================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the fiscal year ended December 31, 2004
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-13669
TAG-IT PACIFIC, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4654481
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
21900 BURBANK BLVD., SUITE 270
WOODLAND HILLS, CALIFORNIA 91367
(Address of Principal Executive Offices) (Zip Code)
(818) 444-4100
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
COMMON STOCK, $.001 PAR VALUE AMERICAN STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 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 [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2) Yes [ ] No [X]
At June 30, 2004 the aggregate market value of the voting and
non-voting common stock held by non-affiliates of the registrant was
$65,632,028. At March 31, 2005 the issuer had 18,241,045 shares of Common Stock,
$.001 par value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the issuer's proxy statement with respect to its 2005
annual meeting of stockholders are incorporated by reference into Part III of
this report.
================================================================================
EXPLANATORY NOTE
We are filing this Annual Report on Form 10-K/A for the year ended
December 31, 2004 (the "Amended Annual Report"), to amend our Annual Report on
Form 10-K for the year ended December 31, 2004 (the "Original Annual Report"),
which was originally filed with the Securities and Exchange Commission (the
"SEC") on April 7, 2005. The Company is filing this Amended Annual Report in
response to comments received from the SEC. The following Items amend the
Original Annual Report, as permitted by the rules and regulations of the SEC.
Unless otherwise stated, all information contained in this Amended Annual Report
is as of March 31, 2005. All capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to them in the Original Annual Report.
i
PART I
ITEM 9A. CONTROLS AND PROCEDURES.
We maintain disclosure controls and procedures, which we have designed
to ensure that information required to be disclosed in our reports under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding disclosure. In response to recent legislation and proposed
regulations, we reviewed our internal control structure and our disclosure
controls and procedures.
In the course of conducting its audit of our financial statements for
the fiscal year ended December 31, 2004, our independent auditors, BDO Seidman
LLP informed members of our senior management and the Audit Committee of our
Board of Directors that they had discovered significant deficiencies in our
internal control over financial reporting that alone and in the aggregate
constituted a "material weakness", which is defined under standards established
by the Public Company Accounting Oversight Board as a deficiency that could
result in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. The
deficiencies identified consisted of the following:
o A deficiency related to the identification of approximately
$1.0 million of our inventory located in a third party
warehouse. We have taken steps and will continue to take
additional steps to remedy this deficiency and believe that
this deficiency was limited to the third party warehouse at
which the inventory was located.
o We recorded post-closing adjustments in our financial
statements for the year ended December 31, 2004 related to the
allowance for doubtful accounts and deferred tax asset, which
were identified by BDO Seidman LLP in connection with their
audit of the financial statements. In order to address this
deficiency, we will implement additional review procedures
over the selection and monitoring of appropriate assumptions
and estimates affecting these accounting practices.
Members of management, including the Company's Chief Executive Officer,
Colin Dyne, and Chief Financial Officer, Ronda Ferguson, have evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of December 31, 2004, the end of the period covered by this
report. Based upon that evaluation, because of the material weakness described
above, Mr. Dyne and Ms. Ferguson were unable to conclude that the Company's
disclosure controls and procedures were effective as of December 31, 2004.
Management has identified the steps necessary to address the material weakness
as described above, and has begun to implement remediation plans. We believe
these corrective actions, taken as a whole, have mitigated the control
deficiencies with respect to our preparation of this Annual Report and that
these measures have been effective to ensure that the information required to be
disclosed in this Annual Report has been recorded, processed, summarized and
reported correctly.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no significant changes in our internal controls over
financial reporting that occurred during the fourth quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
2
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.
TAG-IT PACIFIC, INC.
/S/ AUGUST DELUCA
--------------------------------
By: August DeLuca
Its: Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Stephen Forte and August DeLuca, and each of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and his name, place and stead, in any and all capacities, to sign any or
all amendments to this Annual Report on Form 10-K and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
foregoing, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
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 DATE
--------- ----- ----
/S/ STEPHEN FORTE Chief Executive Officer December 6, 2005
--------------------------- (Principal Executive Officer)
Stephen Forte
/S/ AUGUST DELUCA Chief Financial Officer December 6, 2005
--------------------------- (Principal Accounting and
August DeLuca Financial Officer)
/S/ MARK DYNE Chairman of the Board of December 6, 2005
--------------------------- Directors
Mark Dyne
Director
---------------------------
Colin Dyne
Director
---------------------------
Kevin Bermeister
/S/MICHAEL KATZ Director December 6, 2005
---------------------------
Michael Katz
/S/JONATHAN BURSTEIN Director,Vice President of December 6, 2005
--------------------------- Operations and Secretary
Jonathan Burstein
/S/ BRENT COHEN Director December 6, 2005
---------------------------
Brent Cohen
/S/ JOSEPH MILLER Director December 6, 2005
---------------------------
Joseph Miller
3
SIGNATURE TITLE DATE
--------- ----- ----
Director
---------------------------
Susan White
/S/ RAY MUSCI Director December 6, 2005
---------------------------
Ray Musci
4
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- ----------------------------------------------------------
3.1 Certificate of Incorporation of Registrant. Incorporated
by reference to Exhibit 3.1 to Form SB-2 filed on October
21, 1997, and the amendments thereto.
3.2 Bylaws of Registrant. Incorporated by reference to Exhibit
3.2 to Form SB-2 filed on October 21, 1997, and the
amendments thereto.
3.3 Certificate of Designation of Rights, Preferences and
Privileges of Series A Preferred Stock. Incorporated by
reference to Exhibit A to the Rights Agreement filed as
Exhibit 4.1 to Current Report on Form 8-K filed as of
November 4, 1998.
3.4 Certificate of Amendment of Certificate of Incorporation
of Registrant. Incorporated by reference to Exhibit 3.4 to
Annual Report on Form 10-KSB, filed March 28, 2000.
4.1 Specimen Stock Certificate of Common Stock of Registrant.
Incorporated by reference to Exhibit 4.1 to Form SB-2
filed on October 21, 1997, and the amendments thereto. 4.2
Rights Agreement, dated as of November 4, 1998, between
Registrant and American Stock Transfer and Trust Company
as Rights Agent. Incorporated by reference to Exhibit 4.1
to Current Report on Form 8-K filed as of November 4,
1998.
4.3 Form of Rights Certificate. Incorporated by reference to
Exhibit B to the Rights Agreement filed as Exhibit 4.1 to
Current Report on Form 8-K filed as of November 4, 1998.
10.1 Form of Indemnification Agreement. Incorporated by
reference to Exhibit 10.1to Form SB-2 filed on October 21,
1997, and the amendments thereto.
10.2 Promissory Note, dated September 30, 1996, provided by
Tag-It, Inc. to Harold Dyne. Incorporated by reference to
Exhibit 10.21 to Form SB-2 filed on October 21, 1997, and
the amendments thereto.
10.3 Promissory Note, dated June 30, 1991, provided by Tag-It,
Inc. to Harold Dyne. Incorporated by reference to Exhibit
10.23 to Form SB-2 filed on October 21, 1997, and the
amendments thereto.
10.4 Promissory Note, dated January 31, 1997, provided by
Tag-It Inc. to Mark Dyne. Incorporated by reference to
Exhibit 10.24 to Form SB-2 filed on October 21, 1997, and
the amendments thereto.
10.5 Promissory Note, dated February 29, 1996, provided by
A.G.S. Stationary, Inc. to Monto Holdings Pty. Ltd.
Incorporated by reference to Exhibit 10.25 of Form SB-2
filed on October 21, 1997, and the amendments thereto.
10.6 Promissory Note, dated January 19, 1995, provided by
Pacific Trim & Belt, Inc. to Monto Holdings Pty. Ltd.
Incorporated by reference to Exhibit 10.26 to Form SB-2
filed on October 21, 1997, and the amendments thereto.
10.7 Registrant's 1997 Stock Incentive Plan, as amended. (2)
Incorporated by reference to Exhibit 10.1 to Form 10-Q
filed on August 16, 2004.
5
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- ----------------------------------------------------------
10.8 Form of Non-statutory Stock Option Agreement. (2)
Incorporated by reference to Exhibit 10.30 to Form SB-2
filed on October 21, 1997, and the amendments thereto.
10.9 Promissory Note, dated August 31, 1997, provided by Harold
Dyne to Pacific Trim & Belt, Inc. Incorporated by
reference to Exhibit 10.32 to Form SB-2 filed on October
21, 1997, and the amendments thereto.
10.10 Promissory Note, dated October 15, 1997, provided by
Harold Dyne to Pacific Trim & Belt, Inc. Incorporated by
reference to Exhibit 10.34 to Form SB-2 filed on October
21, 1997, and the amendments thereto.
10.11 Warrant Agreement, dated June 1, 1994, between Jonathan
Markiles and Tag-It, Inc. Incorporated by reference to
Exhibit 10.39 to Form SB-2 filed on October 21, 1997, and
the amendments thereto.
10.12 Contract for Manufacturing Services between USA and
Mexico, between Tag-It, Inc. and Tagit de Mexico, S.A. de
C.V. Incorporated by reference to Exhibit 10.44 to Form
SB-2 filed on October 21, 1997, and the amendments
thereto.
10.13 Promissory Note, dated October 15, 1997, provided by
A.G.S. Stationary Inc. to Monto Holdings Pty. Ltd.
Incorporated by reference to Exhibit 10.48 to Form SB-2
filed on October 21, 1997, and the amendments thereto.
10.14 Promissory Note, dated November 4, 1997, provided by
Pacific Trim & Belt, Inc. to Monto Holdings Pty. Ltd.
Incorporated by reference to Exhibit 10.49 to Form SB-2
filed on October 21, 1997, and the amendments thereto.
10.15 Binding Letter of Understanding, dated October 14, 1998.
Incorporated by reference to Exhibit 99.3 to Current
Report on Form 8-K filed as of October 29, 1998.
10.16 Side Letter Agreement, dated October 14, 1998.
Incorporated by reference to Exhibit 99.4 to Current
Report Form 8-K filed as of October 29, 1998.
10.17 Guaranty, dated as of October 4, 2000, by A.G.S.
Stationery, Inc. in favor or Mark I. Dyne. Incorporated by
reference to Exhibit 10.40 to Form 10-K filed on April 4,
2001.
10.18 Guaranty, dated as of October 4, 2000, by Tag-It, Inc. in
favor of Mark I. Dyne. Incorporated by reference to
Exhibit 10.41 to Form 10-K filed on April 4, 2001.
10.19 Guaranty, dated as of October 4, 2000, by Talon
International, Inc. in favor of Mark I. Dyne. Incorporated
by reference to Exhibit 10.42 to Form 10-K filed on April
4, 2001.
10.20 Intercreditor Agreement, dated as of October 4, 2000, by
and among Mark I. Dyne, Sanwa Bank California, the
Registrant, Tag-It, Inc., Talon International, Inc. and
A.G.S. Stationery, Inc. Incorporated by reference to
Exhibit 10.43 to Form 10-K filed on April 4, 2001.
10.21 Security Agreement, dated as of October 4, 2000, between
A.G.S. Stationery, Inc. and Mark I. Dyne. Incorporated by
reference to Exhibit 10.44 to Form 10-K filed on April 4,
2001. Incorporated by reference to Exhibit 10.44 to Form
10-K filed on April 4, 2001.
10.22 Security Agreement, dated as of October 4, 2000, between
Tag-It, Inc. and Mark I. Dyne. Incorporated by reference
to Exhibit 10.45 to Form 10-K filed on April 4, 2001.
6
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- ----------------------------------------------------------
10.23 Security Agreement, dated as of October 4, 2000, between
Talon International Inc. and Mark I. Dyne. Incorporated by
reference to Exhibit 10.46 to Form 10-K filed on April 4,
2001.
10.24 Security Agreement, dated as of October 4, 2000, between
Tag-It Pacific, Inc. and Mark I. Dyne. Incorporated by
reference to Exhibit 10.47 to Form 10-K filed on April 4,
2001.
10.25 Convertible Secured Subordinated Promissory Note, dated
October 4, 2000, provided by Mark I. Dyne to the
Registrant. Incorporated by reference to Exhibit 10.48 to
Form 10-K filed on April 4, 2001.
10.26 Trim Handling Agreement, dated as of December 29, 1999,
among the Registrant, Tarrant Apparel Group, Inc. & Tagmex
and Tag-It de Mexico S.A. Incorporated by reference to
Exhibit 10.51 to Form 10-K filed on April 4, 2001.
10.27 Supply Agreement entered into on December 22, 2000, by and
between the Company, Hubert Guez, Paul Guez and Azteca
Production International, Inc., AZT International SA D RL,
and Commerce Investment Group, LLC. (1) Incorporated by
reference to Exhibit 10.53 to Form 10-K filed on April 4,
2001.
10.28 Investor Rights Agreement entered into on December 22,
2000, by and between the Company and Commerce Investment
Group, LLC. Incorporated by reference to Exhibit 10.54 to
Form 10-K filed on April 4, 2001.
10.29 Voting Agreement entered into on December 22, 2000, by and
between the Company, Hubert Guez, Paul Guez and Azteca
Production International, Inc., AZT International SA D RL,
Commerce Investment Group, LLC, and Colin Dyne.
Incorporated by reference to Exhibit 10.55 to Form 10-K
filed on April 4, 2001.
10.30 Right of First Refusal and Sale Agreement entered into on
December 22, 2000, by and between the Company, Hubert
Guez, Paul Guez and Azteca Production International, Inc.,
AZT International SA D RL, Commerce Investment Group, LLC,
and Colin Dyne. Incorporated by reference to Exhibit 10.56
to Form 10-K filed on April 4, 2001.
10.31 Co-Marketing and Supply Agreement, dated as of September
20, 2001, between Tag-It Pacific, Inc. and Coats America,
Inc. Incorporated by reference to Exhibit 99.3 to Form 8-K
filed on October 15, 2001.
10.32 Purchase Money Security Agreement, dated as of September
20, 2001, between Tag-It Pacific, Inc. and Coats America,
Inc. Incorporated by reference to Exhibit 99.4 to Form 8-K
filed on October 15, 2001.
10.33 Promissory Note, dated as of December 21, 2001, by Tag-It
Pacific, Inc. for the benefit of Talon, Inc. Incorporated
by reference to Exhibit 99.2 to Form 8-K filed on January
7, 2002.
10.34 Form of Warrant to Purchase Common Stock Agreements dated
December 28, 2001. Incorporated by reference to Exhibit
99.2 to Form 8-K filed on January 23, 2002.
10.35 Form of Stockholders Agreements dated December 28, 2001.
Incorporated by reference to Exhibit 99.3 to Form 8-K
filed on January 23, 2002.
7
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- ----------------------------------------------------------
10.36 Form of Investor Rights Agreements dated December 28,
2001. Incorporated by reference to Exhibit 99.4 to Form
8-K filed on January 23, 2002.
10.37 Exclusive Supply Agreement dated July 12, 2002, among
Tag-It Pacific, Inc. and Levi Strauss & Co. (1)
Incorporated by reference to Exhibit 10.68 to Form 10-Q
filed on November 15, 2002.
10.37.1 Amendment to Exclusive Supply Agreement, dated July 12,
2002, between Tag-It Pacific, Inc. and Levi Strauss & Co.
(1) Incorporated by reference to Exhibit 10.70 to Form
10-K filed on March 28, 2003.
10.37.2 Amendment, dated June 29, 2004, to Exclusive Supply
Agreement, dated July 12, 2002, between Tag-It Pacific,
Inc. and Levi Strauss & Co. (3)
10.38 Intellectual Property Rights Agreement, dated April 2,
2002, between the Company and Pro-Fit Holdings, Ltd. (1)
Incorporated by reference to Exhibit 10.69 to Form 10-K/A
filed on October 1, 2003.
10.39 Securities Purchase Agreement dated May 23, 2003, by and
among the Company and the Purchasers identified on the
signature pages thereto. Incorporated by reference to
Exhibit 99.2 to Form 8-K filed on June 4, 2003.
10.40 Registration Rights Agreement dated May 23, 2003, by and
among the Company and the Purchasers identified on the
signature pages thereto. Incorporated by reference to
Exhibit 99.3 to Form 8-K filed on June 4, 2003.
10.41 Common Stock Purchase Warrant dated May 30, 2003 between
the Company and Roth Capital Partners LLC. Incorporated by
reference to Exhibit 10.15 to Form S-3 Registration
Statement filed on June 25, 2003.
10.42 Form of Subscription Agreement between the Company and the
Purchaser to be identified therein dated December 18,
2003. Incorporated by reference to Exhibit 99.1 to Form
8-K filed on December 22, 2003.
10.43 Form of Registration Rights Agreement dated December 18,
2003 among the Company and the Purchasers identified
therein. Incorporated by reference to Exhibit 99.2 to Form
8-K filed on December 22, 2003.
10.44 Placement Agent Agreement dated December 18, 2003 between
the Company and Sanders Morris Harris Inc. Incorporated by
reference to Exhibit 99.3 to Form 8-K filed on December
22, 2003.
10.45 Common Stock Purchase Warrant dated December 18, 2003
between the Company and Sanders Morris Harris Inc.
Incorporated by reference to Exhibit 99.4 to Form 8-K
filed on December 22, 2003.
10.46 Form of Subscription Agreement, dated as of November 9,
2004, between the Company and the Purchaser identified
therein. Incorporated by reference to Exhibit 10.1 to Form
S-3 filed on December 9, 2004.
8
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- ----------------------------------------------------------
10.47 Form of Secured Convertible Promissory Note, dated as of
November 9, 2004. Incorporated by reference to Exhibit
10.2 to Form S-3 filed on December 9, 2004.
10.48 Form of Common Stock Purchase Warrant, dated as of
November 9, 2004. Incorporated by reference to Exhibit
10.3 to Form S-3 filed on December 9, 2004.
10.49 Trademark Security Agreement, dated as of November 9,
2004, among the Registrant and the Secured Parties
identified on the signature page thereto. Incorporated by
reference to Exhibit 10.4 to Form S-3 filed on December 9,
2004.
10.50 Registration Rights Agreement, dated as of November 9,
2004, among the Registrant, Sanders Morris Harris Inc. and
the Purchasers identified therein. Incorporated by
reference to Exhibit 10.5 to Form S-3 filed on December 9,
2004.
10.51 Placement Agent Agreement, dated as of November 9, 2004,
between the Registrant and Sanders Morris Harris Inc.
Incorporated by reference to Exhibit 10.6 to Form S-3
filed on December 9, 2004.
10.52 Common Stock Purchase Warrant dated as of November 9,
2004, issued by the Registrant in favor of Sanders Morris
Harris Inc. Incorporated by reference to Exhibit 10.7 to
Form S-3 filed on December 9, 2004.
14.1 Code of Ethics. Incorporated by reference to Exhibit 14.1
to Form 10-K filed on March 30, 2004.
21.1 Subsidiaries. Incorporated by reference to Exhibit 14.1 to
Form 10-K filed on March 30, 2004.
23.1 Consent of BDO Seidman, LLP. (3)
24.1 Power of Attorney (included on signature page).
31.1 Certificate of Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities and Exchange Act of 1934,
as amended
31.2 Certificate of Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities and Exchange Act of 1934,
as amended
32.1 Certificate of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(b) under the Securities
and Exchange Act of 1934, as amended.
(1) Certain portions of this agreement have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for an
order granting confidential treatment pursuant to Rule 406 of the General
Rules and Regulations under the Securities Act of 1933, as amended.
(2) Indicates a management contract or compensatory plan.
(3) Previously filed on Form 10-K for the year ended December 31, 2004.
9