SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X| | |
Filed by a Party other than the Registrant |_| | |
Check the appropriate box: | |
|_| | Preliminary Proxy Statement |
|_| | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
|X| | Definitive Proxy Statement |
|_| | Definitive Additional Materials |
|_| | Soliciting Material Pursuant to Rule 14a-12 |
Payment of Filing Fee (Check the appropriate box):
|X| | No fee required. | |
|_| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
1. | Title of each class of securities to which transaction applies: | |
| ||
2. | Aggregate number of securities to which transaction applies: | |
| ||
3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
| ||
4. | Proposed maximum aggregate value of transaction: | |
| ||
5. | Total fee paid: | |
| ||
|_| | Fee paid previously with preliminary materials. | |
|_| | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |
1. | Amount Previously Paid: | |
| ||
2. | Form, Schedule or Registration Statement No.: | |
| ||
3. | Filing Party: | |
| ||
4. | Date Filed: | |
|
Sincerely | |||
Marvin H. Fink | |||
Chief Executive Officer and President |
| ||
Date and Time |
Thursday, June 10, 2004, at 10:00 a.m., Pacific Coast Time. |
Place |
Sportsmens Lodge Hotel, 12825 Ventura Boulevard, Studio City, California |
Items of Business |
· To elect five directors to serve until the Annual Meeting of Shareholders to be held in the year 2005;
· to ratify the appointment of Stonefield Josephson, Inc. as our independent auditors for the fiscal year ended December 31, 2004; and
· to transact such other business as may properly come before the meeting or any postponements or adjournments thereof. |
Who May Vote |
You may vote if you are a holder of our common stock or series A preferred stock as of the record date for our annual meeting. |
Record Date |
April 23, 2004 |
Annual Report |
Our 2003 Annual Report on Form 10-KSB, which is not a part of our proxy soliciting materials, is enclosed. |
Voting By Proxy |
|
Mailing Date |
This Notice of Annual Meeting and Proxy Statement and accompanying Proxy Card and Annual Report on Form 10-KSB are being distributed on or about May 20, 2004 |
-1- | ||
| ||
Q: |
Why Am I Receiving These Materials? | A: | The board of directors of Recom Managed Systems, Inc., a Delaware corporation (sometimes referred to in these proxy materials as we, our company or Recom), is providing these proxy materials to you in connection with our annual meeting of shareowners to be held on June 10, 2004 (the Annual Meeting). As a holder of record or beneficial owner of our common stock or series A preferred stock (sometimes referred to in these proxy materials as our common share, or series A preferred share, respectively), you are invited to attend the Annual Meeting. If you are a holder of record or beneficial owner of either our common or series A preferred shares (sometimes referred to in these proxy materials as a common shareholder and series A preferred shareholder, respectively), you will be entitled to and requested to vote on the proposals described in this proxy statement. | |
Q: | What Information Is Contained In These Materials? | A: | The information included in this proxy statement relates to the proposals to be voted on at the Annual Meeting and the voting process, as well as additional information concerning Recom we are required to give you under the regulations of the United States Securities and Exchange Commission (the SEC). We are also including with this proxy statement our annual report on form 10-KSB for fiscal 2003, which includes an updated description of our business and full consolidated audited financial statements for our most recent fiscal year ended December 31, 2003. | |
Q: | What Proposals Are Our Common And Series A Preferred Shareholders Entitled To Vote Upon At The Annual Meeting?
|
A: |
There are two proposals scheduled to be voted on at the Annual Meeting by our common and series A preferred shareholders (sometimes referred to in these proxy materials as the voting shareholders), voting together as a single class: l the election of five directors, and | |
Q: | What Is Recoms Voting Recommendation To Our Common And Series A Preferred Shareholders? | A: | Our board of directors recommends that you vote your shares FOR each of the five director nominees to our board of directors, and FOR the ratification of Stonefield Josephson, Inc. as our independent auditors for fiscal 2004. | |
Q: | What Shares Can I Vote? | A: | You may vote any common and series A preferred shares (sometimes referred to in these proxy materials as the voting shares) which you own as of the close of business on April 23, 2004, the record date for the Annual Meeting (the Record Date). These shares include shares held directly in your name as the shareowner of record, and shares held for you as the beneficial owner through a stockbroker or bank. | |
Q: | Do I Need An Admission Ticket To Attend The Annual Meeting?
|
A: | All Recom shareholders are welcomed to attend the Annual Meeting. You will, however, be required to provide proof of identification should you desire to vote your shares at the Annual Meeting | |
Q: | Can I Vote My Shares In Person At The Annual Meeting? | A: |
Yes, you may vote your shares in person at the Annual Meeting. If you choose to do so, please bring the enclosed proxy card and proof of identification. Even if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy card as described below so that your vote will be counted if you later decide not to attend. |
-2- | ||
| ||
Q: | How Can I Vote My Shares Without Attending The Annual Meeting? |
A: |
To vote your shares without attending the Annual Meeting, you should submit your proxy card directly to Recoms stock transfer and registrar, Atlas Stock Transfer Corporation, either by mail or by facsimile. If you provide specific voting instructions, your shares will be voted as you instruct. If you sign but do not provide instructions, your shares will be voted as described below in Q: How Are Votes Counted?. For Atlas contact information see Q: How Can I Get Further Information? below. | |
Q: | Can I Change My Vote? | A: | You may change your proxy instructions at any time prior to the vote at the Annual Meeting. You may accomplish this by granting a new proxy card bearing a later date (which automatically revokes the earlier proxy) or by attending the Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. | |
Q: | How Are Votes Counted?
|
A: | In the election of directors, you may vote FOR all of the director nominees, or your vote may be WITHHELD with respect to one or more of those nominees.
With respect to the other proposals contained in this proxy statement, you may vote FOR, AGAINST or ABSTAIN. If you ABSTAIN, it has the same effect as a vote AGAINST.
If you sign your proxy card with no further instructions, your shares will be voted in accordance with the recommendations of our board of directors.
Each of our director nominees has consented to his or her nomination for election. Should any director nominee no longer remain a candidate at the time of the Annual Meeting, your proxy card will be voted for the election of a replacement nominee to be designated by our board of directors to fill that vacancy. | |
Q: | What Is The Voting Requirement To Approve Each Of The Proposals? | A: |
In the case of the election of the director positions, the five persons receiving the highest number of FOR votes by the holders of our voting shares voting as a single class will be elected. All other proposals require the affirmative FOR vote of a majority of those shares present and entitled to vote. | |
Q: | What Happens If Additional Proposals Are Presented At The Annual Meeting? | A: | Other than the proposals described in this proxy statement, we do not expect any other matters to be presented for a vote at the Annual Meeting. If you grant a proxy, the persons named as proxy holders on the proxy card, namely, Messrs. Marvin. H. Fink (our Chief Executive Officer and President) and Charles Dargan (our Interim Chief Financial Officer), will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. | |
Q: | How Many Votes Do I Have? | A: | Each voting share outstanding as of the Record Date is entitled to one vote for each of the five director positions (subject to the exercise of cumulative voting rights described below), and one vote for each of the other proposals. As of the Record Date, there were 35,006,567 voting shares issued and outstanding. | |
Q: | What Is Cumulative Voting? | A: | Cumulative voting is a manner of voting in the election of directors in which each shareholder is entitled to a total number of votes equal to the number of directors to be elected multiplied by the number of votes the shareholder would have on a single matter. The number of votes a shareholder has on a single matter is the number of shares entitled to vote held by the shareholder. For example, if you hold 1,000 common shares, you would be entitled to 5,000 total votes in the election of directors (fivethe number of directorsmultiplied by one vote per common share, or 5,000 votes). A shareholder may use all of his or her votes for one nominee, or may distribute his or her votes among two or more nominees as the shareholder sees fit. |
-3- | ||
| ||
Q: | How Can I Cumulate My Votes? | A: | You may only cumulate your votes if (1) at least one shareholder gives notice at the Annual Meeting of his or her intention to cumulate votes, and (2) the names of the candidates for whom such shareholder desires to cumulate votes have been placed in nomination prior to the voting. If a shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. Discretionary authority to cumulate votes is hereby solicited by the board. Since you must be personally present at the Annual Meeting to exercise your cumulative voting rights, you may not do so on your proxy card. | |
Q: | What Is The Quorum Requirement For The Annual Meeting? | A: | The quorum requirement for holding the Annual Meeting and transacting business is a majority of the voting shares present in person or represented by proxy and entitled to be voted. Abstentions are counted as present for the purpose of determining the presence of a quorum. | |
Q: | Who Will Count The Votes? | A: | A representative of our company, or our legal counsel, will tabulate the votes and act as the inspector of election. | |
Q: | Where Can I Find The Voting Results Of The Annual Meeting? | A: | We will announce preliminary voting results at the meeting and publish final results either on our website, a form 8-K filed with the SEC, or in our quarterly report on form 10-QSB for the second quarter of fiscal 2004 which we expect to file with the SEC on or before August 15, 2004. | |
Q: | Who Will Bear The Cost Of Soliciting Votes For The Annual Meeting? | A: | Recom will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for those solicitation activities. | |
Q: | May I Nominate A Director For Election At The Annual Meeting?
|
A: |
So long as you are a shareholder, you may nominate a director for election at the Annual Meeting provided that you provide Recom with written notice of that nomination not more than 90 days and not fewer than 10 days in advance of the Annual Meeting (i.e., May 31, 2004). In addition, the notice must meet all other requirements contained in our bylaws. Any nomination for a director nominee must contain the following information: l the nominees name, age, business address and, if known, residence address;
lthe nominees principal occupation or employment; and
lthe number of shares of each class of our stock which the nominee beneficially owns.
The presiding officer of the Annual Meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. | |
Q: | May I Propose Actions For Consideration At The Annual Meeting? | A: |
It is too late to propose actions at this years Annual Meeting. You may, however, make a proposal for next years Annual Meeting. In order for a shareowner proposal to be considered for inclusion in our proxy statement for next years Annual Meeting, we must, pursuant to SEC rules, receive the written proposal by no later than 120 days in advance of the day specified as the mailing date in our proxy statement for this Annual Meeting. Thus, since May 20, 2004 is specified as the mailing date in this years proxy statement, in order for any such nomination notice to be timely for next years Annual Meeting, it must be received by Recom not later than January 20, 2005 (i.e., 120 days prior to the May 20, 2004 date). In order for a shareowner proposal to be raised from the floor during next years Annual Meeting, we must, pursuant to SEC rules, also receive the written proposal by no later than 45 days in advance of the day specified as the mailing date in our proxy statement for this Annual Meeting. Thus, since May 20, 2004 is specified as the mailing date in this years proxy statement, in order for any such proposal to be made from the floor, it must be received by Recom not later than April 5, 2005 (i.e., 45 days prior to May 20, 2004 date).
These proposals must also comply with SEC regulations regarding the inclusion of shareowner proposals in company-sponsored proxy materials. We suggest that any nominations or proposals be submitted by certified mail-return receipt requested. Recom reserves the right to reject, rule out of order, or take other appropriate action with respect to any nomination or proposal that does not comply with these and other applicable requirements. |
-4- | ||
| ||
Q: | How Can I Contact Recoms Directors? | A: |
If you would like to contact or board or directors or any of our directors, you may send a communication to the board or that director in care of Recom at any of the following company addresses, and we will forward that communication to the board or that director: Recom Managed Systems, Inc.4705 Laurel Canyon Boulevard, Suite 203Studio City, California 91607Tel: (818) 432.4560Fax: (818) 432.4566E-mail:
info@recom-systems.com
After reviewing shareholder messages, our board of directors or director will, at its or his or her discretion, determine whether any response is necessary. | |
Q: | How Can I Get Further Information? | A: | If you have questions or need more information about the Annual Meeting, you may contact Recom at any of the addresses previously described in Q: How Can I Contact Recoms Directors?. You may also direct questions to the following investor relations contacts:
Institutional Investor Relations: The Ruth Group
141 Fifth Avenue
New York, NY 10010
Attn: John Capodanno
Tel: (646) 536-7026
Fax: (646) 536-7100
E-mail: jcapodanno@theruthgroup.com
Retail Investor Relations:
Aurelius Consulting Group Inc.
Maitland City Plaza
225 S. Swoope Ave., Suite 214
Maitland, FL 32751
Attn. Dave Gentry
Tel: (407) 644-4256
Fax: (407) 644-0758
E-mail: dave@aurcg.com
Any questions you may have relating to title to your securities or your address of record should be addressed to Recoms stock transfer and registrar, Atlas Stock Transfer Corporation, at the following addresses:
Atlas Stock Transfer Corporation5899 South State Street, Salt Lake City, Utah 84107Attn: Pam GrayTel: (801) 266-7151Fax: (801) 2620907E-mail: as-transfer@msn.com | |
Q: | What happens if several shareholders reside at the same address but we only receive one set of proxy materials? | A: |
In an effort to reduce printing costs and postage fees, we have adopted a practice approved by the SEC called householding. Under this practice, shareholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of our proxy materials unless one or more of these shareholders notifies us that they wish to continue receiving individual copies. Shareholders who participate in householding will continue to receive separate proxy cards. If you share an address with another shareholder and received only one set of proxy materials and would like to request a separate copy of these materials and/or future proxy materials, please send your request Recom at any of the addresses previously described in Q: How Can I Contact Recoms Directors?. You may also contact the company if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future. | |
-5- | ||
| ||
Marvin H. Fink
Age 68
Director since October 12, 2002 |
Mr. Fink has served as our Chief Executive Officer, President and Chairman of the Board since October 12, 2002, and our Secretary since November 2003. Prior to joining us, Mr. Fink was president of his own management consulting group from August 2001 until he joined Recom in October 2002. Mr. Fink has 45 years of experience in the management of high technology programs from development stage through production including projects for the Department of Defense, NASA, Teledyne Systems, Litton Industries and Hughes Aircraft. Until his retirement in August 2001, Mr. Fink served as President of Teledyne Electronic Technologies from 1993, which was then a subsidiary of Teledyne Technologies, Inc. (NYSE:TDY). From 1986 until 1993, he served as President of Teledyne Microelectronics. Mr. Fink has served
as a director of RF Industries (Nasdaq:RFIL), a manufacturer of coaxial connectors used for communication applications, since October 2001. Mr. Fink holds a bachelors of science degree in electronic engineering from City College of New York, a Masters of Science degree in Electronic Engineering from the University of Southern California, and a Juris Doctor degree from the San Fernando Valley College of Law. |
-6- | ||
| ||
Ellsworth Roston
Age 81
Director since November 1, 2002 |
Mr. Roston has practiced patent law since 1943, and currently serves as Of Counsel to the patent firm of Fulwider Patton Lee & Utecht since 1997. Mr. Roston has a history of assisting technology companies during their development stages. Most recently, Mr. Roston has served as a director of Natgram, Inc., an internet software developer, since 1998, Amerlin Inc., a pet house/kennel manufacturer, since 1996, and American Legal Net, a provider of legal forms, since April 2004. Mr. Roston also served as a director of Rokenbok Corporation, a toy manufacturer, from 1996 through February 2004, and of Dome Industries, an electronic hardware manufacturer, from 1991 through 2002. Mr. Roston was one of three founders of Brooktree Corporation, and served on its board of directors for 15 years until
it was purchased by Rockwell Corporation in 1998. Mr. Roston received his undergraduate degree and his law degree from Yale University. |
Robert Koblin, M.D.
Age 72
Director since February 6, 2003 |
Dr. Koblin, a cardiologist, has more than 30 years of medical experience beginning during the time he served in the United States Army as a medic and continuing most recently as a staff physician and instructor at the Cedars-Sinai Medical Center in Los Angeles since 1966. He has also served as the Managing Director of the Robertson Diagnostic Center in Beverly Hills, California since April 2002, and as an assistant clinical professor of medicine at the University of California, Los Angeles (UCLA), since 1982. Dr. Koblin received his undergraduate degree from New York University, his medical degree from Stanford University |
Lowell T. Harmison,
Ph.D.
Age 66
Director since June 6, 2003 |
Dr. Harmison has a very distinguished 35 year career in the field of biomedicine. Most recently, Dr. Harmison has served as a director and as chairman of the board of World Doc Foundation, a private foundation promoting health education and expanded knowledge of telemedicine, since June 2002. Dr. Harmison has also served as a director and chief executive officer of ProCell Corporation, a cancer research company, since June 2000, and as a director of pHA Bio Remediation, an environmental restoration company, since 1997. Dr. Harmison also served as chairman of Sequella Foundation, which promotes research into tuberculosis, from 1997 to 2001, and served as a director of Sequella Inc., a research and development company for tuberculosis products, from 1997 to 2000. Dr. Harmison is the holder of the first
domestic and foreign patents on the fully implantable artificial heart; and served as Chief Executive Officer of USET, Inc. from 1987 to 1989. Dr. Harmison also served as the Director of the Robert Maxwell Foundation, a private foundation operating internationally and consisting of 21 operating companies, from 1987 to 1989. He also served as the Principal Deputy Assistant Secretary for Health of the U.S. Public Health Service, Department of Health and Human Services. Dr. Harmison has a Ph.D. from the University of Maryland and a B.S. and M.S. from West Virginia University. He was also given an honorary Doctor of Science degree from the West Virginia University. |
Jennifer Black
Age 48
Director since January 20, 2004 |
Ms. Black has been President of her own business, Jennifer Black & Associates, since September 2003. Her firm provides independent research for institutional clients. Previously, Ms. Black was with Black & Co. (since 1979), where she was responsible for research coverage on the apparel and specialty retail industries. Ms. Black was President of Black & Co. when it was acquired by First Security Van Kasper in April 2000. Subsequently, Wells Fargo Securities acquired First Security Van Kasper in September 2000. Ms. Black left Wells Fargo Securities in September 2003. Ms. Black serves on the Governors Council of Economic Advisors for the State of Oregon, where she has been re-appointed to a second three-year term. Ms. Black attended Washington State and Portland
State Universities. |
-7- | ||
| ||
-8- | ||
| ||
The audit committee of the Recoms board of directors oversees Recoms financial reporting process on behalf of the full board. Management is responsible for Recoms financial statements and the financial reporting process, including the system of internal controls. Recoms independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles. In fulfilling its oversight responsibilities, the audit committee has reviewed and discussed with management and the independent auditors the audited financial statements that have been included in Recoms annual report on form 10-KSB for the year ended December 31, 2003. The audit committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the audit committee has discussed with the independent auditors the auditors independence from the company and its management including the matters in the written disclosures provided to the audit committee as required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. |
The audit committee recommended to Recoms board of directors, and the board approved, the inclusion of the audited financial statements in Recoms annual report on Form 10-KSB for the year ended December 31, 2003 for filing with the Securities and Exchange Commission. The audit committee has also recommended the selection of the companys independent auditors for the fiscal year ending December 31, 2004.
The Audit Committee
Dr. Robert Koblin Jennifer Black |
-9- | ||
| ||
-10- | ||
| ||
Name |
|
Grant Date |
|
Common Shares Purchasable |
|
Exercise Price |
|
Expiration Date | |
|
|
|
|
| |||||
Marvin H. Fink |
|
2/6/2003 |
|
150,000(3) |
|
$ 0.88 |
|
2/5/2008 | |
|
|
11/3/2003 |
|
28,000 |
|
$ 4.40 |
|
11/2/2008 | |
|
|
4/1/2004 |
|
2,000 |
|
$ 6.00 |
|
3/31/2009 | |
Ellsworth Roston (1) |
|
2/6/2003 |
|
150,000(3) |
|
$ 0.88 |
|
2/5/2008 | |
|
|
11/3/2003 |
|
28,000 |
|
$ 4.40 |
|
11/2/2008 | |
|
|
4/1/2004 |
|
2,000 |
|
$ 6.00 |
|
3/31/2009 | |
Dr. Robert Koblin |
|
6/6/2003 |
|
50,000 |
|
$ 4.20 |
|
6/5/2008 | |
|
|
2/5/2004 |
|
28,000 |
|
$ 3.70 |
|
2/4/2009 | |
|
|
4/1/2004 |
|
4,000 |
|
$ 6.00 |
|
3/31/2009 | |
Dr. Lowell T. Harmison (2) |
|
6/6/2003 |
|
50,000 |
|
$ 4.20 |
|
6/5/2008 | |
Jennifer Black |
|
1/20/2004 |
|
50,000 |
|
$ 3.50 |
|
1/19/2009 | |
|
|
4/1/2004 |
|
2,000 |
|
$ 6.00 |
|
3/31/2009 | |
|
|
|
|
|
|
|
|
|
|
|
(1) | Excludes 450,000 common share purchase warrants unrelated to the provision of services as a director which were granted to Mr. Roston as compensation for providing consulting services. See Business-Employment And Consulting Agreements With Management. | |
(2) | Excludes 216,000 common share purchase warrants unrelated to the provision of services as a director which were granted to Dr. Harmison as compensation for providing consulting services. See Business-Employment And Consulting Agreements With Management. | |
(3) | 50,000 shares pre-split. |
Marvin H. Fink
Age 68
Chief Executive Officer, President and Secretary |
For a summary of Mr. Finks business experience, see Background Of Director Nominees above. | |
Budimir S. Drakulic, Ph.D.
Age 54
Vice President and Chief Technology Officer |
Dr. Drakulic has served as our Vice President and Chief Technology Officer since October 15, 2002. Dr. Drakulic has more than 25 years of experience in the design, development and integration of hardware and software modules for biomedical microelectronics circuits and systems. From 1997 through February of 2002, Dr. Drakulic was involved directly and indirectly with Advanced Heart Technologies, Inc., a corporation controlled by Dr. Drakulic. Dr. Drakulic was the Consultant and Chief Scientist, Medical Device Business Unit for Teledyne Electronic Technologies from 1992 through 1997. Before that, he held numerous positions affiliated with the University of California at Los Angeles, including Visiting Assistant Professor with the Electrical Engineering Department and Director of the Microelectronics
Development Lab at the Crump Institute for Medical Engineering. He holds a Bachelor of Science degree in electrical engineering from the University of Belgrade, Yugoslavia. He also holds a Masters degree and a Ph.D. in Electronic and Biomedical Engineering from the same university. Dr. Drakulic was the recipient of the Ralph and Marjorie Crump Prize for Excellence in Medical Engineering from UCLA in 1985, and was a Research Fellow with the Crump Institute for Medical Engineering at UCLA. Dr. Drakulic filed a petition for bankruptcy in November 2001. |
-11- | ||
| ||
Charles Dargan
Age 48
Interim Chief Financial Officer |
Mr. Dargan has provided his services as our interim Chief Financial Officer since December 18, 2003 on a leased basis through CFO 911, an agency that specializes in providing financial management personnel to businesses on a temporary basis. We are actively recruiting a permanent full-time Chief Financial Officer. Mr. Dargan is also currently employed as the Chief Financial and Accounting Officer of Semotus Solutions, Inc. (AMEX:DLK). From April 2000 until his appointment as Chief Financial and Accounting Officer in January 2001, Mr. Dargan served as Semotus Solutions Executive Vice President of Operations. Mr. Dargan was also a director of Semotus Solutions from March 1999 to July 2002. Prior to joining Semotus Solutions, Mr. Dargan served as a Managing Director
of Corporate Finance for The Seidler Companies Incorporated, a private brokerage, investment banking and public finance firm. In addition, he was a partner and Chief Financial Officer of the investment banking firm of Ambient Capital; a Managing Director of Corporate Finance at L.H. Friend, Weinress, Frankson & Presson, Inc.; and a First Vice President at Drexel Burnham Lambert, Incorporated. His accounting and financial industry experience has made him an expert in public and private debt and equity finance, mergers and acquisitions and financial management of and planning for emerging growth companies. Mr. Dargan graduated from the University of Southern California with an MBA and an MS in Finance, and possesses an A.B. in Government and Economics from Dartmouth College. He also holds accounting and finance industry certifications of Chartered Financial Analyst (CFA) and Certified Public Accountant (CPA). |
-12- | ||
| ||
|
Class Of Stock(1) | |||||
| ||||||
|
Common (Voting) |
|
Series A Preferred (2) (Voting) | |||
|
| |||||
Name |
Amount |
% |
|
Amount |
% | |
|
|
|
|
|
| |
Marvin H. Fink (3)(4)(5) |
2,264,500(7) |
6.8% |
|
0 |
| |
Dr. Budimir S. Drakulic (4) |
834,375(8) |
2.5% |
|
0 |
| |
Charles Dargan (4) |
0 |
|
|
0 |
| |
Ellsworth Roston (3) |
910,750(9) |
2.7% |
|
0 |
| |
Dr. Robert Koblin (3) |
158,000(10) |
* |
|
0 |
| |
Dr. Lowell T. Harmison (3) |
272,793(11) |
* |
|
0 |
| |
Jennifer Black (3) |
50,500 (12) |
* |
|
0 |
| |
Tracey Hampton / ARC Finance Group, LLC (5)(6) |
22,950,000(13) |
69.6% |
|
0 |
| |
Morgan Witt Alliance |
0 |
|
|
316,673 |
19% | |
Directors and executive officers, as a group |
4,494,918(14) |
13.0% |
|
0 |
| |
|
|
|
|
|
|
|
|
* | Less than one percent. | |
(1) | Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrant or conversion of UGC series A preferred shares. The number of outstanding shares of our common and series A preferred shares as of the April 30, 2004 are 33,345,262 and 1,661,305 shares, respectively. | |
(2) |
Each series A preferred share is convertible into one common share. | |
(3) | Director. | |
(4) | Executive officer. | |
(5) | 5% shareholder. | |
(6) | The address of Ms. Hampton and ARC Finance Group LLC is 23679 Calabasas Road, Suite 754, Calabasas, CA 91302. | |
(7) | Includes 2,100,000 common shares held by the Fink Family Trust, and 164,500 common shares issuable upon exercise of options granted to Mr. Fink in his capacity as a director. | |
(8) | Includes 600,000 common shares held by B World Technologies, Inc. and 234,375 common shares issuable upon exercise of options granted to B World Technologies in connection with services performed by Dr. Drakulic. Both B World Technologies and B Technologies are owned and controlled by Dr. Drakulic | |
(9) | Includes 296,250 common shares held by Roston Enterprises, 450,000 common shares issuable upon exercise of warrants granted to Mr. Roston in his capacity as a consultant, and 164,500 common shares issuable upon exercise of options granted to Mr. Roston in his capacity as a director. | |
(10) | Includes 158,000 common shares issuable upon exercise of options granted to Dr. Koblin in his capacity as a director. | |
(11) | Includes 216,000 common shares issuable upon exercise of warrants granted to Dr. Harmison in his capacity as a consultant, and 50,000 common shares issuable upon exercise of options granted to Dr. Harmison in his capacity as a director. | |
(12) | Includes 50,500 common shares issuable upon exercise of options granted to Ms. Black in her capacity as a director. | |
(13) | Includes 22,950,000 common shares held by ARC Finance Group, Inc. ARC Finance Group is owned and controlled by Ms. Hampton. | |
(14) | Includes 1,487,875 common shares issuable upon exercise of common share pur |
l |
Mr. Finks will receive an initial base salary of $1 per year. Following the one-year anniversary of the agreement, our board of directors may review and adjust the base salary in light of our companys performance. Given the status of Recoms development efforts, the board has not decided to increase Mr. Finks base salary under this provision to date. |
-13- | ||
| ||
l |
Mr. Fink is entitled to a cash bonus for his second through fourth years of employment. The amount of the bonus is 10% of our after tax income exclusive of extraordinary expenses for the second year, and 15% of that amount for the third and fourth years. On May 10, 2004, Mr. Fink and Recom agreed to pay Mr. Fink 250,000 common shares upon Recom achieving $0.50 in fully-diluted earnings per share in lieu of the cash bonus, subject to approval by Recoms full board of directors. | |
l |
Mr. Fink is granted 2,100,000 restricted common shares (700,000 shares pre-split), to be earned over three years of continuous employment. These shares, which are held in escrow by the company pursuant to the terms of a restricted stock agreement until they are earned, vest in tranches of 1744,999 each at the end of the first eleven quarters of Mr. Finks employment, with the balance vesting at the end of the twelfth quarter. Mr. Fink is entitled to all dividends which may be declared with respect to these shares, even if not vested. | |
l |
The agreement contains a gross up provision obligating us to make a cash payment to Mr. Fink to cover any taxes he may incur by reason of receiving any payment or distribution that would constitute an excess golden parachute payment under the federal tax laws. The gross up provision also applies to the 2,100,000 restricted common shares described above, however, Mr. Fink exercised his section 83(b) election under the Internal Revenue Code subjecting him to immediate taxation upon the receipt of the shares notwithstanding their future forfeitability, so our liability, if any, for any taxes imposed under that grant should be nominal. | |
l |
Should our common shares be listed on any of the NYSE, AMEX or Nasdaq national stock exchanges or markets, Mr. Fink would be entitled, if then still employed by us, to an additional grant of 600,000 common shares (200,000 shares pre-split). | |
In the event of a change in control (as that term is defined in the employment agreement), Mr. Fink would be entitled, if then still employed by us, to an additional grant of common shares having a market value of $5,000,000, but not to exceed 600,000 common shares (200,000 shares pre-split) in total. | ||
l |
Mr. Fink is entitled to a number of employee benefits under the agreement, including a $1,200 per month automobile allowance, individual medical plan reimbursement of up to $2,000 per month, and the right to participate in all benefit plans established for company employees or executives, including medical, hospitalization, dental, long-term care and life insurance programs | |
|
l |
if the agreement is terminated during years two through four due to Mr. Finks disability, termination by Mr. Fink for good reason; Recoms termination of Mr. Fink without cause, or a change in ownership, Mr. Fink will nevertheless be entitled to a pro rata portion (based upon the actual number of days of employment) of the cash bonus based on our after-tax income that he would have otherwise received for the year of termination had he remained employed until the end of that year; |
|
l |
if the agreement is terminated due to Mr. Finks death, disability, termination by Mr. Fink for good reason; Recoms termination of Mr. Fink without cause, or a change in ownership, the unvested portion of the 2,100,000 restricted common share grant to Mr. Fink will become fully vested and the shares released from escrow; and |
|
l |
Mr. Fink and his family will be entitled to an additional three years medical, hospitalization, dental, long-term care and life insurance coverage if the agreement is terminated by Mr. Fink for good reason or terminated by Recoms
termination without cause, and an additional one years coverage if the
agreement is terminated due to Mr. Finks disability. |
-14- | ||
| ||
l |
The agreement provides for a ten-year initial term. After the initial term, the agreement renews automatically for successive one year terms, unless either party delivers 90-days written notice to the other of their intent not to renew. | |
l |
Dr. Drakulics services are provided on a mutually-acceptable part-time basis. | |
l |
Recom is obligated to pay B Technologies a $10,000 bonus upon execution, and a monthly service fee of $15,000 thereafter. | |
l |
B World Technologies was granted 600,000 restricted common shares (200,000 shares pre-split), to be earned over five years of continuous provision of services by Dr. Drakulic. These shares, which will be held in escrow with the company pursuant to the terms of a restricted stock agreement until they are earned, vest at the rate of 30,000 shares per quarter with the first 30,000 shares vesting on January 15, 2003. B World Technologies is entitled to all dividends which may be declared with respect to these shares, even if not vested. |
-15- | ||
| ||
l |
Recom is obligated to pay Dr. Harmison $36,000 per year over the term of the agreement, payable quarterly. | |
l |
Dr. Harmison was entitled to receive upon execution of the agreement | |
l |
an initial grant of options entitling him to purchase 108,000 common shares (36,000 shares pre-split) at $0.97 per share, exercisable over five years. | |
l |
Dr. Harmison was further entitled to receive upon execution of the agreement an additional grant of options entitling him to purchase 108,000 common shares (36,000 shares pre-split) at $0.97 per share, vesting in increments of 9,000 common shares each upon the first through twelfth quarterly anniversary dates of the agreement based upon his provision of services. These options are exercisable for a period of five years following vesting. | |
l |
Dr. Harmison is entitled to receive grants of common share purchase options in tranches of 20,000 shares per milestone for assisting Recom in attaining various milestones determined by our board of directors, including the preparation and filing with the FDA of a 510(k) application for our product as it relates to its incorporation into a vest, approval of that application by the FDA, and market launch of that product. | |
l |
Dr. Harmison is entitled to receive a grant of 20,000 common shares in the event of a change in control as that term is defined in the agreement |
-16- | ||
| ||
|
|
|
|
|
|
Long Term Compensation |
| ||||||
|
|||||||||||||
|
|
Annual Compensation (1) |
|
Awards |
|
Payouts |
| ||||||
|
|
|
|||||||||||
Named Executive Officer and Principal Position |
Year |
Salary |
Bonus |
Other |
|
Restricted
Stock |
Securities
Underlying
Options & SARs |
|
Long Term Incentive Plan |
All Other Compensation | |||
|
|
|
|
|
|
|
|
|
| ||||
Marvin H. Fink (2)
Chief Executive Officer |
2003
2002
2001 |
$ 1(5)
1
|
$
|
$19,598(8)
|
|
$
14,284(9)
|
178,000
|
|
$
|
$
| |||
Dr. Budimir Drakulic (3)
Vice President and Chief Technology Officer |
2003
2002
2001 |
$ 180,000(6)45,000(6)
|
$
|
$
|
|
$
3,987(10)
|
750,000
|
|
$
|
$
| |||
Charles Dargan (4)
Interim Chief Financial Officer |
2003
2002
2001 |
$ 7,500 (7)
|
$
|
$
|
|
$
|
|
|
$
|
$
| |||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes, among other things, perquisites and other personal benefits, securities or property which exceed in the aggregate the lesser of either $50,000 or 10% of the total annual salary and bonus reported for that fiscal year. | |
(2) | Mr. Fink has served as our Chief Executive Officer since October 12, 2002. | |
(3) | Dr. Drakulic has served as our Vice President and Chief Technology Officer since October 15, 2002. | |
(4) | Mr. Dargan has served as our interim Chief Financial Officer since December 18, 2003 on a leased basis through CFO 911, an agency that specializes in providing financial management personnel to businesses on a temporary basis. | |
(5) | Recom has recorded a non-cash accounting expense in the amount of $80,000 to reflect the value of Mr. Finks services. | |
(6) | These amounts were paid in consulting payments to B Technologies in connection with its provision of Dr. Drakulics services. | |
(7) | Amounts paid to CFO 911 in December 2003. | |
(8) | Includes $14,400 in automobile allowance payments and $5,598 in premiums payable on health insurance. | |
(9) | Reflects the value of an award to Mr. Fink of 2,100,000 restricted common shares (700,000 shares pre-split) in conjunction with the execution of his employment agreement dated October 12, 2002. The value cited is based upon the closing price for on common shares as of the date of the employment agreement. As of December 31, 2003, all 2,100,000 restricted common shares remained outstanding. The value of those shares as of that date was $7,875,000 based upon the $3.75 closing price for our common shares as quoted on the OTCBB for December 31, 2003. | |
(10) | Reflects the value of an award to B. World Technologies of 600,000 restricted common shares (200,000 shares pre-split) in conjunction with the execution of a loan-out agreement dated October 12, 2002 by which it provided the services of Dr. Drakulic to Recom. The value cited is based upon the closing price for on common shares as of the date of the loan-out agreement. As of December 31, 2003, all 600,000 restricted common shares remained outstanding. The value of those shares as of that date was $2,250,000 based upon the $3.75 closing price for our common shares as quoted on the OTCBB for December 31, 2003. |
-17- | ||
| ||
Name |
Common Shares Underlying Grant Of Options Or SARs |
As Percentage Of Grants To All Employees(1) |
Exercise Or Base Price |
FMV At Grant Date |
Expiration Date |
|
|
|
|
|
|
Marvin H. Fink |
150,000(2) |
7.1% |
$0.88(2) |
$0.88 |
February 5, 2008 |
Dr. Budimir S. Drakulic |
750,000(3) |
12.0% |
$0.95(3) |
$0.95 |
March 9, 2008 |
Marvin H. Fink |
28,000 |
1.3% |
$4.40 |
$4.40 |
November 2, 2008 |
Charles Dargan |
|
|
|
|
|
(1) | The numerator in calculating this percentage includes common share purchase options granted to each named executive officer in fiscal 2003 in his capacity as an officer (employee) and, if applicable, as a director. The denominator in calculating this percentage is 2,088,000, which represents options granted to all Recom employees during fiscal 2003, including those to the named executive officers. | |
(2) | 50,000 shares pre-split exercisable at $2.64 per share. | |
(3) | 250,000 shares pre-split exercisable at $2.76 per share. |
|
|
|
Unexercised In-The-Money Options and SARs at December 31, 2003 | |
| ||||
Named Executive Officer |
Shares Acquired On Exercise |
Value Realized (1) |
Number (Exercisable/Unexercisable) |
Value (2)(Exercisable/Unexercisable) |
|
|
|
|
|
Marvin H. Fink |
|
|
150,000 / 0 |
$430,500 / $0 |
Dr. Budimir S. Drakulic |
|
|
187,500 / 562,500 |
$530,625 / $1,591,875 |
Charles Dargan |
|
|
/ |
/ |
(1) | The dollar amount shown represents the difference between the fair market value of our common stock underlying the options as of the date of exercise and the option exercise price. | |
(2) | The dollar value provided represents the cumulative difference in the fair market value of our common stock underlying all in-the-money options as of December 31, 2003 and the exercise prices for those options. Options are considered in-the-money if the fair market value of the underlying common shares as of the last trading day in fiscal 2003 exceeds the exercise price of those options. The fair market value of Recom common shares for purposes of this calculation is $3.75, based upon the closing price for our common shares as quoted on the OTCBB on December 31, 2003. |
-18- | ||
| ||
l |
On September 19, 2002, as part of the agreements leading to and facilitating the acquisition of the Signal Technologies from ARC Finance Group, Mr. Sim Farar, our president and principal shareholder at that time, invested $125,000 into the company as working capital in exchange for a warrant entitling him to purchase 600,000 common shares (200,000 shares pre-split) at approximately $0.21 per share. | |
l |
On October 12, 2002 we entered into a four-year employment agreement with Mr. Marvin H. Fink pursuant to which, among other things, we employed Mr. Fink as our Chief Executive Officer and Chairman of the Board, and granted to Mr. Fink 2,100,000 restricted common shares (700,000 shares pre-split) as compensation for those services. For a description of the full terms of that agreement see that section of this prospectus captioned ManagementEmployment And Consulting Agreements With Management. | |
l |
On October 15, 2002 we entered into a ten-year loan-out agreement with Dr. Budimir S. Drakulic and his two companies, B. World Technologies and B Technologies pursuant to which, among other things, we engaged the services of Dr. Drakulic as our Vice President and Chief Technology Officer, and granted B World Technologies 600,000 restricted common shares (200,000 shares pre-split) as compensation for those services. For a description of the full terms of that agreement see that section of this prospectus captioned ManagementEmployment And Consulting Agreements With Management. | |
l |
On October 11, 2002, we reached an agreement-in-principle with Dr. Budimir Drakulic to become our Vice President and Chief Technology Officer on a consulting basis through his consulting companies. In conjunction with that understanding, we also reached an agreement-in-principle with Dr. Drakulic to offer to sell our common shares to certain individuals with potential claims against Dr. Drakulic relating to termination of a prior license of the Signal Technologies to a company in which those claimants had invested. While we did not believe that these claims had legal basis, we nevertheless agreed to assist Dr. Drakulic in the settlement in order to ensure that Dr. Drakulics time, effort and focus in developing the technology was not unduly disrupted by litigation, and to otherwise ensure that our rights in the Signal Technologies were protected should that be a matter of concern to any of our investors. Pursuant to this
understanding, on October ;22, 2002, we sold 564,810 common shares (188,270 shares pre-split) to eleven of those individuals (Bernard Carmeol, William London, Walter M. Sawyer, Stephen Verchick, Belle Zwerdling, Steve Neuberger, Tom Byers, Baron St. John, Thomas Mozjesik, Jeffrey H. Sawyer and Robert M. Cherry), and issued a five-year warrant to purchase 375,000 common shares (125,000 shares pre-split) for $0.007 per share to one of those individuals (Stephen Verchick), in consideration of their cash investment of $17,786. We further agreed that should we raise more than $2 million in certain offerings, to pay 4% of the proceeds of those offerings to those individuals up to the amount of $480,350. We have since entered into agreements with ten of those investors releasing Recom from the obligation to pay $380,350 of the $480,350, and are currently in discussion with the last of those individuals, Mr. Verchick, to release the remaining
liability of $100,000, including $3 5,203 to which he would be entitled under our private placement in the amount of $5,378,750 facilitated through Maxim Group LLC. | |
l |
On November 1, 2002, we entered into a two-year consulting agreement with Mr. Ellsworth Roston, who then became one of our directors pursuant to that agreement. Under the terms of that agreement, we granted to Mr. Roston, among other things, Roston 225,000 restricted common shares (75,000 shares pre-split) and five-year warrants to purchase an additional 450,000 common shares (150,000 shares pre-split) at $1.67 per share. For a description of the full terms of that agreement see that section of this prospectus captioned ManagementEmployment And Consulting Agreements With Management. | |
l |
In compensation for his consulting services, we granted to Mr. Roston 225,000 restricted common shares (75,000 shares pre-split) and five-year warrants to purchase an additional 450,000 common shares (150,000 shares pre-split) at $1.67 per share. | |
l |
On February 14, 2003, we entered into a three-year consulting agreement with Dr. Lowell T. Harmison, who later became one of our directors. Under the terms of that agreement, we granted to Dr. Harmison, among other things, (1) fully vested options entitling him to purchase 108,000 common shares (36,000 shares pre-split) at $0.97 per share, and (2) options entitling him to purchase an additional 108,000 common shares (36,000 shares pre-split) at $0.97 per share subject to vesting over twelve quarters. All of the aforesaid options are exercisable over five years after vesting. For a description of the full terms of that agreement see that section of this prospectus captioned ManagementEmployment And Consulting Agreements With Management. | |
l |
On April 8, 2003, we sold to Mr. Mitchell Stein 112,812 common shares (37,604 shares pre-split) for $100,000 in cash and $150,000 in expenses and equipment. Mr. Stein is the spouse of Ms. Tracey Hampton, who owns and controls ARC Finance Group, LLC, which owns approximately 69.6% of our outstanding common shares. | |
l |
On May 15, 2003, we sold to Mr. Mitchell Stein 16,000 units at $3 per unit for cash amounting to $48,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3 until May 14, 2004. Upon exercise of the warrants, Mr. Stein will receive one common share and an additional warrant to purchase one common share $6 per share until November 15, 2004. The sale of units to Mr. Stein was part of a larger private placement on the same terms and conditions with two other investors. | |
l |
On July 24, 2003, we sold to Mr. Mitchell Stein 30,030 units at $3.33 per unit for cash amounting to $100,000. Each unit consisted of one common share and one warrant. Each warrant is exercisable at $3.33 until July 14, 2004. Upon exercise of the warrants, Mr. Stein will receive one common share and an additional warrant to purchase one common share at $6.66 per share until November 15, 2004. The sale of units to Mr. Stein was part of a larger private placement on the same terms and conditions with three other investors. |
-19- | ||
| ||
|
2003 |
2002 | |||||
|
| ||||||
Audit fees |
$ |
90,644 |
$ |
11,585 |
|||
Audit-related fees |
$ |
|
$ |
|
|||
Tax fees |
$ |
|
$ |
|
|||
All other fees |
$ |
|
$ |
|
|||
All other fees, including tax consultation and preparation |
$ |
|
$ |
|
-20- | ||
| ||
-21- | ||
| ||
1. |
The director is employed by the Company or any of its affiliates in the current year or has been thus employed in any of the past three years; | |
2. |
The director accepts any compensation from the Company or any of its affiliates in excess of $60,000 during the previous fiscal year, other than compensation for board service, benefits under a tax qualified retirement plan, or non-discretionary compensation; | |
3. |
The director is a member of the immediate family of an individual (including such director's spouse, parents, children, mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law and anyone residing in such director's home) who is, or has been in any of the past three years, employed by the Company or any of its affiliates as an executive officer; | |
4. |
The director is a partner in, or a controlling shareholder or an executive officer of, any for-profit business organization to which the Company had, or from which the Company received, payments (other than those arising solely from investments in the Company's securities) that exceed 5% of the Company's or the business organization's consolidated gross revenues for the year, or $200,000, whichever is more, in any of the past three years; or | |
5. |
The director is employed or has been employed as an executive of another entity where any of the Company's executives serve on the compensation committee. |
A-1 | ||
| ||
1. |
The Committee will maintain a clear understanding with the Company's management and its independent auditors regarding the ultimate accountability of the independent auditors to the Committee and to the full Board; | |
2. | The Committee will assist, where appropriate, in the evaluation of the Company's independent auditors, and when appropriate assist to recommend replacements; | |
3. | The Committee will discuss with the Company's independent auditors (a) the independence of such auditors, and (b) the matters included in the written disclosures required by the Financial Accounting Standards Board; | |
4. | The Committee will annually review the performance of the independent auditors and will recommend to the Board and will assist in the selection of the Company's independent auditors for the upcoming year; | |
5. | The Committee will assist management with the Company's internal auditors and independent auditors with the overall scope and plans for their respective audits, including the adequacy of staffing and compensation, and make such recommendations to the Board in this regard as deemed necessary or appropriate by the Committee. The Committee will also discuss with such auditors the adequacy and effectiveness of the accounting and financial controls of the Company, including the Company's system to monitor and manage business risk; | |
6. | The Committee will meet separately with the Companys internal auditors and its independent auditors, both with and without representatives of the Company's management present, to discus the results of their examinations; | |
7. | The Committee will review the Company's interim (quarterly) financial statements and the Company's Quarterly Report on Form l0-Q (SB) and press releases before release for a given quarter and will discuss its review and any other pertinent matters with the Company's management; |
A-2 | ||
| ||
8. | The Committee will review the Company's annual financial statements, including footnotes, to be included in the Company's Annual Report on Form 10-K (SB), and the Annual Report to Shareholders with respect to (a) the quality, as opposed to only the acceptability, of the Company's accounting principles, (b) the reasonableness of significant judgments, and (c) the clarity of the disclosures in the financial statements along with any other pertinent matters with the Company's management, including the management letter and conflict of interest transactions. | |
9. | The Committee will otherwise meet with and request and obtain reports and information from such Company officers, employees, suppliers and others as the Committee shall determine to be necessary or desirable in carrying out its duties as set forth in this Charter. | |
10. | The Committee will perform a self-assessment annually and review the results with the Board. | |
11. | The Committee, in conjunction with management will develop a list of employees involved in the Company's audit and accounting practices. Annually, the Committee will mail information to these employees on how they may anonymously and confidentially report complaints specifically relating to accounting data, accounting practices, and/or other information that would have an impact on the financial statements of the Company. The employees involved in the Companys audit and accounting practices will also be given the contact information of all the audit committee members to enable such employees, to anonymously and confidentially report at anytime, complaints specifically relating to accounting data, accounting practices, and/or other information that would have an impact on the financial statements of the Company. The Audit Committee will be responsible for addressing the complaints received and determine any actions, if deemed necessary, in a timely manner. |
A-3 | ||
| ||
| ||
| ||
(Date) | ||
| ||
(Signature) | ||
| ||
(Signature) |