UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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 BOULEVARD, SUITE 270
WOODLAND HILLS, CALIFORNIA 91367
(Address of Principal Executive Offices)
NON-STATUTORY STOCK OPTION AGREEMENTS
(Full Title of the Plans)
LONNIE D. SCHNELL, CHIEF FINANCIAL OFFICER
21900 BURBANK BOULEVARD, SUITE 270
WOODLAND HILLS, CALIFORNIA 91367
(Name and Address of Agent for Service)
(818) 444-4100
(Telephone Number, Including Area Code, of Agent for Service)
Copies to:
JOHN MCILVERY, ESQ.
STUBBS ALDERTON & MARKILES, LLP
15260 VENTURA BOULEVARD, 20TH FLOOR
SHERMAN OAKS, CALIFORNIA 91403
CALCULATION OF REGISTRATION FEE
=============================== ================ ====================== ========================== ==================
Title of Each Class Proposed Maximum Proposed Maximum
of Securities Amount to be Offering Price Aggregate Offering Amount of
To Be Registered Registered (1) Per Share (2) Price (2) Registration Fee
------------------------------- ---------------- ---------------------- -------------------------- ------------------
Common Stock, par value 900,000 $0.37 $333,000 $35.63
$.001 per share............
------------------------------- ---------------- ---------------------- -------------------------- ------------------
Common Stock, par value
$.001 per share............ 325,000 $0.53 $172,250 $18.43
------------------------------- ---------------- ---------------------- -------------------------- ------------------
Common Stock, par value
$.001 per share............ 400,000 $0.59 $236,000 $25.25
------------------------------- ---------------- ---------------------- -------------------------- ------------------
Total 1,625,000 $741,250 $79.31
------------------------------- ---------------- ---------------------- -------------------------- ------------------
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), this registration statement also covers such
additional shares as may hereinafter be offered or issued to prevent
dilution resulting from stock splits, stock dividends or similar
transactions effected without the receipt of consideration.
(2) Determined in accordance with Rule 457(h) under the Securities Act
solely for the purpose of calculating the Registration Fee.
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EXPLANATORY NOTE
This registration statement on Form S-8 of Tag-It Pacific, Inc. has
been prepared in accordance with the requirements of Form S-8 under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
1,625,000 shares of our common stock, par value $0.001 per share, to be issued
pursuant to certain non-statutory stock options, as follows:
o 900,000 shares of Common Stock to be issued to Stephen Forte
pursuant to that certain Non-Statutory Stock Option dated as
of January 16, 2006 between us and Stephen Forte (the "Forte
Agreement");
o 400,000 shares of Common Stock to be issued to Lonnie D.
Schnell pursuant to that certain Non-Statutory Stock Option
dated as of January 26, 2006 between us and Lonnie D. Schnell
(the "Schnell Agreement"); and
o 325,000 shares of Common Stock to be issued to Wouter van
Biene pursuant to that certain Non-Statutory Stock Option
dated as of March 1, 2006 between us and Wouter van Biene (the
"van Biene Agreement").
The reoffer and resale of 1,625,000 shares of our common stock is being
registered pursuant to a reoffer prospectus prepared in accordance with the
requirements of Instruction C to Form S-8 and Part I of Form S-3. The reoffer
prospectus relates to the reoffer and resale of the shares to be issued to our
affiliates, Stephen P. Forte, Lonnie D. Schnell, and Wouter van Biene, pursuant
to the Forte Agreement, the Schnell Agreement and the van Biene Agreement,
respectively.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
Except for the reoffer prospectus included herein, the document(s)
containing the information specified in Part I will be sent or given to
participants as specified by Rule 428(b)(1). Such documents are not being filed
with the Securities and Exchange Commission either as part of this registration
statement or as prospectuses or prospectus supplements pursuant to Rule 424.
Such documents and the documents incorporated by reference in this registration
statement pursuant to Item 3 of Part II of this Form, taken together, constitute
a prospectus that meets the requirements of Section 10(a) of the Securities Act
of 1933, as amended.
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REOFFER PROSPECTUS
TAG-IT PACIFIC, INC.
1,625,000 SHARES OF COMMON STOCK
($0.001 par value)
----------
This reoffer prospectus covers the reoffer and resale by the selling
stockholders from time to time of up to 1,625,000 shares of our common stock
that we may issue in the future pursuant to certain non-statutory stock option
agreements, consisting of:
o up to 900,000 shares of our common stock that may be acquired
by Stephen Forte pursuant to that certain Non-Statutory Stock
Option Agreement dated as of January 16, 2006, between us and
Mr. Forte (the "Forte Agreement");
o up to 400,000 shares of our common stock that may be acquired
by Lonnie D. Schnell pursuant to that certain Non-Statutory
Stock Option Agreement dated as of January 26, 2006, between
us and Mr. Schnell (the "Schnell Agreement"); and
o up to 325,000 shares of our common stock that may be acquired
by Wouter van Biene pursuant to that certain Non-Statutory
Stock Option Agreement dated as of March 1, 2006, between us
and Mr. van Biene (the "van Biene Agreement").
Each of Mr. Forte, Mr. Schnell, and Mr. van Biene is an "affiliate" of
ours as such term is defined in Rule 405 under the Securities Act of 1933, and
the shares that may be acquired by each of Mr. Forte, Mr. Schnell, and Mr. van
Biene referenced above constitute "control securities" as such term is defined
in General Instruction C.1(a) of Form S-8 under the Securities Act.
The prices at which the selling stockholders may sell the shares in
this offering will be determined by the prevailing market price for the shares
or in negotiated transactions. We will not receive any of the proceeds from the
sale of the shares. We will bear all expenses of registration incurred in
connection with this offering. The selling stockholders whose shares are being
registered will bear all selling and other expenses.
Our common stock is traded on the American Stock Exchange under the
symbol "TAG." On May 30, 2006, the last reported sale price of the common stock
on the American Stock Exchange was $0.61 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 TO READ ABOUT THE RISKS YOU
SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
----------
The date of this prospectus is May 31, 2006.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY........................................................ 6
RISK FACTORS.............................................................. 7
FORWARD-LOOKING STATEMENTS................................................ 14
USE OF PROCEEDS........................................................... 14
SELLING STOCKHOLDERS...................................................... 14
PLAN OF DISTRIBUTION...................................................... 17
WHERE YOU CAN FIND MORE INFORMATION....................................... 20
LEGAL MATTERS............................................................. 20
EXPERTS................................................................... 20
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PROSPECTUS SUMMARY
ABOUT TAG-IT PACIFIC, INC.
Tag-It Pacific is an apparel company that specializes in the
distribution of a full range of apparel zippers and trim items to manufacturers
of fashion apparel, specialty retailers and mass merchandisers. We manufacture
and distribute zippers under our TALON brand name to manufacturers for apparel
brands and retailers such as Levi Strauss & Co., Wal-Mart and JC Penny, among
others. We act as a full service outsourced trim design, sourcing and management
department for manufacturers of fashion apparel such as Abercrombie & Fitch and
Kellwood. We also serve as a specified supplier of trim items to owners of
specific brands, brand licensees and retailers, including Levi Strauss & Co.,
Express, The Limited, Lerner, Mother's Work and Miller's Outpost, among others.
In our TEKFIT division, we develop and sell apparel components that utilize the
patented Pro-Fit technology, including a stretch waistband sold to Levi Strauss
& Co.
CORPORATE INFORMATION
We were incorporated in the State of Delaware in 1997. We were formed
to serve as the parent holding company of Tag-It, Inc., a California
corporation, Tag-It Printing & Packaging Ltd., which changed its name in 1999 to
Tag-It Pacific (HK) LTD, a BVI corporation, Tagit de Mexico, S.A. de C.V.,
A.G.S. Stationery, Inc., a California corporation, and Pacific Trim & Belt,
Inc., a California corporation. All of these companies were consolidated under a
parent limited liability company in October 1997. These companies became our
wholly owned subsidiaries immediately prior to the effective date of our initial
public offering in January 1998. In 2000, we formed two wholly owned
subsidiaries of Tag-It Pacific, Inc: Tag-It Pacific Limited, a Hong Kong
corporation, and Talon International, Inc., a Delaware corporation.
Our Web site is www.tagitpacific.com. our Web site address provided in
this prospectus is not intended to function as a hyperlink and the information
on our website is not and should not be considered part of this prospectus and
is not incorporated by reference in this document. Our executive offices are
located at 21900 Burbank Boulevard, Suite 270, Woodland Hills, CA 91367, and our
telephone number is (818) 444-4100.
ABOUT THE OFFERING
This prospectus may be used only in connection with the resale by the
selling stockholders of up to 1,625,000 shares of our common stock.
We will not receive any proceeds from the sale of the shares of common
stock offered by the selling stockholders using this prospectus.
The total number of securities registered under this registration
statement on Form S-8 of which this prospectus is a part is 1,625,000 shares of
our common stock. We are presently authorized to issue 30,000,000 shares of
common stock. As of April 10, 2006, there were 18,241,045 shares of our common
stock outstanding. The holders of common stock are entitled to one vote per
share on each matter submitted to a vote at any meeting of stockholders. Our
stockholders have no preemptive rights to acquire additional shares of common
stock or other securities. The common stock is not subject to redemption and
carries no subscription or conversion rights. In the event of our liquidation,
the shares of common stock are entitled to share equally in corporate assets
after satisfaction of all liabilities. The shares, when issued, will be fully
paid and nonassessable. A majority of all issued and outstanding shares shall
constitute a quorum for conducting business. The majority of shares present, in
any regular or special meeting where a quorum is present, may vote in favor of
or against any item of business or election, and shall constitute a
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majority approval or disapproval of matters voted upon at any such meeting.
Shares of common stock do not carry cumulative voting rights. We presently do
not pay any dividends and has no foreseeable plan to pay dividends.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING SHARES OF OUR COMMON
STOCK. INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IF ANY OF
THE FOLLOWING EVENTS OR OUTCOMES ACTUALLY OCCURS, OUR BUSINESS, OPERATING
RESULTS AND FINANCIAL CONDITION WOULD LIKELY SUFFER. AS A RESULT, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF THE
MONEY YOU PAID TO PURCHASE OUR COMMON STOCK.
OUR GROWTH AND OPERATING RESULTS COULD BE MATERIALLY, ADVERSELY
EFFECTED IF WE ARE UNSUCCESSFUL IN RESOLVING A DISPUTE THAT NOW EXISTS REGARDING
OUR RIGHTS UNDER OUR EXCLUSIVE LICENSE AND INTELLECTUAL PROPERTY AGREEMENT
("AGREEMENT") WITH PRO-FIT. Pursuant to our agreement with Pro-Fit Holdings,
Limited, we have exclusive rights in certain geographic areas to Pro-Fit's
stretch and rigid waistband technology. We are in litigation with Pro-Fit
regarding our rights. Please see Item 3, "Legal Proceedings" in our Annual
Report on Form 10-K for the year ended December 31, 2005 which is incorporated
herein by reference for a discussion of this litigation. We derive a significant
amount of revenues from the sale of products incorporating the stretch waistband
technology. Our business, results of operations and financial condition could be
materially adversely affected if we are unable to conclude our present
negotiations in a manner acceptable to us and ensuing litigation is not resolved
in a manner favorable to us. Additionally, we have incurred significant legal
fees in this litigation, and unless the case is settled, we will continue to
incur additional legal fees in increasing amounts as the case accelerates to
trial.
FAILURE TO MANAGE OUR CORPORATE RESTRUCTURING COULD IMPAIR OUR
BUSINESS. In an effort to better align our organizational and cost structures
with our future growth opportunities, in August 2005 our Board of Directors
adopted a restructuring plan for our company that we believe was substantially
completed by December 31, 2005. The plan included restructuring our global
operations by eliminating redundancies in our Hong Kong operation, closing our
Mexican facilities, converting our Guatemala facility from a manufacturing site
to a distribution center, and closing our North Carolina manufacturing facility.
We have also refocused our sales efforts on higher margin products, which may
result in lower net sales over the next twelve months.
While we expect that the restructuring will result in reduced operating
costs and improved operating results and cash flows, there can be no assurance
that these results will be achieved. We recorded restructuring costs during 2005
of $6.4 million. We face many challenges related to our decision to implement
this restructuring plan, including that we may not execute the restructuring
effectively, and our expectation that we will benefit from greater efficiencies
may not be realized. Any failure on our part to successfully manage these
challenges or other unanticipated consequences may result in the loss of
customers and sales, which could cause our results to differ materially from our
current expectations. The challenges we face include:
o Our ability to execute successfully through business cycles
while we continue to implement the restructuring plan and cost
reductions;
o Our ability to meet and achieve the benefits of our
cost-reduction goals and otherwise successfully adapt our cost
structures to continuing changes in business conditions;
o The risk that our cost-cutting initiatives will impair our
ability to develop products and remain competitive and to
operate effectively;
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o We may experience delays in implementing our restructuring
plan and incur additional costs;
o We may experience decreases in employee morale; and
o We may experience unanticipated expenses winding down
manufacturing operations, including labor costs, which may
adversely affect our results of operations in the short term.
WE MAY BE UNABLE TO CONTINUE AS A GOING CONCERN IF WE DO NOT
SUCCESSFULLY ACHIEVE CERTAIN OBJECTIVES. If we are unable to successfully fully
implement our restructuring initiative, or collect the note receivable, or
experience greater than anticipated reductions in sales, we may need to raise
additional capital or further reduce the scope of our business to fully satisfy
our future short-term liquidity requirements. If we cannot raise additional
capital, or reduce the scope of our business in response to our failure to
implement our restructuring initiative in accordance with our plan, or fail to
achieve other operating objectives, we may be otherwise unable to achieve our
goals or continue our operations. Our auditors have included in their report on
our financial statements for the year ending December 31, 2005 an explanatory
paragraph expressing substantial doubt about our ability to continue as a going
concern.
IF WE LOSE OUR LARGER CUSTOMERS OR THEY FAIL TO PURCHASE AT ANTICIPATED
LEVELS, OUR SALES AND OPERATING RESULTS WILL BE ADVERSELY AFFECTED. Our results
of operations will depend to a significant extent upon the commercial success of
our larger customers. If these customers fail to purchase our products at
anticipated levels, or our relationship with these customers terminates, it may
have an adverse affect on our results because:
o We will lose a primary source of revenue if these customers
choose not to purchase our products or services;
o We may not be able to reduce fixed costs incurred in
developing the relationship with these customers in a timely
manner;
o We may not be able to recoup setup and inventory costs;
o We may be left holding inventory that cannot be sold to other
customers; and
o We may not be able to collect our receivables from them.
CONCENTRATION OF RECEIVABLES FROM OUR LARGER CUSTOMERS MAKES RECEIVABLE
BASED FINANCING DIFFICULT AND INCREASES THE RISK THAT IF OUR LARGER CUSTOMERS
FAIL TO PAY US, OUR CASH FLOW COULD BE SEVERELY AFFECTED. Our business relies
heavily on a relatively small number of customers. This concentration of our
business reduces the amount we can borrow from our lenders under receivables
based financing agreements. If we are unable to collect any large receivables
due us, our cash flow would be severely impacted.
IF CUSTOMERS DEFAULT ON INVENTORY PURCHASE COMMITMENTS WITH US, WE WILL
BE LEFT HOLDING NON-SALABLE INVENTORY. We hold significant inventories for
specific customer programs, which the customers have committed to purchase. If
any customer defaults on these commitments, or insists on markdowns, we may
incur a charge in connection with our holding significant amounts of non-salable
inventory and this would have a negative impact on our operations and cash flow.
OUR REVENUES MAY BE HARMED IF GENERAL ECONOMIC CONDITIONS WORSEN. Our
revenues depend on the health of the economy and the growth of our customers and
potential future customers. When economic conditions weaken, certain apparel
manufacturers and retailers, including some of our customers may experience
financial difficulties that increase the risk of extending credit to such
customers. Customers adversely affected by economic conditions have also
attempted to improve their own operating efficiencies by concentrating their
purchasing power among a narrowing group of vendors. There can be no assurance
that we will remain a preferred vendor to our existing customers. A decrease in
business from or loss of a
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major customer could have a material adverse effect on our results of
operations. Further, if the economic conditions in the United States worsen or
if a wider or global economic slowdown occurs, we may experience a material
adverse impact on our business, operating results, and financial condition.
BECAUSE WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS, WE MAY NOT BE ABLE
TO ALWAYS OBTAIN MATERIALS WHEN WE NEED THEM AND WE MAY LOSE SALES AND
CUSTOMERS. Lead times for materials we order can vary significantly and depend
on many factors, including the specific supplier, the contract terms and the
demand for particular materials at a given time. From time to time, we may
experience fluctuations in the prices, and disruptions in the supply, of
materials. Shortages or disruptions in the supply of materials, or our inability
to procure materials from alternate sources at acceptable prices in a timely
manner, could lead us to miss deadlines for orders and lose sales and customers.
WE OPERATE IN AN INDUSTRY THAT IS SUBJECT TO SIGNIFICANT FLUCTUATIONS
IN OPERATING RESULTS THAT MAY RESULT IN UNEXPECTED REDUCTIONS IN REVENUE AND
STOCK PRICE VOLATILITY. We operate in an industry that is subject to significant
fluctuations in operating results from quarter to quarter, which may lead to
unexpected reductions in revenues and stock price volatility. Factors that may
influence our quarterly operating results include:
o The volume and timing of customer orders received during the
quarter;
o The timing and magnitude of customers' marketing campaigns;
o The loss or addition of a major customer;
o The availability and pricing of materials for our products;
o The increased expenses incurred in connection with the
introduction of new products;
o Currency fluctuations;
o Delays caused by third parties; and
o Changes in our product mix or in the relative contribution to
sales of our subsidiaries.
Due to these factors, it is possible that in some quarters our
operating results may be below our stockholders' expectations and those of
public market analysts. If this occurs, the price of our common stock could be
adversely affected. In the past, following periods of volatility in the market
price of a company's securities, securities class action litigation has often
been instituted against such a company. In October 2005, a securities class
action lawsuit was filed against us. See Item 3, "Legal Proceedings" for a
detailed description of this lawsuit.
THE OUTCOME OF LITIGATION IN WHICH WE HAVE BEEN NAMED, AS A DEFENDANT
IS UNPREDICTABLE AND AN ADVERSE DECISION IN ANY SUCH MATTER COULD HAVE A
MATERIAL ADVERSE AFFECT ON OUR FINANCIAL POSITION AND RESULTS OF OPERATIONS. We
are defendants in a number of litigation matters. These claims may divert
financial and management resources that would otherwise be used to benefit our
operations. Although we believe that we have meritorious defenses to the claims
made in each and all of the litigation matters to which we have been named a
party, and intend to contest each lawsuit vigorously, no assurances can be given
that the results of these matters will be favorable to us. An adverse resolution
of any of these lawsuits could have a material adverse affect on our financial
position and results of operations.
We maintain product liability and director and officer insurance that
we regard as reasonably adequate to protect us from potential claims; however we
cannot assure you that it will. Further, the costs of insurance have increased
dramatically in recent years, and the availability of coverage has decreased. As
a result, we cannot assure you that we will be able to maintain our current
levels of insurance at a reasonable cost, or at all.
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OUR CUSTOMERS HAVE CYCLICAL BUYING PATTERNS WHICH MAY CAUSE US TO HAVE
PERIODS OF LOW SALES VOLUME. Most of our customers are in the apparel industry.
The apparel industry historically has been subject to substantial cyclical
variations. Our business has experienced, and we expect our business to continue
to experience, significant cyclical fluctuations due, in part, to customer
buying patterns, which may result in periods of low sales usually in the first
and fourth quarters of our financial year.
OUR BUSINESS MODEL IS DEPENDENT ON INTEGRATION OF INFORMATION SYSTEMS
ON A GLOBAL BASIS AND, TO THE EXTENT THAT WE FAIL TO MAINTAIN AND SUPPORT OUR
INFORMATION SYSTEMS, IT CAN RESULT IN LOST REVENUES. We must consolidate and
centralize the management of our subsidiaries and significantly expand and
improve our financial and operating controls. Additionally, we must effectively
integrate the information systems of our Hong Kong facility with the information
systems of our principal offices in California. Our failure to do so could
result in lost revenues, delay financial reporting or adversely affect
availability of funds under our credit facilities.
THE LOSS OF KEY MANAGEMENT AND SALES PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS, INCLUDING OUR ABILITY TO OBTAIN AND SECURE ACCOUNTS AND GENERATE
SALES. Our success has and will continue to depend to a significant extent upon
key management and sales personnel, many of whom would be difficult to replace.
In connection with our restructuring, we significantly reduced the number of
employees within our company, which has increased our reliance on those
employees that have remained with the company. The loss of the services of key
employees could have a material adverse effect on our business, including our
ability to establish and maintain client relationships. Our future success will
depend in large part upon our ability to attract and retain personnel with a
variety of sales, operating and managerial skills.
IF WE EXPERIENCE DISRUPTIONS AT ANY OF OUR FOREIGN FACILITIES, WE WILL
NOT BE ABLE TO MEET OUR OBLIGATIONS AND MAY LOSE SALES AND CUSTOMERS. Currently,
we do not operate duplicate facilities in different geographic areas. Therefore,
in the event of a regional disruption where we maintain one or more of our
facilities, it is unlikely that we could shift our operations to a different
geographic region and we may have to cease or curtail our operations. This may
cause us to lose sales and customers. The types of disruptions that may occur
include:
o Foreign trade disruptions;
o Import restrictions;
o Labor disruptions;
o Embargoes;
o Government intervention;
o Natural disasters; or
o Regional pandemics.
INTERNET-BASED SYSTEMS THAT HOST OUR MANAGED TRIM SOLUTION MAY
EXPERIENCE DISRUPTIONS AND AS A RESULT WE MAY LOSE REVENUES AND CUSTOMERS. Our
MANAGED TRIM SOLUTION is an Internet-based business-to-business e-commerce
system. To the extent that we fail to adequately continue to update and maintain
the hardware and software implementing the system, our customers may experience
interruptions in service due to defects in our hardware or our source code. In
addition, since our software is Internet-based, interruptions in Internet
service generally can negatively impact our customers' ability to use the
MANAGED TRIM SOLUTION to monitor and manage various aspects of their trim needs.
Such defects or interruptions could result in lost revenues and lost customers.
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THERE ARE MANY COMPANIES THAT OFFER SOME OR ALL OF THE PRODUCTS AND
SERVICES WE SELL AND IF WE ARE UNABLE TO SUCCESSFULLY COMPETE OUR BUSINESS WILL
BE ADVERSELY AFFECTED. We compete in highly competitive and fragmented
industries with numerous local and regional companies that provide some or all
of the products and services we offer. We compete with national and
international design companies, distributors and manufacturers of tags,
packaging products, zippers and other trim items. Some of our competitors have
greater name recognition, longer operating histories and greater financial and
other resources than we do.
UNAUTHORIZED USE OF OUR PROPRIETARY TECHNOLOGY MAY INCREASE OUR
LITIGATION COSTS AND ADVERSELY AFFECT OUR SALES. We rely on trademark, trade
secret and copyright laws to protect our designs and other proprietary property
worldwide. We cannot be certain that these laws will be sufficient to protect
our property. In particular, the laws of some countries in which our products
are distributed or may be distributed in the future may not protect our products
and intellectual rights to the same extent as the laws of the United States. If
litigation is necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others, such litigation could result in substantial
costs and diversion of resources. This could have a material adverse effect on
our operating results and financial condition. Ultimately, we may be unable, for
financial or other reasons, to enforce our rights under intellectual property
laws, which could result in lost sales.
IF OUR PRODUCTS INFRINGE ANY OTHER PERSON'S PROPRIETARY RIGHTS, WE MAY
BE SUED AND HAVE TO PAY LEGAL EXPENSES AND JUDGMENTS AND REDESIGN OR DISCONTINUE
SELLING OUR PRODUCTS. From time to time in our industry, third parties allege
infringement of their proprietary rights. Any infringement claims, whether or
not meritorious, could result in costly litigation or require us to enter into
royalty or licensing agreements as a means of settlement. If we are found to
have infringed the proprietary rights of others, we could be required to pay
damages, cease sales of the infringing products and redesign the products or
discontinue their sale. Any of these outcomes, individually or collectively,
could have a material adverse effect on our operating results and financial
condition.
OUR STOCK PRICE MAY DECREASE, WHICH COULD ADVERSELY AFFECT OUR BUSINESS
AND CAUSE OUR STOCKHOLDERS TO SUFFER SIGNIFICANT LOSSES. The following factors
could cause the market price of our common stock to decrease, perhaps
substantially:
o The failure of our quarterly operating results to meet
expectations of investors or securities analysts;
o Adverse developments in the financial markets, the apparel
industry and the worldwide or regional economies;
o Interest rates;
o Changes in accounting principles;
o Intellectual property and legal matters;
o Sales of common stock by existing shareholders or holders of
options;
o Announcements of key developments by our competitors; and
o The reaction of markets and securities analysts to
announcements and developments involving our company.
IF WE NEED TO SELL OR ISSUE ADDITIONAL SHARES OF COMMON STOCK OR ASSUME
ADDITIONAL DEBT TO FINANCE FUTURE GROWTH, OUR STOCKHOLDERS' OWNERSHIP COULD BE
DILUTED OR OUR EARNINGS COULD BE ADVERSELY IMPACTED. Our business strategy may
include expansion through internal growth, by acquiring complementary businesses
or by establishing strategic relationships with targeted customers and
suppliers. In order to do so or to fund our other activities, we may issue
additional equity securities that could dilute our
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stockholders' value. We may also assume additional debt and incur impairment
losses to our intangible assets if we acquire another company.
IF WE ARE NOT ABLE TO REGAIN COMPLIANCE WITH LISTING REQUIREMENTS, OUR
SHARES MAY BE REMOVED FROM LISTING ON AMEX. We have been advised by AMEX that we
are non-compliant with certain listing requirements related to the number of
independent board members, and the number of members on our audit committee. The
AMEX has allowed the company until July 28, 2006 to regain compliance with these
matters. We have been advised by AMEX that we are also non-compliant with the
minimum net equity listing requirements and we must submit a plan acceptable to
AMEX by June 15, 2006 that provides for increases in our equity beyond the
minimum $4.0 million equity within a timeframe that is acceptable to AMEX. We
have suffered substantial recurring losses and may fail to comply with other
listing requirements of AMEX. We may not be able to regain compliance with these
matters within the time allowed by the exchange, and our shares of common stock
may be removed from the listing on AMEX.
WE MAY NOT BE ABLE TO REALIZE THE ANTICIPATED BENEFITS OF ACQUISITIONS.
We may consider strategic acquisitions as opportunities arise, subject to the
obtaining of any necessary financing. Acquisitions involve numerous risks,
including diversion of our management's attention away from our operating
activities. We cannot assure you that we will not encounter unanticipated
problems or liabilities relating to the integration of an acquired company's
operations, nor can we assure you that we will realize the anticipated benefits
of any future acquisitions.
OUR ACTUAL TAX LIABILITIES MAY DIFFER FROM ESTIMATED TAX RESULTING IN
UNFAVORABLE ADJUSTMENTS TO OUR FUTURE RESULTS. The amount of income taxes we pay
is subject to ongoing audits by federal, state and foreign tax authorities. Our
estimate of the potential outcome of uncertain tax issues is subject to our
assessment of relevant risks, facts, and circumstances existing at that time.
Our future results may include favorable or unfavorable adjustments to our
estimated tax liabilities in the period the assessments are made or resolved,
which may impact our effective tax rate and our financial results. Please see
Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the year ended
December 31, 2005 which is incorporated herein by reference for discussion of
certain tax claims.
WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE
PRICE OF OUR COMMON STOCK. Our stockholders' rights plan, our ability to issue
additional shares of preferred stock and some provisions of our certificate of
incorporation and bylaws and of Delaware law could make it more difficult for a
third party to make an unsolicited takeover attempt of us. These anti-takeover
measures may depress the price of our common stock by making it more difficult
for third parties to acquire us by offering to purchase shares of our stock at a
premium to its market price.
INSIDERS OWN A SIGNIFICANT PORTION OF OUR COMMON STOCK, WHICH COULD
LIMIT OUR STOCKHOLDERS' ABILITY TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS. As
of March 31, 2006, our officers and directors and their affiliates beneficially
owned approximately 10.5% of the outstanding shares of our common stock. The
Dyne family, which includes Mark Dyne, Colin Dyne, and Jonathan Burstein, who
are also our directors; Larry Dyne and the estate of Harold Dyne; beneficially
owned approximately 12.7% of the outstanding shares of our common stock at March
31, 2006. As a result, our officers and directors and the Dyne family are able
to exert considerable influence over the outcome of any matters submitted to a
vote of the holders of our common stock, including the election of our Board of
Directors. The voting power of these stockholders could also discourage others
from seeking to acquire control of us through the purchase of our common stock,
which might depress the price of our common stock.
WE MAY FACE INTERRUPTION OF PRODUCTION AND SERVICES DUE TO INCREASED
SECURITY MEASURES IN RESPONSE TO TERRORISM. Our business depends on the free
flow of products and services through the channels of commerce. In response to
terrorists' activities and threats aimed at the United States,
12
transportation, mail, financial and other services may be slowed or stopped
altogether. Extensive delays or stoppages in transportation, mail, financial or
other services could have a material adverse effect on our business, results of
operations and financial condition. Furthermore, we may experience an increase
in operating costs, such as costs for transportation, insurance and security as
a result of the activities and potential delays. We may also experience delays
in receiving payments from payers that have been affected by the terrorist
activities. The United States economy in general may be adversely affected by
the terrorist activities and any economic downturn could adversely impact our
results of operations, impair our ability to raise capital or otherwise
adversely affect our ability to grow our business.
13
FORWARD-LOOKING STATEMENTS
This reoffer prospectus contains statements that constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Exchange Act of 1934, both as amended. These
forward-looking statements are subject to various risks and uncertainties. The
forward-looking statements include, without limitation, statements regarding our
future business plans and strategies and our future financial position or
results of operations, as well as other statements that are not historical. You
can find many of these statements by looking for words like "will", "may",
"believes", "expects", "anticipates", "plans" and "estimates" and for similar
expressions. Because forward-looking statements involve risks and uncertainties,
there are many factors that could cause the actual results to differ materially
from those expressed or implied. These include, but are not limited to, economic
conditions. Any forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual results may differ
materially from those projected in this prospectus, for the reasons, among
others, described in the Risk Factors section beginning on page 8. You should
read the Risk Factors section carefully, and should not place undue reliance on
any forward-looking statements, which speak only as of the date of this
prospectus. We undertake no obligation to release publicly any updated
information about forward-looking statements to reflect events or circumstances
occurring after the date of this prospectus or to reflect the occurrence of
unanticipated events.
USE OF PROCEEDS
The proceeds from the sales of the selling stockholders' common stock
will belong to the selling stockholders. We will not receive any proceeds from
such sales.
SELLING STOCKHOLDERS
The shares to which this reoffer prospectus relates are being
registered for reoffer and resale by the selling stockholders, who acquired the
shares pursuant to the Agreements. The material relationships between us and the
selling shareholders are described below.
STEPHEN P. FORTE EXECUTIVE EMPLOYMENT AGREEMENT
On March 16, 2006, we entered into an Executive Employment Agreement
with Stephen P. Forte, pursuant to which Mr. Forte serves as our Chief Executive
Officer. This employment agreement has a term continuing though December 31,
2008, which may be extended to December 31, 2009. Pursuant to this agreement,
Mr. Forte will receive an annual base salary of $275,000 for 2006 and $325,000
for each subsequent year of the term and will be entitled to receive an annual
incentive bonus based upon our earnings before interest and taxes. In the event
that prior to the end of the term, Mr. Forte's employment is terminated by us
"without cause" (as defined in the agreement), by Mr. Forte for "good reason"
(as defined in the agreement) or due to Mr. Forte's death or disability, then
Mr. Forte or his estate will be entitled to receive, in addition to all accrued
salary, (i) severance payments equal to Mr. Forte's base salary for the
remaining term of the agreement or, in the case of death or disability, through
December 31, 2008, (ii) a pro rated portion of the annual incentive bonus for
the year in which the termination occurred, (iii) full acceleration of vesting
of the options issued to Mr. Forte pursuant to the agreement and (iv) continued
healthcare coverage for Mr. Forte and his dependents for the remaining term of
the agreement. In connection with the employment agreement and as an inducement
to employment, we granted Mr. Forte an option to purchase 900,000 shares of our
common stock pursuant to the Forte Agreement. This option vests and becomes
exercisable with respect to 300,000 shares on October 24, 2006 and with respect
the remaining shares in 24 equal monthly installments thereafter until fully
vested. In addition, in lieu of $50,000 in cash compensation, we granted Mr.
Forte 135,135 shares of common stock and an option to
14
purchase 135,135 shares of common stock that vests in full on October 24, 2006.
All of these options will vest in full upon a change of control of our company
or upon termination of Mr. Forte's employment without cause, for good reason or
due to his death or disability.
In June 2005, we entered into a consulting agreement with Forte Group,
LLC, a consulting company of which Mr. Forte is an owner and executive officer,
pursuant to which Mr. Forte provided business development services to us. During
2005, we paid approximately $120,666 in consulting fees to the Forte Group
pursuant to the consulting agreement prior to Mr. Forte's appointment as our
Chief Executive Officer in October 2005.
Other than the transactions described above, we had no material
relationship with Mr. Forte during the three years preceding the date of this
prospectus.
LONNIE D. SCHNELL EMPLOYMENT AGREEMENT
On March 16, 2006, we entered into an employment offer letter with
Lonnie D. Schnell, pursuant to which Mr. Schnell serves as our Chief Financial
Officer on an "at-will" basis. Pursuant to this offer letter, Mr. Schnell will
receive an annual base salary of $185,000 and will be eligible to receive an
annual incentive bonus based upon our earnings before interest and taxes. In the
event that Mr. Schnell's employment is terminated by us without "cause" (as
defined in the agreement) or due to Mr. Schnell's death or disability, then Mr.
Schnell or his estate will be entitled to receive as severance, in addition to
all accrued salary, (i) salary continuation and continuation of coverage under
our group health plan for a period of six months and (ii) six months
acceleration of vesting of all outstanding options. In connection with the offer
letter and as an inducement to employment, we granted Mr. Schnell an option to
purchase 400,000 shares of our common stock pursuant to the Schnell Agreement.
The option vests and becomes exercisable with respect to 100,000 shares on the
first anniversary of the grant date and with respect to the remaining shares in
36 equal monthly installments thereafter until fully vested. Upon a change of
control of our company, 50% of Mr. Schnell's then-outstanding unvested stock
options shall vest and the remaining unvested options shall vest in full if Mr.
Schnell is terminated, his position or base pay is reduced or he is required to
relocate within six months before or twelve months following the change of
control.
Other than the transactions and relationships described above, we had
no material relationship with Mr. Schnell during the three years preceding the
date of this prospectus.
WOUTER VAN BIENE EMPLOYMENT AGREEMENT
On March 16, 2006, we entered into an employment offer letter with
Wouter van Biene, pursuant to which Mr. van Biene serves as our Chief Operating
Officer on an "at-will" basis. Pursuant to this offer letter, Mr. van Biene will
receive an annual base salary of $225,000 and will be eligible to receive an
annual incentive bonus based upon our earnings before interest and taxes. In the
event that Mr. van Biene's employment is terminated by us without "cause" (as
defined in the agreement) or due to Mr. van Biene's death or disability, then
Mr. van Biene or his estate will be entitled to receive as severance, in
addition to all accrued salary, (i) salary continuation and continuation of
coverage under our group health plan for a period of six months if the
termination occurs during the first year of employment, a period of twelve
months if the termination occurs during the second year of employment or a
period of eighteen months if the termination occurs after the second year of
employment, and (ii) twelve months acceleration of vesting of all outstanding
options. In connection with the offer letter and as an inducement to employment,
we previously granted Mr. van Biene an option to purchase 325,000 shares of our
common stock pursuant to the van Biene Agreement. This option vests and becomes
exercisable with respect to 108,333 shares on the first anniversary of the grant
date and with respect to the remaining shares in 24
15
equal monthly installments thereafter until fully vested. Upon a change of
control of our company, 50% of Mr. van Biene's then-outstanding unvested stock
options shall vest and the remaining unvested options shall vest in full if Mr.
van Biene is terminated, his position or base pay is reduced or he is required
to relocate within twelve months following the change of control.
Other than the transaction described above, we had no material
relationship with Mr. van Biene during the three years preceding the date of
this prospectus.
SELLING STOCKHOLDER TABLE
Up to 1,625,000 shares of our common stock that we may issue in the
future pursuant to the terms of the Schnell Agreement, the Forte Agreement and
the van Biene Agreement are being registered under the registration statement of
which this prospectus is a part. Each of Mr. Schnell, Mr. Forte, and Mr. van
Biene are an "affiliate" of ours (as such term is defined in Rule 405 under the
Securities Act).
The inclusion of the shares of common stock in the table below does not
constitute a commitment to sell any shares.
The selling stockholders may in the future receive shares of our common
stock upon exercise of the non-statutory stock option agreements. The selling
stockholders may from time to time resell all, a portion, or none of the shares
of our common stock covered by this prospectus. The following table sets forth
information as of May 24, 2006 with respect to the beneficial ownership of our
common stock by each selling stockholder whose identity is known as of the date
of this prospectus and the number of shares of our common stock held by such
selling stockholders as of the date of this prospectus that are covered by this
prospectus. The address for each executive officer, director, and employee
listed below is c/o Tag-It Pacific, Inc., 21900 Burbank Boulevard, Suite 270,
Woodland Hills, California 91367.
The following table sets forth: (1) the name of each selling
stockholder; (2) the number of shares of our common stock beneficially owned by
such selling stockholder prior to this offering; (3) the number of shares of our
common stock offered by such selling stockholder pursuant to this prospectus;
and (4) the number of shares, and (if one percent or more) the percentage of the
total of the outstanding shares, of our common stock to be beneficially owned by
such selling stockholder after this offering, assuming that all of the shares of
our common stock beneficially owned by such selling stockholder and offered
pursuant to this reoffer prospectus are sold and that the selling stockholder
acquires no additional shares of our common stock prior to the completion of
this offering. Such data is based upon information provided by the selling
stockholder.
PERCENTAGE OF
COMMON STOCK COMMON STOCK COMMON STOCK
COMMON STOCK BEING OFFERED OWNED UPON OWNED UPON
OWNED PRIOR TO PURSUANT TO THIS COMPLETION OF COMPLETION OF
NAME THE OFFERING PROSPECTUS THIS OFFERING THIS OFFERING
--------------------------------------------------------------------------------------------
Stephen Forte (1) 1,070,652 900,000 170,652 *
Lonnie D. Schnell (2) 400,000 400,000 0 *
Wouter van Biene (3) 326,000 325,000 1,000 *
* Less than 1%
16
(1) Includes 900,000 shares of our common stock that we may issue in the
future under the Forte Agreement to Mr. Forte, who is our "affiliate"
(as such term is defined in Rule 405 under the Securities Act ).
(2) Consists of 400,000 shares of our common stock that we may issue in the
future under the Schnell Agreement to Mr. Schnell, who is our
"affiliate" (as such term is defined in Rule 405 under the Securities
Act ).
(3) Includes 325,000 shares of our common stock that we may issue in the
future under the van Biene Agreement to Mr. van Biene, who is our
"affiliate" (as such term is defined in Rule 405 under the Securities
Act ).
PLAN OF DISTRIBUTION
The shares of our common stock offered pursuant to this prospectus may
be offered and sold from time to time by the selling stockholders listed in the
preceding section, or their donees, transferees, pledgees or other successors in
interest that receive such shares as a gift or other non-sale related transfer.
The selling stockholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale.
The selling stockholders and any of their respective pledgees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholder may use any one or more of
the following methods when selling shares:
o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o Purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o An exchange distribution in accordance with the rules of the
applicable exchange;
o Privately negotiated transactions;
o Settlement of short sales;
o Broker-dealers may agree with the selling stockholder to sell
a specified number of such shares at a stipulated price per
share;
o A combination of any such methods of sale; and
o Any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for
other broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholder (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholder does not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
17
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as a selling stockholder under this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933. The selling
stockholders have informed us that they do not have any agreement or
understanding, directly or indirectly, with any person to distribute the common
stock.
We will pay all fees and expenses incident to the registration of the
shares.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. We incorporate by reference the documents listed
below and any additional documents filed by us with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of
securities is terminated. The information we incorporate by reference is an
important part of this prospectus, and any information that we file later with
the SEC will automatically update and supersede this information.
The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the year ended December 31,
2005 (File No. 001-13669);
2. Our Amendment No. 1 to Annual Report on Form 10-K/A for the
year ended December 31, 2005 (File No. 001-13669);
3. Our Quarterly Report on Form 10-Q, filed May 22, 2006 (File
No. 001-13669);
4. Our Current Report on Form 8-K, filed January 31, 2006 (File
No. 001-13669);
5. Our Current Report on Form 8-K, filed March 7, 2006 (File No.
001-13669);
6. Our Current Report on Form 8-K, filed March 22, 2006 (File No.
001-13669);
7. Our Current Report on Form 8-K, filed March 29, 2006 (File No.
001-13669);
8. Our Current Report on Form 8-K, filed April 3, 2006 (File No.
001-13669);
9. Our Current Report on Form 8-K, filed April 19, 2006 (File No.
001-13669);
10. Our Current Report on Form 8-K, filed May 19, 2006 (File No.
001-13669);
11. Our Current Report on Form 8-K, filed May 24, 2006 (File No.
001-13669);
18
12. The description of our capital stock contained in our
Registration Statement on Form 8-A (File No. 001-13669); and
13. All other reports filed by us pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this reoffer prospectus and prior to
the filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference and to be a part hereof
from the date of filing of such documents.
You may request a copy of these filings, as well as a copy of the
documents required to be delivered to employees pursuant to Rule 428(b), at no
cost, by writing or calling us at Tag-It Pacific, Inc., 21900 Burbank Boulevard,
Suite 270 Woodland Hills, California 91367, (818) 444-4100, Attention:
Secretary.
You should rely only on the information contained in this reoffer
prospectus or any supplement and in the documents incorporated by reference
above. We have not authorized anyone else to provide you with different
information. You should not assume that the information in this prospectus or
any supplement or in the documents incorporated by reference is accurate on any
date other than the date on the front of those documents.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law authorizes a court
to award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the 1933 Act. Our Bylaws
provide that we shall indemnify our director and officers to the fullest extent
not prohibited by the Delaware General Corporation Law, subject to limited
exceptions. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
19
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-8 with the SEC with
respect to the common stock offered by this reoffer prospectus. This reoffer
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement or the
exhibits and schedules that are part of the registration statement. You may read
and copy any document we file at the SEC's public reference room at 100 Fifth
Street, N.W., Washington, D.C. 20549. We refer you to the registration statement
and the exhibits and schedules thereto for further information with respect to
us and our common stock. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our SEC filings are also available to
the public from the SEC's website at www.sec.gov.
We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934 and, in accordance with those
requirements, will continue to file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the SEC's website referred to above.
LEGAL MATTERS
Stubbs Alderton & Markiles, LLP, Sherman Oaks, California, has rendered
to Tag-It Pacific, Inc. a legal opinion as to the validity and due issuance of
the shares of our common stock covered by this prospectus.
EXPERTS
The consolidated financial statements at December 31, 2005 and for the
fiscal year then ended incorporated in this reoffer prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 2005 have been so
incorporated in reliance on the report of Singer Lewak Greenbaum & Goldstein LLP
(our current independent registered accounting firm), given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements at December 31, 2003 and 2004 and
for the fiscal years then ended incorporated in this reoffer prospectus by
reference to the Annual Report on Form 10-K for the year ended December 31, 2005
have been so incorporated in reliance on the report of BDO Seidman, LLP (our
former independent registered accounting firm), given on the authority of said
firm as experts in auditing and accounting.
20
PART II
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents previously filed by us with the Securities and
Exchange Commission are incorporated in this registration statement by
reference:
1. Our Annual Report on Form 10-K for the year ended December 31,
2005 (File No. 001-13669);
2. Our Amendment No. 1 to Annual Report on Form 10-K/A for the
year ended December 31, 2005 (File No. 001-13669);
3. Our Quarterly Report on Form 10-Q, filed May 22, 2006 (File
No. 001-13669);
4. Our Current Report on Form 8-K, filed January 31, 2006 (File
No. 001-13669);
5. Our Current Report on Form 8-K, filed March 7, 2006 (File No.
001-13669);
6. Our Current Report on Form 8-K, filed March 22, 2006 (File No.
001-13669);
7. Our Current Report on Form 8-K, filed March 29, 2006 (File No.
001-13669);
8. Our Current Report on Form 8-K, filed April 3, 2006 (File No.
001-13669);
9. Our Current Report on Form 8-K, filed April 19, 2006 (File No.
001-13669);
10. Our Current Report on Form 8-K, filed May 19, 2006 (File No.
001-13669);
11. Our Current Report on Form 8-K, filed May 24, 2006 (File No.
001-13669);
12. The description of our capital stock contained in our
Registration Statement on Form 8-A (File No. 001-13669); and
13. All other reports filed by us pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended,
subsequent to the date of this reoffer prospectus and prior to
the filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference and to be a part hereof
from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
The securities to be offered are registered under Section 12 of the
Exchange Act of 1934.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
21
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Certificate of Incorporation and Bylaws provide for the
indemnification by us of each of our directors, officers and employees to the
fullest extent permitted by the Delaware General Corporation Law, as the same
exists or may hereafter be amended. Section 145 of the Delaware General
Corporation Law provides in relevant part that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Our Certificate of Incorporation provides that a director of our
company shall not be liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director. Section 102(o)(7) of the Delaware
General Corporation Law provides that a provision so limiting the personal
liability of a director shall not eliminate or limit the liability of a director
for, among other things: breach of the duty of loyalty; acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law; unlawful payment of dividends; and transactions from which the director
derived an improper personal benefit.
We have entered into separate but identical indemnity agreements with
certain of our directors and certain of our officers (the "Indemnitees").
Pursuant to the terms and conditions of the indemnity agreements, we agreed to
indemnify each Indemnitee against any amounts which he or she becomes legally
obligated to pay in connection with any claim against him or her based upon any
action or inaction which he or she may commit, omit or suffer while acting in
his or her capacity as a director and/or officer of our company or our
subsidiaries, provided, however, that Indemnitee acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the company and, with respect to any criminal action, had no
reasonable cause to believe Indemnitee's conduct was unlawful.
22
ITEM 7. EXEMPTION FROM REGISTRATION.
The restricted securities that are to be reoffered or resold pursuant
to this registration statement were issued or may be issued in the future
pursuant to the non-statutory stock option agreements described in this
registration statement in transactions exempt from registration pursuant to
Section 4(2) under the Securities Act of 1933.
ITEM 8. EXHIBITS.
The following exhibits are filed as part of this registration
statement:
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
5.1 Opinion of Stubbs Alderton & Markiles, LLP.
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP
23.2 Consent of BDO Seidman, LLP
23.3 Consent of Stubbs Alderton & Markiles, LLP (included in Exhibit
5.1)
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement
to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement.
(2) That for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) the undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Los Angeles, State of California, on this 31st
day of May, 2006.
TAG-IT PACIFIC, INC.
(Registrant)
By: /s/ Stephen P. Forte
-----------------------------
Stephen P. Forte
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Stephen P. Forte Chief Executive Officer May 31, 2006
----------------------- (Principal Executive Officer),
Stephen P. Forte Director
/s/ Lonnie D. Schnell Chief Financial Officer May 31, 2006
----------------------- (Principal Accounting and
Lonnie D. Schnell Financial Officer)
/s/ Mark Dyne Chairman of the Board of May 31, 2006
----------------------- Directors
Mark Dyne
/s/ Colin Dyne Director May 31, 2006
-----------------------
Colin Dyne
Director
-----------------------
Kevin Bermeister
/s/ Jonathan Burstein Director, Vice President May 31, 2006
----------------------- of Operations and Secretary
Jonathan Burstein
/s/ Brent Cohen Director May 31, 2006
-----------------------
Brent Cohen
/s/ Joseph Miller Director May 31, 2006
-----------------------
Joseph Miller
/s/ Susan White Director May 31, 2006
-----------------------
Susan White
/s/ Raymond Musci Director May 31, 2006
-----------------------
Raymond Musci
24
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
5.1 Opinion of Stubbs Alderton & Markiles, LLP.
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP
23.2 Consent of BDO Seidman, LLP
23.3 Consent of Stubbs Alderton & Markiles, LLP (included in Exhibit
5.1)
25