital identification cards and related databases and records and can be used
by, among others, schools, airports, hospitals, corporations or
governments. We have recently added the
ability to incorporate multiple biometrics into the ID systems we offer with
the addition of our new IWS Biometric Engine to our product line.
Our enterprise authentication software includes the IWS Desktop
Security product which is a comprehensive authentication management
infrastructure solution providing added layers of security to workstations,
networks and systems through advanced encryption and authentication technologies.
IWS Desktop Security is optimized to enhance network security and usability,
and uses multi-factor authentication methods to protect access, verify identity
and help secure the computing environment without sacrificing ease-of-use
features such as quick login. Additionally, IWS Desktop Security provides an
easy integration with various smart card-based credentials including the Common
Access Card (CAC), Homeland Security Presidential Directive 12 (HSPD-12)
Personal Identity Verification (PIV) credential, and Transportation Worker
Identification Credential (TWIC) with an organizations access control process.
IWS Desktop Security provides the crucial end-point component of a Logical
Access Control System (LACS), and when combined with a Physical Access Control
System (PACS), organizations benefit from a complete door to desktop access
control and security model.
Our offices are located at 10883 Thornmint Road, San Diego, California
92127, and our telephone number at this address is (858) 673-8600. Our website address is www.iwsinc.com. Information contained on our website, or that
can be accessed through our website, is not a part of this prospectus. See the section entitled Where You Can Find
More Information on page 64 of this
prospectus.
Our common stock is traded on the American Stock Exchange (AMEX)
under the symbol IW.
The Offering
This prospectus relates to the resale of up to
17,151,664 shares of common stock of the Company, by the selling stockholders
identified in this prospectus. The selling stockholders acquired the shares
offered by this prospectus in various private placements and debt financings
that took place between May 2002 and September 2007, all as more
fully described in the section entitled The Selling Stockholders beginning on
page 29 of this prospectus.
RISK
FACTORS
An investment in our common stock involves a high
degree of risk. Before investing in our common stock, you should consider
carefully the specific risks detailed in this Risk Factors section and any
applicable prospectus supplement, together with all of the other information
contained in this prospectus and any prospectus supplement. If any of these
risks occur, our business, results of operations and financial condition could
be harmed, the price of our common stock could decline, and you may lose all or
part of your investment.
Risks
Related to Our Business
We have incurred net losses in our six most recent fiscal years and
AMEX has issued us a letter that it intends to remove our common stock from
listing and registration on the exchange
.
The AMEX Company Guide (the Company Guide) provides that AMEX will
normally consider suspending dealings in, or removing from the list, securities
of a company which sustains net losses in its five most recent fiscal years and
has shareholders equity of less than $6,000,000, unless the company has total
market capitalization of at least $50,000,000, or total assets and revenue of
$50,000,000. We have sustained net losses during our six most recent fiscal
years, and as of December 31, 2007, our shareholders equity was
approximately $3,527,000. In addition, we do not meet the alternative minimum
market capitalization or total asset and revenue requirements.
On December 14, 2007, we received a letter from AMEX indicating
that we do not comply with AMEXs continued listing standards due to our
inability to maintain compliance with Sections 1003(a)(ii), 1003(a)(iii) and
1003(a)(iv) of the Company Guide and that AMEX intends to remove our
common stock from listing and registration on AMEX by filing a delisting
2
application with the Securities and Exchange Commission (SEC). The letter from AMEX states that we were not
in compliance with (i) Section 1003(a)(ii) of the Company Guide
because our shareholders equity was less than $4,000,000 and we sustained
losses from continuing operations and/or net losses in three out of our four
most recent fiscal years, and (ii) Section 1003(a)(iii) of the
Company Guide because our shareholders equity was less than $6,000,000 and we
sustained losses from continuing operations and/or net losses in our five most
recent fiscal years. We had also been
notified by AMEX that we were not in compliance with Section 1003(a)(iv) of
the Company Guide in that we had sustained losses which are so substantial in
relation to our overall operations or our existing financial resources, or our
financial condition had become so impaired that it appeared questionable, in
the opinion of AMEX, as to whether we would be able to continue operations
and/or meet our obligations as they matured.
We filed an appeal of AMEXs determination and requested an oral
hearing before an AMEX Listing Qualifications Panel (a Qualifications Panel). On March 10, 2008, we received a letter
from AMEX granting our request. Our
hearing with a Qualifications Panel is scheduled for April 16, 2008. If the Qualifications Panel does not grant
the relief sought, our common stock will be delisted from AMEX following which
it is expected that our common stock would be quoted on the Over-the-Counter
Bulletin Board
. As a consequence
of any such delisting, the public price of our common stock could be adversely
affected and a stockholder would likely find it more difficult to dispose of,
or to obtain accurate quotations as to the prices of, our common stock.
We have a history of significant recurring losses totaling
approximately $75.9 million, and these losses may continue in the future
.
As of December 31, 2007, we had an accumulated deficit of $75.9
million, and these losses may continue in the future. We will need to raise
capital to fund our continuing operations, and financing may not be available
to us on favorable terms or at all. In the event financing is not available in
the time frame required, we will be forced to sell certain of our assets or
license our technologies to others. We expect to continue to incur significant
sales and marketing, research and development, and general and administrative
expenses. As a result, we will need to generate significant revenues to achieve
profitability and we may never achieve profitability.
Our operating
results have fluctuated in the past and are likely to fluctuate significantly
in the future. We may experience fluctuations in our quarterly results of
operations as a result of:
·
varying demand for and market
acceptance of our technology and products;
·
changes in our product or customer
mix;
·
the gain or loss of one or more key
customers or their key customers, or significant changes in the financial
condition of one or more of our key customers or their key customers;
·
our ability to introduce, certify and
deliver new products and technologies on a timely basis;
·
the announcement or introduction of
products and technologies by our competitors;
·
competitive pressures on selling
prices;
·
costs associated with acquisitions
and the integration of acquired companies, products and technologies;
·
our ability to successfully integrate
acquired companies, products and technologies, including the assets recently
acquired from Sol Logic, Inc. (Sol Logic);
·
our accounting and legal expenses;
and
·
general economic conditions.
These factors,
some of which are not within our control, may cause the price of our stock to
fluctuate substantially. To respond to these and other factors, we may need to
make business decisions that could result in failure to meet financial
expectations. If our quarterly operating results fail to meet or exceed the
expectations of securities analysts or investors, our stock price could drop
suddenly and significantly. Most of our expenses, such as employee
compensation, inventory and debt repayment obligations, are relatively fixed in
the short term. Moreover, our expense levels are based, in part, on our
3
expectations
regarding future revenue levels. As a result, if our revenue for a particular
period were below our expectations, we would not be able to proportionately
reduce our operating expenses for that period. Any revenue shortfall would have
a disproportionately negative effect on our operating results for the period.
We received a going
concern opinion from our independent registered public accounting firm for the
fiscal years ended December 31, 2006
and 2007, which may negatively impact our business.
We received a report from Stonefield Josephson, Inc., our
independent registered public accounting firm (Stonefield Josephson),
regarding our consolidated financial statements for the fiscal year ended December 31,
2006 and 2007, which included an explanatory paragraph stating that the
consolidated financial statements were prepared assuming we will continue as a
going concern. The report also stated that our substantial net losses and
monetary liabilities have raised substantial doubt about our ability to
continue as a going concern. The going concern opinion for the fiscal
year ended December 31, 2007, may fail to dispel any continuing doubts
about our ability to continue as a going concern and could adversely affect our
ability to enter into collaborative relationships with business partners, to
raise additional capital and to sell our products, and could have a material
adverse effect on our business, financial condition and results of operations.
We currently have limited cash resources and
we will require additional funding to finance our working capital requirements
for at least the next twelve months
.
We currently
have limited cash resources and we will require financing to fund our
anticipated working capital requirements for at least the next twelve months.
If we are not able to generate positive cash flows from operations in the near
future, we will be required to seek additional funding through public or
private equity or debt financing. There can be no assurance that additional financing
will be available on acceptable terms, or at all. If we are required to sell
equity to raise additional funds, our existing stockholders may incur
substantial dilution and any shares so issued may have rights, preferences and
privileges superior to the rights, preferences and privileges of our
outstanding common stock. If we seek debt financing, the terms of the financing
may require us to agree to restrictive covenants or impose other obligations
that limit our ability to grow our business, acquire necessary assets or take
other actions that we consider necessary or desirable. Also, we may be required to obtain funds
through arrangements with third parties that require us to relinquish rights to
certain of our technologies or products that we would seek to develop or
commercialize ourselves. In addition, our ability to raise additional capital
may be dependent upon our common stock being listed on AMEX. We have not
satisfied the criteria for continued listing on AMEX in the past and we cannot
guarantee that we will be able to satisfy the criteria for continued listing on
AMEX in the future.
Our current ineligibility to use the Registration Statement on Form S-3
may affect our ability to
finance
our working capital requirements for the next twelve months
.
As a result of
the fact that our Current Report on Form 8-K, filed with the SEC on December 21,
2007, was filed after the deadline for its filing, we became ineligible through
December 2008 to register shares of our common stock on a Form S-3
Registration Statement. Certain investors, for whom the ability to resell their
shares relatively soon after they acquire them is important, may only be
willing to participate in private financings by us if we can register their
shares using a Form S-3 Registration Statement. Therefore, our ineligibility to use Form S-3
could limit our ability to raise additional capital for at least the next 12
months or such longer period that we are ineligible to use the Form S-3
Registration Statement.
We depend upon a small number of large system sales ranging from
$500,000 to in excess of $2,000,000, and we may fail to achieve one or more
large system sales in the future
.
Historically,
we have derived a substantial portion of our revenues from a small number of
sales of large, relatively expensive systems, typically ranging in price from
$500,000 to $2,000,000. If we fail to receive orders for these large systems in
a given sales cycle on a consistent basis, our business could be significantly
harmed. Further, our quarterly results are difficult to predict because we
cannot predict in which quarter, if any, large system sales will occur in a
given year. As a result, we believe that quarter-to-quarter comparisons of our
results of operations are not a good indication of our future performance. In
some future quarters, our operating results may be below the expectations of
securities analysts and investors, in which case the market price of our common
stock may decrease significantly.
4
Our lengthy sales cycle may cause us to expend significant resources
for as long as one year in anticipation of a sale to certain customers, yet we
still may fail to complete the sale
.
When
considering the purchase of a large computerized identity management system,
potential customers of ours may take as long as one year to evaluate different
systems and obtain approval for the purchase. Under these circumstances, if we
fail to complete a sale, we will have expended significant resources and received
no revenue in return. Generally, customers consider a wide range of issues
before committing to purchase our products, including product benefits, ability
to operate with their current systems, product reliability and their own
budgetary constraints. While potential customers are evaluating our products,
we may incur substantial selling costs and expend significant management
resources in an effort to accomplish potential sales that may never occur.
A significant number of our customers and potential customers are
government agencies that are subject to unique political and budgetary
constraints and have special contracting requirements which may affect our
ability to obtain new and retain current government customers
.
A significant
number of our customers are government agencies. These agencies often do not
set their own budgets and therefore have little control over the amount of
money they can spend from quarter-to-quarter or year-to-year. In addition,
these agencies experience political pressure that may dictate the manner in
which they spend money. Due to political and budgetary processes and other
scheduling delays that may frequently occur relating to the contract or bidding
process, some government agency orders may be canceled or substantially
delayed, and the receipt of revenues or payments from these agencies may be
substantially delayed. In addition, future sales to government agencies will
depend on our ability to meet government contracting requirements, certain of
which may be onerous or impossible to meet, resulting in our inability to
obtain a particular contract. Common requirements in government contracts
include bonding requirements, provisions permitting the purchasing agency to
modify or terminate at will the contract without penalty, and provisions
permitting the agency to perform investigations or audits of our business
practices, any of which may limit our ability to enter into new contracts or
maintain our current contracts.
We may fail to create new applications for our products and enter new
markets, which may have an adverse effect on our operations, financial
condition and prospects
.
We believe our
future success depends in part on our ability to develop and market our
technology for applications other than booking systems for the law enforcement
market. If we fail in these goals, our business strategy and ability to
generate revenues and cash flow would be significantly impaired. We intend to
expend significant resources to develop new technology, but the successful
development of new technology cannot be predicted and we cannot guarantee we
will succeed in these goals.
We occasionally rely on systems integrators to manage our large
projects, and if these companies do not perform adequately, we may lose
business
.
We occasionally
act as a subcontractor to systems integrators who manage large projects that
incorporate our systems, particularly in foreign countries. We cannot control
these companies, and they may decide not to promote our products or may price
their services in such a way as to make it unprofitable for us to continue our
relationship with them. Further, they may fail to perform under agreements with
their customers, in which case we might lose sales to these customers. If we
lose our relationships with these companies, our business, financial condition
and results of operations may suffer.
If the patents we own or license, or our other intellectual property
rights, do not adequately protect our products and technologies, we may lose
market share to our competitors and our business, financial condition and
results of operations would be adversely affected
.
Our success
depends significantly on our ability to protect our rights to the technologies
used in our products. We rely on patent protection, trade secrets, as well as a
combination of copyright and trademark laws and nondisclosure, confidentiality
and other contractual arrangements to protect our technology. However, these
legal means afford only limited protection and may not adequately protect our
rights or permit us to gain or keep any competitive advantage. In addition, we
cannot be assured that any of our current and future pending patent
applications will result in the issuance of a patent to us. The U.S. Patent and
Trademark Office (PTO) may deny or require significant narrowing of claims in
our pending patent applications, and patents issued as a result of the pending
patent applications, if any, may not provide us with significant commercial
protection or be issued in a form that is advantageous to us. We could also
incur substantial costs in proceedings before the PTO. These proceedings could
result in adverse decisions as to the claims included in our patents.
5
Our issued and
licensed patents and those that may be issued or licensed in the future may be
challenged, invalidated or circumvented, which could limit our ability to stop
competitors from marketing related products. Additionally, upon expiration of
our issued or licensed patents, we may lose some of our rights to exclude
others from making, using, selling or importing products using the technology
based on the expired patents. We also must rely on contractual rights with the
third parties that license technology to us to protect our rights in the
technology licensed to us. Although we have taken steps to protect our
intellectual property and technology, there is no assurance that competitors
will not be able to design around our patents. We also rely on unpatented
proprietary technology. We cannot assure you that we can meaningfully protect
all our rights in our unpatented proprietary technology or that others will not
independently develop substantially equivalent proprietary products or
processes or otherwise gain access to our unpatented proprietary technology. We
seek to protect our know-how and other unpatented proprietary technology with
confidentiality agreements and intellectual property assignment agreements with
our employees. However, such agreements may not provide meaningful protection
for our proprietary information in the event of unauthorized use or disclosure
or other breaches of the agreements or in the event that our competitors
discover or independently develop similar or identical designs or other
proprietary information. In addition, we rely on the use of registered and
common law trademarks with respect to the brand names of some of our products.
Our common law trademarks provide less protection than our registered
trademarks. Loss of rights in our trademarks could adversely affect our
business, financial condition and results of operations.
Furthermore,
the laws of foreign countries may not protect our intellectual property rights
to the same extent as the laws of the United States. If we fail to apply for
intellectual property protection or if we cannot adequately protect our
intellectual property rights in these foreign countries, our competitors may be
able to compete more effectively against us, which could adversely affect our
competitive position, as well as our business, financial condition and results
of operations.
If third parties claim that we infringe their intellectual property
rights, we may incur liabilities and costs and may have to redesign or
discontinue selling certain products
.
Whether a
product infringes a patent involves complex legal and factual issues, the
determination of which is often uncertain. We face the risk of claims that we
have infringed on third parties intellectual property rights. Searching for
existing intellectual property rights may not reveal important intellectual
property and our competitors may also have filed for patent protection, which
is not as yet a matter of public knowledge, or claimed trademark rights that
have not been revealed through our availability searches. Our efforts to
identify and avoid infringing on third parties intellectual property rights
may not always be successful. Any claims of patent or other intellectual
property infringement, even those without merit, could:
·
increase the cost of our products;
·
be expensive and time consuming to
defend;
·
result in us being required to pay
significant damages to third parties;
·
force us to cease making or selling
products that incorporate the challenged intellectual property;
·
require us to redesign, reengineer or
rebrand our products;
·
require us to enter into royalty or
licensing agreements in order to obtain the right to use a third partys
intellectual property, the terms of which may not be acceptable to us;
·
require us to indemnify third parties
pursuant to contracts in which we have agreed to provide indemnification to
such parties for intellectual property infringement claims;
·
divert the attention of our
management; and
·
result in our customers or potential
customers deferring or limiting their purchase or use of the affected products
until the litigation is resolved.
In addition,
new patents obtained by our competitors could threaten a products continued
life in the market even after it has already been introduced.
6
The failure to successfully integrate any business or asset
acquisitions into our existing operations, or if we discover previously
undisclosed liabilities, could negatively affect our business, financial
condition and results of operations
.
We completed the acquisition of certain assets of Sol Logic in December 2007,
and we plan to continue to review potential acquisition candidates. Our
business and our strategy include building our business through acquisitions.
However, acceptable acquisition candidates may not be available in the future
or may not be available on terms and conditions acceptable to us.
Successful
acquisitions depend upon our ability to identify, negotiate, complete and integrate
suitable acquisitions and to obtain any necessary financing. Even if we
complete acquisitions, we may experience:
·
difficulties in integrating any
acquired companies, personnel and products into our existing business;
·
delays in realizing the benefits of
the acquired company or products;
·
diversion of our managements time
and attention from other business concerns;
·
limited or no direct prior experience
in new markets or countries we may enter;
·
higher costs of integration than we
anticipated; and
·
difficulties in retaining key
employees of the acquired business who are necessary to manage these
acquisitions.
In addition,
an acquisition could materially impair our operating results by causing us to
incur debt or requiring us to amortize acquisition expenses and acquired
assets. We may also discover deficiencies in internal controls, data adequacy
and integrity, product quality, regulatory compliance and product liabilities
that we did not uncover prior to our acquisition of such businesses, which
could result in us becoming subject to penalties or other liabilities. Any
difficulties in the integration of acquired businesses or unexpected penalties
or liabilities in connection with such businesses could have a material adverse
effect on our business, financial condition and results of operations.
We operate in foreign countries and are exposed to risks associated
with foreign political, economic and legal environments and with foreign
currency exchange rates
.
With our
acquisition of G&A Imaging Ltd. in 2001, we have significant foreign
operations. As a result, we are exposed to risks, including among others, risks
associated with foreign political, economic and legal environments and with
foreign currency exchange rates. Our results may be adversely affected by,
among other things, changes in government policies with respect to laws and
regulations, anti-inflation measures, currency conversions, remittance abroad
and rates and methods of taxation.
We depend on key personnel, the loss of any of whom could materially
adversely affect future operations
.
Our success
will depend to a significant extent upon the efforts and abilities of our
executive officers and other key personnel. The loss of the services of one or
more of these key employees and any negative market or industry perception
arising from the loss of such services could have a material adverse effect on
us and the trading price of our common stock.
Our business will also be dependent upon our ability to attract and
retain qualified personnel. Acquiring and keeping these personnel could prove
more difficult or cost substantially more than estimated and we cannot be
certain that we will be able to retain such personnel or attract a high caliber
of personnel in the future.
Compliance with Section 404 of the Sarbanes-Oxley Act of 2002 may
result in substantial costs to us and a diversion of management attention and
resources, and failure to maintain adequate internal controls over financial
reporting could result in our business being harmed and our stock price
declining
.
Section 404
of the Sarbanes-Oxley Act of 2002 requires us to document and test the
effectiveness of our internal controls over financial reporting in accordance
with an established control framework and to report on our managements
conclusion as to the effectiveness of these internal controls over financial
reporting beginning with the fiscal year ending December 31, 2007. This section also requires that our
independent registered public accounting firm provide an attestation report on
our internal control over financial reporting beginning with the fiscal year
ending December 31, 2008. Our
management completed its evaluation of the effectiveness of our disclosure
controls and procedures as of December 31, 2007 and concluded that our
internal controls over financial reporting were effective as of that date.
7
The standards
that must be met for management to continue to assess the internal control over
financial reporting are complex and will require significant documentation,
testing and possible remediation to meet the detailed standards. In addition, the attestation process that
must be performed by our independent registered public accounting firm is new
and complex. We may encounter problems or delays in completing the activities
necessary to continue to make assessments of our internal control over
financial reporting, completing the implementation of any requested
improvements, or receiving an unqualified attestation of our assessment by our
independent registered public accountants.
Ensuring that we have adequate internal financial and accounting
controls and procedures in place is a costly and time-consuming effort that needs
to be evaluated frequently, so compliance with these new rules could
require us to incur substantial costs and may require a significant amount of
time and attention of management, which could seriously harm our business,
financial condition and results of operations. If we are unable to continue to assess
our internal control over financial reporting as effective, or if our
independent registered public accounting firm is unable to provide an
unqualified attestation report on our assessment, investors may lose confidence
in us and our stock price may be negatively impacted.
We face competition from companies with greater financial, technical,
sales, marketing and other resources, and, if we are unable to compete
effectively with these competitors, our market share may decline and our business
could be harmed
.
We face
competition from other established companies. A number of our competitors have
longer operating histories, larger customer bases, significantly greater
financial, technological, sales, marketing and other resources than we do. As a result, our competitors may be able to
respond more quickly than we can to new or changing opportunities,
technologies, standards or client requirements, more quickly develop new
products or devote greater resources to the promotion and sale of their
products and services than we can.
Likewise, their greater capabilities in these areas may enable them to
better withstand periodic downturns in the identity management solutions
industry and compete more effectively on the basis of price and production. In addition, new companies may enter the
markets in which we compete, further increasing competition in the identity
management solutions industry.
We believe
that our ability to compete successfully depends on a number of factors,
including the type and quality of our products and the strength of our brand
names, as well as many factors beyond our control. We may not be able to
compete successfully against current or future competitors, and increased
competition may result in price reductions, reduced profit margins, loss of
market share and an inability to generate cash flows that are sufficient to
maintain or expand the development and marketing of new products, any of which
would adversely impact our results of operations and financial condition.
Risks
Related to Our Securities
The holders of our preferred stock have certain rights and privileges
that are senior to our common stock, and we may issue additional shares of
preferred stock without stockholder approval that could have a material adverse
effect on the market value of the common stock
.
Our Board of
Directors (Board) has the authority to issue a total of up to 4,000,000
shares of preferred stock and to fix the rights, preferences, privileges, and
restrictions, including voting rights, of the preferred stock, which typically
are senior to the rights of the common stockholders, without any further vote
or action by the common stockholders. The rights of our common stockholders
will be subject to, and may be adversely affected by, the rights of the holders
of the preferred stock that have been issued, or might be issued in the future.
Preferred stock also could have the effect of making it more difficult for a
third party to acquire a majority of our outstanding voting stock. This could
delay, defer, or prevent a change in control. Furthermore, holders of preferred
stock may have other rights, including economic rights, senior to the common
stock. As a result, their existence and issuance could have a material adverse
effect on the market value of the common stock. We have in the past issued and
may from time to time in the future issue, preferred stock for financing or
other purposes with rights, preferences, or privileges senior to the common
stock. As of December 31, 2007, we had three series of preferred stock
outstanding, Series B preferred stock, Series C 8% convertible
preferred stock and Series D 8% convertible preferred stock.
The provisions
of our Series B Preferred Stock prohibit the payment of dividends on the
common stock unless the dividends on those preferred shares are first paid. In
addition, upon a liquidation, dissolution or sale of our business, the holders
of the Series B Preferred Stock will be entitled to receive, in preference
to any distribution to the holders of common stock, initial distributions of $2.50
per share, plus all accrued but unpaid dividends. Pursuant to the terms of our Series B
Preferred Stock we are obligated to pay cumulative cash dividends on shares of Series B
Preferred Stock from legally available funds at the annual rate of $0.2125 per
share, payable in two semi-annual installments of $0.10625 each, which
cumulative dividends must be paid prior to payment of any dividend on our
common stock. As of December 31, 2007, we had cumulative undeclared
dividends on the Series B Preferred Stock of approximately $9,000.
8
The Series C
Preferred Stock has a liquidation preference equal to its stated value, plus
any accrued and unpaid dividends thereon and any other fees or liquidated
damages owing thereon. The Series C Preferred Stock accrues cumulative
dividends at the rate of 8.0% of the stated value per share per annum. At the option of the Company, the dividend
payment may be made in the form of cash, after the payment of cash dividends to
the holders of Series B Preferred Stock, or common stock issuable upon
conversion of the Series C Preferred Stock. Each share of Series C Preferred Stock
is convertible at any time at the option of the holder into a number of shares
of common stock equal to the stated value (initially $1,000 per share, subject
to adjustment), plus any accrued and unpaid dividends, divided by the
conversion price (initially $1.50 per share, subject to adjustment). Subject to
certain limitations, the conversion price per share shall be adjusted in the
event of certain subsequent stock dividends, splits, reclassifications,
dilutive issuances, rights offerings, and reclassifications. Certain activities may not be undertaken by
the Company without the affirmative vote of a majority of the holders of the
outstanding shares of Series C Preferred Stock. As of December 31,
2007, we had cumulative undeclared dividends on the Series C Preferred
Stock of approximately $234,000.
The Series D
Preferred Stock has a liquidation preference equal to its stated value, plus
any accrued and unpaid dividends thereon and any other fees or liquidated
damages owing thereon. The Series D Preferred Stock accrues cumulative
dividends at the rate of 8.0% of the stated value per share per annum. At the option of the Company, the dividend
payment may be made in the form of cash, after the payment of cash dividends to
the holders of Series B and Series C Preferred Stock, or common stock
issuable upon conversion of the Series D Preferred Stock. Each share of Series D Preferred Stock
is convertible at any time at the option of the holder into a number of shares
of common stock equal to the stated value (initially $1,000 per share, subject
to adjustment), plus any accrued and unpaid dividends, divided by the
conversion price (initially $1.90 per share, subject to adjustment). Subject to
certain limitations, the conversion price per share shall be adjusted in the
event of certain subsequent stock dividends, splits, reclassifications,
dilutive issuances, rights offerings, and reclassifications. Certain activities may not be undertaken by the
Company without the affirmative vote of a majority of the holders of the
outstanding shares of Series D Preferred Stock. As of December 31,
2007, we had cumulative undeclared dividends on the Series D Preferred
Stock of approximately $98,000.
Our stock price has been volatile, and your investment in our common
stock could suffer a decline in value
.
There has been
significant volatility in the market price and trading volume of equity
securities, which is unrelated to the financial performance of the companies
issuing the securities. These broad market fluctuations may negatively affect
the market price of our common stock. You may not be able to resell your shares
at or above the price you pay for those shares due to fluctuations in the
market price of our common stock caused by changes in our operating performance
or prospects and other factors.
Some specific
factors that may have a significant effect on our common stock market price
include:
·
actual or anticipated fluctuations in
our operating results or future prospects;
·
our announcements or our competitors
announcements of new products;
·
the publics reaction to our press
releases, our other public announcements and our filings with the SEC;
·
strategic actions by us or our
competitors, such as acquisitions or restructurings;
·
new laws or regulations or new
interpretations of existing laws or regulations applicable to our business;
·
changes in accounting standards,
policies, guidance, interpretations or principles;
·
changes in our growth rates or our
competitors growth rates;
·
developments regarding our patents or
proprietary rights or those of our competitors;
·
our inability to raise additional
capital as needed;
·
substantial sales of common stock
underlying warrants and preferred stock;
·
concern as to the efficacy of our
products;
9
·
changes in financial markets or
general economic conditions;
·
sales of common stock by us or
members of our management team; and
·
changes in stock market analyst
recommendations or earnings estimates regarding our common stock, other
comparable companies or our industry generally.
Our future sales of our common stock could adversely affect its price
and our future capital-raising activities could involve the issuance of equity
securities, which would dilute your investment and could result in a decline in
the trading price of our common stock
.
We may sell
securities in the public or private equity markets if and when conditions are
favorable, even if we do not have an immediate need for additional capital at
that time. Sales of substantial amounts of our common stock, or the perception
that such sales could occur, could adversely affect the prevailing market price
of our common stock and our ability to raise capital. We may issue additional
common stock in future financing transactions or as incentive compensation for
our executive management and other key personnel, consultants and advisors.
Issuing any equity securities would be dilutive to the equity interests
represented by our then-outstanding shares of common stock. The market price
for our common stock could decrease as the market takes into account the
dilutive effect of any of these issuances. Furthermore, we may enter into
financing transactions at prices that represent a substantial discount to the
market price of our common stock. A negative reaction by investors and
securities analysts to any discounted sale of our equity securities could
result in a decline in the trading price of our common stock.
If registration rights that we have previously granted are exercised,
then the price of our common stock may be adversely affected
.
We have agreed
to register with the SEC up to 17,151,664 shares of common stock which are
included in the registration statement of which this prospectus is a part. In the event these securities are registered
with the SEC, they may be freely sold in the open market provided the
registration statement of which this prospectus forms a part remains effective
and subject to trading restrictions to which our affiliates holding the shares
may be subject from time to time. We expect that we also will be required to
register any securities sold in future private financings. Additionally, the
number of shares of our common stock underlying issued and outstanding warrants
and preferred stock registered under prior registration statements, many of
which are now available for resale under Rule 144 of the Securities Act of
1933, as amended (the Securities Act), is substantial and sales of such
underlying stock could cause significant dilution. The sale of a significant amount of shares in
the open market, or the perception that these sales may occur, could cause the
trading price of our common stock to decline or become highly volatile.
Our corporate documents and Delaware law contain provisions that could
discourage, delay or prevent a change in control of our company
.
Provisions in
our certificate of incorporation and bylaws may discourage, delay or prevent a
merger or acquisition involving us that our stockholders may consider
favorable. For example, our certificate of incorporation authorizes preferred
stock, which carries special rights, including voting and dividend rights. With
these rights, preferred stockholders could make it more difficult for a third
party to acquire us.
We are also
subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law. Under these provisions, if anyone becomes an interested
stockholder, we may not enter into a business combination with that person
for three years without special approval, which could discourage a third party
from making a takeover offer and could delay or prevent a change of control.
For purposes of Section 203, interested stockholder means, generally,
someone owning 15% or more of our outstanding voting stock or an affiliate of
ours that owned 15% or more of our outstanding voting stock during the past
three years, subject to certain exceptions as described in Section 203.
We do not expect to pay cash dividends on our common stock for the
foreseeable future
.
We have never
paid cash dividends on our common stock and do not anticipate that any cash
dividends will be paid on the common stock for the foreseeable future. The
payment of any cash dividend by us will be at the discretion of our board of
directors and will depend on, among other things, our earnings, capital,
regulatory requirements and financial condition. Furthermore, the terms of our Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock directly limit our ability to pay cash dividends on our common stock.
10
Securities analysts may not continue to cover our common stock or may
issue negative reports, and this may have a negative impact on our common stocks
market price
.
There is no
guarantee that securities analysts will continue to cover our common stock. If
securities analysts do not cover our common stock, the lack of research
coverage may adversely affect our common stocks market price. The trading
market for our common stock relies in part on the research and reports that
industry or financial analysts publish about our business or us. If one or more
of the analysts who cover us downgrades our stock, our stock price may decline
rapidly. If one or more of these analysts ceases coverage of our common stock,
we could lose visibility in the market, which in turn could cause our stock price
to decline. In addition, rules mandated by the Sarbanes-Oxley Act of 2002,
and a global settlement reached between the SEC, other regulatory analysts and
a number of investment banks in April 2003, may lead to a number of
fundamental changes in how analysts are reviewed and compensated. In
particular, many investment banking firms will now be required to contract with
independent financial analysts for their stock research. It may be difficult
for companies with smaller market capitalizations, such as our company, to
attract independent financial analysts that will cover our common stock, which
could have a negative effect on our market price.
The large number of holders and lack of concentration of ownership of
our common stock may make it difficult for us to reach a quorum or obtain an
affirmative vote of our stockholders at future stockholder meetings
.
Our stock is held in a large number of individual
accounts. As a result, it may be difficult for us to reach a quorum or obtain
an affirmative vote of a majority of our stockholders where either of those
thresholds are measured based on the total number of shares of our common stock
outstanding. Difficulty in obtaining a stockholder vote could impact our
ability to complete any financing or strategic transaction requiring
stockholder approval or effect basic corporate governance changes, such as an
increase in the authorized number of shares of our preferred stock and our
common stock.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This prospectus contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth
opportunities for existing patents, technologies, products, plans and
objectives of management, markets for stock of ImageWare and other matters.
Statements in this prospectus that are not historical facts are hereby
identified as forward-looking statements for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934, as amended
(the Exchange Act), and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to
the future business prospects, revenues and income of ImageWare, wherever they
occur, are necessarily estimates reflecting the best judgment of our senior
management on the date on which they were made, or if no date is stated, as of the
date of this prospectus. These forward-looking statements are subject to risks,
uncertainties and assumptions, including those described in the section
entitled Risk Factors, may affect the operations, performance, development
and results of our business. Because the factors discussed in this prospectus
could cause actual results or outcomes to differ materially from those
expressed in any forward-looking statements made by us or on our behalf, you
should not place undue reliance on any such forward-looking statements. New
factors emerge from time to time, and it is not possible for us to predict
which factors will arise. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
You are advised to read carefully the section titled Risk
Factors beginning on page 2 of this prospectus.
We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or any other reason. All subsequent forward-looking statements
attributable to ImageWare or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to herein. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus may not occur. Except as
required under the federal securities laws and the rules and regulations
of the SEC, we do not have any intention or obligation to update publicly any
forward-looking statements after we distribute this prospectus, whether as a
result of new information, future events or otherwise.
11
USE OF
PROCEEDS
All of our common stock being offered under this
prospectus is being sold by or for the account of the selling
stockholders. We will not receive any
proceeds from the sale of our common stock by or for the account of the selling
stockholders. However, we will receive
proceeds to the extent the selling stockholders exercise their warrants for
cash. Any such proceeds will be used for
general corporate purposes. General
corporate purposes may include capital expenditures, repayment of debt,
possible acquisitions, investments and any other purposes that we may specify
in any prospectus supplement.
MANAGEMENT
Directors
The following table sets forth information regarding our directors as
of April 1, 2008:
Name
|
|
Age
|
|
Principal Occupation/Position
Held With the Company
|
|
Mr. S. James Miller, Jr.
|
|
54
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
|
Mr. John Callan
|
|
61
|
|
Director
|
|
Mr. David Carey
|
|
63
|
|
Director
|
|
Mr. Guy Steven Hamm
|
|
60
|
|
Director
|
|
Mr. John Holleran
|
|
81
|
|
Director
|
|
Mr. David Loesch
|
|
63
|
|
Director
|
|
On March 16, 2008, Mr. Patrick
Downs, a member of our board of directors, passed away. We have not yet filled the vacancy resulting
from Mr. Downs untimely passing.
S. James Miller, Jr.
has served as our Chief Executive Officer since 1990 and Chairman of the Board
since 1996. He also served as our President from 1990 until 2003. From 1980 to
1990, Mr. Miller was an executive with Oak Industries, Inc., a
manufacturer of components for the telecommunications industry. While at Oak
Industries, Mr. Miller served as a director and as Senior Vice President,
General Counsel, Corporate Secretary and Chairman/President of Oak Industries
Pacific Rim subsidiaries. He has a J.D. from the University of San Diego School
of Law and a B.A. from the University of California, San Diego.
John Callan
was
appointed to the Board in September 2000. Since February 2007, Mr. Callan
has served as Vice President, Strategy and Business Development at DHL Global
Mail, Americas. From March 2006 to February 2007, Mr. Callan
served DHL Global Mail as Vice President - Domestic Product Management. From
2001 to 2006, Mr. Callan served as Principal of Ursa Major Associates,
LLC, the logistics strategy consulting firm he co-founded. From 1997 to 2002,
he was an independent business strategy consultant in the imaging and logistics
fields. From 1995 to 1997, Mr. Callan served as Chief Operating Officer
for Milestone Systems, a shipping systems software company. From 1987 to 1995,
he served as Director of Entertainment Imaging at Polaroid Corporation. Mr. Callan
is a graduate of the University of North Carolina.
David Carey
was
appointed to the Board in February 2006. Mr. Carey is a former
Executive Director of the Central Intelligence Agency. Since April 2005, Mr. Carey
has served as Executive Director for Blackbird Technologies, which provides
state-of-the-art IT security expertise, where he assists the company with
business development and strategic planning. Prior to joining Blackbird
Technologies, Mr. Carey was Vice President, Information Assurance for
Oracle Corporation from September 2001 to April 2005. In addition, Mr. Carey
worked for the CIA for 32 years until 2001. During his career at the CIA, Mr. Carey
held several senior positions including that of Executive Director, often
referred to as the Chief Operating Officer, or No. 3 person in the agency,
from 1997 to 2001. Before assuming that position, Mr. Carey was Director
of the DCI Crime and Narcotics Center, the Director of the Office of Near
Eastern and South Asian Analysis, and Deputy Director of the Office of Global
Issues. Mr. Carey is a graduate of Cornell University and the University
of Delaware.
Guy Steven Hamm
was
appointed to the Board in October 2004. Mr. Hamm served Aspen
Holding, a privately held insurance provider, as CFO from December 2005 to
February 2007. In 2002, Mr. Hamm retired from PricewaterhouseCoopers,
where he was a national partner-in-charge of middle market. Mr. Hamm was
instrumental in growing the Audit Business Advisory Services (ABAS) Middle
Market practice at PricewaterhouseCoopers, where he was responsible for $300
million in revenue and more than 100 partners. Mr. Hamm is a graduate of
San Diego State University.
12
John Holleran
was
appointed to the Board in May 1996. Since 1974, Mr. Holleran has been
a management and investment consultant. Prior to consulting, Mr. Holleran
served as the Chief Financial Officer, Executive Vice President and Chief
Operating Officer of Southwest Gas Corporation. He served as Executive Vice
President of the Hawaii Corporation, a diversified holding company, and as
President and Chairman of Property Research Financial Corporation, a real
estate investment and syndication firm, from 1972 to 1974. Mr. Holleran
has also served as a director of Kilroy Industries, a national office building
and office park developer, as a director of Walker & Lee, a national
full service real estate firm, and as a director of NTN Communications, Inc.,
a company engaged in the interactive television business. Mr. Holleran is
a graduate of Woodbury University.
David Loesch
was
appointed to the Board in September 2001 after 29 years of service as
a Special Agent with the Federal Bureau of Investigations (FBI). At the time
of his retirement from the FBI, Mr. Loesch was the Assistant Director in
Charge of the Criminal Justice Information Services Division of the FBI. Mr. Loesch
was awarded the Presidential Rank Award for Meritorious Executive in 1998 and
has served on the board of directors of the Special Agents Mutual Benefit
Association since 1996. He is also a member of the International Association of
Chiefs of Police and the Society of Former Special Agents of the FBI, Inc.
Mr. Loesch served in the United States Army as an Officer with the 101st
Airborne Division in Vietnam. He holds a Bachelors degree from Canisius
College and a Masters degree in Criminal Justice from George Washington
University. Mr. Loesch is currently a private consultant on public safety
and criminal justice solutions.
Executive Officers
The following table sets forth the names, ages and positions for our
executive officers and certain significant employees not discussed above as of April 1,
2008:
Name
|
|
Age
|
|
Principal Position(s) Held With the Company
|
|
Mr. Wayne Wetherell
|
|
55
|
|
Sr. Vice
President, Administration, Chief Financial Officer, Secretary and Treasurer
|
|
Mr. Charles AuBuchon
|
|
64
|
|
Vice
President, Business Development
|
|
Mr. David Harding
|
|
38
|
|
Vice
President and Chief Technical Officer
|
|
Wayne Wetherell
has
served as our Senior Vice President, Administration and Chief Financial Officer
since May 2001 and additionally as our Secretary and Treasurer since October 2005.
From 1996 to May 2001, he served as Vice President of Finance and Chief
Financial Officer. From 1991 to 1996, Mr. Wetherell was the Vice President
and Chief Financial Officer of Bilstein Corporation of America, a manufacturer
and distributor of automotive parts. Mr. Wetherell holds a B.S. degree in
Management and an M.S. degree in Finance from San Diego State University.
Significant Employees
Chuck AuBuchon
has
served as our Vice President, Business Development since January 2007.
From 2004 to 2007 he served as Vice President, Sales. From 2003 to 2004, he
served as Director of North American Sales. From 2000 to 2003, Mr. AuBuchon
was Vice President Sales & Marketing at Card Technology Corporation, a
manufacturer of Card Personalization Systems, where he was responsible for
distribution within the Americas, Asia Pacific and EMEA (Europe, Middle East
and Africa) regions. From 1992 to 2000, Mr. AuBuchon held various sales
management positions, including Vice President Sales and Marketing, for Gemplus
and Datacard. Mr. AuBuchon is a graduate of Pennsylvania State University.
David Harding
has
served as our Vice President and Chief Technology Officer since January 2006.
Before joining us, Mr. Harding was the Chief Technology Officer at IC
Solutions, Inc., where he was responsible for all technology departments
including the development and management of software development, IT and
quality assurance as well as their respective hardware, software and human
resource budgets from 2001 to 2003. He was the Chief Technology Officer at Thirsty.com
from 1999 to 2000, the Chief Technology Officer at Fulcrum Point Technologies, Inc.,
from 1996 to 1999, and consultant to Access360, which is now part of
IBM/Tivoli, from 1995 to 1996.
13
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Overview of Compensation Program and
Philosophy
Our compensation program is intended to support the achievement of our
specific annual and long-term operational and strategic goals by attracting and
rewarding employees for superior results. A key objective of the program is to
align executives interests with those of the stockholders by rewarding
performance above established goals, with the ultimate objective of improving
stockholder value.
The Compensation Committee of our Board of Directors has responsibility
for establishing, implementing and monitoring adherence to the Companys
compensation philosophy. The Compensation Committee seeks to ensure that the
total compensation paid to our executive officers is fair, reasonable and
competitive.
The Compensation Committee evaluates both performance and compensation
in an effort to ensure that we maintain our ability to attract and retain
individuals of superior ability and managerial talent in key positions and that
compensation provided to key employees remains competitive relative to the
compensation paid to similarly situated executives of our peer companies. To
that end, the Compensation Committee believes executive compensation packages
we provide to our executive officers should include both cash and stock-based
compensation that rewards individual and corporate performance as measured
against established goals.
Role of Executive Officers in Compensation
Decisions
The Compensation Committee makes all compensation decisions for our
executive officers. Regarding the establishment of base salary levels payable
throughout 2007 and cash and equity incentives in respect of 2007 performance,
our Chief Executive Officer, S. James Miller, provided input and arranged
for the Compensation Committee to have access to our records and personnel for
purposes of its deliberations. Our Sr. Vice President Administration, Chief
Financial Officer, Secretary and Treasurer, Wayne G. Wetherell, also provided
input to the Compensation Committee to this end. With respect to compensation
levels of executive officers in 2008 with respect to 2007 performance, S. James
Miller reviewed the performance of each executive officer (other than his own,
which was reviewed by the Compensation Committee) and provided such input and
observations to the Compensation Committee. The conclusions reached and
recommendations based on these reviews, including with respect to salary
adjustments for 2008 for 2007 performance, were presented to the Compensation
Committee. The Compensation Committee can exercise its discretion in modifying
any recommended adjustments or awards to executive officers.
Setting Executive Compensation
Based on the foregoing objectives, the Compensation Committee has structured
our annual and long-term incentive-based cash and non-cash executive
compensation in an effort to motivate our executive officers to achieve the
business goals set by us and reward them for achieving such goals. In
furtherance of these objectives, in 2005 the Compensation Committee engaged
Compensia, an outside consulting firm, to assess and evaluate its total
compensation program for our executive officers and provide the Compensation
Committee with relevant market data and recommendations to consider when
developing compensation packages for the executive officers. Compensia provided
market data for peer-group companies such as ActiveCard, Authentidate Holding
Corp., CAM Solutions, Cogent, Connetix, CSP, Identix, IPIX, Lasercard, Loudeye,
Merge Technologies, Raining Data, SAFLINK, Smith Micro Software, Vasco Data,
Viewpoint and Viisage Technology.
Management plays a significant role with respect to the process of
setting compensation for executive officers, other than the Chairman and Chief
Executive Officer, by:
·
providing
performance evaluations;
·
developing and
recommending targets for performance and objectives; and
·
recommending
salary levels, incentives and equity awards.
Management provides the Compensation Committee and the Board of
Directors with material for each Compensation Committee meeting and the
Chairman and Chief Executive Officer, at the Compensation Committees request
to provide:
14
·
background
relative to strategic objectives;
·
discussion relative
to performance evaluations of the executive officers; and
·
compensation
recommendations as to executive officers (other than himself).
In making compensation decisions, the Compensation Committee compared
each element of the executives total compensation package with the research
and recommendations of Compensia.
The Compensation Committee believes that we compete with many companies
for top executive-level talent. Accordingly, the Compensation Committee strives
to implement compensation packages for our executive officers that are
competitive with total compensation paid to similarly situated executives.
Variations to this objective may occur as dictated by the experience level of
the individual and market factors. A significant percentage of total
compensation for our executive officers is allocated to incentives as a result
of the philosophy mentioned above. Nevertheless, strictly speaking, there is no
pre-established policy or target for the allocation between either cash and
non-cash or short-term and long-term incentive compensation. Income from such
incentive compensation is realized as a result of our performance the
individuals performance, depending on the type of award, compared to
established goals.
2007 Executive Compensation Components
For the fiscal year ended December 31, 2007, the principal
components of compensation for executive officers were:
·
base salary; and
·
long-term equity
incentive compensation in the form of stock options and restricted stock.
Base Salary.
We provide our executive officers and
other employees with a base salary to compensate them for services rendered
during the fiscal year. Base salary ranges for executive officers are
determined for each executive based on his or her position and responsibility by
using market data.
During its review of base salaries for executive officers for 2007, the
Compensation Committee primarily considered:
·
market data
provided by our outside consultant and data published by independent
third-party sources;
·
internal review
of the executives compensation, both individually and relative to other
executive officers; and
·
individual
performance and responsibility of the executive.
Salary levels for named executives not under employment contracts are
considered annually as part of our performance review process as well as upon a
promotion or other material change in job responsibility. Merit-based increases
to salaries of executive officers are determined upon assessment of the
individuals performance and responsibility.
Long-Term Equity Incentive
Compensation.
Our long-term incentive compensation
program is designed to recognize the executives scope of responsibilities,
reward demonstrated performance and leadership, motivate future superior
performance, align the interests of the executives with our stockholders and
retain the executives through the term of the awards. When making equity-award
decisions, the Compensation Committee considers market data, the grant size,
the forms of long-term equity compensation available to it under existing plans
and the status of awards granted in previous years. The amount of equity
incentive compensation granted in 2007 was based upon our strategic,
operational and financial performance overall and reflects the executives
expected contributions to our future success. Existing ownership levels are not
a factor in award determination, as the Compensation Committee does not want to
discourage executives from holding significant amounts of our stock.
Effective January 1, 2006, we adopted the requirements of
Statement of Financial Accounting Standards No. 123R,
Share-Based
Payment
(SFAS 123R), which requires companies to estimate the
fair value of share-based payment option awards on the date of grant using an
option-pricing model. The value of the awards that are ultimately expected to
vest are recognized as compensation expense over the requisite service periods
using the straight-line method. When determining the appropriate form of
incentive award (for example whether stock options, restricted stock,
restricted stock units, or stock appreciation rights, each of which our Amended
and Restated 1999 Stock Award Plan (the 1999 Plan) permits, should be used)
the Compensation Committees goal is to weigh the cost of these grants with
their potential benefits as a compensation tool.
Retirement and Other Benefits.
All
of our employees in the United States are eligible to participate in the 401(k) Savings
Plan (the Savings Plan). The Savings Plan is a tax-qualified retirement
savings plan pursuant to which all
15
U.S. based employees, including the named executive officers, are able
to contribute. The Savings Plan provides for annual contributions by us of 50%
of employee contributions not to exceed 8% of employee compensation.
Participants may contribute up to 100% of the annual contribution
limitations determined by the Internal Revenue Service. Employees are fully
vested in their share of our contributions after the completion of five years
of service.
Tax and Accounting
Implications.
As
part of its role, the Compensation Committee reviews and considers the
deductibility of executive compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code), which provides that we
may not deduct compensation of more than $1,000,000 that is paid to certain
individuals. To qualify for deductibility under Section 162(m),
compensation in excess of $1,000,000 per year paid to the named executive
officers at the end of such fiscal year generally must be performance-based
compensation as determined under Section 162(m). The Compensation
Committee generally intends to comply with the requirements for full
deductibility of executive compensation under Section 162(m). However, the
Compensation Committee will balance the costs and burdens involved in such
compliance against the value to us and our stockholders of the tax benefits
that we would obtain as a result, and may in certain instances pay compensation
that is not fully deductible if, in its determination, such costs and burdens
outweigh such benefits.
Summary Compensation Table
The following table sets forth information regarding the compensation
of our Chief Executive Officer, our Chief Financial Officer, the person who
was, at December 31, 2007, one of our most highly compensated executive
officers during 2007, and two of our significant employees who were not serving
as executive officers at December 31, 2007, collectively referred to as
our named executive officers.
16
|
|
|
|
|
|
Stock
|
|
Option
|
|
All Other
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Awards
|
|
Awards(1)(2)
|
|
Compensation
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. James Miller, Jr.
Chairman of the Board
and Chief Executive
Officer
|
|
2007
|
|
$
|
314,791
|
|
$
|
126,119
|
(3)
|
$
|
52,325
|
|
$
|
12,244
|
(4)
|
$
|
505,479
|
|
|
|
2006
|
|
299,230
|
|
167,540
|
(3)
|
168,648
|
(5)
|
12,015
|
(6)
|
647,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne G. Wetherell
Senior Vice President Administration, Chief
Financial Officer,
Secretary, and
Treasurer
|
|
2007
|
|
186,631
|
|
67,136
|
(7)
|
35,588
|
|
10,019
|
(8)
|
299,374
|
|
|
|
2006
|
|
177,022
|
|
75,702
|
(7)
|
91,079
|
(5)
|
|
|
343,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Willis(9)
Executive Vice
President Sales
|
|
2007
|
|
225,000
|
|
|
|
58,585
|
|
|
|
283,585
|
|
|
|
2006
|
|
229,917
|
|
|
|
100,780
|
(5)
|
|
|
330,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles AuBuchon
Vice President Business Development
|
|
2007
|
|
155,581
|
|
|
|
62,439
|
|
|
|
218,020
|
|
|
|
2006
|
|
152,600
|
|
|
|
117,557
|
(5)
|
|
|
270,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Harding
Vice President and
Chief Technical Officer
|
|
2007
|
|
182,132
|
|
|
|
48,251
|
|
|
|
230,383
|
|
|
|
2006
|
|
138,107
|
|
|
|
36,052
|
(5)
|
|
|
174,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
All
option awards were granted under the 1999 Plan.
|
|
|
|
(2)
|
|
The
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2007, in
accordance with the provisions of SFAS 123R and thus may include amounts
from awards granted prior to 2007. We have elected to use the Black-Scholes
option-pricing model, which incorporates various assumptions including volatility,
expected life, and interest rates. We are required to make various
assumptions in the application of the Black-Scholes option pricing model and
have determined that the best measure of expected volatility is based on the
historical weekly volatility of our common stock. Historical volatility
factors utilized in our Black-Scholes computations range from 82.1% to 98.5%.
We have elected to estimate the expected life of an award based upon the SEC
approved simplified method noted under the provisions of Staff Accounting
Bulletin No. 107. Under this formula, the expected term is equal to:
((weighted-average vesting term + original contractual term)/2). The expected
term used by us as computed by this method ranges from 3.5 years to 6.1
years. The interest rate used is the risk free interest rate and is based
upon U.S. Treasury rates appropriate for the expected term. Interest rates
used in our Black-Scholes calculations range from 2.7% to 4.6%. Dividend
yield is zero as we do not expect to declare any dividends on our common
shares in the foreseeable future. In addition to the key assumptions used in
the Black-Scholes model, the estimated forfeiture rate at the time of
valuation is a critical assumption. We have estimated an annualized
forfeiture rate of 5.7% for corporate officers, 2.4% for members of the Board
of Directors and 25% for all other employees. We review the expected
forfeiture rate annually to determine if that percent is still reasonable
based on historical experience.
|
|
|
|
(3)
|
|
Represents
the quarterly vesting of 124,162 restricted shares granted on March 30,
2004, and the vesting of 109,700 restricted shares granted on
September 27, 2005 for Mr. Miller. The restricted shares granted in
September 2005 vest one-third after one year with the remainder vesting
ratably on a quarterly basis over two years ending September 27, 2008.
|
|
|
|
(4)
|
|
Consists
of $9,000 in 401(K) matching contributions, $1,244 in life insurance
premiums and $2,000 in club membership.
|
17
(5)
|
|
The
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2006, in
accordance with the provisions of SFAS 123R and thus may include amounts
from awards granted prior to 2006. Assumptions used in the calculation of
these amounts are included in Notes to the Consolidated Financial Statements
for the fiscal year ended December 31, 2006, included in our annual
report on Form 10-K filed with the SEC on April 17, 2007.
|
|
|
|
(6)
|
|
Consists
of $8,800 in 401(K) matching contributions, $1,215 in life insurance
premiums and $2,000 in club membership.
|
|
|
|
(7)
|
|
Represents
the quarterly vesting of 80,281 restricted shares granted on March 30,
2004 and the vesting of 52,600 restricted shares granted on
September 27, 2005. The restricted shares granted in September 2005
vest one-third after one year with the remainder vesting ratably on a
quarterly basis over two years ending September 27, 2008.
|
|
|
|
(8)
|
|
Consists
of $7,221 in 401(K) matching contributions, $798 in life insurance
premiums and $2,000 in club membership.
|
|
|
|
(9)
|
|
Mr. Willis
resigned from the Company on March 31, 2008.
|
2007 Grants of Plan-Based Awards
The
following table sets forth certain information with respect to each grant of an
award made to a named executive officer in 2007 under our plans.
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Exercise or
|
|
|
|
|
|
|
|
Awards:
|
|
Base
|
|
Grant Date
|
|
|
|
|
|
Number of
|
|
Price of
|
|
Fair Value
|
|
|
|
|
|
Securities
|
|
Option
|
|
of Stock
|
|
|
|
Grant
|
|
Underlying
|
|
Awards
|
|
and Option
|
|
Name
|
|
Date
|
|
Options(1)
|
|
($/Sh)(2)
|
|
Awards(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. James Miller, Jr.
|
|
4/3/2007
|
|
18,000
|
|
$
|
2.49
|
|
$
|
37,296
|
|
|
|
|
|
|
|
|
|
|
|
Wayne Wetherell
|
|
4/3/2007
|
|
15,000
|
|
$
|
2.49
|
|
31,080
|
|
|
|
|
|
|
|
|
|
|
|
Charles AuBuchon
|
|
4/3/2007
|
|
10,000
|
|
$
|
2.49
|
|
20,720
|
|
|
|
|
|
|
|
|
|
|
|
William Willis(4)
|
|
4/3/2007
|
|
20,000
|
|
$
|
2.49
|
|
41,440
|
|
|
|
|
|
|
|
|
|
|
|
David Harding
|
|
4/3/2007
|
|
25,000
|
|
$
|
2.49
|
|
51,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The
shares subject to each option vest over a three year period, with 33 1/3% of
the shares subject to each option vesting on each anniversary at the grant
date. The options expire ten years from the date of grant.
(2) The
exercise price is the closing price of our common stock on the date of grant.
(3) The
fair value of our stock options is computed using the Black-Scholes valuation
model.
(4) Mr. Willis
resigned from the Company on March 31, 2008.
Outstanding Equity Awards at Fiscal Year-End
The
following table sets forth information regarding unexercised options, stock
that has not vested and equity incentive awards held by each of the named
executive officers outstanding as of December 31, 2007.
18
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
Units of
|
|
Units of
|
|
|
|
Unearned
|
|
Unearned
|
|
Option
|
|
|
|
Stock That
|
|
Stock That
|
|
|
|
Options:
|
|
Options:
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
|
#
|
|
#
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
|
(#)
|
|
($)
|
|
S. James Miller, Jr.
|
|
75,000
|
|
|
|
$
|
3.00
|
|
9/12/2011
|
|
27,423
|
(7)
|
$
|
41,957
|
|
|
|
25,000
|
|
|
|
$
|
1.97
|
|
5/28/2013
|
|
|
|
|
|
|
|
100,000
|
|
|
|
$
|
2.40
|
|
10/28/2014
|
|
|
|
|
|
|
|
75,001
|
(1)
|
24,999
|
|
$ 2.62
|
|
8/16/2015
|
|
|
|
|
|
|
|
82,277
|
(2)
|
27,423
|
|
$
|
2.36
|
|
9/27/2015
|
|
|
|
|
|
|
|
0
|
(3)
|
18,000
|
|
$ 2.49
|
|
9/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wayne G. Wetherell
|
|
25,000
|
|
|
|
$
|
3.00
|
|
9/12/2011
|
|
13,149
|
(7)
|
$
|
20,118
|
|
|
|
10,000
|
|
|
|
$
|
1.97
|
|
5/28/2013
|
|
|
|
|
|
|
|
50,000
|
|
|
|
$ 2.40
|
|
10/28/2014
|
|
|
|
|
|
|
|
45,000
|
(1)
|
15,000
|
|
$ 2.62
|
|
8/16/2015
|
|
|
|
|
|
|
|
39,451
|
(2)
|
13,149
|
|
$
|
2.36
|
|
9/27/2015
|
|
|
|
|
|
|
|
0
|
(3)
|
15,000
|
|
$
|
2.36
|
|
9/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Willis(4)
|
|
67,500
|
|
|
|
$
|
2.65
|
|
10/1/2013
|
|
|
|
|
|
|
|
50,000
|
|
|
|
$
|
2.30
|
|
10/15/2014
|
|
|
|
|
|
|
|
45,000
|
(1)
|
15,000
|
|
$ 2.62
|
|
8/16/2015
|
|
|
|
|
|
|
|
35,000
|
(4)
|
25,000
|
|
$
|
1.99
|
|
1/13/2016
|
|
|
|
|
|
|
|
0
|
(3)
|
20,000
|
|
$
|
2.36
|
|
9/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles AuBuchon
|
|
10,000
|
|
|
|
$
|
3.00
|
|
12/31/2013
|
|
|
|
|
|
|
|
40,000
|
|
|
|
$
|
2.30
|
|
10/15/2014
|
|
|
|
|
|
|
|
20,000
|
(5)
|
10,000
|
|
$ 3.19
|
|
4/1/2015
|
|
|
|
|
|
|
|
45,000
|
(1)
|
15,000
|
|
$ 2.62
|
|
8/16/2015
|
|
|
|
|
|
|
|
35,000
|
(4)
|
25,000
|
|
$
|
1.99
|
|
1/13/2016
|
|
|
|
|
|
|
|
0
|
(3)
|
10,000
|
|
$
|
2.36
|
|
9/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Harding
|
|
58,375
|
(6)
|
41,625
|
|
$
|
1.65
|
|
1/31/2016
|
|
|
|
|
|
|
|
0
|
(3)
|
25,000
|
|
$ 2.36
|
|
9/12/2017
|
|
|
|
|
|
(1)
|
|
These
options vest over three years with one third vesting 8/16/2006 and the
remainder vesting in equal quarterly installments thereafter.
|
(2)
|
|
These
options vest over three years with one third vesting 9/27/2006 and the
remainder vesting in equal quarterly installments thereafter.
|
(3)
|
|
These
options vest over three years with one third vesting 4/2/2008 and the
remainder vesting in equal quarterly installments thereafter.
|
(4)
|
|
Mr. Willis
resigned from the Company on March 31, 2008.
|
(5)
|
|
These
options vest over three years with one third vesting 1/13/2007 and the
remainder vesting in equal quarterly installments thereafter.
|
(6)
|
|
These
options vest over three years with one third vesting on each of 4/1/2006,
4/1/2007 and 4/1/2008.
|
(7)
|
|
These
options vest over three years with one third vesting 1/31/2007 and the
remainder vesting in equal quarterly installments thereafter.
|
(8)
|
|
These
stock grants vest over three years with one third vesting 9/27/2006 and the
remainder vesting in equal quarterly installments thereafter.
|
19
Options Exercises and Stock Vested
The
following table sets forth information regarding exercises of stock options and
vesting of stock for each of the named executive officers during 2007.
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Shares
|
|
Value
|
|
|
|
Acquired on
|
|
Realized
|
|
Name
|
|
Vesting
|
|
on Vesting
|
|
|
|
|
|
|
|
S. James Miller, Jr.(1)
|
|
46,909
|
|
$
|
126,119
|
|
|
|
|
|
|
|
Wayne G. Wetherell(2)
|
|
24,223
|
|
67,136
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents
the quarterly vesting of 124,162 restricted shares granted on March 30,
2004 and the vesting of 109,700 restricted shares granted on
September 27, 2005. The restricted shares granted in September 2005
vest one-third after one year with the remainder vesting ratably on a
quarterly basis over two years ending September 27, 2008.
|
|
|
|
(2)
|
|
Represents
the quarterly vesting of 80,281 restricted shares granted on March 30,
2004 and the vesting of 52,600 restricted shares granted on
September 27, 2005. The restricted shares granted in September 2005
vest one-third after one year with the remainder vesting ratably on a
quarterly basis over two years ending September 27, 2008.
|
Employment Contracts
Employment Agreement with S. James Miller, Jr.
On October 1, 2005,
we entered into an employment agreement with Mr. Miller pursuant to which Mr. Miller
will serve as President and Chief Executive Officer. This agreement is for a
three-year term ending September 30, 2008. This agreement provides for
annual base compensation in the amount of $291,048, which amount will be
increased based on cost-of-living increases. Under this agreement, we will
reimburse Mr. Miller for reasonable expenses incurred in connection with
our business. Under the terms of the agreement, Mr. Miller will be entitled
to the following severance benefits if we terminate his employment without
cause or in the event of an involuntary termination: (i) a lump sum cash
payment equal to twenty-four months base salary; (ii) continuation of Mr. Millers
fringe benefits and medical insurance for a period of three years; and (iii) immediate
vesting of 50% of Mr. Millers outstanding stock options and restricted
stock awards. In the event that Mr. Millers employment is terminated
within six months prior to or thirteen months following a change of control
(defined below), Mr. Miller is entitled to the severance benefits
described above, except that 100% of Mr. Millers outstanding stock
options and restricted stock awards will immediately vest.
Employment Agreement with Wayne Wetherell.
On October 1,
2005, we entered into an amended employment agreement with Mr. Wetherell
pursuant to which Mr. Wetherell will serve as our Chief Financial Officer.
This agreement is for a three-year term ending September 30, 2008. This
agreement provides for annual base compensation in the amount of $174,100,
which amount will be increased based on cost-of-living increases and may also
be increased based on performance reviews. Under this agreement, we will
reimburse Mr. Wetherell for reasonable expenses incurred in connection
with our business. Under the terms of the agreement, Mr. Wetherell will be
entitled to the following severance benefits if we terminate his employment
without cause or in the event of an involuntary termination: (i) a lump sum
cash payment equal to twelve months; (ii) continuation of Mr. Wetherells
fringe benefits and medical insurance for a period of three years; (iii) immediate
vesting of 50% of Mr. Wetherells outstanding stock options and restricted
stock awards. In the event that Mr. Wetherells employment is terminated
within six months prior to or thirteen months following a change of control
(defined below), Mr. Wetherell is entitled to the severance benefits
described above, except that 100% of Mr. Wetherells outstanding stock
options and restricted stock awards will immediately vest.
Change of Control and Severance Benefits Agreement with Charles
AuBuchon.
On October 31, 2005, we entered into a Change
of Control and Severance Benefits Agreement with Mr. Charles AuBuchon, our
Vice President of Sales. This agreement has a three-year term, commencing
on October 31, 2005. Subject to the conditions and other limitations set
forth therein, Mr. AuBuchon will be entitled to the following severance
benefits if we terminate his employment without cause prior to the closing of
any change of control transaction: (i) a lump sum cash payment equal to
six months of base salary; and (ii) continuation of Mr. AuBuchons
health insurance benefits until the earlier of six (6) months following
the date of termination, the date on which he is no longer entitled to
continuation coverage pursuant to COBRA or the date that he
20
obtains
comparable health insurance coverage. In the event that Mr. AuBuchons
employment is terminated within the twelve months following a change of
control, he is entitled to the severance benefits described above, plus his
stock options will immediately vest and become exercisable. Mr. AuBuchons
eligibility to receive severance payments or other benefits upon his
termination is conditioned upon him executing a general release of liability.
Change of Control and Severance Benefits Agreement with David Harding.
On May 21,
2007, we entered into a Change of Control and Severance Benefits Agreement with
Mr. David Harding, our Vice President and Chief Technical
Officer. This agreement has a three-year term, commencing on May 21,
2007. Subject to the conditions and other limitations set forth therein, Mr. Harding
will be entitled to the following severance benefits if we terminate his
employment without cause prior to the closing of any change of control
transaction: (i) a lump sum cash payment equal to six months of base
salary; and (ii) continuation of Mr. Hardings health insurance
benefits until the earlier of six (6) months following the date of
termination, the date on which he is no longer entitled to continuation
coverage pursuant to COBRA or the date that he obtains comparable health
insurance coverage. In the event that Mr. Hardings employment is
terminated within the twelve months following a change of control, he is
entitled to the severance benefits described above, plus his stock options will
immediately vest and become exercisable. Mr. Hardings eligibility to
receive severance payments or other benefits upon his termination is
conditioned upon him executing a general release of liability.
For
purposes of each of the above-referenced agreements, termination for cause
generally means the executives commission of an act of fraud or similar
conduct which is intended to result in substantial personal enrichment of the
executive, conviction or plea of
nolo
contendere
to a felony, gross negligence or breach of fiduciary duty
that results in material injury to us, material breach of the executives
proprietary information agreement that is materially injurious to us, willful
and material failure to perform his duties as an officer or employee of ours or
material breach of his employment agreement and the failure to cure such breach
in a specified period of time or a violation of a material policy of ours that
is materially injurious to us. A change in control as used in these
agreements generally means the occurrence of any of the following events: (i) the
acquisition by any person or group of 50% or more of our outstanding voting
stock, (ii) the consummation of a merger, consolidation, reorganization,
or similar transaction other than a transaction: (1) in which
substantially all of the holders of our voting stock hold or receive directly
or indirectly 50% or more of the voting stock of the resulting entity or a
parent company thereof, in substantially the same proportions as their
ownership of the Company immediately prior to the transaction; or (2) in
which the holders of our capital stock immediately before such transaction
will, immediately after such transaction, hold as a group on a fully diluted
basis the ability to elect at least a majority of the directors of the
surviving corporation (or a parent company); (iii) there is consummated a
sale, lease, exclusive license, or other disposition of all or substantially
all of the consolidated assets of us and our Subsidiaries, other than a sale,
lease, license, or other disposition of all or substantially all of the
consolidated assets of us and our Subsidiaries to an entity, 50% or more of the
combined voting power of the voting securities of which are owned by our
stockholders in substantially the same proportions as their ownership of the
Company immediately prior to such sale, lease, license, or other disposition;
or (iv) individuals who, on the date the applicable agreement was adopted
by the Board, are Directors (the Incumbent Board) cease for any reason to
constitute at least a majority of the Directors;
provided
,
however
,
that if the appointment or election (or nomination for election) of any new
Director was approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member shall, for purposes of
the applicable agreement, be considered as a member of the Incumbent Board.
Potential
Payments Upon Termination or Change in Control
The
following tables summarize the potential payments to certain of our named
executive officers upon a termination of employment or a change in control. The
amounts shown in the tables are only estimates and apply the assumption that
employment terminated on December 31, 2007. The calculations of payments
related to equity reflect the closing price of our common stock on December 31,
2007 on the AMEX. The amounts set forth below do not include accrued
obligations such as salary and other amounts payable with respect to days
previously worked, accrued vacation time and other accrued amounts that were
fully earned and vested as of December 31, 2007, and would be payable in
connection with the executives employment.
21
S. James Miller, Jr.
The following
table describes the potential payments upon termination or a change in control
for Mr. Miller, our Chief Executive Officer.
|
|
|
|
Involuntary
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
|
|
Not for Cause
|
|
Change in
|
|
Upon Termination(1)
|
|
Termination
|
|
Termination
|
|
Control
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
623,976
|
(2)
|
$
|
623,976
|
(2)
|
Equity
|
|
$
|
|
|
$
|
20,979
|
(3)(4)
|
$
|
41,957
|
(3)(4)
|
Fringe Benefits
|
|
$
|
|
|
$
|
66,469
|
(5)
|
$
|
66,469
|
(5)
|
(1)
|
|
For
purposes of this analysis, we assumed Mr. Millers compensation is based
on his current base salary of $311,988.
|
|
|
|
(2)
|
|
Mr. Millers
cash severance benefit under an involuntary, good reason termination or a
termination due to a change in control is equal to two times annual
compensation.
|
|
|
|
(3)
|
|
Mr. Millers
equity severance benefit under an involuntary or good reason termination is
the immediate vesting of 50% of Mr. Millers outstanding stock options
and restricted stock awards. In the event that Mr. Millers employment
is terminated within six months prior to or thirteen months following a
change in control, Mr. Miller is entitled to the immediate vesting of
100% of Mr. Millers outstanding stock options and restricted stock
awards.
|
|
|
|
(4)
|
|
This
amount was calculated from the unexercised unexercisable stock options and
unvested stock awards held by Mr. Miller on December 31, 2007. The
stock option award amount was calculated by multiplying the number of
securities underlying the unexercised unexercisable options by the difference
between the option price and the price per share of common stock on the date
of termination. The unvested stock award amount was calculated by multiplying
the number of unvested shares of stock by the price per share on the date of
termination.
|
|
|
|
(5)
|
|
Mr. Millers
fringe benefits consist of medical and life insurance for a period of three
years.
|
Wayne G. Wetherell.
The following
table describes the potential payments upon termination or a change in control
for Mr. Wetherell, our Sr. Vice President Administration, Chief Financial
Officer, Secretary and Treasurer.
|
|
|
|
Involuntary
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
|
|
Not for Cause
|
|
Change in
|
|
Upon Termination(1)
|
|
Termination
|
|
Termination
|
|
Control
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
186,660
|
(2)
|
$
|
186,660
|
(2)
|
Equity
|
|
$
|
|
|
10,059
|
(3)(4)
|
20,118
|
(3)(4)
|
Fringe Benefits
|
|
$
|
|
|
$
|
70,517
|
(5)
|
$
|
70,517
|
(5)
|
(1)
|
|
For
purposes of this analysis, we assumed Mr. Wetherells compensation is
based on his current base salary of $186,660.
|
|
|
|
(2)
|
|
Mr. Wetherells
cash severance benefit under an involuntary, good reason termination or a
termination due to a change in control is equal to the amount of his annual
compensation.
|
|
|
|
(3)
|
|
Mr. Wetherells
equity severance benefit under an involuntary or good reason termination is
the immediate vesting of 50% of Mr. Wetherells outstanding stock
options and restricted stock awards. In the event that Mr. Wetherells
employment is terminated within six months prior to or thirteen months following
a change in control, Mr. Wetherell is entitled to the immediate vesting
of 100% of Mr. Wetherells outstanding stock options and restricted
stock awards.
|
|
|
|
(4)
|
|
This
amount was calculated from the unexercised unexercisable stock options and
unvested stock awards held by Mr. Wetherell on December 31, 2007.
The stock option award amount was calculated by multiplying the number of
securities underlying the unexercised unexercisable options by the difference
between the option price and the price
|
22
|
|
per
share of common stock on the date of termination. The unvested stock award
amount was calculated by multiplying the number of unvested shares of stock
by the price per share on the date of termination.
|
|
|
|
(5)
|
|
Mr. Wetherells
fringe benefits consist of medical and life insurance for a period of three
years.
|
Charles AuBuchon.
The following
table describes the potential payments upon termination or a change in control
for Mr. AuBuchon, our Vice President Business Development.
|
|
|
|
Involuntary
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
|
|
Not for Cause
|
|
Change in
|
|
Upon Termination(1)
|
|
Termination
|
|
Termination
|
|
Control
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
77,500
|
(2)
|
$
|
77,500
|
(2)
|
Equity
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Fringe Benefits
|
|
$
|
|
|
$
|
13,868
|
(3)
|
$
|
13,868
|
(3)
|
(1)
|
|
For
purposes of this analysis, we assumed Mr. AuBuchons compensation is
based on his current base salary of $155,000.
|
|
|
|
(2)
|
|
Mr. AuBuchons
cash severance benefit under an involuntary, good reason termination or a
termination due to a change in control is equal to six months of annual
compensation.
|
|
|
|
(3)
|
|
Mr. AuBuchons
fringe benefits consist of medical and life insurance for a period of six
months.
|
David Harding.
The following
table describes the potential payments upon termination or a change in control
for Mr. Harding, our Vice President and Chief Technical Officer.
|
|
|
|
Involuntary
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
|
|
Not for Cause
|
|
Change in
|
|
Upon Termination(1)
|
|
Termination
|
|
Termination
|
|
Control
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
|
|
$
|
92,500
|
(2)
|
$
|
92,500
|
(2)
|
Equity
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Fringe Benefits
|
|
$
|
|
|
$
|
6,495
|
(3)
|
$
|
6
|
(3)
|
(1)
|
|
For
purposes of this analysis, we assumed Mr. Hardings compensation is based
on his current base salary of $185,000.
|
|
|
|
(2)
|
|
Mr. Hardings
cash severance benefit under an involuntary, good reason termination or a
termination due to a change in control is equal to six months of annual
compensation.
|
|
|
|
(3)
|
|
Mr. Hardings
fringe benefits consist of medical and life insurance for a period of six
months.
|
23
DIRECTOR COMPENSATION
Each
of our non-employee directors receives a monthly retainer of $2,000 for serving
on the Board. Board members who also serve on the Audit Committee receive
additional monthly compensation of $458.33 for the Chairman and $208.33 for the
remaining members of the Audit Committee. The members of the Board of Directors
are also eligible for reimbursement for their expenses incurred in attending
Board meetings in accordance with our policies. For the fiscal year ended December 31,
2007, the total amounts paid to non-employee directors as compensation
(excluding reimbursable expenses) was $153,500.
Each
of our non-employee directors are also eligible to receive stock option grants
under the 1999 Plan. Options granted under the 1999 Plan are intended by us not
to qualify as incentive stock options under the Code.
The
term of options granted under the 1999 Plan is 10 years. In the event of a
merger of us with or into another corporation or a consolidation, acquisition
of assets or other change-in-control transaction involving us, an equivalent
option will be substituted by the successor corporation, provided, however,
that we may cancel outstanding options upon consummation of the transaction by
giving at least thirty (30) days notice.
During
the last fiscal year, we granted 30,000 options under the 1999 Plan to our
non-employee directors. The fair market value of the common stock underlying
such options on the date of grant is based on the closing sales price reported
on AMEX for the date of each such grant, as detailed in the following table:
Name (1)
|
|
Option
Awards
(number of
shares)
|
|
Exercise Price
Per Share
|
|
Fair Market Value
on Option Grant
Date (2)
|
|
|
|
|
|
|
|
|
|
John Callan
|
|
5,000
|
|
$
|
2.49
|
|
$
|
2.49
|
|
|
|
|
|
|
|
|
|
Patrick Downs(3)
|
|
5,000
|
|
2.49
|
|
2.49
|
|
|
|
|
|
|
|
|
|
John Holleran
|
|
5,000
|
|
2.49
|
|
2.49
|
|
|
|
|
|
|
|
|
|
David Loesch
|
|
5,000
|
|
2.49
|
|
2.49
|
|
|
|
|
|
|
|
|
|
Guy Steven Hamm
|
|
5,000
|
|
2.49
|
|
2.49
|
|
|
|
|
|
|
|
|
|
David Carey
|
|
5,000
|
|
2.49
|
|
2.49
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
As
of December 31, 2007, no options had been exercised by non-employee
directors under any plans maintained by us.
|
|
|
|
(2)
|
|
The
fair market value of the common stock underlying such options on the date of
grant is based on the closing sales price reported on AMEX for the date of
each such grant.
|
|
|
|
(3)
|
|
Mr. Downs
passed away on March 16, 2008.
|
The
following table sets forth the compensation of our directors for the 2007
fiscal year.
Name and Principal Position
|
|
Fees
Earned or
Paid in
Cash
|
|
Option
Awards(1)(2)(3)
|
|
Total
|
|
|
|
|
|
|
|
|
|
John Callan
|
|
$
|
24,000
|
|
$
|
8,114
|
|
$
|
32,114
|
|
|
|
|
|
|
|
|
|
Patrick Downs
|
|
24,000
|
|
9,620
|
|
33,620
|
|
|
|
|
|
|
|
|
|
John Holleran
|
|
26,500
|
|
8,114
|
|
34,614
|
|
|
|
|
|
|
|
|
|
David Loesch
|
|
26,500
|
|
9,670
|
|
36,170
|
|
|
|
|
|
|
|
|
|
Guy Steven Hamm
|
|
28,500
|
|
5,828
|
|
34,328
|
|
|
|
|
|
|
|
|
|
David Carey
|
|
24,000
|
|
7,589
|
|
31,589
|
|
|
|
|
|
|
|
|
|
|
|
|
24
(1)
|
|
The
grant date per share fair value of options issued to Messrs. Callan,
Downs, Holleran, Loesch, Hamm and Carey in 2007 was $2.07.
|
|
|
|
(2)
|
|
The
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2007, in
accordance with the provisions of SFAS 123R and thus may include amounts
from awards granted prior to 2007. We have elected to use the Black-Scholes
option-pricing model, which incorporates various assumptions including
volatility, expected life, and interest rates. We are required to make
various assumptions in the application of the Black-Scholes option pricing
model and have determined that the best measure of expected volatility is
based on the historical weekly volatility of our common stock. Historical
volatility factors utilized in our Black-Scholes computations range from
82.1% to 98.5%. We have elected to estimate the expected life of an award
based upon the SEC approved simplified method noted under the provisions of
Staff Accounting Bulletin No. 107. Under this formula, the expected term
is equal to: ((weighted-average vesting term + original contractual term)/2).
The expected term used by us as computed by this method ranges from 3.5 years
to 6.1 years. The interest rate used is the risk free interest rate and is
based upon U.S. Treasury rates appropriate for the expected term. Interest
rates used in our Black-Scholes calculations range from 2.7% to 4.6%.
Dividend yield is zero as we do not expect to declare any dividends on our
common shares in the foreseeable future. In addition to the key assumptions
used in the Black-Scholes model, the estimated forfeiture rate at the time of
valuation is a critical assumption. We have estimated an annualized
forfeiture rate of 5.7% for corporate officers, 2.4% for members of the Board
of Directors and 25% for all other employees. We review the expected
forfeiture rate annually to determine if that percent is still reasonable
based on historical experience.
|
|
|
|
(3)
|
|
The
aggregate number of stock option awards outstanding at the end of fiscal 2007
for each director were as follows: John Callan (37,535); Patrick Downs
(41,261); John Holleran (35,261); David Loesch (42,000); Guy Steven Hamm
(22,000); and David Carey (15,000).
|
SECURITIES
AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The
following table sets forth additional information as of December 31, 2007,
with respect to the shares of common stock that may be issued upon the exercise
of options and other rights under our existing equity compensation plans and
arrangements. The information includes the number of shares covered by, and the
weighted average exercise price of, outstanding options and other rights and
the number of shares remaining available for future grants, excluding the
shares to be issued upon exercise of outstanding options and other rights.
Equity Compensation Plan Information
Plan category
|
|
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
|
|
Weighted-
average exercise price of
outstanding options, warrants and
rights
|
|
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
Equity
compensation
plans approved by security holders:
|
|
|
|
|
|
|
|
1994 Employee Stock Option
Plan
|
|
24,250
|
|
$
|
2.15
|
|
|
|
1999 Stock Award Plan amended
and restated as of June 7, 2005
|
|
1,378,495
|
|
$
|
2.19
|
|
1,035,208
|
|
Equity
compensation
plans not
approved by security holders:
|
|
|
|
|
|
|
|
2001 Equity Incentive Plan
|
|
345,654
|
|
$
|
2.89
|
|
|
|
Total
|
|
1,748,399
|
|
$
|
2.33
|
|
1,035,208
|
|
25
Description of Equity Compensation Plans Not Approved by
Security Holders.
2001 Equity Incentive Plan.
On
September 12, 2001, our Board of Directors adopted the 2001 Equity
Incentive Plan (the 2001 Plan). Under the terms of the 2001 Plan, we
may issue stock awards to our employees, directors and consultants, and
such stock awards may be given for non-statutory stock options (options not
intended to qualify as an incentive stock option within the meaning of Section 422
of the Code), stock bonuses, and rights to acquire restricted stock. The number
of options issued and outstanding and the number of options remaining available
for future issuance are shown in the table above.
The
2001 Plan is administered by the Board of Directors or a Committee of the Board
as provided in the 2001 Plan. Options granted under the 2001 Plan shall not be
less than 85% of the market value of our common stock on the date of the grant,
and, in some cases, may not be less than 110% of such fair market value.
The term of options granted under the 2001 Plan as well as their vesting are
determined by the Board and to date, options have been granted with a ten-year
term and vesting over a three-year period. While the Board may suspend or
terminate the 2001 Plan at any time, if not terminated earlier, it will
terminate on the day before its tenth anniversary of the date of adoption. The
Board has determined not to issue any future awards under the 2001 Plan.
RELATED PARTY TRANSACTIONS
Transactions with Related Persons
On
November 14, 2006, we entered into a Securities Purchase Agreement with
certain accredited investors (the Series C Investors) pursuant to which
we issued an aggregate of 2,300 shares of our Series C 8% Convertible
Preferred Stock (the Series C Preferred Stock) and issued to the Series C
Investors warrants to purchase up to an aggregate of 115,000 shares of the
Companys common stock, for aggregate gross proceeds of $2,300,000 (the Series C
Financing).
On
March 9, 2007, we entered into a Securities Purchase Agreement with
certain accredited investors (the Series D Investors) pursuant to which
we issued an aggregate of 1,500 shares of our Series D 8% Convertible
Preferred Stock (the Series D Preferred Stock) and issued to the Series D
Investors warrants to purchase up to an aggregate of 59,207 shares of our
common stock, for aggregate gross proceeds of $1,500,000 (the Series D
Financing).
On
September 25, 2007, we entered into a Securities Purchase Agreement with
certain accredited investors (the Investors) pursuant to which we sold to the
Investors an aggregate of 2,016,666 shares of our common stock, and issued to
the Investors warrants (the September 2007 Investor Warrants) to
purchase up to an aggregate of 1,008,333 shares of our common stock, for
aggregate gross proceeds of approximately $3,000,000 (the September 2007
Private Placement).
On
March 12, 2008, we agreed to reduce the price of the September 2007
Investor Warrants, which initially had an exercise price of $1.67 per share, to
an exercise price of $1.00 per share, in consideration for their immediate
exercise (the Warrant Repricing) by the Investors who participated in the
Warrant Repricing (the Participating Investors). In addition, we also issued to the
Participating Investors new warrants to purchase up to an aggregate of 270,833
shares of our common stock. We received
aggregate gross proceeds of $541,666 from the Warrant Repricing.
Gruber &
McBaine Capital Management, LLC and its affiliates, which include Lagunitas
Partners, LP and Gruber & McBaine International, beneficially own more
than 10% of our issued and outstanding common stock. J. Patterson McBaine, together
with Jon D. Gruber, exercises voting and investment control over the shares
held by Gruber & McBaine Capital Management, LLC, Lagunitas Partners,
LP, and Gruber & McBaine International.
Gruber &
McBaine International purchased 400 shares of Series C Preferred Stock and
warrants to purchase 20,000 shares of common stock in the Series C
Financing; 135 shares of Series D Preferred Stock and warrants to purchase
5,328 shares of common stock in the Series D Financing; and 60,000 shares
of common stock and warrants to purchase 30,000 shares of common stock in the September 2007
Private Placement.
Lagunitas
Partners LP purchased 1,200 shares of Series C Preferred Stock and
warrants to purchase 60,000 shares of common stock in the Series C
Financing; 440 shares of Series D Preferred Stock and warrants to purchase
17,368 shares of
26
common
stock in the Series D Financing; and 240,000 shares of common stock and
warrants to purchase 120,000 shares of common stock in the September 2007
Private Placement.
J.
Patterson McBaine purchased 400 shares of Series C Preferred Stock and
warrants to purchase 20,000 shares of common stock in the Series C
Financing; 100 shares of Series D Preferred Stock and warrants to purchase
3,947 shares of common stock in the Series D Financing; and 50,000 shares
of common stock and warrants to purchase 25,000 shares of common stock in the September 2007
Private Placement.
In
addition to the employment agreements with Messrs. Miller and Wetherell
and the Change of Control and Severance Benefits Agreements with Messrs. AuBuchon
and Harding, we have entered into indemnity agreements with certain officers
and directors that provide, among other things, that we will indemnify such
officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he or she may
be required to pay in actions or proceedings which he or she is or may be made
a party by reason of his or her position as a director, officer or other agent
of ours, and otherwise to the fullest extent permitted under Delaware law and
our Bylaws.
Review,
Approval or Ratification of Transactions with Related Persons
As provided in the
charter of our Audit Committee, it is our policy that we will not enter into
any transactions required to be disclosed under Item 404 of the SECs
Regulation S-K unless the Audit Committee or another independent body of our
Board of Directors first reviews and approves the transactions.
In
addition, pursuant to our Code of Ethical Conduct and Business Practices, all
employees, officers and directors of ours and our subsidiaries are prohibited
from engaging in any relationship or financial interest that is an actual or
potential conflict of interest with us without approval. Employees, officers
and directors are required to provide written disclosure to the Chief Executive
Officer as soon as they have any knowledge of a transaction or proposed
transaction with an outside individual, business or other organization that
would create a conflict of interest or the appearance of one.
DIRECTOR
INDEPENDENCE
Our
Board of Directors has the responsibility for establishing corporate policies
and for our overall performance, although it is not involved in day-to-day
operations. As required under the listing standards of AMEX, a majority of the
members of a listed companys board of directors must qualify as independent,
as affirmatively determined by the Board. Consistent with these considerations,
after review of all relevant transactions or relationships between each
director, or any of his family members, and ImageWare, our senior management
and our independent auditors, our Board of Directors has affirmatively
determined that all of our directors are independent directors within the
meaning of the applicable AMEX
listing
standards, except for Mr. Miller, our Chairman of the Board and Chief
Executive Officer.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The
Compensation Committee of our Board of Directors consisted of Messrs. Callan,
Downs and Holleran during the fiscal year ended December 31, 2007. No
member of the Compensation Committee was at any time during or prior to the
fiscal year ended December 31, 2007, an officer or employee of ImageWare.
No interlocking relationship existed between Mr. Callan, Mr. Downs or
Mr. Holleran and any member of any other companys board of directors,
board of trustees or Compensation Committee during that period.
LEGAL PROCEEDINGS
We are periodically engaged
in litigation in the ordinary course of business and do not believe that any of
such litigation is material to our ongoing operations.
27
MARKET PRICE INFORMATION
Market Information.
Our common
stock trades under the symbol IW on AMEX.
The following
table sets forth the high and low sales prices per share for our common stock
as reported by AMEX for each quarter in 2006 and 2007:
2006 Fiscal Quarters
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
2.540
|
|
$
|
1.350
|
|
Second Quarter
|
|
$
|
2.560
|
|
$
|
1.580
|
|
Third Quarter
|
|
$
|
2.300
|
|
$
|
1.110
|
|
Fourth Quarter
|
|
$
|
2.250
|
|
$
|
1.200
|
|
2007 Fiscal Quarters
|
|
High
|
|
Low
|
|
First Quarter
|
|
$
|
2.810
|
|
$
|
1.450
|
|
Second Quarter
|
|
$
|
2.740
|
|
$
|
1.450
|
|
Third Quarter
|
|
$
|
2.210
|
|
$
|
1.400
|
|
Fourth Quarter
|
|
$
|
2.000
|
|
$
|
1.400
|
|
There is no
public trading market for our preferred stock.
Holders.
As of April 9,
2008, the last reported sale price on AMEX for our common stock was $
1.12 per share. As of March 25,
2008, there were approximately 1,600 holders of record of our common stock.
Dividends.
We have never
declared or paid dividends on our common stock and do not anticipate paying any
cash dividends on our shares of common stock in the foreseeable future. We are
obligated to pay cumulative cash dividends on shares of Series B Preferred
Stock from legally available funds at the annual rate of $0.2125 per share,
payable in two semi-annual installments of $0.10625 each, which cumulative
dividends must be paid prior to payment of any dividend on our common stock.
The holders of our Series C Preferred Stock are entitled to receive
cumulative dividends, at the option of the Company, payable (i) in common
stock upon conversion of the Series C Preferred Stock, or (ii) in
cash after the payment of cash dividends to the holders of our Series B
Preferred Stock at the rate of 8% per annum (as a percentage of stated value
per share). Our Series D Preferred Stock accrues cumulative dividends at
the rate of 8.0% of the stated value per share per annum. At the option of the
Company, the dividend payment may be made in the form of cash, after the
payment of cash dividends to the holders of Series B and Series C
Preferred Stock, or common stock issuable upon conversion of the Series D
Preferred Stock. As of December 31, 2007, we had cumulative undeclared
dividends on the Series B Preferred Stock of approximately $9,000. As of December 31,
2007, we had cumulative undeclared dividends on the Series C Preferred
Stock of approximately $234,000. As of December 31, 2007, we had
cumulative undeclared dividends on the Series D Preferred Stock of
approximately $98,000.
Repurchases.
We did not
repurchase any shares of our common stock during fiscal 2007.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Market risk is
the potential loss arising from adverse changes in market rates and prices,
such as interest rates and foreign currency exchange rates. Changes in foreign
currency exchange rates have an impact on our results of operations. Our
exposure to adverse movements in foreign currency exchange rates is primarily
related to our subsidiaries operating expense, primarily in Canada and Germany,
denominated in the respective local currency. We currently do not enter into
forward exchange contracts to hedge exposures denominated in foreign currencies
and do not use derivative financial instruments for trading or speculative
purposes. The effect of an immediate 10% change in foreign currency exchange
rates should not have a
28
material
effect on our future operating results or cash flows; however, a long term
change in foreign currency rates would likely result in increased technical
support and engineering expenses. The vast majority of our sales are transacted
in U.S. dollars.
THE
SELLING STOCKHOLDERS
The shares of common stock covered by this prospectus
consist of 17,151,664 shares of our common stock that we issued to the selling
stockholders under the terms of certain private placements and debt financings
in several private placements and debt financings that took place between May 2002
and September 2007, all as more fully described below.
The term selling stockholders includes the
stockholders listed in the tables below and their transferees, pledgees, donees
or other successors. The tables below assume that the selling stockholders will
sell all of the shares offered under this prospectus. However, because the
selling stockholders may offer from time to time all or some of their shares
under this prospectus, or in another permitted manner, no assurances can be
given as to the actual number of shares that will be sold by the selling
stockholders or that will be held by the selling stockholders after completion
of the sales. Information about the
selling stockholders may change over time.
The applicable percentages of ownership shown in the
tables below are based on an aggregate of 18,332,788 shares of our common stock
issued and outstanding on March 31, 2008.
2003
Financings
In June 2003, we
completed a convertible debt financing (the June 2003 Financing) with
certain lenders pursuant to which we issued the lenders warrants (the June 2003
Warrants) to purchase up to an aggregate of 1,600,000 shares of our common
stock, par value $0.01 per share (Common Stock). The June 2003 Warrants had an initial
exercise price of $2.11 per share. In
connection with the June 2003 Financing, we entered into a registration
rights agreement with the lenders pursuant to which we agreed to prepare and
file with the SEC a registration statement covering the resale of all of the
Common Stock issuable upon exercise of the June 2003 Warrants.
In November 2003, we
completed a private placement financing pursuant to which we sold to certain
accredited investors (the November 2003 Investors) an aggregate of
4,069,484 shares (the November 2003 Shares) of Common Stock, for
aggregate gross proceeds of $6,999,512, and issued to the November 2003
Investors warrants (the November 2003 Warrants) to purchase up to an
aggregate of 813,897 shares of Common Stock (the November 2003 Financing
and together with the June 2003 Financing, the 2003 Financings). The November 2003 Warrants had an
initial exercise price of $2.58 per share.
In connection with the November 2003 Financing, we entered into a
registration rights agreement with the November 2003 Investors pursuant to
which we agreed to prepare and file with the SEC a registration statement
covering the resale of all of the November 2003 Shares and all of the
shares of Common Stock issuable upon exercise of the November 2003
Warrants.
In connection the November 2003
Financing, we also issued to the placement agents warrants to purchase up to an
aggregate of 406,948 shares of Common Stock, in a form substantially similar to
the November 2003 Warrants. In connection with the November 2003
Financing, AMEX granted our request for an exception to its shareholder
approval requirements. We sent a letter to our shareholders describing these
transactions and the circumstances surrounding the exception. A copy of the
letter was filed with our Current Report on Form 8-K filed with the SEC on
November 17, 2003.
The table below presents
information regarding the selling stockholders in the 2003 Financings and the
shares of Common Stock that they may offer and sell under this prospectus.
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Alfred Abiouness (2)
|
|
87,600
|
|
87,600
|
|
0
|
|
*
|
|
Marian L Acree (3)
|
|
27,600
|
|
27,600
|
|
0
|
|
*
|
|
29
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
Ardmore Blouses, Inc. Retirement Plan, Alan Wolf and Michael
Wolf, Trustees (4)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
William C. Bartholomay (5)
|
|
51,600
|
|
51,600
|
|
0
|
|
*
|
|
Richard Bergum (6)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
IRA FBO Paul Berman (7)
|
|
18,000
|
|
18,000
|
|
0
|
|
*
|
|
Fiserv Securities Inc. A/C/F Hartley Bernstein (8)
|
|
34,800
|
|
34,800
|
|
0
|
|
*
|
|
Joseph Bianco SEP IRA (9)
|
|
18,000
|
|
18,000
|
|
0
|
|
*
|
|
Edwin R. Bindseil (10)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Russel F. Bonasso (11)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Timothy Borne (12)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
Broadway Partners LLC (13)
|
|
24,000
|
|
24,000
|
|
0
|
|
*
|
|
Bru Holding Co. LLC (14)
|
|
207,600
|
|
207,600
|
|
0
|
|
*
|
|
Warren G. Bulman (15)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
Carcap Co. LLC (16)
|
|
108,000
|
|
108,000
|
|
0
|
|
*
|
|
CCJ TR ST Vincent TR SVC Ltd TTEE DTD 1/27/93 (17)
|
|
62,400
|
|
62,400
|
|
0
|
|
*
|
|
Chann-Zai LLC (18)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
M. Robert Ching, Trustee of the M. Robert Ching & Phyllis
Ching Living Trust U/A/D 6/15/95 (19)
|
|
69,600
|
|
69,600
|
|
0
|
|
*
|
|
Marc Cohen (20)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
Corman Foundation, Inc. (21)
|
|
42,000
|
|
42,000
|
|
0
|
|
*
|
|
Scott Crowther, Sr. (22)
|
|
19,200
|
|
19,200
|
|
0
|
|
*
|
|
George R. Dick & JoAnn
L. Dick (23)
|
|
18,000
|
|
18,000
|
|
0
|
|
*
|
|
Donald Ekman (24)
|
|
62,400
|
|
62,400
|
|
0
|
|
*
|
|
Glen Emig (25)
|
|
13,200
|
|
13,200
|
|
0
|
|
*
|
|
Hargreave-Hale Nominees Ltd. (26)
|
|
34,800
|
|
34,800
|
|
0
|
|
*
|
|
Jorge Gardyn and Catherine M. Gardyn JT WROS (27)
|
|
14,400
|
|
14,400
|
|
0
|
|
*
|
|
Gilcy Partners Inc. (28)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
30
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
Bonnie Goldberg & Daniel
Goldberg JTTEN WROS (29)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Stanley Goldberg, Trustee & Lynn G. Intrater, Trustee,
Stanley Goldberg Revocable Trust (30)
|
|
45,360
|
|
45,360
|
|
0
|
|
*
|
|
Marvin Goldstein and Sheryl Goldstein JTTEN WROS (31)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
NOW Electronics Inc. 401(k) P/S/P FBO Aaron Goodridge (32)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
Sean Greene (33)
|
|
24,000
|
|
24,000
|
|
0
|
|
*
|
|
Harvey Greenfield (34)
|
|
27,600
|
|
27,600
|
|
0
|
|
*
|
|
John J. Harte, Trustee (35)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
J.E. Deck, LLC (36)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
JR Squared, LLC (37)
|
|
210,000
|
|
210,000
|
|
0
|
|
*
|
|
James Jacobs (38)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Jaor Inc. (39)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Fiserv Securities Inc A/C/F Joseph S. Kashi CON IRA (40)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Harvey Kohn SEP IRA (41)
|
|
62,400
|
|
62,400
|
|
0
|
|
*
|
|
Steven A. Kohn & Karen J. Kohn, Trustees of the Kohn Family
Revocable Trust (42)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
David Krathen and Fran Krathen JT WROS (43)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
Ronald M. Krinick (44)
|
|
34,800
|
|
34,800
|
|
0
|
|
*
|
|
Little Bear Investments LLC (45)
|
|
20,000
|
|
20,000
|
|
0
|
|
*
|
|
L.W. Marjac LLC (46)
|
|
24,000
|
|
24,000
|
|
0
|
|
*
|
|
Joseph N. Lowe and Beva Lowe JT WROS (47)
|
|
20,400
|
|
20,400
|
|
0
|
|
*
|
|
William J. Mannion (48)
|
|
13,800
|
|
13,800
|
|
0
|
|
*
|
|
Ted Marcucilli and Judy Marcucilli JT WROS (49)
|
|
18,000
|
|
18,000
|
|
0
|
|
*
|
|
John C. McNabney & Joyce L. McNabney JT WROS (50)
|
|
16,080
|
|
16,080
|
|
0
|
|
*
|
|
31
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
Robert J. Molleur (51)
|
|
20,400
|
|
20,400
|
|
0
|
|
*
|
|
Joan Morris (52)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
Gayle Mosenson (53)
|
|
13,800
|
|
13,800
|
|
0
|
|
*
|
|
David M. Muffet (54)
|
|
12,000
|
|
12,000
|
|
0
|
|
*
|
|
Kay Murcer (55)
|
|
4,800
|
|
4,800
|
|
0
|
|
*
|
|
John OMahoney (56)
|
|
24,000
|
|
24,000
|
|
0
|
|
*
|
|
Dennis Pudvah and Emma Pudvah JTTEN (57)
|
|
12,000
|
|
12,000
|
|
0
|
|
*
|
|
Dave Roush (58)
|
|
36,000
|
|
36,000
|
|
0
|
|
*
|
|
Alan Rubin (59)
|
|
69,600
|
|
69,600
|
|
0
|
|
*
|
|
Richard Santulli (60)
|
|
27,600
|
|
27,600
|
|
0
|
|
*
|
|
David Schlotterback, Trustee, David Schlotterback Trust U/A Dtd
4/9/93 (61)
|
|
10,440
|
|
10,440
|
|
0
|
|
*
|
|
Fiserv Securities Inc. A/C/F Joel M. Schoenfeld CON IRA (62)
|
|
18,000
|
|
18,000
|
|
0
|
|
*
|
|
Shadow Capital LLC (63)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
Ronald Shapiro & Susan Shapiro (64)
|
|
6,960
|
|
6,960
|
|
0
|
|
*
|
|
Jerome Silverstein (65)
|
|
20,400
|
|
20,400
|
|
0
|
|
*
|
|
Robert Spira (66)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
George Steller, TTEE NOW Electronics Inc 401(k) P/S/P FBO George
Steller (67)
|
|
13,800
|
|
13,800
|
|
0
|
|
*
|
|
Fiserv Securities Inc. A/C/F Cary W. Sucoff CON IRA (68)
|
|
18,000
|
|
18,000
|
|
0
|
|
*
|
|
Jeffrey Sucoff (69)
|
|
17,400
|
|
17,400
|
|
0
|
|
*
|
|
Fiserv Securities Inc. C/F John R. Swingle (70)
|
|
11,160
|
|
11,160
|
|
0
|
|
*
|
|
Trude Taylor (71)
|
|
34,800
|
|
34,800
|
|
0
|
|
*
|
|
Valkyrie Leasing LLC (72)
|
|
139,200
|
|
139,200
|
|
0
|
|
*
|
|
Vertical Ventures LLC (73)
|
|
120,000
|
|
120,000
|
|
0
|
|
*
|
|
32
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
Donald
White and Joan White JT WROS (74)
|
|
24,000
|
|
24,000
|
|
0
|
|
*
|
|
Bristol
Investment Fund, Ltd. (75)
|
|
174,419
|
|
174,419
|
|
0
|
|
*
|
|
CD
Investment Partners, Ltd. (76)
|
|
174,419
|
|
174,419
|
|
0
|
|
*
|
|
Core
Fund, L.P. (77)
|
|
208,096
|
|
208,096
|
|
0
|
|
*
|
|
Crestview
Capital Fund II, L.P. (78)
|
|
422,257
|
|
345,565
|
|
76,692
|
|
*
|
|
Gruber &
McBaine International (79)
|
|
224,740
|
|
224,740
|
|
0
|
|
*
|
|
J.
Patterson McBaine (80)
|
|
116,532
|
|
116,532
|
|
0
|
|
*
|
|
Jon D. Gruber & Linda W. Gruber (81)
|
|
116,532
|
|
116,532
|
|
0
|
|
*
|
|
Lagunitas
Partners LP (82)
|
|
707,518
|
|
707,518
|
|
0
|
|
*
|
|
Mark
Lamb (83)(84)
|
|
3,377
|
|
3,377
|
|
0
|
|
*
|
|
William
Corbett (83)(85)
|
|
21,621
|
|
21,621
|
|
0
|
|
*
|
|
Gary
Shemano (83)(86)
|
|
89,023
|
|
89,023
|
|
0
|
|
*
|
|
Reed
Freyermuth (83)(87)
|
|
6,225
|
|
6,225
|
|
0
|
|
*
|
|
David
Baker (83)(88)
|
|
2,625
|
|
2,625
|
|
0
|
|
*
|
|
Scott
Cacchione (83)(89)
|
|
3,377
|
|
3,377
|
|
0
|
|
*
|
|
Michael
Jacks (83)(90)
|
|
177,240
|
|
177,240
|
|
0
|
|
*
|
|
Ronit
Sucoff (91)
|
|
134,486
|
|
134,486
|
|
0
|
|
*
|
|
Helen
Kohn (92)
|
|
245,329
|
|
245,329
|
|
0
|
|
*
|
|
Lisa
Sucoff (93)
|
|
24,500
|
|
24,500
|
|
0
|
|
*
|
|
Diana
Anderson (94)
|
|
4,500
|
|
4,500
|
|
0
|
|
*
|
|
Mary
Ellen Spedale (95)
|
|
3,744
|
|
3,744
|
|
0
|
|
*
|
|
Howard
Sterling (96)
|
|
10,174
|
|
10,174
|
|
0
|
|
*
|
|
Loius
Trust (97)
|
|
45,785
|
|
45,785
|
|
0
|
|
*
|
|
33
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
Targhee
(98)
|
|
45,785
|
|
45,785
|
|
0
|
|
*
|
|
Alan
Shapiro & Judy Shapiro Trustees t/v/a/ Judy Shapiro d/t/d 5/15/2001
(99)
|
|
100,000
|
|
100,000
|
|
0
|
|
*
|
|
Ira
Gerald Bassin Trustee g/b/b Ira Bassin Revocable Living Trust u/a/d
07/14/2004 (100)
|
|
100,000
|
|
100,000
|
|
0
|
|
*
|
|
Laurus
Master Fund (101)
|
|
578,313
|
|
578,313
|
|
0
|
|
*
|
|
*
Represents beneficial ownership of less than 1%
(1)
|
|
The
information related to voting and investment control and, if applicable, the
selling stockholders status as an affiliate of a registered broker-dealer,
is based on information provided to the Company by the selling stockholders
as of November 24, 2003.
|
|
|
|
(2)
|
|
Comprised
of 73,000 shares of common stock held directly and 14,600 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(3)
|
|
Comprised
of 23,000 shares of common stock held directly and 4,600 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(4)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(5)
|
|
Comprised
of 43,000 shares of common stock held directly and 8,600 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(6)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(7)
|
|
Comprised
of 15,000 shares of common stock held directly and 3,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(8)
|
|
Comprised
of 29,000 shares of common stock held directly and 5,800 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(9)
|
|
Comprised
of 15,000 shares of common stock held directly and 3,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(10)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(11)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(12)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(13)
|
|
Comprised
of 20,000 shares of common stock held directly and 4,000 shares of common
stock issuable upon exercise of warrants. Jeffrey Cohen, Stephanie Cohen
Rubin, Allyson Cohen Shapiro, Gabrielle Cohen and Jaclyn Cohen have voting
and investment control over these shares.
|
|
|
|
(14)
|
|
Comprised
of 173,000 shares of common stock held directly and 34,600 shares of common
stock issuable upon exercise of warrants. Bruce E. Toll has voting and
investment control over these shares. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
table for the 2006
|
34
|
|
Financings beginning on
page 49 of this prospectus.
|
|
|
|
(15)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(16)
|
|
Comprised
of 90,000 shares of common stock held directly and 18,000 shares of common
stock issuable upon exercise of warrants. Richard P. Carney and Jean M.
Carney have voting and investment control over these shares.
|
|
|
|
(17)
|
|
Comprised
of 52,000 shares of common stock held directly and 10,400 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(18)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants. Dean M. Willard has voting and
investment control over these shares.
|
|
|
|
(19)
|
|
Comprised
of 58,000 shares of common stock held directly and 11,600 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(20)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(21)
|
|
Comprised
of 35,000 shares of common stock held directly and 7,000 shares of common
stock issuable upon exercise of warrants. James F. Corman, Chuck Dettling and
Jane D. Corman have voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the 2006 Financings and
September 2007 Financing beginning on page 49 and 55 of this
prospectus, respectively.
|
|
|
|
(22)
|
|
Comprised
of 16,000 shares of common stock held directly and 3,200 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(23)
|
|
Comprised
of 15,000 shares of common stock held directly and 3,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(24)
|
|
Comprised
of 52,000 shares of common stock held directly and 10,400 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(25)
|
|
Comprised
of 11,000 shares of common stock held directly and 2,200 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(26)
|
|
Comprised
of 29,000 shares of common stock held directly and 5,800 shares of common
stock issuable upon exercise of warrants. Michael Withers has voting and
investment control over these shares.
|
|
|
|
(27)
|
|
Comprised
of 12,000 shares of common stock held directly and 2,400 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(28)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants. Aaron Cohen has voting and
investment control over these shares.
|
|
|
|
(29)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(30)
|
|
Comprised
of 37,800 shares of common stock held directly and 7,560 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(31)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(32)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(33)
|
|
Comprised
of 20,000 shares of common stock held directly and 4,000 shares of common
stock issuable upon exercise of warrants. The selling stockholder is also the
beneficial owner of the securities set forth under his name in the selling
stockholder tables for the 2006 Financings and September 2007 Financing
beginning on page 49 and 55 of this prospectus, respectively.
|
|
|
|
(34)
|
|
Comprised
of 23,000 shares of common stock held directly and 4,600 shares of common
stock issuable upon exercise of warrants.
|
35
(35)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(36)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common stock
issuable upon exercise of warrants. Philip Collins has voting and investment
control over these shares.
|
|
|
|
(37)
|
|
Comprised
of 175,000 shares of common stock held directly and 35,000 shares of common
stock issuable upon exercise of warrants. Jeffrey Markowitz and Richard
Friedman have voting and investment control over these shares.
|
|
|
|
(38)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(39)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants. Jim Jacobs and David Orlinsky have
voting and investment control over these shares.
|
|
|
|
(40)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(41)
|
|
Comprised
of 52,000 shares of common stock held directly and 10,400 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(42)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(43)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(44)
|
|
Comprised
of 29,000 shares of common stock held directly and 5,800 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(45)
|
|
Comprised
of 20,000 shares of common stock issuable upon exercise of warrants. Based on
information provided to the Company on March 18, 2008. Zachary Prensky
and Jeffrey Mann have voting and investment control over these shares. In
connection with the November 2003 Financing, the selling stockholder
purchased 100,000 shares of common stock and such shares were resold, prior
to the date of this prospectus, pursuant to that certain Form SB-2
Registration Statement (Reg. No. 333-111842) filed with the SEC on
January 12, 2004, as amended. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
tables for the July 2005 Financing, 2006 Financings, and
September 2007 Financing beginning on page 44, 49, and 55 of this
prospectus, respectively.
|
|
|
|
(46)
|
|
Comprised
of 20,000 shares of common stock held directly and 4,000 shares of common
stock issuable upon exercise of warrants. Alan Zunamon has voting and
investment control over these shares.
|
|
|
|
(47)
|
|
Comprised
of 17,000 shares of common stock held directly and 3,400 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(48)
|
|
Comprised of 11,500 shares
of common stock held directly and 2,300 shares of common stock issuable upon
exercise of warrants.
|
|
|
|
(49)
|
|
Comprised
of 15,000 shares of common stock held directly and 3,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(50)
|
|
Comprised
of 13,400 shares of common stock held directly and 2,680 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(51)
|
|
Comprised
of 17,000 shares of common stock held directly and 3,400 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(52)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(53)
|
|
Comprised
of 11,500 shares of common stock held directly and 2,300 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(54)
|
|
Comprised
of 10,000 shares of common stock held directly and 2,000 shares of common
stock issuable upon exercise of warrants.
|
36
(55)
|
|
Comprised
of 4,000 shares of common stock held directly and 800 shares of common stock
issuable upon exercise of warrants.
|
|
|
|
(56)
|
|
Comprised
of 20,000 shares of common stock held directly and 4,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(57)
|
|
Comprised
of 10,000 shares of common stock held directly and 2,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(58)
|
|
Comprised
of 30,000 shares of common stock held directly and 6,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(59)
|
|
Comprised
of 58,000 shares of common stock held directly and 11,600 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(60)
|
|
Comprised
of 23,000 shares of common stock held directly and 4,600 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(61)
|
|
Comprised
of 8,700 shares of common stock held directly and 1,740 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(62)
|
|
Comprised
of 15,000 shares of common stock held directly and 3,000 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(63)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants. B. Kent Garlinghouse has voting and
investment control over these shares.
|
|
|
|
(64)
|
|
Comprised
of 5,800 shares of common stock held directly and 1,160 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(65)
|
|
Comprised of 17,000 shares
of common stock held directly and 3,400 shares of common stock issuable upon
exercise of warrants.
|
|
|
|
(66)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(67)
|
|
Comprised
of 11,500 shares of common stock held directly and 2,300 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(68)
|
|
Comprised
of 15,000 shares of common stock held directly and 3,000 shares of common
stock issuable upon exercise of warrants. Fiserv Securities Inc. A/C/F
Cary W. Sucoff CON IRA is or may be an affiliate of a registered
broker-dealer. We have been informed by Fiserv Securities Inc. A/C/F
Cary W. Sucoff CON IRA that it acquired the securities offered by this
prospectus for its own account in the ordinary course of business, and that,
at the time it acquired such securities, it had no agreement or
understanding, direct or indirect, with any person to distribute such
securities.
|
|
|
|
(69)
|
|
Comprised
of 14,500 shares of common stock held directly and 2,900 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(70)
|
|
Comprised
of 9,300 shares of common stock held directly and 1,860 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(71)
|
|
Comprised
of 29,000 shares of common stock held directly and 5,800 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(72)
|
|
Comprised
of 116,000 shares of common stock held directly and 23,200 shares of common
stock issuable upon exercise of warrants. Charles Simonyi has voting and
investment control over these shares. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
tables for the 2006 Financings and September 2007 Financing beginning on
page 49 and 55 of this prospectus, respectively.
|
|
|
|
(73)
|
|
Comprised
of 100,000 shares of common stock held directly and 20,000 shares of common
stock issuable upon exercise of warrants. Joshua Silverman has voting and
investment control over these shares.
|
|
|
|
(74)
|
|
Comprised
of 20,000 shares of common stock held directly and 4,000 shares of common
stock issuable upon exercise of warrants.
|
37
(75)
|
|
Comprised
of 145,349 shares of common stock held directly and 29,070 shares of common
stock issuable upon exercise of warrants. Paul Kessler has voting and investment
control of the securities held by Bristol Investment Fund, Ltd.
|
|
|
|
(76)
|
|
Comprised
of 145,349 shares of common stock held directly and 29,070 shares of common
stock issuable upon exercise of warrants. CD Capital Management LLC, as the
investment manager of CD Investment Partners, Ltd., and John D.
Ziegelman, president of CD Capital Management LLC, each may be deemed to have
beneficial ownership of the registered shares.
|
|
|
|
(77)
|
|
Comprised
of 145,349 shares of common stock held directly and 62,747 shares of common
stock issuable upon exercise of warrants. Core Fund, L.P. is or may be an
affiliate of a registered broker-dealer. We have been informed by Core Fund,
L.P. that it acquired the securities offered by this prospectus for its own
account in the ordinary course of business, and that, at the time it acquired
such securities, it had no agreement or understanding, direct or indirect,
with any person to distribute such securities. David Baker has voting and
investment control over these shares.
|
|
|
|
(78)
|
|
Comprised of 422,257
shares of common stock issuable upon exercise of warrants. Stewart Flink,
Robert Hoyt & Daniel Warsh have voting and investment control over
these shares. Based on information provided to the Company by the selling
stockholder on March 19, 2008. In connection with the November 2003
Financing, the selling stockholder purchased 784,884 shares of common stock
and such shares were resold, prior to the date of this prospectus, pursuant
to that certain Form SB-2 Registration Statement (Reg.
No. 333-111842) filed with the SEC on January 12, 2004, as amended.
|
|
|
|
(79)
|
|
Comprised
of 156,977 shares of common stock held directly and 67,763 shares of common
stock issuable upon exercise of warrants. Gruber & McBaine Capital
Management is the financial advisor for Gruber & McBaine
International and has full voting and dispositive power over investments. Jon
D. Gruber and J. Patterson McBaine are managers of Gruber & McBaine
Capital Management and oversee investment activity. The selling stockholder is also the
beneficial owner of the securities set forth under its name in the selling
stockholder tables for the July 2005 Financing, 2006 Financings,
March 2007 Financing, and September 2007 Financing beginning on
page 44, 49, 53, and 55 of this prospectus, respectively.
|
|
|
|
(80)
|
|
Comprised
of 81,395 shares of common stock held directly and 35,137 shares of common
stock issuable upon exercise of warrants. The selling stockholder is also the
beneficial owner of the securities set forth under his name in the selling
stockholder tables for the July 2005 Financing, 2006 Financings,
March 2007 Financing, and September 2007 Financing beginning on
page 44, 49, 53, and 55 of this prospectus, respectively.
|
|
|
|
(81)
|
|
Comprised
of 81,395 shares of common stock held directly and 35,137 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(82)
|
|
Comprised
of 494,186 shares of common stock held directly and 213,332 shares of common
stock issuable upon exercise of warrants. Gruber & McBaine Capital
Management is the financial advisor for Lagunitas Partners LP and has full
voting and dispositive power over investments. Jon D. Gruber and J. Patterson
McBaine are managers of Gruber & McBaine Capital Management and
oversee investment activity. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
tables for the July 2005 Financing, 2006 Financings, March 2007
Financing, and September 2007 Financing beginning on page 44, 49,
53, and 55 of this prospectus, respectively.
|
|
|
|
(83)
|
|
The
selling security holder is or may be an affiliate of a registered
broker-dealer. We have been informed by each selling security holder that
such selling security holder acquired the securities offered by this prospectus
for its own account in the ordinary course of business, and that, at the time
it acquired the securities, it had no agreement or understanding, direct or
indirect, with any person to distribute such securities.
|
|
|
|
(84)
|
|
Comprised
of 3,377 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder table for the January 2004 Financing
beginning on page 39 of this prospectus.
|
|
|
|
(85)
|
|
Comprised
of 21,621 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the January 2004
Financing, July 2005 Financing, 2006 Financings, and September 2007
Financing beginning on page 39, 44, 49, and 55 of this prospectus,
respectively.
|
|
|
|
(86)
|
|
Comprised
of 89,023 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the January 2004
|
38
|
|
Financing and
July 2005 Financing beginning on page 39 and 44 of this prospectus,
respectively.
|
|
|
|
(87)
|
|
Comprised
of 6,225 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder table for the January 2004 Financing
beginning on page 39 of this prospectus.
|
|
|
|
(88)
|
|
Comprised
of 2,625 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder table for the January 2004 Financing
beginning on page 39 of this prospectus.
|
|
|
|
(89)
|
|
Comprised
of 3,377 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under his
name in the selling stockholder table for the January 2004 Financing
beginning on page 39 of this prospectus.
|
|
|
|
(90)
|
|
Comprised
of 177,240 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the January 2004
Financing, July 2005 Financing, 2006 Financings, and September 2007
Financing beginning on page 39, 44, 49, and 55 of this prospectus,
respectively.
|
|
|
|
(91)
|
|
Comprised
of 134,486 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
her name in the selling stockholder table for the July 2005 Financing
beginning on page 44 of this prospectus.
|
|
|
|
(92)
|
|
Comprised
of 245,329 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
her name in the selling stockholder table for the July 2005 Financing
beginning on page 44 of this prospectus.
|
|
|
|
(93)
|
|
Comprised
of 24,500 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(94)
|
|
Comprised
of 4,500 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(95)
|
|
Comprised
of 3,744 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(96)
|
|
Comprised
of 10,174 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(97)
|
|
Comprised
of 45,785 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(98)
|
|
Comprised of 45,785 shares of common stock issuable upon exercise of
warrants. Kim Sands, trustee, has voting and investment control over these
shares.
|
|
|
|
(99)
|
|
Comprised
of 100,000 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(100)
|
|
Comprised
of 100,000 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(101)
|
|
Comprised
of 578,313 shares of common stock issuable upon exercise of warrants. David
Grin has voting and investment control over these shares.
|
January 2004
Financing
In January 2004, we
completed a private placement financing pursuant to which we sold to certain
accredited investors an aggregate of 1,818,332 shares (the January 2004
Shares) of Common Stock, for aggregate gross proceeds of $6,635,936, and issued
such investors warrants (the January 2004 Warrants) to purchase up to an
aggregate of 363,660 shares of Common Stock (the January 2004 Financing). The January 2004 Warrants have a
five-year term and had an initial exercise price of $5.48 per share. In connection with the January 2004
Financing, we entered into a registration rights agreement with the investors,
pursuant to which we agreed to prepare and file with the SEC a registration
statement covering the resale of all of the January 2004 Shares and all of
the shares of Common Stock issuable upon exercise of the January 2004
Warrants.
In connection with the January 2004
Financing, we also issued to the placement agents warrants to purchase up to an
aggregate of 99,108 shares of Common Stock, in a form substantially identical
to the January 2004 Warrants.
39
The following table
presents information regarding the selling stockholders in the January 2004
Financing and the shares of Common Stock that they may offer and sell under
this prospectus.
|
|
NUMBER OF
|
|
|
|
SHARES
|
|
|
|
SHARES
|
|
SHARES OF
|
|
BENEFICIALLY
|
|
|
|
BENEFICIALLY
|
|
COMMON
|
|
OWNED AFTER
|
|
|
|
OWNED BEFORE
|
|
STOCK BEING
|
|
OFFERING
|
|
SELLING STOCKHOLDERS(1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Adams Market Neutral Fund, LP (2)(3)
|
|
52,603
|
|
52,603
|
|
0
|
|
*
|
|
Adams Select Fund, LP (2)(4)
|
|
26,400
|
|
26,400
|
|
0
|
|
*
|
|
Adams Technology Fund, LLLP (2)(5)
|
|
13,200
|
|
13,200
|
|
0
|
|
*
|
|
Alexandra Global Master Fund Ltd. (2)(6)
|
|
330,000
|
|
330,000
|
|
0
|
|
*
|
|
Chilmark Partners LP (2)(7)
|
|
82,191
|
|
82,191
|
|
0
|
|
*
|
|
Choice Long-Short Fund (2)(8)
|
|
49,320
|
|
49,320
|
|
0
|
|
*
|
|
Choice Market Neutral Fund (2)(9)
|
|
36,164
|
|
36,164
|
|
0
|
|
*
|
|
Conestoga Partners, LP (2)(10)
|
|
13,200
|
|
13,200
|
|
0
|
|
*
|
|
Cranshire Capital, L.P. (2)(11)
|
|
82,191
|
|
82,191
|
|
0
|
|
*
|
|
Edward & Edna Elbaor Family LP #2
(2)(12)
|
|
13,200
|
|
13,200
|
|
0
|
|
*
|
|
Elliot Associates, L.P. (13)
|
|
65,752
|
|
65,752
|
|
0
|
|
*
|
|
Elliot International, L.P. (14)
|
|
98,630
|
|
98,630
|
|
0
|
|
*
|
|
Enable Growth Partners (2)(15)
|
|
32,876
|
|
32,876
|
|
0
|
|
*
|
|
Glenbrook Capital L.P. (16)
|
|
32,876
|
|
32,876
|
|
0
|
|
*
|
|
MicroCapital Fund LP (17)
|
|
115,068
|
|
115,068
|
|
0
|
|
*
|
|
MicroCapital Fund Ltd. (18)
|
|
49,314
|
|
49,314
|
|
0
|
|
*
|
|
Omicron Master Trust (19)
|
|
155,705
|
|
155,705
|
|
0
|
|
*
|
|
Palisades Master Fund, LP (20)
|
|
230,136
|
|
230,136
|
|
0
|
|
*
|
|
Porter Partners, L.P. (21)
|
|
60,000
|
|
60,000
|
|
0
|
|
*
|
|
Portside Growth and Opportunity Fund
(2)(22)
|
|
32,876
|
|
32,876
|
|
0
|
|
*
|
|
Potrero Capital Research (23)
|
|
32,876
|
|
32,876
|
|
0
|
|
*
|
|
40
|
|
NUMBER OF
|
|
|
|
SHARES
|
|
|
|
SHARES
|
|
SHARES OF
|
|
BENEFICIALLY
|
|
|
|
BENEFICIALLY
|
|
COMMON
|
|
OWNED AFTER
|
|
|
|
OWNED BEFORE
|
|
STOCK BEING
|
|
OFFERING
|
|
SELLING STOCKHOLDERS(1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
SF Capital Partners Ltd. (2)(24)
|
|
328,756
|
|
328,756
|
|
0
|
|
*
|
|
Spectrum Galaxy Fund Re: CM Market Neutral
Fund (2)(25)
|
|
42,720
|
|
42,720
|
|
0
|
|
*
|
|
TCMP3 Partners (26)
|
|
32,880
|
|
32,880
|
|
0
|
|
*
|
|
Vulcan Properties (27)
|
|
49,314
|
|
49,314
|
|
0
|
|
*
|
|
AS Capital Partners, LLC (28)
|
|
32,876
|
|
32,876
|
|
0
|
|
*
|
|
PAS Stock Purchase Account (29)
|
|
32,876
|
|
32,876
|
|
0
|
|
*
|
|
Lyons Community Property Trust (30)
|
|
49,314
|
|
49,314
|
|
0
|
|
*
|
|
Gary Shemano (31)
|
|
86,644
|
|
86,644
|
|
0
|
|
*
|
|
Michael Jacks (32)
|
|
75,239
|
|
75,239
|
|
0
|
|
*
|
|
William Corbett (33)
|
|
21,621
|
|
21,621
|
|
0
|
|
*
|
|
Reed Freyermuth (34)
|
|
6,225
|
|
6,225
|
|
0
|
|
*
|
|
David Baker (35)
|
|
2,625
|
|
2,625
|
|
0
|
|
*
|
|
Mark Lamb (36)
|
|
3,377
|
|
3,377
|
|
0
|
|
*
|
|
Scott Cacchione (37)
|
|
3,377
|
|
3,377
|
|
0
|
|
*
|
|
Rockmore Investment Master Fund (38)
|
|
8,678
|
|
8,678
|
|
0
|
|
*
|
|
* Represents beneficial ownership of less than 1%
(1)
|
|
The information related to voting and investment control and, if
applicable, the selling stockholders status as an affiliate of a registered
broker-dealer, is based on information provided to the Company by the selling
stockholders as of February 9, 2004.
|
|
|
|
(2)
|
|
The selling stockholder is or may be an affiliate of a registered
broker-dealer. We have been informed by the selling stockholder that such
selling stockholder acquired the securities offered by this prospectus for
its own account in the ordinary course of business, and that, at the time it
acquired the securities, it had no agreement or understanding, direct or
indirect, with any person to distribute such securities.
|
|
|
|
(3)
|
|
Comprised of 43,836 shares of common stock and 8,767 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
|
|
|
(4)
|
|
Comprised of 22,000 shares of common stock and 4,400 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
41
(5)
|
|
Comprised of 11,000 shares of common stock and 2,200 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
|
|
|
(6)
|
|
Comprised of 275,000 shares of common stock and 55,000 shares of
common stock issuable upon exercise of warrants. Alexandra Investment
Management, LLC, a Delaware limited liability company (Alexandra), serves
as investment adviser to Alexandra Global Master Fund Ltd., a British Virgin
Islands company (Master Fund). By reason of such relationship, Alexandra
may be deemed to share dispositive power over the shares of common stock
stated as beneficially owned by Master Fund. Alexandra disclaims beneficial
ownership of such shares of common stock. Messrs. Mikhail A. Filimonov
(Filimonov) and Dimitri Sogoloff (Sogoloff) are managing members of
Alexandra. By reason of such relationships, Filimonov and Sogoloff may be
deemed to share dispositive power over the shares of common stock stated as
beneficially owned by Master Fund. Filimonov and Sogoloff disclaim beneficial
ownership of such shares of common stock.
|
|
|
|
(7)
|
|
Comprised of 68,493 shares of common stock and 13,698 shares of
common stock issuable upon exercise of warrants. Mitchell Peters and David
Fried have voting and investment control over these shares.
|
|
|
|
(8)
|
|
Comprised of 41,100 shares of common stock and 8,220 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
|
|
|
(9)
|
|
Comprised of 30,137 shares of common stock and 6,027 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
|
|
|
(10)
|
|
Comprised of 11,000 shares of common stock and 2,200 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
|
|
|
(11)
|
|
Comprised of 68,493 shares of common stock and 13,698 shares of
common stock issuable upon exercise of warrants. Mitchell Kopin, president of
Downsview Capital, Inc., the general partner of Cranshire Capital, L.P.,
has sole voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the 2006 Financings and
September 2007 Financing beginning on page 49 and 55 of this
prospectus, respectively.
|
|
|
|
(12)
|
|
Comprised of 11,000 shares of common stock and 2,200 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(13)
|
|
Comprised of 54,794 shares of common stock and 10,958 shares of
common stock issuable upon exercise of warrants. Paul Singer has voting and
investment control over these shares.
|
|
|
|
(14)
|
|
Comprised of 82,192 shares of common stock and 16,438 shares of
common stock issuable upon exercise of warrants. Paul Singer has voting and
investment control over these shares.
|
|
|
|
(15)
|
|
Comprised of 27,397 shares of common stock and 5,479 shares of common
stock issuable upon exercise of warrants. Mitch Levine has voting and
investment control over these shares.
|
|
|
|
(16)
|
|
Comprised of 27,397 shares of common stock and 5,479 shares of common
stock issuable upon exercise of warrants. Robert Lishman has voting and
investment control over these shares.
|
|
|
|
(17)
|
|
Comprised of 95,890 shares of common stock and 19,178 shares of
common stock issuable upon exercise of warrants. Ian P. Ellis has voting and
investment control over these shares.
|
|
|
|
(18)
|
|
Comprised of 41,095 shares of common stock and 8,219 shares of common
stock issuable upon exercise of warrants. Ian P. Ellis has voting and
investment control over these shares.
|
|
|
|
(19)
|
|
Comprised of 136,986 shares of common stock and 18,719 shares of
common stock issuable upon exercise of warrants. Based on certain records of
the Company. Omicron Capital, L.P., a Delaware limited partnership (Omicron
Capital), serves as investment manager to Omicron Master Trust, a trust
formed under the laws of Bermuda (Omicron), Omicron Capital, Inc., a
Delaware corporation (OCI), serves as general partner of Omicron Capital
and Winchester Global Trust Company Limited (Winchester) serves as the
trustee of Omicron. By reason of such relationships, Omicron Capital and OCI may
be deemed to share dispositive power over the shares of our common stock
owned by Omicron, and Winchester may be deemed to share voting and
dispositive power over the shares of our common stock owned by Omicron.
Omicron Capital, OCI and Winchester disclaim beneficial ownership of such
shares of our common stock. Omicron Capital has delegated authority from the
board of directors of Winchester regarding the portfolio management decisions
with respect to the shares of common stock owned by Omicron and, as of
April 21, 2003, Mr. Oliver H. Morali and Mr. Bruce T.
Bernstein, officers of OCI, have delegated authority from the board of
directors of OCI regarding the portfolio management decisions of Omicron
Capital with respect to the shares of common stock owned by Omicron. By
reason of such delegated authority, Messrs. Morali and Bernstein may be
deemed to share dispositive power over the shares of our common stock owned
by Omicron.
|
42
|
|
Messrs. Morali and Bernstein disclaim beneficial ownership of
such shares of our common stock and neither of such persons has any legal
right to maintain such delegated authority. No other person has sole or
shares voting or dispositive power with respect to the shares of our common
stock being offered by Omicron, as those terms are used for purposes under
Regulation 13D-G of the Securities Exchange Act of 1934, as amended. Omicron
and Winchester are not affiliates of one another, as that term is used for
purposes of the Securities Exchange Act of 1934, as amended, or of any other
person named in this prospectus as a selling stockholder. No person or
group (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, or the SECs Regulation 13D-G controls
Omicron and Winchester. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
July 2005 Financing beginning on page 44 of this prospectus.
|
|
|
|
(20)
|
|
Comprised of 191,780 shares of common stock and 38,356 shares of
common stock issuable upon exercise of warrants. Murray Todd and Leslie
Elliott, signing on behalf of Discovery Management Ltd., have voting and
investment control over these shares.
|
|
|
|
(21)
|
|
Comprised of 50,000 shares of common stock and 10,000 shares of
common stock issuable upon exercise of warrants. Jeffrey H. Porter has voting
and investment control over these shares. The selling stockholder is also the
beneficial owner of the securities set forth under its name in the selling
stockholder table for the September 2007 Financing beginning on
page 55 of this prospectus.
|
|
|
|
(22)
|
|
Comprised of 27,397 shares of common stock and 5,479 shares of common
stock issuable upon exercise of warrants. The investment advisor to Portside
Growth and Opportunity Fund is Ramius Capital Group, LLC. The managing member
of Ramius Capital Group, LLC is CAS & Co., the managing members of
which are Peter Cohen, Morgan Stark, Thomas Strauss and Jeffrey Solomon. As such,
Messrs. Cohen, Stark, Strauss and Solomon may be deemed beneficial
owners of the shares. Messrs. Cohen, Stark, Strauss and Solomon
therefore disclaim beneficial ownership of such shares.
|
|
|
|
(23)
|
|
Comprised of 27,397 shares of common stock and 5,479 shares of common
stock issuable upon exercise of warrants. Jack R. Ripsteen has voting and
investment control over these shares.
|
|
|
|
(24)
|
|
Comprised of 273,964 shares of common stock and 54,792 shares of
common stock issuable upon exercise of warrants. Michael A. Roth and Brian J.
Stark are the founding members and direct the management of Staro Asset
Management, L.L.C., a Wisconsin limited liability company (Staro), which
acts as investment manager and has sole power to direct the management of SF
Capital Partners Ltd. Through Staro, Messrs. Roth and Stark possess
sole voting and dispositive power over all the shares owned by SF Capital
Partners Ltd.
|
|
|
|
(25)
|
|
Comprised of 35,600 shares of common stock and 7,120 shares of common
stock issuable upon exercise of warrants. Patrick Adams, CFA, managing member
and portfolio manager, has voting and investment control over these shares.
|
|
|
|
(26)
|
|
Comprised of 27,400 shares of common stock and 5,480 shares of common
stock issuable upon exercise of warrants. Steven Slawson and Walter Schenker
have voting and investment control over these shares.
|
|
|
|
(27)
|
|
Comprised of 41,095 shares of common stock and 8,219 shares of common
stock issuable upon exercise of warrants. Karen B. Cohen has voting and
investment control over these shares.
|
|
|
|
(28)
|
|
Comprised of 27,397 shares of common stock and 5,479 shares of common
stock issuable upon exercise of warrants. Michael Coughlin has voting and
investment control over these shares.
|
|
|
|
(29)
|
|
Comprised of 27,397 shares of common stock and 5,479 shares of common
stock issuable upon exercise of warrants. Lonnie M. Garber, president of
Personal Asset Strategies, Inc., has voting and investment control over
these shares.
|
|
|
|
(30)
|
|
Comprised of 41,095 shares of common stock and 8,219 shares of common
stock issuable upon exercise of warrants. Phillip N. Lyons, Trustee, has
voting and investment control over these shares.
|
|
|
|
(31)
|
|
Comprised of 75,239 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings and
July 2005 Financing beginning on page 29 and 44 of this prospectus,
respectively.
|
|
|
|
(32)
|
|
Comprised of 72,239 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, 2006 Financings, and September 2007 Financing
beginning on page 29, 44, 49, and 55 of this prospectus, respectively.
|
43
(33)
|
|
Comprised of 26,621 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, 2006 Financings, and September 2007 Financing
beginning on page 29, 44, 49, and 55 of this prospectus, respectively.
|
|
|
|
(34)
|
|
Comprised of 6,225 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder table for the 2003 Financings
beginning on page 29 of this prospectus.
|
|
|
|
(35)
|
|
Comprised of 2,625 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder table for the 2003 Financings
beginning on page 29 of this prospectus.
|
|
|
|
(36)
|
|
Comprised of 3,377 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder table for the 2003 Financings
beginning on page 29 of this prospectus.
|
|
|
|
(37)
|
|
Comprised of 3,377 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder table for the 2003 Financings
beginning on page 29 of this prospectus.
|
|
|
|
(38)
|
|
Comprised of 8,678 shares of common stock issuable upon exercise of
warrants. Based on information provided to the Company by the selling stockholder
on March 19, 2008. Rockmore Capital, LLC (Rockmore Capital) and
Rockmore Partners, LLC (Rockmore Partners), each a limited liability
company formed under the laws of the State of Delaware, serve as the
investment manager and general partner, respectively, to Rockmore Investments
(US) LP, a Delaware limited partnership, which invests all of its assets
through Rockmore Investment Master Fund Ltd., an exempted company formed
under the laws of Bermuda (Rockmore Master Fund). By reason of such relationships,
Rockmore Capital and Rockmore Partners may be deemed to share dispositive
power over the shares of our common stock owned by Rockmore Master Fund.
Rockmore Capital and Rockmore Partners disclaim beneficial ownership of such
shares of our common stock. Rockmore Partners has delegated authority to
Rockmore Capital regarding the portfolio management decisions with respect to
the shares of common stock owned by Rockmore Master Fund and, as of
April 15, 2008, Mr. Bruce T. Bernstein and Mr. Brian Daly, as
officers of Rockmore Capital, are responsible for the portfolio management
decisions of the shares of common stock owned by Rockmore Master Fund. By
reason of such authority, Messrs. Bernstein and Daly may be deemed to
share dispositive power over the shares of our common stock owned by Rockmore
Master Fund. Messrs. Bernstein and Daly disclaim beneficial ownership of
such shares of our common stock and neither of such persons has any legal
right to maintain such authority. No other person has sole or shared voting
or dispositive power with respect to the shares of our common stock as those
terms are used for purposes under Regulation 13D-G of the Securities Exchange
Act of 1934, as amended. No person or group (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended,
or the SECs Regulation 13D-G) controls Rockmore Master Fund.
|
July 2005
Financing
In July 2005, we
completed a private placement financing pursuant to which we sold to certain
accredited investors an aggregate of 1,397,287 shares (the July 2005
Shares) of Common Stock and issued such investors warrants (the July 2005
Warrants) to purchase up to an aggregate of 635,767 shares of Common Stock
(the July 2005 Financing). The July 2005
Warrants have a five-year term and had an initial exercise price of $3.45 per
share. In connection with the July 2005
Financing, we agreed to prepare and file with the SEC a registration statement
covering the resale of the July 2005 Shares and the shares of Common Stock
issuable upon exercise of the July 2005 Warrants. Of the 2,033,054
shares of Common Stock being offered by the selling stockholders set forth in
the table below, 90,262 shares are issuable upon the exercise of warrants
issued to Laidlaw & Company (UK), Ltd., and five of its affiliates, as
partial compensation for acting as placement agents in the July 2005
Financing.
The table below presents
information regarding the selling stockholders in the July 2005 Financing
and shares of Common Stock that they may offer and sell under this prospectus.
44
|
|
NUMBER OF
|
|
SHARES OF
|
|
SHARES
|
|
|
|
SHARES
|
|
COMMON
|
|
BENEFICIALLY
|
|
|
|
BENEFICIALLY
|
|
STOCK
|
|
OWNED AFTER
|
|
|
|
OWNED BEFORE
|
|
BEING
|
|
OFFERING
|
|
SELLING STOCKHOLDERS(1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Iroquois Master Fund Ltd. (2)
|
|
534,884
|
|
534,884
|
|
0
|
|
*
|
|
Omicron Master Trust (3)
|
|
122,057
|
|
122,057
|
|
0
|
|
*
|
|
Smithfield Fiduciary, LLC (4)
|
|
133,721
|
|
133,721
|
|
0
|
|
*
|
|
Haystack Capital (5)
|
|
267,441
|
|
267,441
|
|
0
|
|
*
|
|
Jeffrey Glassman (6)
|
|
13,372
|
|
13,372
|
|
0
|
|
*
|
|
Helen Kohn (7)
|
|
53,489
|
|
53,489
|
|
0
|
|
*
|
|
Ronit Sucoff (8)
|
|
53,489
|
|
53,489
|
|
0
|
|
*
|
|
Little Bear Investments LLC (9)
|
|
16,202
|
|
16,202
|
|
0
|
|
*
|
|
Zachary Prensky (10)
|
|
267,441
|
|
267,441
|
|
0
|
|
*
|
|
Wolf Prensky (11)
|
|
53,489
|
|
53,489
|
|
0
|
|
*
|
|
Martha Lipton (12)
|
|
5,349
|
|
5,349
|
|
0
|
|
*
|
|
Danny Aharon (13)
|
|
5,349
|
|
5,349
|
|
0
|
|
*
|
|
A1-Kim Profit Sharing Plan (14)
|
|
26,744
|
|
26,744
|
|
0
|
|
*
|
|
Dean Willard (15)
|
|
53,489
|
|
53,489
|
|
0
|
|
*
|
|
Laidlaw & Company (UK) Ltd. (16)
|
|
20,000
|
|
20,000
|
|
0
|
|
*
|
|
Lagunitas Partners LP (17)
|
|
160,466
|
|
160,466
|
|
0
|
|
*
|
|
Gruber & McBaine International (18)
|
|
53,489
|
|
53,489
|
|
0
|
|
*
|
|
J. Patterson McBaine (19)
|
|
26,743
|
|
26,743
|
|
0
|
|
*
|
|
Jon D. and Linda W. Gruber Trust (20)
|
|
26,743
|
|
26,743
|
|
0
|
|
*
|
|
Gary Shemano (21)
|
|
7,267
|
|
7,267
|
|
0
|
|
*
|
|
Michael Jacks (22)
|
|
3,634
|
|
3,634
|
|
0
|
|
*
|
|
William Corbett (23)
|
|
3,634
|
|
3,634
|
|
0
|
|
*
|
|
45
|
|
NUMBER OF
|
|
SHARES OF
|
|
SHARES
|
|
|
|
SHARES
|
|
COMMON
|
|
BENEFICIALLY
|
|
|
|
BENEFICIALLY
|
|
STOCK
|
|
OWNED AFTER
|
|
|
|
OWNED BEFORE
|
|
BEING
|
|
OFFERING
|
|
SELLING STOCKHOLDERS(1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Cary Sucoff (24)(25)
|
|
23,131
|
|
23,131
|
|
0
|
|
*
|
|
Harvey Kohn (24)(26)
|
|
20,000
|
|
20,000
|
|
0
|
|
*
|
|
Lewis Mason (24)(27)
|
|
12,000
|
|
12,000
|
|
0
|
|
*
|
|
Scott Sucoff (24)(29)
|
|
12,000
|
|
12,000
|
|
0
|
|
*
|
|
Francis Anderson (24)(29)
|
|
3,131
|
|
3,131
|
|
0
|
|
*
|
|
Rockmore Investment Master Fund Ltd. (30)
|
|
11,664
|
|
11,664
|
|
0
|
|
*
|
|
* Represents beneficial ownership of less than 1%
(1)
|
|
The information related to voting and investment control and, if
applicable, the Selling Stockholders status as an affiliate of a registered
broker-dealer, is based on information provided to the Company by the Selling
Stockholders as of November 8, 2005.
|
|
|
|
(2)
|
|
Comprised of 387,597 shares of common stock
and 147,287 shares of common stock issuable upon exercise of warrants. Joshua
Silverman exercises sole voting and investment control over these
shares. Mr. Silverman disclaims beneficial ownership of these
shares. The
selling stockholder is also the beneficial owner of the securities set forth
under its name in the selling stockholder tables for the 2006 Financings and
September 2007 Financing beginning on page 49 and 55 of this
prospectus, respectively.
|
|
|
|
(3)
|
|
Comprised of 96,899 shares of common stock and 25,158 shares of
common stock issuable upon exercise of warrants. Based on certain records of
the Company. Omicron Capital, L.P., a Delaware limited partnership (Omicron
Capital), serves as investment manager to Omicron Master Trust, a trust
formed under the laws of Bermuda (Omicron), Omicron Capital, Inc., a
Delaware corporation (OCI), serves as general partner of Omicron Capital,
and Winchester Global Trust Company Limited (Winchester) serves as the
trustee of Omicron. By reason of such relationships, Omicron Capital
and OCI may be deemed to share dispositive power over the shares of our
common stock owned by Omicron, and Winchester may be deemed to share voting
and dispositive power over the shares of our common stock owned by
Omicron. Omicron Capital, OCI and Winchester disclaim beneficial
ownership of such shares of our common stock. Omicron Capital has
delegated authority from the board of directors of Winchester regarding the
portfolio management decisions with respect to the shares of common stock
owned by Omicron and, as of October 3, 2005, Mr. Olivier H. Morali
and Mr. Bruce T. Bernstein, officers of OCI, have delegated authority
from the board of directors of OCI regarding the portfolio management
decisions of Omicron Capital with respect to the shares of common stock owned
by Omicron. By reason of such delegated authority, Messrs. Morali
and Bernstein exercise voting and dispositive power over the shares of our
common stock owned by Omicron. Messrs. Morali and Bernstein
disclaim beneficial ownership of such shares of our common stock and neither
of such persons has any legal right to maintain such delegated
authority. No other person has sole or shared voting or dispositive
power with respect to the shares of our common stock being offered by
Omicron, as those terms are used for purposes under Regulation 13-D-G of
the Securities and Exchange Act of 1934, as amended. Omicron and
Winchester are not affiliates of one another, as that term is used for
purposes of the Securities Exchange Act of 1934, as amended, or of any other
person named in this prospectus as a selling shareholder. No person or
group (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, or the SECs Regulation 13D-G) controls
Omicron and Winchester. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
January 2004 Financing beginning on page 39 of this prospectus.
|
46
(4)
|
|
Comprised of 96,899 shares of common stock and 36,822 shares of
common stock issuable upon exercise of warrants. Highbridge Capital
Management, LLC is the trading manager of Smithfield Fiduciary LLC and exercises
voting control and investment discretion over securities these shares.
Glenn Dubin and Henry Swieca control Highbridge Capital Management, LLC and
as such, exercise voting and investment control over these shares. Each
of Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca disclaims
beneficial ownership of these shares.
|
|
|
|
(5)
|
|
Comprised of 193,798 shares of common stock and 73,643 shares of
common stock issuable upon exercise of warrants. Judith Finger and Douglas
Topkis exercise voting and investment control over these shares.
|
|
|
|
(6)
|
|
Comprised of 9,690 shares of common stock held directly and 3,682
shares of common stock issuable upon exercise of warrants.
|
|
|
|
(7)
|
|
Comprised of 38,760 shares of common stock held directly and 14,729
shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
her name in the selling stockholder table for the 2003 Financings beginning
on page 29 of this prospectus.
|
|
|
|
(8)
|
|
Comprised of 38,760 shares of common stock held directly and 14,729
shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
her name in the selling stockholder table for the 2003 Financings beginning
on page 29 of this prospectus.
|
|
|
|
(9)
|
|
Comprised of 16,202 shares of common stock issuable upon exercise of
warrants. Based on information provided to the Company by the Selling
Stockholder on March 19, 2008. Zachary Prensky and Jeffrey Mann exercise
voting and investment control over these shares. Zachary Prensky owns
50% of Little Bear Investments LLC, and is therefore deemed an affiliate of
Little Bear Investments LLC. In connection with the November 2003
Financing, the selling stockholder purchased 42,636 shares of common stock
and such shares were resold, prior to the date of this prospectus, pursuant
to that certain Form S-3 Registration Statement (Reg.
No. 333-127829) filed with the SEC on August 25, 2005, as amended. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the 2003 Financings, 2006
Financings, and September 2007 Financing beginning on page 29, 49,
and 55 of this prospectus, respectively.
|
|
|
|
(10)
|
|
Comprised of 193,798 shares of common stock held directly and 73,643
shares of common stock issuable upon exercise of warrants. Zachary Prensky
and Jeffrey Mann exercise voting and investment control over these shares.
Zachary Prensky owns 50% of Little Bear Investments LLC, and is therefore
deemed an affiliate of Little Bear Investments LLC. The selling stockholder is also the
beneficial owner of the securities set forth under his name in the selling
stockholder tables for the 2006 Financings and September 2007 Financing
beginning on page 49 and 55 of this prospectus, respectively.
|
|
|
|
(11)
|
|
Comprised of 38,760 shares of common stock held directly and 14,729
shares of common stock issuable upon exercise of warrants.
|
|
|
|
(12)
|
|
Comprised of 3,876 shares of common stock held directly and 1,473
shares of common stock issuable upon exercise of warrants.
|
|
|
|
(13)
|
|
Comprised of 3,876 shares of common stock held directly and 1,473
shares of common stock issuable upon exercise of warrants.
|
|
|
|
(14)
|
|
Comprised of 19,380 shares of common stock held directly and 7,364
shares of common stock issuable upon exercise of warrants. Joshua Kanter is
the trustee of the A1-Kim Profit Sharing Plan and exercises voting and
investment control over these shares.
|
|
|
|
(15)
|
|
Comprised of 38,760 shares of common stock held directly and 14,729
shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder table for the 2006 Financings beginning
on page 49 of this prospectus.
|
|
|
|
(16)
|
|
Comprised of 20,000 shares of common stock issuable upon exercise of
warrants. Robert Bonaventura, President, exercises voting and investment control
over these shares. Consists of shares that could be purchased on
exercise of warrants issued in connection with our private placement in
July 2005. Laidlaw & Company (UK) Ltd. (Laidlaw)
|
47
|
|
is a registered broker-dealer. We issued these warrants to
Laidlaw as partial compensation for Laidlaws services as placement agent in
connection with our private placement in July 2005. Laidlaw
represents that it acquired these warrants in the ordinary course of business
and at the time of receiving the securities had no agreements or
understandings, directly or indirectly, with any person to distribute
them. These shares are subject to a 180 day lock-up agreement in
accordance with the requirements of NASD Rule 2710(g)(1).
|
|
|
|
(17)
|
|
Comprised of 116,280 shares of common stock held directly and 44,186
shares of common stock issuable upon exercise of warrants. Jon D. Gruber and
J. Patterson McBaine are affiliates of Lagunitas Partners LP and
Gruber & McBaine International. The number of shares being
sold for these affiliates are noted separately in this table. Jon D.
Gruber and J. Patterson McBaine exercise voting and investment control over
these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder tables for the
2003 Financings, 2006 Financings, March 2007 Financing, and
September 2007 Financing beginning on page 29, 49, 53, and 55 of
this prospectus, respectively.
|
|
|
|
(18)
|
|
Comprised of 38,760 shares of common stock held directly and 14,729
shares of common stock issuable upon exercise of warrants. Jon D. Gruber and
J. Patterson McBaine are affiliates of Lagunitas Partners LP and
Gruber & McBaine International. The number of shares being
sold for these affiliates are noted separately in this table. Jon D.
Gruber and J. Patterson McBaine exercise voting and investment control over
these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder tables for the
2003 Financings, 2006 Financings, March 2007 Financing, and
September 2007 Financing beginning on page 29, 49, 53, and 55 of
this prospectus, respectively.
|
|
|
|
(19)
|
|
Comprised of 19,379 shares of common stock held directly and 7,364
shares of common stock issuable upon exercise of warrants. Jon D. and Linda
W. Gruber Trust and J. Patterson McBaine are affiliates of one another.
The number of shares being sold for these affiliates are noted separately in
this table. Jon D. Gruber exercises voting and investment control over
these shares. The selling stockholder is also the beneficial owner of the
securities set forth under his name in the selling stockholder tables for the
2003 Financings, 2006 Financings, March 2007 Financing, and
September 2007 Financing beginning on page 29, 49, 53, and 55 of
this prospectus, respectively.
|
|
|
|
(20)
|
|
Comprised of 19,379 shares of common stock held directly and 7,364
shares of common stock issuable upon exercise of warrants. Jon D. and Linda
W. Gruber Trust and J. Patterson McBaine are affiliates of one another.
The number of shares being sold for these affiliates are noted separately in
this table. Jon D. Gruber exercises voting and investment control over
these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
September 2007 Financing beginning on page 55 of this prospectus.
|
|
|
|
(21)
|
|
Comprised of 7,267 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings and
January 2004 Financing beginning on page 29 and 39 of this
prospectus, respectively.
|
|
|
|
(22)
|
|
Comprised of 3,634 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings,
January 2004 Financing, 2006 Financings, and September 2007
Financing beginning on page 29, 39, 49, and 55 of this prospectus,
respectively.
|
|
|
|
(23)
|
|
Comprised of 3,634 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings,
January 2004 Financing, 2006 Financings, and September 2007
Financing beginning on page 29, 39, 49, and 55 of this prospectus,
respectively.
|
|
|
|
(24)
|
|
This selling shareholder is an associated person of Laidlaw and
represents that he or she received these warrants as a designee of Laidlaw in
the ordinary course of business and at the time of receiving the securities
had no agreements or understandings, directly or indirectly, with any person
to distribute them. Laidlaw was entitled to receive these securities as
compensation for its services as placement agent in the ordinary course of
business and at the time of receiving the securities had no agreements or
understandings, directly or indirectly, with any person to distribute
them. These shares are subject to a 180 day lock-up agreement in
accordance with the requirements of NASD Rule 2710(g)(1).
|
48
(25)
|
|
Comprised of 23,131 shares of common stock issuable upon exercise of
warrants.
|
|
|
|
(26)
|
|
Comprised of 20,000 shares of common stock issuable upon exercise of
warrants.
|
|
|
|
(27)
|
|
Comprised of 12,000 shares of common stock issuable upon exercise of
warrants.
|
|
|
|
(28)
|
|
Comprised of 12,000 shares of common stock issuable upon exercise of
warrants.
|
|
|
|
(29)
|
|
Comprised of 3,131 shares of common stock issuable upon exercise of
warrants.
|
|
|
|
(30)
|
|
Comprised of 11,664 shares of common stock issuable upon exercise of
warrants. Based on information provided to the Company by the selling
stockholder on March 19, 2008. Rockmore Capital and Rockmore Partners,
each a limited liability company formed under the laws of the State of
Delaware, serve as the investment manager and general partner, respectively,
to Rockmore Investments (US) LP, a Delaware limited partnership, which
invests all of its assets through Rockmore Master Fund, an exempted company
formed under the laws of Bermuda. By reason of such relationships, Rockmore
Capital and Rockmore Partners may be deemed to share dispositive power over
the shares of our common stock owned by Rockmore Master Fund. Rockmore
Capital and Rockmore Partners disclaim beneficial ownership of such shares of
our common stock. Rockmore Partners has delegated authority to Rockmore
Capital regarding the portfolio management decisions with respect to the
shares of common stock owned by Rockmore Master Fund and, as of April 15,
2008, Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of
Rockmore Capital, are responsible for the portfolio management decisions of
the shares of common stock owned by Rockmore Master Fund. By reason of such
authority, Messrs. Bernstein and Daly may be deemed to share dispositive
power over the shares of our common stock owned by Rockmore Master Fund.
Messrs. Bernstein and Daly disclaim beneficial ownership of such shares
of our common stock and neither of such persons has any legal right to
maintain such authority. No other person has sole or shared voting or
dispositive power with respect to the shares of our common stock as those
terms are used for purposes under Regulation 13D-G of the Securities Exchange
Act of 1934, as amended. No person or group (as that term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended,
or the SECs Regulation 13D-G) controls Rockmore Master Fund.
|
Gary
Shemano, Michael Jacks and William Corbett are registered agents of The Shemano
Group (collectively Shemano). We issued a portion of the July 2005
warrants to Shemano as compensation for Shemanos services as placement agent
in connection with the July 2005 Financing. The Shemano Group is a
broker-dealer, and as such, it is deemed to be an underwriter of 14,535 shares
set forth in the table immediately above, held by Gary Shemano, Michael Jacks,
and William Corbett, and offered pursuant to this prospectus. We do not have
any underwriting agreement with Shemano. Shemano completed all services in
connection with earning the shares and is under no obligation to sell the
shares in this offering or pay any of the proceeds thereof to us. We did not
pay and will not owe any discounts or commissions to Shemano. Shemano has
no right to designate any member to our board of directors. We have no
obligation to indemnify Shemano for violations of the Securities Act, other
than the standard indemnification provisions of the registration rights
agreement entered into with all of the selling shareholders in the July 2005
Financing regarding our liability for our inclusion of false or misleading
information in this prospectus. We are not aware of any intention of Shemano or
its affiliates to engage in passive market making transactions as permitted by Rule 103
of Regulation M. We are not aware of any intention of Shemano or its affiliates
to engage in any transaction during the offering that stabilizes, maintains, or
otherwise affects the market price of the offered securities.
2006 Financings
On March 17, 2006,
we completed a secured debt financing in the aggregate amount of $1,550,000
(the 2006 Debt Financing). As part of that financing, we issued a series of
secured promissory notes in the aggregate amount of $1,550,000 (the 2006 Notes)
pursuant to a Note Purchase Agreement (the Note Purchase Agreement). The 2006
Notes were set to mature in full in March 2007, but could become due prior
to that time upon the occurrence of certain events. As part of the 2006 Debt
Financing, we also issued warrants to purchase an aggregate of 387,500 shares
of Common Stock to the holders of the 2006 Notes (the 2006 Warrants). The
2006 Warrants have a five-year term and had an initial exercise price $2.30 per
share. The shares of Common Stock issuable upon exercise of the 2006
Warrants have piggyback registration rights that require us to register these
shares with the SEC. Pursuant to these registration rights, the shares of
Common Stock issuable upon exercise of the 2006 Warrants are being registered
hereunder.
In November and December 2006,
we consummated a private placement financing (the 2006 Private Placement and
together with the 2006 Debt Financing, the 2006 Financings) of an aggregate
of 2,500 shares of our Series C Preferred
49
Stock and warrants to
purchase an aggregate of 125,000 shares of Common Stock to certain accredited
investors (the 2006
Private Placement
Warrants). The Series C Preferred Stock has a stated value of $1,000 per
share and is initially convertible into Common Stock at a rate of $1.50 of the
per share stated value. The 2006 Private Placement Warrants have a five-year
term and an initial exercise price of $1.575 per share. As part of the
2006 Private Placement, we also issued warrants to purchase an aggregate of
46,000 shares of Common Stock to certain placement agents (the Placement Agent
Warrants). The Placement Agent Warrants each have a five-year term and an
initial exercise price of $1.575 per share. We have agreed to register for
resale all of the shares of Common Stock that are issuable upon conversion of
the Series C Preferred Stock and upon exercise of the 2006 Private
Placement Warrants and the Placement Agent Warrants.
Under the terms of the
Note Purchase Agreement, the 2006 Private Placement would have caused an
immediate acceleration of the full amounts owed under the 2006 Notes.
However, we received a written waiver of the acceleration of the 2006 Notes in
connection with the 2006 Private Placement in consideration for the issuance of
additional warrants to purchase an aggregate of up to 200,250 shares of Common
Stock to the holders of the 2006 Notes (the 2006 Additional Warrants) and the
adjustment of the exercise prices of the 2006 Warrants from $2.30 per share to
$1.80 per share. We have agreed to register for resale all of the shares of
Common Stock issuable upon exercise of the 2006 Additional Warrants.
The table below presents
information regarding the selling stockholders in the 2006 Financings and
shares of Common Stock that they may offer and sell under this prospectus.
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK
BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
AJW Offshore Ltd. (2)
|
|
23,131
|
|
23,131
|
|
0
|
|
*
|
|
AJW Partners, LLC (3)
|
|
4,171
|
|
4,171
|
|
0
|
|
*
|
|
AJW Qualified Partners, LLC (4)
|
|
10,238
|
|
10,238
|
|
0
|
|
*
|
|
Asset Factoring Ansbacher Bahamas Ltd. (5)
|
|
37,919
|
|
37,919
|
|
0
|
|
*
|
|
Bru Holding Co. LLC (6)
|
|
143,333
|
|
143,333
|
|
0
|
|
*
|
|
Eugene & Natalie Ciner JTWROS (7)
|
|
3,792
|
|
3,792
|
|
0
|
|
*
|
|
William Corbett (8)
|
|
14,000
|
|
14,000
|
|
0
|
|
*
|
|
Corman Foundation, Inc. (9)
|
|
18,960
|
|
18,960
|
|
0
|
|
*
|
|
Cranshire Capital, L.P. (10)
|
|
94,798
|
|
94,798
|
|
0
|
|
*
|
|
Empire Financial Group, Inc. (11)
|
|
12,000
|
|
12,000
|
|
0
|
|
*
|
|
Equity Source Partners, LLC (12)
|
|
6,000
|
|
6,000
|
|
0
|
|
*
|
|
Goldberg Partners (13)
|
|
143,333
|
|
143,333
|
|
0
|
|
*
|
|
Sean Greene (14)
|
|
18,960
|
|
18,960
|
|
0
|
|
*
|
|
Gruber & McBaine International (15)
|
|
286,666
|
|
286,666
|
|
0
|
|
*
|
|
Iroquois Master Fund Ltd. (16)
|
|
71,099
|
|
71,099
|
|
0
|
|
*
|
|
Michael Jacks (17)
|
|
14,000
|
|
14,000
|
|
0
|
|
*
|
|
The Kybartai Trust (18)
|
|
37,919
|
|
37,919
|
|
0
|
|
*
|
|
Lagunitas Partners LP (19)
|
|
860,000
|
|
860,000
|
|
0
|
|
*
|
|
Little Bear Investments LLC (20)
|
|
54,604
|
|
54,604
|
|
0
|
|
*
|
|
J. Patterson McBaine (21)
|
|
286,666
|
|
286,666
|
|
0
|
|
*
|
|
50
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED BEFORE
|
|
SHARES OF
COMMON
STOCK
BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
New Millennium Capital Partners II, LLC (22)
|
|
379
|
|
379
|
|
0
|
|
*
|
|
Zachary Prensky (23)
|
|
97,074
|
|
97,074
|
|
0
|
|
*
|
|
RMW Envirovest (24)
|
|
18,960
|
|
18,960
|
|
0
|
|
*
|
|
Trudy C Taylor and Joan C. Taylor Co-Trustees Taylor Family Trust
u/a/d June 10, 1983 (25)
|
|
19,908
|
|
19,908
|
|
0
|
|
*
|
|
Valkyrie Leasing, LLC (26)
|
|
75,839
|
|
75,839
|
|
0
|
|
*
|
|
Dean Willard (27)
|
|
71,666
|
|
71,666
|
|
0
|
|
*
|
|
*
Represents beneficial ownership of less than 1%
(1)
|
|
The
information related to voting and investment control is based on information
provided to the Company by the selling stockholders as of December 27,
2006.
|
|
|
|
(2)
|
|
Comprised
of 23,131 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
|
(3)
|
|
Comprised
of 4,171 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
|
(4)
|
|
Comprised
of 10,238 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
|
(5)
|
|
Comprised
of 37,919 shares of common stock issuable upon exercise of warrants. Charles
Johnston is the vice president, investing of Asset Factoring Ansbacher
Bahamas Ltd. and has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
|
(6)
|
|
Comprised
of 133,333 shares of common stock issuable upon conversion of Series C
Preferred Stock and 10,000 shares of common stock issuable upon exercise of
warrants. Bruce Toll has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the 2003 Financings beginning
on page 29 of this prospectus.
|
|
|
|
(7)
|
|
Comprised
of 3,792 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(8)
|
|
Comprised
of 14,000 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings,
January 2004 Financing, July 2005 Financing, and
September 2007 Financing beginning on page 29, 39, 44, and 55 of
this prospectus, respectively.
|
|
|
|
(9)
|
|
Comprised
of 18,960 shares of common stock issuable upon exercise of warrants. James
Corman, President of Corman Foundation, Inc. has voting and investment
control over these shares. The selling stockholder is also the beneficial owner of the securities
set forth under its name in the selling stockholder tables for the 2003
Financings and September 2007 Financing beginning on page 29 and 55
of this prospectus, respectively.
|
51
(10)
|
|
Comprised
of 94,798 shares of common stock issuable upon exercise of warrants. Mitchell
P. Kohn, President of Downsview Capital, Inc., the General Partner of
Cranshire Capital, L.P., has sole voting and investment discretion over
shares of common stock beneficially owned by Cranshire Capital, L.P. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the January 2004
Financing and September 2007 Financing beginning on page 39 and 55
of this prospectus, respectively.
|
|
|
|
(11)
|
|
Comprised
of 12,000 shares of common stock issuable upon exercise of warrants. Steve
Rabinivice, as Chief Executive Officer of Empire Financial Group, Inc.,
has voting and investment control over these shares. The selling stockholder is also the
beneficial owner of the securities set forth under its name in the selling
stockholder table for the September 2007 Financing beginning on
page 55 of this prospectus.
|
|
|
|
(12)
|
|
Comprised
of 6,000 shares of common stock issuable upon exercise of warrants. Cary
Sucoff, Harvey Kohn, Scott Sucoff and Lewis Mason have voting and investment
control over these shares.
|
|
|
|
(13)
|
|
Comprised
of 133,333 shares of common stock issuable upon conversion of Series C
Preferred Stock and 10,000 shares of common stock issuable upon exercise of
warrants. John Goldberg has voting and investment control over these shares.
|
|
|
|
(14)
|
|
Comprised
of 18,960 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings and
September 2007 Financing beginning on page 29 and 55 of this
prospectus, respectively.
|
|
|
|
(15)
|
|
Comprised
of 266,666 shares of common stock issuable upon conversion of Series C
Preferred Stock and 20,000 shares of common stock issuable upon exercise of
warrants. Jon D. Gruber and J. Patterson McBaine, as managers of
Gruber & McBaine Capital Management, exercise all voting and investment
control over these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder tables for the
2003 Financings, July 2005 Financing, March 2007 Financing, and
September 2007 Financing beginning on page 29, 44, 53, and 55 of
this prospectus, respectively.
|
|
|
|
(16)
|
|
Comprised
of 71,099 shares of common stock issuable upon exercise of warrants. Joshua
Silverman exercises sole voting and investment control over these shares.
Mr. Silverman disclaims beneficial ownership of the shares held by
Iroquois Master Fund Ltd. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder tables for the
July 2005 Financing and September 2007 Financing beginning on
page 44 and 55 of this prospectus, respectively.
|
|
|
|
(17)
|
|
Comprised
of 14,000 shares of common stock issuable upon exercise of warrants directly.
The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder tables for the 2003 Financings,
January 2004 Financing, July 2005 Financing, and
September 2007 Financing beginning on page 29, 39, 44, and 55 of
this prospectus, respectively.
|
|
|
|
(18)
|
|
Comprised
of 37,919 shares of common stock issuable upon exercise of warrants. Wolf
Prensky, Trustee of the Kyabrtai Trust, exercises voting and investment
control over these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
September 2007 Financing beginning on page 55 of this prospectus.
|
|
|
|
(19)
|
|
Comprised
of 800,000 shares of common stock issuable upon conversion of Series C
Preferred Stock and 60,000 shares of common stock issuable upon exercise of warrants.
Jon D. Gruber and J. Patterson McBaine, managers of Gruber & McBaine
Capital Management, exercise all voting and investment control over these
shares. The
selling stockholder is also the beneficial owner of the securities set forth
under its name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, March 2007 Financing, and September 2007
Financing beginning on page 29, 44, 53, and 55 of this prospectus,
respectively.
|
|
|
|
(20)
|
|
Comprised
of 54,604 shares of common stock issuable upon exercise of warrants. Zachary
Prensky and Jeffrey Mann exercise voting and investment control over these
shares being sold by Little Bear Investments LLC. Zachary Prensky, an
affiliate and 50% owner of Little Bear Investments LLC, directly owns 97,074
shares of common stock issuable upon exercise of warrants referenced in
footnote 17 below. Little Bear Investments LLC disclaims any ownership or
control over common stock and warrants held directly by Mr. Prensky. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, and September 2007 Financing beginning on
page 29, 44, and 55 of this prospectus, respectively.
|
52
(21)
|
|
Comprised
of 266,666 shares of common stock issuable upon conversion of Series C
Preferred Stock held directly by Mr. McBaine and 20,000 shares of common
stock issuable upon exercise of warrants held directly by Mr. McBaine. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, March 2007 Financing, and September 2007
Financing beginning on page 29, 44, 53, and 55 of this prospectus,
respectively.
|
|
|
|
(22)
|
|
Comprised
of 379 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
|
(23)
|
|
Comprised
of 97,074 shares of common stock issuable upon exercise of warrants. Zachary
Prensky is an affiliate and 50% owner of Little Bear Investments LLC.
Mr. Prensky beneficially owns the securities held by Little Bear
Investments LLC referenced in footnote 15 above. The selling stockholder is also the
beneficial owner of the securities set forth under his name in the selling
stockholder tables for the July 2005 Financing and September 2007
Financing beginning on page 44 and 55 of this prospectus, respectively.
|
|
|
|
(24)
|
|
Comprised
of 18,960 shares of common stock issuable upon exercise of warrants. Michael
Withers has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
|
(25)
|
|
Comprised
of 19,908 shares of common stock issuable upon exercise of warrants. Trude C.
Taylor, Trustee of the Taylor Family Trust Dated June 10, 1983, has
voting and investment control over these shares.
|
|
|
|
(26)
|
|
Comprised
of 75,839 shares of common stock issuable upon exercise of warrants. Charles
Simonyi has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the 2003 Financings and
September 2007 Financing beginning on page 29 and 55 of this
prospectus, respectively.
|
|
|
|
(27)
|
|
Comprised
of 66,666 shares of common stock issuable upon conversion of Series C
Preferred Stock and 5,000 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under his name in the selling stockholder table for the July 2005
Financing beginning on page 44 of this prospectus.
|
Selling stockholders in
the 2006 Private Placement who are registered broker-dealers are underwriters
within the meaning of the Securities Act. In addition, selling
stockholders who are affiliates of registered broker-dealers may be deemed to
be underwriters within the meaning of the Securities Act if such selling
stockholders (a) did not acquire its Series C Preferred Stock,
warrants or underlying stock in the ordinary course of business or (b) had
any agreement or understanding, directly or indirectly, with any person to
distribute the Series C Preferred Stock, warrants or underlying common
stock.
Michael Jacks and William
Corbett are registered agents of Empire Financial Group, Inc. (Empire).
We issued the warrants referenced in footnotes 8, 11 and 17 above to Empire as
compensation for Empires services as placement agent in connection with the
2006 Private Placement. Equity Source Partners, LLC (Equity, and
together with Empire, the Placement Agents) was also issued the warrant
referenced in footnote 12 above as compensation for Equitys services as a
placement agent in connection with the Private Placement. The Placement Agents
are broker-dealers, and as such, may be deemed to be underwriters of an
aggregate of 46,000 shares offered pursuant to this prospectus. We do not have
any underwriting agreement with the Placement Agents. The Placement Agents
completed all services in connection with earning the shares and are under no
obligation to sell the shares in this offering or pay any of the proceeds
thereof to us. We did not pay and will not owe any discounts or commissions to
the Placement Agents. The Placement Agents have no right to designate any
member to our board of directors. We have no obligation to indemnify the
Placement Agents for violations of the Securities Act. We are not aware of any
intention of the Placement Agents or their affiliates to engage in passive
market making transactions as permitted by Rule 103 of Regulation M. We
are not aware of any intention of the Placement Agents or their affiliates to
engage in any transaction during the offering that stabilizes, maintains, or
otherwise affects the market price of the offered securities.
March 2007
Financing
In March 2007, we
completed a financing pursuant to which we sold to certain accredited investors
(the March 2007 Investors) an aggregate of 1,500 shares of our Series D
8% Convertible Preferred Stock (the Series D Preferred Stock) at a
stated value of $1,000 per share for aggregate gross proceeds of $1,500,000,
and issued to the March 2007 Investors warrants (the March 2007
Warrants) to purchase up to an aggregate of 59,207 shares of Common Stock with
an exercise price of $2.33 per share (the March 2007 Financing). As part
of the March 2007 Financing, we entered into a registration rights
53
agreement (the March 2007
Rights Agreement) with the March 2007 Investors covering the resale of
the shares of Common Stock underlying the Series D Preferred Stock, all
shares of Common Stock issuable upon exercise of the March 2007 Warrants,
all shares of Common Stock issuable as dividends on the Series D Preferred
Stock, and all shares of Common Stock issuable upon any stock split, dividend
or other distribution, recapitalization or similar event contemplated by Rule 416
of the Securities Act, with respect to the foregoing, with certain exceptions
described in the March 2007 Rights Agreement. Pursuant to these
registration rights, the shares of Common Stock issuable upon exercise of the March 2007
Warrants and the shares of Common Stock underlying the Series D Preferred
Stock are being registered hereunder.
The table below presents
information regarding the selling stockholders in the March 2007 Financing
and shares of Common Stock that they may offer and sell under this prospectus.
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED
BEFORE
|
|
SHARES OF
COMMON
STOCK
BEING
|
|
SHARES
BENEFICIALLY
OWNED AFTER
OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
OFFERING
|
|
OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Gruber & McBaine International (2)
|
|
76,380
|
|
76,380
|
|
0
|
|
*
|
|
Harrison H. Augur Smith Barney 401-K Prototype, Harrison H. Augur,
Trustee (3)
|
|
56,578
|
|
56,578
|
|
0
|
|
*
|
|
Lagunitas Partners LP (4)
|
|
248,946
|
|
248,946
|
|
0
|
|
*
|
|
J. Patterson McBaine (5)
|
|
56,578
|
|
56,578
|
|
0
|
|
*
|
|
The Wallace Foundation (6)
|
|
63,368
|
|
63,368
|
|
0
|
|
*
|
|
Trustees of Hamilton College (7)
|
|
63,933
|
|
63,933
|
|
0
|
|
*
|
|
Robert D van Roijen, Jr. TTEE U/A DTD
12-14-82 FBO Robert D van Roijen, Jr. (8)
|
|
282,893
|
|
282,893
|
|
0
|
|
*
|
|
*
Represents beneficial ownership of less than 1%
(1)
|
The
information related to voting and investment control is based on information
provided to the Company by the selling stockholders as of April 20,
2007.
|
|
|
(2)
|
Comprised
of 71,052 shares of common stock issuable upon conversion of Series D
Preferred Stock and 5,328 shares of common stock issuable upon exercise of
warrants. Jon D. Gruber and J. Patterson McBaine, as managers of
Gruber & McBaine Capital Management, exercise all voting and
investment control over these shares. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
tables for the 2003 Financings, July 2005 Financing, 2006 Financings,
and September 2007 Financing beginning on page 29, 44, 49, and 55
of this prospectus, respectively.
|
|
|
(3)
|
Comprised
of 52,631 shares of common stock issuable upon conversion of Series D
Preferred Stock and 3,947 shares of common stock issuable upon exercise of
warrants. Harry Augur is a partner in both Auginco and Patience Partners LP
and has shared voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the September 2007
Financing beginning on page 55 of this prospectus.
|
|
|
(4)
|
Comprised
of 231,578 shares of common stock issuable upon conversion of Series D
Preferred Stock and 17,368 shares of common stock issuable upon exercise of
warrants. The
selling stockholder is also the beneficial owner of the securities set forth
under its name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, 2006 Financings, and September 2007 Financing
beginning on page 29, 44, 49, and 55 of this prospectus, respectively.
|
54
(5)
|
Comprised
of 52,631 shares of common stock issuable upon conversion of Series D
Preferred Stock held directly by Mr. McBaine and 3,947 shares of common
stock issuable upon exercise of warrants held directly by Mr. McBaine.
Mr. McBaine, as a manager of Gruber & McBaine Capital
Management, exercises all voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, 2006 Financings, and September 2007 Financing
beginning on page 29, 44, 49, and 55 of this prospectus, respectively.
|
|
|
(6)
|
Comprised
of 58,947 shares of common stock issuable upon conversion of Series D
Preferred Stock and 4,421 shares of common stock issuable upon exercise of
warrants. Jon D. Gruber and J. Patterson McBaine, as managers of
Gruber & McBaine Capital Management, exercise all voting and
investment control over these shares. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
table for the September 2007 Financing beginning on page 55 of this
prospectus.
|
|
|
(7)
|
Comprised
of 59,473 shares of common stock issuable upon conversion of Series D
Preferred Stock and 4,460 shares of common stock issuable upon exercise of
warrants. Jon D. Gruber and J. Patterson McBaine, as managers of
Gruber & McBaine Capital Management, exercise all voting and investment
control over these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
September 2007 Financing beginning on page 55 of this prospectus.
|
|
|
(8)
|
Comprised
of 263,157 shares of common stock issuable upon conversion of Series D
Preferred Stock and 19,736 shares of common stock issuable upon exercise of
warrants. Robert D van Roijen, Jr. has voting and investment
control over these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
September 2007 Financing beginning on page 55 of this prospectus.
|
Selling stockholders in
the March 2007 Financing who are registered broker-dealers are underwriters
within the meaning of the Securities Act. In addition, such selling
stockholders who are affiliates of registered broker-dealers may be deemed to
be underwriters within the meaning of the Securities Act if such selling
stockholders (a) did not acquire its Series D Preferred Stock,
warrants or underlying stock in the ordinary course of business or (b) had
any agreement or understanding, directly or indirectly, with any person to
distribute the Series D Preferred Stock, warrants or underlying Common
Stock.
September 2007 Financing
In September 2007,
we completed a private placement financing pursuant to which we sold to certain
accredited investors (the September 2007 Investors) an aggregate of
2,016,666 shares (the September 2007 Shares) of Common Stock, at a
purchase price of $1.50 per share for aggregate gross proceeds of approximately
$3.0 million, and issued to the September 2007 Investors warrants (the September 2007
Warrants) to purchase up to an aggregate of 1,008,333 shares of Common Stock
with an exercise price of $1.67 per share (the September 2007 Financing).
The September 2007 Warrants become exercisable on March 26,
2008. As part of the September 2007 Financing, we entered into a
registration rights agreement (the September 2007 Rights Agreement) with
the September 2007 Investors covering the resale of the September 2007
Shares, all shares of Common Stock issuable upon exercise of the September 2007
Warrants, and all shares of Common Stock issuable upon any stock split,
dividend or other distribution, recapitalization or similar event contemplated
by Rule 416 of the Securities Act, with respect to the foregoing, with
certain exceptions described in the September 2007 Rights Agreement.
Pursuant to these registration rights, the shares of Common Stock issuable upon
exercise of the September 2007 Warrants and the September 2007 Shares
are being registered hereunder. Empire acted as placement agent and
financial advisor to us in connection with the September 2007 Financing.
In connection with its services, we issued Empire and certain of its affiliates
warrants to purchase up to an aggregate of 151,249 shares of Common Stock and
agreed to register these shares for resale. Accordingly, the shares of Common
Stock issuable upon exercise of these warrants are being registered hereunder.
The table below presents
information regarding the selling stockholders in the September 2007
Financing and shares of Common Stock that they may offer and sell under this
prospectus. The table also contains
information for selling stockholders who hold (i) warrants previously
issued by us (the Prior Warrants) and (ii) Series D Preferred
Stock, each with certain antidilution and registration rights. Upon the
consummation of the September 2007 Financing, (i) the exercise price
and number of shares issuable upon exercise of the Prior Warrants were
adjusted, resulting in an additional 113,834 shares of Common Stock becoming
issuable upon the exercise of the Prior Warrants, and (ii) the conversion
price and number of shares issuable upon conversion of the Series D
Preferred Stock were adjusted, resulting in an additional 210,528 shares of
Common Stock becoming issuable upon conversion of the Series D Preferred
Stock. We agreed to register for
55
resale all of the shares
of Common Stock issuable as a result of these antidilution adjustments upon
exercise of the Prior Warrants and conversion of the Series D Preferred
Stock.
|
|
NUMBER OF
SHARES
BENEFICIALLY
OWNED
|
|
SHARES OF
COMMON STOCK
|
|
SHARES BENEFICIALLY OWNED
AFTER OFFERING
|
|
SELLING STOCKHOLDERS (1)
|
|
BEFORE OFFERING
|
|
BEING OFFERED
|
|
NUMBER
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
AJW Offshore Ltd. (2)
|
|
4,627
|
|
4,627
|
|
0
|
|
*
|
|
AJW Partners, LLC (3)
|
|
835
|
|
835
|
|
0
|
|
*
|
|
AJW Qualified Partners, LLC (4)
|
|
2,048
|
|
2,048
|
|
0
|
|
*
|
|
Asset Factoring Ansbacher Bahamas Ltd. (5)
|
|
7,584
|
|
7,584
|
|
0
|
|
*
|
|
Bank of America NA & Harrison H. Augur Co-Trustees Laura
T.H. Hoblitzelle T/U/W dtd 2/1/1929 FBO Harrison H. Augur (6)
|
|
75,000
|
|
75,000
|
|
0
|
|
*
|
|
Corman Foundation, Inc. (7)
|
|
3,792
|
|
3,792
|
|
0
|
|
*
|
|
Cranshire Capital, L.P. (8)
|
|
218,961
|
|
218,961
|
|
0
|
|
*
|
|
Empire Financial Group, Inc. (9)
|
|
44,415
|
|
44,415
|
|
0
|
|
*
|
|
Eugene and Natalie Ciner (10)
|
|
759
|
|
759
|
|
0
|
|
*
|
|
Gruber & McBaine International (11)
|
|
108,948
|
|
108,948
|
|
0
|
|
*
|
|
Harrison H. Augur Smith Barney 401-K Prototype, Harrison H. Augur,
Trustee (12)
|
|
14,035
|
|
14,035
|
|
0
|
|
*
|
|
Iroquois Master Fund Ltd. (13)
|
|
139,220
|
|
139,220
|
|
0
|
|
*
|
|
J. Patterson McBaine (14)
|
|
89,035
|
|
89,035
|
|
0
|
|
*
|
|
JMR Capital Partners II LTD (15)
|
|
49,999
|
|
49,999
|
|
0
|
|
*
|
|
JMR Capital Partners LTD (16)
|
|
249,999
|
|
249,999
|
|
0
|
|
*
|
|
Jon D. and Linda W. Gruber Trust (17)
|
|
75,000
|
|
75,000
|
|
0
|
|
*
|
|
Kenneth H. Robertson (18)
|
|
24,999
|
|
24,999
|
|
0
|
|
*
|
|
Lagunitas Partners LP (19)
|
|
421,755
|
|
421,755
|
|
0
|
|
*
|
|
Little Bear Investments LLC (20)
|
|
7,200
|
|
7,200
|
|
0
|
|
*
|
|
Michael Jacks (21)
|
|
51,817
|
|
51,817
|
|
0
|
|
*
|
|
Neal Goldman IRA (22)
|
|
600,000
|
|
600,000
|
|
0
|
|
*
|
|
New Millennium Capital Partners II, LLC (23)
|
|
76
|
|
76
|
|
0
|
|
*
|
|
Patience Partners, L.P. (24)
|
|
75,000
|
|
75,000
|
|
0
|
|
*
|
|
Porter Partners, L.P. (25)
|
|
150,000
|
|
150,000
|
|
0
|
|
*
|
|
RHP Master Fund, Ltd. (26)
|
|
250,002
|
|
250,002
|
|
0
|
|
*
|
|
RMW Envirovest (27)
|
|
3,792
|
|
3,792
|
|
0
|
|
*
|
|
Robert D van Roijen, Jr. TTEE U/A DTD
12-14-82 FBO Robert D van Roijen, Jr. (28)
|
|
670,176
|
|
670,176
|
|
0
|
|
*
|
|
Sean Greene (29)
|
|
3,792
|
|
3,792
|
|
0
|
|
*
|
|
Taylor Family Trust, Trude C. Taylor,
Trustee (30)
|
|
3,982
|
|
3,982
|
|
0
|
|
*
|
|
The Kybartai Trust (31)
|
|
7,584
|
|
7,584
|
|
0
|
|
*
|
|
The Wallace Foundation (32)
|
|
15,719
|
|
15,719
|
|
0
|
|
*
|
|
Thomas R. Noonan IRA (33)
|
|
24,999
|
|
24,999
|
|
0
|
|
*
|
|
Trustees of Hamilton College (34)
|
|
15,860
|
|
15,860
|
|
0
|
|
*
|
|
Union Financial Corporation (35)
|
|
3,200
|
|
3,200
|
|
0
|
|
*
|
|
Valkyrie Leasing, LLC (36)
|
|
15,168
|
|
15,168
|
|
0
|
|
*
|
|
William Corbett (37)
|
|
51,817
|
|
51,817
|
|
0
|
|
*
|
|
Zachary Prensky (38)
|
|
19,415
|
|
19,415
|
|
0
|
|
*
|
|
56
*
Represents beneficial ownership of less than 1%
|
|
|
|
(1)
|
|
The information related
to voting and investment control is based on information provided to the
Company by the selling stockholders as of November 5, 2007.
|
|
|
|
(2)
|
|
Comprised
of 4,627 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the 2006 Financings beginning
on page 49 of this prospectus.
|
|
|
|
(3)
|
|
Comprised
of 835 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the 2006 Financings beginning
on page 49 of this prospectus.
|
|
|
|
(4)
|
|
Comprised
of 2,048 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the 2006 Financings beginning
on page 49 of this prospectus.
|
|
|
|
(5)
|
|
Comprised
of 7,584 shares of common stock issuable upon exercise of warrants. Charles
Johnston, vice president of investing of Asset Factoring Ansbacher Bahamas
Ltd., has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the 2006 Financings beginning
on page 49 of this prospectus.
|
|
|
|
(6)
|
|
Comprised
of 50,000 shares of common stock held directly and 25,000 shares of common
stock issuable upon exercise of warrants. Bank of America NA and Harrison H.
Augur are co-trustees and share voting and investment control over these
shares.
|
|
|
|
(7)
|
|
Comprised
of 3,792 shares of common stock issuable upon exercise of warrants. James
Corman, president of Corman Foundation, Inc., has voting and investment
control over these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder tables for the
2003 Financings and 2006 Financings beginning on page 29 and 49 of this
prospectus, respectively.
|
|
|
|
(8)
|
|
Comprised of 133,334 shares of common stock held directly and 85,627
shares of common stock issuable upon exercise of warrants. Mitchell P. Kopin,
the president of Downsview Capital, Inc., or DCI, the general partner of
Cranshire Capital, L.P., or CCLP, has sole voting control and investment
discretion over these shares. Each of Mitchell P. Kopin and DCI disclaims
beneficial ownership of the shares held by CCLP. The selling stockholder is also the
beneficial owner of the securities set forth under its name in the selling
stockholder tables for the January 2004 Financing and 2006 Financings
beginning on page 39 and 49 of this prospectus, respectively.
|
|
|
|
(9)
|
|
Comprised
of 44,415 shares of common stock issuable upon exercise of warrants. Steve
Rabinivice, the chief executive officer of Empire Financial Group, Inc.,
has voting and investment control over these shares. The selling stockholder is also the
beneficial owner of the securities set forth under its name in the selling
stockholder table for the 2006 Financings beginning on page 49 of this
prospectus.
|
|
|
|
(10)
|
|
Comprised
of 759 shares of common stock issuable upon exercise of warrants.
|
|
|
|
(11)
|
|
Comprised
of 60,000 shares of common stock held directly, 18,948 shares of common stock
issuable upon conversion of Series D Preferred Stock and 30,000 shares
of common stock issuable upon exercise of warrants. Jon D. Gruber and J.
Patterson McBaine, as managers of Gruber & McBaine Capital
Management, LLC, have shared voting and investment control over these shares.
The
selling stockholder is also the beneficial owner of the securities set forth
under its name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, 2006 Financings, and March 2007 Financing
beginning on page 29, 44, 49, and 53 of this prospectus, respectively.
|
|
|
|
(12)
|
|
Comprised
of 14,035 shares of common stock issuable upon conversion of Series D
Preferred Stock. Harrison H. Augur is the trustee and has sole voting and
investment control over these shares. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
table for the March 2007 Financing beginning on page 53 of this
prospectus.
|
|
|
|
(13)
|
|
Comprised
of 83,333 shares of common stock held directly and 55,887 shares of common
stock issuable upon exercise of warrants. Joshua Silverman has voting and
investment control over these shares.Mr. Silverman
|
57
|
|
disclaims
beneficial ownership over these shares. The selling stockholder is also the
beneficial owner of the securities set forth under its name in the selling
stockholder tables for the July 2005 Financing and 2006 Financings
beginning on page 44 and 49 of this prospectus, respectively.
|
|
|
|
(14)
|
|
Comprised
of 50,000 shares of common stock held directly, 14,035 shares of common stock
issuable upon conversion of Series D Preferred Stock, and 25,000 shares
of common stock issuable upon exercise of warrants. J. Patterson McBaine, as
a manager of Gruber & McBaine Capital Management, LLC, has shared
voting and investment control over the shares being sold by Gruber &
McBaine International and Lagunitas Partners LP as referenced in footnotes 11
above and 19 below, respectively. The selling stockholder is also the beneficial
owner of the securities set forth under his name in the selling stockholder
tables for the 2003 Financings, July 2005 Financing, 2006 Financings,
and March 2007 Financing beginning on page 29, 44, 49, and 53 of
this prospectus, respectively.
|
|
|
|
(15)
|
|
Comprised
of 33,333 shares of common stock held directly and 16,666 shares of common
stock issuable upon exercise of warrants. Back Bay Management, or BBM, is the
general partner of JMR Capital Partners II LTD. J. Michael Reisert is the
president of BBM and has sole voting and investment control over these
shares.
|
|
|
|
(16)
|
|
Comprised
of 166,666 shares of common stock held directly and 83,333 shares of common
stock issuable upon exercise of warrants. JMR Group is the general partner of
JMR Capital Partners LTD. J. Michael Reisert is the president of JMR Group
and has sole voting and investment control over these shares.
|
|
|
|
(17)
|
|
Comprised
of 50,000 shares of common stock held directly and 25,000 shares of common
stock issuable upon exercise of warrants. Jon D. Gruber is the trustee
and has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the July 2005 Financing
beginning on page 44 of this prospectus.
|
|
|
|
(18)
|
|
Comprised
of 16,666 shares of common stock held directly and 8,333 shares of common
stock issuable upon exercise of warrants.
|
|
|
|
(19)
|
|
Comprised
of 240,000 shares of common stock held directly, 61,755 shares of common
stock issuable upon conversion of Series D Preferred Stock, and 120,000
shares of common stock issuable upon exercise of warrants. Jon D. Gruber and
J. Patterson McBaine, managers of Gruber & McBaine Capital
Management, LLC, have shared voting and investment control over these shares.
The
selling stockholder is also the beneficial owner of the securities set forth
under its name in the selling stockholder tables for the 2003 Financings,
July 2005 Financing, 2006 Financings, and March 2007 Financing
beginning on page 29, 44, 49, and 53 of this prospectus, respectively.
|
|
|
|
(20)
|
|
Comprised
of 7,200 shares of common stock issuable upon exercise of warrants. Zachary
Prensky and Jeffrey Mann have shared voting and investment control over these
shares. Zachary Prensky, an affiliate and 50% owner of Little Bear
Investments LLC, or Little Bear, directly owns 19,415 shares of common stock
issuable upon exercise of warrants referenced in footnote 38 below. Little
Bear disclaims any ownership or control over common stock and warrants held
directly by Mr. Prensky. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
tables for the 2003 Financings, July 2005 Financing, and 2006 Financings
beginning on page 29, 44, and 49 of this prospectus, respectively.
|
|
|
|
(21)
|
|
Comprised
of 51,817 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings, January 2004
Financing, July 2005 Financing, and 2006 Financings beginning on
page 29, 39, 44, and 49 of this prospectus, respectively.
|
|
|
|
(22)
|
|
Comprised
of 400,000 shares of common stock held directly and 200,000 shares of common
stock issuable upon exercise of warrants. Neal Goldman has voting and
investment control over these shares.
|
|
|
|
(23)
|
|
Comprised
of 76 shares of common stock issuable upon exercise of warrants. Corey S.
Ribotsky has voting and investment control over these shares. The selling stockholder
is also the beneficial owner of the securities set forth under its name in
the selling stockholder table for the 2006 Financings beginning on
page 49 of this prospectus.
|
|
|
|
(24)
|
|
Comprised
of 50,000 shares of common stock held directly and 25,000 shares of common
stock issuable upon exercise of warrants. Harrison H. Augur and Robert van
Roijen, Jr. are the managing partners of Patience Partners, L.P. and
have shared voting and investment control over these shares.
|
58
(25)
|
|
Comprised
of 100,000 shares of common stock held directly and 50,000 shares of common
stock issuable upon exercise of warrants. Jeffrey H. Porter is the general
partner of Porter Partners, L.P. and has voting and investment control over
these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
January 2004 Financing beginning on page 39 of this prospectus.
|
|
|
|
(26)
|
|
Comprised
of 166,668 shares of common stock held directly and 83,334 shares of common
stock issuable upon exercise of warrants. RHP Master Fund, Ltd., or RHPMF, is
a party to an investment agreement with Rock Hill Investment Management,
L.P., or RHIM, a limited partnership of which the general partner is RHP
General Partner, LLC. Pursuant to such agreement, RHIM directs the voting and
disposition of shares owned by RHPMF. Messrs. Wayne Bloch and Peter
Lockhart own all of the interests in RHP General Partner, LLC. The aforementioned
entities and individuals disclaim beneficial ownership of the Companys
securities owned by RHPMF.
|
|
|
|
(27)
|
|
Comprised
of 3,792 shares of common stock issuable upon exercise of warrants. Michael
Withers has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the 2006 Financings beginning
on page 49 of this prospectus.
|
|
|
|
(28)
|
|
Comprised
of 400,000 shares of common stock held directly, 70,176 shares of common
stock issuable upon conversion of Series D Preferred Stock, and 200,000
shares of common stock issuable upon exercise of warrants. Robert D. van
Roijen, Jr. is the trustee and has voting and investment control over
these shares. The selling stockholder is also the beneficial owner of the
securities set forth under its name in the selling stockholder table for the
March 2007 Financing beginning on page 53 of this prospectus.
|
|
|
|
(29)
|
|
Comprised
of 3,792 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings and 2006
Financings beginning on page 29 and 49 of this prospectus, respectively.
|
|
|
|
(30)
|
|
Comprised
of 3,982 shares of common stock issuable upon exercise of warrants. Trude C.
Taylor is the trustee and has sole voting and investment control over these
shares.
|
|
|
|
(31)
|
|
Comprised
of 7,584 shares of common stock issuable upon exercise of warrants. Zachary
Prensky is the trustee of the Kybartai Trust and has sole voting and
investment control over these shares. The selling stockholder is also the beneficial
owner of the securities set forth under its name in the selling stockholder
table for the 2006 Financings beginning on page 49 of this prospectus.
|
|
|
|
(32)
|
|
Comprised
of 15,719 shares of common stock issuable upon conversion of Series D
Preferred Stock. The following are officers of The Wallace Foundation:
M. Christine DeVita, president, Rob D. Nagel, treasurer & director
of investments, Mary E. Geras, assistant treasurer and director of finance,
and Sharon W. Clark, director of operations. Any two such officers acting
together may exercise voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder table for the March 2007 Financing
beginning on page 53 of this prospectus.
|
|
|
|
(33)
|
|
Comprised
of 16,666 shares of common stock held directly and 8,333 shares of common
stock issuable upon exercise of warrants. Thomas R. Noonan has voting and
investment control over these shares.
|
|
|
|
(34)
|
|
Comprised
of 15,860 shares of common stock issuable upon conversion of Series D
Preferred Stock. Peter J. Blanchfield, chief investment officer and Karen
Leach, vice president of administration and finance, of the Trustees of
Hamilton College have shared voting and investment control over these shares.
The
selling stockholder is also the beneficial owner of the securities set forth
under its name in the selling stockholder table for the March 2007
Financing beginning on page 53 of this prospectus.
|
|
|
|
(35)
|
|
Comprised
of 3,200 shares of common stock issuable upon exercise of warrants. Thomas R.
Noonan is the president of Union Financial Corporation and has voting and
investment control over these shares.
|
|
|
|
(36)
|
|
Comprised
of 15,168 shares of common stock issuable upon exercise of warrants. Charles
Simonyi has voting and investment control over these shares. The selling
stockholder is also the beneficial owner of the securities set forth under
its name in the selling stockholder tables for the 2003 Financings and 2006
Financings beginning on page 29 and 49 of this prospectus, respectively.
|
59
(37)
|
|
Comprised
of 51,817 shares of common stock issuable upon exercise of warrants. The selling
stockholder is also the beneficial owner of the securities set forth under
his name in the selling stockholder tables for the 2003 Financings,
January 2004 Financing, July 2005 Financing, and 2006 Financings
beginning on page 29, 39, 44, and 49 of this prospectus, respectively.
|
|
|
|
(38)
|
|
Comprised
of 19,415 shares of common stock issuable upon exercise of warrants. Zachary
Prensky is an affiliate and 50% owner of Little Bear Investments LLC, or
Little Bear. Mr. Prensky beneficially owns the securities held by Little
Bear referenced in footnote 20 above. Mr. Prensky is also the trustee of
The Kybartai Trust and beneficially owns the securities held by The Kybartai
Trust referenced in footnote 31 above. The selling stockholder is also the
beneficial owner of the securities set forth under his name in the selling
stockholder tables for the July 2005 Financing and 2006 Financings
beginning on page 44 and 49 of this prospectus, respectively.
|
Selling stockholders in
the September 2007 Financing who are registered broker-dealers are underwriters
within the meaning of the Securities Act. In addition, selling
stockholders who are affiliates of registered broker-dealers may be deemed to
be underwriters within the meaning of the Securities Act if such selling
stockholders (a) did not acquire its Common Stock, warrants or underlying
stock in the ordinary course of business or (b) had any agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock, warrants or underlying common stock.
60
RELATIONSHIP OF SELLING STOCKHOLDERS
TO THE COMPANY
Gruber & McBaine
Capital Management, LLC and its affiliates, which include Lagunitas Partners LP
and Gruber & McBaine International, beneficially own more than 10% of
our issued and outstanding common stock. J. Patterson McBaine, a selling
stockholder, together with Jon D. Gruber, exercises voting and investment
control over the shares held by Gruber & McBaine Capital Management,
LLC, Lagunitas Partners LP, and Gruber & McBaine International. In
addition, Empire Financial Group, Inc. served as a placement agent for the
September 2007 Financing and 2006 Financings. None of the other selling
stockholders listed above has held any position or office, or has had any
material relationship, with us or any of our affiliates within the past three
years.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 31, 2008,
with respect to the beneficial ownership of shares of our common stock and Series B
Preferred Stock by (i) each person known by us to be the beneficial owner
of more than five percent of our common stock or Series B Preferred Stock,
(ii) each director, (iii) each named executive officer and (iv) all
directors and executive officers as a group
.
|
|
Beneficial Ownership(1)
|
|
|
|
Series B Preferred Stock
|
|
Common Stock
|
|
Name and Address of Beneficial Owner
|
|
Number of
Shares
|
|
Percent of
Class (2)
|
|
Number of
Shares
|
|
Percent of
Class (3)
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
S. James Miller, Jr.(4)
|
|
0
|
|
*
|
|
694,442
|
|
3.7
|
%
|
John Callan(5)
|
|
0
|
|
*
|
|
70,967
|
|
*
|
|
David Carey(6)
|
|
0
|
|
*
|
|
13,340
|
|
*
|
|
G. Steve Hamm(7)
|
|
0
|
|
*
|
|
17,424
|
|
*
|
|
John Holleran(8)
|
|
0
|
|
*
|
|
29,355
|
|
*
|
|
David Loesch(9)
|
|
0
|
|
*
|
|
43,679
|
|
*
|
|
Wayne Wetherell(10)
|
|
0
|
|
*
|
|
325,180
|
|
1.8
|
|
William Willis(11)
|
|
0
|
|
*
|
|
224,172
|
|
1.2
|
|
Charles AuBuchon(12)
|
|
0
|
|
*
|
|
203,336
|
|
1.1
|
|
David Harding (13)
|
|
0
|
|
*
|
|
83,425
|
|
*
|
|
Total Shares Held By Directors and
Executive Officers
|
|
0
|
|
*
|
|
1,705,320
|
|
8.7
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
Gruber & McBaine Capital
Management LLC 50 Osgood
Place San Francisco, CA(14)
|
|
0
|
|
*
|
|
4,249,916
|
|
22.4
|
|
Harvey and Helen Kohn (15)
|
|
0
|
|
*
|
|
1,025,808
|
|
5.5
|
|
Wesley Hampton
|
|
16,000
|
|
6.7
|
%
|
3,033
|
|
*
|
|
Howard Harrison(16)
|
|
20,000
|
|
8.4
|
|
4,197
|
|
*
|
|
Darrelyn Carpenter(17)
|
|
28,500
|
|
11.9
|
|
59,270
|
|
*
|
|
*
|
|
Less
than one percent.
|
|
|
|
(1)
|
|
This table is based our
records and Schedules 13D and 13G filed with the SEC. Unless otherwise
indicated in the footnotes to this table and subject to community property
laws where applicable, we believe that each of the stockholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Unless otherwise indicated, the address for
each listed stockholder is c/o ImageWare Systems, Inc., 10883 Thornmint
Road, San Diego, CA 92127.
|
|
|
|
(2)
|
|
The percentages set
forth below are based on 239,400 shares of Series B Preferred Stock
outstanding as of March 31, 2008.
The holders of Series B Preferred Stock will have one vote for
each share of common stock into which their shares of Series B Preferred
Stock were convertible, with any fractional shares (determined on an
aggregate conversion basis for each such holder) being rounded to the nearest
whole share. As of March 31, 2008, each share of Series B Preferred
Stock was convertible into approximately 0.1979 shares of our common stock.
|
|
|
|
(3)
|
|
The percentages set
forth below are based on 18,332,788 shares of common stock outstanding as of
March 31, 2008.
|
61
(4)
|
|
Mr. Miller serves
as the Chairman of our Board of Directors and our Chief Executive Officer.
Includes 84,680 shares held jointly with spouse and by sons and 389,085
options exercisable within 60 days of March 31, 2008 .
|
|
|
|
(5)
|
|
Includes 30,967 options
exercisable within 60 days of March 31, 2008.
|
|
|
|
(6)
|
|
Includes 8,340 options
exercisable within 60 days of March 31, 2008.
|
|
|
|
(7)
|
|
Includes 17,424 options
exercisable within 60 days of March 31, 2008.
|
|
|
|
(8)
|
|
Includes 28,693 options
exercisable within 60 days of March 31, 2008.
|
|
|
|
(9)
|
|
Includes 34,679 options
exercisable within 60 days of March 31, 2008.
|
|
|
|
(10)
|
|
Includes 188,834
options exercisable within 60 days of March 31, 2008.
|
|
|
|
(11)
|
|
Includes 224,172
options exercisable within 60 days of March 31, 2008.
|
|
|
|
(12)
|
|
Includes 183,336
options exercisable within 60 days of March 31, 2008.
|
|
|
|
(13)
|
|
Includes 83,425 options
exercisable within 60 days of March 31, 2008 .
|
|
|
|
(14)
|
|
Based on certain of our
records and Schedule 13G filed with the SEC on January 29, 2008.
Includes 610,164 shares issuable upon exercise of warrants.
|
|
|
|
(15)
|
|
Based on
Schedule 13G filed with the SEC on June 12, 2007. Includes 385,748
shares issuable upon exercise of warrants.
|
|
|
|
(16)
|
|
The number of shares of
common stock beneficially owned includes 406 shares held directly and 3,791
shares of common stock issuable upon conversion of Series B Preferred
Stock.
|
|
|
|
(17)
|
|
The number of shares of
common stock beneficially owned includes 51,027 shares held directly, 5,402
shares of common stock issuable upon conversion of Series B Preferred
Stock, and 2,841 shares of common stock held by other individuals for which
Mr. Carpenter is either custodian or trustee and exercises voting power.
|
PLAN
OF DISTRIBUTION
We are registering the sale of shares of our common
stock on behalf of the selling stockholders. The selling stockholders and any
of their donees, pledgees, transferees or other successors-in-interest may,
from time to time, sell any or all of their shares of our common stock on AMEX
or any other stock exchange, market or trading facility on which the shares are
traded or in private transactions. These sales may be at fixed or negotiated
prices. The selling stockholders may use any one or more of he following
methods when selling shares:
·
ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers;
·
block trades in which the
broker-dealer will attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction;
·
purchases by a broker-dealer as
principal and resale by the broker-dealer for its account;
·
an exchange distribution in
accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
settlement of short sales entered
into after the effective date of the registration statement of which this
prospectus is a part;
62
·
broker-dealers may agree with the
selling stockholders to sell a specified number of such shares at a stipulated
price per share;
·
through the writing or settlement of
options or other hedging transactions, whether through an options exchange or
otherwise;
·
a combination of any such methods of
sale; or
·
any other method permitted pursuant
to applicable law.
The selling stockholders may also sell shares under Rule 144
under the Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may
arrange for other brokers-dealers to participate in sales. Broker-dealers may
receive commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated, but, except as set forth in a supplement to this
prospectus, in the case of an agency transaction not in excess of a customary
brokerage commission in compliance with NASDR Rule 2440; and in the case
of a principal transaction a markup or markdown in compliance with NASDR
IM-2440.
In connection with the sale of the common stock or
interests therein, the selling stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of the common stock short
and deliver these securities to close out their short positions entered into
after the effective date of the registration statement of which this prospectus
is a part, or loan or pledge the common stock to broker-dealers that in turn
may sell these securities. The selling stockholders may also enter into option
or other transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the delivery to
such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The selling stockholders and any broker-dealers or
agents that are involved in selling the shares may be deemed to be underwriters
within the meaning of the Securities Act in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay certain fees and
expenses incurred by the Company incident to the registration of the shares.
The Company has agreed to indemnify the selling stockholders, its directors and
officers and each person who controls the selling stockholders (within the
meaning of Section 15 of the Securities Act) against certain claims,
losses, damages and liabilities, including liabilities under the Securities
Act.
Because the selling stockholders may be deemed to be a
underwriters within the meaning of the Securities Act, they will be subject
to the prospectus delivery requirements of the Securities Act including Rule 172
thereunder. There is no underwriter or coordinating broker acting in connection
with the proposed sale of the resale shares by the selling stockholders.
We agreed to keep this prospectus effective until the
earlier of (i) the date on which the shares may be resold by the selling
stockholders without registration and without regard to any volume limitations
by reason of Rule 144(k) under the Securities Act or any other rule of
similar effect or (ii) all of the shares have been sold pursuant to this
prospectus or Rule 144 under the Securities Act or any other rule of
similar effect. The resale shares will
be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws.
In addition, in certain states, the resale shares may not be sold unless
they have been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is available and
is complied with.
Under applicable rules and regulations under the
Exchange Act, any person engaged in the distribution of the resale shares may
not simultaneously engage in market making activities with respect to the common
stock for the applicable restricted period, as defined in Regulation M, prior
to the commencement of the distribution. In addition, the selling stockholders
will be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the common stock by the selling stockholders
or any other person. We will make copies of this prospectus available to the
selling stockholders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act.
63
EXPERTS
Stonefield Josephson, Inc., independent
registered public accounting firm, has audited our financial statements
included in our Annual Report on Form 10-K for the year ended December 31,
2007, as set forth in its report (which contains an explanatory paragraph
describing conditions that raise substantial doubt about our ability to
continue as a going concern as described in Note 1 to the consolidated
financial statements), which is incorporated by reference in this prospectus
and elsewhere in the registration statement of which this prospectus forms a
part. Our financial statements are incorporated by reference in reliance on
Stonefield Josephson, Inc.s report, given on their authority as experts
in accounting and auditing.
LEGAL MATTERS
The validity of our common stock offered hereby
has been passed upon for us by Paul, Hastings, Janofsky & Walker LLP,
San Diego, California.
WHERE YOU CAN FIND MORE INFORMATION
This
prospectus is part of a Post Effective Amendment on Form S-1 to Form SB-2
and Forms S-3 Registration Statement that we filed with the SEC. Certain
information in the registration statement has been omitted from this prospectus
in accordance with the rules and regulations of the SEC.
We
electronically file annual, quarterly and special reports, proxy and
information statements and other information with the SEC. The public may read
and copy any materials we file with the SEC at the SECs Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is http://www.sec.gov.
Our website address is www.iwsinc.com. Information contained in, or accessible
through, our website is not a part of this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to incorporate by reference the information we file with them.
This means that we can disclose important information to you by referring to
other documents filed with the SEC that contain that information.
The
following documents filed with the SEC are incorporated by reference into this
prospectus:
(a)
Annual Report on Form 10-K for the year ended December 31, 2007 filed
with the SEC on April 15, 2008;
(b) Current Reports on Form 8-K filed with
the SEC, March 6, 2008, March 12, 2008, March 18, 2008, April 1,
2008, April 3, 2008, and April 4, 2008; and
(c) Description of our common stock contained in
our Registration Statement on Form 8-A filed on March 21, 2000 (File No. 001-15757),
pursuant to Section 12(b) of the Exchange Act, including any
amendment or report filed for the purpose of updating such description.
You
may obtain a copy of any of the above-referenced documents, at no cost, from
our website at www.iwsinc.com, or by writing or telephoning us at the following
address:
Corporate Secretary
ImageWare Systems, Inc.
10883 Thornmint Road
San Diego, California 92127
(858) 673-8600
64
You should rely only on the information provided
or incorporated by reference in this registration statement or any related
prospectus. We have not authorized anyone to provide you with different
information. You should not assume that the information in this registration
statement or any related prospectus, including any information incorporated
herein by reference, is accurate as of any date other than the date on the
front of the applicable document, or such earlier date as is expressly stated
or otherwise apparent with respect to such incorporated information in the
applicable document, regardless of the time of delivery of this prospectus or
any sale of our common stock. Our business, financial condition, results of
operations and prospects may have changed since any such date.
65
Part II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 13
.
Other
Expenses of Issuance and Distribution
The following table lists the costs and
expenses payable by the Registrant in connection with the sale of the common
stock covered by this prospectus other than any sales commissions or discounts,
which expenses will be paid by the selling stockholders. All amounts shown are
estimates except for the SEC registration fee.
SEC registration fee
|
|
$
|
0
|
|
Legal fees and expenses
|
|
65,000
|
|
Accounting fees and expenses
|
|
5,000
|
|
Printing expenses
|
|
25,000
|
|
Miscellaneous fees and expenses
|
|
5,000
|
|
Total
|
|
$
|
100,000
|
|
Item 14
.
Indemnification
of Directors and Officers
The Registrant is
incorporated under the laws of the State of Delaware. Section 145 of the
Delaware General Corporation Law provides that a Delaware corporation may
indemnify any persons who are, or are threatened to be made, parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation), by reason of the fact that such person was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such person as an officer, director, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the corporations
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his or her conduct was illegal. A Delaware
corporation may indemnify any persons who are, or are threatened to be made, a
party to any threatened, pending or completed action or suit by or in the right
of the corporation by reason of the fact that such person was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit provided such
person acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporations best interests except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses that such officer or director has actually and reasonably incurred.
The Registrants amended and restated certificate of incorporation and amended
and restated bylaws provide for the indemnification of the Registrants
directors and officers to the fullest extent permitted under the Delaware
General Corporation Law.
The Registrants amended
and restated bylaws provide that expenses incurred by any officer or director
in defending any such action, suit or proceeding in advance of its final
disposition shall be paid by the Registrant, provided, however, that if
required by the Delaware General Corporation Law, such expenses shall be
advanced only upon delivery to the Registrant of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified by the Registrant.
Section 174 of the
Delaware General Corporation Law provides, among other things, that a director
who willfully or negligently approves of an unlawful payment of dividends or an
unlawful stock purchase or redemption may be held liable for such actions. A
director who was either absent when the unlawful actions were approved, or
dissented at the time, may avoid liability by causing his or her dissent to
such actions to be entered in the books containing minutes of the meetings of
the board of directors at the time such action occurred or immediately after
such absent director receives notice of the unlawful acts.
As permitted by the
Delaware General Corporation Law, the Registrant has entered into indemnity
agreements with each of its directors and executive officers that require the
Registrant to indemnify such persons against any and all expenses including
attorneys, witness or other professional fees and related disbursements and
other out-of-pocket costs incurred by such director or officer in connection
with the investigation, defense or appeal of a proceeding or establishing or
enforcing a
II-1
right to indemnification
under the indemnity agreements, Delaware General Corporation Law or otherwise,
and amounts paid in settlement by or on behalf of such director or officer, but
will not include any judgments, fines or penalties actually levied against such
director or officer for such individuals violations of law. Proceedings that
are covered by the indemnity agreements include any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding (including an action by or in the Registrants right),
and whether civil, criminal, administrative or investigative in nature to which
such director or officer is, was or at any time will be involved as a party, or
is threatened to be made a party, by reason of the fact: (i) that such
director or officer is or was a director or officer; or (ii) that such
director or officer is or was serving at the Registrants request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, whether or not
serving in such capacity at the time any liability or expense is incurred for
which indemnification, reimbursement, or advancement of expenses may be
provided under the indemnity agreements.
Such additional indemnity
is not available, however, with respect to: (i) a final judgment rendered
against such director or officer for an accounting, disgorgement or repayment
of profits made from the purchase or sale by such individual of securities of
the Registrant against such individual or in connection with a settlement by or
on behalf of such individual to the extent it is acknowledged by him or her and
the Registrant that such amount paid in settlement resulted from the individuals
conduct from which the individual received monetary personal profit, pursuant
to the provisions of Section 16(b) of the Exchange Act or other
provisions of any federal, state or local statute or rules and regulations
thereunder; (ii) a final judgment that such director or officers conduct
was in bad faith, knowingly fraudulent or deliberately dishonest or constituted
willful misconduct (but only to the extent of such specific determination); (iii) on
account of conduct that is established by a final judgment as constituting a
breach of such director or officers duty of loyalty to the Registrant or
resulting in any personal profit or advantage to which such individual is not
legally entitled; (iv) claims for which payment is actually made to such
director or officer under a valid and collectible insurance policy or under a
valid and enforceable indemnity clause, bylaw or agreement, except in respect
of any excess beyond payment under such insurance, clause, bylaw or agreement;
or (v) remuneration paid to such director or officer, if it is determined
by final judgment that such remuneration was in violation of law (and, in this
respect, both the Registrant and such individual have been advised that the
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication). Nor do the indemnity agreements provide
for additional indemnity with respect to proceedings or claims initiated or
brought by such director or officer against the Registrant or its directors,
officers, employees or other agents, except with respect to: (a) indemnification
required by applicable law; (b) proceedings authorized by the Registrants
board of directors; (c) indemnification provided by the Registrant in its
sole discretion pursuant to its powers under the Delaware General Corporation
Law; or (d) proceedings brought to enforce a right to indemnification
under the indemnity agreements. The indemnity agreements do not obligate the
Registrant to pay for any amounts paid in settlement of a proceeding effected
without the Registrants written consent. The indemnification agreements also
set forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
The Registrant has an
insurance policy covering its officers and directors with respect to certain
liabilities, including liabilities arising under the Securities Act of 1933, as
amended (the Securities Act) or otherwise.
Item 15. Recent Sales of Unregistered
Securities
Since January 2005, we have issued the following securities that
were not registered under the Securities Act:
(1)
In April 1, 2005, the Registrant sold and issued to Argus Solutions Ltd.,
a New South Wales, Australia corporation and accredited investor, an aggregate
of 71,225 shares of the Registrants common stock for aggregate gross proceeds
of approximately $250,000. This transaction was exempt from registration under Section 4(2) of
the Securities Act.
(2)
On July 22, 2005, the Registrant sold and issued to accredited investors
1,203,489 shares of the Registrants common stock, and warrants to purchase up
to an aggregate of 457,356 shares of the Registrants common stock, for
aggregate gross proceeds of approximately $3.1 million. Additionally, the
Registrant issued the finder in the transaction a warrant to purchase up to an
aggregate of 90,262 shares of the Registrants common stock. These transactions
were exempt from registration under Section 4(2) of the Securities
Act.
(3) On July 28, 2005, the Registrant sold and issued to
accredited investors 193,798 shares of the Registrants common stock, and
warrants to purchase up to an aggregate of 73,642 shares of the Registrants
common stock, for aggregate gross proceeds of approximately $500,000.
Additionally, the Registrant issued the finder in the transaction a warrant to
purchase up to an aggregate of 14,534 shares of the Registrants common stock.
These transactions were exempt from registration under Section 4(2) of
the Securities Act.
II-2
(4) On March 17, 2006, the Registrant consummated a loan in
the aggregate amount of $1,550,000 (the Loan) from multiple lenders (the Lenders)
in consideration for the issuance of secured promissory notes (the Notes) to
the Lenders. In connection with the Loan, the Registrant issued the Lenders
warrants to purchase up to an aggregate of 387,500 shares of the Registrants
common stock. This transaction was exempt from registration under Section 4(2) of
the Securities Act.
(5) On November 14, 2006, the Registrant sold and issued to
accredited investors (the Series C Investors) an aggregate of 2,300
shares of the Registrants Series C 8% Convertible Preferred Stock (the Series C
Financing) and issued to the Series C Investors warrants to purchase up
to an aggregate of 115,000 shares of the Registrants common stock, for
aggregate gross proceeds of $2,300,000. In connection with the transaction, the
Registrant issued the placement agent and its affiliates warrants to purchase
up to an aggregate of 40,000 shares of the Registrants common stock. These
transactions were exempt from registration under Section 4(2) of the
Securities Act and Rule 506 promulgated thereunder.
Additionally, the consummation of the Series C Financing caused
all amounts outstanding under the Notes to become immediately due and payable
in full. In consideration for the Lenders written waiver of the acceleration
of the Notes in connection with the Series C Financing the Registrant
issued the Lenders warrants to purchase up to an aggregate of 200,250 shares of
the Registrants common stock. This transaction was also exempt from
registration under Section 4(2) of the Securities Act and Rule 506
promulgated thereunder.
(6) On March 9, 2007, the Registrant sold and issued to
accredited investors (the Series D Investors) an aggregate of 1,500
shares of the Registrants Series D 8% Convertible Preferred Stock and
issued to the Series D Investors warrants to purchase up to an aggregate
of 59,207 shares of the Registrants common stock, for aggregate gross proceeds
of $1,500,000. This transaction was exempt from registration under Section 4(2) of
the Securities Act and Rule 506 promulgated thereunder.
(7) On September 25, 2007, the Registrant sold and issued to
accredited investors (the Investors) an aggregate of 2,016,666 shares of the
Registrants common stock, and issued to the Investors warrants (the September 2007
Investor Warrants) to purchase up to an aggregate of 1,008,333 shares of the
Registrants common stock, for aggregate gross proceeds of approximately
$3,000,000. Additionally, the Registrant issued the placement agent in the
transaction a warrant to purchase up to an aggregate of 151,249 shares of the
Registrants common stock. This transaction was exempt from registration under Section 4(2) of
the Securities Act and Rule 506 promulgated thereunder.
(8) On December 19, 2007, the Registrant
sold and issued to an accredited investor, Sol Logic, 677,940 shares of
restricted common stock of the Registrant (the Initial Shares), and, in the
event certain milestones are achieved, the Registrant will issue to Sol Logic
the number of shares of restricted common stock (the Additional Shares), equal
to the quotient obtained by dividing $1,921,924 by the greater of (A) $1.10
and (B) the volume weighted average closing price of the Registrants
common stock over the 20 trading-day period immediately prior to the date the
Additional Shares are issued, as reported on the American Stock Exchange or the
Over-the-Counter Bulletin Board. The Initial Shares were issued to Sol Logic in
consideration for certain assets of Sol Logic, including customer contracts,
software licenses and intellectual property. This transaction was exempt from
registration under Section 4(2) of the Securities Act.
(9) On March 12, 2008, the Registrant reduced the price of
the Warrants, which initially had an exercise price of $1.67 per share, to an
exercise price of $1.00 per share, in consideration for their immediate
exercise (the Warrant Repricing) by the Investors who participated in the
Warrant Repricing (the Participating Investors). In addition, the Registrant also issued to
the Participating Investors new warrants to purchase up to an aggregate of
270,833 shares of the Registrants common stock. The Registrant received aggregate gross
proceeds of $541,666 from the Warrant Repricing. This transaction was exempt from registration
under Section 4(2) of the Securities Act and Rule 506
promulgated thereunder.
Item 16. Exhibits and Financial
Statement Schedules
(a)
Exhibits
Exhibit
Number
|
|
Description
|
2.1
|
|
Stock Purchase Agreement, dated March 1,
2005, between the Registrant and Argus Solutions Ltd. (incorporated by reference
to Exhibit 2.1 to the Registrants Current Report on Form 8-K,
filed March 9, 2005).
|
2.2
|
|
Agreement and Plan of Merger, dated October 27,
2005 (incorporated by reference to Annex A to the Registrants Definitive
Proxy Statement on Schedule 14A, filed November 15, 2005).
|
3.1
|
|
Certificate of Incorporation (incorporated
by reference to Annex B to the Registrants Definitive Proxy Statement on
Schedule 14A, filed November 15, 2005).
|
II-3
Exhibit
Number
|
|
Description
|
3.2
|
|
Bylaws (incorporated by reference to Annex
C to the Registrants Definitive Proxy Statement on Schedule 14A, filed November 15,
2005).
|
3.3
|
|
Certificate of Designations of Preferences,
Rights and Limitations of Series C 8% Convertible Preferred Stock dated November 2,
2006, as amended (incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on Form 8-K, filed November 20, 2006).
|
3.4
|
|
Certificate
of Designations of Preferences, Rights and Limitations of Series D 8% Convertible
Preferred Stock dated March 8, 2007 (incorporated by reference to Exhibit 3.1
to the Registrants Current Report on Form 8-K, filed March 15,
2007).
|
4.1
|
|
Warrant to Purchase Common Stock in favor
of Imperial Bank, dated January 15, 1998 (incorporated by reference to Exhibit 10.42
to the Registrants Registration Statement on Form SB-2 (No. 333-93131),
filed December 20, 1999, as amended).
|
4.2
|
|
Registration Rights Agreement, dated May 22,
2002, by and between the Registrant and Perseus 2000 L.L.C. (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed May 24, 2002).
|
4.3
|
|
Warrant to Purchase Common Stock, dated June 13,
2003, issued by the Registrant to L.F. Global Holdings, LLC (incorporated by
reference to Exhibit 10.5 to the Registrants Current Report on Form 8-K,
filed June 20, 2003).
|
4.4
|
|
Form of Warrant dated November 24,
2003 (incorporated by reference to Exhibit 99.2 to the Registrants
Current Report on Form 8-K, filed February 9, 2004).
|
4.5
|
|
Form of Registration Rights Agreement
dated November 24, 2003 (incorporated by reference to Exhibit 99.3
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
|
4.6
|
|
Form of Registration Rights Agreement
dated March 13, 2003 (incorporated by reference to Exhibit 10.2 to
the Registrants Quarterly Report on Form 10-QSB, filed May 15,
2003).
|
4.7
|
|
Form of Warrant dated January 29,
2004 (incorporated by reference to Exhibit 99.5 to the Registrants
Current Report on Form 8-K, filed February 9, 2004).
|
4.8
|
|
Form of Registration Rights Agreement
dated January 29, 2004 (incorporated by reference to Exhibit 99.8
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
|
4.9
|
|
Form of Warrant dated July 22,
2005 and dated July 28, 2005 (incorporated by reference to Exhibit A
to Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed July 26, 2005).
|
4.10
|
|
Form of Warrant dated March 17,
2006 (incorporated by reference to Exhibit 4.1 to the Registrants
Quarterly Report on Form 10-Q, filed May 22, 2006).
|
4.11
|
|
Registration Rights Agreement, dated November 14,
2006 by and among the Registrant and certain investors (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K,
filed November 20, 2006).
|
4.12
|
|
Form of Warrant to Purchase Common
Stock dated November 14, 2006 (incorporated by reference to Exhibit 10.3
to the Registrants Current Report on Form 8-K, filed November 20,
2006).
|
4.13
|
|
Registration
Rights Agreement, dated March 9, 2007, by and among the Registrant and
certain accredited investors (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K, filed March 15,
2007).
|
4.14
|
|
Form of
Warrant to Purchase Common Stock dated March 9, 2007 (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed March 15, 2007).
|
4.15
|
|
Registration
Rights Agreement, dated September 25, 2007, by and among the Registrant
and certain accredited investors (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K, filed September 26,
2007).
|
4.16
|
|
Form of
Warrant to Purchase Common Stock dated September 25, 2007 (incorporated
by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed September 26, 2007).
|
4.17
|
|
Registration
Rights Agreement, dated December 19, 2007, by and among the Registrant,
Sol Logic, and Wink Jones, as the representative of Sol Logic (incorporated
by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K,
filed December 21, 2007).
|
4.18
|
|
Form of Warrant to Purchase Common
Stock dated March 12, 2008 (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K, filed March 18,
2008).
|
4.19
|
|
Amendment No.1 to Registration Rights
Agreement, dated March 28, 2008, by and among the Registrant, Sol Logic,
and Wink Jones, as the representative of Sol Logic (incorporated by reference
to Exhibit 4.1 to the Registrants Current Report on Form 8-K,
filed April 1, 2008).
|
5.1
|
|
Opinion of Paul, Hastings, Janofsky &
Walker LLP**
|
10.1
|
|
Employment Agreement, dated September 27,
2005, between the Registrant and S. James Miller (incorporated by reference
to Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed September 30, 2005).
|
II-4
Exhibit
Number
|
|
Description
|
10.2
|
|
Employment Agreement, dated September 27,
2005, between the Registrant and Wayne G. Wetherell (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K,
filed September 30, 2005).
|
10.3
|
|
Change of Control and Severance Benefits
Agreement, dated October 31, 2005, between Registrant and Charles
Aubuchon (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed November 3, 2005).
|
10.4
|
|
Offer
of Employment Letter Agreement, dated December 19, 2007, between the
Registrant and Frank Mitchell (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K, filed December 21,
2007).
|
10.5
|
|
Form of Indemnification Agreement
entered into by the Registrant with its directors and executive officers
(incorporated by reference to Exhibit 10.4 to the Registrants
Registration Statement on Form SB-2 (No. 333-93131), filed December 20,
1999, as amended).
|
10.6
|
|
1994 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.6 to the Registrants
Registration Statement on Form SB-2 (No. 333-93131), filed December 20,
1999, as amended).
|
10.7
|
|
1994 Nonqualified Stock Option Plan (incorporated
by reference to Exhibit 10.7 to the Registrants Registration Statement
on Form SB-2 (No. 333-93131), filed December 20, 1999, as
amended).
|
10.8
|
|
Amended and Restated 1999 Stock Plan Award
(incorporated by reference to Appendix B of the Registrants Definitive Proxy
Statement on Schedule 14A, filed November 21, 2007).
|
10.9
|
|
Form of Stock Option Agreement
(incorporated by reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K, filed July 14, 2005).
|
10.10
|
|
2001 Equity Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-QSB,
filed November 14, 2001).
|
10.11
|
|
Form of Restricted Stock Bonus
Agreement (incorporated by reference to Exhibit 99.3 to the Registrants
Registration Statement on Form S-8, filed November 27, 2001).
|
10.12
|
|
Form of Stock Option Agreement
(incorporated by reference to Exhibit 99.2 to the Registrants
Registration Statement on Form S-8, filed November 27, 2001).
|
10.13
|
|
Note and Warrant Purchase Agreement, dated May 22,
2002, by and between the Registrant and Perseus (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed May 24,
2002).
|
10.14
|
|
Form of Securities Purchase Agreement
dated November 14, 2003 (incorporated by reference to Exhibit 99.1
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
|
10.15
|
|
Form of Securities Purchase Agreement
dated January 29, 2004 (incorporated by reference to Exhibit 99.4
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
|
10.16
|
|
Offer of Restricted Stock in Exchange for
Certain Stock Options Previously Granted Offer Made to James Miller
(incorporated by reference to Exhibit 10.1 to the Registrants Quarterly
Report on Form 10-QSB, filed August 16, 2004).
|
10.17
|
|
Offer of Restricted Stock in Exchange for
Certain Stock Options Previously Granted Offer Made to Wayne Wetherell,
dated March 30, 2004 (incorporated by reference to Exhibit 10.3 to
the Registrants Quarterly Report on Form 10-QSB, filed August 16,
2004).
|
10.18
|
|
Form of Securities Purchase Agreement
dated July 22, 2005 and July 28, 2005 (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed July 26,
2005).
|
10.19
|
|
Security Agreement, dated March 17,
2006, executed by the Registrant in favor of Little Bear Investments, LLC
(incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K, filed March 23, 2006).
|
10.20
|
|
Form of Secured Promissory Note dated March 17,
2006 (incorporated by reference to Exhibit 10.1 to the Registrants
Quarterly Report on Form 10-Q, filed May 22, 2006).
|
10.21
|
|
Securities Purchase Agreement, dated November 14,
2006 by and among the Registrant and certain accredited investors
(incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K, filed November 20, 2006).
|
10.22
|
|
Securities
Purchase Agreement, dated March 9, 2007, by and among the Registrant and
certain accredited investors (incorporated by reference to Exhibit 10.1
to the Registrant Current Report on Form 8-K, filed March 15,
2007).
|
10.23
|
|
Securities
Purchase Agreement, dated September 25, 2007, by and among the
Registrant and certain accredited investors (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K, filed September 26,
2007).
|
10.24
|
|
Asset
Purchase Agreement and Plan of Reorganization, by and among Sol Logic, Frank
Mitchell, as shareholder of Sol Logic, and Wink Jones, as the representative
of Sol Logic (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed December 21, 2007).
|
10.25
|
|
Amendment No.1 to Asset Purchase Agreement
and Plan of Reorganization, by and between the Registrant and Wink Jones, as
the representative of Sol Logic (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K, filed April 1,
2008).
|
10.26
|
|
Product Line Purchase Agreement, dated November 30,
2006, by and between the Registrant and PhotoLynx, Inc. (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed December 26, 2006).
|
II-5
Exhibit
Number
|
|
Description
|
10.27
|
|
Standard Commercial Lease, dated September 26,
2003, by and between Thornmint I and the Registrant (incorporated by
reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-QSB,
filed November 14, 2003).
|
10.28
|
|
Amendment to Office Lease, dated June 12,
2006, by and between Thornmint I and the Registrant (incorporated by
reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q,
filed August 14, 2006).
|
10.29
|
|
Office Lease, dated September 7, 2006,
by and between Union Bank of California as Trustee for Quest Group Trust VII
and the Registrant (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q, filed November 20,
2006).
|
10.30
|
|
Office Space Lease between I.W. Systems
Canada Registrant and Dundeal Canada (GP) Inc. dated June 1, 2006
(incorporated by reference to Exhibit 10.40 to the Registrants Annual
Report on Form 10-K, filed April 17, 2007).
|
21.1
|
|
Subsidiaries of the Registrant
(incorporated by reference to Exhibit 21.1 to the Registrants
Registration Statement on Form S-1, filed January 18, 2008).
|
23.1
|
|
Consent of Stonefield Josephson, Inc.,
Independent Registered Public Accounting Firm
|
24.1
|
|
Power of Attorney**
|
** Previously filed.
Item 17. Undertakings
(a) The undersigned registrant hereby
undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, as amended (the Securities
Act);
(ii) To reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the Calculation of Registration Fee table in the
effective registration statement.
(iii) To include any material
information with respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining
any liability under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) That, for the purpose of determining
liability under the Securities Act to any purchaser, each prospectus filed
pursuant to Rule 424(b) as part of a registration statement relating
to an offering shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness; provided,
however, that no statement made in the registration statement or prospectus
that is part of the registration statement or made in a document incorporated
or deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document immediately
prior to such date of first use.
(b) Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful
II-6
defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.
II-7
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, as amended, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on April 15, 2008.
|
IMAGEWARE SYSTEMS, INC.
|
|
|
|
By:
|
/s/ Wayne
Wetherell
|
|
|
Wayne
Wetherell
|
|
|
Chief Financial Officer
|
Pursuant to
the requirements of the Securities Act of 1933, as amended, this Amendment No. 1
on Form S-1 to Registration Statement on Form SB-2 and Forms S-3 has
been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE
|
|
TITLE(S)
|
|
DATE
|
|
|
|
|
|
*
|
|
Chief Executive Officer and Chairman of the
|
|
April 15, 2008
|
S. James
Miller, Jr.
|
|
Board
(Principal Executive
Officer)
|
|
|
|
|
|
|
|
/s/ Wayne
Wetherell
|
|
Senior Vice President, Administration and
Chief
|
|
April 15, 2008
|
Wayne
Wetherell
|
|
Financial Officer
(Principal
Financial and
|
|
|
|
|
Accounting Officer)
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
|
John Callan
|
|
|
|
April 15, 2008
|
|
|
|
|
|
*
|
|
Director
|
|
|
David Carey
|
|
|
|
April 15, 2008
|
|
|
|
|
|
*
|
|
Director
|
|
|
G. Steve
Hamm
|
|
|
|
April 15, 2008
|
|
|
|
|
|
*
|
|
Director
|
|
|
John L.
Holleran
|
|
|
|
April 15, 2008
|
|
|
|
|
|
*
|
|
Director
|
|
|
David Loesch
|
|
|
|
April 15, 2008
|
*By:
|
/s/ Wayne Wetherell
|
|
|
|
April 15, 2008
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Wayne
Wetherell
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Attorney-in-fact
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II-8
EXHIBIT INDEX
Exhibit
Number
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Description
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2.1
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Stock Purchase Agreement, dated March 1,
2005, between the Registrant and Argus Solutions Ltd. (incorporated by
reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K,
filed March 9, 2005).
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2.2
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Agreement and Plan of Merger, dated October 27,
2005 (incorporated by reference to Annex A to the Registrants Definitive
Proxy Statement on Schedule 14A, filed November 15, 2005).
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3.1
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Certificate of Incorporation (incorporated
by reference to Annex B to the Registrants Definitive Proxy Statement on
Schedule 14A, filed November 15, 2005).
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3.2
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Bylaws (incorporated by reference to Annex
C to the Registrants Definitive Proxy Statement on Schedule 14A, filed November 15,
2005).
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3.3
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Certificate of Designations of Preferences,
Rights and Limitations of Series C 8% Convertible Preferred Stock dated November 2,
2006, as amended (incorporated by reference to Exhibit 3.1 to the
Registrants Current Report on Form 8-K, filed November 20, 2006).
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3.4
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Certificate
of Designations of Preferences, Rights and Limitations of Series D 8%
Convertible Preferred Stock dated March 8, 2007 (incorporated by
reference to Exhibit 3.1 to the Registrants Current Report on Form 8-K,
filed March 15, 2007).
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4.1
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Warrant to Purchase Common Stock in favor
of Imperial Bank, dated January 15, 1998 (incorporated by reference to Exhibit 10.42
to the Registrants Registration Statement on Form SB-2 (No. 333-93131),
filed December 20, 1999, as amended).
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4.2
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Registration Rights Agreement, dated May 22,
2002, by and between the Registrant and Perseus 2000 L.L.C. (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed May 24, 2002).
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4.3
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Warrant to Purchase Common Stock, dated June 13,
2003, issued by the Registrant to L.F. Global Holdings, LLC (incorporated by
reference to Exhibit 10.5 to the Registrants Current Report on Form 8-K,
filed June 20, 2003).
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4.4
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Form of Warrant dated November 24,
2003 (incorporated by reference to Exhibit 99.2 to the Registrants
Current Report on Form 8-K, filed February 9, 2004).
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4.5
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Form of Registration Rights Agreement
dated November 24, 2003 (incorporated by reference to Exhibit 99.3
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
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4.6
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Form of Registration Rights Agreement
dated March 13, 2003 (incorporated by reference to Exhibit 10.2 to
the Registrants Quarterly Report on Form 10-QSB, filed May 15,
2003).
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4.7
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Form of Warrant dated January 29,
2004 (incorporated by reference to Exhibit 99.5 to the Registrants
Current Report on Form 8-K, filed February 9, 2004).
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4.8
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Form of Registration Rights Agreement
dated January 29, 2004 (incorporated by reference to Exhibit 99.8
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
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4.9
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Form of Warrant dated July 22,
2005 and dated July 28, 2005 (incorporated by reference to Exhibit A
to Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed July 26, 2005).
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4.10
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Form of Warrant dated March 17,
2006 (incorporated by reference to Exhibit 4.1 to the Registrants
Quarterly Report on Form 10-Q, filed May 22, 2006).
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4.11
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Registration Rights Agreement, dated November 14,
2006 by and among the Registrant and certain investors (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K,
filed November 20, 2006).
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4.12
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Form of Warrant to Purchase Common
Stock dated November 14, 2006 (incorporated by reference to Exhibit 10.3
to the Registrants Current Report on Form 8-K, filed November 20,
2006).
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4.13
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Registration
Rights Agreement, dated March 9, 2007, by and among the Registrant and
certain accredited investors (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K, filed March 15,
2007).
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4.14
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Form of
Warrant to Purchase Common Stock dated March 9, 2007 (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed March 15, 2007).
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4.15
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Registration
Rights Agreement, dated September 25, 2007, by and among the Registrant
and certain accredited investors (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K, filed September 26,
2007).
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4.16
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Form of
Warrant to Purchase Common Stock dated September 25, 2007 (incorporated
by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed September 26, 2007).
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4.17
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Registration
Rights Agreement, dated December 19, 2007, by and among the Registrant,
Sol Logic, and Wink Jones, as the representative of Sol Logic (incorporated
by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K,
filed December 21, 2007).
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Exhibit
Number
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Description
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4.18
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Form of Warrant to Purchase Common
Stock dated March 12, 2008 (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K, filed March 18,
2008).
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4.19
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Amendment No.1 to Registration Rights
Agreement, dated March 28, 2008, by and among the Registrant, Sol Logic,
and Wink Jones, as the representative of Sol Logic (incorporated by reference
to Exhibit 4.1 to the Registrants Current Report on Form 8-K,
filed April 1, 2008).
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5.1
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Opinion of Paul, Hastings, Janofsky &
Walker LLP**
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10.1
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Employment Agreement, dated September 27,
2005, between the Registrant and S. James Miller (incorporated by reference
to Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed September 30, 2005).
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10.2
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Employment Agreement, dated September 27,
2005, between the Registrant and Wayne G. Wetherell (incorporated by
reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K,
filed September 30, 2005).
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10.3
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Change of Control and Severance Benefits
Agreement, dated October 31, 2005, between Registrant and Charles
Aubuchon (incorporated by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K, filed November 3, 2005).
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10.4
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Offer
of Employment Letter Agreement, dated December 19, 2007, between the
Registrant and Frank Mitchell (incorporated by reference to Exhibit 10.2
to the Registrants Current Report on Form 8-K, filed December 21,
2007).
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10.5
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Form of Indemnification Agreement
entered into by the Registrant with its directors and executive officers
(incorporated by reference to Exhibit 10.4 to the Registrants
Registration Statement on Form SB-2 (No. 333-93131), filed December 20,
1999, as amended).
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10.6
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1994 Employee Stock Option Plan
(incorporated by reference to Exhibit 10.6 to the Registrants
Registration Statement on Form SB-2 (No. 333-93131), filed December 20,
1999, as amended).
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10.7
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1994 Nonqualified Stock Option Plan
(incorporated by reference to Exhibit 10.7 to the Registrants
Registration Statement on Form SB-2 (No. 333-93131), filed December 20,
1999, as amended).
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10.8
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Amended and Restated 1999 Stock Plan Award
(incorporated by reference to Appendix B of the Registrants Definitive Proxy
Statement on Schedule 14A, filed November 21, 2007).
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10.9
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Form of Stock Option Agreement
(incorporated by reference to Exhibit 10.2 to the Registrants Current
Report on Form 8-K, filed July 14, 2005).
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10.10
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2001 Equity Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-QSB,
filed November 14, 2001).
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10.11
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Form of Restricted Stock Bonus
Agreement (incorporated by reference to Exhibit 99.3 to the Registrants
Registration Statement on Form S-8, filed November 27, 2001).
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10.12
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Form of Stock Option Agreement
(incorporated by reference to Exhibit 99.2 to the Registrants
Registration Statement on Form S-8, filed November 27, 2001).
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10.13
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Note and Warrant Purchase Agreement, dated May 22,
2002, by and between the Registrant and Perseus (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed May 24,
2002).
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10.14
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Form of Securities Purchase Agreement
dated November 14, 2003 (incorporated by reference to Exhibit 99.1
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
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10.15
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Form of Securities Purchase Agreement
dated January 29, 2004 (incorporated by reference to Exhibit 99.4
to the Registrants Current Report on Form 8-K, filed February 9,
2004).
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10.16
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Offer of Restricted Stock in Exchange for
Certain Stock Options Previously Granted Offer Made to James Miller
(incorporated by reference to Exhibit 10.1 to the Registrants Quarterly
Report on Form 10-QSB, filed August 16, 2004).
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10.17
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Offer of Restricted Stock in Exchange for
Certain Stock Options Previously Granted Offer Made to Wayne Wetherell,
dated March 30, 2004 (incorporated by reference to Exhibit 10.3 to
the Registrants Quarterly Report on Form 10-QSB, filed August 16,
2004).
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10.18
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Form of Securities Purchase Agreement
dated July 22, 2005 and July 28, 2005 (incorporated by reference to
Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed July 26,
2005).
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10.19
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Security Agreement, dated March 17,
2006, executed by the Registrant in favor of Little Bear Investments, LLC
(incorporated by reference to Exhibit 10.1 to the Registrants Current
Report on Form 8-K, filed March 23, 2006).
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10.20
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Form of Secured Promissory Note dated March 17,
2006 (incorporated by reference to Exhibit 10.1 to the Registrants
Quarterly Report on Form 10-Q, filed May 22, 2006).
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10.21
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Securities Purchase Agreement, dated November 14,
2006 by and among the Registrant and certain accredited investors (incorporated
by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K,
filed November 20, 2006).
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10.22
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Securities
Purchase Agreement, dated March 9, 2007, by and among the Registrant and
certain accredited investors (incorporated by reference to Exhibit 10.1
to the Registrant Current Report on Form 8-K, filed March 15,
2007).
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10.23
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Securities
Purchase Agreement, dated September 25, 2007, by and among the
Registrant and certain accredited investors (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K, filed September 26,
2007).
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Exhibit
Number
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Description
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10.24
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Asset
Purchase Agreement and Plan of Reorganization, by and among Sol Logic, Frank
Mitchell, as shareholder of Sol Logic, and Wink Jones, as the representative
of Sol Logic (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K, filed December 21, 2007).
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10.25
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Amendment No.1 to Asset Purchase Agreement
and Plan of Reorganization, by and between the Registrant and Wink Jones, as
the representative of Sol Logic (incorporated by reference to Exhibit 10.1
to the Registrants Current Report on Form 8-K, filed April 1,
2008).
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10.26
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Product Line Purchase Agreement, dated November 30,
2006, by and between the Registrant and PhotoLynx, Inc. (incorporated by
reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K,
filed December 26, 2006).
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10.27
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Standard Commercial Lease, dated September 26,
2003, by and between Thornmint I and the Registrant (incorporated by
reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-QSB,
filed November 14, 2003).
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10.28
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Amendment to Office Lease, dated June 12,
2006, by and between Thornmint I and the Registrant (incorporated by
reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q,
filed August 14, 2006).
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10.29
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Office Lease, dated September 7, 2006,
by and between Union Bank of California as Trustee for Quest Group Trust VII
and the Registrant (incorporated by reference to Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q, filed November 20,
2006).
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10.30
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Office Space Lease between I.W. Systems
Canada Registrant and Dundeal Canada (GP) Inc. dated June 1, 2006
(incorporated by reference to Exhibit 10.40 to the Registrants Annual
Report on Form 10-K, filed April 17, 2007).
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21.1
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Subsidiaries of the Registrant
(incorporated by reference to Exhibit 21.1 to the Registrants
Registration Statement on Form S-1, filed January 18, 2008).
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23.1
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Consent of Stonefield Josephson, Inc.,
Independent Registered Public Accounting Firm
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24.1
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Power of Attorney**
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**Previously filed
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