Attached files
file | filename |
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EX-31.1 - TOWERSTREAM CORP | v182797_ex31-1.htm |
EX-32.1 - TOWERSTREAM CORP | v182797_ex32-1.htm |
EX-32.2 - TOWERSTREAM CORP | v182797_ex32-2.htm |
EX-31.2 - TOWERSTREAM CORP | v182797_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K/A
(Amendment
No. 1)
(Mark
One)
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
fiscal year ended December 31, 2009
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from_______to_______
Commission
file number 001-33449
TOWERSTREAM
CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
(State
or other jurisdiction of incorporation or organization)
|
20-8259086
(I.R.S.
Employer Identification No.)
|
|
55
Hammarlund Way
Middletown,
Rhode Island
(Address
of principal executive offices)
|
02842
(Zip
Code)
|
Registrant’s
telephone number, including area code (401) 848-5848
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
|
Name of each exchange on which
registered
|
|
Common
Stock, par value $0.001 per share
|
The
NASDAQ Capital Market
|
Securities
registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes o No x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the 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
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) 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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Accelerated
filer o
|
|
Non-accelerated
filer o (Do not check if
a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o
No x
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common stock was
last sold as of the last business day of the registrant’s most recently
completed second fiscal quarter was $26,029,981.
As of
March 15, 2010, there were 34,671,454 shares of Common Stock, par value $0.001
per share, outstanding.
EXPLANATORY
NOTE
We are
filing this Amendment No. 1 on Form 10-K/A to our Annual Report on Form 10-K for
the fiscal year ended December 31, 2009, as originally filed with the Securities
and Exchange Commission (the “SEC”) on March 17, 2010 (the “Original Filing”),
for the sole purpose of including the information required by Part III. This
information was permitted to have been incorporated by reference from our
definitive proxy statement for our 2010 annual meeting of stockholders, if such
proxy statement had been filed with the SEC within 120 days of our 2009 fiscal
year-end.
As a
result of this Amendment No. 1, we are also filing as exhibits the
certifications required under Section 302 and Section 906 of the Sarbanes-Oxley
Act of 2002.
This
Amendment No. 1 does not change any of the information contained in the Original
Filing. This Amendment No. 1 continues to speak as of the date of the
Original Filing and we have not updated or amended the disclosures contained
therein to reflect events that have occurred since the date of the Original
Filing. Accordingly, this Amendment No. 1 should be read in
conjunction with our filings made with the SEC subsequent to the date of the
Original Filing.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
Directors
and Executive Officers
The
following table sets forth the names, ages, and positions of our current
directors and executive officers. Our directors hold office for
one-year terms until the following annual meeting of stockholders and until his
or her successor has been elected and qualified or until the director’s earlier
resignation or removal. Officers are elected annually by the Board of Directors
(the “Board”) and serve at the discretion of the Board.
Name
|
Age
|
Position
|
||
Jeffrey
M. Thompson
|
45
|
President,
Chief Executive Officer and Director
|
||
Philip
Urso
|
51
|
Chairman
of the Board of Directors
|
||
Joseph
P. Hernon
|
50
|
Chief
Financial Officer
|
||
Melvin
L. Yarbrough, Jr.
|
44
|
Chief
Revenue Officer
|
||
Howard
L. Haronian, M.D.(1)(2)(3)
|
48
|
Director
|
||
Paul
Koehler(1)(3)
|
50
|
Director
|
||
William
J. Bush(1)(2)
|
45
|
Director
|
||
|
(1)
Member of our Audit Committee.
|
|
(2)
Member of our Compensation
Committee.
|
|
(3)
Member of our Nominating Committee.
|
The
biographies below include information related to service by the persons below to
Towerstream Corporation and our subsidiary, Towerstream I, Inc. On January 4,
2007, we merged with and into a wholly-owned Delaware subsidiary, for the sole
purpose of changing our state of incorporation to Delaware. On January 12, 2007,
a wholly-owned subsidiary of ours completed a reverse merger with and into a
private company, Towerstream Corporation, with Towerstream Corporation (the
private company) being the surviving company and becoming a wholly-owned
subsidiary of ours. Upon closing of the merger, we discontinued our former
business and succeeded to the business of Towerstream Corporation as our sole
line of business. At the same time, we also changed our name from University
Girls Calendar Ltd to Towerstream Corporation, and our newly acquired
subsidiary, Towerstream Corporation, changed its name to Towerstream I,
Inc.
Jeffrey M.
Thompson co-founded Towerstream I, Inc. in December 1999 with Philip
Urso. Mr. Thompson has served as a director since inception and as chief
operating officer from inception until November 2005 when Mr. Thompson became
president and chief executive officer. Since the completion of our reverse
merger in January 2007, Mr. Thompson has been our president, chief executive
officer and a director. In 1995, Mr. Thompson co-founded and was vice
president of operations of EdgeNet Inc., a privately held Internet service
provider (which was sold to Citadel Broadcasting Corporation in 1997 and became
eFortress (“eFortress”)) through 1999. Mr. Thompson holds a B.S. degree from the
University of Massachusetts.
Philip
Urso co-founded Towerstream I, Inc. in December 1999 with Jeffrey M.
Thompson. Mr. Urso has served as a director and chairman since inception and as
chief executive officer from inception until November 2005. Since the completion
of our reverse merger in January 2007, Mr. Urso has been our chairman and a
director. In 1995, Mr. Urso co-founded eFortress (previously EdgeNet Inc.) and
served as its president through 1999. From 1983 until 1997, Mr. Urso owned and
operated a group of radio stations. In addition, Mr. Urso co-founded the
regional cell-tower company, MCF Communications, Inc.
Joseph P.
Hernon has been our chief financial officer, principal financial officer
and principal accounting officer since joining the Company in May 2008. From
November 2007 until May 2008, Mr. Hernon was a financial consultant to a high
technology company. From November 2005 until October 2007, Mr. Hernon served as
the chief financial officer of Aqua Bounty Technologies Inc., a biotechnology
company dedicated to the improvement of productivity in the acquaculture
industry through the application of biotechnology. From August 1996 until
October 2005, Mr. Hernon served as vice president, chief financial officer and
secretary of Boston Life Sciences Inc., a biotechnology company focused on
developing therapeutics and diagnostics for central nervous system diseases.
From January 1987 until August 1996, Mr. Hernon held various positions while
employed at Price Waterhouse Coopers LLP, an international accounting
firm. Mr. Hernon is a certified public accountant and holds a B.S.
degree in Business Administration from the University of Lowell, Massachusetts
and a M.S. degree in Accounting from Bentley College in Waltham,
MA.
Melvin L.
Yarbrough, Jr. has been our chief revenue officer since August
2008. Mr. Yarbrough has been employed by Towerstream since April
2007, serving as Vice President of Sales until his appointment as Chief Revenue
Officer. Mr. Yarbrough came to Towerstream from Hoovers (Dun and
Bradstreet (“D&B”)), where he first served as Vice President of Business
Development and then Vice President of Subscription Sales from 2005 until 2007.
Prior to joining D&B, Mr. Yarbrough spent nearly a decade in several
executive sales positions, including serving as Senior Vice President of Sales,
Marketing and Alliance Channel at StarCite, an on-demand global meetings
management company, and as Vice President of Sales at Handango, a handheld and
wireless software solutions company. Mr. Yarbrough holds a B.A. degree in
Economics and Business from Southern Methodist University and a J.D. degree from
Vanderbilt University School of Law.
Howard L.
Haronian, M.D., has served as a director of Towerstream I, Inc. since
inception in December 1999. Since the completion of our reverse merger in
January 2007, Dr. Haronian has been a director. Dr. Haronian is an
interventional cardiologist and has been president of Cardiology Specialists,
Ltd. of Rhode Island since 1994. Dr. Haronian has served on the clinical faculty
of the Yale School of Medicine since 1994. Dr. Haronian has directed the cardiac
catheterization program at Westerly Hospital since founding the program in
2003.
Paul Koehler
has been a director since January 2007. Mr. Koehler has served as vice
president of corporate development of Pacific Ethanol, Inc. (NasdaqGM: PEIX)
since June 2005. Mr. Koehler has over twenty years of experience in the power
and renewable fuels industries and in marketing, trading and project
development. Prior to working for Pacific Ethanol Inc., from 2001 to 2005, Mr.
Koehler developed wind power projects for PPM Energy Inc., a wind power producer
and marketer. Mr. Koehler was president and co-founder of Kinergy Corporation, a
consulting firm focused on renewable energy, project development and risk
management from 1993 to 2003. During the 1990s, Mr. Koehler worked for Portland
General Electric Company and Enron Corp. in marketing and origination of long-
term transactions, risk management and energy trading. Mr. Koehler holds a B.A.
degree from the Honors College at the University of Oregon. Mr.
Koehler currently serves on the Board of Directors of Oregon College of Art and
Craft, a private art college, and has been a director since 2009. Mr.
Koehler also served on the Board of Directors of Oregon College of Art and
Craft, from 2005 through 2007.
William J.
Bush has been a director since January 2007. Since October 2008, Mr. Bush
has served as the chief financial officer of Solar Semiconductor, Ltd., a global
distributor of photovoltaic products and services. From January 2006 through
December 2007, Mr. Bush served as chief financial officer of ZVUE Corporation
(formerly known as Handheld Entertainment, Inc. (Pink Sheets: ZVUE.PK)), a
distributor of user generated content. Mr. Bush has over twenty years of
experience in accounting, financial support and business development. From 2002
to 2005, Mr. Bush was the chief financial officer and secretary for
International Microcomputer Software, Inc. (OTCBB: IMSI.OB), a developer and
distributor of precision design software, content and on-line services. Prior to
that he was a director of business development and corporate controller for
Buzzsaw.com, Inc. Mr. Bush was one of the founding members of Buzzsaw.com, Inc.,
a privately held company spun off from Autodesk, Inc. in 1999, focusing on
online collaboration, printing and procurement applications. From 1997 to 1999,
Mr. Bush worked as corporate controller at Autodesk, Inc. (NasdaqGM: ADSK), the
fourth largest software applications company in the world. Prior to that, Mr.
Bush worked for seven years in public accounting, first with Ernst & Young,
and later with Price Waterhouse in Munich, Germany. Mr. Bush holds a B.S. degree
in Business Administration from U.C. Berkeley and is a certified public
accountant. Mr. Bush currently serves on the Board of Directors of FindEx.com
(OTCBB: FIND), a Bible study software provider, and has been a director since
2007. Mr. Bush also currently serves on the Board of Directors of
Thin Identity, Inc., a software and solutions company dedicated to transforming
the virtual desktop experience, and has been a director since
2009.
Except
for Howard L. Haronian and Philip Urso, who are cousins, there are no family
relationships among our directors or executive officers.
Board
Committees
Since
January 2007, the standing committees of our Board consist of an
Audit Committee, a Compensation Committee and a Nominating
Committee. Each member of our committees is “independent” as such
term is defined under and required by the federal securities laws and the rules
of The NASDAQ Stock Market. The charters of each of the committees
have been approved by our Board and are available on our website at www.towerstream.com.
Audit
Committee
The Audit
Committee is comprised of three directors: William Bush, Howard L. Haronian,
M.D., and Paul Koehler. Mr. Bush is the Chairman of the Audit
Committee. The Audit Committee’s duties are to recommend to our Board
the engagement of independent auditors to audit our financial statements and to
review our accounting and auditing principles. The Audit Committee reviews the
scope, timing and fees for the annual audit and the results of audit
examinations performed by independent public accountants, including their
recommendations to improve the system of accounting and internal
controls. The Audit Committee oversees the independent auditors,
including their independence and objectivity. However, the committee
members are not acting as professional accountants or auditors, and their
functions are not intended to duplicate or substitute for the activities of
management and the independent auditors. The Audit Committee is
empowered to retain independent legal counsel and other advisors as it deems
necessary or appropriate to assist the Audit Committee in fulfilling its
responsibilities, and to approve the fees and other retention terms of the
advisors. Each of our Audit Committee members possesses an
understanding of financial statements and generally accepted accounting
principles. Our Board has determined that Mr. Bush is an “audit
committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation
S-K.
Compensation
Committee
The
Compensation Committee is comprised of Howard L. Haronian, M.D., and William
Bush. Dr. Haronian is the Chairman of the Compensation
Committee. The Compensation Committee has certain duties and powers
as described in its charter, including but not limited to periodically reviewing
and approving our salary and benefits policies, compensation of executive
officers, administering our stock option plans, and recommending and approving
grants of stock options under such plans.
Nominating
Committee
The
Nominating Committee is comprised of Howard L. Haronian, M.D., and Paul
Koehler. Dr. Haronian is Chairman of the Nominating
Committee. The Nominating Committee considers and makes
recommendations on matters related to the practices, policies and procedures of
the Board of Directors and takes a leadership role in shaping our corporate
governance. As part of its duties, the Nominating Committee assesses the size,
structure and composition of the Board and its committees, coordinates
evaluation of Board performance and reviews Board compensation. The Nominating
Committee also acts as a screening and nominating committee for candidates
considered for election to the Board.
Changes
in Nominating Process
There are
no material changes to the procedures by which security holders may recommend
nominees to our Board of Directors.
Compensation
of Directors
The
following table summarizes the compensation awarded during the fiscal year ended
December 31, 2009 to our directors who are not named executive officers in the
summary compensation table below:
Name
|
Fees Earned or
Paid in Cash
|
Option Awards
(1)(2)
|
Total
|
|||||||||
Philip
Urso
|
$ | 31,000 | (3) | $ | 18,343 | $ | 49,343 | |||||
Howard
L. Haronian, M.D.
|
$ | 36,000 | (3) | $ | 18,343 | $ | 54,343 | |||||
Paul
Koehler
|
$ | 31,500 | $ | 18,343 | $ | 49,843 | ||||||
William
Bush
|
$ | 35,500 | (3) | $ | 18,343 | $ | 53,843 |
(1)
|
Based
upon the aggregate grant date fair value calculated in accordance with the
Stock Compensation Topic of the Financial Accounting Standards Board
Accounting Standards Codification. Our policy and assumptions
made in the valuation of share-based payments are contained in Note 8 to
our December 31, 2009 financial
statements.
|
(2)
|
Information
provided relates to the issuance in 2009 of options to purchase 50,000
shares each for Messrs. Urso, Koehler and Bush, and Dr.
Haronian. Does not include outstanding options to purchase an
aggregate of 412,886 shares, 75,039 shares, 60,000 shares and 62,500
shares held by Mr. Urso, Dr. Haronian, Mr. Koehler and Mr. Bush,
respectively.
|
(3)
|
Includes
$1,000 of fees earned during fiscal year 2009 that were not paid until
fiscal year 2010.
|
Pursuant
to the 2008 Non-Employee Directors Compensation Plan, each non-employee director
is entitled to receive five-year options to purchase 50,000 shares of our common
stock at an exercise price equal to the fair market value of our common stock on
the date of grant upon such non-employee director’s election or appointment to
our Board and thereafter each year on the first business day in June, subject to
such director remaining on the Board. Non-employee directors also receive
$25,000 per annum in cash and an additional $1,000 per Board meeting attended in
person or by telephone, and $500 per committee meeting attended in person or by
telephone.
Section 16(a) Beneficial Ownership
Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
requires our executive officers and directors, and persons who beneficially own
more than 10% of our equity securities, to file reports of ownership and changes
in ownership with the SEC. Based solely on our review of copies of such reports
and representations from our executive officers and directors, we believe that
our executive officers and directors complied with all Section 16(a) filing
requirements during the year ended December 31, 2009, except that Jeffrey M.
Thompson, our President, Chief Executive Officer and a director, failed to
timely file Form 4s reporting the grant of an option to purchase shares of our
common stock on May 6, 2009 and the issuance of common stock as bonus shares on
May 11, 2009 and August 11, 2009, Joseph P. Hernon, our Chief Financial Officer,
failed to timely file Form 4s reporting the grant of an option to purchase
shares of our common stock on May 6, 2009 and the issuance of common stock as
bonus shares on May 11, 2009 and August 11, 2009, and Melvin L. Yarbrough, Jr.,
our Chief Revenue Officer, failed to timely file Form 4s reporting the grant of
an option to purchase shares of our common stock on May 6, 2009 and the issuance
of common stock as bonus shares on May 11, 2009 and August 11,
2009.
Code
of Ethics
Our Board
has adopted a code of conduct and ethics that establishes the standards of
ethical conduct applicable to all directors, officers and employees of
Towerstream Corporation. The code addresses, among other things, conflicts of
interest, compliance with disclosure controls and procedures, and internal
control over financial reporting, corporate opportunities and confidentiality
requirements. The Audit Committee is responsible for applying and interpreting
our code of conduct and ethics in situations where questions are presented to
it. There were no amendments or waivers to this code in fiscal year
2009. Our code of ethics is available for review on our website at
www.towerstream.com. We
will provide a copy of our code of ethics free of charge to any person who so
requests. Requests should be directed by e-mail to Philip Mongada, our Vice
President of Human Resources, at pmongada@towerstream.com, by mail to
Towerstream Corporation, 55 Hammarlund Way, Middletown, Rhode Island 02842, or
by telephone at (401) 848-5848.
Item
11. Executive Compensation.
The
following table summarizes the annual and long-term compensation paid to our
chief executive officer and our two other most highly compensated executive
officers who were serving at the end of 2009, whom we refer to collectively in
this prospectus as the “named executive officers”:
Summary
Compensation Table
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Option
Awards(1)
|
Other
Compensation (2)
|
Total
|
||||||||||||||||
Jeffrey
M. Thompson
|
2009
|
$ | 236,250 | $ | 114,374 | (3) | $ | 74,480 | (4) | - | $ | 425,104 | ||||||||||
President
and Chief Executive Officer
|
2008
|
$ | 225,000 | $ | 121,533 | (5) | $ | 43,095 | (6) | - | $ | 389,628 | ||||||||||
Joseph
P. Hernon
|
2009
|
$ | 190,000 | $ | 78,788 | (7) | $ | 59,584 | (8) | - | $ | 328,372 | ||||||||||
Chief
Financial Officer (14)
|
2008
|
$ | 114,487 | $ | 60,715 | (9) | $ | 197,055 | (10) | $ | 4,156 | $ | 376,413 | |||||||||
Melvin
L. Yarbrough, Jr.
|
2009
|
$ | 190,000 | $ | 62,133 | (11) | $ | 59,584 | (8) | - | $ | 311,717 | ||||||||||
Chief
Revenue Officer
|
2008
|
$ | 179,480 | $ | 95,053 | (12) | $ | 108,142 | (13) | $ | 2,172 | $ | 384,847 |
(1)
|
Based
upon the aggregate grant date fair value calculated in accordance with the
Stock Compensation Topic of the Financial Accounting Standards Board
Accounting Standards Codification. Our policy and assumptions
made in the valuation of share-based payments are contained in Note 8 to
our December 31, 2009 financial
statements.
|
(2)
|
Includes
reimbursement for relocation costs, including
travel.
|
(3)
|
Consists
of $78,782 paid in cash and $35,592 paid in common stock. Mr.
Thompson was awarded $41,506 in cash and $23,167 in common stock in 2009
in recognition of services performed during 2009 and Mr. Thompson was
awarded $37,276 in cash and $12,425 in common stock in February 2010 in
recognition of services performed during
2009.
|
(4)
|
Represents
a ten-year option to purchase 125,000 shares of our common stock at an
exercise price of $0.78 per share granted on May 6, 2009 in recognition of
services performed during 2009. Such option vests quarterly
over an 18 month period beginning on August 6,
2009.
|
(5)
|
Consists
of $113,276 paid in cash and $8,257 paid in common stock. Mr.
Thompson was awarded $85,590 in cash and $8,257 in common stock in 2008 in
recognition of services performed during 2008 and Mr. Thompson was awarded
$27,686 in cash in January 2009 in recognition of services performed
during 2008.
|
(6)
|
Represents
(i) a ten-year option to purchase 75,000 shares of common stock at an
exercise price of $0.69 per share granted on December 31, 2008 in
recognition of services performed during 2008, with vesting occurring
annually as to one-third of the option, commencing December 31, 2009, and
(ii) a ten-year option to purchase 18,406 shares of common stock at an
exercise price of $0.77 per share granted in March 2009 in recognition of
services performed in 2008, which option was fully vested and exercisable
on the date of grant.
|
(7)
|
Consists
of $59,091 paid in cash and $19,697 paid in common stock. Mr.
Hernon was awarded $31,969 in cash and $10,656 in common stock in 2009 in
recognition of services performed during 2009 and Mr. Hernon was awarded
$27,122 in cash and $9,041 in common stock in February 2010 in recognition
of services performed during 2009.
|
(8)
|
Represents
a ten-year option to purchase 100,000 shares of our common stock at an
exercise price of $0.78 per share granted on May 6, 2009 in recognition of
services performed during 2009. Such option vests quarterly
over an 18 month period beginning on August 6,
2009.
|
(9)
|
Consists
of $52,981 paid in cash and $7,734 paid in stock. Mr. Hernon
was awarded $23,203 in cash and $7,734 in common stock in 2008 in
recognition of services performed during 2008 and Mr. Hernon was awarded
$29,778 in cash in January 2009 in recognition of services performed
during 2008.
|
(10)
|
Represents
(i) a ten-year option to purchase 150,000 shares of common stock at an
exercise price of $1.45 per share granted on June 2, 2008 in recognition
of the commencement of employment with the Company, with vesting occurring
annually as to one-third of the option, commencing June 2, 2009, (ii) a
ten-year option to purchase 25,000 shares of common stock at an exercise
price of $0.69 per share granted on December 31, 2008 in recognition of
services performed during 2008, vesting occurring annually as to one-third
of the option, commencing December 31, 2009, and (iii) a ten-year option
to purchase 19,797 shares of common stock at an exercise price of $0.77
per share granted in March 2009 in recognition of services performed in
2008, which option was fully vested and exercisable on the date of
grant.
|
(11)
|
Consists
of $46,600 paid in cash and $15,533 paid in common stock. Mr.
Yarbrough was awarded $26,104 in cash and $8,701 in common stock in 2009
in recognition of services performed during 2009 and Mr. Yarbrough was
awarded $20,496 in cash and $6,832 in common stock in February 2010 in
recognition of services performed during
2009.
|
(12)
|
Consists
of $89,897 paid in cash and $5,156 paid in common stock. Mr.
Yarbrough was awarded $61,796 in cash and $5,156 in common stock in 2008
in recognition of services performed during 2008 and Mr. Yarbrough was
awarded $28,101 in cash in January 2009 in recognition of services
performed during 2008.
|
(13)
|
Represents
(i) a ten-year option to purchase 65,000 shares of common stock at an
exercise price of $1.45 per share granted on June 2, 2008 in recognition
of services performed during 2008, with vesting occurring annually as to
one-third of the option, commencing June 2, 2009, (ii) a ten-year option
to purchase 50,000 shares of common stock at an exercise price of $0.69
per share granted on December 31, 2008 in recognition of services
performed during 2008, with vesting occurring annually as to one-third of
the option, commencing December 31, 2009, and (iii) a ten-year option to
purchase 18,683 shares of common stock at an exercise price of $0.77 per
share granted in March 2009 in recognition of services performed in 2008,
which option was fully vested and exercisable on the date of
grant.
|
(14)
|
Mr.
Hernon joined the Company in May
2008.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes the outstanding equity awards to our named executive
officers as of December 31, 2009:
Option Awards
|
|||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
|||||||||
Jeffrey
M. Thompson
|
280,309 | (1) | − | $ | 0.78 |
2/27/13
|
|||||||
175,193 | (2) | − | $ | 1.14 |
12/14/14
|
||||||||
175,193 | (3) | − | $ | 1.43 |
4/28/15
|
||||||||
75,000 | (4) | − | $ | 9.74 |
2/13/12
|
||||||||
12,010 | (5) | − | $ | 2.00 |
12/2/17
|
||||||||
3,678 | (6) | 7,354 | $ | 2.00 |
3/2/18
|
||||||||
25,000 | (7) | 50,000 | $ | 0.69 |
12/30/18
|
||||||||
18,406 | (8) | − | $ | 0.77 |
3/30/19
|
||||||||
41,668 | (9) | 83,332 | $ | 0.78 |
5/5/19
|
||||||||
Joseph
P. Hernon
|
50,000 | (10) | 100,000 | $ | 1.45 |
6/1/18
|
|||||||
8,333 | (7) | 16,667 | $ | 0.69 |
12/30/18
|
||||||||
19,797 | (8) | − | $ | 0.77 |
3/30/19
|
||||||||
33,334 | (9) | 66,666 | $ | 0.78 |
5/5/19
|
||||||||
Melvin
L. Yarbrough, Jr.
|
90,000 | (11) | 45,000 | $ | 7.05 |
5/9/17
|
|||||||
90,000 | (12) | 45,000 | $ | 3.70 |
6/28/17
|
||||||||
21,667 | (10) | 43,333 | $ | 1.45 |
6/1/18
|
||||||||
16,667 | (7) | 33,333 | $ | 0.69 |
12/30/18
|
||||||||
18,683 | (8) | − | $ | 0.77 |
3/30/19
|
||||||||
33,334 | (9) | 66,666 | $ | 0.78 |
5/5/19
|
|
(1)
|
Such
option vested as to one-third of the shares subject to the option
annually, commencing February 28,
2004.
|
|
(2)
|
Such
option was fully vested and exercisable on December 15, 2004, the date of
grant.
|
|
(3)
|
Such
option was fully vested and exercisable on April 29, 2005, the date of
grant.
|
|
(4)
|
Such
option vested in equal quarterly installments over a two-year period
commencing April 1, 2007.
|
|
(5)
|
Such
option was fully vested and exercisable on December 3, 2007, the date of
grant.
|
|
(6)
|
Such
option vests as to one-third of the shares subject to the option annually,
commencing March 3, 2009.
|
|
(7)
|
Such
option vests as to one-third of the shares subject to the option annually,
commencing December 31, 2009.
|
|
(8)
|
Such
option was fully vested and exercisable on March 31, 2009, the date of
grant.
|
|
(9)
|
Such
option vested in equal quarterly installments over an 18 month period
commencing August 6, 2009.
|
|
(10)
|
Such
option vests as to one-third of the shares subject to the option annually,
commencing June 2, 2009.
|
|
(11)
|
Such
option vests as to one-third of the shares subject to the option annually,
commencing May 10, 2008.
|
|
(12)
|
Such
option vests as to one-third of the shares subject to the option annually,
commencing June 29, 2008.
|
Employment
Agreements and Change-in-Control Agreements
In
December 2007, we entered into an employment agreement with Jeffrey M. Thompson,
our principal executive officer. Pursuant to the terms of the
agreement, Mr. Thompson served as our chief executive officer and president for
a period of two years, with automatic one-year renewals, subject to either party
electing not to renew. For such services, Mr. Thompson will receive a
base salary of $225,000 per annum, which may be increased annually by our Board
in its discretion, but which increase shall not be less than the greater of (i)
the annual increase in the consumer price index or (ii) 5%. Mr.
Thompson is eligible for a bonus of up to 75% of his base salary, as determined
by our Board. In addition, we will pay 100% of all costs associated
with Mr. Thompson’s employee benefits, including without limitation health
insurance.
If Mr.
Thompson’s employment is terminated (i) by us without “cause,” (ii) by him for
“good reason” or (iii) by us within two years of a “change of control” (as such
terms are defined in the agreement), then (a) we will be required to pay Mr.
Thompson twenty-four months base salary in monthly installments, (b) any
unvested options to purchase shares of our common stock would immediately vest
and become exercisable and any restrictions on restricted stock would
immediately lapse, and (c) we must continue to provide employee benefits,
including without limitation health insurance, to Mr. Thompson for a period of
five years following such termination.
During
Mr. Thompson’s employment with us, and for a period of twelve months following
his termination (the “Restricted Period”), except for a termination by Mr.
Thompson for “good reason,” he is prohibited from engaging in any line of
business in which we were engaged or had a formal plan to enter during the
period of his employment with us. We will continue to pay Mr.
Thompson his base salary then in effect, in accordance with our customary
payroll practices for the duration of any such Restricted Period in the event
that Mr. Thompson’s employment is terminated voluntarily by him, except for
“good reason,” or by us for “cause.”
In May
2008, Joseph P. Hernon joined the Company as Chief Financial Officer. His
employment offer provided for a base annual salary of $190,000 and bonus
payments up to 58% of base salary, as determined by the Board. Upon
joining the Company, Mr. Hernon was granted options to purchase 150,000 shares
of common stock at an exercise price of $1.45 per share, vesting in three annual
installments commencing upon the first anniversary of the grant. He is
eligible to receive additional awards at the discretion of the Board and as
provided under the Company’s stock based incentive plans. He is also
eligible to participate in the Company’s health and other employee benefit
plans. Mr. Hernon is an employee at will.
In April
2007, Mel Yarbrough joined the Company as Vice President of
Sales. His employment offer provided for a base annual salary of
$165,000 and bonus payments up to 61% of base salary, as determined by the Chief
Executive Officer. Upon joining the Company, Mr. Yarbrough was granted
options to purchase 135,000 shares of common stock at an exercise price of $7.05
per share, vesting in three annual installments commencing upon the first
anniversary of the grant. In August 2008, Mr. Yarbrough was appointed
to the position of Chief Revenue Officer. Under the terms of his
employment, Mr. Yarbrough receives a base salary of $190,000 per year, with
potential bonus payments subject to the discretion of the Board. He
is eligible to receive additional stock based awards at the discretion of the
Board and as provided under the Company’s stock based incentive plans. He
is also eligible to participate in the Company’s health and other employee
benefit plans. Mr. Yarbrough relocated from Texas to Rhode Island to join the
Company which agreed to reimburse him for reasonable relocation costs including
moving expenses, up to 90 days of temporary housing, and other related costs.
Mr. Yarbrough is an employee at will.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table sets forth information with respect to the beneficial ownership
of our common stock as of April 28, 2010 by:
|
·
|
each
person known by us to beneficially own more than 5% of our common
stock;
|
|
·
|
each
of our directors;
|
|
·
|
each
of our named executive officers;
and
|
|
·
|
all
of our directors and executive officers as a
group.
|
The
percentages of common stock beneficially owned are reported on the basis of
regulations of the SEC governing the determination of beneficial ownership of
securities. Under the rules of the SEC, a person is deemed to be a beneficial
owner of a security if that person has or shares voting power, which includes
the power to vote or to direct the voting of the security, or investment power,
which includes the power to dispose of or to direct the disposition of, with
respect to the security. Except as indicated in the footnotes to this table,
each beneficial owner named in the table below has sole voting and sole
investment power with respect to all shares beneficially owned and each person’s
address is c/o Towerstream Corporation, 55 Hammarlund Way, Middletown, Rhode
Island 02842, unless otherwise indicated.
Name and Address of Beneficial Owner
|
Amount and Nature
of Beneficial Ownership(1)
|
Percent of
Class(1)
|
|||||
5%
Stockholders:
|
|||||||
Lacuna
Hedge Fund LLLP (2)
|
1,784,818 | 5.1 | % | ||||
1100
Spruce Street, Suite 202
|
|||||||
Boulder,
CO 80302
|
|||||||
Directors
and Named Executive Officers:
|
|||||||
Philip
Urso
|
3,805,528 | (3) | 10.8 | % | |||
William
J. Bush
|
117,500 | (4) | * | ||||
Howard
L. Haronian
|
1,074,370 | (5) | 3.1 | % | |||
Paul
Koehler
|
110,000 | (6) | * | ||||
Jeffrey
M. Thompson
|
2,699,310 | (7) | 7.5 | % | |||
Joseph
P. Hernon
|
217,719 | (8) | * | ||||
Melvin
L. Yarbrough, Jr.
|
387,485 | (9) | 1.1 | % | |||
All
directors and executive officers as a group (7 persons)
|
8,411,912 | (3)(4)(5)(6)(7)(8)(9) | 22.6 | % |
* Less
than 1%.
(1)
|
Shares
of common stock beneficially owned and the respective percentages of
beneficial ownership of common stock assumes the exercise of all options,
warrants and other securities convertible into common stock beneficially
owned by such person or entity currently exercisable or exercisable within
60 days of April 28, 2010. Shares issuable pursuant to the exercise of
stock options and warrants exercisable within 60 days are deemed
outstanding and held by the holder of such options or warrants for
computing the percentage of outstanding common stock beneficially owned by
such person, but are not deemed outstanding for computing the percentage
of outstanding common stock beneficially owned by any other person. As of
April 28, 2010, there were 34,948,059 shares of our common stock
outstanding.
|
(2)
|
Based
on a Schedule 13G/A filed with the SEC on February 16,
2010. Includes 333,333 shares issuable upon exercise of a
warrant issued to Lacuna Hedge Fund LLLP (“Lacuna Hedge”), dated January
12, 2007, at an exercise price of $4.50 per share. This warrant expires on
January 12, 2012. The remaining 1,451,485 shares are held directly by
Lacuna Hedge. Lacuna, LLC (“Lacuna LLC”) serves as the sole general
partner of Lacuna Hedge GP LLLP (“Lacuna Hedge GP”), which serves as the
sole general partner of Lacuna Hedge. Neither Lacuna Hedge GP nor Lacuna
LLC directly owns any securities of the Company. Lacuna Hedge GP and
Lacuna LLC may be deemed to have shared power to vote or direct the vote
of, and to dispose or direct the disposition of, the securities of the
Company held by Lacuna Hedge but disclaim beneficial ownership except to
the extent of their pecuniary interest
therein.
|
(3)
|
Includes
299,386 shares of common stock held by Mr. Urso’s minor children, for whom
Mr. Urso and his wife are the trustees, and 462,886 shares of common stock
issuable upon the exercise of options that are currently exercisable or
exercisable within 60 days.
|
(4)
|
Includes
112,500 shares of common stock issuable upon the exercise of options that
are currently exercisable or exercisable within 60
days.
|
(5)
|
Includes
125,039 shares of common stock issuable upon the exercise of options that
are currently exercisable or exercisable within 60
days.
|
(6)
|
Includes
110,000 shares of common stock issuable upon the exercise of options that
are currently exercisable or exercisable within 60
days.
|
(7)
|
Includes
851,799 shares of common stock issuable upon the exercise of options that
are currently exercisable or exercisable within 60
days.
|
(8)
|
Includes
194,798 shares of common stock issuable upon the exercise of options that
are currently exercisable or exercisable within 60
days.
|
(9)
|
Includes
370,351 shares of common stock issuable upon the exercise of options that
are currently exercisable or exercisable within 60
days.
|
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
Related
parties can include any of our directors or executive officers, certain of our
stockholders and their immediate family members. Each year, we prepare and
require our directors and executive officers to complete Director and Officer
Questionnaires identifying any transactions with us in which the officer or
director or their family members have an interest. This helps us identify
potential conflicts of interest. A conflict of interest occurs when an
individual’s private interest interferes, or appears to interfere, in any way
with the interests of the company as a whole. Our code of ethics requires all
directors, officers and employees who may have a potential or apparent conflict
of interest to immediately notify our Audit Committee of the Board of Directors,
which is responsible for considering and reporting to the Board any questions of
possible conflicts of interest of Board members. Our code of ethics further
requires pre-clearance before any employee, officer or director engages in any
personal or business activity that may raise concerns about conflict, potential
conflict or apparent conflict of interest. Copies of our code of ethics and the
Audit Committee charter are posted on the corporate governance section of our
website at www.towerstream.com.
In
evaluating related party transactions and potential conflicts of interest, our
compliance officer and independent directors apply the same standards of good
faith and fiduciary duty they apply to their general responsibilities. They will
approve a related party transaction only when, in their good faith judgment, the
transaction is in the best interest of the Company.
Director
Independence
Each of
Howard L. Haronian, Paul Koehler and William Bush are independent directors, as
provided in NASDAQ Marketplace Rule 5605(a)(2).
Item
14. Principal Accountant Fees and Services.
The
following table sets forth the fees that the Company accrued or paid to Marcum
LLP during fiscal 2009 and fiscal 2008.
2009
|
2008
|
|||||||
Audit
Fees(1)
|
$ | 172,519 | $ | 178,550 | ||||
Audit-Related
Fees(2)
|
− | − | ||||||
Tax
Fees(3)
|
− | − | ||||||
All
Other Fees
|
− | − | ||||||
Total
|
$ | 172,519 | $ | 178,550 |
(1)
|
Audit
fees relate to professional services rendered in connection with the audit
of the Company’s annual financial statements and internal control over
financial reporting, quarterly review of financial statements included in
the Company’s Quarterly Reports on Form 10-Q, and audit services provided
in connection with other statutory and regulatory
filings.
|
(2)
|
Audit-related
fees relate to professional services rendered in connection with assurance
and related services that are reasonably related to the performance of the
audit or review of the Company’s financial statements, including due
diligence.
|
(3)
|
Tax
fees relate to professional services rendered for tax compliance, tax
advice and tax planning for the Company. The Company does not engage
Marcum LLP to perform personal tax services for its executive
officers.
|
Item
15. Exhibits and Financial Statement Schedules.
Exhibit
No.
|
|
|
Description
|
31.1
|
Section
302 Certification of Principal Executive Officer
|
||
31.2
|
Section
302 Certification of Principal Financial Officer
|
||
32.1
|
Section
906 Certification of Principal Executive Officer
|
||
32.2
|
Section
906 Certification of Principal Financial
Officer
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
TOWERSTREAM
CORPORATION
|
||
Date: April
29, 2010
|
By:
|
/s/
Jeffrey M. Thompson
|
Jeffrey
M. Thompson
President
and Chief Executive
Officer
|
In
accordance with the 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.
Name
|
Capacity
|
Date
|
||
/s/
Jeffrey M. Thompson
|
Director
and Chief Executive Officer
|
|||
Jeffrey
M. Thompson
|
(President
and Principal Executive Officer)
|
April
29, 2010
|
||
/s/
Joseph P. Hernon
|
Chief
Financial Officer
|
|||
Joseph
P. Hernon
|
(Principal
Financial Officer and
|
April
29, 2010
|
||
Principal
Accounting Officer)
|
||||
/s/
Philip Urso
|
Director
- Chairman of the Board of Directors
|
|||
Philip
Urso
|
April
29, 2010
|
|||
/s/
Howard L. Haronian, M.D.
|
Director
|
|||
Howard
L. Haronian, M.D.
|
April
29, 2010
|
|||
/s/
William J. Bush
|
Director
|
|||
William
J. Bush
|
April
29, 2010
|
|||
/s/
Paul Koehler
|
Director
|
|||
Paul
Koehler
|
April
29,
2010
|
EXHIBIT
INDEX
Exhibit No.
|
Description
|
||
31.1
|
Section
302 Certification of Principal Executive Officer
|
||
31.2
|
Section
302 Certification of Principal Financial Officer
|
||
32.1
|
Section
906 Certification of Principal Executive Officer
|
||
32.2
|
Section
906 Certification of Principal Financial Officer
|
||