Delaware
|
13-3899021
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
o
No
þ
|
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes
o
No
þ
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PART I
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Page
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Item 1.
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1
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Item 1A.
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9
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Item 1B.
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12
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Item 2.
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12
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Item 3.
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12
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Item 4.
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14
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PART II
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||
Item 5.
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15
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Item 6.
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16
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Item 7.
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17
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Item 7A.
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27
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Item 8.
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27
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Item 9.
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52
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Item 9A.
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52
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Item 9B.
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53
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PART III
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||
Item 10.
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54
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Item 11.
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56
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Item 12.
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59
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Item 13.
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61
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Item 14.
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63
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PART IV
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||
Item 15.
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64
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·
|
Lowers Total Cost of Ownership.
Reducing information technology costs is a primary goal of our software products. Installing enterprise applications is time-consuming, complex, and expensive, typically requiring administrators to manually install and support diverse desktop configurations and interactions. Our application virtualization software and private cloud software will simplify application management by enabling deployment, administration and support from a central location (the host). Installation and updates will be made only on the host, thereby avoiding desktop software and operating system conflicts and minimizing at-the-desk support.
|
·
|
Supports Strong Information Security Practices.
The distributed nature of most organizations’ computing environments makes information security difficult. Business assets, in the form of data, are often dispersed among desktop systems. Our private cloud approach places the application and data on an organization’s servers, behind its firewalls, thus enabling an organization to centrally manage and protect its applications and data.
|
·
|
Web-enables Existing Applications.
The Internet represents a fundamental change in distributed computing. Organizations now benefit from ubiquitous access to corporate resources by both local and remote users. However, to fully exploit this opportunity, organizations need to find a way to provide access to existing applications from Internet-enabled devices. Our technology is specifically targeted at solving this problem. With GO-Global, an organization can provide access to an application already existing on the host to an Internet-enabled device without the need to rewrite the application. This reduces application development costs while preserving the original user interface, which is typically difficult to replicate in Web-based versions of the original application.
|
·
|
Connects Diverse Computing Platforms.
Today’s computing infrastructures are a mix of computing devices, network connections and operating systems. Enterprise-wide application deployment is problematic due to this heterogeneity, often requiring costly and complex emulation software or application rewrites. Our products afford business enterprises and other organizations the means to permit their personnel to access applications from virtually all devices, utilizing their existing computing infrastructure, without rewriting a single line of code or changing or reconfiguring hardware. This means that enterprises can maximize their investment in existing technology and allow users to work in their preferred environment.
|
·
|
Leverages Existing PCs and Deploys New Desktop Hardware.
Our software brings the benefits of application virtualization to users of existing PC hardware, while simultaneously enabling enterprises to take advantage of, and deploy, new, less complex network computers. This assists organizations in maximizing their current investment in hardware and software while, at the same time, facilitating a manageable and cost-effective transition to newer devices.
|
·
|
Efficient Communications Protocol.
Applications typically are designed for network-connected desktops, which can put tremendous strain on congested networks and may yield poor, sometimes unacceptable, performance over remote connections. For application service providers, bandwidth typically is the top recurring expense when Web-enabling, or renting, access to applications over the Internet. In the wireless market, bandwidth constraints limit application deployment. Our communications protocol sends only keystrokes, mouse clicks and display updates over the network, resulting in minimal impact on bandwidth for application deployment, thus lowering costs on a per-user basis. Within the enterprise, our protocol can extend the reach of business-critical applications to many areas, including branch offices, telecommuters and remote users over the Internet, phone lines or wireless connections. This concept may be extended further to include vendors and customers for increased flexibility, time-to-market and customer satisfaction.
|
·
|
GO-Global Host:
Host products allow access to applications from remote locations and a variety of connections, including the Internet and dial-up connections. Such access allows applications to be run via a Web browser, over many types of data connections, regardless of the bandwidth or operating system. Web-enabling is achieved without modifying the underlying application’s code or requiring costly add-ons.
Host family products include GO-Global Windows Host 4 and all currently available versions of our legacy GO-Global products (GO-Global for Windows 3.2 and GO-Global for UNIX 2.2).
|
·
|
GO-Global Cloud:
Cloud products offer
a centralized management suite that gives users the ability to access and share applications, files and documents on Windows, UNIX and Linux computers via simple hyperlinks. They give administrators extensive control over user rights and privileges, and allow them to monitor and manage clusters of GO-Global Hosts that support thousands of users. GO-Global Cloud products give application developers the ability to integrate Windows, UNIX and Linux applications into their Web-based enterprise and workflow applications. GO-Global Cloud products include GO-Global Host capabilities. We released GO-Global Cloud for Windows in March 2011 and expect to release GO-Global Cloud for UNIX in 2012.
|
·
|
GO-Global Client:
We plan to continue to develop Client products for portable and mobile devices. We released Client products for the iPad and Android tablets in June 2011 and February 2012, respectively.
|
·
|
ISVs
.
By Web-enabling their applications through use of our products, we believe that our ISV customers can accelerate their time to market without the risks and delays associated with rewriting applications or using other third-party software, thereby opening up additional revenue opportunities and securing greater satisfaction and loyalty from their customers.
Our technology integrates with their existing software applications without sacrificing the full-featured look and feel of such applications, thereby providing ISVs with out-of-the-box Web-enabled applications with their own branding for licensed, volume distribution to their enterprise customers. We further believe that ISVs that effectively address the Web computing needs of customers and the emerging application service provider market will have a competitive advantage in the marketplace.
|
·
|
Enterprises Employing a Mix of UNIX, Linux, Macintosh and Windows.
Small to medium-sized companies that utilize a mixed computing environment require cross-platform connectivity software, like GO-Global Host and/or GO-Global Cloud, that will allow users to access applications from different client devices. We believe that our server-based software products will significantly reduce the cost and complexity of connecting PCs to various applications.
|
·
|
Enterprises with Remote Computer Users and/or Extended Markets.
We believe that remote computer users and enterprises with extended markets comprise two of the faster growing market segments in the computing industry. Extended enterprises permit access to their computing resources by their customers, suppliers, distributors and other partners, thereby affording them manufacturing flexibility, increased speed-to-market, and enhanced customer satisfaction. For example, extended enterprises may maintain decreased inventory via just-in-time, vendor-managed inventory and related techniques, or they may license their proprietary software application on a “pay-per-use” model, based on actual time usage by the user. The early adoption of extended enterprise software may be driven in part by an organization’s need to exchange information over a wide variety of computing platforms. We believe that our server-based software products, along with our low-impact communications protocol, which has been designed to enable highly efficient low-bandwidth connections, are well positioned to provide extended enterprises with the necessary means to exchange information over a wide variety of computing platforms.
|
·
|
VARs.
The VAR channel presents an additional sales force for our products and services. In addition to creating broader awareness of our GO-Global products, VARs also provide integration and support services for our current and potential customers. Our products allow VARs to offer a cost-effective competitive alternative for server-based, or thin-client, computing. In addition, reselling our GO-Global products creates new revenue streams for our VARs.
|
·
|
We are party to a non-exclusive distribution agreement with KitASP, a Japanese application service provider founded by companies within Japan’s electronics and infrastructure industries, including NTT DATA, Mitsubishi Electric, Omron, RICS, Toyo Engineering and Hitachi. Pursuant to this agreement, which was entered into in September 2011, KitASP has licensed our GO-Global product line for inclusion in their software products, primarily their server-bundled application service provider software solution. Our agreement with KitASP is for a minimum of twelve months, during which time it may only be terminated upon the occurrence of a limited number of circumstances. After the initial twelve-month period, either party may terminate the contract upon 60 days’ written notice to the other party.
|
·
|
We are party to a non-exclusive distribution agreement with Ericsson, a global provider of telecommunications equipment and related services to mobile and fixed network operations. Pursuant to this agreement, Ericsson has licensed our legacy GO-Global for UNIX software for inclusion with their ServiceON Optical and ServiceON Access telecommunications network management systems. Our agreement with Ericsson, which was originally entered into in September 2000, automatically renews annually. Either party may terminate the contract upon written notice to the other party at least one month prior to the expiration of the then current term.
|
·
|
We are party to a non-exclusive channel partner agreement with Elosoft Informatica Ltda, a South American distributor of various technology products, including both hardware and software offerings, and related services. Under the terms of this agreement, Elosoft has licensed both our GO-Global Windows Host and legacy GO-Global for UNIX software for deployment to their distribution network with both sub-distributors and end-users. Our agreement with Elosoft, which was originally entered into in February 2005, automatically renews annually. Either party may terminate the agreement upon 60 days written notice to the other party.
|
·
|
We are party to a non-exclusive global purchasing agreement with Alcatel-Lucent, a telecommunications, network systems and services company. Pursuant to this relationship, which started in July 1999, Alcatel-Lucent has licensed our legacy GO-Global for UNIX software for inclusion with their software products. Many of Alcatel-Lucent’s customers are using our legacy server-based software to remote access Alcatel-Lucent's Network Management Systems (NMS) applications. Our current agreement with Alcatel-Lucent expires in December 2012. Either party may renew the agreement for additional periods of twelve months upon written notice to the other party at least 60 days prior to the expiration of the then current term. Lacking such renewal notice, the agreement will expire at the end of its term.
|
·
|
frequent new product and service introductions and enhancements;
|
·
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rapid technological change;
|
·
|
evolving industry standards;
|
·
|
fluctuations in customer demand; and
|
·
|
changes in customer requirements.
|
·
|
the amount of cash we have available to fund investment in new products and enhancements;
|
·
|
delays in our introduction of new products and/or enhancements of existing products;
|
·
|
delays in market acceptance of new products and/or enhancements of existing products; and
|
·
|
a competitor’s announcement of new products and/or product enhancements or technologies that could replace or shorten the life cycle of our existing products.
|
·
|
lack of success with our strategic partners;
|
·
|
new competitive product releases and updates to existing competitive products;
|
·
|
decreasing or stagnant information technology spending levels;
|
·
|
price competition;
|
·
|
technological changes; or
|
·
|
general economic conditions in the markets in which we operate.
|
·
|
our ability to maximize the revenue opportunities of our patents;
|
·
|
variations in the size of orders by our customers;
|
·
|
increased competition; and
|
·
|
the proportion of overall revenues derived from different sales channels such as distributors, original equipment manufacturers (OEMs) and others.
|
ITEM 5
.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Fiscal 2011 *
|
Fiscal 2010 *
|
|||||||||||||||
Quarter
|
High
|
Low
|
High
|
Low
|
||||||||||||
First
|
$ | 0.16 | $ | 0.05 | $ | 0.10 | $ | 0.05 | ||||||||
Second
|
$ | 0.22 | $ | 0.13 | $ | 0.08 | $ | 0.05 | ||||||||
Third
|
$ | 0.28 | $ | 0.11 | $ | 0.10 | $ | 0.04 | ||||||||
Fourth
|
$ | 0.24 | $ | 0.17 | $ | 0.12 | $ | 0.05 |
|
*
The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
|
ITEM
7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
|
|
|
|
2011
|
2010
|
|||||||
Estimated volatility
|
154% - 221 | % | 175 | % | ||||
Annualized forfeiture rate
|
0.0% - 5.0 | % | 2 | % | ||||
Expected option term (years)
|
0.25 – 10.00 | 7.5 | ||||||
Estimated exercise factor
|
2 - 20 | 20 | ||||||
Approximate risk-free interest rate
|
0.02% - 3.24 | % | 3.72 | % | ||||
Expected dividend yield
|
— | — |
Year Ended December 31,
|
Increase (Decrease)
|
|||||||||||||||
Revenue
|
2011
|
2010
|
Dollars
|
Percentage
|
||||||||||||
Software licenses
|
$ | 3,617,400 | $ | 4,168,700 | $ | (551,300 | ) | (13.2 | ) % | |||||||
Software service fees
|
2,722,700 | 2,411,600 | 311,100 | 12.9 | ||||||||||||
Intellectual property licenses
|
— | 875,000 | (875,000 | ) | (100.0 | ) | ||||||||||
Other
|
244,300 | 61,200 | 183,100 | 299.2 | ||||||||||||
Total Revenue
|
6,584,400 | 7,516,500 | (932,100 | ) | (12.4 | ) | ||||||||||
Cost of revenue
|
||||||||||||||||
Software service costs
|
285,700 | 411,500 | (125,800 | ) | (30.6 | ) |
Software product costs
|
229,200 | 76,300 | 152,900 | 200.4 | ||||||||||||
Intellectual property licenses - contingent legal fees
|
— | 338,100 | (338,100 | ) | (100.0 | ) | ||||||||||
Total Cost of revenue
|
514,900 | 825,900 | (311,000 | ) | (37.7 | ) | ||||||||||
Gross profit
|
6,069,500 | 6,690,600 | (621,100 | ) | (9.3 | ) | ||||||||||
Operating expenses
|
||||||||||||||||
Selling and marketing
|
2,240,900 | 2,170,100 | 70,800 | 3.3 | ||||||||||||
General and administrative
|
3,265,900 | 2,889,400 | 376,500 | 13.0 | ||||||||||||
Research and development
|
2,547,400 | 2,466,700 | 80,700 | 3.3 | ||||||||||||
Total Operating expenses
|
8,054,200 | 7,526,200 | 528,000 | 7.0 | ||||||||||||
Loss from operations
|
(1,984,700 | ) | (835,600 | ) | (1,149,100 | ) | 137.5 | |||||||||
Other income (expense)
|
||||||||||||||||
Change in fair value of warrants liability
|
222,700 | — | 222,700 |
nm
|
||||||||||||
Interest and other income
|
4,700 | 11,200 | (6,500 | ) | (58.0 | ) | ||||||||||
Interest and other expense
|
(1,400 | ) | (8,100 | ) | 6,700 | (82.7 | ) | |||||||||
Total other income
|
226,000 | 3,100 | 222,900 |
nm
|
||||||||||||
Loss before provision for income tax
|
(1,758,700 | ) | (832,500 | ) | (926,200 | ) | 111.3 | |||||||||
Provision for income taxes
|
2,400 | 3,200 | (800 | ) | (25.0 | ) | ||||||||||
Net loss
|
$ | (1,761,100 | ) | $ | (835,700 | ) | $ | (925,400 | ) | 110.7 |
Year Ended December 31,
|
Increase (Decrease)
|
|||||||||||||||
Software licenses
|
2011
|
2010
|
Dollars
|
Percentage
|
||||||||||||
Windows
|
$ | 2,430,900 | $ | 2,664,300 | $ | (233,400 | ) | (8.8 | ) % | |||||||
UNIX/Linux
|
1,186,500 | 1,504,400 | (317,900 | ) | (21.1 | ) | ||||||||||
Total
|
$ | 3,617,400 | $ | 4,168,700 | $ | (551,300 | ) | (13.2 | ) |
Increase (Decrease)
|
||||||||||||||||
Year Ended December 31,
|
2011
|
2010
|
Dollars
|
Percentage
|
||||||||||||
Software
|
$ | 6,584,400 | $ | 6,641,500 | $ | (57,100 | ) | (0.9 | ) % | |||||||
Intellectual Property
|
— | 875,000 | (875,000 | ) | (100.0 | ) | ||||||||||
Consolidated Total
|
$ | 6,584,400 | $ | 7,516,500 | $ | (932,100 | ) | (12.4 | ) |
Year Ended December 31,
|
2011
|
2010
|
||||||
Software
|
$ | (1,183,700 | ) | $ | (341,700 | ) | ||
Intellectual Property
|
(801,000 | ) | (493,900 | ) | ||||
Consolidated Total
|
$ | (1,984,700 | ) | $ | (835,600 | ) |
Cost Basis
|
Accumulated Depreciation /Amortization
|
Net
|
||||||||||
Software
|
$ | 1,824,000 | $ | (1,476,300 | ) | $ | 347,700 | |||||
Intellectual Property
|
2,839,000 | (2,839,000 | ) | — | ||||||||
Unallocated
|
39,400 | — | 39,400 | |||||||||
$ | 4,702,400 | $ | (4,315,300 | ) | $ | 387,100 |
Year Ending December 31,
|
||||
2012
|
$ | 200,300 | ||
2013
|
145,700 | |||
2014
|
144,200 | |||
2015
|
148,600 | |||
2016
|
153,000 | |||
2017
|
78,400 | |||
$ | 870,200 |
Index to Consolidated Financial Statements
|
|
Page
|
|
28
|
|
29
|
|
30
|
|
31
|
|
32
|
|
33
|
Consolidated Balance Sheets
|
||||||||
As of December 31,
|
||||||||
Assets
|
2011
|
2010
|
||||||
Current Assets:
|
||||||||
Cash
|
$ | 7,237,500 | $ | 1,891,000 | ||||
Accounts receivable, net of allowance for doubtful accounts of $25,000 and $32,800, respectively
|
732,100 | 1,015,900 | ||||||
Prepaid expenses and other current assets
|
151,900 | 84,100 | ||||||
Total Current Assets
|
8,121,500 | 2,991,000 | ||||||
Capitalized software development costs, net
|
303,800 | 237,700 | ||||||
Property and equipment, net
|
43,900 | 69,900 | ||||||
Patents, net
|
— | 39,300 | ||||||
Other assets
|
39,400 | 8,100 | ||||||
Total Assets
|
$ | 8,508,600 | $ | 3,346,000 | ||||
Liabilities and Shareholders’ Equity (Deficit)
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 121,500 | $ | 75,700 | ||||
Accrued expenses
|
168,500 | 66,600 | ||||||
Accrued wages
|
468,700 | 526,700 | ||||||
Deferred revenue
|
2,878,500 | 2,058,300 | ||||||
Total Current Liabilities
|
3,637,200 | 2,727,300 | ||||||
Long Term Liabilities:
|
||||||||
Warrants liability
|
3,696,600 | — | ||||||
Deferred revenue
|
457,200 | 640,200 | ||||||
Total Liabilities
|
7,791,000 | 3,367,500 | ||||||
Commitments and contingencies (Note 10)
|
||||||||
Shareholders' Equity (Deficit):
|
||||||||
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding
|
— | — | ||||||
Common stock, $0.0001 par value, 195,000,000 shares authorized, 81,886,926 and 45,981,625 shares issued and outstanding, respectively
|
8,200 | 4,600 | ||||||
Additional paid-in capital
|
61,398,600 | 58,902,000 | ||||||
Accumulated deficit
|
(60,689,200 | ) | (58,928,100 | ) | ||||
Total Shareholders' Equity (Deficit)
|
717,600 | (21,500 | ) | |||||
Total Liabilities and Shareholders' Equity (Deficit)
|
$ | 8,508,600 | $ | 3,346,000 |
Consolidated Statements of Operations
|
||||||||
For the Year Ended December 31,
|
||||||||
Revenue
|
2011
|
2010
|
||||||
Software licenses
|
$ | 3,617,400 | $ | 4,168,700 | ||||
Software service fees
|
2,722,700 | 2,411,600 | ||||||
Intellectual property licenses
|
— | 875,000 | ||||||
Other
|
244,300 | 61,200 | ||||||
Total Revenue
|
6,584,400 | 7,516,500 | ||||||
Cost of revenue
|
||||||||
Software service costs
|
285,700 | 411,500 | ||||||
Software product costs
|
229,200 | 76,300 | ||||||
Intellectual property licenses - contingent legal fees
|
— | 338,100 | ||||||
Total Cost of Revenue
|
514,900 | 825,900 | ||||||
Gross Profit
|
6,069,500 | 6,690,600 | ||||||
Operating Expenses
|
||||||||
Selling and marketing
|
2,240,900 | 2,170,100 | ||||||
General and administrative
|
3,265,900 | 2,889,400 | ||||||
Research and development
|
2,547,400 | 2,466,700 | ||||||
Total Operating Expenses
|
8,054,200 | 7,526,200 | ||||||
Loss from Operations
|
(1,984,700 | ) | (835,600 | ) | ||||
Other Income (Expense)
|
||||||||
Change in fair value of warrants liability
|
222,700 | — | ||||||
Interest and other income
|
4,700 | 11,200 | ||||||
Interest and other expense
|
(1,400 | ) | (8,100 | ) | ||||
Total other income
|
226,000 | 3,100 | ||||||
Loss Before Provision for Income Tax
|
(1,758,700 | ) | (832,500 | ) | ||||
Provision for income taxes
|
2,400 | 3,200 | ||||||
Net Loss
|
$ | (1,761,100 | ) | $ | (835,700 | ) | ||
Loss per Common Share – Basic and Diluted
|
$ | (0.03 | ) | $ | (0.02 | ) | ||
Weighted Average Common Shares Outstanding – Basic and Diluted
|
57,604,103 | 45,973,691 |
Consolidated Statements of Shareholders’ Equity (Deficit)
|
||||||||
For the Year Ended December 31,
|
||||||||
2011
|
2010
|
|||||||
Preferred stock - shares outstanding
|
||||||||
Beginning balance
|
— | — | ||||||
Ending balance
|
— | — | ||||||
Common stock - shares outstanding
|
||||||||
Beginning balance
|
45,981,625 | 46,284,292 | ||||||
Employee stock option issuances
|
180,301 | 83,333 | ||||||
Private placement of common stock
|
35,500,000 | — | ||||||
Employee restricted stock awards
|
225,000 | — | ||||||
Employee stock purchase plan issuances
|
— | 14,000 | ||||||
Previously issued unearned performance-based restricted stock award forfeited
|
— | (400,000 | ) | |||||
Ending balance
|
81,886,926 | 45,981,625 | ||||||
Common stock – amount
|
||||||||
Beginning balance
|
$ | 4,600 | $ | 4,600 | ||||
Private placement of common stock – par value
|
3,600 | — | ||||||
Ending balance
|
$ | 8,200 | $ | 4,600 | ||||
Additional paid-in capital
|
||||||||
Beginning balance
|
$ | 58,902,000 | $ | 58,861,500 | ||||
Stock-based compensation expense
|
264,800 | 83,200 | ||||||
Proceeds from private placement of common stock and warrants
|
7,100,000 | — | ||||||
Costs of private placement of common stock and warrants
|
(974,500 | ) | — | |||||
Allocation of proceeds from common stock and warrants to warrants liability
|
(3,900,700 | ) | — | |||||
Employee stock purchase plan issuances
|
— | 400 | ||||||
Treasury shares retired
|
— | (48,100 | ) | |||||
Exercise of employee stock options
|
10,600 | 5,000 | ||||||
Reclass private placement of common stock – par value amount
|
(3,600 | ) | — | |||||
Ending balance
|
$ | 61,398,600 | $ | 58,902,000 | ||||
Accumulated deficit
|
||||||||
Beginning balance
|
$ | (58,928,100 | ) | $ | (58,092,400 | ) | ||
Net loss
|
(1,761,100 | ) | (835,700 | ) | ||||
Ending balance
|
$ | (60,689,200 | ) | $ | (58,928,100 | ) | ||
Common stock held in treasury – shares held
|
||||||||
Beginning balance
|
— | 550,000 | ||||||
Treasury shares retired
|
— | (550,000 | ) | |||||
Ending balance
|
— | — | ||||||
Common stock held in treasury – amount
|
||||||||
Beginning balance
|
$ | — | $ | (48,100 | ) | |||
Treasury shares retired
|
— | 48,100 | ||||||
Ending balance
|
$ | — | $ | — | ||||
Total Shareholders' Equity (Deficit)
|
$ | 717,600 | $ | (21,500 | ) |
Consolidated Statements Of Cash Flows
|
||||||||
For the Year Ended December 31,
|
||||||||
Cash Flows Provided By (Used In) Operating Activities:
|
2011
|
2010
|
||||||
Net loss
|
$ | (1,761,100 | ) | $ | (835,700 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
234,800 | 595,000 | ||||||
Stock based compensation expense
|
263,100 | 79,400 | ||||||
Revenue deferred to future periods
|
4,473,700 | 3,608,900 | ||||||
Recognition of deferred revenue
|
(3,836,500 | ) | (3,609,200 | ) | ||||
Change in allowance for doubtful accounts
|
(7,800 | ) | 800 | |||||
Change in fair value of derivative instruments - warrants
|
(222,700 | ) | — | |||||
Warrants issued for consulting services
|
18,600 | — | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
291,600 | (177,100 | ) | |||||
Prepaid expenses and other current assets
|
(50,300 | ) | (19,600 | ) | ||||
Other long term assets
|
(31,300 | ) | 6,700 | |||||
Accounts payable
|
28,300 | (246,100 | ) | |||||
Accrued expenses
|
101,900 | (169,300 | ) | |||||
Accrued wages
|
(58,000 | ) | 98,200 | |||||
Net Cash Used In Operating Activities:
|
(555,700 | ) | (668,000 | ) | ||||
Cash Flows Used In Investing Activities:
|
||||||||
Capitalized software development costs
|
(208,200 | ) | (274,000 | ) | ||||
Capital expenditures
|
(25,700 | ) | (25,300 | ) | ||||
Net Cash Used In Investing Activities:
|
(233,900 | ) | (299,300 | ) | ||||
Cash Flows Provided By Financing Activities:
|
||||||||
Proceeds from Employee Stock Purchase Plan
|
— | 400 | ||||||
Proceeds from exercise of employee stock options
|
10,600 | 5,000 | ||||||
Proceeds from private placement of common stock and warrants, net of issuance costs
|
6,125,500 | — | ||||||
Net Cash Provided By Financing Activities:
|
6,136,100 | 5,400 | ||||||
Net Increase (Decrease) in Cash
|
5,346,500 | (961,900 | ) | |||||
Cash,
beginning of year
|
1,891,000 | 2,852,900 | ||||||
Cash, end of year
|
$ | 7,237,500 | $ | 1,891,000 |
|
|
|
|
Beginning Balance
|
Charge Offs
|
Recoveries
|
Provision
|
Ending Balance
|
||||||||||||||||
2011
|
$ | 32,800 | $ | — | $ | — | $ | (7,800 | ) | $ | 25,000 | |||||||||
2010
|
32,000 | (4,100 | ) | — | 4,900 | 32,800 |
·
|
Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities.
|
·
|
Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
·
|
Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.
|
2011
|
2010
|
|||||||
Cost of revenue
|
$ | 10,400 | $ | 5,300 | ||||
Selling and marketing expense
|
22,400 | 25,600 | ||||||
General and administrative expense
|
135,600 | 25,000 | ||||||
Research and development expense
|
94,700 | 23,500 | ||||||
$ | 263,100 | $ | 79,400 |
2011
|
2010
|
|||||||
Estimated volatility
|
154% - 221 | % | 175 | % | ||||
Annualized forfeiture rate
|
0.0% - 5.0 | % | 2 | % | ||||
Expected option term (years)
|
0.25 – 10.00 | 7.5 | ||||||
Estimated exercise factor
|
2 - 20 | 20 | ||||||
Approximate risk-free interest rate
|
0.02% - 3.24 | % | 3.72 | % | ||||
Expected dividend yield
|
— | — |
2011
|
2010
|
|||||||
Software development costs
|
$ | 487,700 | $ | 277,800 | ||||
Accumulated amortization
|
(183,900 | ) | (40,100 | ) | ||||
$ | 303,800 | $ | 237,700 |
2011
|
2010
|
|||||||
Equipment
|
$ | 1,077,200 | $ | 1,051,600 | ||||
Furniture
|
236,000 | 236,000 | ||||||
Leasehold improvements
|
23,000 | 23,000 | ||||||
1,336,200 | 1,310,600 | |||||||
Less: accumulated depreciation and amortization
|
1,292,300 | 1,240,700 | ||||||
$ | 43,900 | $ | 69,900 |
2011
|
2010
|
|||||||
Patents
|
$ | 2,839,000 | $ | 2,839,000 | ||||
Accumulated amortization
|
(2,839,000 | ) | (2,799,700 | ) | ||||
$ | — | $ | 39,300 |
2011
|
2010
|
|||||||
Professional fees
|
$ | 88,400 | $ | 1,400 | ||||
Consulting services
|
60,800 | 33,900 | ||||||
Royalties
|
14,600 | 5,300 | ||||||
Other
|
4,700 | 26,000 | ||||||
$ | 168,500 | $ | 66,600 |
Warrants
|
Estimated Volatility
|
Annualized Forfeiture Rate
|
Expected Option Term (Years)
|
Estimated Exercise Factor
|
Risk-Free Interest Rate
|
Dividends
|
||||||||||||||||||
2011 Private Placement
|
198% - 199 | % | — | 4.67 – 5.00 | 10 | 0.83% - 0.96 | % | — | ||||||||||||||||
ipCapital
|
199 | % | — | 4.79 – 5.00 | 10 | 0.83% - 1.14 | % | — |
Aggregate fair value of the warrants liability associated with the 2011 private placement at issuance
|
$ | 3,900,700 | ||
Change in fair value of warrant liability recorded in other income
|
(222,700 | ) | ||
Accretion of warrant liability recorded in general and administrative expense
|
18,600 | |||
December 31, 2011 fair value of the warrants liability
|
$ | 3,696,600 |
Gross cash proceeds
|
$ | 7,100,000 | ||
Less:
|
||||
Gross proceeds allocated to warrants liability - investors
|
(2,999,700 | ) | ||
Gross proceeds allocated to additional paid-in capital and common stock
|
4,100,300 | |||
Cash issuance costs
|
||||
Placement Agent fee and expenses
|
(766,500 | ) | ||
Legal and accounting fees
|
(208,000 | ) | ||
Non-cash issuance costs
|
||||
Warrants liability – Placement Agent fees
|
(901,000 | ) | ||
Recorded in additional paid-in capital and common stock
|
$ | 2,224,800 |
Options Outstanding
|
|||||||||||||||||||||
Year
|
Beginning of Year
|
Granted
|
Exercised
|
Cancelled
|
End of Year
|
||||||||||||||||
1998 Stock Option/Stock Issuance Plan
|
2011
|
2,691,600 | — | — | (2,259,100 | ) | 432,500 | ||||||||||||||
Supplemental Stock Option Agreement
|
2011
|
381,000 | — | — | (351,000 | ) | 30,000 | ||||||||||||||
GG Stock Option Plan
|
2011
|
250,000 | — | — | (250,000 | ) | — | ||||||||||||||
1996 Stock Option Plan
|
2011
|
30,000 | — | — | (30,000 | ) | — | ||||||||||||||
Total - Inactive Plans
|
3,352,600 | — | — | (2,890,100 | ) | 462,500 | |||||||||||||||
1998 Stock Option/Stock Issuance Plan
|
2010
|
3,027,325 | — | — | (335,725 | ) | 2,691,600 | ||||||||||||||
Supplemental Stock Option Agreement
|
2010
|
381,000 | — | — | — | 381,000 | |||||||||||||||
GG Stock Option Plan
|
2010
|
250,000 | — | — | — | 250,000 | |||||||||||||||
1996 Stock Option Plan
|
2010
|
54,625 | — | — | (24,625 | ) | 30,000 | ||||||||||||||
Total - Inactive Plans
|
3,712,950 | — | — | (360,350 | ) | 3,352,600 |
2011
|
2010
|
|||||||||||||||
Shares
|
Weighted Average Exercise Price
|
Shares
|
Weighted Average Exercise Price
|
|||||||||||||
Beginning
|
7,322,933 | $ | 0.27 | 7,047,450 | $ | 0.32 | ||||||||||
Granted
|
8,428,500 | $ | 0.20 | 1,049,166 | $ | 0.06 | ||||||||||
Exercised
|
(180,301 | ) | $ | 0.06 | (83,333 | ) | $ | 0.06 | ||||||||
Forfeited or expired
|
(3,934,438 | ) | $ | 0.39 | (690,350 | ) | $ | 0.47 | ||||||||
Ending
|
11,636,694 | $ | 0.18 | 7,322,933 | $ | 0.27 | ||||||||||
Exercisable at year-end
|
11,636,694 | $ | 0.18 | 7,322,933 | $ | 0.27 | ||||||||||
Vested or expected to vest at year-end
|
11,455,294 | $ | 0.18 | 7,303,463 | $ | 0.27 | ||||||||||
Weighted average fair value of options granted during the period
|
$ | 0.11 | $ | 0.06 |
Options Outstanding | Options Exercisable | ||||||||||||||||
Range of Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | ||||||||||||
$ | 0.05 | — | $ | 0.16 | 2,321,694 | 7.02 | $ | 0.06 | 2,321,694 | $ | 0.06 | ||||||
$ | 0.17 | — | $ | 0.20 | 2,182,500 | 7.45 | $ | 0.18 | 2,182,500 | $ | 0.18 | ||||||
$ | 0.21 | — | $ | 0.23 | 5,792,500 | 9.16 | $ | 0.21 | 5,792,500 | $ | 0.21 | ||||||
$ | 0.24 | — | $ | 0.56 | 1,340,000 | 8.98 | $ | 0.29 | 1,340,000 | $ | 0.29 | ||||||
11,636,694 | 8.39 | $ | 0.18 | 11,636,694 | $ | 0.18 |
Current
|
2011
|
2010
|
||||||
Federal
|
$ | — | $ | — | ||||
State
|
— | — | ||||||
Foreign
|
2,400 | 3,200 | ||||||
$ | 2,400 | $ | 3,200 | |||||
Deferred
|
||||||||
Federal
|
$ | — | $ | — | ||||
State
|
— | — | ||||||
Foreign
|
— | — | ||||||
— | — | |||||||
Total
|
$ | 2,400 | $ | 3,200 |
2011
|
2010
|
|||||||
Federal income tax (benefit) at statutory rate
|
$ | (596,200 | ) | $ | (287,400 | ) | ||
Foreign taxes
|
2,400 | 3,200 | ||||||
Temporary differences
|
292,700 | 104,500 | ||||||
Federal net operating loss not utilized
|
376,500 | 182,300 | ||||||
Warrant liability
|
(75,700 | ) | — | |||||
Meals and entertainment (50%)
|
4,400 | 3,800 | ||||||
Other items
|
(1,700 | ) | (3,200 | ) | ||||
Provision (benefit) for income tax
|
$ | 2,400 | $ | 3,200 |
2011
|
2010
|
|||||||
Net operating loss carryforwards
|
$ | 15,815,000 | $ | 15,251,000 | ||||
Tax credit carryforwards
|
1,059,000 | 1,059,000 | ||||||
Depreciation and amortization
|
64,000 | 92,000 | ||||||
Compensation expense – non-qualified stock options
|
441,000 | 329,000 | ||||||
Deferred revenue and maintenance service contracts
|
1,329,000 | 1,075,000 | ||||||
Reserves and other
|
89,000 | 90,000 | ||||||
Total deferred tax assets
|
18,797,000 | 17,896,000 | ||||||
Deferred tax liability – patent amortization
|
— | (16,000 | ) | |||||
Deferred tax liability – capitalized software
|
(121,000 | ) | (95,000 | ) | ||||
Net deferred tax asset
|
18,676,000 | 17,785,000 | ||||||
Valuation allowance
|
(18,676,000 | ) | (17,785,000 | ) | ||||
Net deferred tax asset
|
$ | — | $ | — |
Year Ending December 31,
|
||||
2012
|
$ | 200,300 | ||
2013
|
145,700 | |||
2014
|
144,200 | |||
2015
|
148,600 | |||
2016
|
153,000 | |||
2017
|
78,400 | |||
$ | 870,200 |
Cash Paid:
|
2010
|
2010
|
||||||
Income Taxes (1)
|
$ | 2,600 | $ | 3,100 | ||||
Interest
|
— | 2,200 |
Increase (Decrease)
|
||||||||||||||||
2011
|
2010
|
Dollars
|
Percentage
|
|||||||||||||
Software
|
$ | 6,584,400 | $ | 6,641,500 | $ | (57,100 | ) | (0.9 | ) % | |||||||
Intellectual Property
|
— | 875,000 | (875,000 | ) | (100.0 | ) | ||||||||||
Consolidated Total
|
$ | 6,584,400 | $ | 7,516,500 | $ | (932,100 | ) | (12.4 | ) |
2011
|
2010
|
|||||||
Software
|
$ | (1,183,700 | ) | $ | (341,700 | ) | ||
Intellectual Property
|
(801,000 | ) | (493,900 | ) | ||||
Consolidated Total
|
$ | (1,984,700 | ) | $ | (835,600 | ) |
Cost Basis
|
Accumulated Depreciation /Amortization
|
Net
|
||||||||||
Software
|
$ | 1,824,000 | $ | (1,476,300 | ) | $ | 347,700 | |||||
Intellectual Property
|
2,839,000 | (2,839,000 | ) | — | ||||||||
Unallocated
|
39,400 | — | 39,400 | |||||||||
$ | 4,702,400 | $ | (4,315,300 | ) | $ | 387,100 |
·
|
On the Release Effective Date, Mr. Dilworth’s outstanding options will become fully vested and exercisable and will remain exercisable until the earlier of (i) the expiration dates of each of such options or (ii) the date that is 30 months after the Release Effective Date. The number of shares of common stock issuable upon exercise of such outstanding options is 2,000,000.
|
·
|
On the Release Effective Date, Mr. Dilworth will be granted options to purchase 500,000 shares of common stock at an exercise price of the greater of (i) $0.20 per share or (ii) the per-share fair market value of the common stock on the Release Effective Date. Such options will have a term of 30 months from the date of grant and will vest and become exercisable at a rate of 62,500 shares per quarter commencing on July 1, 2012.
|
·
|
From May 2012 through April 2013, Mr. Dilworth will be paid $27,268 per month. From May 2013 through April 2014, Mr. Dilworth will be paid $13,634 per month.
|
·
|
For a period of 18 months, the Company will pay the premium costs to continue medical coverage for Mr. Dilworth and his spouse under the Employment Retirement income Security Act of 1974 (COBRA).
|
·
|
Within five business days after the Release Effective Date, the Company will pay Mr. Dilworth $15,000 as reimbursement for a portion of his legal fees in connection with negotiation of the separation agreement and the release.
|
·
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; and
|
·
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
·
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material impact on the financial statements.
|
Summary Compensation Table
|
|||||||||||||||||
Name and Principal Position
|
Year
|
Salary
|
Option Awards (1)
|
All Other Compensation
|
Total
|
||||||||||||
Robert Dilworth,
|
2011
|
$ | 325,774 | $ | 58,753 | $ | 63,719 | (2) | $ | 448,246 | |||||||
Chief Executive Officer *
|
2010
|
321,717 | — | 57,876 | (2) | 379,593 | |||||||||||
Eldad Eilam, (3)
|
2011
|
121,154 | 280,000 | 26,966 | (4) | 428,120 | |||||||||||
Inteirm Chief Executive Officer and President
|
|||||||||||||||||
William Swain,
|
2011
|
166,112 | 31,843 | 20,488 | (5) | 218,443 | |||||||||||
Chief Financial Officer
|
2010
|
170,489 | — | 19,866 | (5) | 190,355 |
|
*
|
Mr. Dilworth resigned as Chief Executive Officer on April 12, 2012.
|
(1)
|
Other than amounts attributable to the grant of options pursuant to our 2011 tender offer, the amounts listed in the Option Awards column reflect the aggregate grant date fair value of stock options granted to the named executive officers during the respective year calculated in accordance with FASB ASC Topic 718. The amounts listed in the Option Awards column attributable to the grant of options in our 2011 tender offer reflect the incremental fair value of the stock options granted to the named executive officers pursuant to the 2011 tender offer computed as of the reporting date in accordance with FASB ASC Topic 718. The valuation assumptions used in calculating these amounts for the years indicated are set forth in Note 1 to our consolidated financial statements in this Form 10-K. The number of options granted for the years indicated is set forth below.
|
·
|
Mr. Dilworth options to purchase 187,500 shares of common stock at an exercise price of $0.18 per share.
|
·
|
Mr. Swain options to purchase 112,500 shares of common stock at an exercise price of $0.18 per share.
|
·
|
Mr. Dilworth exchanged options to purchase 725,000 shares of common stock at exercise prices between $0.25 and $0.43 per share for new options to purchase 725,000 shares of common stock at an exercise price of $0.202 per share.
|
·
|
Mr. Swain exchanged options to purchase 615,000 shares of common stock at exercise prices between $0.34 and $0.43 per share for new options to purchase 615,000 shares of common stock at an exercise price of $0.202 per share.
|
(2)
|
Represents group life insurance premiums ($6,181 in 2011 and $3,810 in 2010); our payment of commuting expenses ($36,475 in 2011 and $27,422 in 2010); our payment of travel expenses of Mr. Dilworth’s wife ($15,036 in 2011 and $12,775 in 2010); the incremental cost of a house located near our offices in New Hampshire, which house was rented by Mr. Dilworth ($4,105 in 2011 and $12,383 in 2010); and miscellaneous personal benefits ($1,922 in 2011 and $1,486 in 2010). The incremental cost represents for each of 2011 and 2010 the aggregate cost of maintaining the house in New Hampshire (rent, utilities, etc.) less the estimated cost we would have incurred had Mr. Dilworth stayed in a hotel near our offices during the days he was in New Hampshire.
|
(3)
|
Mr. Eilam has served as our President since January 2012 and as our Acting Chief Executive Officer between March 2012 and April 2012 when he was appinted Interim Chief Executive Officer. Mr. Eilam served as our Chief Operating Officer from January 2012 to April 2012 and as our Chief TEchnology Officer from July 2011 to Jnaury 2012. Prior to being appointed Chief Technology Officer, Mr. Eilam was not an employee of our company but provided services to our company as an independent consultant for which services he was paid $157,672 and $65,610 during 2011 and 2010, respectively.
|
(4)
|
Represents group life insurance premiums ($111) and our payment of Mr. Eilam’s relocation expenses ($26,855) from Israel to California.
|
(5)
|
Represents group life insurance premiums ($6,238 in 2011 and $6,428 in 2010); our contribution to the 401(k) Plan ($2,000 in each of 2011 and 2010); and our payment of commuting expenses ($12,250 in 2011 and $11,438 in 2010).
|
Outstanding Equity Awards At December 31, 2011
|
|||||||||
Option Awards
|
|||||||||
Name
|
Number of Securities Underlying Unexercised Options Exercisable
|
Option Exercise Price
|
Option Expiration Date
|
||||||
Robert Dilworth,
|
40,000 | (1) | $ | 0.1800 |
05/05/13
|
||||
Chief Executive Officer *
|
125,000 | (1) | $ | 0.2100 |
01/26/16
|
||||
125,000 | (1) | $ | 0.1650 |
01/15/17
|
|||||
125,000 | (1) | $ | 0.0500 |
01/02/19
|
|||||
187,500 | (1) | $ | 0.1800 |
05/02/21
|
|||||
725,000 | (2) | $ | 0.2020 |
10/12/21
|
Eldad Eilam,
Interim Chief Executive Officer and President
|
1,000,000 | (1) | $ | 0.2800 |
09/08/21
|
||||
William Swain,
|
40,000 | (1) | $ | 0.1800 |
05/05/13
|
||||
Chief Financial Officer
|
75,000 | (1) | $ | 0.2100 |
01/26/16
|
||||
75,000 | (1) | $ | 0.1650 |
01/15/17
|
|||||
75,000 | (1) | $ | 0.0500 |
01/02/19
|
|||||
112,500 | (1) | $ | 0.1800 |
05/02/21
|
|||||
615,000 | (2) | $ | 0.2020 |
10/12/21
|
|
*
|
Mr. Dilworth resigned as Chief Executive Officer on April 12, 2012.
|
(1)
|
All such options were immediately exercisable upon grant and vest in thirty-three equal monthly installments, beginning in the fourth month after their respective grant date. For Mr. Dilworth, the options identified in this table were, or will be, fully vested on the following dates: May 5, 2006, January 26, 2009, January 15, 2010, January 2, 2012 and May 2, 2014, respectively. For Mr. Swain, the options identified in this table were, or will be, fully vested on the following dates: May 5, 2006, January 26, 2009, January 15, 2010, January 2, 2012, and May 2, 2014, respectively. For Mr. Eilam, the options identified in this table will be fully vested on September 8, 2014. If Messrs. Dilworth’s, Swain’s or Eilam’s employment ceases prior to full vesting of the options, we have the right to repurchase any shares issued upon exercise of options not vested.
|
(2)
|
Mr. Dilworth and Mr. Swain voluntarily surrendered, on October 12, 2011, 725,000 and 615,000 out-of-the-money options, respectively, in conjunction with participation in a voluntary stock option exchange program. New option grants equal to the number of options cancelled were made on October 12, 2011. All such new option grants will vest in twenty-four equal monthly installments beginning in the first month after grant and will be fully vested on October 12, 2013.
|
Director Compensation
|
|||||||||||||||||
Name
|
Year
|
Fees Earned or Paid in Cash
|
Option Awards (1)
|
All Other Compensation
|
Total
|
||||||||||||
Steven Ledger
|
2011
|
$ | 7,500 | $ | 80,000 | $ | — | $ | 87,500 | ||||||||
John Cronin
|
2011
|
8,000 | 80,000 | — | 88,000 | ||||||||||||
August Klein
|
2011
|
24,500 | 51,011 | — | 75,511 | ||||||||||||
Gordon Watson
|
2011
|
24,500 | 50,517 | — | 75,017 |
(1)
|
Other than amounts attributable to the grant of options pursuant to our 2011 tender offer, the amounts listed in the Option Awards column reflect the aggregate grant date fair value of stock options granted to the named director during 2011 calculated in accordance with FASB ASC Topic 718. The amounts listed in the Option Awards column attributable to the grant of options in our 2011 tender offer reflect the incremental fair value of the stock options granted to the named directors pursuant to the 2011 tender offer computed as of the reporting date in accordance with FASB ASC Topic 718. The valuation assumptions used in calculating these amounts are set forth in Note 1 to our consolidated financial statements in this Form 10-K. The number of options granted for each director is set forth below.
|
·
|
On May 2, 2011, we granted to each of Messrs. Klein and Watson options to purchase 112,500 shares of common stock at an exercise price of $0.18 per share.
|
·
|
On August 9, 2011, we granted to each of Messrs. Ledger and Cronin options to purchase 400,000 shares of common stock at an exercise price of $0.15 per share.
|
·
|
On October 5, 2011, we granted to each of Messrs. Klein and Watson options to purchase 100,000 shares of common stock at an exercise price of $0.23 per share.
|
·
|
Mr. Klein exchanged options to purchase 297,500 shares of common stock at exercise prices between $0.38 and $0.56 per share for new options to purchase 297,500 shares of common stock at an exercise price of $0.202 per share.
|
·
|
Mr. Watson exchanged options to purchase 350,000 shares of common stock at exercise prices between $0.21 and $0.56 per share for new options to purchase 350,000 shares of common stock at an exercise price of $0.202 per share.
|
Name and Address of Beneficial Owner
|
Number of Shares of Common Stock Beneficially Owned (1)(2)
|
Percent of Class (%)
|
Steven Ledger (3)
|
2,275,000
|
2.7
|
Robert Dilworth (4)
|
2,263,820
|
2.7
|
Eldad Eilam (5)
|
1,600,000
|
1.9
|
William Swain (6)
|
1,149,900
|
1.4
|
August P. Klein (7)
|
1,025,760
|
1.2
|
Gordon Watson (8)
|
934,800
|
1.1
|
John Cronin (9)
|
400,000
|
0.5
|
AIGH Investment Partners, LLC (10)
6006 Berkeley Avenue
Baltimore, MD 21209
|
6,080,278
|
7.4
|
Austin Marxe and David Greenhouse
(11)
527 Madison Avenue, Suite 2600
New York, NY 10022
|
8,250,000
|
9.7
|
David R. Wilmerding, III (12)
2 Hamill Road, Suite 272
Baltimore, MD 21117
|
7,500,000
|
8.9
|
Jon C. Baker Family LLC (13)
101 St. Johns Road
Baltimore, MD 21210
|
7,500,000
|
8.9
|
All current executive officers and directors as a group (7 persons)(14)
|
7,385,460
|
8.6
|
(1)
|
As used in this table, beneficial ownership means the sole or shared power to vote, or direct the voting of, a security, or the sole or shared power to invest or dispose, or direct the investment or disposition, of a security. Except as otherwise indicated, based on information provided by the named individuals, all persons named herein have sole voting power and investment power with respect to their respective shares of our common stock, except to the extent that authority is shared by spouses under applicable law, and record and beneficial ownership with respect to their respective shares of our common stock. With respect to each stockholder, any shares issuable upon exercise of options held by such stockholder that are currently exercisable or will become exercisable within 60 days of April 13, 2012 are deemed outstanding for computing the percentage of the person holding such options, but are not deemed outstanding for computing the percentage of any other person.
|
(2)
|
Percentage ownership of our common stock is based on 81,943,015 shares of common stock outstanding as of April 13, 2012.
|
(3)
|
Includes 400,000 shares of common stock issuable upon the exercise of outstanding options. Also includes 1,250,000 shares of common stock and 625,000 shares of common stock issuable upon the exercise of outstanding warrants held by Tamalpais Master Fund Ltd. Mr. Ledger has sole voting and dispositive power with respect to the shares held by Tamalpais Master Fund Ltd.
|
(4)
|
Includes 2,000,000 shares of common stock issuable upon the exercise of outstanding options.
|
(5)
|
Includes 1,000,000 shares of common stock issuable upon the exercise of outstanding options.
|
(6)
|
Includes 992,500 shares of common stock issuable upon the exercise of outstanding options.
|
(7)
|
Includes 775,000 shares of common stock issuable upon the exercise of outstanding options.
|
(8)
|
Includes 792,500 shares of common stock issuable upon the exercise of outstanding options.
|
(9)
|
Includes 400,000 shares of common stock issuable upon the exercise of outstanding options.
|
(10)
|
Based on information contained in a Schedule 13G/A filed by AIGH Investment Partners, LLC on March 3, 2008, and information known to us, AIGH has shared voting and dispositive power with respect to 6,080,278 shares of common stock. Orin Hirschman is the managing member of AIGH Investment Partners, LLC.
|
(11)
|
Based on information contained in a Schedule 13G filed by Austin Marxe and David Greenhouse on February 13, 2012, such stockholders have shared voting and dispositive power over shares of common stock held by Special Situations Technology Fund, L.P. and Special Situations Technology Fund II, L.P. Includes 2,750,000 shares of common stock issuable upon the exercise of outstanding warrants.
|
(12)
|
Based on information contained in a Schedule 13G filed by David R. Wilmerding, III on January 13, 2012, Mr. Wilmerding has sole voting and dispositive power with respect to these shares. Includes 2,500,000 shares of common stock issuable upon the exercise of outstanding warrants.
|
(13)
|
Based on information contained in a Schedule 13G filed by Jon C. Baker on January 13, 2012, Mr. Baker has sole voting and dispositive power with respect to these shares. Includes 2,500,000 shares of common stock issuable upon the exercise of outstanding warrants.
|
(14)
|
Includes 4,360,000 shares of common stock issuable upon the exercise of outstanding options and 625,000 shares of common stock issuable upon the exercise of outstanding warrants.
|
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights
|
Number of Securities Remaining Available for Future Issuance
|
|||||||||
Equity compensation plans approved by security holders:
|
||||||||||||
1998 Stock Option/Stock Issuance Plan
|
432,500 | $ | 0.16 | — | ||||||||
2005 Equity Incentive Plan
|
1,705,000 | $ | 0.19 | 1,115,000 | ||||||||
Equity compensation plans not approved by security holders:
|
||||||||||||
2008 Equity Incentive Plan (1)
|
9,469,194 | $ | 0.18 | 4,705,505 | ||||||||
Supplemental Stock Option Plan (2)
|
30,000 | $ | 0.39 | — | ||||||||
Total - all plans
|
11,636,694 | $ | 0.18 | 5,820,505 |
(1)
|
On November 19, 2008 our board of directors approved the 2008 Equity Incentive Plan (the “08 Plan”) pursuant to which options or restricted stock may be granted to officers and other employees, non-employee directors and independent consultants and advisors who render services to the Company. The 08 Plan was originally authorized to issue options or restricted stock for up to 3,000,000 shares of common stock. During the quarter ended September 30, 2012, our board of directors authorized the issuance of options and restricted stock for up to an additional 11,438,333 shares of common stock for an aggregate authorization of 14,438,333 shares of common stock.
Under the 08 Plan the exercise price of options granted is to be no less than 100% of the fair market value of the Company’s common stock on the date the option is granted. The purchase price of performance-vested stock issued under the 08 Plan shall also not be less than 100% of the fair market value of the Company’s common stock on the date the performance-vested stock is granted.
|
In the case of a restricted stock award, the entire number of shares subject to such award would be issued at the time of the grant and subject to vesting provisions based on time or performance conditions specified by our board of directors or an authorized committee of the board. For awards based on time, should the grantee’s service to us end before full vesting occurred, all unvested shares would be forfeited and returned to us. In the case of awards granted with vesting provisions based on specific performance conditions, if those conditions are not met, then all shares would be forfeited and returned to us. Until forfeited, all shares issued under a performance vested stock award would be considered outstanding for dividend, voting and other purposes.
|
|
All options granted under the 08 Plan are immediately exercisable by the optionee; however, there is a vesting period for the options. The options vest, ratably, over a 33-month period, however no options vest until after three months from the date of the option grant. The exercise price is immediately due upon exercise of the option. Under the terms of the 08 Plan, the exercise price of all options issued under the 08 Plan would be equal to the fair market value of our common stock on the date of the grant. Shares issued upon exercise of options are subject to our repurchase, which right lapses as the shares vest. The 08 Plan will terminate no later than November 19, 2018. As of December 31, 2011, options to purchase 9,469,194 shares were outstanding under the 08 Plan, no restricted shares had been awarded, options to purchase 263,634 shares had been exercised, and 4,705,505 shares remained available for issuance.
|
|
(2)
|
The supplemental stock option plan was approved by our board of directors in May 2000 and expired on April 30, 2010; thus, no options can be granted from this plan. Options were restricted to employees who were neither officers nor directors at the grant date. As of December 31, 2011, options to purchase 30,000 shares of common stock were outstanding.
|
·
|
On the Release Effective Date, Mr. Dilworth’s outstanding options will become fully vested and exercisable and will remain exercisable until the earlier of (i) the expiration dates of each of such options or (ii) the date that is 30 months after the Release Effective Date. The number of shares of common stock issuable upon exercise of such outstanding options is 2,000,000.
|
·
|
On the Release Effective Date, Mr. Dilworth will be granted options to purchase 500,000 shares of common stock at an exercise price of the greater of (i) $0.20 per share or (ii) the per-share fair market value of the common stock on the Release Effective Date. Such options will have a term of 30 months from the date of grant and will vest and become exercisable at a rate of 62,500 shares per quarter commencing on July 1, 2012.
|
·
|
From May 2012 through April 2013, Mr. Dilworth will be paid $27,268 per month. From May 2013 through April 2014, Mr. Dilworth will be paid $13,634 per month.
|
·
|
For a period of 18 months, we will pay the premium costs to continue medical coverage for Mr. Dilworth and his spouse under the Employment Retirement income Security Act of 1974 (COBRA).
|
·
|
Within five business days after the Release Effective Date, we will pay Mr. Dilworth $15,000 as reimbursement for a portion of his legal fees in connection with negotiation of the separation agreement and the release.
|
Category
|
2011
|
2010
|
||||||
Audit fees
|
$ | 160,400 | $ | 142,600 | ||||
Audit – related fees
|
— | — | ||||||
Tax fees
|
15,000 | 14,000 | ||||||
Other fees
|
— | — | ||||||
Totals
|
$ | 175,400 | $ | 156,600 |
(1)
|
Filed on April 2, 2007 as an exhibit to Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 2006, and incorporated herein by reference
|
(2)
|
Filed on March 31, 2010 as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009, and incorporated herein by reference
|
(3)
|
Filed on September 19, 1996 as an exhibit to the Registrant’s Registration Statement on Form S-1 (File No. 333-11165), and incorporated herein by reference
|
(4)
|
Filed on September 8, 2011 as an exhibit to Registrant’s Current Report on Form 8-K and incorporated herein by reference
|
(5)
|
Filed on October 13, 2011 as an exhibit to Registrant’s Current Report on Form 8-K and incorporated herein by reference
|
(6)
|
Filed on March 30, 2004 as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference
|
(7)
|
Filed on June 23, 2000 as an exhibit to the Registrant’s Registration Statement on Form S-8 (File No. 333-40174), and incorporated herein by reference
|
(8)
|
Filed on November 25, 2005 as an exhibit to the Registrant’s definitive Proxy Statement for the Registrant’s 2005 Annual Meeting, and incorporated herein by reference
|
(9) | Filed on September 29, 2011 as an exhibit to the Registrant's Registration Statement on Form S-8 (File No. 333-177069) and incorporated herein by reference |
(10)
|
Filed on February 7, 2007 as an exhibit to Post-Effective Amendment No. 4 to the Registrant’s Registration Statement to Form S-1 on Form SB-2 (File No. 333-124791), and incorporated herein by reference
|
(11)
|
Filed on November 14, 2011 as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011, and incorporated herein by reference.
|
(12)
|
Filed on November 23, 2011 as an exhibit to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1, and incorporated herein by reference
|
(13)
|
Filed on February 14, 2012 as an exhibit to the Registrant’s Current Report on Form 8-K and incorporated herein by reference
|
(14)
|
Filed on March 31, 2009 as an exhibit to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008, and incorporated herein by reference
|
GraphOn Corporation
|
|||
April 16, 2012
|
By:
|
/s/ Eldad Eilam | |
Eldad Eilam
|
|||
Interim Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/ Steven Ledger
|
Chairman of the Board
|
April 16, 2012
|
||
Steven Ledger
|
||||
/s/ Eldad Eilam
|
Interim Chief Executive Officer, President and Director
|
April 16, 2012
|
||
Eldad Eilam
|
(Principal Executive Officer) |
/s/ William Swain
|
Chief Financial Officer and Secretary
|
April 16, 2012
|
||
William Swain
|
(Principal Financial Officer and Principal Accounting Officer) | |||
/s/ John Cronin
|
Director
|
April 16, 2012
|
||
John Cronin
|
||||
/s/ August Klein | Director | April 16, 2012 | ||
August Klein | ||||
/s/ Gordon Watson
|
Director
|
April 16, 2012
|
||
Gordon Watson
|
1.10Address of Tenant:
|
Before the Commencement Date
:
5400 Soquel Avenue, Suite A2
Santa Cruz, CA 95062
From and after the Commencement Date
: the Premises.
|
1.11Address of Landlord:
|
CA-Pruneyard Limited Partnership
c/o Equity Office
1875 S. Bascom Avenue, Suite 2440
Campbell, California 95008
Attention: Pruneyard Property Manager
with copies to
:
Equity Office
2655 Campus Drive, Suite 100
San Mateo, CA 94403
Attn: Managing Counsel
and
Equity Office
Two North Riverside Plaza
Suite 2100
Chicago, IL 60606
Attn: Lease Administration
|
1.12 Broker(s):
|
Grubb & Ellis Company, a Delaware corporation (“
Tenant’s Broker
”), representing Tenant, and Cassidy Turley Northern California, Inc., a California corporation (“
Landlord’s Broker
”), representing Landlord.
|
1.13 Building HVAC Hours and Holidays:
|
“
Building HVAC Hours
” mean 8:00 a.m. to 6:00
p.m.
,
Monday through Friday, excluding the day of observation of New Year’s Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and, at Landlord’s discretion, any other locally or nationally recognized holiday that is observed by other buildings comparable to and in the vicinity of the Building (collectively, “
Holidays
”).
|
1.14 “
Transfer Radius
”:
|
None.
|
1.15 “
Tenant Improvements
”:
|
Defined in
Exhibit B
, if any.
|
1.16 “
Guarantor
”:
|
As of the date hereof, there is no Guarantor.
|
LANDLORD
:
CA-PRUNEYARD LIMITED PARTNERSHIP, a Delaware limited partnership
By: EOP Owner GP L.L.C.,
a Delaware limited liability company,
its general partner
By:
/s/ Todd Hedrick
Name:
Todd Hedrick
Title:
Senior Vice President
|
|
TENANT
:
GRAPHON CORPORATION, a Delaware corporation
By:
/s/ William Swain
Name:
William Swain
Title:
Chief Financial Officer
|
2
|
PLANS.
|
3
|
CONSTRUCTION.
|
4
|
COMPLETION.
|
CARPENTRY
|
|
Provide backing as required at 5 each LCD televisions
|
|
FRAMING / DRYWALL
|
|
Furnish and install approximately 142 lf of metal stud and drywall partition under existing grid. Drywall to be taped and finished to Level IV finish. Furnish and install approximately 1,278 sf R-13 unfaced batt insulation in wall cavities.
|
|
MILLWORK / CABINETRY
|
|
Furnish and install 14 lf of 24” x 34” base cabinets. Furnish and install 14 lf 12” x 36” upper cabinets. Furnish and install 14 lf of 25 1/2” countertop. All millwork to be finished in plastic laminate from available samples.
|
|
DOORS / FRAMES / HARDWRE
|
|
Furnish and install 6 each 3’ x 8’ 4" building standard door assemblies. 3 each to have 2’ x 8’ 4" integral sidelite frames. Provide 10’ x 8’ 4"clear aluminum frame to receive butt glazing at board room.
|
|
GLASS AND GLAZING
|
|
Furnish and install 3 each 1/4” x 2’ x 8’ 4" clear tempered glass in frames by others. Furnish and install 3/8” x 10’ x 8' 4" silicone filled butt joint glazing at board room.
|
|
ACOUSTICAL CEILINGS
|
|
Remove and store existing ceiling tiles as required for overhead rough-in. Reinstall ceiling tiles after rough-in completed. Replace any damaged ceiling tiles.
|
|
FLOOR FINISHES
|
|
Furnish and install approximately 412 sy of building standard Shaw carpet chosen from available samples. Furnish and install approximately 278 sf of Armstrong “Stonetex” VCT. Furnish and install approximately 650 lf of 4” Burke rubber base.
|
|
PAINT AND WALL COVERINGS
|
|
Prep and paint new gypsum board surfaces 1 coat primer and 2 coats finish paint.
|
|
FIRE EXTINGUISHERS
|
|
Furnish and install 2 each recessed fire extinguisher cabinets. Furnish and install 2 each fire extinguishers.
|
|
FIRE SPRINKLER
|
|
Add, and or relocate sprinkler heads and piping as required for new layout. All heads to be Tyco model Universal with 155* orifice standard response semi-recessed chrome with chrome 2 piece escutcheons and centered in ceiling tiles.
|
|
PLUMBING
|
|
Furnish and install 1 each new break room sink with single handle faucet. Provide water lines for refrigerator and coffee maker. Furnish and install all waste, vent and domestic water piping. Provide condensate piping for Server Room A/C.
|
|
HVAC
|
|
Modify existing ductwork for new layout. The returns in each conference room will include acoustically lined duct section. All other returns to be open to the plenum return system. Relocate existing thermostats as required. Furnish and install Comfort Star 2 Ton cooling only mini-split system. The fan coil will be wall mounted inside the room and the condenser will be mounted in the ceiling plenum. Furnish and install one each condensation pump located in the server room below the wall mount fan coil. Comfort air balance the entire suite.
|
ELECTRICAL
|
|
Relocate existing lights as required for new layout. Provide 4 new exit lights. Provide Title 24 compliant switching and motion sensors. Furnish and install 18 convenience duplex outlets. Furnish and install 11 ring and strings. Furnish and install 5 GFCI outlets at break room. Provide electrical connection to inst-hot water heater. Provide electrical connection to cubicles. Provide 6 dedicated 120 V 20A circuits at server room. Provide server room HVAC connection & Emon monitoring system. Provide 4 each poke-through floor box locations with coring. Provide 4 TV power/data outlets. Provide 4 additional A/V floor boxes with 1 1/4” conduit to 4 TV locations. Furnish and install 1 1/2” conduit from server room to back side of stairwell wall. Furnish and install 2 each dedicated outlets per revised plan. NOTE: We have added 2" conduit at 11 each ring & string locations per plan comment.
|
|
FIRE LIFE SAFETY
|
|
Furnish and install 11 each Analog Photo Smoke Sensors including flanged bases. Furnish and install 10 each Multi Candela Speaker/Strobes white. Provide end user training and one set of manuals .
|
|
_____________________, 20__
|
To:
|
_______________________
|
|
_______________________
|
|
_______________________
|
|
_______________________
|
|
1.
|
The Commencement Date is _____________ and the Expiration Date is _______________.
|
|
2.
|
The exact number of rentable square feet within the Premises is _________ square feet, subject to Section 2.1.1 of the Lease.
|
|
3.
|
Tenant’s Share, based upon the exact number of rentable square feet within the Premises, is ____________%, subject to Section 2.1.1 of the Lease.
|
“Landlord”:
_______________________________,
a ________________________
By:
Name:
Title:
|
|
Agreed and Accepted as of
, 200
.
“Tenant”:
_______________________________,
a ________________________
By:
Name:
Title:
|
1.
|
Asbestos Notification
. Tenant acknowledges that it has received the asbestos notification letter attached to this Lease as
Exhibit G
, disclosing the existence of asbestos in the Building. Tenant agrees to comply with the California “Connelly Act” and other applicable laws, including by providing copies of Landlord’s asbestos notification letter to all of Tenant’s “employees” and “owners”, as those terms are defined in the Connelly Act and other applicable laws.
|
2.
|
Early Entry
.
Tenant may enter the Premises upon the full and final execution and delivery of this Lease by Landlord and Tenant solely for the purpose of installing telecommunications, data cabling, equipment, furnishings and other personal property in the Premises. Other than the obligation to pay Base Rent and Tenant’s Share of any Expense Excess or Tax Excess, all of Tenant’s obligations hereunder shall apply during any period of such early entry. Notwithstanding the foregoing, Landlord may limit, suspend or terminate Tenant’s rights to enter the Premises pursuant to this Section if Landlord reasonably determines that such entry is endangering individuals working in the Premises or is delaying completion of the Tenant Improvement Work.
|
3.
|
Provisions Required Under Existing Security Agreement.
Notwithstanding any contrary provision of this Lease:
|
|
A.
|
Permitted Use.
No portion of the Premises shall be used for any of the following uses: any pornographic or obscene purposes, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling, materials, activities, or sexual conduct or any other use that, as of the time of the execution hereof, has or could reasonably be expected to have a material adverse effect on the Property or its use, operation or value.
|
|
B.
|
Subordination and Attornment.
This Lease shall be subject and subordinate to any Security Agreement (other than a ground lease) existing as of the date of mutual execution and delivery of this Lease (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, an “
Existing Security Agreement
”) or any loan document secured by any Existing Security Agreement (an “
Existing Loan Document
”). In the event of the enforcement by any Security Holder of any remedy under any Existing Security Agreement or Existing Loan Document, Tenant shall, at the option of the Security Holder or of any other person or entity succeeding to the interest of the Security Holder as a result of such enforcement, attorn to the Security Holder or to such person or entity and shall recognize the Security Holder or such successor in the interest as lessor under this Lease without change in the provisions thereof; provided, however, the Security Holder or such successor in interest shall not be liable for or bound by (i) any payment of an installment of rent or additional rent which may have been made more than thirty (30) days before the due date of such installment, (ii) any act or omission of or default by Landlord under this Lease (but the Security Holder, or such successor, shall be subject to the continuing obligations of Landlord to the extent arising from and after such succession to the extent of the Security Holder’s, or such successor’s, interest in the Property), (iii) any credits, claims, setoffs or defenses which Tenant may have against Landlord, or (iv) any obligation under this Lease to maintain a fitness facility at the Property. Tenant, upon the reasonable request by the Security Holder or such successor in interest, shall execute and deliver an instrument or instruments confirming such attornment. Notwithstanding the foregoing, in the event the Security Holder under any Existing Security Agreement or Existing Loan Document shall have entered into a separate subordination, attornment and non-disturbance agreement directly with Tenant governing Tenant’s obligation to attorn to the Security Holder or such successor in interest as lessor, the terms and provisions of such agreement shall supersede the provisions of this Subsection.
|
|
C.
|
Proceeds.
|
|
1.
|
As used herein, “
Proceeds
” means any compensation, awards, proceeds, damages, claims, insurance recoveries, causes or rights of action (whenever accrued) or payments which Landlord may receive or to which Landlord may become entitled with respect to the Property or any part thereof (other than payments received in connection with any liability or loss of rental value or business
|
|
2.
|
Nothing in this Lease shall be deemed to entitle Tenant to receive and retain Proceeds except those that may be specifically awarded to it in condemnation proceedings because of the Taking of its trade fixtures and its leasehold improvements which have not become part of the Property and such business loss as Tenant may specifically and separately establish. Nothing in the preceding sentence shall be deemed to expand any right Tenant may have under this Lease to receive or retain any Proceeds.
|
|
3.
|
Nothing in this Lease shall be deemed to prevent Proceeds from being held and disbursed by any Security Holder under any Existing Loan Documents in accordance with the terms of such Existing Loan Documents. However, if, in the event of any casualty or partial Taking, any obligation of Landlord under this Lease to restore the Premises or the Building is materially diminished by the operation of the preceding sentence, then Landlord, as soon as reasonably practicable after the occurrence of such casualty or partial Taking, shall provide written notice to Tenant describing such diminution with reasonably specificity, whereupon, unless Landlord has agreed in writing, in its sole and absolute discretion, to waive such diminution, Tenant, by written notice to Landlord delivered within 10 days after receipt of Landlord’s notice, shall have the right to terminate this Lease effective 10 days after the date of such termination notice.
|
|
4.1.
|
Grant of Option; Conditions
. Tenant shall have the right (the “
Extension Option
”) to extend the Term for one additional period of five (5) years commencing on the day following the Expiration Date
and ending on the 5
th
anniversary of the Expiration
Date (the “
Extension Term
”), if:
|
|
A.
|
Not less than nine (9) and not more than 12 full calendar months before the Expiration Date, Tenant delivers written notice to Landlord (the “
Extension Notice
”) electing to exercise the Extension Option and stating Tenant’s estimate of the Prevailing Market (defined in
Section 4.5
below) rate for the Extension Term;
|
|
B.
|
Tenant is not in default under this Lease beyond any applicable cure period when Tenant delivers the Extension Notice;
|
|
C.
|
No part of the Premises is sublet (other than to an Affiliate of Tenant) when Tenant delivers the Extension Notice; and
|
|
D.
|
This Lease has not been assigned (other than pursuant to a Permitted Transfer) before Tenant delivers the Extension Notice.
|
|
4.2.
|
Terms Applicable to Extension Term
.
|
|
A.
|
During the Extension Term, (a) the Base Rent rate per rentable square foot shall be equal to the Prevailing Market rate per rentable square foot; (b) Base Rent shall increase, if at all, in accordance with the increases assumed in the determination of Prevailing Market rate; and (c) Base Rent shall be payable in monthly installments in accordance with the terms and conditions of this Lease.
|
|
B.
|
During the Extension Term Tenant shall pay Tenant’s Share of Expenses and Taxes for the Premises in accordance with this Lease.
|
|
4.3.
|
Procedure for Determining Prevailing Market
.
|
|
A.
|
Initial Procedure
. Within 30 days after receiving the Extension Notice, Landlord shall give Tenant either (i) written notice (“
Landlord’s Binding
Notice
”) accepting Tenant’s estimate of the Prevailing Market rate for the Extension Term stated in the Extension Notice, or (ii) written notice (“
Landlord’s Rejection Notice
”) rejecting such estimate and stating Landlord’s estimate of the Prevailing Market rate for the Extension Term. If Landlord gives Tenant a Landlord’s Rejection Notice, Tenant, within 15 days thereafter, shall give Landlord either
|
|
B.
|
Dispute Resolution Procedure
.
|
|
1.
|
If, within 30 days after delivery of a Tenant’s Rejection Notice, the parties fail to agree in writing upon the Prevailing Market rate, Landlord and Tenant, within five (5) days thereafter, shall each simultaneously submit to the other, in a sealed envelope, its good faith estimate of the Prevailing Market rate for the Extension Term (collectively, the “
Estimates
”). Within seven (7) days after the exchange of Estimates, Landlord and Tenant shall each select an appraiser to determine which of the two Estimates most closely reflects the Prevailing Market rate for the Extension Term. Each appraiser so selected shall be certified as an MAI appraiser or as an ASA appraiser and shall have had at least five (5) years experience within the previous 10 years as a real estate appraiser working in Campbell or San Jose, California, with working knowledge of current rental rates and leasing practices relating to buildings similar to the Building. For purposes hereof, an “
MAI
” appraiser means an individual who holds an MAI designation conferred by, and is an independent member of, the American Institute of Real Estate Appraisers (or its successor organization, or in the event there is no successor organization, the organization and designation most similar), and an “
ASA
” appraiser means an individual who holds the Senior Member designation conferred by, and is an independent member of, the American Society of Appraisers (or its successor organization, or, in the event there is no successor organization, the organization and designation most similar).
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|
2.
|
If each party selects an appraiser in accordance with
Section 4.3.B.1
above, the parties shall cause their respective appraisers to work together in good faith to agree upon which of the two Estimates most closely reflects the Prevailing Market rate for the Extension Term. The Estimate, if any, so agreed upon by such appraisers shall be final and binding on both parties as the Prevailing Market rate for the Extension Term and may be entered in a court of competent jurisdiction. If the appraisers fail to reach such agreement within 20 days after their selection, then, within 10 days after the expiration of such 20-day period, the parties shall instruct the appraisers to select a third appraiser meeting the above criteria (and if the appraisers fail to agree upon such third appraiser within 10 days after being so instructed, either party may cause a court of competent jurisdiction to select such third appraiser). Promptly upon selection of such third appraiser, the parties shall instruct such appraiser (or, if only one of the parties has selected an appraiser within the 7-day period described above, then promptly after the expiration of such 7-day period the parties shall instruct such appraiser) to determine, as soon as practicable but in any case within 14 days after his selection, which of the two Estimates most closely reflects the Prevailing Market rate. Such determination by such appraiser (the “
Final Appraiser
”) shall be final and binding on both parties as the Prevailing Market rate for the Extension Term and may be entered in a court of competent jurisdiction. If the Final Appraiser believes that expert advice would materially assist him, he may retain one or more qualified persons to provide such expert advice. The parties shall share equally in the costs of the Final Appraiser and of any experts retained by the Final Appraiser. Any fees of any other appraiser, counsel or expert engaged by Landlord or Tenant shall be borne by the party retaining such appraiser, counsel or expert.
|
|
C.
|
If the Prevailing Market rate has not been determined by the commencement date of the Extension Term, Tenant shall pay Base Rent for the Extension Term upon
|
|
4.4.
|
Extension Amendment
.
If Tenant is entitled to and properly exercises its Extension Option, and if the Prevailing Market rate for the Extension Term is determined in accordance with
Section 4.3
above, Landlord, within a reasonable time thereafter, shall prepare and deliver to Tenant an amendment (the “
Extension Amendment
”) reflecting changes in the Base Rent, the Term, the Expiration Date, and other appropriate terms, and Tenant shall execute and return the Extension Amendment to Landlord within 15 business days after receiving it. Notwithstanding the foregoing, upon determination of the Prevailing Market rate for the Extension Term in accordance with
Section 4.3
above, an otherwise valid exercise of the Extension Option shall be fully effective whether or not the Extension Amendment is executed.
|
|
4.5.
|
Definition of Prevailing Market
.
For purposes of this Extension Option, “
Prevailing Market
” shall mean the arms-length, fair-market, annual rental rate per rentable square foot under extension and renewal leases and amendments entered into on or about the date on which the Prevailing Market is being determined hereunder for space comparable to the Premises in the Building and office buildings comparable to the Building in the Campbell, California area. The determination of Prevailing Market shall take into account any material economic differences between the terms of this Lease and any comparison lease or amendment, such as rent abatements, construction costs and other concessions, and the manner, if any, in which the landlord under any such lease is reimbursed for operating expenses and taxes. The determination of Prevailing Market shall also take into consideration any reasonably anticipated changes in the Prevailing Market rate from the time such Prevailing Market rate is being determined and the time such Prevailing Market rate will become effective under this Lease.
|
1.
|
SERVICES AND COMPENSATION
|
2.
|
CONFIDENTIALITY
|
3.
|
OWNERSHIP
|
4.
|
CONSULTANT OBLIGATIONS
|
5.
|
TERM AND TERMINATION
|
6.
|
ASSIGNMENT
|
7.
|
INDEPENDENT CONTRACTOR
|
10.
|
GOVERNING LAW
|
11.
|
ENTIRE AGREEMENT
|
12.
|
ATTORNEY’S FEES
|
13.
|
SEVERABILITY
|
GraphOn Corporation
|
Steven Ledger
|
||||||
Tamalpais Partners LLC
|
|||||||
By:
|
/s/ Eldad Eilam *
|
By:
|
/s/ Steven A. Ledger
|
||||
Name:
|
Eldad Eilam
|
Name:
|
Steven A. Ledger
|
||||
Title:
|
Acting Chief Executive Officer
|
Title:
|
Managing Partner
|
||||
Address:
|
Tamalpais Partners LLC
|
||||||
* Signed on April 4, 2012 to be effective as of February 1, 2012
|
24 Tamalpais Avenue
|
||||||
Mill Valley, CA 94941
|
1.
|
I have reviewed this annual report on Form 10-K of GraphOn Corporation (“registrant”);
|
||
2.
|
Based on my knowledge, this 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 report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this 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 report;
|
||
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|||
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
|
|||
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|||
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
||
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this annual report on Form 10-K of GraphOn Corporation (“registrant”);
|
||
2.
|
Based on my knowledge, this 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 report;
|
||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this 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 report;
|
||
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
||
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|||
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
|
|||
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
||||
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|||
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
||||
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|