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EX-32.1 - PIKSEL, INC. | v183012_ex32-1.htm |
EX-31.2 - PIKSEL, INC. | v183012_ex31-2.htm |
EX-31.1 - PIKSEL, INC. | v183012_ex31-1.htm |
EX-32.2 - PIKSEL, INC. | v183012_ex32-2.htm |
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
AMENDMENT NO. 1 TO FORM 10-K
ON
FORM 10-K/A
(Mark
One)
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R
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ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the fiscal year ended December
31, 2009
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OR
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¨
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Commission file number:
001-34437
KIT digital, Inc.
(Exact Name of Registrant as Specified
in its Charter)
Delaware
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11-3447894
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(State or Other Jurisdiction
of
Incorporation or
Organization)
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(I.R.S.
Employer
Identification
No.)
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205
Hudson Street, Suite 802
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10013
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New
York, New York
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(Zip
code)
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(Address of principal executive
offices)
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Registrant’s
telephone number, including area code: (212) 661-4111
Securities registered pursuant to
Section 12(b) of the Act:
Title of each
Class
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Name of each exchange on which
registered
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Common Stock, par value $0.0001
per share
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The Nasdaq Global
Market
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Securities registered pursuant to
Section 12(g) of the Act: None
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ¨ No R
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 ¨ No R
Indicate by 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 R No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes ¨
No ¨ (not required)
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of the registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer ¨
|
Accelerated filer o
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Non-accelerated
filer ¨
(Do not check if a smaller
reporting company)
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Smaller reporting
company R
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Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ¨ No R
The aggregate market value of the common
stock held by non-affiliates of the registrant was $16,911,000 as of June 30,
2009.
The number of shares outstanding of the
registrant’s common stock as of April 29, 2010 was 21,948,696
shares.
KIT digital, Inc.
AMENDMENT NO. 1 TO ANNUAL REPORT ON FORM
10-K
FOR THE YEAR ENDED DECEMBER 31,
2009
ON FORM 10-K/A
TABLE OF CONTENTS
Page
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PART I
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Explanatory
Note
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iii
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Item
1.
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Business
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N/A
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Item
1A.
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Risk
Factors
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N/A
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Item
1B.
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Unresolved
Staff Comments
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N/A
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Item
2.
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Properties
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N/A
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Item
3.
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Legal
Proceedings
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N/A
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Item
4.
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Reserved
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N/A
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PART II
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|||
Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
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N/A
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Item
6.
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Selected
Financial Data
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N/A
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Item
7.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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N/A
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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N/A
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Item
8.
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Financial
Statements and Supplementary Data
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N/A
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Item
9.
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Changes
in and Disagreements With Accountants on Accounting and Financial
Disclosure
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N/A
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Item
9A(T).
|
Controls
and Procedures
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N/A
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Item
9B.
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Other
Information
|
N/A
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PART III
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|||
Item
10.
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Directors,
Executive officers and Corporate Governance
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1
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Item
11.
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Executive
Compensation
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7
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
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13
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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15
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Item
14.
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Principal
Accountant Fees and Services
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15
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PART IV
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|||
Item
15.
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Exhibits
and Financial Statement Schedules
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N/A
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SPECIAL NOTE REGARDING FORWARD-LOOKING
INFORMATION
This report includes and incorporates
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. We intend such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the United States
Private Securities Litigation Reform Act of 1995. All statements, other than
statements of historical facts, included or incorporated in this report
regarding our strategy, future operations, financial position, future revenues,
projected costs, prospects, plans and objectives of management are
forward-looking statements. The words “anticipates,” “believes,” “estimates,”
“expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. We cannot
guarantee that we actually will achieve the plans, intentions or expectations
disclosed in our forward-looking statements and you should not place undue
reliance on our forward-looking statements. There are a number of important
factors that could cause our actual results to differ materially from those
indicated by these forward-looking statements. These important factors include
the factors that we identify in the documents we incorporate by reference in
this report, as well as other information we include or incorporate by reference
in this report. See “Risk Factors” in our Annual Report on Form 10-K
for the year ended December 31, 2009. You should read these factors and
other cautionary statements made in this report, and in the documents we
incorporate by reference as being applicable to all related forward-looking
statements wherever they appear in this report, and in the documents
incorporated by reference. Except to the extent required by U.S.
federal securities laws, we do not assume any obligation to update any
forward-looking statements made by us.
ii
EXPLANATORY NOTE
This amendment to our Annual Report on
Form 10-K for the year ended December 31, 2009 is being filed to add Items 10
through 14 of Part III of the Annual Report on Form 10-K, which were omitted in
reliance on General Instruction G(3) thereto.
iii
PART III
Item 10. Directors, Executive
Officers and Corporate Governance.
Directors
and Executive Officers
The following table sets forth the
names and ages of our directors and executive officers, and their positions with
us, as of April 29, 2010:
Name
|
|
Age
|
|
Position with Company
|
|
Director Since
|
Kaleil Isaza
Tuzman
|
38
|
Chairman of the Board and Chief
Executive Officer
|
2008
|
|||
Gavin
Campion
|
37
|
President and
Director
|
2008
|
|||
Robin Smyth
|
56
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Chief Financial Officer and
Director
|
2003
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|||
Kamal
El-Tayara
|
39
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Director
|
2008
|
|||
Steven G.
Felsher
|
61
|
Director
|
2008
|
|||
Daniel W.
Hart
|
36
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Director
|
2008
|
|||
Lars
Kroijer
|
38
|
Director
|
2008
|
|||
Wayne
Walker
|
51
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Director
|
2008
|
The
principal occupations for the past five years (and, in some instances, for prior
years) of each of our directors and executive officers are as
follows:
Kaleil
Isaza Tuzman was elected
Chairman of the Board and has served as our Chief Executive Officer since
January 2008. Mr. Isaza Tuzman has worked in the digital media industry since
the late 1990s as a venture capitalist and entrepreneur. From 2005 to 2007, he
served as the President and Chief Operating Officer of JumpTV Inc., subsequently
acquired by Neulion, Inc. (TSX: NLN), a leader in IP-based broadcasting of
international television and sports. From 2002 to date, Mr. Isaza Tuzman has
served as the Managing Partner of KIT Capital, a software and digital
media-focused restructuring and merchant banking firm which merged into
Dubai-based merchant bank KCP Capital in 2008. From 2001 to 2002, he served as
Chairman and Chief Executive Officer of KPE, Inc., a leading digital media
services company. Prior to that, Mr. Isaza Tuzman worked at Goldman Sachs, in
investment banking and equities risk arbitrage. He has been a member of the
Council on Foreign Relations, and has acted as a U.S. trade representative. Mr.
Isaza Tuzman graduated magna cum
laude and holds an A.B.
from Harvard University and holds graduate certificates in International
Relations from El Colegio de México and in Latin American Studies from Harvard
University.
Gavin
Campion has served as our
President since April 2008 and elected as a Director in November 2008. From
January 2005 to March 2008, he served as managing director of Sputnik Agency Pty
Ltd., an Australian-based interactive marketing agency. In 1999, Mr. Campion
co-founded Reality Group Pty Ltd., a subsidiary of KIT digital, which has
attracted blue-chip advertising customers. From 2004 to 2008, Mr. Campion served
as Chief Executive Officer of Shoppers Advantage, a leading Australian
e-commerce company, and as a director of Presidential Card, Australia’s largest
discount loyalty program. Mr. Campion received his B.A. with honors in marketing
from the University of Huddersfield in England.
Robin
Smyth has served as a
Director since December 2003 and has served as our Chief Financial Officer since
December 2003, except for a five-month leave from April 27 to September 28,
2009. From 1998 to 2001, Mr. Smyth was a partner at Infinity International, a
consulting and IT recruitment operation. From 1990 to 1998, he worked for
Computer Consultants International. He is also on the board of directors of a
number of wholly-owned subsidiaries of KIT digital. Mr. Smyth received his
undergraduate degree in economics from Monash University in
Australia.
Kamal
El-Tayara has served as a
Director since February 2008. Since 2004, Mr. El-Tayara has been the managing
partner of MNA Partners, a Dubai-based merchant bank, which merged into KCP
Capital in 2008. Prior to that, Mr. El-Tayara held senior positions with Merrill
Lynch and Salomon Smith Barney in the Middle East. In early 2003, Mr. El-Tayara
managed the corporate finance initiatives of MBC Group, MENA’s (Middle East and
North Africa) largest media company, where he participated in the set up of
Alarabiya News Channel, for which he acted as Chief Financial Officer. In 2007,
Mr. El-Tayara set up the Swiss EFG Bank in Dubai, for which he acted as the
Dubai Head. Mr. El-Tayara is a board member of KIT Media Ltd. Mr. El-Tayara
holds a B.S. in electrical engineering from the American University of Beirut
(with distinction) and an M.B.A. from INSEAD.
1
Steven
G. Felsher has served as a
Director since November 2008 and is our lead director and Chairman of our Audit
Committee. Mr. Felsher was the Vice Chairman and Chief Financial
Officer-Worldwide of Grey Global Group Inc., and was responsible for its
integration into WPP Group plc following WPP Group’s acquisition of Grey in
March 2005. Mr. Felsher was responsible for overseeing Grey’s financial
operations, investor relations, acquisitions and other corporate functions. Mr.
Felsher joined Grey in 1979 as a Vice President, became Senior Vice President in
1986, and Chief Financial Officer in 1989. He headed Grey’s Legal Affairs
department from 1979 to 1989. Since leaving Grey, Mr. Felsher consults for a
number of intellectual property and marketing services companies. Mr. Felsher
holds a B.A. in Classical Greek from Dickinson College, was a Thomas J. Watson
Fellow, and holds a J.D. from Yale Law School.
Daniel
W. Hart has served as a
Director since March 2008. Mr. Hart is the founder and managing partner of River
Road Ventures, a private equity and advisory firm, since February 2004. River
Road Ventures merged into KCP Capital in 2008. Prior to founding River Road
Ventures, Mr. Hart founded Fundamental Capital, an investment partnership which
integrated operational management with early-stage venture capital. Mr. Hart’s
entrepreneurial and investing background has focused on the digital media,
wireless, semiconductor, enterprise software areas. Mr. Hart is a board member
of KIT Media Ltd. Mr. Hart holds an A.B. in economics from Harvard
University.
Lars
Kroijer has served as a
Director since February 2008 and is Chairman of our Compensation Committee. Mr.
Kroijer is the founder and Chief Executive Officer of Holte Capital Ltd., a
special situations hedge fund, since April 2002. From June 1999 to March 2002,
Mr. Kroijer worked for HBK Investments focusing on special situations investing
and event-driven arbitrage. Prior to that, Mr. Kroijer worked for SC
Fundamental, a value-focused hedge fund, and for Lazard Frères, a boutique
investment banking firm. Mr. Kroijer graduated magna cum
laude and holds an
A.B. from Harvard University and an M.B.A. from Harvard Business
School.
Wayne
Walker has served as a
Director since January 2008 and is Chairman of our Nominations and Corporate
Governance Committee. Mr. Walker has served as the managing partner of Walker
Nell Partners, Inc. since 2004. He has more than 20 years of experience in
corporate law and corporate restructuring. Prior to establishing Walker Nell, he
served as the Principal of Parente Randolph, LLC, an accounting and consulting
firm, from July 2001 to February 2004. He served as Senior Counsel of DuPont
Corporation from 1984 to 1998 and as Chairman of Habitat for Humanity from 1995
to 1998. He holds a B.A. from Loyola University New Orleans and a J.D. from
Catholic University of America. He also studied finance for non-financial
managers at the University of Chicago’s Graduate School of
Business.
Board
of Directors
The Board
of Directors of the Company held 7 meetings during 2009. Each director then
serving attended 75% or more of the aggregate of: (1) the total number of
Board meetings; and (2) the total number of meetings of the committee(s) of
which he is a member, if any. The Company does not have a written policy on
board attendance at annual meetings of stockholders; however it does schedule a
board meeting immediately after the annual meeting for which members attending
receive compensation. The table below describes the Board’s
committees.
Committee
Name
|
Members
|
Number
of
Meetings
in
2009
|
Principal
Functions
|
|||
Audit
Committee
|
S. Felsher
(Chairman)
K.
El-Tayara
L.
Kroijer
W.
Walker
|
|
4
|
|
•
Recommending to the board of directors the engagement or discharge of our
independent public accountants, including pre-approving all audit and
non-audit related services;
•
The appointment, compensation, retention and oversight of the work of the
independent auditor engaged by us to prepare or issue an audit report or
perform other audit review or attest services for
us;
|
2
•
Establishing procedures for the receipt, retention and treatment of
complaints received regarding accounting, internal accounting controls or
auditing matters and for the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters;
•
Approving the scope of the financial audit;
•
Requiring the rotation of the lead audit partner;
•
Consulting regarding the completeness of our financial
statements;
•
Reviewing changes in accounting principles;
•
Reviewing the audit plan and results of the auditing engagement with our
independent auditors and with our officers;
•
Reviewing with our officers, the scope and nature and adequacy of our
internal accounting and other internal controls over financial reporting
and disclosure controls and procedures;
•
Reviewing the adequacy of the Audit Committee Charter at least
annually;
•
Meeting with our Internal Auditor on a regular basis;
•
Performing an internal evaluation of the Audit Committee on an annual
basis; and
•
Reporting to the board of directors on the Audit Committee's activities,
conclusions and recommendations.
|
||||||
Compensation
Committee
|
L.
Kroijer
(Chairman)
S.
Felsher
W.
Walker
|
6
|
•
Approving and evaluating the compensation of directors and executive
officers.
•
Establishing strategies and compensation policies and programs for
employees to provide incentives for delivery of value to our
stockholders.
•
Establishing policies to hire and retain senior executives, with the
objectives of aligning the compensation of senior management with our
business and the interests of our stockholders.
•
Together with management, surveying the amount and types of executive
compensation paid by comparable companies, and engaging consultants as
necessary to assist them;
•
Periodically reviewing corporate goals and objectives relevant to
executive compensation and making recommendations to the board for
changes;
•
Assisting management in evaluating each executive officer's performance in
light of corporate goals and objectives, and recommending to the board
(for approval by the independent directors) the executive officers'
compensation levels based on this evaluation;
•
Overseeing our stock option plan or other stock-based plans with respect
to our executive officers and employee board members, who are subject to
the short-swing profit restrictions of Section 16 of the Securities
Exchange Act of 1934, as amended;
•
Reviewing the overall performance of our employee benefit plans and making
recommendations to the board regarding incentive-compensation plans and
equity-based plans;
|
3
•
Together with the Nominations and Corporate Governance Committee,
reviewing and making recommendations to the independent directors of the
board regarding the form and amount of director compensation;
•
Ensuring that our compensation policies meet or exceed all legal and
regulatory requirements and any other requirements imposed on us by the
board; and
•
Producing an annual report on executive compensation for inclusion in our
proxy statement.
|
||||||
Nominations
and Corporate Governance
|
W.
Walker
(Chairman)
K.
El-Tayara
S.
Felsher
L.
Kroijer
|
3
|
|
•
Identifying individuals qualified to become board members and recommending
that the board select a group of director nominees for each next annual
meeting of stockholders.
•
Ensuring that the Audit, Compensation and Nominations and Corporate
Governance Committees of the board have the benefit of qualified and
experienced “independent” directors.
•
Developing and recommending to the board a set of effective corporate
governance policies and procedures, and reviewing and reassessing the
adequacy of such guidelines annually and recommending to the board any
changes deemed appropriate.
•
Periodically reviewing the charters of all board committees and
recommending to the committees and board any changes deemed
appropriate;
•
Developing policies on the size and composition of the board;
•
Conducting annual evaluations of the performance of the board, committees
of the board and individual directors;
•
Reviewing conflicts of interest and the independence status of
directors;
•
Together with the Compensation Committee, reviewing and making
recommendations to the independent directors of the board regarding the
form and amount of director compensation;
•
Reviewing the structure of our senior staffing and management succession
plans with the Chief Executive Officer;
•
Together with the Compensation Committee, developing criteria to assist
the board's assessment of the Chief Executive Officer's leadership of our
company; and
•
Generally advising the board (as a whole) on corporate governance
matters.
|
Director
Independence
The Board
of Directors has determined that Messrs. El-Tayara, Felsher, Hart, Kroijer, and
Walker are “independent,” as independence is defined in the listing standards
for the Nasdaq Stock Market. Accordingly, six of the nine directors
are independent. Although Messrs. El-Tayara and Hart are board
members of KIT Media Ltd., our largest single stockholder, they are neither
controlling shareholders nor employees of KIT Media, and are not disqualified
under Nasdaq’s independence standards from being considered independent
directors by us.
Board
Leadership Structure
Kaleil Isaza Tuzman has been the
Company’s Chairman of the Board and Chief Executive Officer since December 2007
when Mr. Isaza Tuzman, through entities controlled by him, made a significant
investment in the Company and assumed management control of the
Company. The Company believes that having one person, particularly
Mr. Isaza Tuzman with his wealth of industry and executive management
experience, his extensive knowledge of the operations of the Company and his own
history of innovation and strategic thinking, serve as both Chief Executive
Officer and Chairman is the best leadership structure for the Company because it
demonstrates to our employees, customers and stockholders that the Company is
under strong leadership, with a single person setting the tone and having
primary responsibility for managing the Company’s operations. This
unity of leadership promotes strategy development and execution, timely
decision-making and effective management of Company resources. The
Company believes that it has been well-served by this
structure.
4
As described above, six of our eight
directors are independent. In addition, all of the directors on each
of the Audit Committee, Compensation Committee and Nominations and Corporate
Governance Committee are independent directors and each of these committees is
led by a committee chair. The committee chairs set the agendas for
their committees and report to the full Board on their work. We have
a lead independent director, Steven G. Felsher. As the lead
independent director, Mr. Felsher acts as an intermediary between the Board and
senior management. Among other things, the lead independent director
is responsible for facilitating communication among directors and between the
Board and the Chairman and Chief Executive Officer, working with the Chairman
and Chief Executive Officer to provide an appropriate information flow to the
Board, and serving as an ex-officio member of each of our board committees and
chairman of the executive sessions of the independent directors. As
required by Nasdaq, our independent directors meet in executive session without
management present as frequently as they deem appropriate, typically at the time
of each regular in-person Board meeting. All of our independent
directors are highly accomplished and experienced business people in their
respective fields, who have demonstrated leadership in significant enterprises
and are familiar with board processes. The Company’s independent
directors bring experience, oversight and expertise from outside the company and
industry, while the Company’s Chairman and Chief Executive Officer and Messrs.
Campion and Smyth bring company-specific experience and expertise.
Risk
Oversight
While the Board of Directors is
responsible for overseeing the Company’s risk management, the Board has
delegated many of these functions to the Audit Committee. Under its
charter, the Audit Committee is responsible for discussing with management and
the independent auditors the Company’s major financial risk exposures, the
guidelines and policies by which risk assessment and management is undertaken,
and the steps management has taken to monitor and control risk
exposure. In addition to the Audit Committee’s work in overseeing
risk management, the full Board regularly engages in discussions of the most
significant risks that the Company is facing and how those risks are being
managed, and the Board receives reports on risk management from senior officers
of the Company and from the chair of the Audit Committee. In
addition, the Chairman and Chief Executive Officer’s extensive knowledge of the
Company uniquely qualifies him to lead the Board in assessing
risks. The Board of Directors believes that the work undertaken by
the Audit Committee, together with the work of the lead independent director,
the full Board and the Chairman and Chief Executive Officer, enables the Board
to effectively oversee the Company’s risk management function.
Audit
Committee
The Audit Committee is comprised of four
non-employee directors, each of whom is independent as defined under Nasdaq’s
listing standards. The board of directors has determined that each committee
member qualifies as an “audit committee financial expert.” The Audit Committee
functions pursuant to a written charter, under which the committee has such
powers as may be assigned to it by the board from time to time. The Audit
Committee was established in 2008. In 2007 and until the formation of the Audit
Committee in 2008, the entire board of directors performed the functions of the
Audit Committee.
Compensation
Committee
The Compensation Committee is comprised
of three non-employee directors, each of whom is independent as defined under
Nasdaq’s listing standards. The Compensation Committee functions pursuant to a
written charter, under which the committee has such powers as may be assigned to
it by the board from time to time. The Compensation Committee was established in
2008. In 2007 and until the formation of the Compensation Committee in 2008, the
entire board of directors performed the functions of the Compensation
Committee.
In general, the Compensation Committee
formulates and recommends compensation policies for board approval, oversees and
implements these board-approved policies, and keeps the board apprised of its
activities on a regular basis. In addition, the Compensation Committee together
with the Nominations and Corporate Governance Committee, develops criteria to
assist the board's assessment of the Chief Executive Officer's leadership of our
company.
5
Nominations
and Corporate Governance Committee
The Nominations and Corporate Governance
Committee is comprised of four non-employee directors, each of whom is
independent as defined under Nasdaq’s listing standards. The Nominations and
Corporate Governance Committee functions pursuant to a written charter, under
which the committee has such powers as may be assigned to it by the board from
time to time. The Nominations and Corporate Governance Committee was established
in 2008. In 2007 and until the formation of the Nominations and Corporate
Governance Committee in 2008, the entire board of directors performed the
functions of the Nominations and Corporate Governance Committee. The
Nominations and Corporate Governance Committee will consider candidates for
director recommended by stockholders of the Company. The procedures for
submitting stockholder recommendations are explained below under “Stockholder
Proposals” beginning on page 21.
The
Nominations and Corporate Governance Committee is responsible for the Company’s
qualification and nomination of potential Board members. Pursuant to the
committee’s charter, the Nominations Committee reviews the qualities and skills
of prospective members of the Board of Directors and generally requires that
director candidates be qualified individuals who, if added to the Board of
Directors, would provide the mix of director characteristics, experience,
perspectives and skills appropriate for the Company. Criteria for selection of
candidates include, but are not limited to: (i) business and financial acumen,
as determined by the independent directors in their discretion, (ii) qualities
reflecting a proven record of accomplishment and ability to work with others,
(iii) knowledge of the Company’s industry, (iv) relevant experience and
knowledge of corporate governance practices, and (v) expertise in an area
relevant to the Company. Potential Board members should not have commitments
that would conflict with the time commitments of a director of the
Company.
While the
Company does not have a formal diversity policy for Board membership, the Board
does seek to ensure that its membership consists of sufficiently diverse
backgrounds, meaning a mix of backgrounds and experiences that will enhance the
quality of the Board’s deliberations and decisions. In considering
candidates for the Board, the independent directors consider, among other
factors, diversity with respect to viewpoints, skills, experience and other
demographics.
6
Compliance
with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a)
of the Securities Exchange Act of 1934 requires the Company’s directors and
executive officers, and persons who own more than 10% of a registered class of
the Company’s equity securities, to file with the Securities and Exchange
Commission reports of ownership and changes in ownership of common stock and
other equity securities of the Company. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based
solely on review of the copies of such reports furnished to the Company or
written or oral representations that no other reports were required, the Company
believes that during 2009, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except
that, due to administrative oversight, the Company did not timely file Form 3,
Form 4 or Form 5 reports on behalf of Messrs. Campion, El-Tayara, Felsher, Hart,
Kroijer and Walker with respect to grants of stock options. However,
to date, all such late filings have been made.
Item
11. Executive Compensation.
The
following table describes the compensation awarded to the Chief Executive
Officer and the Company’s two most highly compensated executive officers (other
than the CEO) who were serving as executive officers on December 31, 2009 (the
“named executive officers”):
Summary
Compensation Table
Annual Compensation
|
||||||||||||||||||||||||||||||
Name and
Principal Position
|
Year
|
Salary
($)(1)
|
Bonus
($)
|
Option
Awards
($)(2)
|
Non-Equity
Incentive Plan
Compensation
($) (3)
|
Non-Qualified
Deferred
Compensation
Earnings ($)
|
All Other
Compensation
($)(4)
|
Total
($)
|
||||||||||||||||||||||
Kaleil Isaza Tuzman (1)
|
2009
|
277,789 | — | — | — | — | — | 277,789 | ||||||||||||||||||||||
(amounts paid
to KIT Capital, a company controlled by Mr. Isaza Tuzman) Chairman and
Chief Executive Officer
|
2008
|
289,652 | — | — | — | — | — | 289,652 | ||||||||||||||||||||||
Gavin Campion (2)
|
2009
|
200,000 | — | — | — | — | — | 200,000 | ||||||||||||||||||||||
President
and Director
|
2008
|
130,833 | — | — | — | — | — | 130,833 | ||||||||||||||||||||||
Robin Smyth (3)
|
2009
|
148,250 | — | — | — | — | — | 148,250 | ||||||||||||||||||||||
Chief
Financial Officer, Secretary, Treasurer and Director
|
2008
|
213,167 | — | — | — | — | 275,000 | 488,167 |
(1)
|
Kaleil Isaza Tuzman serves as our
Chairman and Chief Executive Officer and was appointed to these positions
on January 9, 2008. The total amount paid to KIT Capital (the entity that
provides his services) in 2009 and 2008 was $477,750 and $573,284,
respectively, of which $277,789 and $289,652, respectively, was paid to
Mr. Isaza Tuzman, and the remainder was paid to other KIT Capital
personnel dedicated full-time to KIT digital. These amounts include
employer taxes, healthcare costs and other benefits. It also includes KIT
Capital corporate fees, including legal, accounting, insurance, data
hosting and parking related to KIT
digital.
|
7
(2)
|
Mr. Campion serves as our
President and a director. Mr. Campion was appointed President on April 1,
2008 and was appointed as a director on November 17, 2008. The
compensation listed is only for Mr. Campion’s services as an executive
officer, upon his appointment as President and not for his prior
service.
|
(3)
|
Mr. Smyth served as our Chief
Financial Officer, Secretary and Treasurer through April 27, 2009 and,
after a five-month leave, rejoined us on September 28, 2009. Included in
All Other Compensation is the payment of $275,000 related to the
settlement of his separation agreement on March 31,
2008.
|
Employment
and Management Contracts, Termination of Employment and Change-in-Control
Arrangements
KIT Capital
Management Agreement. During 2008 and 2009, the
managerial services of Kaleil Isaza Tuzman, our Chairman and Chief Executive
Officer, and two non-executive personnel, were provided to us through KIT
Capital, which is beneficially controlled by Mr. Isaza Tuzman. For these
services, we paid KIT Capital aggregate fees of $477,750 in 2009 and $573,284 in
2008 for these three individuals, of which $277,789 in 2009
and $289,652 in 2008 was paid to Mr. Isaza Tuzman and the remainder
to other KIT Capital personnel dedicated full-time to KIT digital, as well as
for employer taxes, healthcare costs, corporate fees and other expenses related
to KIT Capital’s work with KIT digital.
Under the Executive Management Agreement
with KIT Capital, dated as of December 18, 2007, the services of Mr. Isaza
Tuzman and two non-executive personnel have been provided to us and our
subsidiaries at an initial monthly rate of $50,800, with an incentive bonus
equal to the greater of (i) the preceding 12 months’ base compensation or (ii)
the previous month’s monthly installment of base compensation multiplied by 12
if we achieve two consecutive quarters of profitability or our total monthly
revenue equals or exceeds $6.0 million. The Management Agreement commenced on
January 9, 2008 and expires on January 9, 2011, unless sooner terminated or
extended by mutual agreement.
Under the Management Agreement, we
issued to KIT Capital stock options to purchase 60,000 shares of our common
stock at an exercise price of $6.11 per share, of which 20,000 options vested as
of January 9, 2008, and the remainder vest in equal monthly increments over a
period of three years. We also established a “phantom” stock plan, pursuant to
which we granted “phantom” shares equal to 60,000 shares of common stock vesting
in equal monthly increments over a three-year period.
In addition, under the Management
Agreement, KIT Capital received the right to: (a) purchase up to 5,100,000
shares of series A preferred stock from the holders of such shares; (b) purchase
from us (i) up to $5.0 million of our common stock at a price per share of no
higher than a 15% premium to the closing price of the common stock on December
18, 2007, and (ii) up to an additional $10.0 million of our common stock at a
price not exceeding 90% of the five-day trailing weighted average trading price
of the common stock at the time of purchase; and (c) include any such purchased
shares of preferred stock and common stock in a registration statement filed by
us with the SEC.
Notwithstanding these agreements,
subsequent to the date of the Management Agreement, (a) we effected the
automatic conversion of all then outstanding shares of series A preferred stock
into 11,429 shares of common stock, thereby preventing KIT Capital from
purchasing such shares, (b) we requested KIT Capital to waive its registration
rights in respect of its purchase of 1,008,572 shares of common stock and
warrants to purchase a like number of shares in our May 2008 financing, and (c)
at the recommendation of our financial advisor, KIT Capital waived its right to
purchase an additional $10.0 million in securities due to the potential negative
effect on the market price with such a large controlling stockholder. For
facilitating these corporate actions and waiving its rights as described above,
and for KIT Capital’s investment of $5.0 million at a time when similar
third-party financing transactions were unavailable and we required such funds
in connection with pending acquisition transactions, we issued to KIT Capital a
warrant to purchase 580,358 shares of our common stock (representing 65% warrant
coverage on KIT Capital’s investment, as compared to 100% warrant coverage in
the May 2008 financing transaction), for a term of five years commencing on
December 31, 2008, at an exercise price of $11.90 per share, subject to the
occurrence of certain events that could potentially reduce the exercise price to
$5.60 per share.
8
The Management Agreement provides that
upon termination of the agreement or after the expiration date for any reason,
except cause (as defined in the Management Agreement), we are required to pay
KIT Capital, in addition to any other payments due, a cash severance payment
equal to the greater of (i) the total amount paid to KIT Capital during the
preceding 12 months, including base compensation and all bonuses, or (ii) the
previous month’s installment of base compensation multiplied by
12.
Gavin Campion Employment
Agreement. On March 16, 2008, we entered into an employment agreement
with Gavin Campion to serve as our President. Pursuant to the terms of his
agreement, Mr. Campion will serve as our President for an indefinite term,
unless terminated by either party upon no less than 30 days written notice. If
the agreement is terminated by Mr. Campion (or by us for the reasons specified
below) prior to two years of consecutive service (April 1, 2010), Mr. Campion
will be required to reimburse us for all expenses related to his employment. Mr.
Campion’s initial base compensation under the agreement is fixed at $200,000 (inclusive of his
transportation and housing allowance). Mr. Campion also received stock options
to purchase 34,286 shares of our common stock upon entering into the agreement.
We are entitled to terminate Mr. Campion without advance notice and without the
payment of any benefits upon the occurrence of certain events, including if Mr.
Campion engages in fraud, dishonesty or any other act of material misconduct in
the performance of his duties on our behalf, or Mr. Campion violates any
material provision of his employment agreement which is not cured under any
applicable cure period allowable under the agreement.
KIT
digital 2004 Stock Option Plan
In April 2004, our board of directors
adopted a stock option plan (the “2004 Option Plan”). Pursuant to this plan,
which expires on April 1, 2014, incentive stock options or non-qualified options
to purchase an aggregate of 28,572 shares of common stock may be issued, as
adjusted. The plan may be administered by our board of directors or by a
committee to which administration of the plan, or part of the plan, may be
delegated by our board of directors. Options granted under this plan are not
generally transferable by the optionee except by will, the laws of descent and
distribution or pursuant to a qualified domestic relations order, and are
exercisable during the lifetime of the optionee only by such optionee. Options
granted under the plan vest in such increments as is determined by our board of
directors or designated committee. To the extent that options are vested, they
must be exercised within a maximum of three months of the end of the optionee's
status as an employee, director or consultant, or within a maximum of 12 months
after such optionee's termination or by death or disability, but in no event
later than the expiration of the option term. The exercise price of all stock
options granted under the plan will be determined by our board of directors or
designated committee. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of our outstanding capital
stock, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date.
In November 2006, our board of directors
increased the number of shares which may be issued under the 2004 Option Plan to
an aggregate of 228,572 shares of common stock. The number of shares subject to
the 2004 Option Plan was subsequently increased to 342,858 shares effective
April 3, 2007.
To date, we have 80,000 options
outstanding under the 2004 Option Plan, as amended, of which 60,000 options were
issued to KIT Capital, Ltd. pursuant to the terms of the Executive Management
Agreement, dated as of December 18, 2007. Our board of directors believes in
order to attract and retain the services of executives and other key employees,
it is necessary for us to have the ability and flexibility to provide a
compensation package which compares favorably with those offered by other
companies and, accordingly, voted unanimously to adopt the 2008 Incentive Stock
Plan.
As of December 31, 2009, the following
options have been granted under our 2004 Option Plan:
Options Issued under 2004 Option
Plan
Optionee
|
Quantity
|
Exercise
Price ($)
|
Date Granted
|
Vest Date
|
Expiration Date
|
||||||||
KIT Capital,
Ltd.
|
60,000 | 6.11 |
January 9,
2008
|
Over 36
months
|
January 9,
2013
|
||||||||
KIT Capital,
Ltd.
|
20,000 | 9.80 |
June 21,
2008
|
Over 48
months
|
June 21,
2013
|
9
KIT digital 2008 Incentive Stock
Plan
In March 2008, our board of directors
adopted the KIT digital, Inc. 2008 Incentive Stock Plan (the “2008 Incentive
Plan”) and initially reserved 400,000 shares of common stock for issuance. Our
board of directors voted unanimously to adopt the amendment to the 2008
Incentive Plan, providing for an additional 457,143 shares of common stock
available for future grants under the 2008 Incentive Plan. The holders of a
majority of our outstanding shares of common stock approved the amendment to our
2008 Incentive Plan at our stockholders meeting held on November 6, 2008. In
November 2009, our board of directors voted unanimously to increase the number
of shares which may be issued under the 2008 Incentive Plan by 2,642,857 to an
aggregate of 3,500,000 shares of common stock subject to ratification by our
stockholders at our next annual stockholders meeting.
Set forth below is a summary of the 2008
Incentive Plan, but this summary is qualified in its entirety by reference to
the full text of the 2008 Incentive Plan, which has been filed with the SEC, and
any stockholder who wishes to obtain a copy of the 2008 Incentive Plan may do so
by written request to KIT digital, Inc., 205 Hudson Street, Suite 802, New York,
New York 10013, Attention: Mr. Robin Smyth, Chief Financial
Officer.
Under the 2008 Incentive Plan, options
may be granted which are intended to qualify as Incentive Stock Options under
Section 422 of the Internal Revenue Code of 1986, or which are not intended to
qualify as Incentive Stock Options. In addition, direct grants of stock or
restricted stock may be awarded.
Purpose. The primary purpose of the
2008 Incentive Plan is to attract and retain the best available personnel in
order to promote the success of our business and to facilitate the ownership of
our stock by employees and others who provide services to
us.
Administration. The 2008 Incentive Plan is
administered by our board of directors, provided that the board may delegate
such administration to the Compensation Committee.
Eligibility. Under the 2008 Incentive
Plan, options may be granted to employees, officers, directors or consultants,
as provided in the 2008 Incentive Plan.
Terms of
Options. The
term of each option granted under the 2008 Incentive Plan will be contained in a
stock option agreement between the optionee and us and such terms will be
determined by the board of directors consistent with the provisions of the 2008
Incentive Plan, including the following:
•
|
Purchase
Price. The
purchase price of the common stock subject to each incentive stock option
will not be less than the fair market value (as set forth in the 2008
Incentive Plan), or in the case of the grant of an incentive stock option
to a principal stockholder, not less that 110% of fair market value of
such common stock at the time such option is granted.
|
|
•
|
Vesting. The dates on which
each option (or portion thereof) will be exercisable and the conditions
precedent to such exercise, if any, will be fixed by the board of
directors, in its discretion, at the time such option is granted. Unless
otherwise provided in the grant agreement, in the event of a change of
control (as set forth in the 2008 Incentive Plan), 50% of the vesting
restrictions will terminate.
|
|
•
|
Expiration. Any option granted to
an employee will become exercisable over a period of no longer than five
years. No option will in any event be exercisable after five years from,
and no Incentive Stock Option granted to a ten percent stockholder will
become exercisable after the expiration of five years from the date of the
option.
|
|
•
|
Transferability. No option will be
transferable, except by will or the laws of descent and distribution, and
any option may be exercised during the lifetime of the optionee only by
such optionee. No option granted under the 2008 Incentive Plan shall be
subject to execution, attachment or other
process.
|
10
•
|
Option
Adjustments. In the
event of any change in the outstanding stock by reason of a stock split,
stock dividend, combination or reclassification of shares,
recapitalization, merger, or similar event, the board or the committee may
adjust proportionally (a) the number of shares of common stock (i)
reserved under the 2008 Incentive Plan, (ii) available for Incentive Stock
Options and Nonstatutory Options and (iii) covered by outstanding stock
awards or restricted stock purchase offers; (b) the stock prices related
to outstanding grants; and (c) the appropriate fair market value and other
price determinations for such grants. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the board or the committee will be
authorized to issue or assume stock options, whether or not in a
transaction to which Section 424(a) of the Code applies, and other grants
by means of substitution of new grant agreements for previously issued
grants or an assumption of previously issued
grants.
|
|
•
|
Termination,
Modification and Amendment. The board may, insofar as
permitted by law, from time to time, suspend or terminate the 2008
Incentive Plan or revise or amend it in any respect whatsoever, except
that without the approval of the stockholders, no such revision or
amendment may (i) increase the number of shares subject to the 2008
Incentive Plan, (ii) decrease the price at which grants may be granted,
(iii) materially increase the benefits to participants, or (iv) change the
class of persons eligible to receive grants under the 2008 Incentive Plan;
provided no such action may alter or impair the rights and obligations
under any option, or stock award, or restricted stock purchase offer
outstanding as of the date thereof without the written consent of the
participant.
|
Grants under the 2008 Incentive
Plan
Through December 31, 2009, we have
granted an aggregate of 819,639 options under the 2008 Incentive Plan, including
the following grants to executive officers and directors:
Name and Position
|
Dollar Value
|
No. of Options
|
||||||
Kamal El-Tayara,
Director
|
$ | 153,686 | 42,314 | |||||
Steven G. Felsher,
Director
|
173,306 | 43,947 | ||||||
Daniel W. Hart,
Director
|
163,687 | 40,998 | ||||||
Lars Kroijer,
Director
|
144,734 | 39,820 | ||||||
Wayne Walker,
Director
|
145,016 | 39,856 | ||||||
Gavin Campion, President and
Director
|
273,000 | 54,286 | ||||||
Robin Smyth, Director and Chief
Financial Officer
|
96,200 | 18,858 |
Stock
Options
During
2009, no stock options were granted to or exercised by the named
executive officers.
The
following table provides information about outstanding equity awards held by the
named executive officers at the end of 2009:
11
Option Awards
|
Stock Awards
|
||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number
of
Shares
or Units
of Stock
that
have not
vested
|
Market
Value
of
Shares
or Units
of Stock
that
have
not
vested
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights that
have not
vested
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights that
have not
vested
|
||||||||||||||
Kaleil
Isaza
Tuzman
|
45,556 | 14,444 | $ | 6.11 |
January 9, 2013
|
||||||||||||||||||
Kaleil
Isaza Tuzman
|
7,500 | 12,500 | $ | 9.80 |
June
21, 2013
|
||||||||||||||||||
Gavin
Campion
|
21,027 | 13,259 | $ | 2.80 |
March 17,
2013
|
||||||||||||||||||
Gavin
Campion
|
7,500 | 12,500 | $ | 9.80 |
June 21,
2013
|
||||||||||||||||||
Robin
Smyth
|
11,715 | $ | 2.80 |
March
17, 2013
|
|||||||||||||||||||
Robin
Smyth
|
2,679 | 4,464 | $ | 9.80 |
June 21,
2013
|
The table
below describes the securities authorized for issuance under the Company’s
equity compensation plans as of December 31, 2009:
Equity
Compensation Plan Information
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
Number of Securities
Remaining Available for
Future Issuance under Equity
Compensations (1)
|
||
Equity
compensation plans approved by security holders
|
797,973
|
|
$
7.15
|
|
37,504
|
|
Equity
compensation plans not approved by security holders
|
80,000
|
|
7.03
|
|
262,858
|
|
|
|
|
||||
Total
|
877,973
|
|
$ 7.14
|
|
300,362
|
(1)
|
Consists
of shares that may be granted under either of the Company’s 2004 Stock
Option Plan or 2008 Incentive Stock
Plan.
|
Directors’
Compensation
All directors are reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their duties to
us. With the exception of Messrs. Isaza Tuzman, Campion and Smyth (who instead
receive compensation for their service as officers of our company), all
directors receive compensation for their services. To date, we have compensated
directors entirely through stock options granted under our incentive
compensation plans. Directors receive the following compensation
package:
12
•
|
Grant of stock options to purchase
8,143 shares of our common stock pursuant to our 2008 Incentive Stock
Plan.
|
•
|
Annual compensation in the amount
of $37,500, payable quarterly, which may be paid in either cash or stock
options (priced using the “Black-Scholes-Merton” options pricing model),
or a combination of both. The form of payment (i.e., cash, stock options
or a combination) will be determined by us in our sole discretion;
provided that if we are operating income (or EBITDA) positive in the
preceding calendar year, such determination may be made by each
independent director. The lead independent director will receive annual
compensation in the amount of $50,000 in consideration for broader
responsibilities.
|
•
|
Fees of $2,000 per board meeting
attended; $1,500 per committee meeting chaired; and $750 per committee
meeting attended but not chaired. The foregoing fees will be discounted by
50% when meetings are attended or chaired telephonically. Payment will be
made according to the same schedule and in the same manner as set forth in
the paragraph above.
|
The
following table shows non-employee director compensation in 2009:
Name
|
Fees Earned
or Paid in
Cash
($)
|
Stock Awards
($)
|
Option
Awards
($) (1)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
||||||||||||
Kamal
El-Tayara
|
$ | 147,599 | $ | 147,599 | |||||||||||||||
Steven G.
Felsher
|
$ | 162,821 | $ | 162,821 | |||||||||||||||
Daniel W.
Hart
|
$ | 145,225 | $ | 145,225 | |||||||||||||||
Lars
Kroijer
|
$ | 131,321 | $ | 131,321 | |||||||||||||||
Robin Smyth(2)
|
$ | 18,092 | $ | 18,092 | |||||||||||||||
Wayne
Walker
|
$ | 132,291 | $ | 132,291 |
(1)
|
The
determination of value of option awards is based upon the
Black-Scholes-Merton Option pricing model, details and assumptions of
which are set out in our financial statements. The amounts represent
annual amortization of fair value of stock options granted to the named
director.
|
(2)
|
Other
than from April 27 to September 28, 2009, Mr. Smyth was also an executive
officer and did not receive compensation for serving as a
director.
|
Code
of Ethics
We have
adopted a Code of Ethics which applies to our directors, Chief Executive Officer
and Chief Financial Officer, as well as our other senior
officers. The full text of the Code of Ethics can be found under
“Corporate Governance” on the Investor Relations page of our corporate website,
which is at www.kitd.com.
Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
The
following table below shows how the Company’s common stock is owned by the
Company’s directors and the executive officers named in the Summary Compensation
Table under “Compensation of Officers and Directors” and by owners of more than
5% of the Company’s outstanding common stock as of April 29, 2010. Each person
or entity, except KIT Media Ltd., KIT Capital, Ltd., Zivar Investments Ltd. and
Wellington Management Company, LLP, maintains a mailing address c/o KIT digital,
Inc., 205 Hudson Street, Suite 802, New York, New York 10013.
13
Security
Ownership of Certain Beneficial Owners and Management
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial Ownership
|
Percent of
Common Stock (1)
|
||||||
KIT
Media Ltd.
|
||||||||
Mill
Mall, Suite 6
|
||||||||
Wickhams
Cay 1
|
||||||||
P.O.
Box 3085
|
||||||||
Road
Town, Tortola
|
||||||||
British
Virgin Islands
|
2,653,287 |
(2)
|
12.1 | % | ||||
KIT
Capital, Ltd.
|
||||||||
P.O.
Box 112888
|
||||||||
Dubai,
United Arab Emirates
|
175,497 |
(3)
|
* | |||||
Kaleil
Isaza Tuzman, sum of above
|
2,828,784 |
(2)(3)
|
12.9 | % | ||||
Gavin
Campion
|
43,969 |
(4)
|
* | |||||
Robin
Smyth
|
43,138 |
(5)
|
* | |||||
Kamal
El-Tayara
|
54,297 |
(6)
|
* | |||||
Steven
G. Felsher
|
42,928 |
(7)
|
* | |||||
Daniel
W. Hart
|
38,130 |
(8)
|
* | |||||
Lars
Kroijer
|
39,420 |
(9)
|
* | |||||
Wayne
Walker
|
39,447 |
(10)
|
* | |||||
Zivar
Investments Ltd.
|
||||||||
10/8
International Commercial Centre
|
||||||||
Casemates
Square, Gibraltar, Gibraltar
|
1,768,111 |
(11)
|
8.1 | % | ||||
Wellington
Management Company, LLP
|
||||||||
75
State Street
|
||||||||
Boston,
MA 02169
|
1,961,758 |
(12)
|
8.9 | % | ||||
All
directors and executive officers as a group (8 persons)
|
3,130,113
|
14.2 | % |
*
|
Less
than 1% of the outstanding common stock.
|
(1)
|
Applicable percentage ownership is
based on 21,948,696 shares of common stock outstanding as of April 29,
2010.
|
(2)
|
Kaleil Isaza Tuzman, our Chairman
and Chief Executive Officer, holds a controlling interest in KIT Media and
holds the voting and dispositive power of the shares directly held by KIT
Media Ltd. For purposes of voting, on an actual basis, KIT Media Limited
owns 12.09% of our outstanding shares. For purposes of voting, on an
actual basis, Mr. Isaza Tuzman owns 12.63% of our outstanding
shares.
|
(3)
|
Represents (a) 117,858 shares of
common stock and (b) 54,999 shares of common stock issuable upon the
exercise of stock options granted under the 2004 Stock Option Plan, which
are currently exercisable. Mr. Isaza Tuzman holds a controlling
interest in KIT Capital and holds the voting and dispositive power of the
shares directly held by KIT Capital. For purposes of voting, on an actual
basis, KIT Capital owns 0.54% of our outstanding shares. For purposes of
voting, on an actual basis, Mr. Isaza Tuzman owns 12.63% of our
outstanding shares.
|
(4)
|
Represents (a) 12,719 shares of
common stock and (b) 31,250 shares of common stock issuable upon the
exercise of stock options granted under the 2008 Incentive Plan, which are
currently exercisable. For purposes of voting, on an actual
basis, Mr. Campion owns 0.06% of our outstanding
shares.
|
(5)
|
Represents (a) 5,441 shares of
common stock, (b) 14,840 shares of common stock issuable upon exercise of
stock options granted under the 2008 Incentive Plan, which are currently
exercisable and (c) 22,857shares of common stock issuable
upon exercise of warrants and have an expiration date of March 30,
2012. For
purposes of voting, on an actual basis, Mr. Smyth owns 0.02% of our
outstanding shares.
|
(6)
|
Represents (a) 14,287 shares of
common stock and (b) 40,010 shares of common stock issuable upon the
exercise of stock options granted under the 2008 Incentive Plan, which are
currently exercisable. For purposes of voting, on an actual basis, Mr.
El-Tayara owns 0.07% of our outstanding shares.
|
(7)
|
Represents shares of common stock
issuable upon the exercise of stock options granted under the 2008
Incentive Plan, which are currently exercisable. For purposes
of voting, on an actual basis, Mr. Felsher owns no outstanding
shares.
|
(8)
|
Represents shares of common stock
issuable upon the exercise of stock options granted under the 2008
Incentive Plan, which are currently exercisable. For purposes of voting,
on an actual basis, Mr. Hart owns no outstanding
shares.
|
(9)
|
Represents (a) 1,144 shares of
common stock and (b) 38,276 shares of common stock issuable upon the
exercise of stock options granted under the 2008 Incentive Plan, which are
currently exercisable For purposes of voting, on an actual
basis, Mr. Kroijer owns 0.01% of our outstanding
shares.
|
14
(10)
|
Represents (a) 1,118 shares of
common stock and (b) 38,329 shares of common stock issuable upon the
exercise of stock options granted under the 2008 Incentive Plan, which are
currently exercisable. For purposes of voting, on an actual
basis, Mr. Walker owns 0.01% of our outstanding
shares.
|
(11)
|
As reported in a Schedule 13G
filed with the SEC on November 18, 2009. For purposes
of voting, on an actual basis, Zivar Investments Ltd. owns
8.06% of our outstanding shares.
|
(12)
|
As reported in a Schedule 13G
filed with the SEC on February 10, 2010. Wellington Management
Company, LLP, in its capacity as investment adviser, may be deemed to
beneficially own such shares of common stock which are held of record by
clients of Wellington Management Company, LLP. None of these
clients owns more than 5% of our outstanding shares of common
stock. For purposes of voting, on an actual basis,
Wellington Management Company, LLP owns 8.94% of our outstanding
shares.
|
Item
13. Certain Relationships And Related Transactions, and Director
Independence.
Other than the Executive Management
Agreement described under “Compensation of Officers and Directors - Employment
and Management Contracts, Termination of Employment and Change-in-Control
Arrangements” below, there are no transactions requiring disclosure between us
and our related persons, promoters or control persons.
Each of
the directors Gavin Campion, Kamal El-Tayara, Steven G. Felsher, Daniel W. Hart
and Lars Kroijer is a minority investor in KIT Media Ltd., our largest single
stockholder controlled by Kaleil Isaza Tuzman, our Chairman and Chief Executive
Officer. Messrs. El-Tayara and Hart are also board members of KIT
Media.
Over a period of 60 days between June
2009 and August 2009, KIT Media Ltd., an entity controlled by Kaleil Isaza
Tuzman, our Chairman and Chief Executive Officer, made $3,350,000 available to
us through an interim convertible promissory note bearing an 8% interest rate
per annum and convertible into the next common stock offering under terms
identical with other investors in the offering. In connection with our
acquisition of certain assets of Narrowstep Inc. in April 2009, Granahan McCourt
Capital, LLC, a stockholder of Narrowstep, loaned us $350,000, pursuant to a
convertible promissory note on substantially the same terms as the KIT Media
note described above. The KIT Media and Granahan McCourt notes payable were
converted into common stock in our August 2009 public
offering. Together with its additional cash investment of
$654,000, KIT Media purchased a total of 572,000 shares of common stock
in our August 2009 public offering. In a subsequent public offering
completed in March 2010, KIT Media invested another $1,750,000, purchasing
179,856 shares of our common stock. In a public offering in April 2010,
KIT Capital invested $1,300,000, purchasing 100,000 shares of our common
stock. In each case, KIT Media and KIT Capital purchased shares at
the same price and on the same terms as the other investors in the public
offerings.
Our board
of directors approved the repurchase of certain outstanding warrants with
exercise prices in excess of market price from certain warrant holders which
acquired the warrants in prior private placement financings, including KIT Media
Ltd., an entity controlled by Kaleil Isaza Tuzman, our Chairman and Chief
Executive Officer. We repurchased and cancelled the warrants on March
31, 2010, in exchange for cash payments equal to the fair value of the
applicable warrants on the date of repurchase, as determined using a percentage
premium over the intrinsic value (using a 20-day trailing average closing stock
price at the time of warrant repurchase agreement minus the applicable warrant
exercise price) of the warrants. Such repurchase amounts were below
the “Black-Scholes-Merton” value of the warrants. The terms of the warrant
repurchase were no more favorable to KIT Media than to other warrant
sellers.
Item
14. Principal Accountant Fees And Services
The
following table presents aggregate fees billed to the Company for professional
services rendered by Grant Thornton LLP since October 2, 2009. Prior
to September 21, 2009, MSPC, Certified Public Accountants and Advisors, A
Professional Corporation, served as the Company’s independent registered public
accounting firm.
15
Grant
Thornton
|
||||||||
2009 Fees
|
2008 Fees
|
|||||||
Audit
Fees
|
$ | 407,449 | $ | — | ||||
Audit-Related
Fees
|
— | — | ||||||
Tax
Fees
|
— | — | ||||||
Total
Fees
|
$ | 407,449 | $ | — |
MSPC
|
||||||||
2009 Fees
|
2008 Fees
|
|||||||
Audit
Fees
|
$ | 65,042 | $ | 149,567 | ||||
Audit-Related
Fees
|
— | 17,324 | ||||||
Tax
Fees
|
||||||||
Total
Fees
|
$ | 65,042 | $ | 166,891 |
Audit
fees were for professional services rendered for the audit of the Company’s
annual consolidated financial statements and review of consolidated financial
statements included in the Company’s Quarterly Reports on Form 10-Q and services
that are normally provided by the independent registered public accounting firm
in connection with statutory and regulatory filings or engagements.
Audit-related
fees were for assurance and related services that are reasonably related to the
performance of the audit or review of the Company’s financial statements and are
not reported under “Audit Fees.”
Tax fees
were for professional services rendered for federal, state and international tax
compliance, tax advice and tax planning.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit
Committee pre-approves all audit and permissible non-audit services provided by
the independent registered public accounting firm. These services may include
audit services, audit-related services, tax services and other services.
Pre-approval is generally provided for up to one year, and any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specific budget. The independent registered public accounting firm
and management are required to periodically report to the Audit Committee
regarding the extent of services provided by the independent registered public
accounting firm in accordance with the pre-approval, and the fees for the
services performed to date. The Audit Committee may also pre-approve particular
services on a case-by-case basis.
16
PART IV
Item 15. Exhibits and
Financial Statement Schedules.
In
addition to the Exhibits listed in our Annual Report on Form 10-K for the year
ended December 31, 2010, the following exhibits are filed
herewith:
(a)(3) Exhibits:
31.1
|
Certification
of C.E.O. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.2
|
Certification
of C.F.O. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1
|
Certification
of C.E.O. pursuant to 18 U.S.C. Section 1350, Section 906 of the
Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
of C.F.O. pursuant to 18. U.S.C. Section 1350, Section 906 of the
Sarbanes-Oxley Act of 2002.
|
17
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: April
30, 2010
|
KIT
DIGITAL, INC.
|
|
By:
|
/s/ Kaleil Isaza Tuzman
|
|
Kaleil
Isaza Tuzman
Chairman
and Chief Executive Officer
(Principal
Executive Officer)
|
By:
|
/s/ Robin Smyth
|
|
Robin
Smyth
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
18