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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended May 31, 2006
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from _____ to _____
Commission File No. 0-18105
-----------------------------
VASOMEDICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2871434
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
180 Linden Avenue, Westbury, New York 11590
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 997-4600
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ X ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. Large Accelerated Filer [ ]
Accelerated Filer [ ] Non-Accelerated Filer [ X ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant (based on the closing sale price of $0.42 as of
November 30, 2005, was approximately $23,831,000. Shares of common stock held by
each officer and director and by each person wh o owns 5% or more of the
outstanding common stock have been excluded in that such persons may be deemed
to be affiliates. The determination of affiliates status is not necessarily a
conclusive determination for other purposes.
At August 16, 2006, the number of shares outstanding of the issuer's common
stock was 65,198,592.
DOCUMENTS INCORPORATED BY REFERENCE
None
EXPLANATORY NOTE
Vasomedical, Inc. (the "Company," "we," "us," or "our") is filing this
Amendment No. 1 on Form 10-K/A to our Report on Form 10-K for the fiscal year
ended May 31, 2006 (the "Report") for the purpose of including information that
was to be incorporated by reference from our definitive proxy statement pursuant
to Regulation 14A of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act"). We will not file our proxy statement within 120 days of our
fiscal year ended May 31, 2006, and are, therefore, amending and restating in
their entirety Items 10, 11, 12, 13 and 14 of Part III of the Report.
Except as described above, no other amendments are being made to this
Report. This Form 10-K/A does not reflect events occurring after the August 28,
2006 filing of our Report or modify or update the disclosure contained in the
Report in any way other than as required to reflect the amendments discussed
above and reflected below.
This amendment should be read in conjunction with our Annual Report for the
year ended May 31, 2006 filed on Form 10-K on August 28, 2006.
INDEX TO FORM 10-K
Page
----
PART III
Item 10. Directors and Executive Officers of the Registrant................................................1
Item 11. Executive Compensation............................................................................3
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...5
Item 13. Certain Relationships and Related Transactions....................................................8
Item 14. Principal Accountant Fees and Services............................................................8
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
Director
Name of Director Age Principal Occupation Since
--------------------------------- ------- -------------------------------------- -----------------
Abraham E. Cohen (5) 70 Chairman, Independent consultant June 1993
Thomas Glover 52 President and Chief Executive Officer October 2004
John C.K. Hui, PhD(4) 60 Chief Technology Officer February 1995
Photios T. Paulson (1)(2)(3) 67 Independent consultant April 2000
Kenneth W. Rind, PhD(1)(4) 71 Independent consultant February 1995
Martin Zeiger (2)(3)(4) 69 Independent consultant October 2001
-----------------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of Compensation Committee
(4) Member of the Corporate Governance Committee
(5) Ex-officio member of all committees
The following is a brief account of the business experience for at least
the past five years of our directors:
Abraham E. Cohen has been our Chairman of the Board since June 1994 and is
presently an independent consultant. He retired in 1992 as Senior Vice President
of Merck & Co., Inc., a position he was elected to in 1985. From 1979 to 1989,
Mr. Cohen was also President of Merck Sharp & Dohme International, a division of
Merck & Co., Inc. Mr. Cohen is a director of the following public companies:
Akzo Nobel Nv., Chugai Pharmaceutical Co., Ltd., Neurobiological Technologies,
Inc. and Teva Pharmaceutical Industries, Ltd.
Thomas Glover has been President and Chief Executive Officer and a director
since October 2004. Prior to joining Vasomedical, Mr. Glover was the acting
President and CEO and advisor to Incappe, Inc. a privately held medical device
company. He was the President and CEO of Vasca, Inc. from 1999 to 2003 and
served as Executive Vice President, Johnson and Johnson Professional, Inc. from
1997 to 1999. From 1983 to 1996, Mr. Glover held several executive positions
with responsibility for U.S and international business for Davis and Geck
(American Cyanamid Company/American Home Products). He is currently a director
of Incappe, Inc.
John C.K. Hui, PhD, our Chief Technology Officer, has been a director and
Senior Vice President since February 1995. Dr. Hui has been an Assistant
Professor in the Department of Surgery and Division of Cardiology at the State
University of Stony Brook, New York since 1978. He has also been a scientist in
the medical department of Brookhaven National Laboratories. Dr. Hui was CEO and
president of and a principal stockholder in Vasogenics, Inc. at the time of its
acquisition by us in January 1995.
Photios T. Paulson has been a director since April 2000 and has served as
our Chief Executive Officer from October 2002 through June 2003 and from March
to October 2004. Mr. Paulson has been an advisor to the health care industry and
was Vice President of bioMerieux N.A. Inc. from 1995 to 2002. Between 1992 and
1995, Mr. Paulson was Chairman of bioMerieux Vitek Inc. Between 1987 and 1990,
he was Senior Advisor, Health Care Industry, for Prudential Securities. Mr.
Paulson previously held senior positions with Becton Dickinson and Company
through 1987. Mr. Paulson is a director of bioMerieux N.A. Inc. and Silliker
Group Inc.
Kenneth W. Rind, PhD has been Chairman of Oxford Venture Corporation, an
independent venture capital company, since 1981 and in 1998 was a founding
General Partner of Israel Infinity Venture Capital Fund. Previously, he was
responsible for acquisitions and venture capital investments at Xerox
Development Corporation and in charge of technology investment banking at
Oppenheimer & Co., Inc. (now CIBC). He is a director of several private
companies.
1
Martin Zeiger is an independent consultant to the pharmaceutical industry.
Mr. Zeiger was Senior Vice President of Strategic Business Development for Barr
Laboratories, a drug manufacturer, from 1999 through August 2003. From 1987
through 1999, Mr. Zeiger was Executive Vice President and General Counsel for
Rugby Laboratories. In 1993 Marion Merrill Dow acquired Rugby Laboratories. Mr.
Zeiger was a Vice President of Marion Merrill Dow, Inc. and its successor
Hoechst Marion Roussell, Inc. Mr. Zeiger is a member of the Heritage Board of
Directors of the American Heart Association in New York and a founding director
of the Larry King Cardiac Foundation.
Executive Officers of the Registrant
Name of Officer Age Position held with the Company
--------------------------------- ------- --------------------------------------
Thomas Glover 52 President and Chief Executive Officer
John C.K. Hui, PhD 60 Chief Technology Officer
Tricia Efstathiou 35 Chief Financial Officer
Tricia Efstathiou was appointed Chief Financial Officer of the Company on
September 20, 2006. Prior thereto, Ms. Efstathiou served as Controller of the
Company since June 2000.
Committees of the Board of Directors
Executive Committee
Abraham E. Cohen
Photios T. Paulson
Kenneth W. Rind
Audit Committee
Photios T. Paulson
Martin Zeiger
Compensation Committee
Photios T. Paulson
Martin Zeiger
Corporate Governance Committee
John C. K. Hui
Kenneth W. Rind
Martin Zeiger
Compliance with Section 16(a) of The Securities Exchange Act of 1934 -
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and persons who beneficially own more than 10% of our common
stock (collectively, "Reporting Persons") to file initial reports of ownership
and reports of changes in ownership of our common stock with the Securities and
Exchange Commission. Reporting Persons are required by SEC regulations to
furnish us with copies of all Section 16(a) reports they file. To our knowledge,
based solely on our review of the copies of such reports received or written
representations from certain Reporting Persons that no other reports were
required, we believe that during fiscal 2006, all Reporting Persons timely
complied with all applicable filing requirements.
2
Corporate Governance - Code of Ethics
We have adopted a Corporate Code of Business Ethics (the "Code") that
applies to all employees, including our principal executive officer, principal
financial officer, and directors of the Company. The Code is broad in scope and
is intended to foster honest and ethical conduct, including accurate financial
reporting, compliance with laws and the like. If any substantive amendments are
made to the Code or if there is any grant of waiver, including any implicit
waiver, from a provision of the Code to our Chief Executive Officer or Chief
Financial Officer, we will disclose the nature of such amendment or waiver in a
report on Form 8-K.
ITEM 11 - EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation of our
Chief Executive Officer and each of our most highly compensated officers other
than the Chief Executive Officer who were serving as executive officers at the
end of the last completed fiscal year, and certain former executive officers as
required under SEC rules (collectively, the "Named Executive Officers") for
services rendered for the fiscal years ended May 31, 2006, 2005 and 2004.
Summary Compensation Table
Long-Term Compensation
------------------------------------
Annual Compensation Award Payouts
--------------------------------------- ------------------------- ----------
Other Shares Long-Term All
Annual Restricted Covered By Incentive Other
Compensa- Stock Option Plan Compensation
Name and Principal Position Year Salary (2) Bonus tion Awards Grants Payout (1)
---------------------------- --------------------- ------------ ------------ ------------ ------------ ---------- -----------
Photios T. Paulson (3) 2006 -- -- -- -- - -- --
Former CEO 2005 $114,583 -- -- -- 100,000 -- $6,006
2004 $20,833 -- -- -- 25,000 -- $106
Thomas Glover (4) 2006 $260,000 -- -- -- 391,228 -- $14,574
President and CEO 2005 $161,667 -- -- -- 1,000,000 -- $4,166
John C. K. Hui 2006 $159,510 -- -- -- 269,558 $20,466
Senior VP, CTO 2005 $155,500 -- -- -- 50,000 -- $18,939
2004 $150,000 $25,000 -- -- -- -- $16,756
Thomas W. Fry 2006 $159,510 -- -- -- 308,244 -- $2,313
CFO 2005 $155,500 -- -- -- 50,000 -- $2,147
2004 $109,712 $33,333 -- -- 100,000 -- $3,000
(1) Represents premiums paid on medical, dental, life and disability group
benefit plans, as well as amounts matched in the Company's 401(k)
Plan.
(2) Includes amounts deferred in FY2006 under the Deferred Compensation
Plan for Mr. Glover, Dr. Hui and Mr. Fry of $26,667, $20,000 and
$13,333, respectively.
(3) The Board of Directors appointed Photios T. Paulson as Chief Executive
Officer in October 2002. Mr. Paulson resigned his position as an
officer on June 30, 2003 and was reappointed Chief Executive Officer
in March 2004 and resigned as of October 2004 upon the appointment of
Thomas Glover as President and Chief Executive Officer. (4) Thomas
Glover was appointed President and Chief Executive Officer on October
4, 2004.
3
Option/SAR Grants in Last Fiscal Year
The following table sets forth the number of options granted to our
named executive officers during the fiscal year ended May 31, 2006.
Potential Realizable
Value at Assumed Annual
Rates of Price
Individual Grants Appreciation for Option
Term
---------------------------------------------------------------------------------------
Total
Number of
Securities % of
Underlying Options/SARs to Exercise or
Options/SAR Employees in Base Price Expiration
Name Granted (#) Fiscal Year (3) ($/Share) Date 5% 10%
----------- --------------- ---------- ---------- ---- ---
Share)
Thomas Glover (1) 391,228 11.8% $0.30 Various $74,207 $188,058
Thomas W. Fry (2) 308,244 9.3% $0.35 Various $66,975 $169,730
John C. K. Hui (2) 269,558 8.1% $0.31 Various $52,855 $133,949
(1) Represents ten-year, non-qualified stock options under the 1997 Stock
Option Plan and 1999 Stock Option Plan that vest equally over four
years commencing on October 4, 2004, granted to Mr. Glover upon his
appointment as the President and Chief Executive Officer. Such vesting
is dependent upon continued service to the Company.
(2) Represents ten-year, non-qualified stock options under the 1999 Stock
Option Plan that vest equally over four years commencing on July 13,
2004. Such vesting is dependent upon continued service to the Company.
(3) Percentages based upon 1,818,000 shares issued to employees and
officers of the Company during the fiscal year.
Aggregated Option/SAR Exercises in Last Fiscal Year and F/Y-End Option Values
The following table sets forth information for each of the named executive
officers with respect to the value of options or warrants exercised during the
fiscal year ended May 31, 2006 and the value of outstanding and unexercised
options or warrants held as of May 31, 2006, based upon the market value of the
common stock of $0.11 per share on that date.
Value of Unexercised
Number of Options at In-the-Money Options
Fiscal Year End at Fiscal Year End (2)
Shares Acquired Value --------------- ----------------------
Name on Exercise (#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ------------ ------------------------- -------------------------
Thomas Glover -- -- 1,391,228 -- -- --
John C. K. Hui -- -- 964,558 -- -- --
Thomas W. Fry -- -- 458,244 -- -- --
(1) Represents the difference between the closing price of the common stock
and the exercise price of the options on the date of exercise
multiplied by the number of shares acquired upon exercise. The
calculation does not reflect the effects of any income taxes that may
be due on the value realized.
(2) Represents the difference between the closing market price of the
common stock at May 31, 2006 of $0.11 per share and the exercise price
per share multiplied by the number of in-the-money options at May 31,
2006.
Deferred Compensation Program
In April 2006, the Company approved a program to defer compensation of
certain senior executives of the company and provided incentives to them for
these deferrals. The Company agreed to repay monies deferred from zero to six
months at 1.5 times the amount deferred; for deferrals of six months to twelve
4
months, the repaid amount shall be two times the amount deferred; and for
deferrals in excess of twelve months, the amount shall be 2.5 times the amount
deferred. In addition, payment of board of directors meeting fees were deferred
until a later date.
Employment Agreements
In December 2005, the Company entered into an agreement with Thomas W. Fry,
Chief Financial Officer of the company, which entitled him to twelve months
salary in the event of his termination without cause. On September 20, 2006, Mr.
Fry resigned as Chief Financial Officer of the Company and his employment
agreement was terminated. Mr. Fry continues to act as a consultant to the
Company.
Thomas Glover, President and Chief Executive of the Company, entered into
an employment agreement with us as of June 22, 2006, which expires on June 21,
2008. The agreement provides for an annual salary of $260,000 plus incentive
compensation of up to 50% of the annual salary. In addition the agreement
provides for a payment of twelve months of base salary in the event of a
termination without cause, as defined, payable in twelve equal monthly
installments.
Director's Compensation
It has been our policy to grant fees of $1,500 per meeting to each outside
director who attends a regularly scheduled or special meeting of its Board of
Directors. Fees for committee meetings are $1,000 per meeting if the meeting is
held on a different day than the Board meeting. In addition, we reimburse
out-of-state directors for their cost of travel and lodging to attend such
meetings.
Our compensation structure for outside directors also includes:
o a one-time grant of 50,000 non-qualified stock options to outside
directors issued on the date of their initial appointment to our Board
of Directors at the closing price on the issue date and vesting in
three equal annual increments commencing on the first anniversary of
the grant and contingent upon their continued service on our Board;
and
o an automatic annual grant of 25,000 non-qualified stock options to
outside directors issued on the date of our Annual Meeting of
Stockholders at the closing price on the issue date and vesting in
three equal annual increments commencing on the first anniversary of
the grant and contingent upon their continued service on our Board.
Limitation on Liability of Officers and Directors
We have entered into indemnification agreements with each of our current
officers and directors pursuant to which we have agreed, among other things, to
indemnify these officers and directors to the fullest extent permitted by
Delaware law.
Compensation Committee Interlocks and Insider Participation
During fiscal 2006, our Compensation Committee consisted of Messrs. Bearn,
Blumenthal, Shapiro, Viscusi, and Whittaker. None of these persons were our
officers or employees during fiscal 2006 or, except as otherwise disclosed, had
any relationship requiring disclosure in this Proxy Statement.
In accordance with rules promulgated by the Securities and Exchange Commission,
the information included under the caption "Compensation Committee Report on
Executive Compensation" will not be deemed to be filed or to be proxy-soliciting
material or incorporated by reference in any prior or future filings by the
Company under the Securities Act of 1933 or the Securities Exchange Act.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth the beneficial ownership of shares of our
Series D Convertible Preferred Stock and Common Stock as of September 12, 2006
of (i) each person known by us to beneficially own 5% or more of the shares of
outstanding common stock, based solely on filings with the Securities and
5
Exchange Commission, (ii) each of our executive officers and directors, and
(iii) all of our executive officers and directors as a group. Except as
otherwise indicated, all shares are beneficially owned, and investment and
voting power is held by the persons named as owners.
Common Stock % of
Beneficially Common
Name of Beneficial Owner Owned (2) Stock (3)
------------------------------------------------------ ----------------- -----------------
Abraham E. Cohen................................. 1,115,650 1.7%
Thomas W. Fry.................................... 466,244 *
Thomas Glover.................................... 1,396,228 2.1%
John C. K. Hui, PhD (4).......................... 1,753,880 2.7%
Photios T. Paulson............................... 486,000 *
Kenneth W. Rind, PhD............................. 485,650 *
Martin Zeiger.................................... 155,000 *
Directors and executive officers as a group
(7 persons).............................. 5,858,652 8.5%
----------
o Less than 1% of the Company's Common Stock
1. No officer or director owns more than one percent of the issued and
outstanding Common Stock of the Company unless otherwise indicated.
2. Includes beneficial ownership of the following numbers of shares that may
be acquired within 60 days of September 12, 2006 pursuant to warrants
awarded under the purchase agreement for the Series D Convertible Preferred
Stock and stock options awarded under our stock option plans:
Abraham E. Cohen 525,650 Photios T. Paulson 445,000
Thomas W. Fry 458,244 Kenneth W. Rind, PhD 110,650
Thomas Glover 1,391,228 Martin Zeiger 115,000
John C. K. Hui, PhD 964,558 Directors and executive
officers as a group 4,010,330
3. Applicable percentages are based on 65,198,592 common shares outstanding on
September 12, 2006, adjusted as required by rules promulgated by the
Commission.
4. Includes 789,322 shares that are held in a trust for the benefit of Dr.
Hui's child. Dr. Hui and his wife are the trustees of this trust.
6
Equity Compensation Plan Information
The following chart summarizes the options and warrants outstanding and
available to be issued at May 31, 2006:
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under equity
exercise of exercise price of compensation plans (excluding
outstanding options outstanding options securities reflected in
Plan Category and warrants and warrants column (a)
------------- ------------ ------------ ----------
(a) (b) (c)
--- --- ---
Equity compensation plans
approved by security holders 3,700,326 $1.07 726,619
Equity compensation plans not
approved by security holders 4,311,749 $1.32 23,253
----------------------- --------------------- -------------------------------
Total 8,012,075 $1.20 749,872
======================= ===================== ===============================
Stock Options and Other Plans
1995 Stock Option Plan
In May 1995, our stockholders approved the 1995 Stock Option Plan for our
officers and employees, for which the Company reserved an aggregate of 1,500,000
shares of common stock. In December 1997, our Board of Directors terminated the
1995 Stock Option Plan with respect to new option grants. At May 31, 2006,
972,000 options had been granted, of which 416,000 are outstanding under the
1995 Option Plan.
Outside Director Stock Option Plan
In May 1995, our stockholders approved an Outside Director Stock Option
Plan for our non-employee directors, for which we reserved an aggregate of
300,000 shares of common stock. On June 1, 1997, 1996 and 1995, options to
purchase an aggregate of 39,550 shares, 31,675 shares, and 77,418 shares of
common stock, respectively, at $1.77, $2.21, and $.78 per share, respectively,
were granted to outside directors. In December 1997, our Board of Directors
terminated the Outside Director Stock Option Plan with respect to new option
grants. At May 31, 2006, 28,250 options are outstanding under the Outside
Director Stock Option Plan.
1997 Stock Option Plan
In December 1997, our stockholders approved the 1997 Stock Option Plan (the
"1997 Plan") for our officers, directors, employees and consultants, for which
we have reserved, as amended, an aggregate of 2,800,000 shares of common stock.
The 1997 Plan provides that it will be administered by a committee of our Board
of Directors and that the committee will have full authority to determine the
identity of the recipients of the options and the number of shares subject to
each option. Options granted under the 1997 Plan may be either incentive stock
options or non-qualified stock options. The option price shall be 100% of the
fair market value of the common stock on the date of the grant (or in the case
of incentive stock options granted to any individual principal stockholder who
owns stock possessing more than 10% of the total combined voting power of all of
our voting stock, 110% of such fair market value). The term of any option may be
fixed by the committee but in no event shall exceed ten years from the date of
grant. Options are exercisable upon payment in full of the exercise price,
either in cash or in common stock valued at fair market value on the date of
exercise of the option. The term for which options may be granted under the 1997
Plan expires August 6, 2007. At May 31, 2006, 2,991,168 options had been granted
(including options previously granted but subsequently cancelled), of which
1,404,527 are outstanding under the 1997 Plan.
1999 Stock Option Plan
In July 1999, our Board of Directors authorized the 1999 Stock Option Plan
(the "1999 Plan") for our officers, directors, employees and consultants, for
which we have reserved, as amended, an aggregate of 5,000,000 shares of common
stock. The 1999 Plan provides that it will be administered by a committee of our
Board of Directors and that the committee will have full authority to determine
the identity of the recipients of the options and the number of shares subject
to each option. Options granted under the 1999 Plan may be either incentive
7
stock options or non-qualified stock options. The option price shall be 100% of
the fair market value of the common stock on the date of the grant (or in the
case of incentive stock options granted to any individual principal stockholder
who owns stock possessing more than 10% of the total combined voting power of
all of our voting stock, 110% of such fair market value). The term of any option
may be fixed by the committee but in no event shall exceed ten years from the
date of grant. Options are exercisable upon payment in full of the exercise
price, either in cash or in common stock valued at fair market value on the date
of exercise of the option. The term for which options may be granted under the
1999 Plan expires July 12, 2009. At May 31, 2006, 8,701,932 options had been
granted, (including options previously granted but subsequently cancelled), of
which 4,311,749 are outstanding under the 1999 Plan.
2004 Stock Option and Stock Issuance Plan
In October 2004, our stockholders approved the 2004 Stock Option and Stock
Issuance Plan (the "2004 Stock Plan") for our officers, directors, employees and
consultants [and other independent advisors], for which we reserved an aggregate
of 2,500,000 shares of common stock. The 2004 Stock Plan is administered by a
committee of our Board of Directors, which has full authority to determine the
identity of the recipients of the options and the number of shares subject to
each option. The 2004 Stock Plan is divided into two separate equity programs:
an option grant program and a stock issuance program. Options granted under the
2004 Stock Plan shall be non-qualified or incentive stock options and the
exercise price is the fair market value of the common stock on the date of grant
except that for incentive stock options it shall be 110% of the fair market
value if the participant owns 10% or more of our common stock. Under the stock
issuance program, the purchase price per share shall be fixed by the Board of
Directors or committee but cannot be less than the fair market value of the
common stock on the issuance date. Payment for the shares may be made in cash or
check payable to us, or for past services rendered to us and all shares of
common stock issued thereunder shall vest upon issuance unless otherwise
directed by the board or committee. The number of shares issuable is also
subject to adjustments upon the occurrence of certain events, including stock
dividends, stock splits, mergers, consolidations, reorganizations,
recapitalizations, or other capital adjustments. At May 31, 2006, 2,118,045
options had been granted, (including options previously granted but subsequently
cancelled), of which 1,851,549 are outstanding under the 2004 Stock Plan.
401(k) Plan
In April 1997, we adopted the Vasomedical, Inc. 401(k) Plan to provide
retirement benefits for its employees. As allowed under Section 401(k) of the
Internal Revenue Code, the plan provides tax-deferred salary deductions for
eligible employees. Employees are eligible to participate in the next quarter
enrollment period after employment. Participants may make voluntary
contributions to the plan up to 100% of their compensation. In fiscal year 2006,
2005 and 2004, the Company made discretionary contributions of approximately
$26,752, $34,766 and $35,535, respectively, to match a percentage of employee
contributions.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
MILLER ELLIN & COMPANY, LLP are our independent registered public accounting
firm and performed the audit of our consolidated financial statements for fiscal
year 2006. Audits of our consolidated financial statements for fiscal years 2005
and 2004 were performed by GRANT THORNTON LLP. The following table sets forth
all fees for the fiscal years ended May 31, 2006 and May 31, 2005:
2006 2005
---- ----
Audit Fees (1) $ 264,000 $ 279,000
Tax Fees (2) $51,000 $35,000
---------------
(1) Audit Fees includes fees for professional services provided in connection
with the audits of our financial statements, the review of our quarterly
8
financial statements, Sarbanes-Oxley 404 related services, consents, and
audit services provided in connection with other statutory or regulatory
filings. All such services were pre-approved by the Audit Committee.
(2) Tax fees principally include fees for tax return preparation and for tax
advice planning fees. All such services were provided by Grant Thornton,
LLP and were pre-approved by the Audit Committee.
The Audit Committee has sole authority to appoint, determine funding for, retain
and oversee our independent auditors and to pre-approve all audit services and
permissible non-audit services. The Audit Committee has delegated to the
chairman of the audit committee the authority to pre-approve audit-related and
non-audit services not prohibited by law to be performed by our independent
registered public accounting firm and associated fees, provided that he reports
any pre-approval of audit-related or non-audit related services and fees to the
full Audit Committee at its next regular meeting.
MILLER ELLIN & COMPANY, LLP did not render any services related to financial
information systems design and implementation during fiscal year 2006. GRANT
THORNTON LLP did not render any services related to financial information
systems design and implementation during fiscal year 2005.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, we have duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on the 28th day of September,
2006.
VASOMEDICAL, INC.
By: /s/ Thomas Glover
-----------------
Thomas Glover
President, Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on September 28, 2006, by the following persons in the
capacities indicated:
/s/ Thomas Glover President, Chief Executive Officer and Director
------------------------ (Principal Executive Officer)
Thomas Glover
----------------------- Chairman of the Board
Abraham E. Cohen
/s/ Tricia Efstathiou Chief Financial Officer (Principal Financial Officer)
------------------------
Tricia Efstathiou
/s/ John C.K. Hui Senior Vice President, Chief Technology Officer
------------------------ and Director
John C.K. Hui
/s/ Photios T. Paulson Director
------------------------
Photios T. Paulson
/s/ Kenneth W. Rind Director
-----------------------
Kenneth W. Rind
Director
-----------------------
Martin Zeiger