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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, 2007
[ ] 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 $0.115 as of
September 21, 2007, was approximately $7,303,902. 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 21, 2007, the number of shares outstanding of the issuer's common
stock was 93,618,004.
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, 2007 (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, 2007, 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
27, 2007 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, 2007 filed on Form 10-KSB on August 27, 2007.
INDEX TO FORM 10-KSB/A
Page
----
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...................................................10
Item 14. Principal Accountant Fees and Services...........................................................10
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 21, 2007, the members of our Board of Directors are:
Director
Name of Director Age Principal Occupation Since
--------------------------------- ------- -------------------------------------- -----------------
Abraham E. Cohen (4) 71 Chairman of the Board and Director June 1993
Derek Enlander (2) 59 Director July 2007
John C.K. Hui, PhD (3) 61 President, Chief Executive Officer, February 1995
Chief Technology Officer and
Director
Jun Ma (2) 44 Director June 2007
Behnam Movaseghi 54 Director July 2007
Photios T. Paulson (1)(2) 68 Director April 2000
Simon Srybnik (3) 91 Director June 2007
Martin Zeiger (1)(2)(3) 70 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.
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.
John C.K. Hui, PhD has been our President and Chief Executive Officer since
April 2007 and our Chief Technology Officer and a director and Senior Vice
President since February 1995. 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.
1
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
companies such as Kerns Manufacturing Corp. and Living Data Technology Corp.
Behnam Movaseghi has been a director since July 2007. Behnam 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 has 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. 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. The Audit Committee is currently comprised of Photios T. Paulson and
Martin Zeiger. During the fiscal year ended May 31, 2007 the Audit Committee
consisted of Forrest R. Whittaker (until his resignation from the board),
Anthony Viscusi (until his resignation from the board), Photios T. Paulson, 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 agencies. As a result, they each have an
understanding of financial statements. However, none of them keep current on all
aspects of generally accepted accounting principles. Accordingly, the Board of
Directors does not consider any of them to be a Financial expert as that term is
2
defined in applicable regulations. Nevertheless, the Board of Directors believes
that they have competently performed the functions required of them as members
of the Audit Committee.
The Audit Committee regularly meets with our independent registered public
accounting firm outside the presence of management.
Compensation Committee
Our Compensation Committee annually establishes, subject to the approval of
the Board of Directors and any applicable employment agreements, the salaries
which will be paid to our executive officers during the coming year, and
administers our stock-based benefit plans. The Compensation Committee is
currently comprised of Martin Zeiger, Photios T. Paulson, Jun Ma, and Derek
Enlander. During the fiscal year ended May 31, 2007, the Compensation Committee
consisted of Photios T. Paulson, Alexander Bearn and David Blumenthal. Upon the
resignation of Messrs. Bearn and Blumenthal, Mr. Zeiger was appointed to the
Compensation Committee. Each member of the Compensation Committee is a director
who is not employed by us or any of our affiliates.
Corporate Governance Committee
The Board of Directors has established a Corporate Governance Committee,
which is currently comprised of John C.K. Hui, Chairman, Simon Syrbnik and
Martin Zeiger. During the fiscal year ended May 31, 2007, the Corporate
Governance Committee consisted of Kenneth W. Rind, John C.K. Hiu 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 Securities Exchange Act of 1934 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 Securities and
Exchange Commission. 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 2007, 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
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 61 President, Chief Executive Officer,
Chief Technology Officer and Director
Tricia Efstathiou 36 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 years ended May 31, 2007 and 2006.
Summary Compensation Table
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Nonqualified
Non-Equity Deferred
Name and Principal Incentive Compensation All Other
Position Stock Option Plan Earnings Compensation Total
Year Salary ($) Bonus Awards ($) Awards Compensation ($) ($) (1) ($)
(2) ($) ($) (3) ($)
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
John C. K. Hui (4) 2007 $162,600 -- -- -- -- -- $26,247 $188,847
President and CEO 2006 $159,510 -- -- $ 84,048 -- -- $20,466 $264,024
Senior VP, CTO
(CEO)
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Thomas Glover (5) 2007 $238,333 -- -- -- -- -- $20,766 $259,099
President and CEO 2006 $260,000 -- -- $118,000 -- -- $14,574 $392,574
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Tricia Efstathiou (6) 2007 $ 86,667 -- -- $ 18,000 -- -- $ 12,084 $116,751
CFO 2006 -- -- -- -- -- -- -- --
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
Thomas W. Fry (7) 2007 $ 69,253 -- -- -- -- -- $ 1,249 $ 70,502
CFO 2006 $159,510 -- -- $106,499 -- -- $2,313 $268,322
-------------------------- ----- ------------ --------- ------------ ----------- ------------- ------------- ------------ ----------
(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 deferred in FY2006 under the Deferred Compensation
Plan for Mr. Glover, Dr. Hui and Mr. Fry of $26,667, $20,000 and
$13,333, respectively. Includes amounts paid in FY2007 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 FY2007. Includes $13,390
deferred by Dr. Hui voluntarily in FY2007.
(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 the fiscal year ended May 31, 2007.
----------------- --------------------------------------------------------------------- --------------------------------------------
Option Awards Stock Awards
----------------- --------------------------------------------------------------------- --------------------------------------------
Equity
Incentive
Plan Equity
Awards: Incentive
Number Plan
of Awards:
Market Unearned Market or
Value Shares, Payout
Equity of Units Value of
Incentive Shares or Unearned
Number of Number of Plan Awards: Number of or Other Shares,
Securities Securities Number of Shares or Units Rights Units or
Underlying Underlying Underlying Units of of Stock That Other
Unexercised Unexercised Unexercised Option Option Stock That That Have Have Rights
Options - Options - Unearned Exercise Expiration Have Not Not Not That Have
Name Exercisable Unexercisable Options Price Date Vested Vested 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 -- -- -- --
200,000 133,333 133,333 $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.
5
The following information is provided about our current stock option plans:
1995 Stock Option Plan
In May 1995, our stockholders approved the 1995 Stock Option Plan for our
officers and employees, for which the Company reserved an aggregate of 1,500,000
shares of common stock. In December 1997, our Board of Directors terminated the
1995 Stock Option Plan with respect to new option grants. At May 31, 2007, there
were no options outstanding under the 1995 Option Plan.
Outside Director Stock Option Plan
In May 1995, our stockholders approved an Outside Director Stock Option
Plan for our non-employee directors, for which we reserved an aggregate of
300,000 shares of common stock. On June 1, 1997, 1996 and 1995, options to
purchase an aggregate of 39,550 shares, 31,675 shares, and 77,418 shares of
common stock, respectively, at $1.77, $2.21, and $.78 per share, respectively,
were granted to outside directors. In December 1997, our Board of Directors
terminated the Outside Director Stock Option Plan with respect to new option
grants. At May 31, 2007, there were no options outstanding under the Outside
Director Stock Option Plan.
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
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, 2007, 3,141,168 options had been granted
(including options previously granted but subsequently cancelled), of which
1,351,835 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
6
1999 Plan expires July 12, 2009. At May 31, 2007, 9,151,932 options had been
granted, (including options previously granted but subsequently cancelled), of
which 3,922,970 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 [and other independent advisors], 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, 2007, 2,318,045
shares had been granted (including options previously granted but subsequently
cancelled), of which options to purchase 1,317,533 shares are outstanding under
the 2004 Stock Plan.
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 year 2007 and 2006, the Company made
discretionary contributions of approximately $15,000 and $27,000, respectively,
to match a percentage of employee contributions.
Deferred Compensation Program
In April 2006, the Company approved a program to defer compensation of
certain senior executives of the company and provided incentives to them for
these deferrals. The Company agreed to repay monies deferred from zero to six
months at 1.5 times the amount deferred; for deferrals of six months to twelve
months, the repaid amount shall be two times the amount deferred; and for
deferrals in excess of twelve months, the amount shall be 2.5 times the amount
deferred. As of May 31, 2007 there was no deferred compensation or incentives
due to any senior executive under this program. In addition, payment of Board of
Directors meeting fees were deferred until a later date.
Employment Agreements
As of May 31, 2007 the Company does not have any employment agreements.
7
Director's Compensation
Directors receive a fee of $1,500 for each Board of Directors and Committee
meetings attended and $2,500 for each Audit Committee meeting attended.
Non-employee directors also received during fiscal 2007:
o A grant of a non-qualified stock option to purchase 150,000 shares
which vest over two years provided the director remains a member of
the board.
The following table provides the compensation earned by our non-employee
directors for the year ended May 31, 2007:
--------------------------------------------------------------------------------------------------------------------------
Director Compensation
--------------------------------------------------------------------------------------------------------------------------
Fees Nonqualified
Earned or Non-equity Deferred
Paid in Stock Option Incentive Plan Compensation All Other
Cash Awards Awards Compensation Earnings Compensation Total
Name ($) ($) ($) ($) ($) ($) ($)
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Abraham E. Cohen $ 6,000 -- $13,500 -- -- -- $19,500
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Alexander G. Bearn $-- -- $ -- -- -- -- $--
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
David Blumenthal $-- -- $ -- -- -- -- $--
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Photios T. Paulson $15,000 -- $13,500 -- -- -- $28,500
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Kenneth W. Rind $ 3,000 -- $13,500 -- -- -- $16,500
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Forrest R. Whittaker $-- -- $ -- -- -- -- $--
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
Martin Zeiger $15,000 -- $13,500 -- -- -- $28,500
----------------------- ----------- --------- ------------- ---------------- ---------------- ---------------- ------------
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 2007, our Compensation Committee consisted of Photios T.
Paulson , Alexander Bearn, and David Blumenthal until the resignations of
Messrs. Bearn and Blumenthal at which time Martin Zeiger was appointed to the
committee. None of these persons were our officers or employees during fiscal
2007 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 21, 2007 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 Securities and Exchange Commission, (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.
8
Common Stock % of
Beneficially Common
Name of Beneficial Owner Owned (1) Stock (2)
------------------------------------------------------ ----------------- -----------------
Abraham E. Cohen ** ................................. 1,410,254 1.5%
Tricia Efstathiou ** ................................ 274,496 *
Derek Enlander **.................................... 150,000 *
John C. K. Hui, PhD (3) ** .......................... 1,603,880 1.7%
Jun Ma **............................................ 150,000 *
Benham Movaseghi **.................................. 150,000 *
Photios T. Paulson **................................ 586,000 *
Simon Srybnik (4) (5) **............................. 32,855,126 34%
Louis Srybnik (4) (5)................................ 32,705,126 33%
Martin Zeiger **..................................... 265,000 *
** Directors and executive officers as a group
(8 persons).............................. 37,444,756 37.09%
* 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.
Includes beneficial ownership of the following numbers of shares that may
be acquired within 60 days of September 21, 2007 pursuant to warrants
awarded under the securities purchase agreement with Kern's Manufacturing
Corp. and stock options awarded under our stock option plans:
Abraham E. Cohen 620,000 Behnam Movaseghi 150,000
Tricia Efstathiou 258,667 Photios T. Paulson 545,000
Derek Enlander 150,000 Simon Srybnik 4,435,714
John C. K. Hui, PhD 814,558 Martin Zeiger 215,000
Jun Ma 150,000 Directors and executive
officers as a group 7,338,939
2. Applicable percentages are based on 93,618,004 common shares outstanding on
September 21, 2007, adjusted as required by rules promulgated by the SEC.
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 Manufacturing
Corp. 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. As a
result, 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.
5. Simon Srybnik and his brother Louis Srybnik are the sole directors and
officers of Living Data Technology Corporation. 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 the
Company owned by Living Data Technology Corp. and, as a result, may be
deemed to be the co-beneficial owners thereof.
9
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 21, 2007 we entered into a Securities Purchase Agreement with Kerns
Manufacturing Corp. ("Kerns"). Concurrently with our entry into the Securities
Purchase Agreement, we also entered into a Distribution Agreement and a Supplier
Agreement with Living Data Technology Corporation, an affiliate of Kerns
("Living Data").
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"). We also have an option
to sell an additional $1 million of our common stock to Kerns. The agreement
further provided for the appointment to our Board of Directors of two
representatives of Kerns. In furtherance thereof, Mr. Simon Srybnik, Chairman of
both Kerns and Living Data, and Mr. Jun Ma 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 6,990,840 shares of our common stock to Living
Data. Pursuant to the Supplier Agreement, Living Data now will be 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.
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 2007 and 2006. The following table sets forth all
fees for the fiscal years ended May 31, 2007 and May 31, 2006:
2007 2006
---- ----
Audit Fees (1) $201,000 $264,000
Tax Fees (2) $13,000 $51,000
(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 related to the audit of
the 401(k) plan were $12,175 for calendar year 2005 and were performed by
Eichen and Dimeglio, CPAS, PC. 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 year 2007
and 2006.
10
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 27th day of September,
2007.
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 27, 2007, 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/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