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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB/A
Amendment No. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended May 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from _____ to _____
Commission File No. 0-18105
---------------------------
VASOMEDICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2871434
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
180 Linden Avenue, Westbury, New York 11590
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 997-4600
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [ X ]
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB.
[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant based on the closing sale price of $0.08 as of
September 24, 2008, was approximately $4,924,255. Shares of common stock held by
each officer and director and by each person who owns 5% or more of the
outstanding common stock have been excluded in that such persons may be deemed
to be affiliates. The determination of affiliates status is not necessarily a
conclusive determination for other purposes.
At September 24, 2008, the number of shares outstanding of the issuer's common
stock was 93,868,004.
DOCUMENTS INCORPORATED BY REFERENCE
None
EXPLANATORY NOTE
Vasomedical, Inc. (the "Company," "we," "us," or "our") is filing this
Amendment No. 1 on Form 10-KSB/A to our Report on Form 10-KSB for the fiscal
year ended May 31, 2008 (the "Report") for the purpose of including information
that was to be incorporated by reference from our definitive proxy statement
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"). We will not file our proxy statement within 120 days of
our fiscal year ended May 31, 2008, and are, therefore, amending and restating
in their entirety Items 9, 10, 11, 12 and 14 of Part III of the Report.
Except as described above, no other amendments are being made to this
Report. This Form 10-KSB/A does not reflect events occurring after the August
29, 2008 filing of our Report or modify or update the disclosure contained in
the Report in any way other than as required to reflect the amendments discussed
above and reflected below.
This amendment should be read in conjunction with our Annual Report for the
year ended May 31, 2008 filed on Form 10-KSB on August 29, 2008.
INDEX TO FORM 10-KSB/A
Page
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PART III
Item 9. Directors and Executive Officers of the Registrant................................................1
Item 10. Executive Compensation............................................................................4
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...8
Item 12. Certain Relationships and Related Transactions....................................................9
Item 14. Principal Accountant Fees and Services...........................................................11
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTIONI 16(a) OF THE EXCHANGE ACT
Directors of the Registrant
As of September 24, 2008, the members of our Board of Directors are:
Director
Name of Director Age Principal Occupation Since
--------------------------------- ------- -------------------------------------- ------------------
Abraham E. Cohen (4) 72 Chairman of the Board and Director June 1993
Derek Enlander (2) 60 Director July 2007
Joseph Giacalone (1) 44 Director December 2007
John C.K. Hui, PhD (3) 62 President, Chief Executive Officer, February 1995
Chief Technology Officer and
Director
Jun Ma (2) 45 Director June 2007
Behnam Movaseghi 55 Director July 2007
Photios T. Paulson (1)(2) 69 Director April 2000
Simon Srybnik (3) 92 Director June 2007
Martin Zeiger (1)(2)(3) 71 Director October 2001
-----------------
(1) Member of the Audit Committee
(2) Member of Compensation Committee
(3) Member of the Corporate Governance Committee (4) Ex-officio member of all
committees
The following is a brief account of the business experience for at least
the past five years of our directors:
Abraham E. Cohen has been our Chairman of the Board since June 1994 and is
presently an independent consultant. He retired in 1992 as Senior Vice President
of Merck & Co., Inc., a position he was elected to in 1985. From 1979 to 1989,
Mr. Cohen was also President of Merck Sharp & Dohme International, a division of
Merck & Co., Inc. Mr. Cohen is a director of the following public companies:
Akzo Nobel Nv., Chugai Pharmaceutical Co., Ltd., Neurobiological Technologies,
Inc. and Teva Pharmaceutical Industries, Ltd.
Joseph A. Giacalone, a certified public accountant, has been a director
since December 2007 and is Chairman of our Audit Committee. He is Director of
Finance and Accounting of Griffon Corporation since December 2007. He was
Director of Finance and Accounting of P & F Industries, Inc. from August 2004 to
October 2007. He was employed by Vasomedical,, Inc. from February 1993 through
August 2003, serving as Chief Financial Officer from January 2000 to August
2003. From 1983 to 1993, Mr. Giacalone was employed by the international
accounting firm of Grant Thornton LLP.
Derek Enlander M.D. has been a director since July 2007. He is an attending
physician at the Mount Sinai Medical Center New York, and a clinical instructor
at the Mount Sinai Medical School. He is in private practice in Internal
Medicine in Manhattan. He is the author of six books on medicine and over twenty
research papers. He has invented a new drug to treat immune dysfunction and is
the President of Computer Medica Inc., where he invented a Medical History card
to store a patient's medical files including X-rays, MRIs, etc. on a credit card
size computer readable card.
1
John C.K. Hui, PhD has been our President and Chief Executive Officer since
April 2007 and Chief Technology Officer, as well as, a director since February
1995. From February 1995 until April 2007, he was a Senior Vice President. Dr.
Hui has been an Assistant Professor in the Department of Surgery and Division of
Cardiology at the State University of Stony Brook, New York since 1978. He has
also been a scientist in the medical department of Brookhaven National
Laboratories. Dr. Hui was CEO and president of and a principal stockholder in
Vasogenics, Inc. at the time of its acquisition by us in January 1995.
Jun Ma, PhD has been a director since June 2007 and is presently an
independent consultant. Dr. Jun Ma has been an associate professor in
engineering at New York Institute of Technology since 1997 and an assistant
professor from 1993 to 1997. Currently he also provides consulting services to
several companies, including Kerns Manufacturing Corp. and Living Data
Technology Corp.
Behnam Movaseghi has been a director since July 2007. Mr. Movaseghi has
been treasurer of Kerns Manufacturing Corporation since 2000, and controller
from 1990 to 2000. For approximately ten years prior thereto, Mr. Movaseghi was
a tax and financial consultant. Mr. Movaseghi is a Certified Public Accountant.
Photios T. Paulson has been a director since April 2000 and served as our
Chief Executive Officer from October 2002 through June 2003 and from March to
October 2004. Mr. Paulson has been an advisor to the health-care industry and
was Vice President of bioMerieux N.A. Inc. from 1995 to 2002. Between 1992 and
1995, Mr. Paulson was Chairman of bioMerieux Vitek Inc. Between 1987 and 1990,
he was Senior Advisor, Health Care Industry, for Prudential Securities. Mr.
Paulson previously held senior positions with Becton Dickinson and Company
through 1987. Mr. Paulson is a director of bioMerieux N.A. Inc. and Silliker
Group Inc.
Simon Srybnik has been a director since June 2007 and is Chairman of the
Board of Kerns Manufacturing Corp. and Living Data Technology Corp. A lifetime
entrepreneur and industrialist, Mr. Srybnik has founded and managed many
companies in various industries including machinery and process equipment,
aerospace and defense, biology and healthcare. Mr. Srybnik is also a director
and Chairman of the Board of Life Sciences, Inc.
Martin Zeiger has been a director since October 2001. He is an independent
consultant to the pharmaceutical industry. Mr. Zeiger was Senior Vice President
of Strategic Business Development for Barr Laboratories, a drug manufacturer,
from 1999 through August 2003. From 1987 through 1999, Mr. Zeiger was Executive
Vice President and General Counsel for Rugby Laboratories. In 1993 Marion
Merrill Dow acquired Rugby Laboratories. Mr. Zeiger was a Vice President of
Marion Merrill Dow, Inc. and its successor, Hoechst Marion Roussell, Inc. Mr.
Zeiger is a founding director of the Larry King Cardiac Foundation and was a
member of the Heritage Board of Directors of the American Heart Association in
New York.
Committees of the Board of Directors
Audit Committee and Audit Committee Financial Expert
The Board has a standing Audit Committee which held four meetings during
the fiscal year ended May 31, 2008 ("fiscal 2008"). The Board has affirmatively
determined that each director who serves on the Audit Committee is independent,
as the term is defined by applicable Securities and Exchange Commission ("SEC")
rules. During fiscal 2008 the Audit Committee consisted of Joseph A. Giacalone,
who has served as the committee chair since his appointment in December 2007,
Photios T. Paulson, who served as the committee chair during fiscal 2008 until
Mr. Giacalone's appointment and Martin Zeiger. The members of the Audit
Committee have substantial experience in assessing the performance of companies,
gained as members of the Company's Board of Directors and Audit Committee, as
well as by serving in various capacities in other companies or governmental
2
agencies. However, Mr. Giacalone keeps current on generally accepted accounting
principles and is considered to be a financial expert as that term is defined in
applicable regulations. As a result, they each have an understanding of
financial statements.
The Audit Committee regularly meets with our independent registered public
accounting firm outside the presence of management.
Compensation Committee
Our Compensation Committee annually establishes, when required, subject to
the approval of the Board of Directors and any applicable employment agreements,
the salaries that will be paid to our executive officers during the coming year,
as well as administers our stock-based benefit plans. There were no meetings of
this committee held in fiscal 2008. During fiscal 2008, the Compensation
Committee consisted of Martin Zeiger, who serves as the committee chair, Derek
Enlander, Jun Ma and Photios T. Paulson. None of these persons were our officers
or employees during fiscal 2008 or, except as otherwise disclosed, had any
relationship requiring disclosure in this Proxy Statement.
Corporate Governance Committee
The Board of Directors has established a Corporate Governance Committee.
There were no meetings of this committee held in fiscal 2008. During fiscal
2008, the Corporate Governance Committee consisted of John C.K. Hui, who serves
as committee chair, Simon Syrbnik and Martin Zeiger. The Corporate Governance
Committee monitors developments in corporate governance principles and other
corporate governance matters and makes recommendations to the Board of Directors
regarding the adoption of additional corporate governance principles.
Compliance with Section 16(a) of The Securities Exchange Act of 1934 -
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires directors, executive officers
and persons who beneficially own more than 10% of our common stock
(collectively, "Reporting Persons") to file initial reports of ownership and
reports of changes in ownership of our common stock with the SEC. Reporting
Persons are required by SEC regulations to furnish us with copies of all Section
16(a) reports they file. To our knowledge, based solely on our review of the
copies of such reports received or written representations from certain
Reporting Persons that no other reports were required, we believe that during
fiscal 2008, all Reporting Persons timely complied with all applicable filing
requirements.
Corporate Governance - Code of Ethics
We have adopted a Corporate Code of Business Ethics (the "Code") that
applies to all employees, including our principal executive officer, principal
financial officer, and directors of the Company. The Code is broad in scope and
is intended to foster honest and ethical conduct, including accurate financial
reporting, compliance with laws and the like. If any substantive amendments are
made to the Code or if there is any grant of waiver, including any implicit
waiver, from a provision of the Code to our Chief Executive Officer or Chief
Financial Officer, we will disclose the nature of such amendment or waiver in a
Current Report on Form 8-K.
3
ITEM 10 - EXECUTIVE COMPENSATION
Executive Officers of the Registrant
Name of Officer Age Position held with the Company
--------------------------------- ------- -------------------------------------
John C.K. Hui, PhD 62 President, Chief Executive Officer,
Chief Technology Officer and Director
Tricia Efstathiou 37 Chief Financial Officer
The following table sets forth the annual and long-term compensation of our
Chief Executive Officer and each of our most highly compensated officers other
than the Chief Executive Officer who were serving as executive officers at the
end of the last completed fiscal year, and certain former executive officers as
required under SEC rules (collectively, the "Named Executive Officers") for
services rendered for the fiscal 2008 and year ended May 31, 2007 ("fiscal
2007").
Summary Compensation Table
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Non-Equity Nonqualified
Name and Principal Incentive Deferred
Position Stock Option Plan Compensation All Other
Year Salary ($) Bonus Awards Awards Compensation Earnings Compensation Total
(2) ($) ($) ($) (3) ($) ($) ($) (1) ($)
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
John C. K. Hui (4) 2008 $187,485 -- -- -- -- -- $21,088 $208,573
President and CEO 2007 $162,600 -- -- -- -- -- $26,247 $188,847
Senior VP, CTO
(CEO)
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Thomas Glover (5) 2008 -- -- -- -- -- -- -- --
President and CEO 2007 $238,333 -- -- -- -- -- $20,766 $259,099
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Tricia Efstathiou (6) 2008 $132,600 -- -- -- -- -- $19,854 $152,454
CFO 2007 $ 86,667 -- -- $ 18,000 -- -- $12,084 $116,751
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Thomas W. Fry (7) 2008 -- -- -- -- -- -- -- --
CFO 2007 $ 69,253 -- -- -- -- -- $1,249 $ 70,502
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
(1) Represents premiums paid on medical, dental, life and disability group
benefit plans, as well as amounts matched in the Company's 401(k)
Plan.
(2) Includes amounts paid in fiscal 2007 to Thomas Fry under the Deferred
Compensation Plan for the incentive portion of the program of $12,500,
as well as vacation time paid of $8,304. Ms. Efstathiou's compensation
reflects the portion received after appointment to Chief Financial
Officer in fiscal 2007. Includes $13,390 deferred by Dr. Hui
voluntarily in fiscal 2007.
(3) Option awards are valued at the fair market value times the number of
shares (which represent the fair market value of the underlying common
stock at the time of the respective grants).
(4) Dr. Hui was appointed President and Chief Executive Officer on April
30, 2007.
(5) Mr. Glover was President and Chief Executive Officer from October 4,
2004 to April 30, 2007.
(6) Ms. Efstathiou was appointed Chief Financial Officer on September 20,
2006.
(7) Mr. Fry was Chief Financial Officer from September 8, 2003 to
September 20, 2006.
4
Outstanding Equity Awards at Last Fiscal Year End
The following table provides information concerning outstanding options,
unvested stock and equity incentive plan awards for our Named Executive Officers
during fiscal 2008:
----------------- --------------------------------------------------------------------- --------------------------------------------
Option Awards Stock Awards
----------------- --------------------------------------------------------------------- --------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Awards: Payout
Equity Market Number of Value of
Incentive Value of Unearned Unearned
Number of Number of Plan Awards: Number of Shares Shares, Shares,
Securities Securities Number of Shares or or Units Units or Units or
Underlying Underlying Underlying Units of of Stock Other Other
Unexercised Unexercised Unexercised Option Option Stock That That Rights Rights
Options - Options - Unearned Exercise Expiration Have Not Have Not That Have That Have
Name Exercisable Unexercisable Options Price Date Vested Vested Not Vested Not Vested
------------------------------------------------------------------------------------------------------------------------------------
John C.K. 375,000 -- -- $1.91 03/11/2008 -- -- -- --
Hui, PhD 70,000 -- -- $0.88 01/04/2009 -- -- -- --
50,000 -- -- $3.96 07/11/2011 -- -- -- --
50,000 -- -- $1.11 07/12/2014 -- -- -- --
29,558 -- -- $0.57 06/22/2015 -- -- -- --
40,000 -- -- $0.58 09/20/2015 -- -- -- --
200,000 -- -- $0.22 04/03/2016 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Tricia 15,000 -- -- $4.28 06/23/2010 -- -- -- --
Efstathiou 30,000 -- -- $3.96 07/10/2011 -- -- -- --
30,000 -- -- $0.91 03/27/2013 -- -- -- --
20,000 -- -- $1.11 07/12/2014 -- -- -- --
15,333 -- -- $0.57 06/22/2015 -- -- -- --
15,000 -- -- $0.58 09/20/2015 -- -- -- --
133,333 66,667 66,667 $0.09 11/01/2016 -- -- -- --
------------------------------------------------------------------------------------------------------------------------------------
Equity Compensation Plan Information
We maintain various stock plans under which options vest and shares are
awarded at the discretion of our Board of Directors or its Compensation
Committee. The purchase price of the shares under the plans and the shares
subject to each option granted is not less than the fair market value on the
date of the grant. The term of each option is generally five years and is
determined at the time of the grant by our board of directors or the
compensation committee. The participants in these plans are officers, directors,
employees, and consultants of the Company and its subsidiaries and affiliates.
The following information is provided about our current stock option plans:
1997 Stock Option Plan
In December 1997, our stockholders approved the 1997 Stock Option Plan (the
"1997 Plan") for our officers, directors, employees, and consultants, for which
we have reserved, as amended, an aggregate of 2,800,000 shares of common stock.
The 1997 Plan provides that it will be administered by a committee of our Board
5
of Directors and that the committee will have full authority to determine the
identity of the recipients of the options and the number of shares subject to
each option. Options granted under the 1997 Plan may be either incentive stock
options or non-qualified stock options. The option price shall be 100% of the
fair market value of the common stock on the date of the grant (or in the case
of incentive stock options granted to any individual principal stockholder who
owns stock possessing more than 10% of the total combined voting power of all of
our voting stock, 110% of such fair market value). The term of any option may be
fixed by the committee but in no event shall exceed ten years from the date of
grant. Options are exercisable upon payment in full of the exercise price,
either in cash or in common stock valued at fair market value on the date of
exercise of the option. The term for which options may be granted under the 1997
Plan expired August 6, 2007. At May 31, 2008, 3,141,168 options had been granted
(including options previously granted but subsequently cancelled), of which
512,668 are outstanding under the 1997 Plan.
1999 Stock Option Plan
In July 1999, our Board of Directors authorized the 1999 Stock Option Plan
(the "1999 Plan") for our officers, directors, employees, and consultants, for
which we have reserved, as amended, an aggregate of 5,000,000 shares of common
stock. The 1999 Plan provides that it will be administered by a committee of our
Board of Directors and that the committee will have full authority to determine
the identity of the recipients of the options and the number of shares subject
to each option. Options granted under the 1999 Plan may be either incentive
stock options or non-qualified stock options. The option price shall be 100% of
the fair market value of the common stock on the date of the grant (or in the
case of incentive stock options granted to any individual principal stockholder
who owns stock possessing more than 10% of the total combined voting power of
all of our voting stock, 110% of such fair market value). The term of any option
may be fixed by the committee but in no event shall exceed ten years from the
date of grant. Options are exercisable upon payment in full of the exercise
price, either in cash or in common stock valued at fair market value on the date
of exercise of the option. The term for which options may be granted under the
1999 Plan expires July 12, 2009. At May 31, 2008, 9,151,932 options had been
granted, (including options previously granted but subsequently cancelled), of
which 3,266,470 are outstanding under the 1999 Plan.
2004 Stock Option and Stock Issuance Plan
In October 2004, our stockholders approved the 2004 Stock Option and Stock
Issuance Plan (the "2004 Stock Plan") for our officers, directors, employees,
and consultants, for which we reserved an aggregate of 2,500,000 shares of
common stock. The 2004 Stock Plan is administered by a committee of our Board of
Directors, which has full authority to determine the identity of the recipients
of the options and the number of shares subject to each option. The 2004 Stock
Plan is divided into two separate equity programs: an option grant program and a
stock issuance program. Options granted under the 2004 Stock Plan shall be
non-qualified or incentive stock options and the exercise price is the fair
market value of the common stock on the date of grant except that for incentive
stock options it shall be 110% of the fair market value if the participant owns
10% or more of our common stock. Under the stock issuance program, the purchase
price per share shall be fixed by the Board of Directors or committee but cannot
be less than the fair market value of the common stock on the issuance date.
Payment for the shares may be made in cash or check payable to us, or for past
services rendered to us and all shares of common stock issued thereunder shall
vest upon issuance unless otherwise directed by the board or committee. The
number of shares issuable is also subject to adjustments upon the occurrence of
certain events, including stock dividends, stock splits, mergers,
consolidations, reorganizations, recapitalizations, or other capital
adjustments. At May 31, 2008, 2,918,045 shares had been granted (including
options previously granted but subsequently cancelled), of which options to
purchase 1,681,072 shares are outstanding under the 2004 Stock Plan.
6
401(k) Plan
In April 1997, we adopted the Vasomedical, Inc. 401(k) Plan to provide
retirement benefits for our employees. As allowed under Section 401(k) of the
Internal Revenue Code, the plan provides tax-deferred salary deductions for
eligible employees. Employees are eligible to participate in the next quarter
enrollment period after employment. Participants may make voluntary
contributions to the plan up to 100% of their compensation subject to 401(k)
maximum limitations. In fiscal years 2008 and 2007, the Company made
discretionary contributions of approximately $9,000 and $15,000, respectively,
to match a percentage of employee contributions.
Employment Agreements
As of May 31, 2008, the Company does not have any employment agreements.
Director's Compensation
Non-employee Directors received a fee of $1,500 for each Board of Directors
and Committee meetings attended and $2,500 for each Audit Committee meeting
attended, payable at each director's option in cash or common stock. Beginning
for fiscal 2008, Directors will also receive annually, $15,000 of common stock
valued at the fair market value of the common stock on the date of grant for
serving as a board member during the fiscal year. New non-employee directors
also received one of the following during fiscal 2008:
o A grant of a non-qualified stock option to purchase 150,000 shares which
vested immediately. or
o A grant of 150,000 shares of common stock.
The following table provides the compensation earned by our non-employee
directors for fiscal 2008:
----------------------------------------------------------------------------------------------------------------------------
Director Compensation
----------------------------------------------------------------------------------------------------------------------------
Fees Nonqualified
Earned or Non-equity Deferred
Paid in Stock Option Incentive Plan Compensation All Other
Cash Awards Awards Compensation Earnings Compensation Total
Name ($) ($) (1) ($) ($) ($) ($) ($)
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Abraham E. Cohen $ 4,500 $16,500 -- -- -- -- $21,000
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Derek Enlander $ 4,500 $15,000 $14,475 -- -- -- $33,975
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Joseph Giacalone $ 8,000 $24,000 -- -- -- -- $32,000
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Jun Ma $ 6,000 $15,000 $14,475 -- -- -- $35,475
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Behnam Movaseghi $ 4,500 $15,000 $14,475 -- -- -- $33,975
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Photios T. Paulson $16,000 $15,000 -- -- -- -- $31,000
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Simon Srybnik $ 6,000 $15,000 $14,475 -- -- -- $35,475
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Martin Zeiger $16,000 $15,000 -- -- -- -- $31,000
------------------------ ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
(1) Stock awards for fiscal 2008 Board of Directors' compensation were
earned and approved, but not issued in fiscal 2008.
7
Limitation on Liability of Officers and Directors
We have entered into indemnification agreements with each of our current
officers and directors pursuant to which we have agreed, among other things, to
indemnify these officers and directors to the fullest extent permitted by
Delaware law.
Compensation Committee Interlocks and Insider Participation
During fiscal 2008, our Compensation Committee consisted of Martin Zeiger,
who serves as the committee chair, Derek Enlander, Jun Ma and Photios T.
Paulson. None of these persons were our officers or employees during fiscal 2008
or, except as otherwise disclosed, had any relationship requiring disclosure in
this Proxy Statement.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table sets forth the beneficial ownership of shares of our
common stock as of September 24, 2008 of (i) each person known by us to
beneficially own 5% or more of the shares of outstanding common stock, based
solely on filings with the SEC, (ii) each of our executive officers and
directors, and (iii) all of our executive officers and directors as a group.
Except as otherwise indicated, all shares are beneficially owned, and investment
and voting power is held by the persons named as owners.
Common Stock % of
Beneficially Common
Name of Beneficial Owner Owned (1) Stock (2)
------------------------------------------------------ ----------------- -----------------
Abraham E. Cohen ** ................................. 1,785,254 1.9%
Tricia Efstathiou ** ................................ 341,162 *
Derek Enlander **.................................... 400,000 *
Joseph Giacalone **.................................. 400,000 *
John C. K. Hui, PhD (3) ** .......................... 1,228,880 1.3%
Jun Ma **............................................ 400,000 *
Benham Movaseghi **.................................. 400,000 *
Photios T. Paulson **................................ 870,000 *
Simon Srybnik (4) (5) **............................. 33,105,126 33.68%
Louis Srybnik (4) (5)................................ 32,705,126 33.27%
Martin Zeiger **..................................... 565,000 *
** Directors and executive officers as a group
(10 persons).............................. 39,495,422 39.11%
*Less than 1% of the Company's common stock
1. No officer or director owns more than one percent of the issued and
outstanding common stock of the Company unless otherwise indicated.
8
Includes beneficial ownership of the following numbers of shares that may
be acquired within 60 days of September 24, 2008 pursuant to a warrant
awarded under the Securities Purchase Agreement with Kerns Manufacturing
Corp. ("Kerns") and stock options awarded under our stock option plans:
Abraham E. Cohen 670,000 Behnam Movaseghi 150,000
Tricia Efstathiou 325,333 Photios T. Paulson 595,000
Derek Enlander 150,000 Simon Srybnik 4,435,714
John C. K. Hui, PhD 439,558 Martin Zeiger 265,000
Jun Ma 150,000 Directors and
executive officers 7,180,605
as a group
2. Applicable percentages are based on 93,868,004 shares of common stock
outstanding on September 24, 2008, adjusted as required by rules
promulgated by the SEC, which does not include stock awards to the Board of
Directors for fiscal 2008 compensation earned that were approved but not
issued as of September 24, 2008. The beneficially owned shares include
stock awards to the Board of Directors for fiscal 2008 compensation that
were approved and earned but not issued by September 24, 2008.
3. Includes 789,322 shares that are held in a trust for the benefit of Dr.
Hui's child. Dr. Hui and his wife are the trustees of this trust.
4. Simon Srybnik and his brother Louis Srybnik are the sole directors and the
Chairman of the Board and President, respectively of Kerns, which is the
record holder of 25,714,286 shares (of which 4,285,714 shares are not
issuable until a restricted warrant is exercised). They are the sole
shareholders of Kerns, each holding 50% of the shares. The reporting
persons, accordingly, share voting and dispositive powers over the
21,428,572 shares held by Kerns and share dispositive power over the
4,285,714 shares underlying the restricted warrant. As a result, they may
be deemed to be the co-beneficial owners of an aggregate of 25,714,286
shares. Mr. Srybnik also holds sole dispositive power over the 150,000
shares underlying the option he was granted upon being appointed to the
Board of Directors, as well as 250,000 shares of common stock awarded to
the Board of Directors for fiscal 2008 compensation earned that were
approved but not issued as of September 24, 2008.
5. Simon Srybnik and his brother Louis Srybnik are the sole directors and
officers of Living Data Technology Corporation ("Living Data"). They also
each own 35% of the outstanding shares of Living Data. The reporting
persons, accordingly, share voting and dispositive powers over the
6,990,840 shares of our common stock owned by Living Data and, as a result,
may be deemed to be the co-beneficial owners thereof.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 21, 2007 we entered into a Securities Purchase Agreement with
Kerns. Concurrently with our entry into the Securities Purchase Agreement, we
also entered into a Distribution Agreement and a Supplier Agreement with Living
Data, an affiliate of Kerns.
We sold to Kerns, pursuant to the Securities Purchase Agreement, 21,428,572
shares of our common stock at $.07 per share for an aggregate of $1,500,000, as
well a five-year warrant to purchase 4,285,714 shares of our common stock at an
initial exercise price of $.08 per share (the "Warrant"). The agreement further
provided for the appointment to our Board of Directors of two representatives of
Kerns. In furtherance thereof, Jun Ma and Simon Srybnik, Chairman of both Kerns
and Living Data, have been appointed members of our Board of Directors. Pursuant
to the Distribution Agreement, we have become the exclusive distributor in the
United States of the AngioNew ECP systems manufactured by Living Data. As
additional consideration for such agreement, we agreed to issue an additional
9
6,990,840 shares of our common stock to Living Data. Pursuant to the Supplier
Agreement, Living Data now is the exclusive supplier to us of the ECP therapy
systems that we market under the registered trademark EECP(R). The Distribution
Agreement and the Supplier Agreement each have an initial term extending through
May 31, 2012.
Pursuant to a Registration Rights Agreement, we granted to Kerns and Living
Data, subject to certain restrictions, "piggyback registration rights" covering
the shares sold to Kerns as well as the shares issuable upon exercise of the
Warrant and the shares issued to Living Data.
On July 10, 2007, the Board of Directors appointed Behnam Movaseghi,
Treasurer and Chief Financial Officer of Kerns Manufacturing Corporation, to our
Board of Directors.
As affiliates of Living Data and Kerns, Mr. Ma, Mr. Movaseghi and Mr.
Srybnik have each been directly involved in the transactions between Living Data
or Kerns, on the one hand, and the Company, on the other hand, with respect to
the Securities Purchase Agreement, the Distribution Agreement and the Supplier
Agreement, as well as providing consulting services to the Company with no
compensation.
During fiscal 2008, the Company purchased ECP therapy systems under the
Supplier Agreement for $120,000 from Living Data, which was paid in full by the
Company as of June 2008. In addition, Living Data purchased $5,000 worth of ECP
therapy system components from the Company, which was paid in full by Living
Data as of June 2008.
During fiscal 2009, Living Data assigned to the Company all of its rights
and interests under its Distributorship Agreement with a corporation organized
and existing under the laws of the People's Republic of China that manufactures
Ambulatory Blood Pressure Monitors, Ambulatory ECG Recorders and Holter & ABPM
Combiner Recorders, for $20,000 payable to Living Data based on certain terms
and conditions. The Company has also agreed to pay to Living Data 5% of the
selling price or 5% of the cost of all goods sold (whichever is higher), and 5%
of the cost of all goods transferred but not sold under the Assignment Agreement
to Living Data based on sales of this equipment. The Company intends to sell
these systems in the United States and other countries subject to obtaining
regulatory clearance.
During fiscal 2009, Living Data assigned to the Company all of its rights
and interests under its Distributorship Agreement with a corporation organized
and existing under the laws of the People's Republic of China that manufactures
Ultrasound Scanners, for $20,000 payable to Living Data based on certain terms
and conditions. The Company has also agreed to pay to Living Data 5% of the
selling price or 5% of the cost of all goods sold (whichever is higher) and 5%
of the cost of all goods transferred but not sold under the Assignment Agreement
to Living Data based on sales of this equipment. The Company intends to sell
these systems in the United States and other countries subject to obtaining
regulatory clearance.
In July of 2008, the Company agreed to purchase ECP therapy systems under
its Distributorship Agreement with Living Data for $360,000 payable over 18
months.
Further, Kerns provides the Company, free of charge, part-time use of one
of its Information Technology (IT) employees as well one of their IT consultants
to provide the Company with IT and database support services. In addition, a
clinical applications support specialist and a service engineer from Living Data
may be used by the Company to provide customers with clinical training and
technical service.
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ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
MILLER ELLIN & COMPANY, LLP are our independent registered public
accounting firm and performed the audits of our consolidated financial
statements for fiscal years 2008 and 2007. The following table sets forth all
fees for the fiscal years ended May 31, 2008 and 2007:
2008 2007
---- ----
Audit Fees (1) $159,000 $201,000
Tax Fees (2) $55,000 $13,000
(1) Audit Fees includes fees for professional services provided in connection
with the audits of our financial statements, the review of our quarterly
financial statements, consents, and audit services provided in connection
with other statutory or regulatory filings. Fees for the guidance from an
independent internal-control consulting firm related to conducting an
evaluation of the effectiveness of the Company's disclosure controls and
procedures were approximately $33,000. All such services were pre-approved
by the Audit Committee.
(2) Tax fees principally include fees for tax return preparation and for tax
advice planning fees. All such services were pre-approved by the Audit
Committee.
The Audit Committee has sole authority to appoint, determine funding for,
retain, and oversee our independent auditors and to pre-approve all audit
services and permissible non-audit services. The Audit Committee has delegated
to the chairman of the Audit Committee the authority to pre-approve
audit-related and non-audit services not prohibited by law to be performed by
our independent registered public accounting firm and associated fees, provided
that he reports any pre-approval of audit-related or non-audit related services
and fees to the full Audit Committee at its next regular meeting.
MILLER ELLIN & COMPANY, LLP did not render any services related to
financial information systems design and implementation during fiscal years 2008
and 2007.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 29th day of September,
2008.
VASOMEDICAL, INC.
By: /s/ John C.K. Hui
----------------------------------------
John C.K. Hui
President, Chief Executive Officer,
Chief Technology Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on September 29, 2008, by the following persons in the
capacities indicated:
/s/ John C.K. Hui President, Chief Executive Officer,
------------------------------------ Chief Technology Officer and Director
John C.K. Hui (Principal Executive Officer)
/s/ Abraham E. Cohen Chairman of the Board
------------------------------------
Abraham E. Cohen
/s/ Tricia Efstathiou Chief Financial Officer
------------------------------------ (Principal Financial Officer)
Tricia Efstathiou
/s/Derek Enlander Director
------------------------------------
Derek Enlander
/s/Joseph Giacalone Director
------------------------------------
Joseph Giacalone
/s/Jun Ma Director
------------------------------------
Jun Ma
/s/Behnam Movaseghi Director
------------------------------------
Behnam Movaseghi
/s/Photios T. Paulson Director
------------------------------------
Photios T. Paulson
/s/Simon Srybnik Director
------------------------------------
Simon Srybnik
/s/Martin Zeiger Director
------------------------------------
Martin Zeiger