SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Amendment No. 1
(Mark one)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended June 30, 2002.
[ ] Transition report under section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to _______________ to ______________.
Commission file number 000-27941
IMERGENT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 87-0591719
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
754 East Technology Avenue,
Orem, Utah 84097
(Address of principal executive office) (Zip Code)
(801) 227-0004
(Issuer's telephone number)
NETGATEWAY, INC.
(Issuer's former name, if changed since last report)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes[X] No [ ], and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the average of the bid and asked price for the registrant's
common stock on the Nasdaq OTC Bulletin Board on October 18, 2002, the aggregate
market value on such date of the registrant's common stock held by
non-affiliates of the registrant was $11,765,545. For the purposes of this
calculation, shares owned by officers, directors and 10% stockholders known to
the registrant have been deemed to be owned by affiliates.
The number of shares outstanding of the registrant's common stock, as
of October 18, 2002, was 11,000,774.
The sole purpose of this Form 10-K/A is to add the information required by
Part III of Form 10-K to the Registrant's Form 10-K, which was originally filed
with the Securities and Exchange Commission on October 15, 2002, pursuant to
General Instruction G(3) of Form 10-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
Set forth in the table below are the names, ages and positions of the
current directors and executive officers of Netgateway. None of the directors or
executive officers has any family relationship to any other director or
executive officer of Netgateway.
Name Age Position
Donald L. Danks................. 45 Chairman of the Board of Directors
John J. "Jay" Poelman........... 59 Chief Executive Officer and Director
Brandon Lewis................... 32 President and Director
Frank C. Heyman................. 65 Chief Financial Officer
David Rosenvall................. 36 Chief Technology Officer
David Wise...................... 42 Vice-President, Operations
Set forth below is a brief description of the business experience for
the previous five years of all current directors and executive officers of
Imergent.
Donald L. Danks
Mr. Danks has served as our Chairman since January 2001. He also served
as our Chief Executive Officer from January 5, 2001 to May 7, 2002. He was an
original investor in founding Imergent in 1998 and is currently one of our
largest stockholders. During the five years previous to joining us as our CEO,
Mr. Danks was involved in the creation, funding and business development of
early-stage technology companies. In addition to attracting inceptive capital
for client companies, Mr. Danks assisted in the development of their business
plans, helped in the recruitment of senior management, supported the development
of the public market for their securities by introducing them to institutional
investors and market makers and oversaw ongoing corporate finance needs.
Previously, Mr. Danks was the co-founder and President of Prosoft Training.com,
(Nasdaq: POSO), a company involved in Internet technology training, education
and certification. Mr. Danks holds a B.S. from UCLA.
John J. "Jay" Poelman
Mr. Poelman has served as our Chief Executive Officer since May 7,
2002. He was appointed as our President and chief operating officer on January
5, 2001. Prior to the acquisition by us of Galaxy Enterprises, Inc. ("Galaxy"),
Mr. Poelman served as Chairman, Chief Executive Officer and President of Galaxy
from 1997-2000. From 1993 until 1997, Mr. Poelman was the CEO of Profit
Education Systems, Inc. (PES). In 1997, Galaxy Mall, Inc. acquired the assets of
PES, and Mr. Poelman became the CEO of Galaxy. Mr. Poelman has served as one of
our directors since November 2000, except for a period from February to May
2002.
Brandon Lewis
Mr. Lewis has served as our President since May 2002, and prior
thereto, since January 2001, he served as our Executive Vice-President for sales
and marketing. He was Vice-President of sales and marketing and COO of Galaxy
from 1997 until he joined our company. Prior to Galaxy, Mr. Lewis was
Vice-President of sales and marketing for Profit Education Systems, Inc. a
worldwide marketing and sales organization. Mr. Lewis earned his B.A. degree
from Brigham Young University.
Frank C. Heyman
Mr. Heyman has served as our Chief Financial Officer since September
2000. Prior to that, he served from 1997-2000 as vice president, secretary,
treasurer and chief financial officer of Galaxy. From June 1992 to May 1996 he
also served as financial vice president and chief financial officer and a
director of NYB Corporation, a manufacturer of women's sport clothing, and from
June 1996 to April 1997 he was employed as controller of Provider Solutions,
Inc., a business consulting firm. Prior to that, from 1986 to 1992, Mr. Heyman
served as vice president and chief financial officer of GC Industries, Inc., a
manufacturer of calibration systems for toxic gas monitors. Mr. Heyman is a
graduate of the University of Utah with a B.S. degree in accounting.
David Rosenvall
Mr. Rosenvall was appointed as our Chief Technology Officer in February
2001. Prior thereto, he served as our Chief Architect from September 1999. He
initially joined us in November 1998 as part of Imergent's acquisition of
StoresOnline.com. From September 1997-December 1998, Mr. Rosenvall was president
of Spartan Multimedia in Calgary, Alberta, Canada, and from January 1995 to
August 1997, he was Vice-President for Research and Development at Xentel,
another Calgary company. Mr. Rosenvall holds a B.S. in Mechanical Engineering
from the University of Calgary and an M.B.A. from Brigham Young University.
David Wise
Mr. Wise was Chief Operating Officer of Galaxy Mall prior to becoming
our Vice President-Operations in July 2000. Prior to joining Galaxy Mall, Mr.
Wise was, from 1998-1999, president of Wise Business Solutions. From 1992 to
1999, he was chief financial officer and chief operating officer of Capsoft
Development Corp.
Election of Officers
Officers are elected annually by the board of directors and hold office
at the discretion of the board of directors. There are no family relationships
among our directors or executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on a review of reports and representations submitted to us, all
reports regarding beneficial ownership of our securities required to be filed
under Section 16(a) of the Exchange Act for the 2002 fiscal year were timely
filed with the exception of the following Forms 4 which should have been filed
by June 10, 2002 but were filed by the following individuals on the dates
indicated: Donald Danks, June 18, 2002; Jay Poelman, June 24, 2002; Brandon
Lewis, June 17, 2002; Frank Heyman, June 17, 2002; David Rosenvall, June 21,
2002; and David Wise, June 28, 2002.
Item 11. Executive Compensation
On June 28, 2002, our stockholders approved amendments to our
Certificate of Incorporation to change our corporate name to "Imergent, Inc."
and to effect a one-for-ten reverse split of the issued and outstanding shares
of our common stock and reduce the authorized number of shares of common stock
from 250,000,000 to 100,000,000. These changes were effected July 2, 2002. As a
result of the reverse stock split, every ten shares of our existing common stock
was converted into one share of our new common stock under our new name,
Imergent, Inc. Fractional shares resulting from the reverse stock split were
settled by cash payment. References herein to numbers of shares and prices of
shares have been adjusted to reflect the reverse stock split.
Executive Compensation
The following table contains information concerning each of the two
persons who served as our chief executive officer during fiscal year 2002 and
our four most highly-compensated executive officers during fiscal year 2002 who
were serving as executive officers at the end of fiscal year 2002 (as a group,
the "named executive officers").
Summary Compensation Table
Annual Compensation Long-Term Compensation Awards
Restricted
Stock Stock
Name and Salary Bonus Awards Options All Other
Principal Position Year ($) ($) ($) (#) (3) Compensation
------------------ ---- --- --- - --- --- ------------
Donald L. Danks (1) ..................2002 -- -- -- -- --
Chief Executive Officer 2001 -- -- -- -- --
2000 -- -- -- -- --
John J. "Jay" Poelman (2)........... 2002 119,274 148,591 -- -- --
Chief Executive Officer 2001 134,200 86,339 -- 27,500 --
2000 126,152 43,212 -- -- --
Brandon Lewis (4)................... 2002 104,787 124,565 -- -- --
President 2001 106,542 69,154 -- 27,500 --
2000 100,169 34,650 -- 11,172 --
David Rosenvall ................... 2002 111,539 20,760 -- -- --
Chief Technology Officer 2001 117,343 -- -- 15,000 --
2000 118,841 -- -- 7,750 --
David Wise.......................... 2002 102,139 53,852 -- -- --
Vice President - Operations 2001 103,841 61,792 -- 12,500 --
2000 49,154 -- -- 9,576 --
Frank C. Heyman..................... 2002 86,513 78,089 -- -- --
Chief Financial Officer 2001 71,165 58,799 -- 15,000 --
2000 60,753 30,030 -- 7,980 --
(1) Mr. Danks was appointed as chief executive officer on January 5, 2001 and
served in this capacity until May 7, 2002.
(2) Mr. Poelman was appointed as chief executive officer on May 7, 2002. Prior
to this appointment, he served as our president and chief operating officer
from January 5, 2001.
(3) On June 28, 2002, our stockholders approved a one-for-ten reverse split of
the outstanding shares of our common stock, which became effective July 3,
2002. All data for shares of common stock, options and warrants have been
adjusted to reflect the one-for-ten reverse split for all periods
presented.
(4) Mr. Lewis was appointed as president on May 7, 2002. Prior to this
appointment, he served as our Executive Vice-President, Sales and
Marketing.
Employment Agreements
The following table summarizes the key provisions of employment
agreements between us and our current executive officers that were in effect
during our fiscal year ended June 30, 2002. All of the agreements expired at
various times during the fiscal year.
Contract Contract Per Annum
Name/Position Commencement Termination Salary Bonus
------------- Date Date ------ Arrangements
---- ---- (1) ------------
John J. "Jay" Poelman......... June 26 2000 June 26, 2002 $143,000 As determined by board of
Chief Executive Officer directors
Brandon Lewis................. June 26, 2000 June 26, 2002 $114,125 As determined by board of
President directors
David Rosenvall .............. November 1, 1998 November 1, 2001 $145,000 As determined by board of
Chief Technology Officer directors
David Wise.................... June 26, 2000 June 26, 2002 $110,650 As determined by board of
Vice President - Operations directors.
Frank C. Heyman............... June 26, 2000 June 26, 2002 $90,700 As determined by board of
Chief Financial Officer directors
--------------------
(1) Each of Messrs. Poelman, Lewis, Rosenvall, Wise and Heyman agreed to a
pay cut for an indefinite period effective March 3, 2001, which cuts remain
in effect at the present time. Mr. Poelman's salary was adjusted to $114,400;
Mr. Lewis' salary was adjusted to $91,300; Mr. Rosenvall's salary was
adjusted to $116,000; Mr. Wise's salary was adjusted to $88,250; and Mr.
Heyman's salary was adjusted to $72,560. From January 28, 2002 through March
31, 2002, Mr. Poelman served without remuneration.
Stock Option Grants in Last Fiscal Year
We did not grant any stock options or stock appreciation rights in
fiscal year 2002 to any of the named executive officers.
Aggregated Stock Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information concerning the year-end
number and value of unexercised options with respect to each of the named
executive officers. None of these individuals exercised any options during this
period.
Number of Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at Fiscal Year End (#) at Fiscal Year End ($)(1)
---------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
Donald Danks......................... - - - -
Jay Poelman.......................... 27,402 12,866 - -
Brandon Lewis........................ 29,317 18,931 - -
David Rosenval....................... 19,965 6,285 - -
David Wise........................... 11,643 10,433 - -
Frank Heyman......................... 20,228 12,328 - -
----------
(1) Based on the closing sale price of our common stock on the OTC
bulletin board at fiscal year end of $1.50 per share less the exercise price
payable for the shares. The fair market value of our common stock at June 30,
2002 was determined on the basis of the closing sale price of our common stock
on June 28, 2002, the last trading day prior to fiscal year-end.
Stock Option Plans
1998 Stock Option Plan for Senior Executives
In December 1998, the board of directors adopted, and our stockholders
approved, the 1998 Stock Option Plan for Senior Executives. This plan provides
for the grant of options to purchase up to 500,000 shares of common stock to our
senior executives. Options may be either incentive stock options or
non-qualified stock options under Federal tax laws.
The board of directors administers this plan. The board has appointed a
plan administrator to address the day-to-day administration of this plan. The
board determines, among other things, the individuals who will receive options,
the time period during which the options may be partially or fully vested and
exercisable, the number of shares of common stock issuable upon the exercise of
each option and the option exercise price.
The exercise price per share of common stock subject to an incentive
option may not be less than the fair market value per share of common stock on
the date the option is granted. The per share exercise price of the common stock
subject to a non-qualified option may be established by the compensation
committee, but shall not be less than 50% of the fair market value per share of
common stock on the date the option is granted. The aggregate fair market value
of common stock for which any person may be granted incentive stock options
which first become exercisable in any calendar year may not exceed $100,000 on
the date of grant.
No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution or, if permitted, pursuant to a qualified
domestic relations order and, during the lifetime of the optionee, the option
will be exercisable only by the optionee. In the event of termination of
employment by reason of death, disability or by us for cause, as defined in each
optionee's employment agreement, the optionee will have no more than 365 days
after such termination during which the optionee shall be entitled to exercise
the vested options, unless otherwise determined by the board of directors. Upon
termination of employment by us without cause or by the optionee for good
reason, as defined in the optionee's employment agreement, the optionee's
options remain exercisable to the extent the options were exercisable on the
date of such termination until the expiration date of the options pursuant to
the option agreement.
We may grant options under this plan within ten years from the
effective date of the plan. The effective date of this plan is December 31,
1998. Holders of incentive stock options granted under this plan cannot exercise
these options more than ten years from the date of grant. Payment of the
exercise price may be made by (1) delivery of cash or a check, bank draft or
money order, in United States dollars, payable to our order, (2) through
delivery to us of shares of common stock already owned by the optionee with an
aggregate fair market value on the date of exercise equal to the total exercise
price, (3) by having shares with an aggregate fair market value on the date of
exercise equal to the total exercise price (A) withheld by us or (B) sold by a
broker-dealer under the circumstances meeting the requirements of 12 C.F.R. ss.
220 or any successor thereof, (4) by any combination of the above methods of
payment or (5) by any other means determined by the board of directors.
Therefore, if it is provided in an optionee's option agreement, the optionee may
be able to tender shares of common stock to purchase additional shares of common
stock and may theoretically exercise all of his stock options with no additional
investment other than the purchase of his original shares.
Any unexercised options that expire or terminate upon an optionee's
ceasing to be employed by us become available again for reissuance under this
plan.
As of June 30, 2002, options exercisable for an aggregate of 91,563
shares of common stock were outstanding pursuant to this plan at a weighted
average exercise price of $28.40 per share.
1998 Stock Compensation Program
In July 1998, the board of directors adopted the 1998 Stock
Compensation Program. Our stockholders approved the program in December 1998.
This program provides for the grant of options to purchase up to 100,000 shares
of common stock to officers, employees, directors and independent contractors
and agents. Options may be either incentive stock options or non-qualified stock
options under Federal tax laws.
The board of directors administers this program. The board has
appointed a plan administrator to address the day-to-day administration of this
plan. The board determines, among other things, the individuals who will receive
options, the time period during which the options may be partially or fully
vested and exercisable, the number of shares of common stock issuable upon the
exercise of each option and the option exercise price.
The exercise price per share of common stock subject to an incentive
option may not be less than the fair market value per share of common stock on
the date the option is granted. The aggregate fair market value of common stock
for which any person may be granted incentive stock options which first become
exercisable in any calendar year may not exceed $100,000 on the date of grant.
No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution or, if permitted, pursuant to a qualified
domestic relations order and, during the lifetime of the optionee, the option
will be exercisable only by the optionee. In the event of termination of
employment for reasons other than the death or disability of the optionee, the
option shall terminate immediately; provided, however, that the board of
directors may, in its sole discretion, allow the option to be exercised, to the
extent exercisable on the date of termination of employment or service, at
anytime within 60 days from the date of termination of employment or service. In
the event of termination of employment by reason of the death or disability of
the optionee, the option may be exercised, to the extent exercisable on the date
of death or disability, within one year from such date.
We may grant options under this program within ten years from the
effective date of the plan. The effective date of this program is July 31, 1998.
Holders of incentive stock options granted under this program cannot exercise
these options more than ten years from the date of grant. Payment of the
exercise price may be made by (1) delivery of cash or a check, bank draft or
money order, in United States dollars, payable to our order, (2) through
delivery to us of shares of common stock already owned by the optionee with an
aggregate fair market value on the date of exercise equal to the total exercise
price, (3) by having shares with an aggregate fair market value on the date of
exercise equal to the total exercise price (A) withheld by us or (B) sold by a
broker-dealer under the circumstances meeting the requirements of 12 C.F.R. ss.
220 or any successor thereof, (4) by any combination of the above methods of
payment or (5) by any other means determined by the board of directors.
Therefore, if it is provided in an optionee's option agreement, the optionee may
be able to tender shares of common stock to purchase additional shares of common
stock and may theoretically exercise all of his stock options with no additional
investment other than the purchase of his original shares.
Any unexercised options that expire or that terminate upon an
optionee's ceasing to be employed by us become available again for reissuance
under this program.
This program permits us to grant, in addition to incentive stock
options and non-qualified stock options: (i) rights to purchase shares of our
common stock to employees; (ii) restricted shares of our common stock; (iii)
stock appreciation rights; and (iv) performance shares of common stock.
However, we have not issued any other type of compensation under this
program other than non-qualified stock options and have agreed not to do so in
the future.
As of June 30, 2002, options exercisable for an aggregate of 8,432
shares of common stock were outstanding pursuant to this program at a weighted
average exercise price of $33.20 per share.
1999 Stock Option Plan For Non-Executives
In July 1999, the board of directors adopted the 1999 Stock Option Plan
for Non-Executives. This plan was approved by our stockholders in May 2000. This
plan is administered by the compensation committee of the board of directors.
The compensation committee has appointed a plan administrator to address the
day-to-day administration of this plan. The compensation committee determines,
among other things, the individuals who will receive options, the time period
during which the options may be partially or fully vested and exercisable, the
number of shares of common stock issuable upon the exercise of each option and
the option exercise price.
The exercise price per share of common stock subject to an option is
determined on the date of grant, and is generally fixed at 100% of the fair
market value per share at the time of grant. The exercise price of any option
granted to an optionee who owns stock possessing more than 10% of the voting
power of our outstanding capital stock must equal at least 110% of the fair
market value of the common stock on the date of grant. Payment of the exercise
price may be made by (1) delivery of cash or a check, bank draft or money order
in United States dollars, payable to our order, (2) through delivery to us of
shares of common stock already owned by the optionee with an aggregate fair
market value on the date of exercise equal to the total exercise price (3) by
having shares with an aggregate fair market value on the date of exercise equal
to the total exercise price (A) withheld by us or (B) sold by a broker-dealer
under circumstances meeting the requirements of 12 C.F.R. ss. 220 or any
successor thereof, (4) by any combination of the above methods of payment or (5)
by any other means determined by the board of directors.
Options granted to employees under the 1999 Stock Option Plan for
Non-Executives generally become exercisable in increments, based on the
optionee's continued employment with us, over a period of up to three years. The
form of option agreement generally provides that options granted under the 1999
Stock Option Plan for Non-Executives is not transferable by the optionee, other
than by will or the laws of descent and distribution, and are exercisable during
the optionee's lifetime only by the optionee. In the event of termination of
employment for reasons other than the death or disability of the optionee, the
option shall terminate immediately; provided, however, that the board of
directors may, in its sole discretion, allow the option to be exercised, to the
extent exercisable on the date of termination of employment or service, at
anytime within 60 days from the date of termination of employment or service. In
the event of termination of employment by reason of the death or disability of
the optionee, the option may be exercised, to the extent exercisable on the date
of death or disability, within one year from such date. Generally, in the event
of our merger with or into another corporation or a sale of all or substantially
all of our assets, all outstanding options under the 1999 Stock Option Plan for
Non-Executives shall accelerate and become fully exercisable upon consummation
of such merger or sale of assets.
The board may amend the 1999 Stock Option Plan for Non-Executives at
any time or from time to time or may terminate the 1999 Stock Option Plan for
Non-Executives without the approval of the stockholders, provided that
stockholder approval is required for any amendment to the 1999 Stock Option Plan
for Non-Executives requiring stockholder approval under applicable law as in
effect at the time. However, no action by the board of directors or stockholders
may alter or impair any option previously granted under the 1999 Stock Option
Plan for Non-Executives. The board may accelerate the exercisability of any
option or waive any condition or restriction pertaining to such option at any
time.
Any unexercised options that expire or that terminate upon an
optionee's ceasing to be employed by us become available for reissuance under
this plan.
In May 2000, our stockholders approved an amendment to this plan to
increase the number of shares available for grant under the plan from 200,000 to
500,000.
As of June 30, 2002, options exercisable for an aggregate of 74,660
shares of common stock were outstanding pursuant to this plan at a weighted
average exercise price of $33.50.
Galaxy Enterprises Stock Option Plan
Pursuant to the terms of the merger with Galaxy Enterprises, each
outstanding option to purchase shares of Galaxy Enterprises common stock under
Galaxy Enterprises' 1997 Employee Stock Option Plan was assumed by us, whether
or not vested and exercisable. We assumed options exercisable for an aggregate
of 166,582 shares of common stock of Galaxy Enterprises.
Each Galaxy Enterprises stock option and warrant we assumed is subject
to the same terms and conditions that were applicable to the stock option or
warrant immediately prior to the merger, except that:
o each Galaxy Enterprises stock option will be exercisable for shares of
our common stock and the number of shares of our common stock issuable
upon exercise of any given option or warrant will be determined by
multiplying 0.63843 by the number of shares of Galaxy Enterprises
common stock underlying such option or warrant; and
o the per share exercise price of any such option or warrant will be
determined by dividing the exercise price of the option immediately
prior to the effective time of the merger by 0.63843.
As at June 30, 2002, outstanding options assumed in the Galaxy merger
were exercisable for 44,373 shares of our common stock.
Compensation Committee Interlocks and Insider Participation
During fiscal 2002, membership of the compensation committee was comprised
of the full board of directors. No interlocking relationships exist between our
compensation committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past. There are no interlocking relationships between us and other entities that
might affect the determination of the compensation of our directors and
executive officers.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation and/or bylaws include provisions to (1)
indemnify the directors and officers to the fullest extent permitted by the
Delaware General Corporation Law including circumstances under which
indemnification is otherwise discretionary and (2) eliminate the personal
liability of directors and officers for monetary damages resulting from breaches
of their fiduciary duty, except for liability for breaches of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, violations under Section 174 of the
Delaware General Corporation Law or for any transaction from which the director
derived an improper personal benefit. We believe that these provisions are
necessary to attract and retain qualified directors and officers.
We have directors and officers liability insurance in an amount of not less
than $2.0 million. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
pursuant to the foregoing provisions or otherwise, we have been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Director Compensation
None of our current directors are awarded stock options or are
compensated for their services as directors, but Mr. Poelman and Mr. Lewis are
compensated as officers of our company and have been granted stock options in
this capacity. All directors are reimbursed for reasonable expenses incurred in
connection with attending meetings of the board of directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of October 8, 2002, the number of shares
of common stock beneficially owned by each of the following persons and groups
and the percentage of the outstanding shares owned by each person and group: (i)
each person who is known by us to be the owner of record or beneficial owner of
more than 5% of the outstanding common stock; (ii) each of our directors and
named executive officers; and (iii) all of our current directors and executive
officers as a group.
With respect to certain of the individuals listed below, we have relied
upon information set forth in statements filed with the Securities and Exchange
Commission pursuant to Section 13(d) or 13(g) of the Securities Exchange Act of
1934. Except as otherwise noted below, the address of each of the persons in the
table is c/o Imergent, Inc., 754 East Technology Ave., Orem, Utah 84097.
--------------------------------------------------------------------------------------------------------------------
Number of Warrants
and Option Grants
Under Imergent Total Percent of Class
Shares Stock Options Plans Beneficial Beneficially
Name of Beneficial Owner Owned (1) Ownership (2) Owned
------------------------ ----- --- ------------- -----
--------------------------------------------------------------------------------------------------------------------
Donald L. Danks.................... 475,751 - 475,751 4.3%
--------------------------------------------------------------------------------------------------------------------
John J. "Jay" Poelman.................... 352,425 34,277 386,702 3.5%
--------------------------------------------------------------------------------------------------------------------
Brandon Lewis............................ 240,968 38,427 279,395 2.5%
--------------------------------------------------------------------------------------------------------------------
David Rosenvall.......................... 109,470 23,715 133,185 1.2%
--------------------------------------------------------------------------------------------------------------------
David Wise............................... 126,271 16,683 142,954 1.3%
--------------------------------------------------------------------------------------------------------------------
Frank Heyman ............................ 134,260 25,574 159,834 1.4%
--------------------------------------------------------------------------------------------------------------------
All current directors and executive 1,439,145 138,676 1,577,821 14.2%
officers as a group (6 persons).......
--------------------------------------------------------------------------------------------------------------------
(1) Reflects warrants or options that will be exercisable or vested, as the
case may be, as of October 18, 2002 or within 60 days thereafter.
(2) Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock subject to
options held by that person that are currently exercisable or become
exercisable within 60 days following October 18, 2002 are deemed
outstanding. These shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person. Unless
otherwise indicated in the footnotes to this table, the persons and
entities named in the table have sole voting and sole investment power with
respect to the shares set forth opposite such stockholder's name.
Item 13. Certain Relationships and Related Transactions
During the fiscal year ended June 30, 2002 we derived approximately
$5,100,000, or 14%, of our total revenues, from the sale to our customers of a
product which allows the customer to accept credit card payments for goods and
services sold by them through their website. In the past, we have experienced
difficulty in maintaining the arrangements that allow us to offer this product
to our customers and have experienced difficulty in establishing such a product
for resale at our workshops held outside the United States. In addition, from
time to time, credit card issuing organizations make changes that affect this
product which could negatively impact, or preclude, our offering this product
for sale in the United States in its present form. We presently obtain this
product for resale from Electronic Commerce International, Inc. ("ECI"), the
sole shareholder of which was John J. Poelman, our chief executive officer and
one of our directors and stockholders, who, effective October 1, 2002, sold his
interest in ECI to an unrelated third party. Were we to lose our access to this
product or if its cost increases our business would be severely and negatively
impacted and were we not to be able to obtain a comparable product for resale
outside the United States our ability to successfully execute our international
expansion would be compromised.
Total revenue generated by us from the sale of ECI merchant account
solutions was $5,106,494, $6,403,478 and $2,412,800 for the years ended June 30,
2002, 2001 and 2000, respectively. The cost to us for these products and
services totaled $994,043, $975,257 and $1,110,404 for the years ended June 30,
2002, 2001 and 2000, respectively. During the years ended June 30, 2002, 2001
and 2000, we processed leasing transactions for customers through ECI in the
amounts of $1,090,520, $3,386,231, and $2,450,292, respectively. As of June 30,
2002 and 2001, we had a receivable from ECI for leases in process of $0 and
$90,109, respectively. In addition, we have $26,702 and $516,858 recorded in
accounts payable as of June 30, 2002 and 2001, respectively, relating to the
amounts owed to ECI for the purchase of its merchant account product.
On August 1, 2001, we entered into an agreement with ECI, pursuant to
which, among other matters, we agreed to issue ECI a total of 83,192 shares of
our common stock at a price of $3.00 per share in exchange for the release by
ECI of trade claims against us totaling $249,575.
We offer our customers at our Internet training workshops, and through
backend telemarketing sales, certain products intended to assist the customer in
being successful with their business. These products include live chat and web
traffic building services. We utilize Electronic Marketing Services, LLC.
("EMS") to fulfill these services to our customers. In addition, EMS provides
telemarketing services, selling some of our products and services to those who
do not purchase at our workshops and to other leads. Ryan Poelman, who owns EMS,
is the son of John J. Poelman, Chief Executive Officer, a director and a
stockholder of the Company. Our revenues realized from the above products and
services were $4,806,497, $1,263,793 and $0 for the years ended June 30, 2002,
2001 and 2000, respectively. We paid EMS $479,984, $78,435, and $0 to fulfill
these services during the years ended June 30, 2002, 2001 and 2000,
respectively.
During our fiscal year ended June 30, 2002 we sold unregistered common
stock to qualified investors in a private placement that closed during May 2002.
The stock was sold at a price of $.40 per share. Our officers and directors
purchased stock in that sale as follows: Mr. Danks 225,000 shares; Mr. Poelman
200,000 shares; Mr. Lewis 200,000 shares; Mr. Heyman 100,000 shares; Mr. Wise
100,000 shares; and Mr. Rosenvall 100,000 shares. We loaned Messrs. Wise and
Rosenvall $20,000 each to assist in their participation in the private
placement. Their full-recourse promissory notes carried interest at 5% and a
repayment schedule of 24 months. Mr. Wise has repaid his loan, and Mr. Rosenvall
is current in making the required monthly payments.
We engaged vFinance Investments, Inc. ("vFinance") as a financial advisor
and placement agent for our private placement of unregistered securities that
closed during May 2002. Shelly Singhal a former member of the Company's Board of
Directors was a principal of vFinance at the time of the private placement.
During the year ended June 30, 2002 the company paid vFinance $61,500 in fees
and commissions for their services. The offering was successful with adjusted
gross proceeds to the Company of $2,185,995.
We engaged SBI-E2 Capital USA Ltd. ("SBI") as a financial consultant to
provide us with various financial services. Shelly Singhal a former member of
the Company's Board of Directors is a managing director of SBI. During the year
ended June 30, 2002 SBI provided us with a Fairness Opinion relating to our
proposed merger with Category 5 Technologies, for which we paid $67,437, and
additional $85,000 is still payable to SBI for that opinion as of June 30, 2002.
We also paid SBI $58,679 for expenses and commissions relating to our
private placement of unregistered securities that closed during November 2001.
The offering was successful with adjusted gross proceeds to us of $2,803,466.
Pursuant to an agreement dated February 15, 2002, SBI also rendered certain
financial advisory services to us in connection with our private placement that
closed in May 2002, including delivery of a fairness opinion with respect to
such private placement. Pursuant to this agreement, we paid SBI a total of
$40,000 and issued to SBI and various of its designees an aggregate of 112,500
shares of our common stock.
During the 12 months ended June 30, 2001, we issued 12,500 warrants to
Shelly Singhal for non-director services rendered. The warrants were valued at
$40,657.
Item 15. Exhibits, Financial Statement Schedules and Report on Form 8-K
(a) 3. Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350
99.2 Certification pursuant to 18 U.S.C. Section 1350
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Imergent, Inc.
By: /s/ John J. Poelman
October 24, 2002 John J. Poelman
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Donald L. Danks
October 24, 2002 Donald L. Danks
Chairman of the Board of Directors
/s/ John J. Poelman
October 24, 2002 John J. Poelman
Chief Executive Officer and Director
October 24, 2002 /s/ Frank C. Heyman
Frank C. Heyman
Chief Financial Officer
October 24, 2002 /s/ Brandon Lewis
Brandon Lewis
President and Director
CERTIFICATION
I, John J. Poelman, certify that:
1. I have reviewed this annual report on Form 10-K/A of Imergent, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
October 24, 2002 /s/ JOHN J. POELMAN
John J. Poelman,
Chief Executive Officer
CERTIFICATION
I, Frank C. Heyman, certify that:
1. I have reviewed this annual report on Form 10-K/A of Imergent, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
October 24, 2002 /s/ FRANK C. HEYMAN
Frank C. Heyman
Chief Financial Officer