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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
Form 10-K/A
(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, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-31263
__________________
VELOCITYHSI, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3360232
- -------------------------------------------------------------- -----------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
2175 N. California Blvd.
Suite 150
Walnut Creek, California 94596
- -------------------------------------------------------------- -----------------------------------------------
(Address of principal executive offices) (Zip Code)
(925) 952-5600
-------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No____
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
At March 15, 2001, the aggregate market value of the registrant's shares of
common stock par value, $.01 per share, held by nonaffiliates of the registrant
was approximately $1,993,000. Shares of common stock held by each executive
officer and director and by each person who owns 5% or more of the outstanding
common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of March 15, 2001, the
Registrant had 12,727,154 outstanding shares of common stock.
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1
DOCUMENTS INCORPORATED BY REFERENCE
None.
The registrant hereby amends the following items on Form 10-K for the
year ended December 31, 2000 as set forth below. Items not referenced below are
not amended. Items referenced herein are amended in their entirety as set forth
below.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A summary of the directors and executive officers and their principal business
for the last five years follows:
Name Age Term Position
- ---- --- ---- --------
LeRoy E. Carlson 55 April 2000 - Chairman of the Board of the Company. Executive vice
Present president, chief operating officer and a director of
BRE Properties, Inc., a real estate investment trust,
since July 2000. From March 1996 to July 2000, Mr.
Carlson served as executive vice president and chief
financial officer of BRE. Prior to joining BRE, Mr.
Carlson served as the chief financial officer of Real
Estate Investment Trust of California.
Stephen E. Carlson 54 April 2000 - President, Chief Executive Officer and director of the
Present Company. Prior to joining the Company, Mr.
Carlson was the owner of Steve Carlson & Associates, a
lobbying and government relations firm. Mr. Carlson
was executive director of the California Housing
Council for over 19 years. Mr. Carlson also served as
executive director of the Cellular Carriers
Association of California from 1993 to 2000.
Christine Garvey 55 August 2000 - Director of the Company. Since April 2001, managing
Present director of worldwide corporate real estate services
of Deutsche Bank, a financial services firm. From
December 1999 to April 2001, Ms. Garvey has served as
Vice President, Worldwide Real Estate and Workplace
Resources at Cisco Systems, Inc., a corporation
engaged in networking for the Internet. From 1997 to
1998, Ms. Garvey served as Group Executive Vice
President, Commercial Real Estate Services Group of
Bank of America NT&SA. From 1992 to 1997, Ms. Garvey
served as Executive Vice President, Corporate Real
Estate, Other Real Estate Owned, Sales and Property
Management of Bank of America. Ms. Garvey is also a
director of Catellus Development Corporation, Center
Trust, Inc. and Pacific Gulf REIT. Due to other
business commitments, Ms. Garvey has announced her
intention to resign from the Company's board of
director effective May 15, 2001.
2
Frank C. McDowell 52 April 2000 - Director of the Company. President, chief executive
Present officer and a director of BRE Properties, Inc. since
June 1995. From 1992 to 1995, Mr. McDowell served as
the chairman and chief executive officer of Cardinal
Realty Services, Inc. Mr. McDowell has over
twenty-five years of experience in the real estate,
investment, management and financing fields and has
served in various executive capacities for banks and
management and investment companies.
Charles P. Wingard 43 April 2000 - Senior vice president, chief financial officer,
Present secretary and treasurer of the Company since April
2000. Prior to that date, Mr. Wingard was vice
president of financial reporting from May 1999 and
director of financial reporting from August 1996 to
May 1999 at BRE Properties, Inc., a real estate
investment trust. Prior to joining BRE Properties,
Mr. Wingard served as controller of De Anza Properties
from April 1996 and controller of Bay Apartment
Communities from July 1994 to April 1996.
Nancye Miller 44 April 2000 - Senior vice president of marketing from April 2000 to
January 2001 January 2001. From 1998 to 2000, Ms. Miller was vice
president for sales and marketing at Coolcast, Inc.
where she was responsible for marketing that company's
Coolcast service and for coordinating technical trials
of Coolcast with Internet service providers. Prior to
joining Coolcast, Ms. Miller was president of Miller &
McCall Enterprises, a media consulting firm, from 1984
to 1998. As of January 2001, Ms. Miller was no longer
employed by the Company.
There are no family relationships among our directors or executive officers.
Section 16 Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than ten percent of a
registered class of our equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of common stock and our other
equity securities. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were required,
during our fiscal year ended December 31, 2000, all
3
Section 16(a) filing requirements applicable to our officers,
directors and greater than ten percent beneficial owners were complied
with.
Item 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid to our Chief
Executive Officer and the other highest paid executive officer and two
former executive officers whose salary and bonus exceeded $100,000,
referred to as the "Named Executive Officers", for the period from
April 19, - December 31, 2000.
Annual Compensation Long Term Compensation
------------------- ----------------------
Restricted Securities
Name and Stock Underlying All Other
Principal Position Year(1) Salary($)(2) Bonus ($)(3) Awards ($)(4) Options/SARs Compensation(5)
------------------ ------- ------------ ------------ ------------- ------------ ---------------
Stephen E. Carlson.............. 2000 $ 131,292 $ 600,000 $ 578,530 - $ 5,965
President and Chief Executive
Officer
Charles P. Wingard.............. 2000 $ 91,442 $ 50,000 $ 48,211 8,600 $ 6,938
Senior Vice President,
Secretary, Chief Financial
Officer and Treasurer
Douglas A. Campillo, II......... 2000 $ 71,421 $ 93,837 $ 0 5,600 $ 6,313
Senior Vice President and Chief
Technology Officer *
Nancye Miller................... 2000 $ 123,620 $ 98,209 $ 16,071 - $ 5,100
Senior Vice President of
Marketing *
* Mr. Campillo and Ms. Miller are no longer employed by the Company.
------------------
(1) The Company was incorporated on April 19, 2000 and no earlier
periods are included.
(2) Represents amounts as follows. The Company functioned as a
division of BRE prior to its spin-off from BRE on August 7, 2000,
and BRE paid amounts pursuant to the Administrative Services and
Reimbursement Agreement from August 8, 2000 to September 30,
2000:
Mr. Carlson $58,887 paid by BRE for the period of
April 19, 2000 to August 7, 2000,
$27,481 paid by BRE from August 8, 2000
to September 30, 2000, pursuant to the
Administrative Services and
Reimbursement Agreement and included as
a liability to BRE at December 31, 2000
and $44,924 paid directly by the
Company.
Mr. Wingard $42,681 paid by BRE for the period of
April 19, 2000 to August 7, 2000,
$19,918 paid by BRE from August 8, 2000
to September 30, 2000, pursuant to the
Administrative Services and
Reimbursement Agreement and included as
a liability to BRE at December 31, 2000
and $28,843 paid directly by the
Company.
4
Mr. Campillo $48,696 paid by BRE for the period of April
19, 2000 to August 7, 2000 and $22,725 paid
by BRE from August 8, 2000 to September 30,
2000, pursuant to the Administrative Services
and Reimbursement Agreement and included as a
liability to BRE at December 31, 2000.
Ms. Miller $51,043 paid by BRE for the period of April
19, 2000 to August 7, 2000 and included as a
liability to BRE at December 31, 2000 and
$72,917 paid directly by the Company.
(3) Mr. Carlson and Mr. Wingard's bonus are required to be repaid
should they voluntarily leave employment with the Company or are
terminated for cause. Mr. Campillo's bonus amount is net of
repurchase proceeds from unvested restricted shares of $206,618.
Ms. Miller's bonus amount is net of repurchase proceeds from
unvested restricted shares of $1,791; the Company and Ms. Miller
are in negotiations concerning the Ms. Miller's repayment
obligation and the repayment amount, if any, is not currently
determinable.
(4) On August 7, 2000 Mr. Carlson purchased 826,472 shares at
a price of $0.50 per share subject to certain repurchase rights
of the Company. On the date of purchase, the fair market value of
these shares was $1.20 per share. On August 7, 2000 Charles P.
Wingard purchased 68,873 shares at a price of $0.50 per share
subject to certain repurchase rights of the Company. On the date
of purchase, the market value of these shares was $1.20 per
share. These shares vest as follows:
10/1/00 2/3/01 4/1/01 8/7/01 10/1/01 2/3/02 4/1/02 10/1/02 4/1/03 Total
------- ------ ------ ------ ------- ------ ------ ------- ------ -----
Stephen E. Carlson 137,746 - 137,746 - 137,745 - 137,745 137,745 137,745 826,472
Charles P. Wingard - 22,958 - 22,958 - 22,957 - - - 68,873
On August 7, 2000, Mr. Campillo purchased 413,236 shares at a
price of $0.50 per share subject to certain repurchase rights of
the Company. On the date of purchase, the fair market value of
these shares was $1.20 per share. Due to the termination of Mr.
Campillo prior to any vesting of his shares, his 413,236 unvested
shares were repurchased by the Company following his termination
pursuant to his subscription agreement. On August 7, 2000, Ms.
Miller purchased 137,745 shares at a price of $0.50 per share
subject to certain repurchase rights of the Company. Due to the
termination of Ms. Miller prior to the full vesting of her
shares, her 114,787 unvested shares were repurchased by the
Company following her termination pursuant to her subscription
agreement.
(5) Consists of contributions to the Company's defined contribution
retirement plan (401(k) Plan) on behalf of the named executive
officers. Also, includes auto allowance of $600 per month for Mr.
Carlson, $250 per month for Mr. Wingard, $300 per month for Mr.
Campillo and $600 per month for Ms. Miller. In addition, Ms.
Miller was given a forgivable loan in the amount of $125,000
which was not included. The Company and Ms. Miller are in
negotiations concerning Ms. Miller's repayment obligation with
respect to the loan and the repayment amount, if any, is not
currently determinable.
5
Option Grants in 2000
The following table sets forth: (i) grants of stock options
made by the Company during 2000 to each of the named executive
officers; (ii) the ratio that the number of options granted to
each individual bears to the total number of options granted to
all employees; (iii) the exercise price and expiration date of
these options; and (iv) the estimated potential realizable values
assuming certain stock price appreciation over the option term.
Individual Grants
-------------------------------------------------------------
Potential Realized Value at
Assumed Annual Rates of
Number of % of Total Stock Price Appreciation for
Securities Options/SARS Option Term (4)
------------------------------
Underlying Granted to Exercise
Options/SARS Employees Base Price Expiration
Name (1) (2) in Fiscal Year ($/Sh) Date (3) 5% 10%
- ------------------------- ------------- -------------- ---------- ---------- ----------- -----------
Stephen Carlson................ - 0.0% $ - N/A $ - $ -
Charles Wingard................ 1,600 0.1% $ 0.727 8/26/06 $ 396 $ 897
2,000 0.1% $ 0.977 3/2/08 $ 874 $ 2,072
2,500 0.1% $ 0.875 2/22/09 $ 1,133 $ 2,760
2,500 0.1% $ 0.820 1/28/10 $ 1,207 $ 3,017
Douglas A. Campillo, II........ 1,600 0.1% $ 0.977 3/2/08 $ 699 $ 1,657
2,000 0.1% $ 0.875 2/22/09 $ 907 $ 2,208
2,000 0.1% $ 0.820 1/28/10 $ 966 $ 2,413
Nancye Miller.................. - 0.0% $ - N/A $ - $ -
__________________
(1) All options shown in the table were granted under the 2000 Equity Incentive
Plan. The exercise price is 100% of the fair market value of the Common
Stock on the date of grant. All options held by Mr. Wingard may become
immediately exercisable upon termination of employment following a change
in control. Mr. Wingard and Mr. Campillo's options were received as part of
the Company's spin-off from BRE, where holders of options in BRE common
stock were granted the option to purchase the Company's common stock. These
options mirror the terms of the BRE options except that the number of the
Company's shares and their strike price we appropriately adjusted to
reflect the ratio of the Company's shares to BRE shares and their relative
values on the spin-off date. Mr. Campillo's options were cancelled upon his
termination from the Company.
(2) The right to receive reload options was given in connection with these
options. The reload options enable the named executive officers to purchase
a number of shares of Common Stock equal to the number of shares of Common
Stock delivered by him or her to exercise the underlying option. The
effective date of the grant of the reload options will be the date the
underlying option is exercised by delivering shares of Common Stock to the
Company. The reload options have the same expiration date as the underlying
options and will have an exercise price equal to the fair market value of
the Common Shares of the effective date of the grant of the reload options.
There are no reload options included in the above table and none have been
granted.
(3) The options have a term of ten years, subject to acceleration upon a change
in control or termination, except the options received by Mr. Wingard and
Mr. Campillo whose options mirror the remaining term of the BRE options.
(4) Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rates shown
(5% and 10%), compounded annually, from the date of grant of the option
until the end of the option term. The value is net of the exercise price
but is not adjusted for the taxes that would be due upon exercise. The 5%
and 10% assumed rates of appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future stock prices. There can be no assurance
that any of the values reflected in the table will be achieved. Actual
gains, if any, upon future exercise of any of these options will depend on
the actual performance of the Common Stock and the continued employment of
the executive officer holding the option through its vesting period.
Aggregated Option Exercises in 2000 and Year-End Option Values
The following table sets forth: (i) the number of shares received and the
aggregate dollar value realized in connection with each exercise of outstanding
stock options during 2000 by each of the named executive officers; (ii) the
total number of all outstanding unexercised options held by the named
6
executive officers at the end of 2000; and (iii) the aggregate dollar value of
all such unexercised options based on the excess of the market price of the
Common Stock over the exercise price of the option.
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Shares Options/SARS at 12/31/00 Options at 12/31/00 (2)
Acquired on Value ---------------------------- ----------------------------
Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ------------- ----------- -------------
Stephen E. Carlson - - - - - -
Charles P. Wingard 1,600 $0.473 - - - -
2,000 $0.223 - - - -
1,372 $0.325 - - - -
1,128 $0.325 - - - -
2,500 $0.380 - - - -
Douglas A. Campillo, II - - - - - -
Nancye Miller - - - - - -
__________________
(1) Value realized (if any) is calculated by subtracting the total exercise
price from the market value of the underlying Common Stock on the date of
exercise.
(2) The market value of the Company's Common Stock at December 31, 2000 was
$0.0156 per share.
Retirement Plan (401(k) Plan)
The Company co-adopted the retirement plan sponsored by BRE upon the
Company's spin-off from BRE. This Retirement Plan is intended to be a qualified
retirement plan under Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code"). Under this plan, participating employees (including the
named executive officers) may contribute up to 15% of their compensation, but
not exceeding the amount allowed under applicable tax laws ($10,500 in calendar
2000), and the Company (or BRE for periods prior to the spin-off on August 7,
2000) contributed 75% of the first 4% of the employee's contribution to December
1, 2000; thereafter, the Company contributed 75% of the first 6% of the
employees' contribution. All regular full-time employees of the Company are
eligible to participate in the Retirement Plan within three months of the start
of their employment; however, prior to the spin-off, BRE required six months of
service. The Company's contributions on behalf of employees who have been
employed with the Company (including prior service for certain entities acquired
by the Company) for at least five years are fully vested.
Compensation of Directors
Under our 2000 Equity Incentive Plan ("the Plan"), each non-employee
Director receives an automatic grant of an option to purchase 25,000 shares of
common stock following their initial appointment or election to the Board, and
an additional 25,000 shares upon initial appointment or election and on each
subsequent anniversary date. The Chairman of the Board receives an automatic
grant of an additional 25,000 shares upon election and on each subsequent
anniversary date. In addition, the Plan provides for grants of option to
purchase 3,000 shares for each committee the director serves on and 5,000 for
serving as chairman of a committee. The exercise price of each option is the
closing stock price on the date of grant. Each option has a ten-year term and
becomes exercisable in cumulative monthly installments of 1/12 of the shares on
each of the monthly anniversaries of the date of the grant.
7
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Mr. Stephen E. Carlson
In July 2000, we entered into an employment agreement with Stephen E.
Carlson to serve as our president and chief executive officer effective as of
April 1, 2000. The employment agreement is for a term of three years beginning
on April 1, 2000. Under the terms of the agreement, Mr. Carlson receives a base
salary of $200,000 per year, subject to adjustment, and an annual discretionary
bonus of between 50% to 100% of his then-current base salary, based upon
achieving specific operating and performance criteria established by the board
of directors. If we terminate Mr. Carlson's employment without cause (as defined
in the agreement) or if Mr. Carlson voluntarily terminates his employment for
good reason (as defined in the agreement), we will pay him his then-current base
salary for the shorter of one year or the remainder of the term of his
employment agreement. Mr. Carlson was also paid a signing bonus of $600,000 upon
his employment with us. Mr. Carlson will be required to forfeit and repay 50% of
this signing bonus to us if he is discharged for cause or resigns without good
reason prior to April 1, 2002.
The agreement contemplated the payment of certain specified bonus and loan
arrangements as of January 2001, in an aggregate amount of up to $500,000. None
of those bonuses or loans have been paid or advanced. In April 2001, the
Compensation Committee and the other members of the Board of Directors,
excluding Mr. Carlson, approved a series of retention/bonus payments to Mr.
Carlson of up to $100,000 in total, payable over an eight week period concurrent
with the Company's bi-weekly payroll. The Board and Mr. Carlson are currently
in discussions regarding additional or alternative bonus and salary arrangements
which could include bonuses and/or fees in connection with the completion of a
strategic transaction; however, no such additional or alternative bonus or
salary arrangements have been established.
Ms. Nancye Miller
In August 2000, we entered into an employment agreement with Nancye Miller
to serve as our senior vice president of marketing effective as of April 1,
2000. Ms. Miller terminated from the Company in January 2001. Under the terms of
the agreement, Ms. Miller received a base salary of $175,000 per year, subject
to adjustment, and an annual discretionary bonus of between 50% to 100% of her
then-current base salary, based upon achieving specific operating and
performance criteria established by the board of directors. The employment
agreement was for a term of three years from April 1, 2000. The agreement
provided that if we terminate Ms. Miller's employment without cause or Ms.
Miller voluntarily terminated her employment for good reason during the first
year of her employment, we would pay her then-current base salary for one year
and a bonus equal to 50% of her then-current base salary for the shorter of one
year or the remainder of the term of her employment agreement and we would pay
her a bonus equal to the average of the bonuses paid to her in previous years.
Under the terms of the employment agreement, we have loaned $125,000 to Ms.
Miller bearing interest at 9.0% per annum with a maturity date of April 1, 2002.
We are in negotiations with Ms Miller with respect to the loan and the repayment
amount, if any, is not currently determinable.
Mr. Charles Wingard
Pursuant to the terms of Mr. Wingard's option agreement, his options may
become immediately exercisable following a change of control.
Compensation Committee Interlocks and Insider Participation
Mr. Guenther and Ms. Garvey, both of whom were outside directors, served
on the compensation committee in 2000. Ms. Garvey has notified us that she will
be re-locating to London in connection with her primary employment and will not
be able to continue serving on our board after May 15, 2001. In addition, Morgan
Guenther, the other independent director on our board, submitted his resignation
to the Board of Directors on April 6, 2001, citing time constraints based on his
other business obligations. The remaining members of the board are seeking
replacements for Ms. Garvey and Mr. Guenther.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT
The following table sets forth, as of March 15, 2001, information regarding
the shares of the Company's common stock beneficially owned by each person who
is known by the Company to own beneficially more than 5% of the common stock, by
each director, by each Named Executive Officer and by all directors and
executive officers as a group. The amounts shown are based on information
provided by the individuals named.
Amount and Nature Percentage
of Beneficial Beneficially
Name and Address of Beneficial Owner (1) Ownership(2)(3) Owned (2) (3)
- ---------------------------------------- ----------------- -------------
BRE Properties, Inc.
44 Montgomery Street, 36th Floor
San Francisco, CA 94104-4809............................................. 1,219,183 9.0%
Banc of America Mortgage Capital Corporation
600 Montgomery Street, 21st Floor
San Francisco, CA 94123.................................................. 750,000 (4) 5.5%
LeRoy E. Carlson.............................................................. 262,652 (5) 1.9%
Stephen E Carlson............................................................. 826,472 (6) 6.1%
Christine Garvey.............................................................. 55,000 (7) *
8
Frank C. McDowell............................................................. 319,836 (8) 2.4%
Charles P. Wingard............................................................ 77,473 (9) *
Douglas A. Campillo, II....................................................... - (10) *
Nancye Miller................................................................. 22,958 (11) *
All directors and executive officers as a group (7 persons)................... 3,533,574 (12) 26.1%
*Less than 1%.
------------------
(1) Except as otherwise set forth above, the address of each stockholder
is c/o VelocityHSI, Inc., 2175 North California Boulevard, Suite 150,
Walnut Creek, CA 94596.
(2) Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. Shares of the
Company common stock subject to options which are currently
exercisable, or will become exercisable within 60 days of March 15,
2001 are deemed outstanding for purposes of computing the percentage
of the person or entity holding the options but are not outstanding
for purposes of computing the percentage of any other person or
entity. Except as otherwise indicated by footnote, and subject to the
community property laws where applicable, each stockholder named in
the table above has sole investment and voting power with respect to
the shares shown.
(3) Assumes full vesting of all restricted shares.
(4) Represents warrants to purchase common stock, which are currently
exercisable.
(5) Represents 20,216 shares he owns directly, 206,023 restricted shares
owned pursuant to vesting arrangements, 1,000 restricted shares that
will vest on or before May 14, 2001 and 35,413 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before May 14, 2001.
(6) Represents 137,746 shares he owns directly, 550,980 shares owned
pursuant to vesting arrangements, and 137,746 restricted shares that
will vest on or before May 14, 2001.
(7) Represents 32,082 shares she owns directly, 13,752 restricted shares
owned pursuant to vesting arrangements and 9,166 restricted shares
that will vest on or before May 14, 2001.
(8) Represents 57,938 shares he owns directly, 290 shares owned by his
wife in which he disclaims any interest, 236,858 restricted shares
owned pursuant to vesting arrangements, 6,000 restricted shares that
will vest on or before May 14, 2001 and 18,750 shares that may be
purchased upon the exercise of stock options that are currently
exercisable or that will become exercisable on or before May 14, 2001.
(9) Represents 22,958 shares he owns directly, 8,600 owned by trusts for
the benefit of his children where he is a trustee and 45,915
restricted shares owned pursuant to vesting arrangements.
(10) Due to the termination of Mr. Campillo during 2000, and unvested
restricted shares granted to him upon the spin-off were repurchased
pursuant to a subscription agreement. The Company is unaware of any
transactions in the Company's stock Mr. Campillo may have made since
his termination.
(11) Ms. Miller terminated from the Company in January 2001, and unvested
restricted shares granted to her upon the spin-off were repurchased
pursuant to a subscription agreement. The Company is unaware of any
transactions in the Company's stock Ms. Miller may have made since her
termination.
(12) Represents 1,513,080 shares owned directly, 290 shares owned by a
spouse in which any interest is disclaimed, 8,600 shares owned by
trusts, 750,000 warrants which are currently exercisable, 1,053,530
restricted shares owned pursuant to vesting arrangements, 153,911
restricted shares that will vest on or before May 14, 2001 and 54,163
shares that may be purchased upon the exercise of stock options that
are currently exercisable or that will become exercisable on or before
May 14, 2001.
9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. LeRoy Carlson and Mr. Frank McDowell, directors of the Company, are
currently the Executive Vice President, Chief Operating Officer and director and
President, Chief Executive Officer and director of BRE Properties, Inc.
BRE incurred direct and indirect costs and expenses on behalf of the
Company. These costs and expenses, attributable to the Company's operations,
including payroll costs, have been included in these financial statements
through August 7, 2000. Where appropriate, costs and expenses were allocated to
the Company by BRE based on BRE's cost, which reflects management's estimate of
what the expenses would have been on a stand-alone basis. In the opinion of
management, the allocation method is reasonable and appropriate.
VelocityHSI and BRE have entered into a Contribution and Distribution
Agreement which provides for the contribution of the Project Velocity assets to
VelocityHSI and the distribution of common stock to BRE. The Contribution and
Distribution Agreement provides that BRE is responsible for all liabilities with
respect to the contributed assets and the VelocityHSI business arising out of
events happening prior to the contribution. We are responsible for all
liabilities with respect to the contributed assets and the VelocityHSI business
arising out of events happening on or after the contribution. The contribution
occurred on August 7, 2000.
Effective August 7, 2000 and under a Service Agreement, the Company is
required to pay or accrue to BRE 10% of revenues generated from services
provided to residents of communities owned by BRE. For the year ended December
31, 2000 and related to the period of August 7 to December 31, 2000, the amount
expensed relating to BRE's share of revenue was $21,627.
BRE provided funding for the operations of VelocityHSI prior to August 7,
2000 in the form of intracompany advances. The intracompany account was
comprised of amounts earned and incurred by BRE on behalf of the Company. This
account was converted into VelocityHSI common stock on August 7, 2000.
On behalf of the Company, BRE entered into a lease agreement on April 24,
2000 for the rental of office space in Walnut Creek, California. The term of the
lease is through July 1, 2005 and all monthly lease payments are required to be
made by the Company. The monthly base rent payments for the lease range between
$26,112 and $28,201. An amendment to this office lease was entered into by BRE
on October 31, 2000, providing for additional office space. The term of the
lease is through November 1, 2003 and monthly base rent payments range between
$7,885 and $8,516. BRE has also entered into agreements for the lease of office
furniture and equipment for the Company's use, with lease terms through December
2003 and monthly base rent payments totaling approximately $8,000. Thereafter,
monthly base rent payments of $3,533 continue through July 2005. The future
obligations have been included in the reserve, reducing funds available on the
BRE Line as of December 31, 2000.
On August 7, 2000 the Company entered into an Administrative Services and
Reimbursement Agreement with BRE pursuant to which BRE will provide the Company
with office space and administrative services in connection with the business
operations as reasonably required of the Company. BRE has also agreed to provide
the Company with up to $10 million in funds through September 30, 2001, to
finance operating expenses and the costs of installing equipment at properties
which are not owned by BRE. BRE has further agreed to provide the Company with
funds through September 30, 2001 to finance the installation of equipment at
properties owned by BRE. Funds advanced by BRE to the Company subsequent to
BRE's contribution of net assets to the Company on August 7, 2000, must be
repaid by the Company on or before September 30, 2001 together with interest on
periodic unpaid balances at the rate of 9% per year. For the year ended December
31, 2000, we incurred interest expense on the BRE Line of $92,493; pursuant to
the terms of the BRE Line, this amount was accrued and not paid.
In April 2001, BRE paid $300,000 to Mr. Stephen Carlson to resolve certain
issues arising out of Mr. Carlson's relationship with BRE.
10
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.
VELOCITYHSI, INC.
By /s/ Stephen E. Carlson
-----------------------------------------------
Stephen E. Carlson
President, Chief Executive Officer and Director
Dated: April 30, 2001
--------------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
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 Dated
--------- ----- -----
/S/ Stephen E. Carlson President, Chief Executive Officer and April 30, 2001
- ------------------------------------------ ------------------------------
Stephen E. Carlson Director
(Principal Executive Officer)
/s/ Charles P. Wingard Senior Vice President, April 30, 2001
- ------------------------------------------ ------------------------------
Charles P. Wingard Chief Financial Officer, Secretary and
Treasurer
(Principal Financial and
Accounting Officer)
* Director, Chairman of the Board April 30, 2001
- ------------------------------------------ ------------------------------
LeRoy E. Carlson
* Director April 30, 2001
- ------------------------------------------ ------------------------------
Christine Garvey
* Director April 30, 2001
- ------------------------------------------ ------------------------------
Frank C. McDowell
* By: /s/ Charles P. Wingard
------------------------------------
Charles P. Wingard
Attorney-in-Fact
11