Disclosure under this section is not required for a smaller reporting company.
Disclosure under this section is not required for a smaller reporting company.
Radical Holdings LP and Radical Investments LP
. As of April 17, 2014, Radical Holdings LP and Radical Investments LP were the beneficial owners of 67.9% of our outstanding voting stock. Radical Management, LLC is the general partner of Radical Holdings LP. Radical Investments Management LLC is the general partner of Radical Investments LP. Mark Cuban is the direct or indirect owner of all the limited partnership and membership interests in Radical Holdings LP, Radical Management, LLC, Radical Investments LP and Radical Investments Management LLC.
Timothy M. Rice
. As of April 17, 2014, Timothy M. Rice was an officer and director of Immediatek and owned 4,804,665 shares of our common stock, representing 15.7% of our outstanding voting stock.
Chetan Jaitly
. As of April 17, 2014, Chetan Jaitly was an officer of Officeware Corporation and owned 4,439,209 shares of our common stock, representing 14.5% of our outstanding voting stock.
Management Services
. On December 31, 2009, the Company entered into a Management Services Agreement with Radical Ventures L.L.C., an affiliate of Radical Holdings LP. Pursuant to this Management Services Agreement, personnel of Radical Ventures L.L.C. will provide certain management services to the Company, including, among others, legal, financial, marketing and technology. These services are provided to us at a cost of $3,500 per month; however, the Company will not be required to pay these fees or reimburse expenses and, accordingly, will account for these costs of services and expenses as deemed contributions to the Company. This agreement was extended on March 17, 2011, to be effective as of December 31, 2010.
This agreement may be terminated upon 30 days’ written notice by Radical Ventures L.L.C. for any reason or by the Company for gross negligence. The Company also agreed to indemnify and hold harmless Radical Ventures L.L.C. for its performance of these services, except for gross negligence and willful misconduct. Further, the Company limited Radical Ventures L.L.C.’s maximum aggregate liability for damages under this agreement to the amounts deemed contributed to the Company by virtue of this agreement during the twelve months prior to that cause of action.
Deemed Contribution
. In March 2012, Mark Cuban, who indirectly owns Radical Investments LP and Radical Holdings LP, made a donation of $40,000 to the organization that facilitates the St. Patrick’s Day parade held annually in Dallas, Texas. In exchange for the donation, Mr. Cuban asked that FilesAnywhere be, and FilesAnywhere was, recognized as a sponsor of the parade. FilesAnywhere is a web-based service provided by Officeware Corporation. This donation was deemed to be an equity contribution on behalf of Officeware Corporation paid by Immediatek’s indirect majority shareholder, Mark Cuban.
Protective Provisions
. Unless the Designated Directors control our board of directors with respect to all actions, for so long as any shares of the Series A Convertible Preferred Stock originally issued under the Series A Securities Purchase Agreement remain outstanding, except where the vote or written consent of the holders of a greater number of our shares is required by law or by our articles of incorporation, and in addition to any other vote required by law or by our articles of incorporation, we cannot, and we must cause our subsidiaries not to, as applicable, without the prior vote or written consent of the holders of at least 75% of the shares of the Series A Convertible Preferred Stock originally issued under the Series A Securities Purchase Agreement then outstanding:
(a) amend our articles of incorporation or bylaws in any manner that would alter or change any of the rights, preferences, privileges or restrictions of the Series A Convertible Preferred Stock or the shares issuable upon conversion of the Series A Convertible Preferred Stock;
(b) reclassify any outstanding securities into securities having rights, preferences or privileges senior to, or on a parity with, the Series A Convertible Preferred Stock;
(c) authorize or issue any additional shares of capital stock (other than to holders of the Series A Convertible Preferred Stock);
(d) merge or consolidate with or into any corporation or other person;
(e) sell all or substantially all of our respective assets in a single transaction or series of related transactions;
(f) license all or substantially all of our respective intellectual property in a single transaction or series of related transactions;
(g) liquidate or dissolve;
(h) alter any rights of the holders of the Series A Convertible Preferred Stock or change the size of the board of directors;
(i) declare or pay any dividends (other than dividends payable to us or our subsidiaries) on, or declare or make any other distribution, directly or indirectly, on account of, any shares of our common stock now or hereafter outstanding;
(j) repurchase any outstanding shares of capital stock;
(k) approve or modify by ten percent or more the aggregate amount of any annual or other operating or capital budget, or approve or modify by 50% or more any single line item of any such operating or capital budget;
(l) increase the salary of any officer or employee or pay any bonus to any officer, director or employee not contemplated in a budget or bonus plan approved by the Designated Directors;
(m) retain, terminate or enter into any salary or employment negotiations or employment agreement with any employee or any future employee;
(n) incur indebtedness (other than trade payables) or enter into contracts or leases that require payments in excess of $5,000 in the aggregate;
(o) make or incur any single capital expenditure;
(p) award stock options, stock appreciation rights or similar employee benefits or determine vesting schedules, exercise prices or similar features;
(q) make any material change in the nature of our business or enter into any new line of business, joint venture or similar arrangement;
(r) pledge our assets or guarantee the obligations of any other individual or entity;
(s) recommend approval of any new equity incentive plan;
(t) form or acquire any subsidiary, joint venture or similar business entity; or
(u) directly or indirectly enter into, or permit to exist, any material transaction with any of our affiliates, any of our directors or officers or any affiliate of our directors or officers, or transfer, pay, loan or otherwise become obligated to give cash, services, assets or other items of value to our affiliates, officers or directors or any affiliate of our officers and directors or commit to do any of the preceding, except for employee compensation or for reimbursement of ordinary business expenses.
Board of Directors
. For so long as any shares of the Series A Convertible Preferred Stock originally issued under the Series A Securities Purchase Agreement remain outstanding, the holders of a majority-in-interest of the shares of the Series A Convertible Preferred Stock originally issued under the Series A Securities Purchase Agreement then outstanding have the right to designate all the persons to serve as directors on our board of directors and our subsidiaries’ boards of directors. If the holders of the shares of the Series A Convertible Preferred Stock originally issued under the Series A Securities Purchase Agreement then outstanding choose not to designate any directors, the holders of a majority-in-interest of the shares of the Series A Convertible Preferred Stock originally issued under the Series A Securities Purchase Agreement then outstanding may appoint a designee to serve as an observer at all meetings of our and our subsidiaries’ board of directors and committees thereof.
Review, Approval or Ratification of Transactions with Related Parties
. During 2012 and 2013, our board or directors reviewed and did not object to any of the related party transactions reported in this proxy statement. Our board of directors recognizes that related party transactions present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof) and therefore follows the procedures as described below to address such risks.
Our board of directors is required to review all related party transactions. Immediatek is prohibited from entering into or continuing a material related party transaction that has not been reviewed and approved or ratified by the board of directors. Additionally, in transactions where an executive officer is related to any of our goods or services providers, the board of directors must approve the transaction. In reviewing a related party transaction, the board of directors considers all of the relevant factors surrounding the transaction including:
(1) whether there is a valid business reason for Immediatek to enter into the related party transaction consistent with the best interests of Immediatek and our stockholders;
(2) whether the transaction is negotiated on an arm’s length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally;
(3) whether the board of directors determines that it has been duly apprised of all significant conflicts that may exist or may otherwise arise on account of the transaction, and it believes, nonetheless, that we are warranted in entering into the related party transaction and have developed an appropriate plan to manage the potential conflicts of interest;
(4) whether the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves rates or charges fixed in conformity with law or governmental authority; and/or
(5) whether the interest of the related party or that of a member of the immediate family of the related party arises solely from the ownership of our class of equity securities and all holders of our equity securities received the same benefit on a pro-rata basis.
Section 16(a) of the Exchange Act requires directors and certain officers, and persons who beneficially own more than ten percent (10%) of our stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Directors, certain officers and greater than ten percent (10%) beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms we received, we believe that during the year ended December 31, 2013, no director, officer, beneficial owner of more than ten percent of our outstanding common shares, or any other person subject to Section 16 of the Exchange Act, failed to file on a timely basis.
We believe that no Forms 5 for certain directors, officers and greater than ten percent (10%) beneficial owners were required to be filed with the SEC for the period ended December 31, 2013.
Our board of directors performed the functions of an audit committee for the fiscal year ended December 31, 2013, and continues to perform such functions. Accordingly, we do not currently operate under an audit committee charter. During 2013, our board of directors consisted of the following persons: Robert Hart, Timothy Rice and Martin Woodall. None of those directors were independent under the rules promulgated by the SEC and the rules of the New York Stock Exchange applicable to audit committees.
Management is responsible for our internal controls and the financial reporting process. Hein & Associates LLP, our independent registered public accounting firm, is responsible for performing an independent audit of our consolidated financial statements in accordance with generally accepted auditing standards. The board of directors’ responsibility is to monitor and oversee the financial reporting processes.
In this context, our board of directors reviewed and discussed the audited financial statements with both management and Hein & Associates LLP. Specifically, our board of directors has discussed with Hein & Associates LLP the matters required to be discussed by statement of Auditing Standard No. 16, which superseded Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU ss.380), as amended and adopted by the Public Company Accounting Oversight Board.
Our board of directors received from Hein & Associates LLP the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with Hein & Associates LLP the issue of its independence from us.
Based on our board of directors’ review and its discussions with management and Hein & Associates LLP noted above, our board of directors recommended and approved the inclusion of the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC.
This report has been furnished by the current members of our board of directors, Timothy Rice, Martin Woodall and Robert Hart.
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Hein & Associates LLP served as our independent registered public accounting firm for 2013 and 2012 and has been selected to serve as our independent registered public accounting firm for 2014, unless our board of directors subsequently determines that a change is desirable.
During the two most recent fiscal years prior to their retention as our auditors we had not consulted with Hein & Associates LLP regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on our financial statements, and neither written nor oral advice was provided that was an important factor considered by us in reaching a decision as to the accounting for an auditing or financial reporting issue.
While stockholder ratification is not required for the selection of Hein & Associates LLP as our independent registered public accounting firm, the selection was ratified solely with a view toward soliciting the stockholders’ opinion on the matter, which opinion will be taken into consideration by the board of directors in its future deliberations.
The ratification, where required or permitted, of the appointment of Hein & Associates LLP as our independent registered public accounting firm requires the affirmative vote of a majority of the shares present in person or by proxy or, if by written consent, a majority of the shares entitled to vote at a meeting of stockholders. Section 2.17 of our Bylaws and Section 78.320 of the Nevada Revised Statutes permit any corporate action, upon which a vote of stockholders is required or permitted, to be taken without a meeting, provided that written consents are received from stockholders having at least the requisite number of shares that would be necessary to authorize or take such action if a meeting was held at which all shares entitled to vote thereon were present and voted. Accordingly, the ratification of the appointment of Hein & Associates LLP as our independent registered public accounting firm may be effected by a written consent executed by stockholders representing at least a majority of our outstanding stock entitled to vote. Since Radical Holdings LP and Radical Investments LP represent 67.9% of our outstanding voting stock on the record date, the written consent that they delivered on April 17, 2014, is sufficient to ratify the appointment and no further vote, approval or consent of stockholders is required to approve or authorize this action.
OUR BOARD OF DIRECTORS RECOMMENDED A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF
HEIN & ASSOCIATES LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
The ratification of the appointment of Hein & Associates LLP as our independent registered public accounting firm will be effective 40 days following the initial mailing of the Notice of Internet Availability of Information Statement, or June 9, 2014.
Fees billed by Hein & Associates LLP for the audits of our 2013 and 2012 annual financial statements, included in our 2013 and 2012 Annual Reports on Form 10-K, and the reviews of the quarterly financial statements included in our Quarterly Reports on Form 10-Q during 2013 and 2012 amounted to $79,870 and $78,450 for those two years, respectively.
No audit-related fees were billed by Hein & Associates LLP during 2013 and 2012.
Fees totaling $11,500 and $11,550 were billed by Hein & Associates LLP for tax compliance, tax advice and tax planning for 2013 and 2012, respectively.
In 2013 and 2012, Hein & Associates LLP billed us for no other services.
Our board of directors pre-approves the nature and estimated amount of all non-audit services to be provided to us by our independent registered public accounting firm, taking into consideration the impact that the rendition of such services could have on auditor independence. Specifically, our board of directors has pre-approved the use of Hein & Associates LLP for detailed, specific types of services within the following categories of non-audit services: merger and acquisition due diligence and audit services related to the Officeware Corporation merger, internal control reviews, tax compliance and advisory services.
No other business was acted upon by our majority stockholders other than that which is explained in this Information Statement.