Delaware
|
6770
|
84-1108035
|
||
(State
or other jurisdiction
of
incorporation)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
No.)
|
Large accelerated filer
¨
|
Accelerated filer ¨
|
Non-accelerated
filer ¨
(Do not check if smaller reporting company)
|
Smaller
reporting company þ
|
Title of Class of
Securities to be
Registered
|
Amount to be
Registered(1)
|
Proposed Maximum
Aggregate Price Per
Share(2)
|
Proposed
Maximum
Aggregate
Offering Price(2)
|
Amount of
Registration Fee
|
||||||||||||
Common
Stock, $0.0001 par value per share (“Common Stock”)
|
5,300,003 | $ | 0.08 | $ | 424,000.24 | $ | 16.66 | |||||||||
Common
Stock issuable upon exercise of warrants
|
21,489,801 | $ | 0.08 | $ | 1,719,184.08 | 67.56 | ||||||||||
Common
Stock, issuable upon conversion of Note
|
3,361,345 | $ | 0.08 | $ | 268,907.60 | $ | 10.57 | |||||||||
Total
|
30,151,149 | $ | 0.08 | $ | 2,412,091.92 | $ | 94.80 |
(1)
|
The
shares of our common stock being registered hereunder are being registered
for resale by the selling stockholders named in the
prospectus.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457(c) under the Securities Act of 1933, as amended, based on the
average of the bid ($.0.0701) and ask ($0.085) prices per share of our
common stock, as reported on the Over-the-Counter Bulletin Board on
January 8, 2009, rounded up to the nearest whole
cent.
|
The
information in this prospectus is not complete and may be amended. The
selling stockholders may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
|
Page
|
|
PROSPECTUS
SUMMARY
|
1
|
RISK
FACTORS
|
6
|
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
|
13
|
TAX
CONSIDERATIONS
|
13
|
USE
OF PROCEEDS
|
14
|
DILUTION
|
14
|
SELLING
STOCKHOLDERS
|
14
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
18
|
PLAN
OF DISTRIBUTION
|
20
|
DESCRIPTION
OF SECURITIES
|
22
|
EXPERTS
|
23
|
LEGAL
REPRESENTATION
|
24
|
DESCRIPTION
OF BUSINESS
|
24
|
DESCRIPTION
OF PROPERTY
|
35
|
LEGAL
PROCEEDINGS
|
36
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
37
|
CHANGES
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
|
52
|
EXECUTIVE
COMPENSATION
|
52
|
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
|
63
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
66
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
69
|
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
|
72
|
72
|
|
FINANCIAL
STATEMENTS
|
73
|
·
|
The
sale of business management systems comprised of proprietary software
applications, implementation and training; and
|
|
·
|
Providing
subscription-based services, including software support and maintenance,
information (content) products and online services for a
fee.
|
Shares
of Common Stock being offered by the selling stockholders:
|
30,151,149
shares of our Common Stock.
|
|
Selling
stockholders
|
Holders
of the shares of Common Stock, Common Stock purchase warrants, and
Convertible Term Note dated
December 21, 2007. See “Selling Stockholders” at page
14.
|
|
Number
of shares outstanding before the offering:
|
103,945,090(1)
|
|
Number
of shares outstanding after the offering, if all the shares are
sold:
|
103,945,090(1)
|
|
Use
of Proceeds:
|
We
will not receive any proceeds from the sale of the shares of Common Stock
by the selling stockholders identified in this prospectus. The selling
stockholders will receive all net proceeds from the sale of the shares
offered by this prospectus.
|
|
Risk
Factors:
|
See
“Risk Factors” beginning on page 6 and the other information in this
prospectus for a discussion of the factors you should consider before
deciding to invest in shares of our Common Stock.
|
|
Dividend
Policy:
|
We
intend to retain any earnings to finance the development and growth of our
business and retire liabilities. Accordingly, we do not anticipate that we
will declare any cash or stock dividends on our Common Stock for the
foreseeable future. See “Market for Common Equity and Related Stockholder
Matters” on page 18.
|
|
Over-the-Counter
Bulletin Board Symbol:
|
ASFG.OB
|
(1)
|
Based
on 79,093,944 shares of Common Stock outstanding as of January 8, 2009,
and assumes that (a) all Warrants to purchase an aggregate 21,489,801
shares of our Common Stock, which shares are covered by this prospectus,
have been exercised in full, and (2) the Convertible Term Note dated
December 21, 2007, which is convertible into an aggregate 3,361,345 shares
of our Common Stock, which shares are covered by this prospectus, is
converted in full.
|
(In
thousands, except per share data)
|
Three Months Ended
|
Years Ended
|
||||||||||||||
September 30,
2008
|
September 30,
2007
|
June 30, 2008
|
June 30, 2007
|
|||||||||||||
Total
revenue
|
$ | 5,845 | $ | 5,355 | $ | 22,463 | $ | 20,217 | ||||||||
Costs
and operating expenses
|
$ | 6,397 | $ | 4,424 | $ | 34,269 | $ | 24,211 | ||||||||
Income
(loss) continuing operations
|
$ | (552 | ) | $ | 931 | $ | (11,806 | ) | $ | (3,994 | ) | |||||
Discontinued
operations
|
$ | - | $ | 37 | $ | (13 | ) | $ | 506 | |||||||
Net
income (loss)
|
$ | (552 | ) | $ | 968 | $ | (11,819 | ) | $ | (3,488 | ) | |||||
Income
(loss) per share attributed to common stockholders basic and
diluted
|
||||||||||||||||
Continuing
operations
|
$ | (0.01 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.05 | ) | |||||
Discontinued
operations
|
$ | - | $ | - | $ | - | $ | 0.01 | ||||||||
Net
Loss per share
|
$ | (0.01 | ) | $ | 0.01 | $ | (0.15 | ) | $ | (0.04 | ) | |||||
Weighted
average number of shares - basic and diluted
|
92,733,220 | 86,239,726 | 87,057,391 | 79,828,912 |
(In
thousands)
|
September 30, 2008
|
September 30, 2007
|
June 30, 2008
|
June 30, 2007
|
||||||||||||
Total
assets
|
$ | 26,472 | $ | 39,445 | $ | 29,802 | $ | 38,882 | ||||||||
Cash
and cash equivalents
|
$ | 947 | $ | 850 | $ | 1,964 | $ | 583 | ||||||||
Total
liabilities
|
$ | 12,910 | $ | 10,197 | $ | 14,747 | $ | 14,108 | ||||||||
Working
capital (deficiency)
|
$ | (1,235 | ) | $ | (666 | ) | $ | (1,895 | ) | $ | (3,665 | ) | ||||
Shareholders’
equity
|
$ | 13,562 | $ | 29,248 | $ | 15,055 | $ | 24,774 |
·
|
implement
and successfully execute our business and marketing
strategy;
|
·
|
continue
to develop new products and upgrade our existing
products;
|
|
·
|
respond
to industry and competitive
developments;
|
·
|
attract,
retain, and motivate qualified personnel;
and
|
·
|
obtain
equity and debt financing on satisfactory terms and in timely fashion in
amounts adequate to implement our business plan and meet our
obligations.
|
·
|
difficulty
in establishing or managing distribution relationships;
|
|
·
|
different
standards for the development, use, packaging and marketing of our
products and technologies;
|
|
·
|
our
ability to locate qualified local employees, partners, distributors and
suppliers;
|
|
·
|
the
potential burden of complying with a variety of foreign laws and trade
standards; and
|
|
·
|
general
geopolitical risks, such as political and economic instability, changes in
diplomatic and trade relations, and foreign currency risks and
fluctuations.
|
|
1.
|
The
number of shares beneficially owned prior to this
offering;
|
|
2.
|
The
total number of shares to be offered hereby;
and
|
|
3.
|
The
total number and percentage of shares that will be beneficially owned upon
completion of this offering.
|
Name
and Address of Selling Stockholder
|
Number of
Shares
Beneficially
Owned Prior
to the Offering
|
Number of
Shares Being
Offered Hereby
|
Number of
Shares
to be
Beneficially
Owned After
the Offering
|
Percentage
of Shares to be
Beneficially
Owned After
the Offering
|
||||||||||||
Arthur
Blumenthal(1)
1801
Swedesford Rd.
Malvern,
PA 19355
|
650,365 | 300,000 | (2) | 350,365 | 0.44 | % | ||||||||||
Aidan
J. McKenna
619
East Drive
Sewickly,
PA 15143
|
3,337,500 | 3,337,500 | (3) | 0 | — | |||||||||||
Wynnefield
Partners Small Cap Value, LP(4)(5)
450
7th
Avenue, Suite 509
New
York, NY 10123
|
3,038,196 | 1,666,668 | (6) | 1,371,528 | 1.72 | % | ||||||||||
Wynnefield
Partners Small Cap Value, LP I(4)(5)
450
7th
Avenue, Suite 509
New
York, NY 10123
|
3,565,919 | 1,666,668 | (6) | 1,899,251 | 2.38 | % | ||||||||||
Wynnefield
Small Cap Value Offshore Fund Ltd. (5)(7)
450
7th
Avenue, Suite 509
New
York, NY 10123
|
5,094,965 | 1,666,668 | (6) | 3,428,297 | 4.29 | % | ||||||||||
Channel
Partnership II, LP(5)
(8)
450
7th
Avenue, Suite 509
New
York, NY 10123
|
1,250,000 | 1,250,000 | (9) | 0 | — | |||||||||||
Lewis
Opportunity Fund, LP(10)
c/o
Lewis Asset Management Corp.
45
Rockefeller Plaza, Suite 2570
New
York, NY 10111
|
10,434,974 | 5,112,328 | (11) | 5,322,646 | 6.32 | % | ||||||||||
LAM
Opportunity Fund, LTD(10)
c/o
Lewis Asset Management Corp.
45
Rockefeller Plaza, Suite 2570
New
York, NY 10111
|
2,639,390 | 1,290,671 | (12) | 1,348,719 | 1.68 | % | ||||||||||
Little
Wing LP(13)
145
East 57th
Street, 10th
Floor
New
York, NY 10022
|
5,886,412 | 714,584 | (14) | 5,171,828 | 6.48 | % | ||||||||||
Tradewinds
Fund Ltd.(13)
145
East 57th
Street, 10th
Floor
New
York, NY 10022
|
600,254 | 118,750 | (15) | 481,504 | 0.61 | % | ||||||||||
W.
Quillen Securities(16)
145
East 57th
Street, 8th
Floor
New
York, NY 10022
|
665,966 | 665,966 | (17) | 0 | — | |||||||||||
Comvest
Capital, LLC(18)
One
North Clematis, Suite 300
West
Palm Beach, FL 33401
|
8,444,678 | 8,444,678 | (19) | 0 | — | |||||||||||
Christopher
Vulliez
c/o
Amphor Capital
529
Fifth Avenue, 8th
Floor
New
York, NY 10017
|
416,668 | 416,668 | (20) | 0 | — | |||||||||||
The
Hummingbird Value Fund L.P.
(21)
145
East 57th
Street, 8th
Floor
New
York, NY 10022
|
2,500,000 | 2,500,000 | (22) | 0 | — | |||||||||||
Commonwealth
Associates LP(23)
830
Third Avenue, 8th Floor
New
York, NY 10022
|
1,000,000 | 1,000,000 | (24) | 0 | — | |||||||||||
TOTAL:
|
49,525,287 | 30,151,149 | 19,374,138 | 21.91 | % |
|
(1)
|
Mr.
Blumenthal is Vice President of Sales and Marketing of ASNA, a position he
has held since 2001.
|
|
(2)
|
Represents
shares issued by the Company to Mr. Blumenthal as partial consideration
for the settlement of claims he brought against the Company (see “Legal
Proceedings” at page 36 and Note 9 on page F-27
below).
|
|
(3)
|
Represents
3,337,500 shares of Common Stock issuable upon the exercise of Warrants
which were issued to Mr. McKenna as partial consideration for the
settlement of claims he brought against the Company and its subsidiaries
(see “Legal Proceedings” at page 36 and Note 9 on page F-27
below). The Warrants are exercisable at $0.48 per share, and
expire on January 31, 2012.
|
|
(4)
|
The
Company has been informed that Wynnefield Capital Management, LLC
(“Wynnefield LLC”) is the general partner and managing entity of this
selling stockholder, and that each of Nelson Obus and Joshua H. Landes,
principals and co-managing members of Wynnefield LLC, exercises voting and
investment control over the shares beneficially owned by this selling
stockholder.
|
|
(5)
|
Dwight
Mamanteo, one of the Company’s directors, is an investment analyst with
Wynnefield Capital, Inc., which is an entity affiliated with Wynnefield
LLC. Mr. Mamanteo exercises neither voting nor dispositive
control over the shares beneficially owned by Wynnefield Partners Small
Cap Value, LP, Wynnefield Partners Small Cap Value, LP I, Wynnefield Small
Cap Value Offshore Fund Ltd. or Channel Partnership II,
LP.
|
|
(6)
|
Represents
833,334 shares of common stock, and 833,334 shares of common stock
issuable upon exercise of warrants, which are currently exercisable at an
exercise price of $1.00 per share and expire on July 2,
2013.
|
|
(7)
|
The
Company has been informed that Wynnefield Capital, Inc. is the investment
manager of this selling stockholder, and that each of Nelson Obus and
Joshua H. Landes, principal executive officers of Wynnefield Capital,
Inc., exercises voting and investment control over the shares beneficially
owned by this selling stockholder.
|
|
(8)
|
The
Company has been informed that Nelson Obus, general partner, exercises
voting and investment control over the shares beneficially by this selling
stockholder.
|
|
(9)
|
Represents
625,000 shares of common stock, and 625,000 shares of common stock
issuable upon exercise of warrants, which are currently exercisable at an
exercise price of $1.00 per share and expire on July 2,
2013.
|
|
(10)
|
The
Company has been informed that Lewis Asset Management Corp. is the
managing entity of this selling stockholder, and that W. Austin Lewis IV,
portfolio manager and general partner, exercises voting and investment
control over the shares beneficially owned by this selling
stockholder.
|
|
(11)
|
Represents
5,112,328 shares of common stock issuable upon exercise of warrants, which
are currently exercisable at $1.00 per share and expire April 24,
2014.
|
|
(12)
|
Represents
1,290,671 shares of common stock issuable upon exercise of warrants, which
are currently exercisable at $1.00 per share and expire April 24,
2014.
|
|
(13)
|
The
Company has been informed that Quilcap Management, LLC is the investment
manager of this selling stockholder, and that Parker Quillen, president of
Quilcap Management, LLC, exercises voting and investment control over the
shares beneficially owned by this selling stockholder. Mr.
Quillen’s brother, Whitney S. Quillen, is a broker-dealer registered with
the Financial Industry Regulatory Authority, Inc. (“FINRA”). See footnote
16 below.
|
|
(14)
|
Includes
357,292 shares of common stock and 357,292 shares issuable upon exercise
of warrants, which are currently exercisable at $1.00 per share and expire
July 2, 2013.
|
|
(15)
|
Represents
59,375 shares of common stock and 59,375 shares issuable upon exercise of
warrants, which are currently exercisable at $1.00 per share and expire
July 2, 2013.
|
|
(16)
|
Each
of W. Quillen Securities, and its president, Whitney S. Quillen, are
broker-dealers registered with FINRA. W. Quillen Securities, received the
securities as placement agent compensation in the ordinary course of
business, and at the time had no understandings or agreements, directly or
indirectly, with any party, to distribute such securities. The
Company has been informed that Whitney S. Quillen exercises voting and
investment control over the shares beneficially owned by this selling
stockholder.
|
|
(17)
|
Represents
shares of common stock underlying warrants to purchase an aggregate
665,966 shares of the Company’s common stock issued to W. Quillen
Securities as placement agent compensation in connection with the
Company’s private placement of units of common stock and warrants on July
2, 2007, which are currently exercisable at $1.00 per share and will
expire on July 2, 2013.
|
|
(18)
|
The
Company has been informed that Comvest Capital Advisors, LLC is the
managing entity of this selling stockholder, and that Gary Jaggard,
managing director of Comvest Capital, LLC exercises voting and investment
control over the shares beneficially owned by this selling
stockholder.
|
|
(19)
|
Represents
(i) an aggregate 3,000,000 shares issuable upon exercise of warrants,
which are currently exercisable at $0.11 per share and expire December 31,
2013; (ii) 2,083,333 shares issuable upon exercise of warrants which are
currently exercisable at $0.3618 and expire December 31, 2013; and (iii)
3,361,345 shares of common stock issuable upon conversion of the
$5,000,000 principal amount of that certain Convertible Term Note dated
December 21, 2007 issued to Comvest Capital LLC, at a current conversion
rate of $1.4875 per share (see “Description of Securities – Convertible
Note” for details regarding this Tern Note). This offering does not
include any shares of common stock which may be issued in the event
that Comvest Capital LLC elects in the future to require payment of
interest in shares of common stock rather than in cash, of approximately
31,933 shares per interest month. The Company may register any
such shares in a future registration statement, when and if
necessary.
|
|
(20)
|
Represents
208,334 shares of common stock and 208,334 shares issuable upon exercise
of warrants, which are currently exercisable at $1.00 per share and expire
July 2, 2013.
|
|
(21)
|
The
Company has been informed that Hummingbird Management LLC is the managing
entity of this selling stockholder, and that Paul D. Sonkin exercises
voting and investment control over the shares beneficially owned by this
selling stockholder.
|
|
(22)
|
Represents
1,250,000 shares of common stock, and 1,250,000 shares of common stock
issuable upon exercise of warrants, which are currently exercisable at an
exercise price of $1.00 per share and expire on July 2,
2013.
|
|
(23)
|
The
Company has been informed that Commonwealth Management LLC is the general
partner of this selling stockholder, and that Robert A. O’Sullivan,
managing member of Commonwealth Management LLC, exercises voting and
investment control over the shares beneficially owned by this selling
stockholder. Each of Commonwealth Associates LP and Robert O’Sullivan are
broker-dealers registered with
FINRA.
|
|
(24)
|
Represents
an aggregate 1,000,000 shares of the Company’s common stock issuable upon
exercise of warrants issued to Commonwealth Associates LP on July 3, 2008
as compensation for work performed during its banking and advisory
engagement with the Company. Commonwealth Associates LP received the
securities as compensation in the ordinary course of business, and at the
time had no understandings or agreements, directly or indirectly, with any
party, to distribute such securities. The warrants are
currently exercisable at an exercise price of $0.30 per share and expire
on July 3, 2013.
|
|
(i)
|
has
had a material relationship with us or any of our affiliates other than as
a stockholder at any time within the past three
years;
|
|
(ii)
|
served
as one of our officers or directors;
nor
|
|
(iii)
|
is
a registered broker-dealer or an affiliate of a
broker-dealer.
|
2007
|
||||||||
High
|
Low
|
|||||||
1st
Quarter ended September 30
|
$ | 1.20 | $ | 1.10 | ||||
2nd
Quarter ended December 31
|
$ | 1.40 | $ | 0.51 | ||||
3rd
Quarter ended March 31
|
$ | 0.90 | $ | 0.48 | ||||
4th
Quarter ended June 30
|
$ | 0.65 | $ | 0.43 |
2008
|
||||||||
High
|
Low
|
|||||||
1st
Quarter ended September 30
|
$ | 0.47 | $ | 0.20 | ||||
2nd
Quarter ended December 31
|
$ | 0.30 | $ | 0.16 | ||||
3rd
Quarter ended March 31
|
$ | 0.45 | $ | 0.23 | ||||
4th
Quarter ended June 30
|
$ | 0.25 | $ | 0.10 |
2009
|
||||||||
High
|
Low
|
|||||||
1st
Quarter ended September 30
|
$ | 0.51 | $ | 0.10 | ||||
2nd
Quarter ended December 31
|
$ | 0.34 | $ | 0.07 |
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
under the Plan(2)
|
||||||
(a)
|
(b)
|
(c)
|
|||||||
Equity
compensation plans approved by security holders
(1)
|
0
|
N/A
|
13,909,983
|
||||||
Equity
compensation plans not approved by security holders
|
0
|
0
|
0
|
||||||
Total
|
0
|
0
|
13,909,983
|
(1)
|
Represents
the shares authorized for issuance under the Aftersoft Group Inc. 2007
Long-Term Incentive Plan, which was approved by the Company’s shareholders
at the Annual Meeting held on June 12, 2008. The maximum aggregate number
of shares of Common Stock that may be issued under the Plan, including
Stock Options, Stock Awards, and Stock Appreciation Rights is limited to
15% of the shares of Common Stock outstanding on the first trading day of
any fiscal year, or 13,909,983 for fiscal 2009.
|
(2)
|
As
of June 30, 2008.
|
|
·
|
ordinary
broker transactions, which may include long or short
sales;
|
|
·
|
transactions
involving cross or block trades on any securities or market where our
Common Stock is trading;
|
|
·
|
purchases
by brokers or dealers as principal and resale by such purchasers for their
own accounts pursuant to this
prospectus;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
at
the market to or through market makers or into an existing market for the
shares;
|
|
·
|
through
transactions in options, swaps or other derivatives (whether exchange
listed or otherwise);
|
|
·
|
in
other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
or
|
|
·
|
any
combination of the foregoing.
|
|
1.
|
Not
engage in any stabilization activities in connection with our Common
Stock;
|
|
2.
|
Furnish
each broker or dealer through which Common Stock may be offered, such
copies of this prospectus from time to time, as may be required by such
broker or dealer, and
|
|
3.
|
Not
bid for or purchase any of our securities or attempt to induce any person
to purchase any of our securities permitted under the Exchange
Act.
|
Amount
|
Exercise Price
|
Expiration Date
|
|||||||
3,437,500 | $ | 0.48 |
1/31/2012
|
||||||
12,277,302 | $ | 1.00 |
7/2/2013
|
||||||
1,000,000 | $ | 0.11 |
12/31/2013
|
||||||
2,083,333 | $ | 0.3618 |
12/31/2013
|
||||||
2,000,000 | $ | 0.11 |
12/31/2013
|
||||||
1,000,000 | $ | 0.30 |
7/3/2013
|
||||||
Total:
|
21,798,135 |
·
|
The
sale of business management systems comprised of proprietary software
applications, implementation and training;
and
|
·
|
Providing
subscription-based services, including software support and maintenance,
information (content) products and online services for a
fee.
|
|
·
|
gradual
growth in the aggregate number of vehicles in
use;
|
|
·
|
an
increase in the average age of vehicles in
operation;
|
|
·
|
fewer
new vehicles being purchased due to uncertainty in the economy, especially
available credit;
|
|
·
|
growth
in the total number of miles driven per vehicle per year;
and
|
|
·
|
increased
vehicle complexity.
|
1.
|
Business
Management Systems comprised of the Company’s proprietary software
applications, implementation and training and third-party hardware and
peripherals;
|
2.
|
Information
Products such as an accessible catalog database related to parts,
tires, labor estimates, scheduled maintenance, repair information,
technical service bulletins, pricing and product features and benefits
that are used by the different participants in the automotive
aftermarket;
|
3.
|
Online
Services and products that provide online connectivity between
manufacturers, warehouse distributors, retailers and automotive service
providers. These products enable electronic data interchange throughout
the automotive aftermarket supply chain between the different trading
partners. They also enable procurement and business services to be
projected over the Web to an expanded business audience;
and
|
4.
|
Customer
Support, Consulting and Training that provide phone and online
support, implementation and
training.
|
·
|
Phone
and online support. Customers can call dedicated support lines to speak
with knowledgeable personnel who provide support and perform on-line
problem solving as required.
|
·
|
Implementation,
education and training consulting. Our consulting and training teams work
together to minimize the disruption to a customer’s business during the
implementation process of a new system and to maximize the customer’s
benefit from the use of the system through
training.
|
·
|
Traditional Wholesale
Channel. The wholesale channel is the predominant distribution
channel in the automotive aftermarket. It is characterized by the
distribution of parts from the manufacturer to a warehouse distributor, to
parts stores and then to automotive service providers. Warehouse
distributors sell to automotive service providers through parts stores,
which are positioned geographically near the automotive service providers
they serve. This distribution method provides for the rapid distribution
of parts. The Company has products and services that meet the needs of the
warehouse distributors, parts stores and the automotive service
providers.
|
·
|
Retail Channel.
The retail channel is comprised of large specialty retailers, small
independent parts stores and regional chains that sell to “do-it-yourself”
customers. Larger specialty retailers, such as Advance Discount Auto
Parts, AutoZone, Inc., O’Reilly Automotive, Inc. and CSK Auto Corporation
carry a greater number of parts and accessories at more attractive prices
than smaller retail outlets and are gaining market share. The business
management systems used in this channel are either custom developed by the
large specialty retailers or purchased from business systems providers by
small to medium-sized businesses. The Company has products and services
that support the retail
channel.
|
·
|
Integrating
all of the Company’s products so that its software solutions work together
seamlessly, thereby eliminating the need to switch between
applications;
|
|
·
|
Enhancing
the Company’s current products and services to support its changing
customers needs; and
|
|
·
|
Providing
a migration path to the Company’s business management systems, reducing a
fear that many customers have that changing systems will disrupt
business.
|
1.
|
When
customer acceptance can be estimated, expenditures are capitalized as work
in process and deferred until completion of the contract at which time the
costs and revenues are recognized.
|
|
2.
|
When
customer acceptance cannot be estimated based on historical evidence,
costs are expensed as incurred and revenue is recognized at the completion
of the contract when customer acceptance is
obtained.
|
For the Twelve Months Ended
June 30,
|
||||||||||||||||
2008
|
2007
|
$ Variance
|
% Variance
|
|||||||||||||
Research
and development
|
$ | 3,176,000 | $ | 2,874,000 | $ | 302,000 | 10.5 | % | ||||||||
Sales
and marketing
|
2,467,000 | 1,985,000 | 482,000 | 24.3 | % | |||||||||||
General
and administrative
|
8,438,000 | 2,675,000 | 5,763,000 | 215.4 | % | |||||||||||
Depreciation
and amortization
|
1,287,000 | 1,462,000 | (175,000 | ) | (12.0 | )% | ||||||||||
Impairment
of Goodwill
|
8,170,000 | 3,100,000 | 5,070,000 | 163.5 | % | |||||||||||
Total
Operating Expenses
|
$ | 23,538,000 | $ | 12,096,000 | $ | 11,442,000 | 94.6 | % |
For the Three Months
Ended September 30,
|
||||||||||||||||
2008
|
2007
|
$ Variance
|
% Variance
|
|||||||||||||
Research
and development
|
$ | 785,000 | $ | 692,000 | $ | 93,000 | 13.4 | % | ||||||||
Sales
and marketing
|
599,000 | 528,000 | 71,000 | 13.5 | % | |||||||||||
General
and administrative
|
1,505,000 | 1,310,000 | 195,000 | 14.9 | % | |||||||||||
Depreciation
and amortization
|
268,000 | 355,000 | (87,000 | ) | -24.5 | % | ||||||||||
Total
Operating Expenses
|
$ | 3,157,000 | $ | 2,885,000 | $ | 272,000 | 9.4 | % |
Years Ending
June 30,
|
||||
2009
|
$ | 641,000 | ||
2010
|
523,000 | |||
2011
|
497,000 | |||
2012
|
410,000 | |||
2013
|
397,000 | |||
Thereafter
|
4,462,000 | |||
$ | 6,930,000 |
·
|
Business
management systems comprised of our proprietary software applications,
implementation and training and third-party hardware and
peripherals;
|
|
·
|
Information
products such as an accessible catalog database related to parts, tires,
labor estimates, scheduled maintenance, repair information, technical
service bulletins, pricing and product features and benefits, which are
used by the different participants in the automotive
aftermarket;
|
|
·
|
Online
services and products that connect manufacturers, warehouse distributors,
retailers and automotive service providers via the internet. These
products enable electronic data interchange throughout the automotive
aftermarket supply chain among the different trading partners. They also
enable procurement and business services to be projected over the internet
to an expanded business audience. Some UK clients use our information
products on their own websites and intranets; some clients in North
America and the UK use our systems and branded software to obtain relevant
and up-to-date information via the internet; and
|
|
·
|
Customer
support and consulting services that provide phone and online support,
implementation and
training.
|
|
·
|
gradual
growth in the aggregate number of vehicles in
use;
|
|
·
|
an
increase in the average age of vehicles in
operation;
|
|
·
|
fewer
new vehicles being purchased due to a slowdown in the
economy;
|
·
|
growth
in the total number of miles driven per vehicle per year;
and
|
·
|
increased
vehicle complexity.
|
|
(1)
|
Compensation should be
related to performance
|
|
(2)
|
Our employees should
think like
stockholders
|
|
(3)
|
Incentive compensation
should be a greater part of total compensation for more senior
positions
|
Name
and
Principal
Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-
Equity
Incentive
Plan
Compensation
($)
|
Non-
qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
||||||||||||||||||||||||
Ian
Warwick(1)
|
2008
|
349,195 | — | — | — | — | — | — | 349,195 | ||||||||||||||||||||||||
Chief
Executive Officer, President and Director
|
2007
|
350,682 | — | — | — | — | — | — | 350,682 | ||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Simon
Chadwick(2)
|
2008
|
259,402 | — | — | — | — | — | — | 259,402 | ||||||||||||||||||||||||
Chief Operating Officer and
Director
|
2007
|
260,507 | — | — | — | — | — | — | 260,507 | ||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Charles F.
Trapp(3)
|
2008
|
214,583 | — | 25,500 | (3) | — | — | — | — | 240,083 | |||||||||||||||||||||||
Vice
President, Finance, and Chief Financial Officer
|
2007
|
N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Michael
O’Driscoll (4)
|
2008
|
93,593 | — | — | — | — | — | 46,992 | (4) | 140,585 | |||||||||||||||||||||||
Former Chief Financial Officer
and Director
|
2007
|
N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||
Michael
Jamieson
(5)
|
2008
|
N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | ||||||||||||||||||||||||
Former
Chief Operating Officer
|
2007
|
196,384 | (5) | — | — | — | — | — | — | 196,384 |
(1)
|
Reflects
salary paid to Mr. Warwick for services rendered to us and our
subsidiaries during fiscal 2008 and 2007 as Aftersoft’s Chief Executive
Officer and President. Salary was paid in British pounds at an annual
salary of 175,000 GBP. The amounts shown was translated to U.S. dollars
based on a June 30, 2008 currency conversion rate of 1 GBP = $1.9954 and
the June 30, 2007 currency conversion rate of 1 GBP = $2.0039. Mr. Warwick
did not receive any additional compensation for his services as a director
on our Board of Directors.
|
(2)
|
Reflects
annual salary paid to Mr. Chadwick for services rendered to us and our
subsidiaries during fiscal 2008 and 2007 as Aftersoft’s Chief Operating
Officer. Salary was paid in British pounds at an annual salary of 130,000
GBP. The amounts shown was translated to U.S. dollars based on a June 30,
2008 currency conversion rate of 1 GBP = $1.9954 and the June 30, 2007
currency conversion rate of 1 GBP = $2.0039. Mr. Chadwick did not receive
any additional compensation for his services as a director on Board of
Directors.
|
(3)
|
Mr.
Trapp was appointed Vice President Finance and Chief Financial Officer
effective as of December 1, 2007. The amount shown in the table reflects
salary in the amount of $134,167 earned for services in these capacities
between December 1, 2007 and June 30, 2008, as well as salary in the
amount of $80,416 earned for services as an accountant prior to his
appointment as an officer. The salary for fiscal 2008 also includes
$20,500 that was deferred and contributed by Mr. Trapp to the Company’s
plan established under section 401(k) of the Internal Revenue Code of
1986, as amended. The amount shown in the “Stock Awards” column reflects
the dollar amount recognized for fiscal 2008 financial statement reporting
purposes of the outstanding stock awards held by Mr. Trapp in accordance
with FAS 123R. Stock award represent an award on May 13, 2008 of 750,000
shares of Common Stock with a grant date closing price of $0.10 per share,
of which 34% or 255,000 shares vested immediately on the date of grant.
The remaining 66% of the shares or 495,000 shares will vest in three equal
installments of 165,000 shares on each of the first, second and third
anniversaries of the grant date. The shares were not issued pursuant to
any existing compensation plan. Refer to the Company’s Consolidated
Financial Statements for the Fiscal Years Ended June 30, 2008 and 2007,
Note 1 “Stock Based Compensation” and Note 10 “Stockholders Equity”
included elsewhere in this prospectus, with respect to valuation
assumptions for this stock grant. Mr. Trapp held no other stock or option
awards at June 30, 2008.
|
(4)
|
The
2008 salary reflected in the table was earned by Mr. O’Driscoll for
services rendered as our Chief Financial Officer between July 1, 2007 and
November 30, 2007 in the amount of $93,593. The amount shown under “All
Other Compensation” reflects amounts paid to Mr. O’Driscoll in connection
with the termination of his employment with the Company. The salary and
termination payments were made in British pounds and were translated to
U.S. dollars based on the November 30, 2007 currency conversion rate of 1
GBP = $2.0705.
|
(5)
|
Mr.
Jamieson previously served as our Chief Operating Officer and a Director
on our Board of Directors, but resigned these positions on March 6, 2007.
The amount shown in the table reflects compensation paid to him for his
services during 2007 as Chief Executive Officer of our subsidiary, MAM
Software Ltd. The amount shown reflects annual salary paid to Mr. Jamieson
in British pounds at an annual salary of 98,000 GPB, and was translated to
U.S. dollars based on June 30, 2007 currency conversion rate of 1 GBP =
$2.0039.
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(# Exercisable)
|
Number of
Securities
Underlying
Unexercised
Option
(# Unexercisable)
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price
($)
|
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
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)
|
|||||||||||||||||||||||||||
Ian Warwick
|
|
|
||||||||||||||||||||||||||||||||||
Simon
Chadwick
|
|
|
||||||||||||||||||||||||||||||||||
Charles
F. Trapp
|
— | — | — | — | — | 495,000 | (1) | $ | 123,750 | (2) | — | — | ||||||||||||||||||||||||
Michael O’Driscoll
|
(1)
|
Stock
awards represent an award on May 13, 2008 to Mr. Trapp of 750,000 shares
of Common Stock with a grant date fair value of $0.10 per share, of which
34%, or 255,000 shares, vested immediately on the date of grant. The
remaining 66% of the shares, the 495,000 shares reflected in the table,
will vest in three equal installments of 165,000 shares, on each of the
first, second and third anniversaries of the grant date. The shares were
not issued pursuant to any existing compensation plan.
|
|
(2)
|
Based
on the closing price of $0.25 of the Company’s Common Stock on June 30,
2008.
|
Name
|
Fees Earned
or Paid in
Cash
($)
|
Stock Awards
($) (1)
|
Options
Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All Other
Compensation
($)
|
Total
($)
|
|||||||||||||||||||||
Ian Warwick
|
– | – | – | – | – | – | – | |||||||||||||||||||||
Simon
Chadwick
|
– | – | – | – | – | – | – | |||||||||||||||||||||
Dwight
B. Mamanteo
|
29,000 | 850 | – | – | – | – | 29,850 | |||||||||||||||||||||
Marcus
Wohlrab
|
29,000 | 850 | – | – | – | – | 29,850 | |||||||||||||||||||||
Frederick
Wasserman
|
28,600 | 850 | – | – | – | – | 29,450 |
(1)
|
The
amount shown in the table reflects the dollar amount recognized for fiscal
2008 financial statement reporting purposes of the outstanding stock
awards held by the directors in accordance with FAS 123R. Stock awards
represent an award on May 13, 2008 to each of Mr. Mamanteo, Wohlrab and
Wasserman of 25,000 shares of Common Stock with a grant date closing price
of $0.10 per share, of which 34% or 8,500 shares, vested immediately on
the date of grant. The remaining 66% of the shares, or 16,500 shares, will
vest in three equal installments of 5,500 shares, on each of the first,
second and third anniversaries of the grant date. The shares were not
issued pursuant to any existing compensation plan. Refer to the Company’s
Consolidated Financial Statements for the Fiscal Years Ended June 30, 2008
and 2007, Note 1 “Stock Based Compensation” and Note 10 “Stockholders
Equity” included elsewhere in this prospectus, with respect to valuation
assumptions for this stock grant. The directors held no other stock or
option awards at June 30,
2008.
|
Name
|
Age
|
Position
|
||
Ian
Warwick
|
48
|
Chief
Executive Officer and Chairman of the Board of Directors of the
Company
|
||
Charles
F. Trapp
|
59
|
Chief
Financial Officer of the Company
|
||
Simon
Chadwick
|
40
|
Chief
Operating Officer and Director
|
||
Dwight
B. Mamanteo
|
39
|
Director
|
||
Marcus
Wohlrab
|
45
|
Director
|
||
Frederick
Wasserman
|
54
|
Director
|
||
Gerald
M. Czarnecki
|
68
|
Director
|
Compensation Committee:
|
Audit Committee
|
Governance and
Nomination Committee
|
||
Dwight
B. Mamanteo – Chair
|
Dwight
B. Mamanteo
|
Dwight
B. Mamanteo
|
||
Marcus
Wohlrab
|
Marcus
Wohlrab
|
Marcus
Wohlrab – Chair
|
||
Frederick
Wasserman
|
Frederick
Wasserman** – Chair
|
Frederick
Wasserman
|
||
Gerald
M. Czarnecki -ex officio member
|
Gerald
M. Czarnecki -ex officio member
|
Gerald
M. Czarnecki -ex officio
member
|
**
|
The
Board of Directors has determined that Frederick Wasserman is a financial
expert as defined in Regulation S-K promulgated under the Securities
Act.
|
Name and address of beneficial owner
|
Amount and Nature of
Beneficial Ownership
|
Percent of class of
Common Stock(1)
|
||||||
Wynnefield
Persons(2)
c/o
Wynnefield Capital Inc.
450
Seventh Ave., Suite 509
New
York, NY 10123
|
12,949,080 |
(3)
|
15.75 | % | ||||
W.
Austin Lewis IV(4)
c/o
Lewis Asset Management Corp.
45
Rockefeller Plaza
New
York, NY 10111
|
15,870,627 |
(5)
|
18.56 | % | ||||
ComVest
Capital LLC
105
S. Narcissus Ave.
West
Palm Beach, FL 33401
|
8,444,678 |
(6)
|
10.24 | % | ||||
Directors and Officers:
|
||||||||
Ian
Warwick
Chief
Executive Officer
and
Chairman
|
4,132,881 |
(7)
|
5.23 | % | ||||
Simon
Chadwick
Chief
Operating Officer
|
1,853,941 | 2.34 | % | |||||
Charles
F. Trapp
Chief
Financial Officer
|
255,000 |
(8)
|
0.32 | % | ||||
Frederick
Wasserman,
Director
|
46,834 |
(9)
|
0.06 | % | ||||
Dwight
B. Mamanteo,
Director
|
143,449 |
(10)
|
0.18 | % | ||||
Marcus
Wohlrab,
Director
|
25,834 |
(11)
|
0.03 | % | ||||
Gerald
M. Czarnecki,
Director
|
502,544 |
(12)
|
0.64 | % | ||||
Executive
Officers and Directors
as
a group (7 persons)
|
6,960,483 | 8.80 | % | |||||
Former Officers:
|
||||||||
Michael
Jamieson
|
340,000 | 0.43 | % | |||||
Michael
O’Driscoll
|
0 | 0.00 | % |
(1)
|
Based
on a total of 79,093,944 shares of Common Stock outstanding. In accordance
with Securities and Exchange Commission rules, each person’s percentage
interest is calculated by dividing the number of shares that person owns
by the sum of (a) the total number of shares outstanding as of January 8,
2009 plus (b) the number of shares such person has the right to acquire
within sixty (60) days of January 8,
2009.
|
(2)
|
Comprised
of Wynnefield Partners Small Cap Value, LP (“Wynnefield Partners”) and
Wynnefield Partners Small Cap Value LP I (“Wynnefield Partners I”), and
the general partner of each of these entities, Wynnefield Capital
Management, LLC (“Wynnefield LLC”); Wynnefield Small Cap Value Offshore
Fund Ltd. (“Wynnefield Offshore”) and its investment manager, Wynnefield
Capital, Inc. (“Wynnefield Capital”); Channel Partnership II, LP
(“Channel”); Nelson Obus, who serves as principal and co-managing member
of Wynnefield Capital Management, LLC, principal executive officer of
Wynnefield Capital, Inc. and general partner of Channel Partnership II,
LP; and Joshua H. Landes, who serves as principal and co-managing member
of Wynnefield Capital Management, LLC and executive officer of Wynnefield
Capital, Inc. (collectively, the “Wynnefield Persons”). Dwight Mamanteo,
one of the Company’s directors, is an investment analyst with Wynnefield
Capital. He exercises neither voting nor dispositive control over the
shares beneficially owned by Wynnefield Capital. The Company has been
informed that Nelson Obus and Joshua H. Landes share voting and investment
control over the shares beneficially owned by Wynnefield Partners,
Wynnefield Partners I, Wynnefield Offshore, Wynnefield LLC and Wynnefield
Capital, and that Nelson Obus exercises sole voting and investment control
over the shares beneficially owned by
Channel.
|
(3)
|
Represents
an aggregate 9,824,078 shares of common stock and 3,125,002 shares
issuable upon exercise of warrants which are currently exercisable at
$1.00 per share and expire July 2, 2013, which are beneficially owned as
follows: (i) 2,204,862 shares of common stock and 833,334 shares issuable
upon exercise of warrants are beneficially owned by Wynnefield Partners;
(ii) 2,732,585 shares of common stock and 833,334 shares issuable upon
exercise of warrants are beneficially owned by Wynnefield Partners I;
(iii) 4,261,631 shares of common stock and 833,334 shares issuable upon
exercise of warrants are beneficially owned by Wynnefield Offshore; and
(iv) 625,000 shares of common stock and 625,000 shares issuable upon
exercise of warrants are beneficially owned by
Channel.
|
(4)
|
W.
Austin Lewis IV is the portfolio manager and general partner of Lewis
Asset Management Corp., the investment manager of Lewis Opportunity Fund,
LP and LAM Opportunity Fund, LTD., which are selling stockholders named in
this prospectus. Accordingly, Mr. Lewis is deemed to be the
beneficial owner of the shares owned by Lewis Opportunity Fund, LP and LAM
Opportunity Fund, LTD. and beneficially owned by Lewis Asset Management
Corp.
|
(5)
|
Represents
(i) 2,796,263 shares owned directly by W. Austin Lewis IV, (ii) 5,322,646
shares of common stock and 5,112,328 shares issuable upon exercise of
warrants, which are currently exercisable at $1.00 per share and expire
April 24, 2014, owned by Lewis Opportunity Fund, LP, and (iii) 1,348,719
shares of common stock and 1,290,671 shares of common stock issuable upon
exercise of warrants, which are currently exercisable at $1.00 per share
and expire April 24, 2014, owned by LAM Opportunity Fund,
LTD.
|
(6)
|
Includes
(i) 1,000,000 shares issuable upon exercise of warrants to purchase shares
of Common Stock, which are currently exercisable at $0.11 per share and
expire December 31, 2013; (ii) 2,083,333 shares issuable upon exercise of
warrants to purchase shares of Common Stock, which are currently
exercisable at $0.3618 per share and expire December 31, 2013; (iii)
2,000,000 shares issuable upon exercise of warrants to purchase shares of
Common Stock, which are currently exercisable at $0.11 per share and
expire December 31, 2013, and (iv) 3,361,345 shares of common stock
issuable upon conversion of the $5,000,000 principal amount of that
certain Convertible Term Note dated December 21, 2007 issued to Comvest
Capital LLC, at a current conversion rate of $1.4875 per share (see
“Description of Securities – Convertible Note” for details regarding this
Tern Note). The Company has been informed that Comvest Capital Advisors,
LLC is the managing entity of this selling stockholder, and that Gary
Jaggard, managing director of Comvest Capital, LLC exercises voting and
investment control over the shares beneficially owned by this selling
stockholder.
|
(7)
|
Includes
425,000 shares that Mr. Warwick owns directly, and 3,707,881 shares which
are held indirectly through a corporation that Mr. Warwick
controls.
|
(8)
|
Represents
the vested portion, or 34%, of an award of an aggregate 750,000 restricted
shares of Common Stock granted by the Company on May 13, 2008 for services
previously rendered, which vested immediately. The remaining 66% of the
shares will vest in three equal installments on each of the first, second
and third anniversaries of the grant
date.
|
(9)
|
Includes
(i) 8,500 vested shares of restricted Common Stock, which represents 34%
of an award for an aggregate 25,000 shares of restricted Common Stock
granted on May 13, 2008 by the Company for services previously rendered,
with respect to which the remaining 66% of the shares will vest in three
equal installments on the first, second and third anniversaries of the
grant date; and (ii) 18,334 vested shares of restricted Common Stock out
of an award of an aggregate 110,000 shares of restricted Common Stock
which vest quarterly over three years from the grant date of October 6,
2008.
|
(10)
|
Includes
(i) 8,500 vested shares of restricted Common Stock, which represents 34%
of an award for an aggregate 25,000 shares of restricted Common Stock
granted on May 13, 2008 by the Company for services previously rendered,
with respect to which the remaining 66% of the shares will vest in three
equal installments on the first, second and third anniversaries of the
grant date; and (ii) 14,301 vested shares of restricted Common Stock out
of an award of an aggregate 104,000 shares of restricted Common Stock
which vest quarterly over three years from the grant date of October 6,
2008.
|
(11)
|
Includes
(i) 8,500 vested shares of restricted Common Stock, which represents 34%
of an award for an aggregate 25,000 shares of restricted Common Stock
granted on May 13, 2008 by the Company for services previously rendered,
with respect to which the remaining 66% of the shares will vest in three
equal installments on the first, second and third anniversaries of the
grant date; and (ii) 17,334 vested shares of restricted Common Stock out
of an award of an aggregate 104,000 shares of restricted Common Stock
which vest quarterly over three years from the grant date of October 6,
2008.
|
(12)
|
Includes
(i) 10,625 shares of restricted Common Stock out of an award for an
aggregate 25,000 shares of restricted Common Stock granted by the Company
for joining the Board of Directors on October 6, 2008, with respect to
which 8,333 shares vested immediately and the remaining 16,667 shares vest
quarterly over three years; (ii) 19,251 shares of restricted Common out of
an award of an aggregate 140,000 shares of restricted Common Stock which
vest quarterly over three years from the grant date of October 6, 2008;
and (iii) 35,000 shares of Common Stock received in lieu of cash
compensation.
|
·
|
From
time to time ADNW advanced funds to the Company. As of June 30, 2008, the
balance of such advances was zero. During the 2008 fiscal year, payments
totaling $2,108,000 were advanced to Aftersoft with repayments of
$219,000. In fiscal 2006, the Company transferred its note receivable with
a related party known as MAM North America, Inc. (“MAM North America”) in
the amount of $510,000 to ADNW. ADNW had agreed to accept the assignment
for all the issued shares of MAM North America from the Company and repaid
the $510,000 note receivable on October 1, 2005 by allowing the Company to
reduce its balance of loans due to ADNW. The Company sold its 43%
shareholder interests in MAM Software North America, Inc. in October 2005.
As a consequence of the sale ADNW agreed that MAM Software Limited could
offset the $510,000 note receivable from MAM Software North America, Inc.
against the outstanding debt due ADNW. The net book value of the Company’s
investment in MAM Software North America, Inc. prior to the transfer to
ADNW was zero. The transactions allowed the Company to improve its balance
sheet by reducing loans due to the ADNW. Furthermore MAM North America has
indemnified MAM UK against all past or current liabilities. In December
2005, the Company sold property and equipment to a third party for
$308,000, who paid the $308,000 directly to ADNW. On June 10, 2006, the
Company sold 100% of the outstanding Common Stock of Euro Soft (which by
then had its own operations) to a different third party for $1,400,000.
The proceeds from the sale of Euro Soft were paid by this third party
purchaser directly to ADNW. No prior or subsequent relationship existed
between ADNW or Aftersoft with either of these
purchasers.
|
·
|
The
Company issued the following shares of Common Stock to ADNW as full
consideration of three
acquisitions:
|
(1)
|
On
December 21, 2005, the Company issued 32,500,000 shares of its Common
Stock to ADNW for the acquisition of MAM Software Limited and CarParts
Technologies Inc. Prior to this transaction, ADNW owned 100% of MAM
Software Limited and CarParts Technologies, Inc. The approximate dollar
value of the 32,500,000 shares that were issued at the time was
$54,925,000, which is based on the closing price of our stock of $1.69 per
share on that date. The transaction was undertaken as part of the spin-off
of businesses that were formerly owned by ADNW into what ultimately became
Aftersoft Group, Inc.
|
(2)
|
On
August 25, 2006, the Company issued 28,000,000 shares of its Common Stock
to ADNW for the acquisition of EXP. EXP is a former subsidiary of the
Company, which was sold on November 12, 2007. Prior to this transaction,
ADNW owned 100% of EXP. The transaction was undertaken with ADNW because
the Company believed at the time that EXP would prove to be a strategic
component of the Company’s business in the United States. The approximate
dollar value of the 28,000,000 shares that were issued at the time was
$30,800,000, which is based on the closing price of the Company’s stock of
$1.10 per share on that date.
|
(3)
|
On
February 1, 2007, the Company issued 16,750,000 shares of its Common Stock
to ADNW for the acquisition of DSS. DSS is a former subsidiary of the
Company, which was sold on November 12, 2007. Prior to this transaction,
ADNW owned 100% of DSS. The transaction was undertaken with ADNW because
the Company believed at the time that DSS would prove to be a strategic
component of the Company’s business in the United States. The approximate
dollar value of the 16,750,000 shares that were issued at the time was
$15,075,000, which is based on the closing price of the Company’s stock of
$0.90 per share on that date.
|
Balance
due to ADNW as of June 30, 2005
|
$
|
(884,418
|
)
|
|
Transfer
of advances made to MAM Software USA to ADNW
|
510,000
|
|||
Advances
received from ADNW
|
(633,875
|
)
|
||
Payments
made on behalf of ADNW
|
236,183
|
|||
Payment
made from Note Receivable by a third party direct to ADNW
|
450,000
|
|||
Proceeds
from sale of Aftersoft Fixed Assets paid by a third party direct to
ADNW
|
308,000
|
|||
Balance
due to ADNW as of June 30, 2006
|
(14,110
|
)
|
||
Payments
made by ADNW to third parties for earn-outs on behalf of
Aftersoft
|
(2,200,000
|
)
|
||
Payments
made from note receivable by third party direct to ADNW
|
950,000
|
|||
Payments
made on behalf of ADNW
|
1,528,110
|
|||
Balance
due from ADNW as of June 30, 2007
|
264,000
|
|||
Payments
made on behalf of ADNW
|
2,108,000
|
|||
Write
down of advance to net realizable value
|
(800,000
|
)
|
||
16,000,000
shares of ADNW common stock issued in April 2008 by ADNW to the Company as
payment for advances
|
(1,572,000
|
)
|
||
Balance
at June 30, 2008
|
$
|
0
|
Report
of Independent Registered Public Accounting Firm
|
F–1
|
Consolidated
Balance Sheets as of June 30, 2008 and 2007
|
F–2
|
Consolidated
Statements of Operations and Comprehensive Loss for the years
ended June 30, 2008 and 2007
|
F–3
|
Consolidated
Statements of Stockholders’ Equity for the years ended June 30, 2008 and
2007
|
F–4
|
Consolidated
Statements of Cash Flows for the years ended June 30, 2008 and
2007
|
F–5
|
Notes
to Consolidated Financial Statements
|
F–7
|
Consolidated
Balance Sheets
|
F-34
|
Consolidated
Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
|
F-35
|
Consolidated
Statements of Cash Flows (Unaudited)
|
F-36
|
Notes
to Consolidated Financial Statements (Unaudited)
|
F-38
|
(In thousands, except share
data)
|
June 30,
|
||||||
|
2008
|
2007
|
|||||
ASSETS
|
|
|
|||||
Current
Assets
|
|
|
|||||
Cash
and cash equivalents
|
$
|
1,964
|
$
|
583
|
|||
Accounts
receivable, net of allowance of $202 and $227
|
3,233
|
2,851
|
|||||
Investment
in non-marketable securities
|
–
|
688
|
|||||
Inventories
|
615
|
319
|
|||||
Current
assets of discontinued operations
|
–
|
2,587
|
|||||
Prepaid
expenses and other current assets
|
690
|
278
|
|||||
Total Current
Assets
|
6,502
|
7,306
|
|||||
|
|
|
|||||
Property and Equipment,
Net
|
592
|
209
|
|||||
|
|
|
|||||
Other
Assets
|
|
|
|||||
Goodwill
|
11,878
|
20,030
|
|||||
Amortizable
intangible assets, net
|
4,584
|
5,265
|
|||||
Software
development costs, net
|
1,718
|
1,301
|
|||||
Investments
in available-for-sale securities
|
4,102
|
–
|
|||||
Non-current
assets of discontinued operations
|
–
|
4,742
|
|||||
Other
long-term assets
|
426
|
29
|
|||||
TOTAL
ASSETS
|
$
|
29,802
|
$
|
38,882
|
|||
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|
|
|||||
Current
Liabilities
|
|
|
|||||
Accounts
payable
|
$
|
2,372
|
$
|
2,196
|
|||
Accrued
expenses and other
|
3,508
|
1,811
|
|||||
Current
portion of accrued litigation costs
|
–
|
2,000
|
|||||
Payroll
and other taxes
|
933
|
866
|
|||||
Current
portion of long-term debt
|
598
|
1,020
|
|||||
Current
portion of deferred revenue
|
607
|
643
|
|||||
Taxes
payable
|
379
|
391
|
|||||
Current
liabilities of discontinued operations
|
–
|
2,044
|
|||||
Total Current
Liabilities
|
8,397
|
10,971
|
|||||
|
|
|
|||||
Long-Term
Liabilities
|
|
|
|||||
Deferred
revenue, net of current portion
|
545
|
753
|
|||||
Deferred
income taxes
|
880
|
880
|
|||||
Accrued
litigation costs, net of current portion
|
–
|
825
|
|||||
Long-term
debt, net of current portion and debt discount
|
4,783
|
679
|
|||||
Other
|
142
|
–
|
|||||
Total
Liabilities
|
14,747
|
14,108
|
|||||
|
|
|
|||||
Commitments
and contingencies
|
|
|
|||||
|
|
|
|||||
Stockholders'
Equity
|
|
|
|||||
Preferred
stock: Par value $0.0001 per share; 10,000,000 shares authorized, none
issued and outstanding
|
–
|
–
|
|||||
Common
stock: Par value $0.0001 per share; 150,000,000 shares authorized,
92,733,220 and 80,127,384 shares issued and outstanding,
respectively
|
9
|
8
|
|||||
Additional
paid-in capital
|
31,732
|
26,123
|
|||||
Due
from parent company
|
(2,850
|
)
|
(264
|
)
|
|||
Accumulated
other comprehensive income
|
1,617
|
1,523
|
|||||
Accumulated
deficit
|
(15,453
|
)
|
(2,616
|
)
|
|||
Total Stockholders'
Equity
|
15,055
|
24,774
|
|||||
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
|
$
|
29,802
|
$
|
38,882
|
(In thousands, except share
and per share data)
|
For the Year Ended
June 30,
|
||||||
|
2008
|
2007
|
|||||
Revenues
|
$
|
22,463
|
$
|
20,217
|
|||
Cost
of revenues
|
10,429
|
9,357
|
|||||
Gross
Profit
|
12,034
|
10,860
|
|||||
|
|
|
|||||
Operating
Expenses
|
|
|
|||||
Research
and development
|
3,176
|
2,874
|
|||||
Sales
and marketing
|
2,467
|
1,985
|
|||||
General
and administrative
|
8,438
|
2,675
|
|||||
Depreciation
and amortization
|
1,287
|
1,462
|
|||||
Impairment
of goodwill
|
8,170
|
3,100
|
|||||
Total Operating
Expenses
|
23,538
|
12,096
|
|||||
|
|
|
|||||
Operating
Loss
|
(11,504
|
)
|
(1,236
|
)
|
|||
|
|
|
|||||
Other Income
(Expense)
|
|
|
|||||
Gain
on extinguishment of liability
|
–
|
487
|
|||||
Interest
expense
|
(874
|
)
|
(129
|
)
|
|||
|
|
|
|||||
Gain
on sale of investments
|
1,312
|
–
|
|||||
Litigation
settlement , net
|
76
|
(2,350
|
)
|
||||
Other,
net
|
57
|
16
|
|||||
Total other income (expense),
net
|
571
|
(1,976
|
)
|
||||
|
|
|
|||||
Loss from continuing operations
before provision for income taxes
|
(10,933
|
)
|
(3,212
|
)
|
|||
|
|
|
|||||
Provision
for income taxes
|
873
|
782
|
|||||
|
|
|
|||||
Loss from continuing
operations
|
(11,806
|
)
|
(3,994
|
)
|
|||
|
|
|
|||||
Income
from discontinued operations, net of tax
|
13
|
884
|
|||||
Loss
on sale of discontinued operations, net of tax
|
(26
|
)
|
(378
|
)
|
|||
|
|
|
|||||
Net Loss
|
(11,819
|
)
|
(3,488
|
)
|
|||
|
|
|
|||||
Unrealized
loss on investments in available-for-sale securities
|
(184
|
)
|
–
|
||||
Foreign
currency translation gain
|
278
|
1,899
|
|||||
Total Comprehensive
Loss
|
$
|
(11,725
|
)
|
$
|
(1,589
|
)
|
|
|
|
|
|||||
Loss
per share attributed to common stockholders - basic and
diluted
|
|
|
|||||
Net
loss from continuing operations
|
$
|
(0.15
|
)
|
(0.05
|
)
|
||
Discontinued
operations
|
–
|
0.01
|
|||||
Net
Loss
|
$
|
(0.15
|
(0.04
|
||||
|
|
|
|||||
Loss
per share attributed to common stockholders - basic and
diluted
|
|
|
|||||
|
87,057,391
|
79,828,912
|
Common Stock
|
Additional
Paid-in-
|
Due To
(From)
|
Other
Comprehensive
|
Retained Earnings
(Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
Capital
|
Parent
|
Income (Loss)
|
Deficit)
|
Total
|
||||||||||||||||
Balance
as of June 30, 2006
|
79,821,167
|
$
|
8
|
$
|
25,564
|
$
|
14
|
$
|
(376
|
)
|
$
|
872
|
$
|
26,082
|
||||||||
Common
stock issued to consultants for services performed
|
6,217
|
–
|
3
|
–
|
–
|
–
|
3
|
|||||||||||||||
Common
stock issued to convert long-term debt
|
300,000
|
–
|
144
|
–
|
–
|
–
|
144
|
|||||||||||||||
Fair
value of warrants issued for litigation costs
|
–
|
–
|
412
|
–
|
–
|
–
|
412
|
|||||||||||||||
Advances
to parent company, net
|
–
|
–
|
–
|
(278
|
)
|
–
|
–
|
(278
|
)
|
|||||||||||||
Foreign
currency translation adjustment
|
–
|
–
|
–
|
–
|
1,899
|
–
|
1,899
|
|||||||||||||||
Net
loss
|
–
|
–
|
–
|
–
|
–
|
(3,488
|
)
|
(3,488
|
)
|
|||||||||||||
Balance
as of June 30, 2007
|
80,127,384
|
8
|
26,123
|
(264
|
)
|
1,523
|
(2,616
|
)
|
24,774
|
|||||||||||||
Common
stock issued for cash
|
5,208,337
|
1
|
2,035
|
–
|
–
|
–
|
2,036
|
|||||||||||||||
Common
stock issued to settle litigation
|
1,718,750
|
–
|
825
|
–
|
–
|
–
|
825
|
|||||||||||||||
Litigation
settlement shares returned
|
(1,718,750
|
)
|
–
|
(275
|
)
|
–
|
–
|
–
|
(275
|
)
|
||||||||||||
Fair
value of warrants issued to settle litigation
|
–
|
–
|
152
|
–
|
–
|
152
|
||||||||||||||||
Fair
value of warrants issued to consultant
|
–
|
–
|
27
|
–
|
–
|
–
|
27
|
|||||||||||||||
Fair
value of warrants issued with long-term debt
|
–
|
–
|
910
|
–
|
–
|
–
|
910
|
|||||||||||||||
Common
stock and warrants issued for parent company common stock
|
6,402,999
|
–
|
1,812
|
–
|
–
|
(1,018
|
)
|
794
|
||||||||||||||
Common
stock issued as compensation
|
994,500
|
–
|
99
|
–
|
–
|
99
|
||||||||||||||||
Fair
value of warrants issued to lender
|
–
|
–
|
24
|
–
|
–
|
–
|
24
|
|||||||||||||||
Foreign
currency translation adjustment
|
–
|
–
|
–
|
–
|
278
|
–
|
278
|
|||||||||||||||
Unrealized
loss on investment in available-for-sale securities
|
–
|
–
|
–
|
–
|
(184
|
)
|
–
|
(184
|
)
|
|||||||||||||
Advances
to parent company, net
|
–
|
–
|
–
|
(2,586
|
)
|
–
|
–
|
(2,586
|
)
|
|||||||||||||
Net
loss
|
–
|
–
|
–
|
–
|
–
|
(11,819
|
)
|
(11,819
|
)
|
|||||||||||||
Balance
June 30, 2008
|
92,733,220
|
$
|
9
|
$
|
31,732
|
$
|
(2,850
|
)
|
$
|
1,617
|
$
|
(15,453
|
)
|
$
|
15,055
|
(In
thousands)
|
For the Years
Ended
June 30,
|
||||||
2008
|
2007
|
||||||
CASH FLOWS FROM OPERATING
ACTIVITIES :
|
|||||||
Net
loss
|
$
|
(11,819
|
)
|
$
|
(3,488
|
)
|
|
Adjustments
to reconcile net loss to net cash (used in) provided by operating
activities:
|
|||||||
Non-cash
revenues
|
–
|
(360
|
)
|
||||
Depreciation
and amortization
|
1,286
|
1,947
|
|||||
Debt
discount amortization
|
412
|
–
|
|||||
Gain
on extinguishment of liability
|
–
|
(487
|
)
|
||||
Loss
on disposition of property and equipment
|
16
|
4
|
|||||
Gain
on sale of investment in non-marketable securities
|
(1,312
|
)
|
–
|
||||
Loss
on settlements of amount due from parent company
|
1,091
|
–
|
|||||
Loss
on sale of discontinued operations
|
26
|
378
|
|||||
Gain
on modification of debt settlement
|
(123
|
)
|
–
|
||||
Fair
value of stock and warrants issued for services and
compensation
|
126
|
3
|
|||||
Fair
value of warrants issued for debt waiver
|
24
|
–
|
|||||
Fair
value of warrants issued for litigation costs
|
–
|
412
|
|||||
Impairment
of goodwill
|
8,170
|
3,100
|
|||||
|
|||||||
Changes
in assets and liabilities (net of the effect of acquisitions and
divestitures):
|
|||||||
Accounts
receivable
|
(382
|
)
|
(233
|
)
|
|||
Inventories
|
(37
|
)
|
(75
|
)
|
|||
Prepaid
expenses and other assets
|
(671
|
)
|
(59
|
)
|
|||
Net
advances to parent company relating to operating
activities
|
(2,060
|
)
|
(278
|
)
|
|||
Accounts
payable
|
176
|
884
|
|||||
Taxes
payable
|
151
|
(224
|
)
|
||||
Deferred
revenue
|
172
|
(1,235
|
)
|
||||
Accrued
expenses and other liabilities
|
1,884
|
300
|
|||||
Accrued
litigation costs
|
(2,000
|
)
|
1,805
|
||||
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES
|
(4,870
|
)
|
2,394
|
||||
|
|||||||
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|||||||
Cash
sold in divestitures
|
(157
|
)
|
–
|
||||
Purchase
of property and equipment
|
(383
|
)
|
(228
|
)
|
|||
Proceeds
from the sale of investment in non-marketable securities
|
2,000
|
–
|
|||||
Net
advances to parent company relating to investing
activities
|
–
|
(1,250
|
)
|
||||
Capitalized
software development costs
|
(681
|
)
|
(585
|
)
|
|||
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES
|
779
|
(2,063
|
)
|
||||
|
|||||||
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|||||||
Proceeds
from sale of common stock, net of cash issuance costs
|
2,036
|
–
|
|||||
Proceeds
from long-term debt, net of cash issuance costs
|
4,359
|
–
|
|||||
Payments
on long-term debt
|
(1,062
|
)
|
(84
|
)
|
|||
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
|
5,333
|
(84
|
)
|
||||
|
|||||||
Effect of exchange rate
changes
|
57
|
(40
|
)
|
||||
Net increase in cash and cash
equivalents
|
1,299
|
207
|
|||||
|
|||||||
Cash and cash equivalents at
beginning of year
|
665
|
458
|
|||||
Cash and cash equivalents at
end of year
|
$
|
1,964
|
$
|
665
|
(In
thousands)
|
For the Years
Ended
June 30,
|
||||||
2008
|
2007
|
||||||
Supplemental disclosures of
cash flow information
|
|||||||
Cash
paid during the year for :
|
|||||||
Interest
|
$
|
438
|
$
|
149
|
|||
Income
taxes
|
$
|
873
|
$
|
1,300
|
|||
|
|||||||
Non-cash
investing and financing transactions during the year for :
|
|||||||
Settlement
of note receivable by offsetting against amounts due to
Parent
|
$
|
–
|
$
|
950
|
|||
Shares
issued for accrued litigation costs
|
$
|
825
|
$
|
–
|
|||
Value
of shares returned in revised litigation settlement
|
$
|
275
|
$
|
–
|
|||
|
|||||||
Value
of warrants issued in revised litigation settlement
|
$
|
152
|
$
|
–
|
|||
|
|||||||
Earn-out
payments to third parties related to EXP paid by Parent
|
$
|
–
|
$
|
2,200
|
|||
Shares
issued for conversion of long-term debt
|
$
|
–
|
$
|
144
|
|||
Value
of warrants issued related to debt issuance
|
$
|
910
|
$
|
–
|
|||
|
|||||||
Shares
exchanged for parent company common stock:
|
|||||||
Value
of parent company shares received
|
$
|
794
|
$
|
–
|
|||
Deemed
dividend to parent company
|
1,018
|
–
|
|||||
Value
of Company shares exchanged
|
$
|
1,812
|
$
|
–
|
|||
Shares
of parent company common stock received in exchange for legal
obligation
|
$
|
484
|
$
|
–
|
|||
Shares
of parent company common stock received in exchange for receivable from
parent company
|
$
|
2,372
|
$
|
–
|
|||
|
|||||||
Divestiture
of Dealer Software and Services Limited (see Notes 2 and
11):
|
|||||||
Accounts
receivable
|
$
|
–
|
$
|
933
|
|||
Goodwill
|
-
|
700
|
|||||
Accounts
payable
|
-
|
(68
|
)
|
||||
Deferred
revenue
|
-
|
(322
|
)
|
||||
Loss
on sale
|
-
|
(378
|
)
|
||||
Note
receivable
|
$
|
-
|
$
|
865
|
|||
|
|||||||
Divestiture
of MMI (see Note s 2 and11):
|
|||||||
Cash
|
$
|
157
|
|||||
Accounts
receivable
|
439
|
||||||
Inventory
|
6
|
||||||
Other
|
27
|
||||||
Current
Assets
|
629
|
||||||
Property
and equipment
|
156
|
||||||
Other
long term assets
|
219
|
||||||
Goodwill
|
723
|
||||||
Intangible
assets
|
2,242
|
||||||
Total
Assets
|
3,969
|
||||||
Liabilities
assumed
|
(1,739
|
)
|
|||||
Net
assets divested
|
2,230
|
||||||
Proceeds
received
|
0
|
||||||
Loss
on disposal
|
$
|
2,230
|
|||||
|
|||||||
Divestiture
of EXP (see Notes 2 and 11):
|
|||||||
Accounts
receivable
|
$
|
1,050
|
|||||
Investments
in available for sale securities
|
369
|
||||||
Current
Assets
|
1,419
|
||||||
Goodwill
|
1,640
|
||||||
Total
Assets
|
3,059
|
||||||
Liabilities
assumed
|
(1,405
|
)
|
|||||
Net
assets divested
|
1,654
|
||||||
Proceeds
received:
|
|||||||
Investments
in available for sale securities
|
2,334
|
||||||
Receivable
from buyer
|
1,707
|
||||||
Gain
on disposal
|
$
|
2,387
|
|||||
|
|||||||
Divestiture
of note receivable of $865,000 for an investment in available for sale
securities of $682,000 as part of the divestitures of EXP and MMI (see
Note 3).
|
Cash
|
$
|
64,000
|
||
Other
current assets
|
773,000
|
|||
Property
and equipment
|
177,000
|
|||
Goodwill
|
635,000
|
|||
Amortizable
intangibles
|
2,784,000
|
|||
Current
liabilities
|
(708,000
|
)
|
||
Other
long-term liabilities
|
(807,000
|
)
|
||
Net
assets recorded to stockholders’ equity
|
$
|
2,918,000
|
||
|
||||
The
net assets of DSS at July 1, 2005 consisted of the
following:
|
||||
|
||||
Investment
in non-marketable securities
|
$
|
688,000
|
||
Net
assets recorded to stockholders’ equity
|
$
|
688,000
|
Balance,
July 1, 2006
|
$
|
22,700,000
|
||
Earn
out payback to third parties related to EXP.
|
2,200,000
|
|||
Effect
of exchange rate changes
|
1,293,000
|
|||
Impairment
charges
|
(3,100,000
|
)
|
||
Elimination
of goodwill related to divesting of EXP
|
(700,000
|
)
|
||
Reclassification
of goodwill relating to discontinued operations
|
(2,363,000
|
)
|
||
Balance
June 30, 2007
|
20,030,000
|
|||
Effect
of exchange rate changes
|
18,000
|
|||
Impairment
charges
|
(8,170,000
|
)
|
||
Balance
June 30, 2008
|
$
|
11,878,000
|
1)
|
When
customer acceptance can be estimated, expenditures are capitalized as work
in process and deferred until completion of the contract at which time the
costs and revenues are recognized.
|
2)
|
When
customer acceptance cannot be estimated based on historical evidence,
costs are expensed as incurred and revenue is recognized at the completion
of the contract when customer acceptance is
obtained.
|
|
2008
|
2007
|
|||||
Numerator
for basic and diluted loss per share:
|
|||||||
Net
loss
|
$
|
(11,819,000
|
)
|
$
|
(3,488,000
|
)
|
|
Deemed
distribution to parent company
|
(1,018,000
|
)
|
-
|
||||
Net
loss available to common shareholders
|
$
|
(12,837,000
|
)
|
$
|
(3,488,000
|
)
|
|
Denominator
for basic and diluted Loss per common share:
|
|||||||
Weighted
average number of shares of common stock outstanding
|
87,057,391
|
79,828,912
|
|||||
|
|||||||
Net
loss per common share available to common stockholders - basic and
diluted
|
$
|
(0.15
|
)
|
$
|
(0.04
|
)
|
|
June 30, 2008
|
June 30, 2007
|
|||||
Leasehold
improvements
|
$
|
574,000
|
$
|
160,000
|
|||
Computer and office
equipment
|
163,000
|
68,000
|
|||||
Equipment under capital
leases
|
10,000
|
10,000
|
|||||
Furniture and
equipment
|
357,000
|
418,000
|
|||||
|
1,104,000
|
656,000
|
|||||
Less : Accumulated
depreciation
|
512,000
|
(447,000
|
)
|
||||
|
$
|
592,000
|
$
|
209,000
|
|
June 30,
2008
|
June 30,
2007
|
|||||
Assets not subject to
amortization:
|
|||||||
Goodwill
|
$
|
11,878,000
|
$
|
20,030,000
|
|||
Assets subject to
amortization:
|
|||||||
Completed
software technology (9-10 years useful life)
|
$
|
3,389,000
|
$
|
3,389,000
|
|||
Customer
contracts / relationships (10 years useful life)
|
3,909,000
|
3,909,000
|
|||||
Automotive
data services (20 years useful life)
|
391,000
|
391,000
|
|||||
|
7,689,000
|
7,689,000
|
|||||
Less
: Accumulated amortization
|
(3,105,000
|
)
|
(2,424,000
|
)
|
|||
Amortizable
intangible assets, net
|
$
|
4,584,000
|
$
|
5,265,000
|
|||
|
|||||||
Software
development costs
|
$
|
3,263,000
|
$
|
2,458,000
|
|||
Less
: Accumulated amortization
|
(1,545,000
|
)
|
(1,157,000
|
)
|
|||
Software
development costs, net
|
$
|
1,718,000
|
$
|
1,301,000
|
Years Ending June
30,
|
||||
2009
|
$
|
1,130,000
|
||
2010
|
1,130,000
|
|||
2011
|
760,000
|
|||
2012
|
760,000
|
|||
2013
|
760,000
|
|||
Thereafter
|
1,762,000
|
|||
Total
|
$
|
6,302,000
|
|
June 30,
2008
|
June 30,
2007
|
|||||
ComVest
term loan, net of debt discount of $756,000
|
$
|
4,244,000
|
$
|
-
|
|||
ComVest
revolver
|
500,000
|
-
|
|||||
McKenna
note
|
497,000
|
825,000
|
|||||
Homann
note
|
125,000
|
125,000
|
|||||
Other
notes
|
15,000
|
749,000
|
|||||
|
5,381,000
|
1,699,000
|
|||||
Less
current portion
|
(598,000
|
)
|
(1,020,000
|
)
|
|||
Long
term portion
|
$
|
4,783,000
|
$
|
679,000
|
Years Ending June
30,
|
||||
$
|
598,000
|
|||
2010
|
1,287,000
|
|||
2011
|
4,252,000
|
|||
Total
|
$
|
6,137,000
|
US
Federal
|
US
State
|
UK
Corporate
|
Total
|
||||||||||
2008
|
|||||||||||||
Current
|
$
|
-
|
$
|
-
|
$
|
873,000
|
$
|
873,000
|
|||||
Deferred
|
-
|
-
|
-
|
-
|
|||||||||
Total
|
$
|
-
|
$
|
-
|
$
|
873,000
|
$
|
873,000
|
|||||
|
|||||||||||||
2007
|
|||||||||||||
Current
|
$
|
50,000
|
$
|
63,000
|
$
|
669,000
|
$
|
782,000
|
|||||
Deferred
|
-
|
-
|
-
|
-
|
|||||||||
Total
|
$
|
50,000
|
$
|
63,000
|
$
|
669,000
|
$
|
782,000
|
|
June 30,
2008
|
June 30,
2007
|
|||||
Deferred tax
assets:
|
|||||||
|
|||||||
Net
operating loss carry-forwards
|
$
|
2,200,000
|
$
|
6,730,000
|
|||
Deferred
revenue
|
392,000
|
731,000
|
|||||
Reserves
and accruals
|
580,000
|
410,000
|
|||||
Total deferred tax
assets
|
3,172,000
|
7,871,000
|
|||||
|
|||||||
Deferred tax
liabilities:
|
|||||||
Other
acquired amortizable intangibles
|
(1,558,000
|
)
|
(2,573,000
|
)
|
|||
Software
development costs
|
(584,000
|
)
|
(455,000
|
)
|
|||
Depreciation
and amortization
|
(100,000
|
)
|
(319,000
|
)
|
|||
State
taxes
|
(56,000
|
)
|
(271,000
|
)
|
|||
Total deferred tax
liabilities
|
(2,298,000
|
)
|
(3,618,000
|
)
|
|||
|
|||||||
Valuation
allowance
|
(1,754,000
|
)
|
(5,133,000
|
)
|
|||
Net deferred tax
liabilities
|
$
|
(880,000
|
)
|
$
|
(880,000
|
)
|
|
June 30,
|
||||||
|
2008
|
2007
|
|||||
Taxes
at statutory rates applied to loss from continuing operations before
taxes
|
$
|
(3,717,000
|
)
|
$
|
(1,092,000
|
)
|
|
State
taxes, net of federal effect
|
(180,000
|
)
|
(193,000
|
)
|
|||
Non-deductible
goodwill impairment
|
3,268,000
|
1,240,000
|
|||||
Other
non-deductible expenses
|
2,000
|
40,000
|
|||||
Differential
in UK corporate tax rate
|
(100,000
|
)
|
(209,000
|
)
|
|||
Income
generated in tax-free location
|
(446,000
|
)
|
(294,000
|
)
|
|||
Change
in valuation allowance
|
2,046,000
|
1,290,000
|
|||||
Total
adjustments
|
4,590,000
|
1,874,000
|
|||||
Provision
for income taxes
|
$
|
873,000
|
782,000
|
(1)
|
On
August 1, 2007 the Company and Mr. McKenna entered into an agreement
resolving all outstanding actions by Mr. McKenna against the Company and
its subsidiaries related to the initial action against CarParts
Technologies, Inc., which is now known as ASNA. The agreement provided
that the Company would pay Mr. McKenna $2,000,000 in cash, $825,000 on a
promissory note with an interest rate of 8% amortized in equal payments
over a 24-month period (see Note 7) and in addition would issue Mr.
McKenna 1,718,750 shares of Common Stock of the Company, which represented
an aggregate number of shares of common stock of the Company that the
parties determined fairly represented $825,000 (assuming a price of $0.48
per share of common stock, the closing price of the Company’s common stock
on the date of settlement). Mr. McKenna was also entitled to warrants to
purchase an equivalent number of shares of common stock at the same price,
which was valued at $412,000 (using the Black-Scholes valuation model) and
recorded as an additional litigation cost for the year ended June 30,
2007. Upon entering this agreement all parties agreed to withdraw all
existing litigation and claims. The Company recorded the settlement with
McKenna as of June 30, 2007. The shares were issued in fiscal 2008 (see
Note 10). This settlement was amended during fiscal 2008 (see Note
10).
|
(2)
|
Homann
Tire LTD (“Homann”) filed a complaint against the Company’s subsidiary
ASNA (f/k/a CarParts Technologies, Inc.) in California District Court on
August 11, 2005 regarding the Company’s obligations pursuant to a software
license agreement that it entered into with Homann on October 18,
2002.
|
(3)
|
The
Company was sued by a former officer of W3 Group, Inc. for $37,000 for an
unpaid note and expenses. The Company settled the litigation by paying
$17,500 in fiscal 2008, which was recorded as part of reduction in
litigation settlement in the accompanying consolidated statement of
operations.
|
Years Ending June
30,
|
||||
2009
|
$
|
641,000
|
||
2010
|
523,000
|
|||
2011
|
497,000
|
|||
2012
|
410,000
|
|||
2013
|
397,000
|
|||
Thereafter
|
4,462,000
|
|||
$
|
6,930,000
|
Issuance
of warrants in connection with the ComVest Loan Agreement (see Note
7):
|
||||
ComVest
|
5,083,333
|
|||
Other
|
250,000
|
|||
|
5,333,333
|
|||
Issuance
of warrants to a service provider (valued at $27,000)
|
155,549
|
|||
Issuance of
warrants in McKenna settlement (see Note 9 and above)
|
3,437,500
|
|||
Issuance of
warrants to investors in private placement (see
above)
|
5,208,337
|
|||
Issuance
of warrants to placement agent in private placement
|
260,417
|
|||
Issuance
of warrants to Lewis Global Funds (see Note 3)
|
6,402,999
|
|||
Total
issued
|
20,798,135
|
Cash
and cash equivalents
|
$
|
82
|
||
Accounts
receivable
|
914
|
|||
Note
receivable
|
865
|
|||
Investment
in available-for-sale securities
|
360
|
|||
Inventories
|
20
|
|||
Other
|
346
|
|||
Current
assets of discontinued operations
|
$
|
2,587
|
||
|
||||
Property
and equipment
|
$
|
150
|
||
Goodwill
|
2,363
|
|||
Amortizable
intangible assets, net
|
2,229
|
|||
Non-current
assets of discontinued operations
|
$
|
4,742
|
||
|
||||
Accounts
payable
|
$
|
492
|
||
Accrued
expenses
|
239
|
|||
Payroll
and other taxes
|
179
|
|||
Current
portion of deferred revenue
|
754
|
|||
Taxes
payable
|
373
|
|||
Other
current liabilities
|
7
|
|||
Current
liabilities of discontinued operations
|
$
|
2,044
|
Cash
|
$
|
157
|
||
Accounts
receivable
|
439
|
|||
Inventories
|
6
|
|||
Other
|
27
|
|||
Current
Assets
|
629
|
|||
Property
and equipment
|
156
|
|||
Other
long term assets
|
219
|
|||
Goodwill
|
723
|
|||
Amortizable
intangible assets, net
|
2,242
|
|||
Total
Assets
|
3,969
|
|||
Liabilities
assumed
|
(1,739
|
)
|
||
Net
assets divested
|
2,230
|
|||
Proceeds
|
0
|
|||
Loss
on disposal
|
$
|
(2,230
|
)
|
Accounts
receivable
|
$
|
1,050
|
||
Investments
in available-for-sale securities
|
369
|
|||
Current
Assets
|
1,419
|
|||
Goodwill
|
1,640
|
|||
Total
Assets
|
3,059
|
|||
Liabilities
assumed
|
(1,405
|
)
|
||
Net
assets divested
|
1,654
|
|||
Proceeds
- value of shares and receivable (see Note 3)
|
4,041
|
|||
Gain
on disposal
|
$
|
2,387
|
Accounts
receivable sold
|
$
|
933
|
||
Goodwill
written off
|
700
|
|||
Accounts
payable assumed
|
(68
|
)
|
||
Deferred
revenue assumed
|
(322
|
)
|
||
Net
assets sold
|
1,243
|
|||
Consideration
received
|
865
|
|||
Loss
on sale of discontinued operations
|
$
|
378
|
|
For the
Period
July
1, 2007
until the
Date of
Sale
|
For the
Year Ended
June 30,
2007
|
|||||
Revenue
|
$
|
1,670
|
$
|
6,561
|
|||
Cost
of sales and operating expenses
|
1,657
|
5,949
|
|||||
Income
from operations
|
13
|
612
|
|||||
Other
expense
|
-
|
(13
|
)
|
||||
Income
taxes
|
-
|
258
|
|||||
Net
income, net of taxes
|
$
|
13
|
$
|
341
|
Revenues
|
$
|
611
|
||
Cost
of sales
|
68
|
|||
Income
from operations
|
543
|
|||
Income
taxes
|
-
|
|||
Income
from discontinued operations, net of tax
|
$
|
543
|
September 30,
|
June 30,
|
||||||
|
2008
|
2008
|
|||||
ASSETS
|
(Unaudited)
|
|
|||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
947
|
$
|
1,964
|
|||
Accounts
receivable, net of allowance of $148 and $202
|
3,137
|
3,233
|
|||||
Inventories
|
348
|
615
|
|||||
Prepaid
expenses and other current assets
|
656
|
690
|
|||||
Total Current
Assets
|
5,088
|
6,502
|
|||||
Property and Equipment,
Net
|
639
|
592
|
|||||
Other
Assets
|
|||||||
Goodwill
|
11,111
|
11,878
|
|||||
Amortizable
intangible assets, net
|
4,246
|
4,584
|
|||||
Software
development costs, net
|
1,674
|
1,718
|
|||||
Investments
in available-for-sale securities
|
3,354
|
4,102
|
|||||
Other
long-term assets
|
360
|
426
|
|||||
Total
Assets
|
$
|
26,472
|
$
|
29,802
|
|||
LIABILITIES AND STOCKHOLDERS’
EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Accounts
payable
|
$
|
1,655
|
$
|
2,372
|
|||
Accrued
expenses and other
|
2,341
|
3,508
|
|||||
Payroll
and other taxes
|
968
|
933
|
|||||
Current
portion of long-term debt
|
535
|
598
|
|||||
Current
portion of deferred revenue
|
435
|
607
|
|||||
Other
current liabilities
|
389
|
379
|
|||||
Total Current
Liabilities
|
6,323
|
8,397
|
|||||
Long-Term
Liabilities
|
|||||||
Deferred
revenue, net of current portion
|
512
|
545
|
|||||
Deferred
income taxes
|
880
|
880
|
|||||
Long-term
debt, net of current portion and debt discount
|
4,863
|
4,783
|
|||||
Other
|
332
|
142
|
|||||
Total
Liabilities
|
12,910
|
14,747
|
|||||
Commitments
and contingencies
|
|||||||
STOCKHOLDERS'
EQUITY
|
|||||||
Preferred
stock:
|
|||||||
Par
value $0.0001 per share; 10,000,000 shares authorized, none issued and
outstanding
|
-
|
-
|
|||||
Common
stock:
|
|||||||
Par
value $0.0001 per share; 150,000,000 shares authorized, 92,733,220 shares
issued and outstanding
|
9
|
9
|
|||||
Additional
paid-in capital
|
32,031
|
31,732
|
|||||
Parent
company common stock
|
(2,154
|
)
|
(2,850
|
)
|
|||
Accumulated
other comprehensive income
|
(179
|
)
|
1,617
|
||||
Accumulated
deficit
|
(16,145
|
)
|
(15,453
|
)
|
|||
Total Stockholders'
Equity
|
13,562
|
15,055
|
|||||
Total Liabilities and
Stockholders' Equity
|
$
|
26,472
|
$
|
29,802
|
For the
three
months
ended
September
30, 2008
|
For the
three
months
ended
September
30, 2007
|
||||||
|
|||||||
Revenues
|
$
|
5,845
|
$
|
5,355
|
|||
Cost
of revenues
|
2,755
|
2,659
|
|||||
Gross
Profit
|
3,090
|
2,696
|
|||||
Operating
Expenses
|
|||||||
Research
and development
|
785
|
692
|
|||||
Sales
and marketing
|
599
|
528
|
|||||
General
and administrative
|
1,505
|
1,310
|
|||||
Depreciation
and amortization
|
268
|
355
|
|||||
Total Operating
Expenses
|
3,157
|
2,885
|
|||||
Operating
Loss
|
(67
|
)
|
(189
|
)
|
|||
Other Income
(Expense)
|
|||||||
Interest
expense
|
(372
|
)
|
(18
|
)
|
|||
Gain
on sale of investments
|
-
|
1,312
|
|||||
Other,
net
|
2
|
(3
|
)
|
||||
Total other income (expense),
net
|
(370
|
)
|
1,291
|
||||
Income (loss) from continuing
operations before provision for income taxes
|
(437
|
)
|
1,102
|
||||
Provision
for income taxes
|
115
|
171
|
|||||
Income (loss) from continuing
operations
|
(552
|
)
|
931
|
||||
Income
from discontinued operations, net of tax
|
-
|
37
|
|||||
Net income
(loss)
|
(552
|
)
|
968
|
||||
Unrealized
loss on investments in available-for-sale securities
|
(748
|
)
|
-
|
||||
Foreign
currency translation gain (loss)
|
(1,048
|
)
|
380
|
||||
Total comprehensive income
(loss)
|
$
|
(2,348
|
)
|
$
|
1,348
|
||
Income
(loss) per share attributed to common stockholders – basic and
diluted
|
|||||||
Net
income (loss) from continuing operations
|
$
|
(0.01
|
)
|
$
|
0.01
|
||
Discontinued
operations
|
-
|
-
|
|||||
Net
income (loss)
|
$
|
(0.01
|
)
|
$
|
0.01
|
||
Weighted
average shares outstanding – basic and diluted
|
92,733,220
|
86,239,726
|
For the three
months ended
September 30,
2008
|
For the three
months ended
September 30,
2007
|
||||||
|
|||||||
Cash flows from operating
activities :
|
|||||||
Net
income (loss)
|
$
|
(552
|
)
|
$
|
968
|
||
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|||||||
Depreciation
and amortization
|
268
|
484
|
|||||
Debt
discount and debt issuance cost amortization
|
200
|
-
|
|||||
Loss
on disposition of property and equipment
|
-
|
12
|
|||||
Gain
on sale of investment in non-marketable securities
|
-
|
(1,312
|
)
|
||||
Changes
in assets and liabilities (net of the effect of acquisitions and
divestitures):
|
|||||||
Accounts
receivable
|
96
|
(394
|
)
|
||||
Inventories
|
267
|
(76
|
)
|
||||
Prepaid
expenses and other assets
|
34
|
53
|
|||||
Net
advances to parent company relating to operating
activities
|
-
|
(74
|
)
|
||||
Accounts
payable
|
(717
|
)
|
12
|
||||
Payroll
and other taxes payable
|
35
|
(151
|
)
|
||||
Deferred
revenue
|
(205
|
)
|
209
|
||||
Accrued
expenses and other liabilities
|
(828
|
)
|
(409
|
)
|
|||
Payment
of litigation costs
|
-
|
(2,000
|
)
|
||||
Net cash used in operating
activities
|
(1,402
|
)
|
(2,678
|
)
|
|||
Cash flows from investing
activities :
|
|||||||
Purchase
of property and equipment
|
(86
|
)
|
(93
|
)
|
|||
Proceeds
from the sale of investment in non-marketable securities
|
-
|
2,000
|
|||||
Capitalized
software development costs
|
(13
|
)
|
(181
|
)
|
|||
Net cash provided by (used in)
investing activities
|
(99
|
)
|
1,726
|
||||
Cash Flows from financing
activities :
|
|||||||
Proceeds
from sale of common stock, net of cash issuance costs
|
-
|
2,037
|
|||||
Proceeds
from sale of Parent company common stock, net of cash issuance
costs
|
841
|
-
|
|||||
Payments
on long-term debt
|
(102
|
)
|
(747
|
)
|
|||
Net cash provided by (used in)
financing activities
|
739
|
1,290
|
|||||
Effect of exchange rate
changes
|
(255
|
)
|
(153
|
)
|
|||
Net increase (decrease) in cash
and cash equivalents
|
(1,017
|
)
|
185
|
||||
Cash and cash equivalents at
beginning of period
|
1,964
|
665
|
|||||
Cash and cash equivalents at
end of period
|
$
|
947
|
$
|
850
|
|||
Continued
/……………..
|
For the three
months ended
September 30,
2008
|
For the three
months ended
September 30,
2007
|
||||||
|
|||||||
Supplemental disclosures of
cash flow information
|
|||||||
Cash
paid during the period for :
|
|||||||
Interest
|
$
|
193
|
$
|
33
|
|||
Income
taxes
|
$
|
95
|
$
|
383
|
|||
Non-cash
investing and financing transactions during the year for :
|
|||||||
Shares
issued for accrued litigation costs
|
$
|
-
|
$
|
825
|
|||
Value
of warrants issued for amended debt covenants
|
$
|
15
|
$
|
-
|
|||
Gain
on sale of Parent company common stock
|
$
|
337
|
$
|
-
|
|||
Shares
of Parent company common stock remitted in exchange for Parent company
obligations
|
$
|
193
|
|||||
Parent
company obligations assumed by Company
|
(140
|
)
|
$
|
-
|
|||
Loss
on settlement of Parent company obligations
|
$
|
53
|
$
|
-
|
Balance,
July 1, 2008
|
$
|
11,878,000
|
||
Effect
of exchange rate changes
|
(767,000
|
) | ||
Balance,
September 30, 2008
|
$
|
11,111,000
|
|
1)
|
When
customer acceptance can be estimated, expenditures are capitalized as work
in process and deferred until completion of the contract at which time the
costs and revenues are recognized.
|
|
2)
|
When
customer acceptance cannot be estimated based on historical evidence,
costs are expensed as incurred and revenue is recognized at the completion
of the contract when customer acceptance is
obtained.
|
|
2008
|
2007
|
|||||
Numerator
for basic and diluted income (loss) per share:
|
|||||||
Net
income (loss)
|
$
|
(552,000
|
)
|
$
|
968,000
|
||
Deemed
distribution to parent company
|
(140,000
|
)
|
-
|
||||
Net
income (loss) available to common shareholders
|
$
|
(692,000
|
)
|
$
|
968,000
|
||
Denominator
for basic and diluted income (loss) per common share:
|
|||||||
Weighted
average number of shares of common stock outstanding
|
92,733,220
|
86,239,726
|
|||||
|
|||||||
$
|
(0.01
|
)
|
$
|
0.01
|
|
September
30,
2008
|
June 30,
2008
|
|||||
ComVest
term loan, net of debt discount of $637,000 and $756,000
|
$
|
4,363,000
|
$
|
4,244,000
|
|||
ComVest
revolver
|
500,000
|
500,000
|
|||||
McKenna
note
|
395,000
|
497,000
|
|||||
Homann
note
|
125,000
|
125,000
|
|||||
Other
notes
|
15,000
|
15,000
|
|||||
|
5,398,000
|
5,381,000
|
|||||
Less
current portion
|
(535,000
|
)
|
(598,000
|
)
|
|||
Long
term portion
|
$
|
4,863,000
|
$
|
4,783,000
|
(1)
|
On
August 1, 2007 the Company and Mr. McKenna entered into an agreement
resolving all outstanding actions by Mr. McKenna against the Company and
its subsidiaries related to the initial action against CarParts
Technologies, Inc., which is now known as ASNA. The agreement provided
that the Company would pay Mr. McKenna $2,000,000 in cash, $825,000 on a
promissory note with an interest rate of 8% amortized in equal payments
over a 24-month period (see Note 6) and in addition would issue Mr.
McKenna 1,718,750 shares of Common Stock of the Company, which represented
an aggregate number of shares of common stock of the Company that the
parties determined fairly represented $825,000 (assuming a price of $0.48
per share of common stock, the closing price of the Company’s common stock
on the date of settlement). Mr. McKenna was also entitled to warrants to
purchase an equivalent number of shares of common stock at the same price,
which was valued at $412,000 (using the Black-Scholes valuation model) and
recorded as an additional litigation cost for the year ended June 30,
2007. Upon entering this agreement all parties agreed to withdraw all
existing litigation and claims. The Company recorded the settlement with
McKenna as of June 30, 2007. The shares were issued in fiscal 2008 (see
Note 8). This settlement was amended during fiscal 2008 (see Note 8).
|
(2)
|
Homann
Tire LTD (“Homann”) filed a complaint against the Company’s subsidiary
ASNA (f/k/a CarParts Technologies, Inc.) in California District Court on
August 11, 2005 regarding the Company’s obligations pursuant to a software
license agreement that it entered into with Homann on October 18, 2002.
|
Issuance
of warrants in connection with the ComVest Loan Agreement (see Note 6):
|
||||
ComVest
|
5,083,333
|
|||
Other
|
250,000
|
|||
|
5,333,333
|
|||
Issuance
of warrants to a service provider (valued at $27,000)
|
155,549
|
|||
Issuance of
warrants in McKenna settlement (see Note 7 and above)
|
3,437,500
|
|||
Issuance of
warrants to investors in private placement (see above)
|
5,208,337
|
|||
Issuance
of warrants to placement agent in private placement
|
260,417
|
|||
Issuance
of warrants to Lewis Global Funds (see Note 3)
|
6,402,999
|
|||
Issuance
of warrants to placement agent (see above )
|
1,000,000
|
|||
Total
issued
|
21,798,135
|
Cash
|
$
|
157
|
||
Accounts
receivable
|
439
|
|||
Inventories
|
6
|
|||
Other
|
27
|
|||
Current
Assets
|
629
|
|||
Property
and equipment
|
156
|
|||
Other
long term assets
|
219
|
|||
Goodwill
|
723
|
|||
Amortizable
intangible assets, net
|
2,242
|
|||
Total
Assets
|
3,969
|
|||
Liabilities
assumed
|
(1,739
|
)
|
||
Net
assets divested
|
2,230
|
|||
Proceeds
|
0
|
|||
Loss
on disposal
|
$
|
(2,230
|
)
|
Accounts
receivable
|
$
|
1,050
|
||
Investments
in available-for-sale securities
|
369
|
|||
Current
Assets
|
1,419
|
|||
Goodwill
|
1,640
|
|||
Total
Assets
|
3,059
|
|||
Liabilities
assumed
|
(1,405
|
)
|
||
Net
assets divested
|
1,654
|
|||
Proceeds
- value of shares and receivable (see Note 3)
|
4,041
|
|||
Gain
on disposal
|
$
|
2,387
|
|
For the
Three
months
Ended
September
30,
2007
|
|||
Revenue
|
$
|
1,260
|
||
Cost
of sales and operating expenses
|
1,148
|
|||
Income
from operations
|
112
|
|||
Other
expense
|
(14
|
)
|
||
Income
taxes
|
61
|
|||
Net
income, net of taxes
|
$
|
37
|
Securities
and Exchange Commission registration fee
|
$
|
94.80
|
||
Printing
costs(1)
|
5,500.00
|
|||
Accounting
fees and expenses(1)
|
10,000.00
|
|||
Legal
fees and expenses(1)
|
25,000.00
|
|||
Miscellaneous(1)
|
15,000.00
|
|||
Total
|
$
|
55,594.80
|
|
(1)
|
The
Company issued 470,000 shares of Common Stock to Brockington Securities in
2006 valued at $499,000 as consideration for consultation services in
connection with the Company’s reorganization. Brockington Securities
assisted the Company in the negotiations to acquire EXP and advised the
Company on management and potential market opportunity for the
restructured group. The Company issued 500,000 shares of Common Stock to
Euro Software Services Limited (“Euro Software”) in 2006 valued at
$530,000 in consideration for 100% of the issued and outstanding shares of
Euro Software. The Company issued 16,750,000 shares of its Common Stock
ADNW on February 1, 2007 in consideration for 100% of the issued and
outstanding shares of DSS, to be valued at the net book value of DSS at
that date since the transaction is a common control
merger.
|
|
(2)
|
On
August 25, 2006, the Company issued 28,000,000 shares of Common Stock to
ADNW in exchange for the acquisition of 100% of the issued and outstanding
shares of EXP from ADNW. EXP was subsequently sold on November 12,
2007.
|
|
(3)
|
On
February 1, 2007, the Company issued 16,750,000 shares of Common Stock to
ADNW in exchange for the acquisition of DSS from ADNW. DSS subsequently
was sold on November 12, 2007.
|
|
(4)
|
On
June 22, 2007, the Company issued 300,000 shares of Common Stock to note
holder Arthur Blumenthal, as partial payment against the 8% note payable
balance. These shares were valued at the closing price of the Common Stock
on the date of the transaction of $0.48 per share which reduced the note
payable balance by a total of
$144,000.
|
|
(5)
|
On
April 24, 2007, the Company issued 6,217 shares to consultants for
services provided. These shares were issued at the market price of $0.50
per share.
|
|
(6)
|
On
July 5, 2007, the Company issued a total of 5,208,333 shares of Common
Stock at $0.48 per share and 5,208,333 warrants to purchase Common Stock
at $1.00 per share to the following entities, who were recognized as
accredited investors, as that term is defined in Rule 501(a) of Regulation
D: 625,000 shares of Common Stock and warrants to Hummingbird Microcap
Value Fund LP; 625,000 shares of Common Stock and warrants to Hummingbird
Value Fund LP; 357,292 shares of Common Stock and warrants to Little Wing
LP; 59,375 shares of Common Stock and warrants to Trade Winds Fund LTD;
208,334 shares of Common Stock and warrants to Alexandra & Christopher
Vulliez; 208,334 shares of Common Stock and warrants to Mary Kanary;
625,000 shares of Common Stock and warrants to Channel Partnership II;
833,334 shares of Common Stock and warrants to Wynnefield SmallCap
Offshore Fund, Ltd.; 833,334 shares of Common Stock and warrants to
Wynnefield Partners SmallCap Value, LP; 833,334 shares of Common Stock and
warrants to Wynnefield Partners SmallCap Value, LP
I.
|
|
(7)
|
On
December 21, 2007, in connection with a Revolving Credit and Term Loan
Agreement with ComVest Capital LLC (“ComVest”), the Company issued a
Credit Note, Term Note and Warrants to
ComVest.
|
|
(8)
|
On
July 5, 2007, the Company issued warrants to Quillen Securities to
purchase 260,417 shares of the Company’s Common Stock as compensation in
connection with the Company’s private placement of 2,500,000 shares of
Common Stock and warrants on the same date. The warrants were immediately
exercisable at $1.00 per share and expire July 2,
2013.
|
|
(9)
|
On
February 7, 2008, the Company issued warrants to Quillen Securities to
purchase 250,000 shares of the Company’s Common Stock, which were
immediately exercisable at $1.00 per share and expire July 2, 2013, as
compensation in connection with the ComVest
financing.
|
(10)
|
On
February 7, 2008, the Company issued warrants to Quillen Securities to
purchase 155,549 shares of the Company’s Common Stock as compensation,
which were immediately exercisable at $1.00 per share and expire July 2,
2013, for services rendered.
|
(11)
|
On
each of August 1, 2007 and November 1, 2007, the Company issued warrants
to Mr. McKenna to purchase 1,718,750 shares of Common Stock, which were
immediately exercisable at $0.48 per share, and expire on January 31,
2012.
|
(12)
|
On
May 13, 2008, the Compensation Committee of the Board of Directors of the
Company approved restricted stock awards of an aggregate of 2,985,000
shares of its Common Stock to certain employees, a corporate officer and
three outside directors in respect of services previously rendered. The
shares vest as follows: 34% of the shares vest immediately on the date of
grant. The remaining 66% of the shares will vest in three equal
installments on each of the first, second and third anniversaries of the
grant date. An aggregate of 994,500 shares were fully vested on the date
of grant. The Company did not receive any consideration for these
grants.
|
(13)
|
On
April 24, 2008, the holder of 2,124,098 shares of ADNW Preferred stock
(which is convertible into 7,231,622 shares of the Company’s common
shares), or 6.97% of the fully diluted shares of ADNW, completed an
exchange of the Preferred shares for 6,402,999 units of the Company, which
consisted of 6,402,999 shares of Common Stock and a six-year warrant to
purchase 6,402,999 shares of the Company’s Common Stock for $1.00 per
share.
|
(14)
|
On
July 3, 2008, the Company issued 1,000,000 warrants exercisable at $0.30,
and expiring July 3, 2013 as placement fees for the sale of the 5,231,622
shares of ADNW common stock.
|
Exhibit
No.
|
Description
of Exhibit
|
|
3(i)
|
Certificate
of Incorporation of Aftersoft Group, Inc., as amended (incorporated by
reference to Exhibit 3(i) to the Company’s Registration Statement on Form
S-1/A filed on July 15, 2008).
|
|
3(ii)
|
By
laws (incorporated by reference to Exhibit 3(ii) to the Company’s
Registration Statement on Form SB-2 filed on February 16,
2007).
|
|
4.1
|
Form
of Certificate of Common Stock (incorporated by reference to Exhibit 4.1
to the Company’s Registration Statement on Form SB-2 filed on February 16,
2007).
|
|
5.1
|
Opinion
of Gersten Savage LLP regarding the legality of the securities being
registered (filed herewith).
|
|
10.1
|
Share
Sale Agreement relating to EXP Dealer Software Limited dated August 4,
2006 among Auto Data Network, Inc., Aftersoft Group, Inc. and Aftersoft
Dealer Software Limited (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on August 31,
2006).
|
|
10.2
|
Share
Sale Agreement relating to Dealer Software and Services Limited dated
February 1, 2007 between Aftersoft Group, Inc. and Auto Data Network, Inc.
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on February 7, 2007).
|
|
10.3
|
Form
of Securities Purchase Agreement (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed July 6,
2007).
|
Exhibit No.
|
Description of Exhibit
|
|
10.4
|
Form
of Common Stock Purchase Warrant (incorporated by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K filed July 6,
2007).
|
|
10.5
|
Form
of Registration Rights Agreement (incorporated by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K filed July 6,
2007).
|
|
10.6
|
Settlement
and Release Agreement between ASNA and Aidan J. McKenna (incorporated by
reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
filed August 6, 2007).
|
|
10.7
|
Share
Sale Agreement, dated November 12, 2007, between EU Web Services, Ltd., as
Purchaser, Aftersoft Group, Inc., as Vendor, and EXP Dealer Software Ltd.
(incorporated by reference to Exhibit 99.1 of the Company’s Current Report
on Form 8-K filed November 16, 2007)
|
|
10.8
|
Revolving
Credit and Term Loan Agreement dated as of December 21, 2007, by and
between ComVest Capital LLC, as Lender, and Aftersoft Group, Inc., as
Borrower (incorporated by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed December 31, 2007).
|
|
10.9
|
Revolving
Credit Note dated December 21, 2007 in the principal amount of $1,000,000
(incorporated by reference to Exhibit 10.2 of the Company’s Current Report
on Form 8-K filed December 31, 2007).
|
|
10.10
|
Convertible
Term Note, dated December 21, 2007 in the principal amount of $5,000,000
(incorporated by reference to Exhibit 10.3 of the Company’s Current Report
on Form 8-K filed December 31, 2007).
|
|
10.11
|
Collateral
Agreement dated as of December 21, 2007 by and among Aftersoft Group,
Inc., Aftersoft Network, N.A. Inc., MAM Software Ltd., Aftersoft Group
(UK) Ltd., AFS Warehouse Distribution Management, Inc., AFS Tire
Management, Inc. and AFS Autoservice Inc., and ComVest Capital LLC
(incorporated by reference to Exhibit 10.4 of the Company’s Current Report
on Form 8-K filed December 31, 2007).
|
|
10.12
|
Guaranty
Agreement dated December 21, 2007 by Aftersoft Network, N.A. Inc., MAM
Software Ltd., Aftersoft Group (UK) Ltd., AFS Warehouse Distribution
Management, Inc., AFS Tire Management, Inc. and AFS Autoservice Inc., in
favor of ComVest Capital LLC (incorporated by reference to Exhibit 10.5 of
the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.13
|
Form
of Validity Guaranty (incorporated by reference to Exhibit 10.6 of the
Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.14
|
Warrant,
dated as of December 21, 2007, to Purchase 1,000,000 Shares of Common
Stock of Aftersoft Group, Inc. (incorporated by reference to Exhibit 10.7
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
Exhibit No.
|
Description of Exhibit
|
|
10.15
|
Warrant,
dated as of December 21, 2007, to Purchase 2,000,000 Shares of Common
Stock of Aftersoft Group, Inc. (incorporated by reference to Exhibit 10.8
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.16
|
Warrant,
dated as of December 21, 2007, to Purchase 2,083,333 Shares of Common
Stock of Aftersoft Group, Inc. (incorporated by reference to Exhibit 10.9
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.17
|
Registration
Rights Agreement dated as of December 21, 2007 by Aftersoft Group, Inc.
for the benefit of the holders (incorporated by reference to Exhibit 10.10
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.18
|
2007
Long-Term Stock Incentive Plan (incorporated by reference to Exhibit D of
the Company’s revised Definitive Proxy Statement filed on May 19,
2008).
|
|
10.19
|
Employment
Agreement dated as of December 1, 2008 between the Company and Ian Warwick
(incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K filed December 5, 2008).
|
|
10.20
|
Employment
Agreement dated as of December 1, 2008 between the Company and Charles F.
Trapp (incorporated by reference to Exhibit 10.2 of the Company’s Current
Report on Form 8-K filed December 5, 2008).
|
|
10.21
|
Employment
Agreement dated as of December 1, 2008 between the Company and Simon
Chadwick (incorporated by reference to Exhibit 10.3 of the Company’s
Current Report on Form 8-K filed December 5, 2008).
|
|
21
|
List
of subsidiaries (incorporated by reference to Exhibit 21 to the Company’s
Registration Statement on Form S-1/A filed on July 15,
2008).
|
|
23.1
|
Consent
of KMJ Corbin & Company LLP (filed herewith).
|
|
23.2
|
Consent
of Gersten Savage LLP (See Exhibit
5.1).
|
AFTERSOFT
GROUP, INC.
|
|
A
Delaware corporation, Registrant
|
|
By:
|
/s/ IAN WARWICK
|
IAN
WARWICK
|
|
Chairman
and Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
By:
|
/s/ CHARLES F. TRAPP
|
CHARLES
F. TRAPP
|
|
Chief
Financial Officer
|
|
(Principal
Accounting Officer)
|
Signature
|
Title
|
Date
|
||
/s/ Ian Warwick
|
Chairman, Chief Executive Officer and Director
|
January
14, 2009
|
||
Ian
Warwick
|
(Principal
Executive Officer)
|
|||
/s/ Charles F. Trapp
|
Chief
Financial Officer
|
January
14, 2009
|
||
Charles
F. Trapp
|
(Principal
Accounting Officer)
|
|||
/s/ Simon Chadwick
|
Chief
Operating Officer
|
January
14, 2009
|
||
Simon
Chadwick
|
||||
/s/ Dwight B. Mamanteo
|
Director
|
January
14, 2009
|
||
Dwight
B. Mamanteo
|
||||
/s/ Marcus Wohlrab
|
Director
|
January
14, 2009
|
||
Marcus
Wohlrab
|
||||
/s/ Frederick Wasserman
|
Director
|
January
14, 2009
|
||
Frederick
Wasserman
|
||||
/s/ Gerald M. Czarnecki
|
Director
|
January
14, 2009
|
||
Gerald
M. Czarnecki
|
Exhibit No.
|
Description
of Exhibit
|
|
3(i)
|
Certificate
of Incorporation of Aftersoft Group, Inc., as amended (incorporated by
reference to Exhibit 3(i) to the Company’s Registration Statement on Form
S-1/A filed on July 15, 2008).
|
|
3(ii)
|
By
laws (incorporated by reference to Exhibit 3(ii) to the Company’s
Registration Statement on Form SB-2 filed on February 16,
2007).
|
|
4.1
|
Form
of Certificate of Common Stock (incorporated by reference to Exhibit 4.1
to the Company’s Registration Statement on Form SB-2 filed on February 16,
2007).
|
|
5.1
|
Opinion
of Gersten Savage LLP regarding the legality of the securities being
registered (filed herewith).
|
|
10.1
|
Share
Sale Agreement relating to EXP Dealer Software Limited dated August 4,
2006 among Auto Data Network, Inc., Aftersoft Group, Inc. and Aftersoft
Dealer Software Limited (incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on August 31,
2006).
|
|
10.2
|
Share
Sale Agreement relating to Dealer Software and Services Limited dated
February 1, 2007 between Aftersoft Group, Inc. and Auto Data Network, Inc.
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K filed on February 7, 2007).
|
|
10.3
|
Form
of Securities Purchase Agreement (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed July 6,
2007).
|
|
10.4
|
Form
of Common Stock Purchase Warrant (incorporated by reference to Exhibit
10.2 to the Company’s Current Report on Form 8-K filed July 6,
2007).
|
|
10.5
|
Form
of Registration Rights Agreement (incorporated by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K filed July 6,
2007).
|
|
10.6
|
Settlement
and Release Agreement between ASNA and Aidan J. McKenna (incorporated by
reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
filed August 6, 2007).
|
|
10.7
|
Share
Sale Agreement, dated November 12, 2007, between EU Web Services, Ltd., as
Purchaser, Aftersoft Group, Inc., as Vendor, and EXP Dealer Software Ltd.
(incorporated by reference to Exhibit 99.1 of the Company’s Current Report
on Form 8-K filed November 16, 2007)
|
|
10.8
|
Revolving
Credit and Term Loan Agreement dated as of December 21, 2007, by and
between ComVest Capital LLC, as Lender, and Aftersoft Group, Inc., as
Borrower (incorporated by reference to Exhibit 10.1 of the Company’s
Current Report on Form 8-K filed December 31,
2007).
|
Exhibit No.
|
Description of Exhibit
|
|
10.9
|
Revolving
Credit Note dated December 21, 2007 in the principal amount of $1,000,000
(incorporated by reference to Exhibit 10.2 of the Company’s Current Report
on Form 8-K filed December 31, 2007).
|
|
|
||
10.10
|
Convertible
Term Note, dated December 21, 2007 in the principal amount of $5,000,000
(incorporated by reference to Exhibit 10.3 of the Company’s Current Report
on Form 8-K filed December 31, 2007).
|
|
10.11
|
Collateral
Agreement dated as of December 21, 2007 by and among Aftersoft Group,
Inc., Aftersoft Network, N.A. Inc., MAM Software Ltd., Aftersoft Group
(UK) Ltd., AFS Warehouse Distribution Management, Inc., AFS Tire
Management, Inc. and AFS Autoservice Inc., and ComVest Capital LLC
(incorporated by reference to Exhibit 10.4 of the Company’s Current Report
on Form 8-K filed December 31, 2007).
|
|
10.12
|
Guaranty
Agreement dated December 21, 2007 by Aftersoft Network, N.A. Inc., MAM
Software Ltd., Aftersoft Group (UK) Ltd., AFS Warehouse Distribution
Management, Inc., AFS Tire Management, Inc. and AFS Autoservice Inc., in
favor of ComVest Capital LLC (incorporated by reference to Exhibit 10.5 of
the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.13
|
Form
of Validity Guaranty (incorporated by reference to Exhibit 10.6 of the
Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.14
|
Warrant,
dated as of December 21, 2007, to Purchase 1,000,000 Shares of Common
Stock of Aftersoft Group, Inc. (incorporated by reference to Exhibit 10.7
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.15
|
Warrant,
dated as of December 21, 2007, to Purchase 2,000,000 Shares of Common
Stock of Aftersoft Group, Inc. (incorporated by reference to Exhibit 10.8
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.16
|
Warrant,
dated as of December 21, 2007, to Purchase 2,083,333 Shares of Common
Stock of Aftersoft Group, Inc. (incorporated by reference to Exhibit 10.9
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.17
|
Registration
Rights Agreement dated as of December 21, 2007 by Aftersoft Group, Inc.
for the benefit of the holders (incorporated by reference to Exhibit 10.10
of the Company’s Current Report on Form 8-K filed December 31,
2007).
|
|
10.18
|
2007
Long-Term Stock Incentive Plan (incorporated by reference to Exhibit D of
the Company’s revised Definitive Proxy Statement filed on May 19,
2008).
|
|
10.19
|
Employment
Agreement dated as of December 1, 2008 between the Company and Ian Warwick
(incorporated by reference to Exhibit 10.1 of the Company’s Current Report
on Form 8-K filed December 5, 2008).
|
|
10.20
|
Employment
Agreement dated as of December 1, 2008 between the Company and Charles F.
Trapp (incorporated by reference to Exhibit 10.2 of the Company’s Current
Report on Form 8-K filed December 5,
2008).
|
Exhibit No.
|
Description of Exhibit
|
|
10.21
|
Employment
Agreement dated as of December 1, 2008 between the Company and Simon
Chadwick (incorporated by reference to Exhibit 10.3 of the Company’s
Current Report on Form 8-K filed December 5, 2008).
|
|
21
|
List
of subsidiaries (incorporated by reference to Exhibit 21 to the Company’s
Registration Statement on Form S-1/A filed on July 15,
2008).
|
|
23.1
|
Consent
of KMJ Corbin & Company LLP (filed herewith).
|
|
23.2
|
Consent
of Gersten Savage LLP (See Exhibit
5.1).
|