UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
DIGICORP
(Name of Registrant as Specified In Its Charter)
Utah 000-50774 41-2052984
---- --------- ----------
(State or other jurisdiction (IRS Employer (Commission
of incorporation) File Number) Identification No.)
4143 Glencoe Avenue
Marina Del Rey, CA 90292
(Address of principal executive offices)
(310) 728-1450
(Registrant's telephone number, including area code)
DIGICORP
4143 GLENCOE AVENUE
MARINA DEL REY, CA 90292
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about March 17, 2006,
by Digicorp (the "Company") to the holders of record of shares of its common
stock as of the close of business on March 16, 2006. This information statement
is provided to you for information purposes only. We are not soliciting proxies
in connection with the items described in this Information Statement. You are
urged to read this Information Statement carefully. You are not, however,
required to take any action.
You are receiving this Information Statement in connection with the
appointment of three new members to the Company's Board of Directors, in
connection with a change in control of the Company. On December 20, 2005, the
Company entered into a Stock Purchase Agreement (the "Stock Purchase Agreement")
to acquire (the "Acquisition") all of the issued and outstanding shares of
capital stock of Rebel Crew Films, Inc., a California corporation ("Rebel Crew
Films"). On December 29, 2005, the transaction closed and the Company completed
the acquisition of Rebel Crew Films. The Company issued 21,207,080 shares of
common stock (the "Purchase Price") to the shareholders of Rebel Crew Films as
compensation for the issued and outstanding capital stock of Rebel Crew Films.
From the Purchase Price, 4,000,000 shares are held in escrow pending
satisfaction of certain performance milestones. In addition, from the Purchase
Price, 16,666,667 shares are subject to lock up agreements as follows: (a)
3,333,333 shares are subject to lockup agreements for one year; (b) 6,666,667
shares are subject to lockup agreements for two years; and (c) 6,666,667 shares,
of which the 4,000,000 escrowed shares are a component, are subject to lockup
agreements for three years.
Pursuant to the Stock Purchase Agreement, upon closing the Acquisition,
the Company's Board of Directors will consist of five persons. Milton "Todd"
Ault, III, former Chairman and Chief Executive Officer of the Company, will
designate or elect two of the five board members, which will initially be
William B. Horne and Alice M. Campbell, both current Board members. Jay Rifkin,
former majority shareholder of Rebel Crew Films and present Chief Executive
Officer of the Company, will designate or elect three of the five Board members,
one of which will be Mr. Rifkin. If after the closing the number of directors on
the Company's Board is less than or more than five, then Mr. Rifkin will have
the right to designate or elect a simple majority of the Company's directors and
Mr. Ault will have the right to designate or elect the remaining directors. In
connection with the Acquisition, certain shareholders of the Company entered
into a voting agreement authorizing Mr. Rifkin to vote the Company's common
stock owned by such parties for directors designated by Mr. Rifkin and Mr. Ault
as described above.
Effective December 29, 2005, the following directors resigned from the
Company's Board of Directors: Lynne Silverstein, Melanie Glazer and Darrell
Grimsley. The Board of Directors also nominated the following directors to fill
vacancies created by the resignations of Ms. Silverstein, Ms. Glazer and Mr.
Grimsley: Jay Rifkin, Alan Morelli and David M. Kaye. The Company plans to
appoint Messrs. Rifkin, Morelli and Kaye to its Board of Directors approximately
ten days after the date the Company mails this Information Statement to the
Company's shareholders.
The information contained in this Information Statement concerning each
person chosen for the Company's Board of Directors has been furnished to the
Company by each individual, and the Company assumes no responsibility for the
accuracy, completeness or fairness of any of that information.
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CERTAIN INFORMATION REGARDING THE COMPANY
CHANGES IN THE COMPANY'S BOARD OF DIRECTORS - Effective December 29,
2005, Lynne Silverstein, Melanie Glazer and Darrell Grimsley resigned from the
Company's Board of Directors. The present directors of the Company consist of
William B. Horne and Alice M. Campbell. The Board of Directors has approved the
following director nominees for appointment to the Board to fill the current
vacancies on the Board: Jay Rifkin, Alan Morelli and David M. Kaye. Such
directors will be appointed approximately ten days after the Company mails this
Information Statement to shareholders of the Company.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000 shares of
common stock at a par value of $0.001 per share. As of March 7, 2006, there were
37,028,320 shares of the Company's common stock issued and outstanding held by
approximately 300 stockholders of record.
Holders of the Company's common stock are entitled to one vote for each
share on all matters submitted to a stockholder vote. Holders of common stock do
not have cumulative voting rights. Therefore, holders of a majority of the
shares of common stock voting for the election of directors can elect all of the
directors. Holders of the Company's common stock representing a majority of the
voting power of the Company's capital stock issued, outstanding and entitled to
vote, represented in person or by proxy, are necessary to constitute a quorum at
any meeting of stockholders. A vote by the holders of a majority of the
Company's outstanding shares is required to effectuate certain fundamental
corporate changes such as liquidation, merger or an amendment to the Company's
articles of incorporation.
Holders of the Company's common stock are entitled to share in all
dividends that the board of directors, in its discretion, declares from legally
available funds. There are no limitations or restrictions upon the rights of the
Board of Directors to declare dividends out of any funds legally available
therefore. In the event of a liquidation, dissolution or winding up, each
outstanding share entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock. The Company's common stock has
no pre-emptive rights, no conversion rights and there are no redemption
provisions applicable to the Company's common stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 7, 2006
with respect to the beneficial ownership of the outstanding common stock by (i)
any holder of more than five (5%) percent; (ii) each of the named executive
officers, directors and director nominees; and (iii) our directors, director
nominees and named executive officers as a group. Except as otherwise indicated,
each of the stockholders listed below has sole voting and investment power over
the shares beneficially owned.
Common Stock Percentage of
Name of Beneficial Owner (1) Beneficially Owned (2) Common Stock (2)
----------------------------------------- ------------------------- ---------------------
Patient Safety Technologies, Inc. 2,750,361 (3) 7.4%
Bodnar Capital Management, LLC 2,941,176 7.9%
William B. Horne 400,000 (4) 1.1%
Alice M. Campbell 350,000 (5) *
Philip Gatch 1,250,000 (6) 3.4%
Cesar Chatel 2,120,708 (7) 5.7%
Jay Rifkin 19,586,372 (8) 52.2%
Alan Morelli 350,000 (9) *
David M. Kaye 350,000 (10) *
----------------------------------------- ------------------------- ---------------------
All named executive officers, directors 24,407,080 63.0%
and director nominees as a group (6
persons) * Less than 1%
(1) Except as otherwise indicated, the address of each beneficial
owner is c/o Digicorp, 4143 Glencoe Avenue, Marina Del Rey, CA
90292.
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(2) Applicable percentage ownership is based on 37,028,320 shares
of common stock outstanding as of March 7, 2006, together with
securities exercisable or convertible into shares of common
stock within 60 days of March 7, 2006 for each stockholder.
Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to
securities. Shares of common stock that a person has the right
to acquire beneficial ownership of upon the exercise or
conversion of options, convertible stock, warrants or other
securities that are currently exercisable or convertible or
that will become exercisable or convertible within 60 days of
March 7, 2006 are deemed to be beneficially owned by the
person holding such securities for the purpose of computing
the percentage of ownership of such person, but are not
treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(3) Patient Safety Technologies, Inc. has granted Mr. Rifkin an
irrevocable proxy to vote the shares of common stock owned by
them for certain directors of the Company.
(4) Represents shares issuable upon exercise of stock options with
an exercise price of $0.25 per share and an expiration date 18
months from the date Mr. Horne's services to the Company
terminate. Mr. Horne has granted Mr. Rifkin an irrevocable
proxy to vote the shares of common stock issuable upon
exercise of such stock options for certain directors of the
Company.
(5) Represents shares issuable upon exercise of stock options with
an exercise price of $0.25 per share and an expiration date 18
months from the date Ms. Campbell's services to the Company
terminate. Ms. Campbell has granted Mr. Rifkin an irrevocable
proxy to vote the shares of common stock issuable upon
exercise of such stock options for certain directors of the
Company.
(6) Includes 250,000 shares issuable upon exercise of stock
options with an exercise price of $0.25 per share and an
expiration date 18 months from the date Mr. Gatch's services
to the Company terminate. Mr. Gatch has granted Mr. Rifkin an
irrevocable proxy to vote the shares of common stock owned by
him for certain directors of the Company.
(7) Includes 400,000 shares which are held in escrow pending
satisfaction of certain performance milesontes through March
31, 2007. Mr. Chatel has granted Mr. Rifkin an irrevocable
proxy to vote the shares of common stock owned by Mr. Chatel
for certain directors of the Company.
(8) Includes: (a) 3,600,000 shares which are held in escrow
pending satisfaction of certain performance milestones through
March 31, 2007; and (b) 500,000 shares issuable upon
conversion of a $556,306.53 principal amount secured
convertible note with a conversion price of $1.112614 per
share. All of these securities are held by Rebel Crew
Holdings, LLC of which Mr. Rifkin is the sole managing member.
Mr. Rifkin's reported beneficial ownership does not include
approximately 8,762,736 shares of common stock issued and
issuable by the Company for which certain shareholders of the
Company have granted Mr. Rifkin an irrevocable proxy to vote
for directors of the Company.
(9) Represents options to purchase 350,000 shares of the Company's
common stock with an exercise price of $1.50 per share, which
stock options vest annually over a period of three years from
the date Mr. Morelli's board appointment is effective. In the
event that Mr. Morelli, for whatever reason, declines the
appointment to serve as a director on the Company's Board of
Directors, then these options will be automatically cancelled.
(10) Represents options to purchase 350,000 shares of the Company's
common stock with an exercise price of $1.50 per share, which
stock options vest annually over a period of three years from
the date Mr. Kaye's board appointment is effective. In the
event that Mr. Kaye, for whatever reason, declines the
appointment to serve as a director on the Company's Board of
Directors, then these options will be automatically cancelled.
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
Below are the names and certain information regarding the Company's
current executive officers, directors and director nominees. The Company plans
to appoint the below director nominees to its Board of Directors approximately
ten days after the date the Company mails this Information Statement to
shareholders. None of the Company's directors, director nominees, officers or
affiliates is involved in a proceeding adverse to the Company or has a material
interest adverse to the Company.
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NAME AGE POSITION
------------------------------------------ ------- -----------------------------------------
Jay Rifkin 50 Chief Executive Officer, Director Nominee
------------------------------------------ ------- -----------------------------------------
William B. Horne 37 Chief Financial Officer and Director
------------------------------------------ ------- -----------------------------------------
Philip Gatch 41 Chief Technology Officer
------------------------------------------ ------- -----------------------------------------
Alice M. Campbell 55 Director
------------------------------------------ ------- -----------------------------------------
Alan Morelli 44 Director Nominee
------------------------------------------ ------- -----------------------------------------
David M. Kaye 51 Director Nominee
------------------------------------------ ------- -----------------------------------------
BACKGROUND OF EXECUTIVE OFFICERS, DIRECTORS AND DIRECTOR NOMINEES
Officers are elected annually by the Board of Directors (subject to the
terms of any employment agreement), at our annual meeting, to hold such office
until an officer's successor has been duly appointed and qualified, unless an
officer sooner dies, resigns or is removed by the Board.
JAY RIFKIN, CHIEF EXECUTIVE OFFICER AND DIRECTOR NOMINEE. Effective
September 30, 2005, the Board of Directors of the Company appointed Mr. Rifkin
interim President of the Company pending closing of the Acquisition. On December
29, 2005, Mr. Rifkin's title was changed to Chief Executive Officer of the
Company effective as of September 30, 2005. From 2004 to Present, Mr. Rifkin has
been the sole Managing Member of Rebel Holdings, LLC, through which he is also
the majority shareholder of Rebel Crew Films, Inc. In 1995, Mr. Rifkin founded
Mojo Music, Inc., a music publishing company, and he has been President of Mojo
Music, Inc. since it was founded. Mr. Rifkin is Chairman and a founder of Media
Revolution, a marketing agency founded in 1977 that has executed marketing
campaigns for major Hollywood studios. Mr. Rifkin has served as Producer and
Executive Producer on various motion pictures with his most recent production
"Waiting" (Lion's Gate) released on October 7, 2005. Mr. Rifkin is also a music
producer, engineer and songwriter. Mr. Rifkin received a Grammy Award for Best
Children's Album and an American Music Award for Favorite Pop/Rock Album for his
work on Disney's "The Lion King," and received a Tony nomination for "The Lion
King" on Broadway. From 1988 to 2004, Mr. Rifkin, through Mojo Music, Inc.,
served as a Managing Member of Media Ventures, LLC, an entertainment cooperative
founded by Mr. Rifkin and composer Hans Zimmer. In 1995, Mr. Rifkin founded Mojo
Records, LLC, which in 1996 became a joint venture with Universal Records, and
was subsequently sold to Zomba/BMG Records in 2001. Mr. Rifkin also serves as
President of Cyberia Holdings, Inc. which is the majority owner of Media
Revolution. In 2004, Cyberia Holdings, Inc. filed for bankruptcy under Chapter 7
which cased was dismissed in May 2005.
WILLIAM B. HORNE, CHIEF FINANCIAL OFFICER AND DIRECTOR. Mr. Horne has
been the Company's Chief Financial Officer and a director since July 20, 2005.
From September 30, 2005 until December 29, 2005, Mr. Horne also served as the
Company's Chief Executive Officer and Chairman of the Company's Board of
Directors. Since July 5, 2005, Mr. Horne has been the Chief Financial Officer
and a director of Ault Glazer Bodnar & Company, Inc. Since July 5, 2005, Mr.
Horne has also been Chief Financial Officer of Patient Safety Technologies, Inc.
and its subsidiaries. From May 2002 to April 2005, Mr. Horne held the position
of Chief Financial Officer of Alaska Wireless Communications, a privately held
advanced cellular communications company. Since January 2002, Mr. Horne has also
provided strategic financial consulting services to both private and public
companies. From November 1996 to December 2001, Mr. Horne held the position of
Chief Financial Officer of The Phoenix Partners, a venture capital limited
partnership located in Seattle, Washington.
PHILIP GATCH, CHIEF TECHNOLOGY OFFICER. Mr. Gatch has been the
Company's Chief Technology Officer since June 30, 2005. From June 30, 2005 until
October 14, 2005, Mr. Gatch was also Chief Technology Officer of Patient Safety
Technologies, Inc. Since May 12, 2005, Mr. Gatch has been President and owner of
Cinapse Digital Media, LLC, a company that operates a production and
post-production media content facility. From September 2003 to June 2005, Mr.
Gatch was Director of Technical Services of The DR Group. From February 2002 to
April 2003, Mr. Gatch was Director of Research and Development for Media.net.
From 1999 to 2002, Mr. Gatch was Director of Research and Development for
Digital Entertainment Solutions.
ALICE M. CAMPBELL, DIRECTOR. Ms. Campbell has been a member of the
Company's Board of Directors since July 16, 2005. Since June 23, 2005, Ms.
Campbell has been a director of IPEX, Inc., a public company quoted on the OTC
Bulletin Board. Since October 22, 2004, Ms. Campbell has been a director of
Patient Safety Technologies, Inc., a public company listed on the American Stock
Exchange. Since 2001, Ms. Campbell has been, and is currently, an investigator
and consultant, specializing in research and litigation services, financial
investigations and computer forensics, for major companies and law firms
throughout the United States. Ms. Campbell is a certified fraud specialist, as
well as a certified instructor for the Regional Training Center of the United
States Internal Revenue Service and for the National Business Institute. From
1979 to 2001, Ms. Campbell served as a special agent for the United States
Treasury Department where she conducted criminal investigations and worked
closely with the United States Attorney's Office and with several federal
agencies, including the Internal Revenue Service, Federal Bureau of
Investigation, Secret Service, Customs Service, State Department, Drug
Enforcement Agency, Bureau of Alcohol, Tobacco and Firearms and U.S. Postal
Service.
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ALAN MORELLI, DIRECTOR NOMINEE. Mr. Morelli is a consultant who has
served as Managing Director of Analog Ventures, LLC, a consulting firm located
in Pacific Palisades, California, since 1997. Mr. Morelli is also currently
serving as a director of PT Holdings, Inc., RADD Holdings, Inc. and Precise
Exercise Equipment. PT Holdings, Inc. is a development-stage company in the
physical therapy industry. RADD Holdings licenses intellectual property to
retail distributors. Precise develops innovative commercial fitness or
rehabilitation technology currently used in most health clubs today. Mr. Morelli
received a B.S. from Rutgers University (1983) and a J.D. from Georgetown
University Law Center (1986).
DAVID M. KAYE, DIRECTOR NOMINEE. Mr. Kaye is an attorney and has been a
partner in the law firm of Danzig Kaye Cooper Fiore & Kay, LLP located in
Florham Park, New Jersey, since the firm's inception in February 1996. Since
1980, Mr. Kaye has been a practicing attorney in the New York City metropolitan
area specializing in corporate and securities matters. He is currently a
director of Dionics, Inc., a company which designs, manufactures and sells
semiconductor electronic products. Mr. Kaye received his B.A. from George
Washington University (1976) and his J.D. from the Benjamin N. Cardozo School of
Law, Yeshiva University (1979).
AUDIT COMMITTEE
The Audit Committee is appointed by the Board of Directors in
fulfilling its responsibilities to oversee: (1) the integrity of the Company's
financial statements and disclosure controls; (2) the qualifications and
independence of our independent accountants; (3) the performance of our
independent accountants; and (4) compliance with legal and regulatory
requirements. Alice M. Campbell is presently the only member of the Company's
Audit Committee and she is Chairman of the Audit Committee. The Board has
determined that Ms. Campbell is an "audit committee financial expert" as defined
under Item 401 of Regulation S-B promulgated pursuant to the Exchange Act.
COMPENSATION COMMITTEE
The Compensation Committee is appointed by the Board of Directors to
discharge the responsibilities of the Board relating to compensation of the
Company's executive officers. Alice M. Campbell is currently the only member of
the Compensation Committee and she is Chairman of the Compensation Committee.
SHAREHOLDER COMMUNICATIONS
The Board of Directors will not adopt a procedure for shareholders to
send communications to the Board of Directors until it has reviewed the merits
of several alternative procedures. The Board of Directors has not adopted a
procedure to recommend nominees for the Board of Directors.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Jay Rifkin serves as President of Cyberia Holdings, Inc. which is the
majority owner of Media Revolution. In 2004, Cyberia Holdings, Inc. filed for
bankruptcy under Chapter 7 which case was dismissed in May 2005.
Except as described above, no director, person nominated to become a
director, executive officer or control person of the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the
time of the bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
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(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type
of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the
judgment has not been reversed, suspended or vacated.
No director, officer or 5% or other shareholder of the Company is a
party to any legal proceeding in which such person is adverse to the Company or
has an interest adverse to the Company.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the total
compensation that the Company has paid or that has accrued on behalf of the
Company's chief executive officer and other executive officers with annual
compensation exceeding $100,000 during the years ended December 31, 2005, 2004
and 2003.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------- ---------- ------------ ------------------------------ -----------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDER-LYING LTIP OTHER
NAME AND COMPEN- STOCK AWARD(S) OPTIONS/ PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SATION ($) ($) SARS (#) ($) SATION ($)
--------------------------- --------- ------------- ---------- ------------ ----------------- ------------ ----------- ------------
Milton "Todd" Ault III (1) 2005 0 0 0 0 2,000,000 0 0
CEO and Chairman 2004 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
William B. Horne (2) 2005 0 0 0 0 500,000 0 0
CEO, CFO and Chairman 2004 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
Philip Gatch (3) 2005 $ 23,866 0 0 $ 11,250 250,000 0 0
CTO 2004 0 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
Jay Rifkin (4) 2005 0 0 0 0 4,400,000 0 0
CEO and President and 2004 0 0 0 0 0 0 0
Principal Executive 2003 0 0 0 0 0 0 0
Officer of Rebel Crew
(1) Mr. Ault was appointed Chief Executive Officer on April 26, 2005, and
director and Chairman of the Board of Directors on July 16, 2005. Mr. Ault
resigned from the positions of Chief Executive Officer and director and
Chairman of the Board of Directors on September 30, 2005.
(2) Mr. Horne was appointed Chief Financial Officer and director on July 20,
2005, and Chief Executive Officer and Chairman of the Board of Directors on
September 30, 2005. Mr. Horne resigned from the position of Chief Executive
Officer on December 29, 2005.
(3) Mr. Gatch was hired as Chief Technology Officer of the Company on September
20, 2005.
(4) Mr. Rifkin was appointed President on September 30, 2005, and Chief
Executive Officer and director nominee on December 29, 2005.
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OPTIONS GRANT TABLE
The following table sets forth information with respect to the named
executive officers concerning the grant of stock options during the fiscal year
ended December 31, 2005. The Company did not have during such fiscal year any
plans providing for the grant of stock appreciation rights ("SARs").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-----------------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK ALTERNATIVE TO
PRICE APPRECIATION (F) AND (G):
INDIVIDUAL GRANTS FOR OPTION TERM GRANT DATE VALUE
------------------------------------------------------------------------------ ------------------- ----------------
(A) (B) (C) (D) (E) (F) (G) (H)
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/ EMPLOYEES OR BASE GRANT DATE
SARS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($) VALUE ($) (1)
-----------------------------------------------------------------------------------------------------------------------
Milton "Todd" Ault III (2) 2,000,000 2,000,000 $ 0.25 7/20/2015 --- --- $ 494,200
William B. Horne (3) 500,000 500,000 $ 0.25 7/20/2015 --- --- $ 123,550
Philip Gatch (4) 250,000 250,000 $ 0.25 7/20/2015 --- --- $ 61,775
Jay Rifkin (5) 4,400,000 4,400,000 $ 0.85 9/30/2015 --- --- $ 3,696,620
-----------------------------------------------------------------------------------------------------------------------
(1) The value shown was calculated utilizing the Black-Scholes option pricing
model and are presented solely for the purpose of comparative disclosure in
accordance with certain regulations of the Securities and Exchange
Commission. This model is a mathematical formula used to value traded stock
price volatility. The actual value that an executive officer may realize,
if any, is dependent on the amount by which the stock price at the time of
exercise exceeds the exercise price. There is no assurance that the value
realized by an executive officer will be at or near the value estimated by
the Black-Scholes model. In calculating the grant date present values, the
Company used the following assumptions: (a) expected volatility of
approximately 155%; (b) risk-free rate of return of approximately 3.75%;
(c) no dividends payable during the relevant period; and (d) exercise at
the end of a 10 year period from the date of grant.
(2) On July 20, 2005, as consideration for service as Chief Executive Officer,
the Company granted Milton "Todd" Ault, III options to purchase 2,000,000
shares of common stock with an exercise price of $0.25 per share. These
stock options would have vested quarterly over two years, however, on
September 30, 2005, the Board of Directors accelerated the vesting of such
options such that options to purchase 475,000 shares of the Company's
common stock immediately vested and are exercisable for a period of 18
months from December 29, 2005. The remaining options to purchase 1,525,000
shares of the Company's common stock were cancelled.
(3) On July 20, 2005, as consideration for service as Chief Financial Officer
and Director, the Company granted William B. Horne options to purchase
500,000 shares of common stock with an exercise price of $0.25 per share.
These stock options would have vested quarterly over two years, however, on
December 29, 2005, the Board of Directors accelerated the vesting of such
options such that options to purchase 400,000 shares of the Company's
common stock immediately vested and are exercisable for a period of 18
months from the date the individual no longer performs services to the
Company. The remaining options to purchase 100,000 shares of the Company's
common stock were cancelled.
(4) On July 20, 2005, as consideration for service as Chief Technology Officer,
the Company granted Philip Gatch options to purchase 250,000 shares of our
common stock with an exercise price of $0.25 per share. These stock options
would have vested quarterly over two years, however, on December 29, 2005,
the Board of Directors accelerated the vesting of such options such that
options to purchase 250,000 shares of the Company's common stock
immediately vested and are exercisable for a period of 18 months from the
date the individual no longer performs services to the Company.
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(5) On September 30, 2005, as consideration for service as Interim President,
the Company granted Jay Rifkin options to purchase 4,400,000 shares of
common stock with an exercise price of $0.85 per share. These stock options
vest annually over three years from December 29, 2005.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
No options of the Company were exercised by the named executive
officers during the most recent fiscal year ended December 31, 2005.
BENEFIT PLANS
Effective July 20, 2005, the Board of Directors approved the Company's
Stock Option and Restricted Stock Plan (the "Plan"). Under the Plan, the Company
can issue restricted shares of common stock, options to purchase shares of
common stock (both incentive stock options and non-incentive stock options) and
warrants to purchase shares of common stock to employees, directors and
consultants. The number of shares subject to the Plan may not exceed 15,000,000
shares. The Plan will be administered by the Company's Compensation Committee.
COMPENSATION OF DIRECTORS
No director currently receives any cash compensation for their service
as a director. All directors are reimbursed for their reasonable out-of-pocket
expenses incurred in connection with their duties to us. In addition, directors
are eligible to receive restricted shares of common stock and stock options
pursuant to the Company's Stock Option Restricted Stock Plan described above.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management of the Company believes that all of the below transactions
were on terms at least as favorable as could have been obtained from unrelated
third parties.
Relationships with Patient Safety Technologies, Inc.
On December 29, 2004, the Company's then current directors along with
several other shareholders sold 2,229,527 shares of the Company's common stock,
representing 22.3% of the outstanding shares of common stock of the Company on
such date, to Patient Safety Technologies, Inc. (formerly, Franklin Capital
Corporation) ("PST"). The Company's directors, Gregg B. Colton, Don J. Colton,
Norman Sammis and Glenn W. Stewart, sold 80% of their holdings to PST at $0.135
per share. Another shareholder who was not a principal shareholder or director
sold all of his shares to PST at $0.145 per share. The aggregate amount of funds
of PST used to purchase the shares of common stock was approximately $301,998.
The source for such funds was PST's working capital. The directors and
shareholders agreed to sell an additional 1,224,000 shares (the "Additional
Shares") of our common stock of to PST upon the shares being registered with the
SEC by December 29, 2005. In addition, prior to the acquisition and change of
control, PST owned 327,500 shares of the Company's common stock.
On December 28, 2005, PST assigned its right to purchase 1,000,000 of
the Additional Shares to Alan Morelli (the "Assignment Agreement") and amended
certain terms of the stock purchase agreement pursuant to which the Original
Purchase Transaction was completed (the "Amendment Agreement"). In the
Assignment Agreement, the Company granted the parties piggyback registration
rights with respect to the sale of the Additional Shares. In the Amendment
Agreement, the Company agreed that if it does not register the resale of the
Additional Shares on or before June 30, 2005, then the Company will redeem the
Additional Shares at a price of $0.145 per share and the Company will thereupon
sell 224,000 shares of the Company's common stock to PST and 1,000,000 shares of
the Company's common stock to Mr. Morelli at a price of $0.145 per share. Mr.
Morelli is a current Director Nominee of the Company.
8
Pursuant to the stock purchase agreement with PST, Melanie Glazer was
appointed as Chairman of the Company's Board of Directors on December 30, 2004,
following the resignation of Glenn W. Stewart, Norman Sammis and Don J. Colton
as directors. Effective April 26, 2005, Gregg B. Colton resigned from his
positions as President, Chief Executive Officer and Chief Financial Officer. On
April 26, 2005, the Company's Board of Directors appointed the following
officers: (a) Milton C. Ault, III - Chief Executive Officer; (b) Kathryn
Macenzie Queen - President of Operations; and (c) Lynne Silverstein - Secretary.
Mr. Ault subsequently resigned on September 30, 2005 and Ms. Queen and Ms.
Silverstein resigned on December 29, 2005. Upon Mr. Ault's resignation as Chief
Executive Officer, William B. Horne was appointed to succeed Mr. Ault as Chief
Executive Officer. Mr. Horne resigned as Chief Executive Officer upon completing
the Acquisition on December 29, 2005.
On June 30, 2005, the Company appointed Philip Gatch as the Company's
Chief Technology Officer. On September 19, 2005, the Company entered into an
asset purchase agreement with Mr. Gatch, and thereby purchased the iCodemedia
Assets. As consideration for the iCodemedia Assets, the Company issued Mr. Gatch
1,000,000 shares of common stock.
Effective July 16, 2005, Gregg B. Colton resigned from his position as
a director. Effective July 16, 2005, the Company appointed Alice M. Campbell,
Milton "Todd" Ault, III and Darrell Grimsley as directors. Upon his appointment,
Mr. Ault was named Chairman of the Company's Board of Directors. Ms. Campbell
was appointed to chair the Company's Audit Committee and to chair the Company's
Compensation Committee. Mr. Ault resigned as a director on September 30, 2005.
Effective July 20, 2005, the Company appointed Lynne Silverstein and
William B. Horne as directors. Ms. Silverstein subsequently resigned as a
director on December 29, 2005.
Effective July 20, 2005, the Company appointed William B. Horne as the
Company's Chief Financial Officer.
Each of Melanie Glazer, Milton C. Ault, III, Kathryn Macenzie Queen,
Lynne Silverstein, Philip Gatch, Alice M. Campbell, Darrell Grimsley and William
B. Horne had and/or currently have employment positions, directorships and/or
other relationships with Ault Glazer & Company Investment Management LLC,
Patient Safety Technologies, Inc. and/or Ault Glazer & Company Investment
Management's or Patient Safety Technologies' current officers and directors.
Acquisition of Rebel Crew Films
On December 29, 2005, the Company acquired all of the issued and
outstanding capital stock of Rebel Crew Films in consideration for the issuance
of 21,207,080 shares of common stock to the shareholders of Rebel Crew Films. Of
these shares, 19,086,372 shares were issued or are issuable to Rebel Holdings,
LLC as consideration for its 90% ownership interest in Rebel Crew Films and
2,120,708 were issued or are issuable to Cesar Chatel as consideration for his
10% ownership interest in Rebel Crew Films. The Company's present Chief
Executive Officer and Director Nominee, Jay Rifkin, is the sole managing member
of Rebel Holdings, LLC. Mr. Chatel is an employee of the Company and is
President of the Company's now wholly owned subsidiary Rebel Crew Films.
On December 29, 2005 the Company entered into a Securities Purchase
Agreement with Rebel Holdings, LLC, pursuant to which the Company purchased a
$556,306.53 principal amount loan receivable owed by Rebel Crew Films to Rebel
Holdings, LLC in exchange for the issuance of a $556,306.53 principal amount
secured convertible note to Rebel Holdings, LLC. The secured convertible note
accrues simple interest at the rate of 4.5%, matures on December 29, 2010 and is
secured by all of the Company's assets now owned or hereafter acquired. The
secured convertible note is convertible into 500,000 shares of common stock of
the Company at the rate of $1.112614 per share. As described above, Jay Rifkin,
the Company's present Chief Executive Officer and a Director Nominee of the
Company, is the sole managing member of Rebel Holdings, LLC.
Between September 2005 and October 2005, Jay Rifkin loaned an aggregate
total principal amount of $73,000 to Rebel Crew Films. The Company has agreed to
repay this loan to Mr. Rifkin pursuant to the terms of a $73,000 principal
amount promissory note due June 30, 2006 which accrues interest at 5% per annum.
In the event of breach of the promissory note, the interest rate will increase
to 8% per annum.
9
On December 29, 2005, the Company granted Alan Morelli, as a consultant
to the Company, warrants to purchase 250,000 shares of the Company's common
stock with an exercise price of $0.145 per share, which warrants vested
immediately. These warrants were issued to Mr. Morelli as compensation for
advisory services rendered to the Company in connection with structuring the
Acquisition. Mr. Morelli is presently a director nominee of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who beneficially own more
than ten percent of a registered class of the Company's equity securities to
file with the SEC initial reports of ownership and reports of change in
ownership of common stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, the following persons have failed to file, on
a timely basis, the identified reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year ended December 31, 2005:
Number Transactions not Known failures to
Name and Relationship of late reports timely reported file a required form
--------------------- ---------------- --------------- --------------------
Philip Gatch, Chief Technology Officer 2 2 0
William B. Horne, Chief Financial Officer
and Director 2 2 0
Alice M. Campbell, Director 2 0 2
Patient Safety Technologies, Inc., Former
10% Owner 1 1 0
Melanie Glazer, Former Director 2 1 1
Milton "Todd" Ault, III, Former Officer,
Former Director and Former 10% Owner 10 16 1
Kathryn Macenzie Queen, Former Officer 3 0 3
Lynne Silverstein, Former Officer and
Former Director 2 0 2
Darrell W. Grimsley, Jr., Former Director 2 0 2
Don J. Colton, Former Officer, Former Director
and Former 10% Owner 1 3 1
Gregg B. Colton, Former Officer, Former
Director and Former 10% Owner 1 2 1
Pioneer Oil and Gas, affiliate of Former
Director 1 1 1
Bodnar Capital Management, LLC, Former 2 0 2
10% Owner
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this Information Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIGICORP
By: /s/ Jay Rifkin
----------------------------------------
Jay Rifkin
Chief Executive Officer
11