UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14f-1
Information Statement Pursuant to Section 14(f) of
the
Securities Exchange Act of 1934 and Rule 14f-1
Thereunder
IMAGEWARE SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
|
Delaware
|
|
33-0224167
|
|
(State
or Other Jurisdiction of Incorporation or
Organization)
|
|
(IRS
Employer Identification No.)
|
13500 Evening Creek Drive N., Suite 550
San Diego, CA 92128
(Address of Principal Executive Offices)
(858) 673-8600
(Registrant’s Telephone Number, Including Area
Code)
____________________
This
Information Statement is being furnished on or about October 27,
2020 to the stockholders of record of ImageWare Systems, Inc.at the
close of business on October
21, 2020.
13500 Evening Creek Drive N., Suite 550
San Diego, CA 92128
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AND RULE 14f-1 PROMULGATED THEREUNDER
Notice of Change in the Majority of the Board of
Directors
THIS INFORMATION STATEMENT IS BEING PROVIDED SOLELY FOR
INFORMATIONAL PURPOSES AND NOT IN CONNECTION WITH ANY VOTE OF THE
STOCKHOLDERS OF IMAGEWARE SYSTEMS, INC. NO PROXIES ARE BEING
SOLICITED AND YOU ARE NOT REQUESTED TO SEND A PROXY.
________________
INTRODUCTION
This
Information Statement is being mailed on or about October 27, 2020 to holders of record as of
the close of business on October
21, 2020 (the “Record
Date”) of shares of common stock, par value $0.01 per
share (“Common
Stock”), Series A Convertible Redeemable Preferred
Stock, par value $0.01 per share (“Series A Preferred”), Series A-1
Convertible Preferred Stock, par value $0.01 per share
(“Series A-1
Preferred”), Series B Convertible Redeemable Preferred
Stock, par value $0.01 per share (“Series B Preferred”), and Series
C Convertible Redeemable Preferred Stock, par value $0.01 per share
(“Series C
Preferred”), of ImageWare Systems, Inc., a Delaware
Corporation (the “Company”), in accordance with the
requirements of Section 14(f) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and Rule 14f-l
promulgated thereunder, in connection
with an anticipated change in a majority of the members of our
Board of Directors (the “Board”) other than by a meeting of
stockholders.
You are
receiving this Information Statement in connection with the
expected designation of new members to the Board. Section 14(f) of the Exchange Act
(“Section
14(f)”) and Rule 14f-1
require the mailing to our stockholders of record the information
set forth in this Information Statement at least ten days prior to
the date that a change in a majority of our directors occurs
(otherwise than at a meeting of our stockholders). Accordingly, the
change in a majority of our directors pursuant to the matters
described below will not occur until at least ten days following
the mailing of this Information Statement.
On
September 28, 2020, the Company entered into a Securities Purchase
Agreement (the “Purchase
Agreement”) whereby the Company agreed to sell a
series of the Company’s preferred stock, par value $0.01 per
share (“Preferred
Stock”) to be designated Series D Convertible
Preferred Stock, par value $0.01 (the “Series D Preferred”), for a
purchase price of $1,000 per share, to certain accredited
investors. The Purchase Agreement provides for the issuance of
Series D Preferred Stock at closing (the “Closing”) resulting in gross
proceeds to the Company of approximately $10.9 million; however,
the Purchase Agreement permits the Company to issue additional
Series D Preferred at Closing resulting in aggregate gross proceeds
of up to $15.0 million (the “Series D
Financing”).
Under
the terms of the Purchase Agreement, upon the Closing of the Series
D Financing, the holders of Series D Preferred (the
“Series D
Holders”) will own approximately 50% of the voting
securities of the Company on an as-converted basis, with the
holders of the Common Stock and remaining classes of Preferred
Stock, including Series A Preferred, Series A-1 Preferred, Series B
Preferred and Series C Preferred, owning the remaining approximate
50% on an as-converted basis. Additionally, the Purchase Agreement
provides that all current members of the Company’s Board will
resign at Closing, with the exception of Kristin Taylor, the
Company’s President and Chief Executive Officer, and two new
members of the Board will be appointed by the Series D Holders (the
“Series D
Directors”). At or after Closing, Ms. Taylor and the
Series D Directors have the right to appoint two additional new
independent directors (the “New Directors”).
There
will not be any changes to the composition of the current Board
prior to the tenth day following the Company’s mailing of
this Information Statement to its stockholders, which mailing is
anticipated to occur on or about October 27, 2020.
For additional information concerning the
transactions and relating to the Series D Financing, see the
Company’s Current Report on Form
8-K filed with the SEC on September 30, 2020 (the
“Form
8-K”) and the
Company’s Information Statement on Schedule 14A filed
by with the SEC on October 13,
2020.
Please
read this Information Statement carefully. It describes the terms
of various transactions that are expected to be consummated on or
about November 6, 2020, that will result in a change of control of
the Company. It also contains certain biographical and other
information concerning the current executive officers and directors
of the Company, as well as the expected Series D Directors. The SEC
also maintains a website that contains reports, proxy and
information statements, and other information regarding public
companies that file reports with the SEC. Copies of this and the
Company’s other public filings may be obtained from the
SEC’s website at http://www.sec.gov.
THIS INFORMATION STATEMENT IS REQUIRED BY SECTION 14(F) OF THE
EXCHANGE ACT AND RULE 14F-1 PROMULGATED THEREUNDER IN CONNECTION
WITH THE APPOINTMENT OF DIRECTOR DESIGNEES TO THE BOARD. NO ACTION
IS REQUIRED BY OUR STOCKHOLDERS IN CONNECTION WITH THE RESIGNATION
AND APPOINTMENT OF ANY DIRECTOR.
DIRECTORS AND OFFICERS PRIOR TO THE BOARD
RESTRUCTURING
The following table sets forth information
regarding the Company’s executive officers and directors
prior to the restructuring of the Board anticipated as a result of
the Series D Financing (“Board
Restructuring”):
|
Name
|
|
Age
|
|
Title/Position Held with the Company
|
|
Kristin Taylor
|
|
53
|
|
President, Chief Executive Officer, Director
|
|
Jonathan D. Morris
|
|
44
|
|
Senior Vice President, Chief Financial Officer
|
|
S. James Miller, Jr.
|
|
66
|
|
Chair of the Board
|
|
David Carey
|
|
75
|
|
Director
|
|
Neal Goldman
|
|
76
|
|
Director
|
|
Guy Steve Hamm
|
|
72
|
|
Director
|
|
Dana W. Kammersgard
|
|
64
|
|
Director
|
|
David Loesch
|
|
76
|
|
Director
|
Messrs. Carey, Goldman, Hamm, Kammersgard,
Loesch and Miller intend to resign from their position as a member
of our Board upon the Closing of the Series D Financing, or at
such time that the Company has
complied with the Section 14(f) and Rule 14f-1 requirements,
whereby each will resign immediately
thereafter.
The
following biographical information regarding the foregoing
directors and officers of the Company, prior to the Board
Restructuring, is presented below:
Kristin
Taylor serves as our President
and Chief Executive Officer since her appointment in March 2020 and
as a member of our Board since May 2020, and is a seasoned
innovative technology executive with over 20 years of experience in
leading organizational modernization and developing go-to-market
strategies. She formerly served as Principal of Veritas Lux since
November 2019 and principal of Kristin Taylor Consulting since
2012, in which she developed a proprietary algorithmic methodology
to weigh and rank the most influential global technical analysts.
From 2017 to 2019, Ms. Taylor served as Global Vice President of
Worldwide Analyst Relations at IBM and led the efforts to modernize
and transform IBM's analyst relations organization to drive
revenue, not just influence. From 2013 to 2017, she served as Vice
President, Global Analyst and Public Relations at MediaTek, the
third largest fabless semiconductor company in the world with a $30
billion market cap, where she led the buildout of a new global
Public and Analyst Relations organization to penetrate the North
American, European, Latin American, Russian and Indian markets.
Prior to that, she served in various positions of increasing
responsibility with Qualcomm from 1998 to 2010 including: Head of
Industry Analyst Relations, Senior Director of Business
Development, and Director of Information Technology. Ms. Taylor
developed and commercialized a highly successful embedded computing
module, designed for notebook computers which thrust Qualcomm into
the computing sector in 2006 to create hundreds of millions of
valuation as they expanded from mobile. Ms. Taylor earned her
Bachelor's degree in Sociology and Business Management from the
University of New Hampshire in Durham, New
Hampshire.
Jonathan D.
Morris serves as our Senior
Vice President, Chief Financial Officer since his appointment in
May 2020. Mr. Morris has over 23 years of experience as a
finance executive holding key leadership positions in financial
management, mergers & acquisitions, private equity, and both
merchant banking and investment banking. Mr. Morris previously
served as Chief Financial Officer of American Patriot Brands, a
provider of consumer staples since joining the organization in
2019. Prior to that, Mr. Morris led Direct Investments and
Special Opportunities with a Private Family Office from 2015 to
2019, where his primary responsibilities included the investment
sourcing and long-term strategic partnerships with core
stakeholders both domestically and internationally. Previously, Mr.
Morris served at Blackstone Group, Inc. in Technology, Media and
Telecommunications and served as a board member of SunGard.
From 2005 to 2012, he served in the TMT Investment Banking
Division of Credit Suisse. Mr. Morris began his career in 1997
within the merchant banking division of Lombard, Odier et Cie,
private bank in Switzerland. Mr. Morris earned his Bachelor's
degree in Finance from the University of Virginia and an MBA from
Georgetown University.
S. James
Miller, Jr. served
as our Chief Executive Officer and President since 1990 until March
2, 2020 and currently serves as Chair of the Board since 1996.
Prior to joining the Company, 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.
The
Nominating and Corporate Governance Committee believes that Mr.
Miller possessed the substantial managerial expertise necessary to
lead the Company through its various stages of development and
growth. Additionally, the historical knowledge of the Company and
his knowledge of the daily operations of the Company was extremely
valuable to the Board and management as it executed the
Company’s business plan. In addition, the Board valued the
input provided by Mr. Miller given his legal
expertise.
David
Carey was appointed to the
Board in February 2006. Mr. Carey currently serves as the
Chairman of Proxy Boards for Leonard DRS Technologies and OnPoint
Consulting. In addition, he is a member of the Proxy Board for
Informatica Federal Operations, Corp. and serves on a number
of Advisory Boards. Mr. Carey briefly served on the Board of
Cybergy, Inc., a publicly-listed company prior to his resignation
in 2015. He is a former Executive Director of the Central
Intelligence Agency (“CIA”), where he served for 32 years until 2001.
During his career with the CIA, Mr. Carey held several senior
positions including that of Executive Director, often referred to
as the Chief Operating Officer within the agency. Mr. Carey
earned his B.S. in Economics from Cornell University and a MBA from
the University of Delaware.
The
Board believes that Mr. Carey’s experience as a former
Executive Director of the CIA and his in-depth knowledge and
expertise with IT security matters as well as his extensive network
within the intelligence and security community, provided the Board
with specialized expertise and insight into the specific markets in
which the Company operates.
Neal
Goldman was appointed to the Board in August 2012. Mr.
Goldman is currently President, Chief Compliance Officer and a
director of Goldman Capital Management, Inc., an employee owned
investment advisor that he founded in 1985. Additionally, Mr.
Goldman is Chairman of Charles and Colvard, LTD, a specialty
jewelry company. Mr. Goldman has previously served as a member
of the Board of Directors and its Compensation Committee for Blyth,
Inc., a New York Stock Exchange-listed designer and marketer of
home decorative and fragrance products.
Mr.
Goldman is the Company’s largest shareholder and has
significant investment experience. As a result, the
Board believes that Mr. Goldman provided valuable insight to the
Board as it sought to build shareholder value.
Guy Steve
Hamm was appointed to the
Board in October 2004. Mr. Hamm served as CFO of Aspen
Holding, a privately held insurance provider, from
December 2005 to February 2007. In 2003, 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.
The
Board believes that Mr. Hamm’s experience in public
accounting, together with his managerial experience as a Chief
Financial Officer, provided the Audit Committee with the expertise
needed to oversee the Company’s finance and accounting
functions and oversight of its independent registered public
accountants.
Dana
Kammersgard was appointed to
the Board in May of 2016. He is currently the Executive Vice
President, Cloud Systems and Solutions for Seagate Technology
(“Seagate
Systems”), where he is
responsible for all storage systems related products and
strategies. Prior to joining Seagate Systems in 2015, he served as
the President, Chief Executive Officer and a director of Dot Hill
System Corp. (“Dot Hill”) since 2006. Mr. Kammersgard served as
President of Dot Hill from 2004 to 2006 and from 1999 to 2004, he
served as its Chief Technical Officer. Mr. Kammersgard was a
Founder of Artecon, Inc. (“Artecon”) a storage systems company, where he
served as a director from its inception in 1984 until the
Artecon’s merger with a competitor, Box Hill Systems Corp. in
1999. While at Artecon, Mr. Kammersgard served in various
positions, including Secretary and Senior Vice President of
Engineering from March 1998 until August 1999, and as Vice
President of Sales and Marketing from March 1997 until March 1998.
Prior to that, Mr. Kammersgard was the Director of Software
Development at Calma, a division of General Electric Company. Mr.
Kammersgard holds a B.A. in chemistry from the University of
California, San Diego.
The
Board believes that Mr. Kammersgard’s engineering and
technical experience, coupled with his senior executive management
experience with technology companies, was valuable to the
Company’s Board and senior management in navigating the
technical and marketing challenges within the
industry.
David
Loesch was appointed to
the Board in September 2001. Prior to that, he served as a
Special Agent with the Federal Bureau of Investigations
(“FBI”) for 29 years and upon his retirement from
the FBI, Mr. Loesch was the Assistant Director in Charge of
the Criminal Justice Information Services Division. He 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. In 1999, Mr.
Loesch was appointed by former Attorney General Janet Reno to serve
as one of 15 original members of the Compact Council, an
organization charged with promulgating rules and procedures
governing the use and exchange of criminal history records for
non-criminal justice use. Mr. Loesch served in the United
States Army as an Officer with the 101st Airborne Division in
Vietnam. He holds a Bachelor’s degree from Canisius College
and a Master’s degree in Criminal Justice from George
Washington University. Mr. Loesch continues to work as a private
consultant on criminal justice information sharing and the use of
biometrics to help identify criminals and individuals of special
concern.
The
Board believes that Mr. Loesch’s extensive service as a
Special Agent with the FBI, together with his knowledge of security
issues relevant to the Company’s products and markets,
provided the Board and the Company with valuable input regarding
the Company’s competitors and the markets in which the
Company serves.
DIRECTORS AND OFFICERS FOLLOWING THE BOARD RESTRUCTURING AND FILING
OF THIS INFORMATION STATEMENT
The
following table sets forth information regarding the
Company’s executive officers and directors following the
Board Restructuring, including those directors who will be
appointed on or after ten days following the mailing of this
Information Statement to the Company’s
stockholders.
In addition to the information provided below and
elsewhere within this Information Statement, the Company will file
a Current Report on Form 8-K disclosing the appointment of any new
members to the Board, as well as at such times that Kristin Taylor
and the Series D Directors have exercised their right to appoint
the two additional directors. In addition, although Messrs. Miller,
Carey, Goldman, Hamm, Kammersgard, Loesch and Miller
currently continue to serve as a
director on the Board, as noted above, each has agreed to resign
from such position on or after ten days following the mailing of
this Information Statement to the Company’s stockholders;
therefore, they have been omitted from the below
table.
|
Name
|
|
Age
|
|
Title/Position Held with the Company
|
|
Kristin Taylor
|
|
53
|
|
President, Chief Executive Officer, Director
|
|
Jonathan D. Morris
|
|
44
|
|
Senior Vice President, Chief Financial Officer
|
|
Benjamin
Smeal (1)
|
|
42
|
|
Director
|
|
James
M. Demitrieus (2)
|
|
72
|
|
Director
|
(1)
Benjamin Smeal will be appointed as a
director on the Board on or about ten days following the mailing of this Information
Statement to the Company’s stockholders.
(2)
James M. Demitrieus will be appointed as a
director on the Board on or about ten days following the mailing of this Information
Statement to the Company’s stockholders.
There
are no familial relationships between any of the Company’s
executive officers and directors listed above.
The
following biographical information regarding the foregoing
directors and officers of the Company following the Board
Restructuring and the filing of this Information Statement is
presented below:
Kristin Taylor, President,
Chief Executive Officer and Director. Please see Ms. Taylor’s biography under the
section of this Information
Statement titled Directors and Officers Prior
to the Transaction”.
Jonathan D. Morris, Senior
Vice President and Chief Financial Officer. Please
see Mr. Morris’s
biography under the section of this
Information Statement titled Directors and Officers Prior
to the Transaction”.
James M.
Demitrieus. From
March 2018 to present, Mr. Demitrieus has served as Managing
Director of Jameson Associates, a specialty investment management
and financial advisory firm. Prior to Jameson, he served
in multiple positions at Eyelock Corporation beginning in 2009,
including Chief Executive Officer from 2010 to 2018. Eyelock
Corporation provides iris based biometric solutions to various
business verticals. Prior to Eyelock Corporation, he served
in various senior executive roles, including as President of
Sherwood Valve, a division of Harsco Corporation, and as Chief
Executive Officer at Aluma Systems. Earlier in Mr.
Demitrieus’ career, he served in numerous senior accounting
and finance roles, including with the public accounting firm of
Arthur Andersen & Co. Mr. Demitrieus holds a Bachelor's
in Business Administration from Adelphi University in New York. The
Company expects to appoint Mr. Demitrieus to the Board on or about
ten days following the mailing of this Information Statement
to the Company’s stockholders.
Mr.
Demitrieus was selected as a member of the Board pending
consummation of the Series D Financing due to his experience in the
field of biometrics, as well as his extensive management, finance
and accounting experience, that management believes will provide
the Board with valuable insights regarding monetizing the
Company’s product offerings and intellectual
property.
Benjamin Smeal.
Since April 2018, Mr. Smeal has been a private investor. From April
2017 to April 2018, he served as the Associate Director, Public
Equities at Willett Advisors, the family office of Michael R.
Bloomberg, managing substantially all of Bloomberg's personal
assets in addition to those of Bloomberg Philanthropies. From
November 2007 to April 2017, he held the role of Senior Analyst at
Kenmare Management, a hedge fund focused on U.S. equities. Mr.
Smeal holds a Bachelor of Arts in Political Economy from Williams
College in Williamstown, Massachusetts, and a Master of Business
Administration, with a focus on Value Investing, from Columbia
Business School in New York, New York. The Company expects to
appoint Mr. Smeal to the Board on or about ten days following the mailing of this Information
Statement to the Company’s stockholders.
Mr. Smeal was selected as a member of the
Board pending consummation of the Series D Financing due to
his capital market experience, as well as his experience
working with undervalued companies, that management believes
will assist in the
Board’s efforts to create
value for shareholders as it executes its business plan following
consummation of the Series D Financing.
There
have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the
evaluation of the ability and integrity of any director or nominee
set forth above during the past ten years.
CORPORATE GOVERNANCE
There
will not be any changes to the composition of the current Board
prior to the tenth day following the Company’s mailing of
this Information Statement to its stockholders, which mailing is
anticipated to occur on or about October 27, 2020. Certain
disclosure which follows regarding corporate governance refers to
the Company’s Board and corporate governance policies and
procedures prior to the resignation of those directors which intend
to resign upon the Closing of the Series D Financing, and does not
reflect the Company’s corporate governance policies and
procedures subsequent to such resignations.
Board of Directors; Attendance at
Meetings
The Board held three meetings and acted by unanimous written
consent one time during the
year ended December 31, 2019. Each director attended at least 75%
of Board meetings during the year ended December 31, 2019. We have
no formal policy with respect to the attendance of Board members at
annual meetings of shareholders, but encourage all incumbent
directors and director nominees to attend each annual meeting of
shareholders.
Director Independence
Our
Board has determined that all of its members, other than Mr.
Goldman, who beneficially owned approximately 31.34% of the
Company’s Common Stock prior to the Board Restructuring are
“independent” within the meaning of the Nasdaq Stock
Market Rules and SEC rules regarding independence.
Board Committees and Charters
Our
Board has an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee, each of which has
the composition and responsibilities described below.
Audit Committee
The
Audit Committee provides assistance to the Board in fulfilling its
legal and fiduciary obligations in matters involving our
accounting, auditing, financial reporting, internal control and
legal compliance functions by approving the services performed by
our independent accountants and reviewing their reports regarding
our accounting practices and systems of internal accounting
controls. The Audit Committee also oversees the audit efforts of
our independent accountants and takes those actions as it deems
necessary to satisfy it that the accountants are independent of
management. The Audit Committee currently consists of Messrs. Hamm
(Committee Chair), Carey and Loesch, each of whom is a
non-management member of our Board. Mr. Hamm is also our Audit
Committee financial expert, as currently defined under current SEC
rules. The Audit Committee met three times during the year
ended December 31, 2019. We believe that the composition
of our Audit Committee meets the criteria for independence under,
and the functioning of our Audit Committee complies with the
applicable Nasdaq Stock Market Rules and SEC rules and
regulations.
Compensation Committee
The
Compensation Committee determines our general compensation policies
and the compensation provided to our directors and officers. The
Compensation Committee also reviews and determines bonuses for our
officers and other employees. In addition, the Compensation
Committee reviews and determines equity-based compensation for our
directors, officers, employees and consultants and administers our
stock option plans. The Compensation Committee currently
consists of Messrs. Carey (Committee Chair) and Goldman, each of
whom is a non-management member of our Board. The Compensation
Committee met one time during the year ended December 31, 2019.
Although Mr. Carey meet the criteria for independence under the
applicable Nasdaq Stock Market Rules and SEC rules and regulations,
Mr. Goldman is not considered independent under such
requirements.
Nominating and
Corporate Governance Committee
The
Nominating and Corporate Governance Committee is responsible for
making recommendations to the Board regarding candidates for
directorships and the size and composition of the Board. In
addition, the Nominating and Corporate Governance Committee is
responsible for overseeing our corporate governance guidelines and
reporting and making recommendations to the Board concerning
corporate governance matters. The Nominating and Corporate
Governance Committee currently consists of all the
nonemployee members of the Board. The Nominating and
Corporate Governance Committee met three times during the year
ended December 31, 2019.
Board Leadership Structure
Our
Board has discretion to determine whether to separate or combine
the roles of Chief Executive Officer and Chair of the Board. Prior
to the appointment of Kristin Taylor as President and Chief
Executive Officer on March 2, 2020, and during the year ended
December 31, 2019, S. James Miller held the roles of both Chief
Executive Officer and Chair of the Board since 1996, and our Board
believed that at the time, his combined role was advantageous to
the Company and its stockholders. At such time as Messrs. Smeal and
Demitrius are appointed to the Board, the Board will elect a new
Chair of the Board.
The
Board maintains effective independent oversight through a number of
governance practices, including open and direct communication with
management, input on meeting agendas, and regular executive
sessions.
Board
Role in Risk Assessment
Management,
in consultation with outside professionals, as applicable,
identifies risks associated with the Company’s operations,
strategies and financial statements. Risk assessment is also
performed through periodic reports received by the Audit Committee
from management, counsel and the Company’s independent
registered public accountants relating to risk assessment and
management. Audit Committee members meet privately in executive
sessions with representatives of the Company’s independent
registered public accountants. The Board also provides risk
oversight through its periodic reviews of the financial and
operational performance of the Company.
Code of Ethics
The Company has adopted a Code of Business Conduct
and Ethics policy that
applies to our directors and employees (including the
Company’s principal executive officer, principal financial
officer, principal accounting officer or controller, or persons
performing similar functions). The Company intends to promptly
disclose (i) the nature of any amendment to this code of ethics
that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, or
persons performing similar functions and (ii) the nature of any
waiver, including an implicit waiver, from a provision of this code
of ethics that is granted to one of these specified individuals,
the name of such person who is granted the waiver and the date of
the waiver on our website in the future. A copy of our
Code of Business Conduct and Ethics can be obtained from our
website at http://www.iwsinc.com.
Indemnification of Officers and Directors
To
the extent permitted by Delaware law, the Company will
indemnify its directors and officers against expenses and
liabilities they incur to defend, settle, or satisfy any civil
or criminal action brought against them on account
of their being or having been Company directors or officers
unless, in any such action, they are adjudged to have acted
with gross negligence or willful
misconduct.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information
about the compensation paid or accrued during the years ended
December 31, 2019 and 2018 to our Chief Executive Officer and each
of our two most highly compensated executive officers other than
our Chief Executive Officer who were serving as executive officers
at December 31, 2019, and whose annual compensation exceeded
$100,000 during such year or would have exceeded $100,000 during
such year if the executive officer were employed by the Company for
the entire fiscal year (collectively the “Named Executive
Officers”).
|
Name and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. James Miller, Jr.
|
2019
|
$400,856
|
$-
|
$-
|
$16,799
|
|
$417,655
|
|
Chair of the Board and
|
2018
|
$387,787
|
$-
|
$199,408
|
$19,967
|
(3)
|
$607,162
|
|
Former Chief Executive Officer
|
|
|
|
|
|
|
|
|
David Harding
|
2019
|
$275,000
|
$-
|
$-
|
$4,784
|
|
$279,784
|
|
Former Vice President and
|
2018
|
$275,000
|
$-
|
$161,481
|
$5,288
|
(4)
|
$441,769
|
|
Chief Technical Officer
|
|
|
|
|
|
|
|
|
David Somerville
|
2019
|
235,000
|
$-
|
-
|
8,963
|
|
$243,963
|
|
Former Sr. Vice President Sales
|
2018
|
$230,631
|
$-
|
$90,400
|
$67,089
|
(5)
|
$388,120
|
|
and Marketing
|
|
|
|
|
|
|
|
(1)
All option awards were granted under the
Company’s 1999 Stock Option Plan (the
“1999
Plan”).
(2)
The amounts presented in this column do not
reflect the cash value or realizable value of option grants to the
named executive officers during the year ended December 31, 2019 or
2018. During the year ended December 31, 2019 and 2018, no named
executive officer exercised an option and therefore no value was
realized during the reporting period. The amounts reflect the grant
date fair value of the options awarded in the fiscal years ended
December 31, 2019 and 2018, respectively, in accordance with
the provisions of FASB ASC Topic 718. 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 for
options granted during the years ended December 31, 2019 and 2018
ranged from 64% to 57%. 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 Topic 14. The expected term used by the Company
during the years ended December 31, 2019 and 2018 was 5.17 years.
The difference between the actual historical expected life and the
simplified method was immaterial. 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 the
Company’s Black-Scholes calculations for the years ended
December 31, 2019 and 2018 was 2.58%. Dividend yield is zero, as we
do not expect to declare any dividends on shares of our Common
Stock 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 0% for corporate officers,
4.1% for members of the Board
and 6.0% for all other
employees. We review the expected forfeiture rate annually to
determine if that percent is still reasonable based on historical
experience.
(3)
This
amount includes premiums on life insurance and disability insurance
of $2,984 and matching 401(k) contributions of $1,800. Effective
July 21, 2020, Mr. Harding resigned from his position with the
Company.
(4)
This
amount includes premiums on life insurance and disability insurance
of $8,399 and matching 401(k) contributions of $8,400.
(5)
This
amount includes premiums in life insurance and disability insurance
of $1,848 and matching 401(k) contributions of $7,115. Effective
March 9, 2020, Mr. Somerville resigned from his position with the
Company.
Outstanding Equity Awards at Fiscal
Year-End
The
following table sets forth information regarding unexercised
options, stock that has not vested and equity incentive awards held
by each of the then Named Executive Officers outstanding as of
December 31, 2019:
|
|
|
|
|
|
Number of
Securities
Underlying
Unexercised
Options:
Exercisable (#)
|
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable (#)
|
Option
Exercise
Price
($)
|
|
Number of Shares That
Have Not Vested
(#)
|
Market Value of Shares That Have Not
Vested
($)
|
|
Former
Named Executive Officers
|
|
|
|
|
|
|
|
David Harding
|
325,000
|
—
|
$0.92
|
2/2/2022
|
—
|
$—
|
|
|
100,000
|
—
|
$0.93
|
2/8/2023
|
—
|
$—
|
|
|
75,000
|
—
|
$1.93
|
10/29/2023
|
—
|
$—
|
|
|
50,000
|
—
|
$2.29
|
12/15/2024
|
—
|
$—
|
|
|
125,000
|
—
|
$1.73
|
9/14/2025
|
—
|
$—
|
|
|
300,000
|
---
|
$1.37
|
9/20/2026
|
—
|
$—
|
|
|
58,375
|
41,625
|
$1.75
|
1/31/2028
|
—
|
$—
|
|
|
|
|
|
|
|
|
|
S. James
Miller, Jr.
|
225,000
|
—
|
$1.11
|
3/10/2021
|
—
|
$—
|
|
|
450,000
|
—
|
$0.92
|
2/2/2022
|
—
|
$—
|
|
|
100,000
|
—
|
$0.93
|
2/8/2023
|
—
|
$—
|
|
|
100,000
|
—
|
$1.93
|
10/29/2023
|
—
|
$—
|
|
|
50,000
|
—
|
$2.29
|
12/15/2024
|
—
|
$—
|
|
|
150,000
|
—
|
$1.73
|
9/14/2025
|
—
|
$—
|
|
|
300,000
|
---
|
$1.37
|
9/20/2026
|
—
|
$—
|
|
|
116,679
|
83,330
|
$1.75
|
1/31/2028
|
—
|
$—
|
|
|
|
|
|
|
|
|
|
David
Somerville
|
175.000
|
125,000
|
$1.75
|
1/31/2028
|
—
|
$—
|
Employment Agreements
Kristin
Taylor. On March 2, 2020, we
entered into an employment agreement with Ms. Kristin Taylor, the
Company’s President and Chief Executive Officer. This
agreement provides for an annual base salary of $330,000 for
a period of 24 months effective April 10, 2020. The agreement is
also provides for (i) the grant of a stock option to purchase 1.75
million shares of the Company's Common Stock, which stock option
shall vest in three equal annual installments beginning one year
from the date of issuance; (ii) an annual bonus equal to 100% of
Ms. Taylor's annual salary upon meeting the following performance
objectives: (a) the Company establishing a major partnership that
generates $1.5 million in revenue during the calendar year 2020;
(b) the Company achieving positive cash flow by the year ended
December 31, 2020; (c) the Company's operating loss being reduced
by a minimum of 50% by the year ended December 31, 2020; and (d)
total sales exceeding $10.0 million in 2020, with each objective
equal to 25% of the total bonus objective. If all performance
objectives are met, Ms. Taylor will be granted an additional stock
option to purchase 500,000 shares of Common Stock. In the event of
termination of her employment other than by reason of death or
disability, or for cause, the employment agreement is also
anticipated to provide Ms. Taylor with certain severance payments,
including continuation of her salary for the greater of one year or
the remaining term under her employment agreement.
Former Named Executive Officers
S. James
Miller, Jr. On October 1, 2005, the Company entered
into an employment agreement with Mr. Miller, pursuant to
which Mr. Miller served as President and Chief Executive
Officer until his resignation on March 2, 2020. On March 2, 2020,
the Company entered into a Transition Services Agreement (the
“Transition
Agreement”) with Mr.
Miller, whereby Mr. Miller continued to serve the Company as its
Executive Chairman of the Board of Directors until May 2, 2021 (the
“Term”). Under the Transition Agreement, Mr.
Miller will receive a base salary of $228,000 annually, payable in
semi-monthly installments. Mr. Miller is also entitled to
reimbursement for reasonable expenses incurred in connection with
the Company’s business, as well as the following severance
benefits if the Company terminates the Agreement without cause, in
the event of an involuntary termination, or in the event of an
involuntary termination in the event of a change in control (as
defined below): (i) a lump sum cash payment equal to twelve
months’ base salary; (ii) continuation of Mr. Miller’s
fringe benefits and medical insurance for a period of one year; and
(iii) immediate vesting of all stock options and restricted stock,
taken collectively, granted by the Company prior any involuntary
termination that are then unexercisable or unvested as of the date
of such involuntary termination.
David
Harding. On
January 1, 2013, the Company entered
into an Emloyment Agreement with Mr. David Harding, pursuant
to which Mr. Harding served as the Company’s Vice President
and Chief Technical Officer until his resignation on July 21,
2020. The Agreement was originally for a one-year term, ending
on December 31, 2013; however, the Agreement was amended to extend
the expiration date to December 31, 2020. Under the terms of the
Agreement, Mr. Harding was paid a semi-monthly base salary
of $9,375. Following his
resignation, Mr. Harding received his then current salary accrued
through the effective date of his resignation, plus accrued
compensation in connection with unused
vacation.
For purposes of the above-referenced agreements,
termination for “cause” means the executive’s
commission of a criminal act or an act of fraud, embezzlement,
breach of trust or other act of gross misconduct; violations of
policies or rules of the Company; refusal to follow the direction
given by the Company from time to time or breach of any covenant or
obligation under the above-referenced agreements or other
agreements with the Company; neglect of duty; misappropriation,
concealment, or conversion of any money or property of the Company;
intentional damage or destruction of property of the Company;
reckless conduct which endangers the safety of other persons or
property during the course of employment or while on premises
leased or owned by the Company; or a breach of any obligation or
requirement set forth in the above-referenced agreements. 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
the Company’s 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 the Company’s 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 the Company’s 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 the Company and the Company’s
subsidiaries, other than a sale, lease, license, or other
disposition of all or substantially all of the consolidated assets
of the Company and the Company’s subsidiaries to an entity,
50% or more of the combined voting power of the voting securities
of which are owned by the Company’s 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.
Other
than as set forth above, there were no arrangements or
understandings between the Company’s Named Executive Officers
and any other person pursuant to which they were appointed as
officers as of December 31, 2019. None of the Company’s Named
Executive Officers as of December 31, 2019 had a family
relationship that is required to be disclosed under Item 401(d) of
Regulation S-K.
DIRECTOR COMPENSATION
Each of our non-employee directors receives a monthly retainer of
$3,000 for serving on the Board, which fee may be paid either in
cash, options or shares of Common Stock. Board members who
also serve on the Audit Committee receive additional monthly
compensation of $458 for the Committee Chair and $208 for the
remaining members of the Audit Committee. Board members who
also serve on the Compensation Committee receive additional monthly
compensation of $417 for the Committee Chair and $208 for the
remaining members of the Compensation Committee. The
members of the Board 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, 2019 the total
amounts of compensation to non-employee directors (excluding
reimbursable expenses) was approximately $82,564, which amount was
paid $20,500 in cash with the remainder paid in stock
options.
Each of
our non-employee directors is also eligible to receive stock option
grants under the 1999 Plan. Stock options granted under the 1999
Plan are intended by us not to qualify as incentive stock options
under the Internal Revenue Code of 1986, as amended (the
“Code”).
The
term of stock options granted under the 1999 Plan is
ten years. In the event of a merger of us with or into another
corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving us, an equivalent option
will be substituted by the successor corporation; provided, however, that we may cancel
outstanding options upon consummation of the transaction by giving
at least thirty (30) days’ notice.
The
Company has not yet adopted a new Director Compensation Plan since
the consummation of the Series D Financing.
The
following table sets forth the compensation awarded to, earned by,
or paid to each person who served as a director during the year
ended December 31, 2019, other than a director who also served as
an executive officer:
|
Current
Directors (1)
|
Fees Earned
or Paid in Cash
($)
|
|
|
All
Other Compensation ($)
|
|
|
David
Carey
|
$7,500
|
$-
|
$8,131
|
$-
|
$15,631
|
|
|
|
|
|
|
|
|
Neal
Goldman
|
$2,500
|
$-
|
$8,131
|
$-
|
$10,631
|
|
|
|
|
|
|
|
|
Guy Steve
Hamm
|
$5,500
|
$-
|
$8,131
|
$-
|
$13,631
|
|
|
|
|
|
|
|
|
Dana
Kammersgard
|
$0
|
$-
|
$12,865
|
$-
|
$12,865
|
|
|
|
|
|
|
|
|
David
Loesch
|
$2,500
|
$-
|
$8,131
|
$-
|
$10,631
|
|
|
|
|
|
|
|
|
Former
Directors
|
|
|
|
|
|
|
Robert T.
Clutterbuck (3)
|
$-
|
$-
|
$3,152
|
$-
|
$3,152
|
|
|
|
|
|
|
|
|
Charles Crocker
(4)
|
$-
|
$-
|
$2,240
|
$-
|
$2,240
|
|
|
|
|
|
|
|
|
John Cronin
(5)
|
$2,500
|
$-
|
$8,131
|
$-
|
$10,631
|
|
|
|
|
|
|
|
|
Charles Frischer
(3)
|
$-
|
$-
|
$3,152
|
$-
|
$3,152
|
(1)
Messrs. Carey, Goldman, Hamm, Kammersgard, Loesch and Miller
intend to resign from their position as a member of our Board upon
the Closing of the Series D Financing, or at such time that the Company has complied with the
Section 14(f) and Rule 14f-1 requirements, whereby each will resign
immediately thereafter.
(2)
The
amounts reflect the grant date fair value of options recognized as
compensation in 2019, in accordance with the provisions of FASB ASC
Topic 718, and thus may include amounts from awards granted prior
to 2019.
(3)
Messrs.
Clutterbuck and Frischer resigned from their positions as members
of our Board on May 6, 2019.
(4)
Mr.
Crocker resigned from his position as a member of our Board on
February 14, 2019.
(5)
Mr.
Cronin resigned from his position as a member of our Board on April
1, 2020.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2019
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
|
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))
|
|
|
|
|
|
|
Equity compensation plans approved by security
holders:
|
|
|
|
|
1999
Stock Award Plan, as amended and restated
|
7,204,672
|
$1.32
|
401,919
|
Description of Equity Compensation Plans
2020 Omnibus Stock Incentive Plan
On June 9, 2020, pursuant to authorization
obtained from the Company’s stockholders, the Company adopted
the 2020 Omnibus Stock Incentive Plan (the
“2020
Plan”). Such plan had
been previously unanimously approved by the Company’s Board.
The purposes of our 2020 Plan are to enhance our ability to attract
and retain highly qualified officers, non-employee directors, key
employees and consultants, and to motivate those service providers
to serve the Company and to expend maximum effort to improve our
business results by providing to those service providers an
opportunity to acquire or increase a direct proprietary interest in
our operations and future success. The 2020 Plan also will allow us
to promote greater ownership in our Company by the service
providers in order to align the service providers’ interests
more closely with the interests of our stockholders. Awards granted
under the 2020 Plan are designed to qualify for special tax
treatment under Section 422 of the Code.
Pursuant
to the adoption of the 2020 Plan, such plan will supersede and
replace the Company’s 1999 Plan and no new awards will be
granted under the 1999 Plan thereafter. Any awards outstanding
under the 1999 Plan on the date of approval of the 2020 Plan will
remain subject to the 1999 Plan. Upon approval of our 2020 Plan,
all shares of Common Stock remaining authorized and available for
issuance under the 1999 Plan and any shares subject to outstanding
awards under the 1999 Plan that subsequently expire, terminate, or
are surrendered or forfeited for any reason without issuance of
shares will automatically become available for issuance under our
2020 Plan.
DESCRIPTION OF VOTING SECURITIES
Our certificate of incorporation, as amended (our
“Charter”), currently authorizes the issuance of up
to 345,000,000 shares of our common stock, $0.01 par value per
share (“Common
Stock”), and 5,000,000
shares of preferred stock, $0.01 par value per share
(“Preferred
Stock”). Of our Preferred
Stock, 38,000 shares have been designated as Series A Preferred,
37,468 shares have been designated as Series A-1 Preferred, 750,000
shares have been designated as Series B Preferred, and 1,000 shares
have been designated as Series C Preferred. As of the Record Date,
there were issued and outstanding: 137,192,877 shares of
Common Stock, 19,320 shares of Series A Preferred, 18,148 shares of
Series A-1 Preferred, 239,400 shares of Series B Preferred, and
1,000 shares of Series C Preferred outstanding. As of the Record
Date, outstanding shares represented 191,928,260 votes, consisting
of 137,192,877 attributable to Common Stock, 16,800,000 attributable to Series A
Preferred, 27,920,000 attributable to Series A-1 Preferred,
45,384 attributable to Series B
Preferred, and 10,000,000
attributable to Series C Preferred.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of October 21, 2020, we had five classes of voting stock
outstanding: (i) Common Stock; (ii) our Series A Preferred; (iii)
our Series A-1 Preferred; (iv) our Series B Preferred; and (v) our
Series C Preferred. The following tables sets forth information
regarding shares of Series A Preferred, Series A-1 Preferred,
Series B Preferred, Series C Preferred, and Common Stock
beneficially owned as of October 21, 2020.
In
connection with Series D Financing, all of the outstanding shares
of each of the Series A Preferred and Series A-1 Preferred will be
converted into shares of Common Stock over a period of time
beginning on November 1, 2020, with 100% of the such outstanding
shares being converted by August 1, 2021. For additional
information concerning the transactions relating to Series D
Financing, including the conversion of all issued and outstanding
shares of the Company’s Series A Preferred and Series A-1
Preferred into shares of Common Stock and the issuance of the new
Series D Preferred, see our Current Report on Form 8-K filed with
the SEC on September 30,
2020.
The following tables set forth information
regarding shares of Series A Preferred Stock, Series A-1 Preferred
Stock, Series B Preferred Stock, Series C Convertible Preferred
Stock, and Common Stock beneficially owned as of October 21,
2020 by:
(i)
Each
of our officers and directors;
(ii)
All
officer and directors as a group; and
(iii)
Each
person known by us to beneficially own five percent or more of the
outstanding shares of our Common Stock, Series A Preferred, Series
A-1 Preferred, Series B Preferred, and Series C
Preferred.
Percentownership is
calculated based on 18,917 shares of Series A Preferred, 18,200
shares of Series A-1 Preferred, 239,400 shares of Series B
Preferred, 1,000 shares of Series C Preferred and 138,256,925
shares Common Stock outstanding as of October 21,
2020.
|
Beneficial Ownership of Series A Preferred
Name, Address and Title (if applicable)(1)
|
Series A
Preferred
Stock (2)
|
|
|
|
|
|
Directors and Named Executive
Officers:
|
|
|
|
S.
James Miller, Jr., Chair of the Board
|
50
|
*
|
|
Neal
Goldman, Director
|
4,717
|
24.94%
|
|
Total beneficial ownership of directors and officers as a group (9
persons):
|
4,767
|
25.1%
|
|
|
|
|
|
5%
Shareholders:
|
|
|
|
Charles
Frischer
4404 52nd Avenue NE
Seattle,
WA 98105
|
1,552
|
8.2%
|
|
Robert
T. Clutterbuck
1360 East 9th
Street, Suite 1250
Cleveland, OH
44114
|
1,073
|
5.7%
|
|
CF Special Situation Fund I, LP
(3)
1360 East 9th
Street, Suite 1250
Cleveland, OH
44114
|
2,802
|
14.8%
|
|
CAP 1 LLC (4)
14000
Quail Spring Parkway, Suite 2200
Oklahoma
City, OK 73134
|
1,500
|
7.9%
|
|
Richard
Leahy
322
Pilots Point
Mt.
Pleasant, SC 29464
|
1,000
|
5.3%
|
* less than 1%
(1)
Each of the Company’s Named Executive
Officers and directors who do not hold shares of Series A Preferred
are excluded from this table. The business address of each of the
executive officers and directors is 13500 Evening Creek Drive N.,
Suite 550, San Diego, CA 92128.
(2)
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities.
(3)
Robert
T. Clutterbuck is President of CF Special Situation Fund I,
LP.
(4)
Mr.
David Sackler, President of CAP I LLC, may be deemed to have voting
and investment discretion over the securities identified
herein.
|
Beneficial Ownership of Series A-1 Preferred
Name, Address and Title (if applicable) (1)
|
Series A-1
Preferred
Stock (2)
|
|
|
|
|
|
Directors and Named Executive
Officers: (3)
|
|
|
|
S.
James Miller, Jr., Chair of the Board
|
50
|
*
|
|
Neal
Goldman, Director
|
4,717
|
25.9%
|
|
Total beneficial ownership of directors and officers as a group (9
persons):
|
4,767
|
26.2%
|
|
|
|
|
|
5%
Shareholders:
|
|
|
|
Charles
Frischer
4404 52nd Avenue NE
Seattle,
WA 98105
|
1,553
|
8.5%
|
|
Robert
T. Clutterbuck
1360 East 9th
Street, Suite 1250
Cleveland, OH
44114
|
1,045
|
5.7%
|
|
CF Special Situation Fund I, LP
(4)
1360 East 9th
Street, Suite 1250
Cleveland, OH
44114
|
2,453
|
13.5%
|
|
CAP 1 LLC (5)
14000
Quail Spring Parkway, Suite 2200
Oklahoma
City, OK 73134
|
1,500
|
8.2%
|
|
Richard
Leahy
322
Pilots Point
Mt.
Pleasant, SC 29464
|
1,000
|
5.5%
|
* less than 1%
(1)
Each of the Company’s Named Executive
Officers and directors who do not hold shares of Series A-1
Preferred are excluded from this table. The business address of
each of the executive officers and directors is 13500 Evening Creek
Drive N., Suite 550, San Diego, CA 92128.
(2)
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities.
(3)
Messrs. Goldman and Miller intend to resign
from their position as a member of our Board upon the Closing of
the Series D Financing, or at such
time that the Company has complied with the Section 14(f) and Rule
14f-1 requirements, whereby each will resign immediately
thereafter.
(4)
Robert
T. Clutterbuck is President of CF Special Situation Fund I,
LP.
(5)
Mr.
David Sackler, President of CAP I LLC, may be deemed to have voting
and investment discretion over the securities identified
herein.
|
Beneficial Ownership of Series B Preferred
Name, Address and Title (if applicable) (1)
|
Series B
Preferred
Stock (2)
|
|
|
Darrelyn
Carpenter
|
28,000
|
12%
|
|
Frederick
C. Orton
|
20,000
|
8%
|
|
Howard
Harrison
|
20,000
|
8%
|
|
Wesley
Hampton
|
16,000
|
7%
|
(1)
Each of the Company’s Named Executive
Officers and directors who do not hold shares of Series B Preferred
are excluded from this table. The business address of each of the
executive officers and directors is 13500 Evening Creek Drive N.,
Suite 550, San Diego, CA 92128.
(2)
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities.
|
Beneficial Ownership of Series C Preferred
Name, Address and Title (if applicable) (1)
|
Series C
Preferred
Stock (2)
|
|
|
Blackwell Partners
LLC – Series A (3)
c/o Nantahala
Capital Management, LLC
19 Old Kings
Highway South, Suite 200
Darien, CT
06820
|
128
|
12.8%
|
|
Seaport
Global Securities LLC
360
Madison Ave, 22 Floor
New
York, NY 10017
|
100
|
10.0%
|
|
Nantahala Capital
Partners Limited Partnership (3)
c/o Nantahala
Capital Management, LLC
19 Old Kings
Highway South, Suite 200
Darien, CT
06820
|
54
|
5.4%
|
|
Nantahala Capital
Partners II Limited Partnership (3)
c/o Nantahala
Capital Management, LLC
19 Old Kings
Highway South, Suite 200
Darien, CT
06820
|
112
|
11.2%
|
|
Nantahala Capital
Partners SI LP (3)
c/o Nantahala
Capital Management, LLC
19 Old Kings
Highway South, Suite 200
Darien, CT
06820
|
397
|
39.7%
|
|
Shellback
Financial, LLC
16405 45th Avenue
North
Minneapolis, MN
55446
|
100
|
10.0%
|
|
Silver Creek CS
SAV, L.L.C. (3)
c/o Nantahala
Capital Management, LLC
19 Old Kings
Highway South, Suite 200
Darien, CT
06820
|
59
|
5.9%
|
(1)
Each
of the Company’s Named Executive Officers and directors who
do not hold shares of Series C Preferred are excluded from this
table.
(2)
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities.
(3)
Nantahala Capital
Management, LLC is a Registered Investment Adviser and has been
delegated the legal power to vote and/or direct the disposition of
securities on behalf of these entities as a General Partner or
Investment Manager and would be considered the beneficial owner of
such securities. The above shall not be deemed to be an admission
by the record owners that they are themselves beneficial owners of
these shares of Series C Preferred for purposes of Section 13(d) of
the Exchange Act or any other purpose.
|
Beneficial Ownership of Common Stock
Name and Address
|
|
|
|
|
|
|
|
Directors and Named Executive
Officers:
|
|
|
|
S. James Miller, Jr., Chair of the
Board (4)
|
2,084,539
|
1.5%
|
|
David Carey, Director (5)
|
138,386
|
*
|
|
Neal Goldman, Director (6)
|
49,322,800
|
32.3%
|
|
G. Steve Hamm, Director (7)
|
135,962
|
*
|
|
Dana W. Kammersgard, Director (8)
|
114,750
|
*
|
|
David Loesch, Director (9)
|
166,584
|
*
|
|
Kristin
Taylor, President and Chief Executive Officer
|
0
|
*
|
|
Jonathan
D. Morris, Chief Financial Officer
|
0
|
*
|
|
|
|
|
|
Total beneficial ownership of directors and Named Executive
Officers as a group (8 persons):
|
51,813,513
|
33.7%
|
* less than 1%
(1)
All entries exclude beneficial ownership of shares
issuable pursuant to options that have not vested or that are not
otherwise exercisable as of the date hereof, or which will not
become vested or exercisable within 60 days of October
21, 2020.
(2)
Percentages are rounded to nearest one-tenth of
one percent. Percentages are based on 138,256,925
shares of Common Stock outstanding as
of October 21, 2020. Options
that are presently exercisable or exercisable within 60 days
of October 21, 2020 are deemed
to be beneficially owned by the stockholder holding the options for
the purpose of computing the percentage ownership of that
stockholder, but are not treated as outstanding for the purpose of
computing the percentage of any other
stockholder.
(3)
Messrs. Carey, Goldman, Hamm, Kammersgard,
Loesch and Miller intend to resign from their position as a member
of our Board upon the Closing of the Series D Financing, or at
such time that the Company has
complied with the Section 14(f) and Rule 14f-1 requirements,
whereby each will resign immediately
thereafter.
(4)
Includes 75,201 shares held jointly with spouse,
295,315 shares issuable for vested restricted stock units, each
vested within 60 days of October 21, 2020, 43,479 shares issuable upon the conversion
of Series A Preferred, 76,925 shares issuable upon the conversion
of Series A-1 Preferred, 642,266 shares issuable upon conversion of
certain convertible promissory notes and 3,987 shares issuable upon
the exercise of warrants.
(5)
Includes 31,690 shares issuable for vested
restricted stock units, each vested within 60 days of
October 21, 2020.
(6)
Includes
28,875 shares issuable for vested restricted stock units, each
vested within 60 days of October 21, 2020, 4,101,740 shares
issuable upon the conversion of Series A Preferred, and 7,256,924
shares issuable upon the conversion of Series A-1 Preferred. Mr.
Goldman exercises sole voting and dispositive power over 33,298,556
shares, and shared voting and dispositive power over 3,147,700
reported shares, of which 3,000,000 shares are owned by the Goldman
Family 2012 GST Trust and 147,700 shares are owed by The Neal and
Marlene Goldman Foundation, 2,884,413 shares issuable upon the
conversion of Convertible Notes and 376,128 shares issuable upon
the exercise of warrants.
(7)
Includes 31,690 shares issuable for vested
restricted stock units, each vested within 60 days of
October 21, 2020.
(8)
Includes 29,250 shares issuable for vested
restricted stock units, each vested within 60 days of
October 21, 2020.
(9)
Includes 31,690 shares issuable for vested
restricted stock units, each vested within 60 days of
October 21, 2020.
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS
Related Party Lines of
Credit
At
January 1, 2018, the Company had certain convertible Lines of
Credit borrowing facilities with two members of the Company’s
Board. Before their termination, (described more fully below),
these convertible Lines of Credit bore interest at 8% per annum and
were convertible into that number of shares of the Company’s
Common Stock equal to the quotient obtained by dividing the
outstanding balance by $1.25. These convertible Lines of Credit had
a maturity date of December 31, 2018.
The
Company evaluated the Lines of Credit and determined that the
instruments contained a contingent beneficial conversion feature,
i.e. an embedded conversion right that enabled the holder to obtain
the underlying Common Stock at a price below market value. The
beneficial conversion feature was contingent, as the terms of the
conversion did not permit the Company to compute the number of
shares that the holder would receive if the contingent event
occurred (i.e. future borrowings under the Line of Credit). The
Company has considered the accounting for this contingent
beneficial conversion feature using the guidance in ASC 470, Debt.
The guidance in ASC 470 states that a contingent beneficial
conversion feature in an instrument shall not be recognized in
earnings until the contingency is resolved. The beneficial
conversion features of borrowings under the Line of
Credit were to be measured using the intrinsic value
calculated at the date the contingency is resolved using the
conversion price and trading value of the Company’s Common
Stock at the date the Lines of Credit were issued (commitment
date).
For the years ended December 31, 2019
and 2018, the Company recorded approximately $0 and $30,000,
respectively, in debt discount
attributable to beneficial conversion feature and accreted
approximately $0 and $162,000, respectively, of debt
discount. Such expense is
recorded as a component of interest expense in the Company’s
consolidated statements of operations.
On
September 10, 2018, the Company entered into an agreement with the
members of the Board, pursuant to which they agreed to exchange
approximately $6.3 million and $0.6 million, respectively, of
outstanding debt (including accrued and unpaid interest) owed under
the terms of their respective Lines of Credit for an aggregate of
6,896 shares of the Company’s Series A Preferred. As a result
of this exchange, all indebtedness, liabilities and other
obligations arising under the Lines of Credit were terminated,
cancelled and deemed satisfied in full. Because the holders of
the Lines of Credit are members of the Company’s Board and
shareholders of the Company, they are considered related parties
and the exchange transaction is considered a capital transaction
and is recorded within the equity accounts of the
Company.
Notes Payable
On February 12, 2020, the Company entered into a
factoring agreement (the “Factoring
Agreement”) with a member
of the Company’s Board for total loan proceeds of $350,000
(the “Factoring
Loan”). The Factoring
Loan to be repaid with the proceeds from certain of the
Company’s trade accounts receivable approximating $500,000
and was due no later than 21 days after February 12, 2020. As of
June 25, 2020, despite collection of the Company’s trade
accounts receivable, $315,000 of the Factoring Loan has not been
repaid and the Company is seeking an extension from the Board
member. Under the terms of the Factoring Agreement, factored money
will bear interest at the rate of 1% of the Factoring Loan for the
first seven days, and 1% for each additional seven days until the
Factoring Loan is paid in full. The Company intends to repay the
full Factoring Loan under the Factoring Agreement out of proceeds
from the Series D Financing.
In April 2020, the Company received an aggregate
amount of $550,000 from two members of the Company’s Board.
On June 30, 2020, the Company entered into promissory notes (the
“Convertible Loan
Notes”) in the principal
amount of $550,000 (the “Convertible Loan
Principal”) payable to
the two members, which Convertible Loan Notes are convertible into
shares of the Company’s Common Stock for $0.16 per share. The
Convertible Loan Notes bear interest at the rate of 5% per annum,
and mature on the earlier to occur of October 13, 2020 or on such
date that the Company consummates a debt and/or equity financing
resulting in net proceeds to the Company of at least $3.0 million.
The holders of the Convertible Loan Notes have agreed to convert
the entire Convertible Loan Principal, and all interest due
pursuant to the Convertible Loan Notes, into shares of Series D
Preferred upon consummation of the Series D Financing in lieu of
repayment of the Convertible Loan Notes by the
Company.
Professional Services Agreement
During
the year ended December 31, 2018, the Company entered into
professional services agreement with a firm whose managing director
is also a member of the Company’s Board. During the year
ended December 31, 2018, the Company recorded and paid one-half of
the aggregate fee of $50,000 with the remaining payment being made
during the year ended December 31, 2019.
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 SEC’s Regulation S-K unless
the Audit Committee or another independent body of our Board 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.
LEGAL PROCEEDINGS
To the
best of the Company’s knowledge, there is no material
proceeding to which any director, nominated director or executive
officer or affiliate of the Company, any owner of record or
beneficially of more than five percent of any class of voting
securities of the Company, or any associate of such director,
nominated director, officer, affiliate of the Company, or security
holder is a party adverse to the Company or any of its subsidiaries
or has a material interest adverse to the Company or any of its
subsidiaries.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Exchange Act requires
our directors and executive officers, and persons who beneficially
own more than 10% of a registered class of our equity securities,
to file with the SEC initial reports of ownership and reports of
changes in ownership of our Common Stock and other equity
securities. Such persons are required by SEC regulations to furnish
us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a
review of the copies of such reports furnished to us and written
representations that no other reports were required, during the
fiscal year ended December 31, 2019, all Section 16(a) filing
requirements were complied with in a timely
manner.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Any
stockholder may contact any of our directors directly by writing to
them, by mail, at our principal executive offices, the address of
which appears on page 1 hereof. In addition, any shareholder may
report to the Board any complaints regarding accounting, internal
accounting controls or auditing matters. Any shareholder
who wishes to so contact the Board should send such complaints to
the Chairman of the Audit Committee at our principal executive
offices.
Our
Chief Executive Officer will review, summarize and, if appropriate,
investigate the complaint and draft a response to the communication
in a timely manner. A member of the Audit Committee, or
the Audit Committee as a whole, will then review the summary of the
communication, the results of the investigation, if any, and the
draft response. The summary and response will be in the
form of a memorandum, which will become part of the
shareholders’ communications log that the Company maintains
with respect to all shareholder communications.
DISTRIBUTION AND COSTS
We
will pay the cost of preparing, printing and distributing this
Information Statement. Only one Information Statement will be
delivered to multiple stockholders sharing an address, unless
contrary instructions are received from one or more of such
stockholders. Upon receipt of a written request at the address
noted above, we will deliver a single copy of this Information
Statement and future stockholder communication documents to any
stockholders sharing an address to which multiple copies are now
delivered.
WHERE YOU CAN FIND MORE INFORMATION
We make
available, free of charge, at our corporate website www.iwsinc.com copies of our
annual reports filed with the SEC on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, proxy
statements, and all amendments to these reports, as soon as
reasonably practicable after such material is electronically filed
with or furnished to the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act. We also provide copies of our
Forms 8-K, 10-K, 10-Q, and proxy statements at no charge to
investors upon request. Additionally, all reports filed by us with
the SEC are available free of charge via EDGAR through the SEC
website at www.sec.gov.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN
ADDRESS
If hard copies of the materials are requested, we
will send only one Information Statement and other corporate
mailings to stockholders who share a single address unless we
received contrary instructions from any stockholder at that
address. This practice, known as “householding,”
is designed to reduce our printing and postage costs.
However, we will deliver promptly upon written or oral
request a separate copy of the Information Statement to a
stockholder at a shared address to which a single copy of the
Information Statement was delivered. You may make such a
written or oral request by sending a written notification stating
(i) your name, (ii) your shared address and (iii) the address to
which we should direct the additional copy of the Information
Statement, to us at our principal executive offices, the
address of which appears on page 1 hereof.
If
multiple stockholders sharing an address have received one copy of
this Information Statement or any other corporate mailing and would
prefer us to mail each stockholder a separate copy of future
mailings, you may send notification to or call our principal
executive offices. Additionally, if current stockholders with
a shared address received multiple copies of this Information
Statement or other corporate mailings and would prefer us to mail
one copy of future mailings to stockholders at the shared address,
notification of such request may also be made by mail or telephone
to our principal executive offices.
SIGNATURES
In
accordance with Section 14(f) of the Exchange Act, the Registrant
has caused this Information Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
ImageWare Systems,
Inc.
|
|
|
|
|
|
|
|
|
|
Date:
October 27, 2020
|
By:
|
/s/
Kristin Taylor
|
|
|
|
Name: Kristin Taylor
|
|
|
|
Title: Chief Executive Officer and President
|
|
|
|
|
|
Date:
October 27, 2020
|
By:
|
/s/
Jonathan D. Morris
|
|
|
|
Name: Jonathan D. Morris
|
|
|
|
Title: Chief Financial Officer
|
Grafico Azioni ImageWare Systems (CE) (USOTC:IWSY)
Storico
Da Nov 2024 a Dic 2024
Grafico Azioni ImageWare Systems (CE) (USOTC:IWSY)
Storico
Da Dic 2023 a Dic 2024
