UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/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 OCTOBER 31, 2005
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from _____ to _____
COMMISSION FILE NUMBER: 000-21785
Rim Semiconductor Company
(Name of small business issuer in its charter)
UTAH 95-4545704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
305 NE 102ND AVENUE, SUITE 105
PORTLAND, OREGON 97220 (503) 257-6700
(Address of principal executive offices, (Issuer's telephone number,
including zip code) including area code)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, $.001 Par Value
--------------------------------------------------------------------------
Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. |_|
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
|_|
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. |_|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|
Issuer's revenues for the fiscal year ended October 31, 2005: $39,866
The aggregate market value of common stock held by non-affiliates of the
registrant as of January 24, 2006 was $6,913,778 (based on the last reported
sale price of $0.0266 per share on January 24, 2006).
The number of shares of the issuer's common stock outstanding as of January
24, 2006 was 265,663,656.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Transitional Small Business Disclosure Format: Yes |_| No |X|
EXPLANATORY NOTE
This Annual Report on Form 10-KSB/A is being filed by Rim Semiconductor
Company ("we," "us" or the "Company") to amend the Company's Annual Report on
Form 10-KSB for the period ended October 31, 2005 that was initially filed with
the Securities and Exchange Commission (the "SEC") on January 30, 2006 (the
"Original Report").
This Form 10-KSB/A amends only Items 9, 10, 11, 12 and 14 of Part III of
the Original Report (the "Amended Items"). In accordance with Rule 12b-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Amended Items have been amended and restated in their entirety. No attempt has
been made in this Form 10-KSB/A to modify or update other disclosures as
presented in the Original Report. In addition, the exhibit list in Item 13 of
Part III has not been updated except that currently-dated certifications from
our Chief Executive Officer and Chief Financial Officer, as required by Rule
12b-15 under the Exchange Act, are filed with this Form 10-KSB/A as Exhibits 31
and 32.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The individuals who serve as our executive officers and directors are:
NAME AGE POSITION
---- --- --------
Brad Ketch 43 President, Chief Executive Officer, Secretary,
Principal Financial Officer and Director
Ray Willenberg, Jr. 54 Chairman of the Board and Executive Vice
President
Jack L. Peckham 56 Director(1)
Thomas J. Cooper 56 Director(2)
--------------------
(1) Audit Committee and Compensation Committee Member
(2) Compensation Committee Member
The business experience, principal occupations and employment, as well as
the periods of service, of each of our directors and executive officers during
at least the last five years are set forth below.
BRAD KETCH has served the Company in various roles since March 2002. In
March 2002, Mr. Ketch became a consultant with us on our broadband technology
and served in that capacity until July 2002, when he became our Chief Marketing
Officer. He has served as our President and Chief Executive Officer, as well as
a director, since December 2002. With over 19 years experience creating
shareholder value through broadband telecommunications products and services,
Mr. Ketch, from October 2001 to March 2002, served as CEO of Kentrox LLC, a
manufacturer and marketer of data networking equipment. At Kentrox, Mr. Ketch
was responsible for a company with 260 employees and $90 million in annual
revenues. From January 2001 to October 2001 Mr. Ketch implemented strategic
plans for telecom service providers and equipment manufacturers through his
telecommunications consulting company, Brad Ketch & Associates, of which he was
founder and President. From February 1999 to January 2001 he was Senior Vice
President of Sales and Marketing for HyperEdge Corporation, a company he
co-founded. HyperEdge acquired and integrated broadband access equipment
manufacturers to further enable service providers to deliver broadband access to
the "Last Mile." From August 1997 through February 1999, Mr. Ketch implemented
2
strategic business and technical plans for competitive local exchange carrier
network access and created products targeted at the incumbent local exchange
carrier market as a consultant to various telecommunications companies as a
consultant with Brad Ketch & Associates. Prior to August 1997 he served in
various capacities at Nortel, Advanced Fibre Communications and Cincinnati Bell.
Mr. Ketch has a Bachelor of Arts degree in Economics from Wheaton College and a
MBA from Northwestern University.
RAY WILLENBERG, JR. served as our President, Chief Executive Officer and
Chairman of the Board from April 1997 to March 2002, and was elected a director
in October 1996. Mr. Willenberg joined us as Vice President and corporate
Secretary in 1996. He currently serves as our Executive Vice President and
Chairman of the Board of Directors. From 1972 to 1995, Mr. Willenberg was Chief
Executive Officer of Mesa Mortgage Company in San Diego, California.
JACK L. PECKHAM is a founder and director of Heritage Bank of Commerce in
San Jose, California, and serves on its audit and compensation committees. He is
currently the Chairman and CEO of Broadband Graphics, a company which owns and
licenses intellectual property in the areas of video and desktop computing. From
1985 through 1998, Mr. Peckham held various positions at ATMEL Corporation
(www.atmel.com), retiring as its General Manager. He received an MA and a BA in
Finance and marketing from Burdette College, Boston.
THOMAS J. COOPER has served as a member of our Board of Directors since
March 2002. From June 1 to December 2, 2002, Mr. Cooper served as our President
and Chief Executive Officer. Mr. Cooper has been engaged in the development,
creation and management of global sales and marketing platforms for businesses
operating in the areas of high technology, real estate, office automation, and
telecommunications for the past 30 years. Mr. Cooper is currently the Senior
Vice President of Sales and Marketing of Artimi, Inc. (www.artimi.com) a fabless
semiconductor firm based in Santa Clara, California serving new markets with
Ultra Wideband wireless technology and products. From 1994 to 2002, Mr. Cooper
served in various high-ranking positions at Conexant (formerly Virata), most
recently as Senior Vice President, Corporate Development (from July 1999 to
February 2002), where he was responsible for the development and implementation
of long range growth strategies, including defining global partnership
initiatives; identifying potential acquisition and joint venture candidates; and
directing strategic investment of corporate capital into select ventures in
which the company acquired minority stakes. From 1994 until 1999, Mr. Cooper
served as Virata's Senior Vice President, Worldwide Sales and Marketing, where
he oversaw all aspects of the company's product sales and marketing, corporate
marketing/communications and public relations. Mr. Cooper has a Bachelor of Arts
degree in English Literature from Hamilton College and an MBA from the
University of Toledo, Ohio.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has determined that Jack L. Peckham is an "Audit
Committee Financial Expert" for purposes of the SEC's rules. The Board believes
that Mr. Peckham meets the independence criteria set out in Rule 4200(a)(14) of
the Marketplace Rules of the National Association of Securities Dealers and the
rules and other requirements of the SEC.
CODE OF ETHICS
We have adopted a code of ethics that applies to our chief executive
officer, president, chief financial officer, controller and others performing
similar executive and financial functions at the Company. This code of ethics is
posted on our Website located at www.rimsemi.com. The code of ethics may be
found as follows: From our main Web page, first click on "About Us" at the top
of the page and then on "Investors". Next, click on "Governance". Finally, click
on "Code of Ethics". We intend to satisfy the disclosure requirement under Item
10 of Form 8-K regarding an amendment to, or waiver from, a provision of this
code of ethics by posting such information on our Website, at the address and
location specified above.
3
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
each of our officers and directors and each person who owns more than 10% of a
registered class of our equity securities to file with the SEC an initial report
of ownership and subsequent reports of changes in such ownership. Such persons
are further required by SEC regulation to furnish us with copies of all Section
16(a) forms (including Forms 3, 4 and 5) that they file. Based solely on our
review of the copies of such forms received by us with respect to fiscal year
2005, or written representations from certain reporting persons, we believe all
of our directors and executive officers met all applicable filing requirements,
except as described in this paragraph. Ray Willenberg, Jr. and Brad Ketch each
filed late Form 5's for fiscal year 2005. Each Form 5 reported five
transactions. Brad Ketch also filed a late Form 4 during fiscal year 2005
reporting four transactions, three of which should have been reported earlier.
Thomas J. Cooper filed a late Form 4 during fiscal year 2005 reporting two
transactions. Ray Willenberg, Jr. filed a late Form 4 during fiscal year 2005
reporting two transactions, and another late Form 4 reporting two transactions,
one of which should have been reported earlier. Finally, Jack L. Peckham, who
joined us as a Director in March of 2005, filed a late Form 3 in February 2006.
Mr. Peckham also filed a late Form 4 for fiscal year 2005 in February 2006,
reporting one transaction.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth all compensation for each of the last three
fiscal years awarded to, or earned by, our Chief Executive Officer and all other
executive officers serving as such at the end of 2005 whose salary and bonus
exceeded $100,000 for the year ended October 31, 2005 or who, as of October 31,
2005, was being paid a salary at a rate of at least $100,000 per year.
SUMMARY COMPENSATION TABLE
--------------------------
Securities
Name and Principal Other Annual Underlying
Position(s) Year Salary Bonus Compensation Options
----------- ---- ------ ----- ------------ -------
BRAD KETCH 2005 $ 250,000 $ 70,000 $ 170,000(1) 7,000,000
President and 2004 $ 250,000(2) -- $ 86,667(3) --
Chief Executive 2003 $ 244,167(4) -- -- 1,500,000
Officer (and Principal
Financial Officer)
RAY WILLENBERG, JR. 2005 $ 84,896 $ 212,450(5) $ 170,000(6) 7,000,000
Chairman of the Board, 2004 $ 175,000(7) $ 152,176 $ 176,667(8) --
Executive Vice President 2003 $ 175,000(9) $ 154,677 -- --
(1) Represents the issuance to Mr. Ketch in April 2005 of 1,000,000 shares of
common stock.
(2) Includes $45,380 paid in 2005.
(3) Represents the issuance to Mr. Ketch in December 2003 of 40,000 shares of
common stock in lieu of $10,000 of deferred payroll, and the issuance to
Mr. Ketch in March 2004 of 333,333 shares of common stock valued at
$76,333.
(4) Includes $43,000 paid in 2005.
4
(5) These amounts are accrued but unpaid.
(6) Represents the issuance to Mr. Willenberg in April 2005 of 1,000,000 shares
of common stock.
(7) Includes $46,250 paid in 2005.
(8) Represents the issuance to Mr. Willenberg in December 2003 of 400,000
shares of common stock in lieu of $100,000 of unpaid bonuses, and the
issuance to Mr. Willenberg in March 2004 of 333,333 shares of common stock
valued at $76,667.
(9) Includes $9,269 paid in 2005.
In accordance with the rules of the SEC, other compensation in the form of
perquisites and other personal benefits has been omitted for the named executive
officers because the aggregate amount of these perquisites and other personal
benefits was less than the lesser of $50,000 or 10% of annual salary and bonuses
for the named executive officers.
OPTION GRANTS IN THE LAST FISCAL YEAR
-------------------------------------
The following table sets forth information concerning individual grants of
stock options made during the year ended October 31, 2005 to each of the named
executive officers:
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE EXPIRATION
GRANTED IN FISCAL YEAR PRICE DATE
------- -------------- ----- ----
Brad Ketch 1,000,000(1) 7.1% $ 0.17 April 5, 2015
6,000,000(1) 42.9% $ 0.17 April 5, 2015
Ray Willenberg, Jr. 1,000,000(1) 7.1% $ 0.17 April 5, 2015
6,000,000(1) 42.9% $ 0.17 April 5, 2015
(1) These options were canceled by agreement effective January 1, 2006. In
January 2006, each of Mr. Willenberg and Mr. Ketch was granted options to
purchase up to 10,700,000 shares of common stock. Those options have an exercise
price of $0.027 per share and vest between February and July 2006.
AGGREGATE OPTIONS EXERCISED IN 2005 AND YEAR-END OPTION VALUES
--------------------------------------------------------------
The named executive officers did not exercise any stock options during the
year ended October 31, 2005. The following table sets forth information as of
October 31, 2005 concerning options held by the named executive officers. None
of these options were in-the-money as of October 31, 2005, and all such options
were canceled by agreement effective January 1, 2006.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END
-------------------------- --------------------------
SHARES VALUE
ACQUIRED ON REALIZED
EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------ --- ----------- ------------- ----------- -------------
Brad Ketch -- -- 1,000,000 6,000,000 $ -- $ --
Ray Willenberg, Jr. -- -- 1,000,000 6,000,000 -- --
5
COMPENSATION OF DIRECTORS
It is our policy to pay each outside director $2,000 for each meeting of
our Board of Directors attended and for each committee meeting attended. We also
reimburse our directors for reasonable expenses incurred in traveling to and
from board or committee meetings. Upon his resignation as a director of the
Company in March 2005, Ivan Berkowitz was paid $57,251, representing deferred
meeting fees, expense reimbursements and fees for service as Vice Chairman of
the Board of Directors accrued and unpaid though the date of his resignation.
In addition, we have granted stock and stock options to the directors to
compensate them for their services. During the fiscal year ended October 31,
2005 we issued 200,000 and 300,000 shares of common stock valued at
approximately $30,000 and $45,000 to Mr. Cooper and Mr. Peckham, respectively,
to compensate them for their services as directors. Our directors are eligible
to receive stock option grants under our 2000 Omnibus Securities Plan. We did
not grant options to our directors in 2005.
EMPLOYMENT AGREEMENT WITH EXECUTIVE OFFICERS
BRAD KETCH. On December 2, 2002, we entered into an employment agreement
with Brad Ketch pursuant to which Mr. Ketch was retained as our Chief Executive
Officer. The agreement had a three-year initial term and provided for Mr. Ketch
to receive an initial base salary of $250,000, with an annual bonus to be paid
at the discretion of the Board of Directors in either cash or stock. In December
2005, this agreement was automatically renewed for an additional one year term.
If Mr. Ketch is terminated without "cause" or leaves Rim Semiconductor for "good
reason," each as defined in his agreement, he will receive a severance payment
equal to two years of his base salary on the date of termination. If he is
terminated without cause or with good reason within one year after a "change of
control," as defined in his agreement, he will receive a severance payment equal
to two years of his base salary and an amount equal to two times the amount of
his last bonus received.
RAY WILLENBERG, JR. On March 3, 2005, we entered into an employment
agreement with Mr. Willenberg pursuant to which he continues to serve as our
Executive Vice President for a term of three years commencing on March 23, 2005,
subject to the earlier of (i) his death or Disability (as defined in the
agreement); (ii) the termination of the agreement by either party without cause
on written notice; or (iii) termination of the agreement by us for Cause (as
defined in the agreement).
Under this agreement, Mr. Willenberg is entitled to receive a payment based
upon any equity or long-term debt financing we obtain during the term of the
agreement or the twelve month period after the termination thereof from any
source introduced to us by Mr. Willenberg or as a result of Mr. Willenberg's
personal efforts. These payments will equal 6% of the aggregate annual proceeds
of such financings up to $2 million; 5% of the aggregate annual proceeds of such
financings in excess of $2 million and up to $5 million; and 4% of the aggregate
annual proceeds of such financings in excess of $5 million. Mr. Willenberg is
also entitled to be paid a bonus equal to the amount, if any, paid as a bonus to
our Chief Executive Officer in connection with the successful commercialization
of our technologies. Mr. Willenberg is not paid a fixed salary for his services
under his employment agreement.
Under his employment agreement, we also granted Mr. Willenberg a right of
first refusal to purchase our equity interest in Top Secret Productions, LLC in
the case of a bona fide third-party offer to purchase that interest or our
determination to offer that interest for sale at a specified price.
6
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no compensation committee interlocks between the members of our
Compensation Committee and any other entity. Jack L. Peckham and Thomas J.
Cooper are the members of the Compensation Committee. Neither of the current
members of the Compensation Committee is an officer or employee of ours, nor of
any of our subsidiaries. Mr. Cooper served as our Chief Executive Officer from
June to December, 2002.
COMPENSATION COMMITTEE REPORT
The Compensation Committee sets compensation policy and administers Rim
Semiconductor's cash and equity incentive programs for the purpose of attracting
and retaining skilled executives who will promote Rim Semiconductor's business
goals and build shareholder value. The Committee is also responsible for
reviewing and making recommendations to the Board regarding all forms of
compensation to be provided to the Company's named executive officers, including
stock compensation and bonuses.
The policy of the Compensation Committee is to attract and retain key
personnel through the payment of competitive base salaries and to encourage and
reward performance through bonuses and stock ownership. The Committee's
objectives are to ensure that:
o there is an appropriate relationship between executive
o compensation and the creation of shareholder value;
o the total compensation program will motivate, retain and attract
quality executives; and
o current cash and equity incentives are competitive with comparable
companies.
ELEMENTS OF COMPENSATION
------------------------
Compensation for officers and key executives includes:
o Annual cash compensation in the form of base salary;
o Discretionary or contractual bonuses;
o Equity elements through the issuance of stock and stock options; and
o Employee benefits, such as health insurance.
SALARY AND BONUS
----------------
Cash compensation consists of base salary, which is determined based upon
the level of responsibility, expertise and experience of the executive and the
competitive conditions of the industry.
EQUITY ELEMENTS
---------------
Ownership of Rim Semiconductor's common stock is a key element of executive
compensation. The Committee believes that a significant portion of executive
compensation should be dependent upon the value created for the shareholders.
Officers and other employees of Rim Semiconductor are eligible to participate in
the Company's 2000 Omnibus Securities Plan and the 2001 Stock Incentive Plan.
These plans allow the Board or the Committee to grant stock options to employees
on such terms as the Board or the Committee may determine. In addition,
employees may be granted stock awards or stock options outside of these plans.
7
BENEFITS
--------
Executive officers also receive benefits generally available to all
employees of the Company (such as health insurance). Our executive officers
receive only the benefits that are available to all of Rim Semiconductor's
employees.
2005 COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
-------------------------------------------------
During the 2005 fiscal year, the Company's Chief Executive Officer was Brad
Ketch, a position he has held since 2002. On December 2, 2002, we entered into
an employment agreement with Mr. Ketch. Mr. Ketch receives a base salary of
$250,000, with an annual bonus to be paid at the discretion of the Board of
Directors in either cash or stock. During fiscal 2005, Mr. Ketch received a
$70,000 bonus. He also was issued 1,000,000 shares of our common stock (valued
at $170,000 when granted) in exchange for the cancellation of 1,955,000 options
that had previously been issued to him. Finally, Mr. Ketch received options to
purchase 7,000,000 shares of common stock at an exercise price of $0.17 per
share. Of these options, 1,000,000 vested upon the closing of the Company's $3.5
million financing in May 2005 and the remainder vested in December 2005 upon the
Company's release of the EmbarqTM E30 digital signal processor (Release 1.3).
These options were canceled by agreement effective January 1, 2006.
THE COMPENSATION COMMITTEE:
Thomas J. Cooper, Chairman
Jack L. Peckham
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on Rim
Semiconductor Company's common stock for the period from October 31, 2000
through October 31, 2005 with the cumulative total return over the same period
of the Russell 2000 Index and the line-of-business index for semiconductors and
related devices (SIC Code 3674) published by Hemscott, Inc.
Assuming the value of the investment in our common stock and each index was
$100 on October 31, 2000, and that all dividends were reinvested, the graph
compares our cumulative total return with each of these referent indices plotted
on an annual basis.
[GRAPHIC OMITTED]
8
--------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ----
RIM SEMICONDUCTOR CO. 100.00 7.10 6.26 4.59 1.46 0.38
SIC CODE INDEX 100.00 46.49 28.62 54.90 38.26 39.95
RUSSELL 2000 INDEX 100.00 86.03 75.05 106.13 117.79 130.46
--------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information as of the close of business on
February 23, 2006, concerning shares of our common stock beneficially owned by
each director and named executive officer and by all directors and executive
officers as a group. We are not aware of any persons beneficially owning more
than 5% of our common stock.
In accordance with the rules of the SEC, the table gives effect to the
shares of common stock that could be issued upon the exercise of outstanding
options and warrants within 60 days of February 23, 2006. Unless otherwise noted
in the footnotes to the table and subject to community property laws where
applicable, the following individuals have sole voting and investment control
with respect to the shares beneficially owned by them. We have calculated the
percentages of shares beneficially owned based on 289,475,004 shares of common
stock outstanding at February 23, 2006.
SHARES BENEFICIALLY OWNED
-------------------------
PERSON OR GROUP NUMBER PERCENT (1)
--------------- ------ -----------
Brad Ketch 7,333,333 (2) 2.48%
Ray Willenberg, Jr. 9,861,790 (3) 3.34%
Jack L. Peckham 300,000 *
Thomas J. Cooper 832,258 (4) *
All executive officers and directors
as a group (4 persons) 18,327,381 (5) 6.07%
* LESS THAN 1%.
(1) Percentage of beneficial ownership as to any person as of a particular date
is calculated by dividing the number of shares beneficially owned by such
person by the sum of the number of shares outstanding as of such date and
the number of unissued shares as to which such person has the right to
acquire voting and/or investment power within 60 days.
(2) Includes options to purchase 5,900,000 shares of common stock.
(3) Includes options to purchase 5,300,000 shares of common stock. Also
includes 880,177 shares of common stock issuable upon conversion of a
convertible promissory note held by Mr. Willenberg with a current balance
of $99,460. The note is convertible at Mr. Willenberg's option at a
conversion price equal to the market price of our common stock on the date
of conversion. At February 23, 2006, the note would have been convertible
at a conversion price of $0.113 per share.
(4) Includes options to purchase 500,000 shares of common stock.
9
(5) Includes options to purchase an aggregate 11,700,000 shares of common
stock.
EQUITY COMPENSATION PLAN INFORMATION
We have three compensation plans (excluding individual stock option grants
outside of such plans) under which our equity securities are authorized for
issuance to employees, directors and consultants in exchange for services - the
2000 Omnibus Securities Plan (the "2000 Plan"), the 2001 Stock Incentive Plan
(the "2001 Plan"), and the 2003 Consultant Stock Plan (the "Consultant Plan")
(collectively, the "Plans"). Our shareholders approved the 2000 Plan and 2001
Plan, and the Consultant Plan has not yet been submitted to the shareholders for
approval.
The following table presents information as of October 31, 2005 with
respect to compensation plans under which equity securities were authorized for
issuance, including the 2000 Plan, the 2001 Plan, the Consultant Stock Plan and
agreements granting options or warrants outside of these plans.
NUMBER OF SECURITIES
TO BE ISSUED UPON WEIGHTED-AVERAGE NUMBER OF SECURITIES
EXERCISE OF EXERCISE PRICE OF REMAINING AVAILABLE FOR
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, FUTURE ISSUANCE UNDER
WARRANTS OR RIGHTS WARRANTS OR RIGHTS EQUITY COMPENSATION PLANS
------------------ ------------------ -------------------------
Equity compensation plans
approved by security holders 993,750 $ 0.97 4,006,250
Equity compensation plans not
approved by security holders 66,712,757 $ 0.26 --
---------- ------------- ------------
Total 67,706,507 $ 0.27 4,006,250
========== ============= ============
NON-SHAREHOLDER APPROVED PLANS
The following is a description of options and warrants granted to
employees, directors, advisory directors, consultants and investors outside of
the Plans that were outstanding as of October 31, 2005.
As of October 31, 2005, we had outstanding options and warrants to purchase
an aggregate of 66,712,757 shares of our common stock were granted outside of
the Plans. Of this amount, outstanding options to purchase 375,000 shares of
common stock that were granted during fiscal 2001 outside of the Plans. These
options, which expire ten years from their grant date, were granted to five
advisory directors at exercise prices ranging from $1.07 to $4.00. All of these
options have vested.
We have outstanding options to purchase an aggregate of 525,000 shares of
common stock that were granted during fiscal 2002 outside of the Plans to a
director and a consultant. These options expire ten years from their grant date.
500,000 of the options have an exercise price of $0.39, and the remaining
options have an exercise price of $1.02. All of these options have vested.
We have outstanding options to purchase 15,000,000 shares of common stock
that were granted in fiscal 2005 outside of the Plans. 1,000,000 options were
granted to a consultant at an exercise price per share of $0.15, and expire four
years from their grant date. 7,000,000 options were granted to each of Brad
Ketch and Ray Willenberg, Jr. at an exercise price per share of $0.17, and were
to expire ten years from their grant date. All of these options have vested, but
the options granted to Mr. Ketch and Mr. Willenberg were canceled by agreement
effective January 1, 2006.
10
There are outstanding warrants to purchase an aggregate of 100,000 shares
of common stock that were granted during fiscal 2001 to a consultant. These
warrants have a five year term and an exercise price of $2.50 with respect to
50,000; $5.00 with respect to 25,000 and $10.00 with respect to 25,000.
There are outstanding warrants that were granted during fiscal 2002 to two
consultants to purchase an aggregate of 200,000 shares of common stock outside
of the Plans. These warrants have an exercise price of $0.51 and expired in
November 2005.
There are outstanding warrants that we granted during fiscal 2003 to a
consultant to purchase 600,000 shares of common stock outside of the Plans.
These warrants have a 35-month term (under certain circumstances the Company may
accelerate the expiration date) and an exercise price of $0.15.
There are outstanding warrants to purchase an aggregate of 100,000 shares
of common stock that were granted during fiscal 2004 to a consultant. These
warrants have a three year term and an exercise price of $0.15.
There are outstanding warrants to purchase an aggregate of 8,999,999 shares
of common stock that we granted during fiscal 2004 to convertible debenture
holders. These warrants have terms of five years and an exercise price of $0.25.
There are outstanding warrants to purchase an aggregate of 900,000 shares
of common stock that we granted during fiscal 2004 to placement agents. These
warrants have terms of five years and an exercise price of $0.15 with respect to
233,334 and $0.25 with respect to 666,666.
There are outstanding warrants to purchase an aggregate of 120,000 shares
of common stock that we granted during fiscal 2004 to four convertible note
holders. These warrants have a three year term and an exercise price of $0.25.
There are outstanding warrants to purchase an aggregate of 33,936,650
shares of common stock that we granted during fiscal 2005 to convertible
debenture holders. These warrants have terms of 15 months with respect to
11,312,220 and 39 months with respect to 22,624,430. These warrants have an
exercise price of $0.1547 with respect to 11,312,220 and $0.3094 with respect to
22,624,430.
There are outstanding warrants to purchase an aggregate of 5,656,108 shares
of common stock that we granted during fiscal 2005 to placement agents. These
warrants have terms of 15 months with respect to 1,131,222; 36 months with
respect to 2,262,443 and 39 months with respect to 2,262,443. These warrants
have an exercise price of $0.1547 with respect to 3,393,665 and $0.3094 with
respect to 2,262,443.
There are outstanding warrants to purchase 200,000 shares of common stock
that we granted during fiscal 2005 to a consultant. These warrants have a term
of three years and an exercise price of $0.12.
The Consultant Plan was adopted in January 2003 and authorizes the issuance
of up to 6,000,000 non-qualified stock options or stock awards to consultants to
the Company. Directors, officers and employees are not eligible to participate
in the Consultant Plan. To date, we have issued a total of 3,200,000 shares of
common stock under the Consultant Plan to four consultants.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 21, 2004, the Company entered into a one-year $100,000 revolving
line of credit with a bank. Ray Willenberg, Jr., Executive Vice President and
Chairman of the Company, guaranteed the repayment of the line of credit, and the
Company agreed to indemnify Mr. Willenberg for any losses or expenses he may
incur as a result of providing such security. The line of credit expired on
August 10, 2005.
On March 23, 2005, we issued in favor of Mr. Willenberg a non-interest
bearing convertible promissory note ("Note") in the principal amount of
$383,910.72. The Note was issued in evidence of our obligation for deferred
compensation. The terms of the Note provide that, beginning April 1, 2005, Mr.
Willenberg is to be paid a monthly amount not less than the monthly base salary
paid to the Company's Chief Executive Officer. However, if the Company
determines in its sole discretion that it has the financial resources available,
it shall pay up to $20,833 per month. As of February 28, 2006, the balance on
the Note was $89,539.47.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Aggregate fees for professional services rendered for the Company by its
independent registered public accountants for the fiscal years ended October 31,
2004 and 2005 are set forth below.
---------------------------------------------------------------------------
Fiscal Year Ended Fiscal Year Ended
October 31, 2005 October 31, 2004
---------------------------------------------------------------------------
Audit Fees $186,603 $146,906
---------------------------------------------------------------------------
Audit Related Fees $50,744 $77,108
---------------------------------------------------------------------------
Tax Fees $11,510 $13,784
---------------------------------------------------------------------------
All Other Fees $12,509 $0
---------------------------------------------------------------------------
Total $261,366 $237,799
---------------------------------------------------------------------------
AUDIT FEES were for professional services rendered for the audits of the
consolidated financial statements of the Company, quarterly review of the
financial statements included in Quarterly Reports on Form 10-QSB, consents, and
other assistance required to complete the year-end audit of the consolidated
financial statements. AUDIT-RELATED FEES were for assurance and related services
reasonably related to the performance of the audit or review of financial
statements and not reported under the caption Audit Fees. TAX FEES were for
professional services related to tax compliance, tax authority audit support and
tax planning. All Other Fees include any other fees charged by the Company's
auditors that are not otherwise specified.
The Audit Committee preapproves all audit and permissible non-audit
services to be provided by the Company's independent registered public
accountants and the estimated fees for these services. None of the services
provided by the independent registered public accountants that are described
above were approved by the Audit Committee pursuant to a waiver of the
preapproval requirements of the SEC's rules and regulations.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATE: February 28, 2006 RIM SEMICONDUCTOR COMPANY
BY: /s/ Brad Ketch
-----------------------------------------
Brad Ketch
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial and Accounting
Officer)
In accordance with Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Chief Executive Officer and Directors
(PRINCIPAL EXECUTIVE OFFICER and PRINCIPAL FINANCIAL AND February 28, 2006
/s/ Brad Ketch ACCOUNTING OFFICER
-----------------------------
Brad Ketch
/s/ Ray Willenberg, Jr. Chairman of the Board and Executive Vice President February 28, 2006
------------------------------
Ray Willenberg, Jr.
/s/ Jack Peckham Director February 28, 2006
-----------------------------
Jack Peckman
/s/ Thomas J. Cooper Director February 28, 2006
-----------------------------
Thomas J. Cooper
EXHIBITS
31.1 Rule 13a-14(a) / 15d - 14(a) Certification.*
32.1 Section 1350 Certification.*
------------------
* Filed herewith.
13