-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EFXFvvwaFijFD/nXaaPJedbRt8ws6xSHmZHYsUN9uZonYHhGX7wdfGR+rEhNgVkm oG1ZXNe01IUkfDqK69h9sA== 0001170918-06-000392.txt : 20060428 0001170918-06-000392.hdr.sgml : 20060428 20060428152355 ACCESSION NUMBER: 0001170918-06-000392 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060428 DATE AS OF CHANGE: 20060428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAG IT PACIFIC INC CENTRAL INDEX KEY: 0001047881 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-APPAREL, PIECE GOODS & NOTIONS [5130] IRS NUMBER: 954654481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13669 FILM NUMBER: 06789647 BUSINESS ADDRESS: STREET 1: 21900 BURBANK BLVD. STREET 2: SUITE 270 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 8184444100 MAIL ADDRESS: STREET 1: 21900 BURBANK BLVD. STREET 2: SUITE 270 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 10-K/A 1 fm10ka1-2005.txt ================================================================================ 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, 2005 [_] 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: TITLE OF EACH CLASS NAME OF EACH EXCHANGE 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [_] No [X] Indicate by check mark if the registration is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [_] No [X] Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Large accelerated filer [_] Accelerated filer [_] Non-accelerated filer [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [_] No [X] At June 30, 2005 the aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was $42,684,045. At March 31, 2006 the issuer had 18,376,180 shares of Common Stock, $.001 par value, issued and outstanding. DOCUMENTS INCORPORATED BY REFERENCE None ================================================================================ EXPLANATORY NOTE This Amendment No. 1 to Form 10-K on Form 10-K/A (this "Amendment") amends Tag-It Pacific, Inc.'s (the "Company") Annual Report on Form 10-K for the fiscal year ended December 31, 2005, originally filed on April 17, 2006 (the "Original Filing"). The Company is filing this Amendment to include the information required by Part III and not included in the Original Filing as the Company will not file its definitive proxy statement within 120 days of the end of the Company's fiscal year ended December 31, 2005. Except as described above, no other changes have been made to the Original Filing. This Amendment continues to speak as of the date of the Original Filing, and the Company has not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing. In this Amendment, unless the context indicates otherwise, the terms "Company," "we," "us," and "our" refer to Tag-It Pacific, Inc., and its subsidiaries. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the name, age and position of each of our executive officers and directors as of April 22, 2006. NAME AGE POSITION - ---- --- -------- Stephen P. Forte........... 38 Chief Executive Officer and Director Mark Dyne (1)............. 45 Chairman of the Board of Directors Colin Dyne (1)............. 43 Vice Chairman of the Board of Directors Jonathan Burstein (2)...... 39 Executive Vice President of Operations, Secretary and Director Kevin Bermeister........... 45 Director Susan White................ 56 Director Raymond Musci ............. 45 Director Joseph Miller.............. 42 Director Brent Cohen................ 47 Director Lonnie D. Schnell.......... 57 Chief Financial Officer Wouter van Biene........... 56 Chief Operating Officer - ---------- (1) Colin Dyne and Mark Dyne are brothers. (2) Jonathan Burstein is Colin Dyne's and Mark Dyne's brother-in-law. CLASS III DIRECTORS: TERMS EXPIRING IN 2006 MARK DYNE Mr. Dyne has served as Chairman of the Board of Directors since 1997. Mr. Dyne currently serves as the Chief Executive Officer and the Managing Partner of Europlay Capital Advisors, LLC, a merchant banking and advisory firm. Mr. Dyne previously served as Chairman and Chief Executive Officer of Sega Gaming Technology Inc. (USA), a gaming company, and Chairman and Chief Executive Officer of Virgin Interactive Entertainment Ltd., a distributor of computer software programs and video games based in London, England. Mr. Dyne was a founder and director of Packard Bell NEC Australia Pty. Ltd., a manufacturer and distributor of personal computers through the Australian mass merchant channel, and he was a founder and former director of Sega Ozisoft Pty Ltd., a leading distributor of entertainment software in both Australia and New Zealand. MEMBER: GOVERNANCE COMMITTEE 1 COLIN DYNE Currently, Mr. Dyne serves as Vice Chairman of the Board of Directors. Mr. Dyne founded Tag-It, Inc., one of our subsidiaries, in 1991 with his father, Harold Dyne. Mr. Dyne served as our President from inception and as our Chief Executive Officer from 1997 to 2005. Before founding Tag-It, Inc. in 1991, Mr. Dyne worked in numerous positions within the stationery products industry, including owning and operating retail stationery businesses and servicing the larger commercial products industry through contract stationery and printing operations. RAYMOND MUSCI Ray Musci has served as a Director of the Company since June 2005. From October 1999, Mr. Musci has served as the President and Chief Executive Officer and a director of BAM! Entertainment, Inc., a publicly traded company that develops, publishes and distributes entertainment software products and video games. Mr. Musci currently serves as a director of Brilliant Digital Entertainment, Inc., a publicly traded corporation (OTCBB: BDEI). From May 1990 to July 1999, Mr. Musci served as the President, Chief Executive Officer and as a director of Infogrames Entertainment, Inc. (formerly Ocean of America, Inc.), a company that develops, publishes and distributes software products. Mr. Musci also previously served as a director of Ocean International, Ltd., the holding company of Ocean of America, Inc. and Ocean Software, Ltd., and as Executive Vice President/General Manager of Data East USA, Inc., a subsidiary of Data East Corp., a Japanese company. MEMBER: AUDIT COMMITTEE CLASS I DIRECTORS: TERMS EXPIRING IN 2007 JOSEPH MILLER Mr. Miller has served on the Board of Directors since June 2005. Since 2003, he has been a Managing Director of Europlay Capital Advisors, LLC, a merchant banking and advisory firm. From 1998 to 2003, Mr. Miller was a Senior Vice President at Houlihan Lokey Howard & Zukin, a leading middle-market investment bank.. From 1994 to 1998, Mr. Miller served as the Vice President, Corporate Development for Alliance Communications Corporation, Canada's leading independent producer and distributor of filmed entertainment. Mr. Miller has bachelor's degree in Economics and Business from the University of California, Los Angeles MEMBER: AUDIT COMMITTEE 2 BRENT COHEN Mr. Cohen has served on the Board of Directors since 1998. Mr. Cohen has served as Chief Executive Officer and a director of Dovebid Inc. since August 2005. Mr. Cohen served as President and was a member of the Board of Directors of First Advantage Corporation (formed by the merger of US Search and First American Financial screening companies) in June 2003. Mr. Cohen served as Chairman of the Board, President and Chief Executive Officer of US Search from February 2000 until June 2003. From July 1987 through October 1998, Mr. Cohen held senior management positions with Packard Bell NEC (formerly Packard Bell Electronics), including Chief Operating Officer, Chief Financial Officer and President--Consumer and International. Subsequently, Mr. Cohen served on the board of advisors and directors of several companies from October 1998 through January 2000. From January 1980 through December 1982 and from January 1985 through June 1987 Mr. Cohen held various management positions in both the management consulting and auditing practice of Arthur Young & Company (now Ernst & Young). Mr. Cohen holds a Bachelor of Commerce degree, a Graduate Diploma in Accounting and an MBA from the University of Cape Town in South Africa. He is also a chartered accountant. MEMBER: COMPENSATION, NOMINATING AND GOVERNANCE COMMITTEES KEVIN BERMEISTER Mr. Bermeister has served on our Board of Directors since 1999. He has been a director of Brilliant Digital Entertainment, Inc. (OTCBB: BDEI) since August 1996 and has served as its President since October 1996 and as its Chief Executive Officer since the beginning of 2001. Mr. Bermeister is a director of Sega Ozisoft Pty. Ltd. and previously served as its Co-Chief Executive Officer. Mr. Bermeister is a founder of Sega Ozisoft which commenced business in 1982. Mr. Bermeister also is a director of Packard Bell NEC Australia Pty. Ltd. and Jacfun Pty. Ltd. Jacfun owns the Darling Harbour property occupied by the Sega World indoor theme park in Sydney, Australia. Mr. Bermeister has served on numerous advisory boards, including Virgin Interactive Entertainment Ltd. MEMBER: COMPENSATION AND NOMINATING COMMITTEES CLASS II DIRECTORS: TERMS EXPIRING IN 2008 STEPHEN P. FORTE Mr. Forte has served as our Chief Executive Officer since October 2005. Prior to joining us Mr. Forte served as a principal at the Forte Group, LLC, a business development consulting company founded by Mr. Forte in February of 2005, which focuses on assisting U.S. companies expand business overseas and foreign corporations expand their business in the U.S. Prior to founding the Forte Group, Mr. Forte served as President of Ascendent Telecommunications, Inc., a premier voice mobility company, which he founded in 1999. Before launching Ascendent, Mr. Forte founded Travelers Telecom (aka Wilshire Cellular) in 1993, a leading cellular rental provider and wireless carrier for short term users and government. Mr. Forte earned a bachelor's degree from the University of Southern California and an MBA from George Washington University. He currently serves on the Board for the School of Business at The George Washington University, and serves as a mentor at the Marshall School of Business, at the University of Southern California. 3 SUSAN WHITE Ms. White has served on the Board of Directors since June 2005. Ms. White has served as Chief Executive Officer and President of Brand Identity Solutions, LLC, a branding, marketing and licensing consulting company, since 1984. Ms. White has also served as Chief Executive Officer and President of Whitespeed, LLC, an Internet design, branding and marketing company, since 2000. Ms. White also previously served as Director of Marketing and Advertising Worldwide for Warnaco from November 1997 through August 1999. Ms. White received a BA from Bay State College. JONATHAN BURSTEIN Mr. Burstein has served as our Vice President of Operations since 1999 and has served on our Board of Directors since 1999. During this period, Mr. Burstein has been responsible for many of the internal operations of the Company, including logistics, purchasing and managing key customer relationships. From 1987 until 1999, Mr. Burstein has been responsible for managing many of our largest customer accounts. Mr. Burstein has served as our Secretary beginning November 2004. OTHER EXECUTIVE OFFICERS LONNIE D. SCHNELL Mr. Schnell joined the Company in January 2006 as our Chief Financial Officer. Mr. Schnell served as Vice President of Finance for Capstone Turbine Corporation, a manufacturer of micro-turbine electric generators from 2004 until 2005. From 2002 to 2004 Mr. Schnell served as Chief Financial Officer of EMSource, LLC, an electronic manufacturing service company. Prior to EMSource, in 2002, Mr. Schnell served as Chief Financial Officer of Vintage Capital Group, a private equity investment firm. From 1999 through 2002, Mr. Schnell served as Chief Financial Officer of Need2Buy, Inc. a business-to-business internet marketplace for electronic components. Mr. Schnell has completed an executive MBA program with the Stanford University Executive Institute, and earned his Bachelor of Science in Accounting at Christian Brothers University. Mr. Schnell is a Certified Public Accountant with experience in the international accounting firm of Ernst & Young LLP. WOUTER VAN BIENE Mr. van Biene joined the Company in March 2006 as our Chief Operating Officer. Prior to joining us, Mr. van Biene served as Senior Vice President - Operations for Ascendent Telecommunications Inc., a provider of mobile telecommunications solutions, from 2002 through February 2006. Prior to joining Ascendent, Mr. van Biene served from 2001 to 2002 as CFO of AbraComm Inc., a private, high tech start up company in the telecommunications arena, and from 2000 to 2001 as Vice President of Operations of CentreCom, another high tech telecommunications firm. Earlier in his career, Mr. van Biene served as CIO of UStel, Inc, a regional Long Distance Carrier and as Founder/CFO of Consortium 2000, Inc. a telecommunications marketing organization. Prior to that, Mr. van Biene held several executive positions over a fourteen-year time span at American Medical International, Inc. Mr. van Biene holds a Masters degree in Economics and Business Administration from the University of Amsterdam in the Netherlands. 4 AUDIT COMMITTEE; AUDIT COMMITTEE FINANCIAL EXPERT We currently have a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The role and responsibilities of the audit committee are set forth in a written charter adopted by the Board and approved by the committee. The audit committee approves the engagement of the independent registered public accounting firm, reviews the scope of the audit to be conducted by the independent registered public accounting firm and meets quarterly with the independent registered public accounting firm and our Chief Financial Officer to review matters relating to our financial statements, our accounting principles and our system of internal accounting controls. The audit committee reports its recommendations as to the approval of our financial statements to the Board of Directors. All audit committee members are independent directors as defined in the listing standards of the American Stock Exchange ("AMEX"). The Audit Committee currently consists of Messrs. Musci and Miller. Messrs. Musci and Miller both meet the AMEX financial knowledge requirements, and the Board of Directors has further determined that Mr. Musci (i) is an "audit committee financial experts" as such term is defined in Item 401(h) of Regulation S-K promulgated by the SEC and (ii) meets the AMEX professional experience requirements. We are currently not in compliance with the AMEX listing requirement that we maintain an audit committee of at least three independent board members. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors, and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Executive officers, directors and greater-than-ten percent stockholders are required by Securities and Exchange Commission regulations to furnish the Company with all Section 16(a) forms they file. Based solely on its review of the copies of the forms received by it and written representations from certain reporting persons that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2005, all of the Company's executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing requirements. CODE OF ETHICS. We have adopted a Code of Ethical Conduct that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as to our other employees and directors generally. A copy of our Code of Ethical Conduct was filed as an exhibit to our Annual Report on Form 10-K. 5 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE. The following table sets forth, as to the Chief Executive Officer, and as to each of the other most highly compensated officers whose compensation exceeded $100,000 during the last fiscal year (the "Named Executive Officers"), information concerning all compensation paid for services to the Company in all capacities for each of the three years ended December 31 indicated below.
LONG-TERM COMPENSATION ------------ ANNUAL NUMBER OF FISCAL YEAR COMPENSATION SECURITIES NAME AND ENDED --------------------- UNDERLYING PRINCIPAL POSITION DECEMBER 31 SALARY ($) OTHER ($) OPTIONS - ----------------------------------------- ----------- --------- --------- ------------ Stephen P. Forte (2).................... 2005 38,250 (1) -- Chief Executive Officer August DeLuca (3)....................... 2005 166,385 (1) 35,000 Former Chief Financial Officer Colin Dyne (4).......................... 2005 556,309 73,097(5) -- Vice Chairman of Board of Directors 2004 450,594 (1) -- (former Chief Executive Officer) 2003 452,397 (1) 100,000 Jonathan Burstein....................... 2005 239,950 (1) -- Executive Vice President of 2004 244,950 (1) -- Operations and Director 2003 246,079 (1) 35,000
(1) Certain of the named executive officers receive personal benefits in addition to salary and cash bonuses, including car allowances and expenses. The aggregate amount of such personal benefits does not exceed the lesser of $50,000 or 10% of the total annual salary and bonus reported for the officer. (2) Mr. Forte was appointed Chief Executive Officer on October 21, 2005. Prior to joining us as CEO, Mr. Forte was paid certain fees as a consultant (see "Item 13. Certain Relationships and Related Transactions"). (3) Mr. DeLuca was appointed Chief Financial Officer on April 1, 2005 and resigned on January 20, 2006. (4) Mr. Dyne served as Chief Executive Officer from 1997 to October 21, 2005. (5) Comprised of car allowances of $24,000; life insurance premiums of $35,000; and other personal expenses. OPTION GRANTS IN FISCAL 2005. The following table sets forth certain information regarding the grant of stock options made during fiscal 2005 to the Named Executive Officers.
PERCENT OF TOTAL POTENTIAL NUMBER OF OPTIONS REALIZABLE VALUE SECURITIES GRANTED TO AT ASSUMED UNDERLYING EMPLOYEES EXERCISE RATE OF STOCK PRICE OPTIONS IN FISCAL OR BASE EXPIRATION APPRECIATION FOR NAME GRANTED YEAR(1) PRICE(2) DATE OPTION TERM(3) - ---- ----------- ---------- -------- ----------- -------------------- 5% 10% -- --- August DeLuca....... 35,000 (4) 15% $5.00 2/14/2015 $110,057 $278,905
6 (1) Options covering an aggregate of 235,000 shares were granted to employees during fiscal 2005. (2) The exercise price and tax withholding obligations related to exercise may be paid by delivery of already owned shares, subject to certain conditions. (3) The potential realizable value is based on the assumption that the common stock appreciates at the annual rate shown (compounded annually) from the date of grant until the expiration of the option term. These amounts are calculated pursuant to applicable requirements of the SEC and do not represent a forecast of the future appreciation of the common stock. (4) Mr. DeLuca resigned from the Company effective January 20, 2006. All unexercised options held by Mr. DeLuca terminated 30 days following the date of his resignation. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES. The following table sets forth, for each of the Named Executive Officers, certain information regarding the number of shares of common stock underlying stock options held at fiscal year-end and the value of options held at fiscal year-end based upon the last reported sales price of the underlying securities on the American Stock Exchange ($0.36 per share) on December 30, 2005, the last trading day in 2005.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS ACQUIRED AT DECEMBER 31, 2005 AT DECEMBER 31, 2005 ON VALUE --------------------------- --------------------------- NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------- -------- -------- ----------- ------------- ----------- ------------- Stephen P. Forte......... -- -- -- -- -- -- August DeLuca (1)........ -- -- 8,750 26,250 -- -- Colin Dyne .............. -- -- 535,000 -- -- -- Jonathan Burstein........ -- -- 175,000 -- -- --
(1) Mr. DeLuca resigned from the Company effective January 20, 2006. All unexercised options held by Mr. DeLuca terminated 30 days following the date of his resignation. DIRECTOR COMPENSATION. We currently pay nonemployee directors $1,500 for their personal attendance at any meeting of the Board of Directors and $500 for attendance at any telephonic meeting of the Board of Directors or at any meeting of a committee of the Board of Directors. We also pay non-employee directors an annual fee of $25,000 and a committee fee of $10,000. Non-employee directors, Mr. Mark Dyne and Messrs. Bermeister, Cohen and Katz, each received an option to purchase 25,000 shares of our common stock in March 2005. Ms. White and Messrs. Miller and Musci, each received an option to purchase 30,000 shares of our common stock in December 2005. We also reimburse directors for their reasonable travel expenses incurred in attending board or committee meetings and pay nonemployee directors a per diem for board services. EMPLOYMENT CONTRACTS. During fiscal year 2005, we did not have employment agreements with any of the Named Executive Officers. In 2006, we have entered into the following employment agreements with our executive officers. On March 16, 2006, we entered into an Executive Employment Agreement with Stephen 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 7 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 previously granted Mr. Forte an option to purchase 900,000 shares of our common stock, which vests over a period of three years. In addition, in lieu of $50,000 in cash compensation, we granted Mr. Forte 135,135 shares of common stock and an option to 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. 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, which vests over a period of three years. 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. On March 16, 2006, we entered into an employment offer letter with Lonnie 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 previously granted Mr. Schnell an option to purchase 400,000 shares of our common stock, which vests over a period of four years. 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. On March 16, 2006, we entered into an employment offer letter with Jonathan Burstein, pursuant to which Mr. Burstein will continue to serve as our Executive Vice President of Operations on an "at-will" basis. Pursuant to this offer letter, Mr. Burstein will receive an annual base salary of $240,000 for 2006 and of $300,000 beginning on January 1, 2007, and will be eligible to receive an annual incentive bonus based upon our earnings before interest and taxes. Additionally, on or before December 31, 2006, we agreed to pay to Mr. Burstein, at our option, either: (i) $60,000 in cash or (ii) 162,162 shares of our common stock and an option to purchase 162,162 shares of common stock with an exercise price equal to the fair market value on the date of grant and which options shall vest in full on December 31, 2006. In the event that Mr. Burstein's employment is terminated by us without "cause" (as defined in the agreement) or due to Mr. Burstein's death or disability, then Mr. Burstein or his estate will be entitled to receive, in addition to all accrued salary, (i) severance payments equal to eighteen months' base salary, payable in six monthly installments, (ii) continuation of coverage under our group health plan for a period of eighteen months and (iii) twelve months acceleration of vesting of all outstanding options. In connection with the offer letter, we previously granted Mr. Burstein an option to purchase 425,000 shares of our common stock, which vests over a period of three years. Upon a change of control of our company, 50% of Mr. Burstein's then-outstanding unvested stock options shall vest and the remaining unvested options shall vest 8 in full if Mr. Burstein is terminated, his position or base pay is reduced or he is required to relocate within twelve months following the change of control. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. As of December 31, 2005, we were indebted to Monto Holdings Pty. Ltd. in the aggregate amount of $60,919, plus accrued interest of $99,398. Kevin Bermeister, a member of the compensation committee of our Board of Directors, holds an equity interest in Monto Holdings Pty. Ltd. The loans from Monto Holdings Pty. Ltd. are all evidenced by promissory notes and are due and payable on the fifteenth day following the date on which the holder of the promissory note makes written demand for payment. No current executive officer of the Company has served as a member of the board of directors or compensation committee of any entity for which a member of our Board of Directors or Compensation Committee has served as an executive officer. STOCK INCENTIVE PLAN. The Company adopted the Tag-It Pacific, Inc. 1997 Stock Plan (the "1997 Plan") in October 1997. The purpose of the 1997 Plan is to provide incentives and rewards to selected eligible directors, officers, employees and consultants of the Company or its subsidiaries in order to assist the Company and its subsidiaries in attracting, retaining and motivating those persons by providing for or increasing the proprietary interests of those persons in the Company, and by associating their interests in the Company with those of the Company's stockholders. Currently, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 1997 Plan is 2,577,500, subject to certain adjustments to prevent dilution. Any shares of common stock subject to an award which for any reason expires or terminates unexercised are again available for issuance under the 1997 Plan. The 1997 Plan authorizes its administrator to enter into any type of arrangement with an eligible participant that, by its terms, involves or might involve the issuance of (1) shares of common stock, (2) an option, warrant, convertible security, stock appreciation right or similar right with an exercise or conversion privilege at a price related to the common stock, or (3) any other security or benefit with a value derived from the value of the common stock. Any stock option granted may be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or a nonqualified stock option. The 1997 Plan currently is administered by the Compensation Committee of the Board of Directors of the Company. Subject to the provisions of the 1997 Plan, the Compensation Committee will have full and final authority to select the executives and other employees to whom awards will be granted thereunder, to grant the awards and to determine the terms and conditions of the awards and the number of shares to be issued pursuant thereto. No participant may receive awards representing more than 25% of the aggregate number of shares of common stock that may be issued pursuant to all awards under the 1997 Plan. As of December 31, 2005, 1,244,500 shares of common stock remained available for grant of awards to eligible participants under the 1997 Plan. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS EQUITY COMPENSATION PLAN INFORMATION The following table sets forth certain information as of December 31, 2005 regarding equity compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance: 9
NUMBER OF SECURITIES NUMBER OF SECURITIES TO WEIGHTED-AVERAGE REMAINING AVAILABLE BE ISSUED UPON EXERCISE EXERCISE PRICE OF FOR FUTURE ISSUANCE OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, UNDER EQUITY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COMPENSATION PLANS ----------------------- -------------------- --------------------- Equity compensation plans approved by security holders..... 1,833,000 $3.46 1,244,500 Equity compensation plans not approved by security holders..... 1,377,147 $4.36 - ----------------------- -------------------- --------------------- Total......................... 3,210,147 $3.92 1,244,500 ======================= ==================== =====================
Warrants issued pursuant to equity compensation plans not approved by security holders are summarized as follows: o 172,500 warrants issued for services in 2003, are exercisable at $5.06 per share and expire in May 2008. o 30,000 warrants issued for services in 2004, are exercisable at $4.29 per share and expire in July 2007. o 102,741 warrants issued in conjunction with a private placement transaction in 2004, are exercisable at $3.65 per share and expire in November 2009. o 215,754 warrants issued for services in 2004, are exercisable at $3.65 per share and expire in November 2009. o 572,818 warrants issued for services in 2003, are exercisable at $4.74 per share and expire in December 2008. o 66,667 warrants issued in conjunction with private placement transaction in 2001 and 2002, are exercisable at $4.34 per share and expired in March 2006. o 66,667 warrants issued in conjunction with private placement transaction in 2001 and 2002, are exercisable at $4.73 per share and expired in March 2006. o 150,000 warrants issued in conjunction with private placement transaction in 2001 and 2002, are exercisable at $3.50 per share and expire at various date through February 2007. Each of the above plans provides that the number of shares with respect to which options and warrants may be granted, and the number of shares of Common Stock subject to an outstanding option or warrant, shall be proportionately adjusted in the event of a subdivision or consolidation of shares or the payment of a stock dividend on Common Stock. BENEFICIAL OWNERSHIP TABLE The following table presents information regarding the beneficial ownership of our common stock as of April 4, 2006: o each person who is known to us to be the beneficial owner of more than 5% of our outstanding common stock; o each of our directors; o each of our executive officers; and o all of our directors and executive officers as a group Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to such shares. Shares of common stock under warrants or options currently exercisable or exercisable within 60 days of the date of this information are deemed outstanding for purposes of computing the percentage ownership of the person holding such warrants or options but are not deemed outstanding for computing the percentage ownership of any other person. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding at April 4, 2006. Unless otherwise indicated, the persons named in this table have sole voting and sole investment power with respect to all shares shown as beneficially 10 owned, subject to community property laws where applicable. As of April 4, 2006, we had 18,241,845 shares of common stock issued and outstanding. The address of each person listed is in our care, at 21900 Burbank Boulevard, Suite 270, Woodland Hills, California 91367, unless otherwise set forth below such person's name. NUMBER OF PERCENT NAME OF BENEFICIAL OWNER SHARES OF CLASS - -------------------------------------------- ----------- -------- DIRECTORS: Mark Dyne (1)............................... 1,252,112 6.7% Colin Dyne (2).............................. 1,229,580 6.5% Jonathan Burstein (3)....................... 313,788 1.7% Kevin Bermeister (4)........................ 247,117 1.3% Stephen P. Forte ........................... 170,652 * Brent Cohen (5)............................. 95,000 * Raymond Musci (6)........................... 30,000 * Joseph M. Miller (6)........................ 30,000 * Susan White (6) ............................ 30,000 * Wouter van Biene............................ 1,000 * Lonnie D. Schnell .......................... 0 -- Directors and executive officers as a group (11 persons) (10) ........................ 3,399,249 17.2% 5% HOLDERS: Todd Kay.................................... 1,003,500 5.5% 3151 East Washington Blvd. Los Angeles, CA 90023 Harris Toibb(7)............................. 1,501,398 8.0% 307 21st Street Santa Monica, CA 90402 The Pinnacle Fund, L.P. (8)(9).............. 1,095,890 5.7% 4965 Preston Park Blvd., Suite 240 Plano, Texas 75093 * Less than one percent. (1) Includes 293,000 shares of common stock reserved for issuance upon exercise of stock options which are currently exercisable, 83,334 shares of common stock reserved for issuance upon exercise of warrants which are currently exercisable and 111,111 shares of common stock reserved for issuance upon conversion of debt which is currently convertible. (2) Includes 535,000 shares of common stock reserved for issuance upon exercise of stock options which are currently exercisable. (3) Includes 175,000 shares of common stock reserved for issuance upon exercise of stock options which are currently exercisable. (4) Includes 90,000 shares of common stock reserved for issuance upon exercise of stock options which are currently exercisable. (5) Consists of 95,000 shares of common stock reserved for issuance upon exercise of stock options which are currently exercisable. (6) Consists of 30,000 shares of common stock reserved for issuance upon the exercise of the stock options which are currently exercisable. (7) Includes 333,332 shares of common stock reserved for issuance upon exercise of warrants which are currently exercisable. (8) Includes 1,095,890 shares of common stock reserved for issuance upon conversion of convertible promissory notes which are currently convertible. (9) Pursuant to the terms of convertible promissory notes and warrants held by The Pinnacle Fund, L.P., the maximum number of shares that may be acquired by the stockholder upon any exercise of its warrant or conversion of its promissory note is limited to the extent necessary to ensure that, following such exercise, the total number of shares of common stock then beneficially owned by the stockholder and its affiliates and any 11 other persons whose beneficial ownership of common stock would be aggregated with the selling stockholder for purposes of Section 13(d) of the Exchange Act, does not exceed 9.99% of the total number of issued and outstanding shares of our common stock then outstanding. The shares of common stock and percentage ownership listed in this table do not reflect these contractual limitations on such stockholders' ability to acquire common shares upon exercise of its warrant or conversion of its promissory note. (10) Includes 1,278,000 shares of common stock reserved for issuance upon exercise of stock options which currently are exercisable, 111,111 shares of common stock reserved for issuance upon conversion of debt which is currently convertible and 83,334 shares of common stock reserved for issuance upon exercise of warrants which currently are exercisable. The information as to shares beneficially owned has been individually furnished by the respective directors, named executive officers, and other stockholders of the company, or taken from documents filed with the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 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 have paid approximately $121,000 in consulting fees to the Forte Group pursuant to this consulting agreement. Todd Kay is a director and significant shareholder of Tarrant Apparel Group ("Tarrant"), and Mr. Kay holds more than 5% of our common stock. We had total sales to Tarrant for the year ended December 31, 2005 of $574,000. As of December 31, 2005, accounts receivable, related party included $560,000 due from Tarrant. Included in due from related parties at December 31, 2005 is $655,000 of unsecured notes, advances and accrued interest receivable from Colin Dyne, a director, significant stockholder and former officer. The notes and advances bear interest at 0%, 8.5% and prime and, together with accrued interest, are due on demand. Demand notes payable to related parties at December 31, 2005 included $580,000 in notes and advances from Mark Dyne, a director of the Company. In addition, as of December 31, 2005, we were indebted to Monto Holdings Pty. Ltd. in the approximate amount of $60,900, plus accrued interest of approximately $99,400. Mark Dyne, our Chairman, holds a significant equity interest in Monto Holdings Pty. Ltd. Kevin Bermeister, a member of the compensation committee of our Board of Directors, holds an equity interest in Monto Holdings Pty. Ltd. The loans from Monto Holdings Pty. Ltd. are all evidenced by promissory notes and are due and payable on the fifteenth day following the date on which the holder of the promissory note makes written demand for payment. As of December 31, 2005, we were also indebted to Harold Dyne estate in the approximate amount of $24,200. We paid consulting fees paid to Diversified Investments, a company owned by Audrey Dyne, mother of Colin Dyne and Mark Dyne, amounted to $150,000 in the year ended December 31, 2005. We paid $24,000 in consulting fees for services provided by Brent Cohen, a director; and $21,000 in fees paid to Ray Musci, a director. These consulting fees were compensation for additional board activities during the year ended December 31, 2005. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES SERVICES PROVIDED BY THE INDEPENDENT AUDITORS. The audit committee of our Board of Directors is responsible for the appointment, compensation, retention and oversight of the work of the independent auditors. On December 16, 2005, we engaged Singer Lewak Greenbaum & Goldstein LLP ("SLGG") as our independent registered public 12 accounting firm. BDO Seidman, LLP ("BDO"), served as our principal independent public accounting firm for the year ended December 31, 2004. BDO resigned as the Company's independent public accounting firm on November 22, 2005 upon its completed review of information to be included in our Form 10-Q for the quarter ended September 30, 2005. AUDIT FEES - The aggregate fees billed by our independent registered accounting firms for professional services rendered for the audit of our annual financial statements and review of our financial statements included in our Forms 10-Q or services that are normally provided in connection with statutory and regulatory filings, were $181,200 for fiscal year 2004 and $506,600 for fiscal year 2005. AUDIT-RELATED FEES - The aggregate fees billed by our independent registered accounting firms for professional services rendered for assurance and related services reasonably related to the performance of the audit or review of our financial statements (other than those reported above) was $5,000 for fiscal year 2004 and none for fiscal year 2005. TAX FEES - The aggregate fees billed by our independent registered accounting firms for professional services rendered for tax compliance, tax advice and tax planning were $43,100 and $900 for fiscal years 2004 and 2005, respectively. ALL OTHER FEES - There were no fees billed by our independent registered accounting firms for services rendered to the Company other than the services described above under "Audit Fees," "Audit-Related Fees" and "Tax Fees." The audit committee approved all of the foregoing services provided by BDO and SLGG. POLICY REGARDING PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT AUDITORS. The audit committee has established a general policy requiring it's pre-approval of all audit services and permissible non-audit services provided by the independent auditors, along with the associated fees for those services. For both types of pre-approval, the audit committee considers whether the provision of a non-audit service is consistent with the SEC's rules on auditor independence, including whether provision of the service (i) would create a mutual or conflicting interest between the independent auditors and the Company, (ii) would place the independent auditors in the position of auditing its own work, (iii) would result in the independent auditors acting in the role of management or as an employee of the Company, or (iv) would place the independent auditors in a position of acting as an advocate for the Company. Additionally, the audit committee considers whether the independent auditors are best positioned and qualified to provide the most effective and efficient service, based on factors such as the independent auditors' familiarity with our business, personnel, systems or risk profile and whether provision of the service by the independent auditors would enhance our ability to manage or control risk or improve audit quality or would otherwise be beneficial to us. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) FINANCIAL STATEMENTS AND SCHEDULES. (Previously filed with the Original Filing.) (b) Exhibits: See Exhibit Index attached to this Annual Report on Form 10-K/A. 13 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/ LONNIE D. SCHNELL -------------------------------- By: Lonnie D. Schnell Its: Chief Financial Officer 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 - --------- ----- ---- * Chairman of the Board April 28, 2006 - ---------------------------- of Directors Mark Dyne * Chief Executive Officer April 28, 2006 - ---------------------------- (Principal Executive Stephen P. Forte Officer)and Director /S/ LONNIE D. SCHNELL Chief Financial Officer April 28, 2006 - ---------------------------- (Principal Accounting and Lonnie D. Schnell Financial Officer) * Director April 28, 2006 - ---------------------------- Kevin Bermeister * Director April 28, 2006 - ---------------------------- Colin Dyne * Director, Vice President April 28, 2006 - ---------------------------- of Operations and Secretary Jonathan Burstein * Director April 28, 2006 - ---------------------------- Brent Cohen * Director April 28, 2006 - ---------------------------- Susan White * Director April 28, 2006 - ---------------------------- Raymond Musci * Director April 28, 2006 - ---------------------------- Joseph Miller * By: /S/ LONNIE D. SCHNELL ----------------------------------- Lonnie D. Schnell, Attorney-in-fact 14 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 4.1to 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. EX-1 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 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. 10.12 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. 10.13 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. 10.14 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. 10.15 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. 10.16 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. 10.17 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. 10.18 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. 10.19 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. 10.20 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. 10.21 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. EX-2 EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 10.22 Form of Stockholders Agreements dated December 28, 2001. Incorporated by reference to Exhibit 99.3 to Form 8-K filed on January 23, 2002. 10.23 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. 10.24 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. 10.24.1 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. 10.24.2 Amendment, dated June 29, 2004, to Exclusive Supply Agreement, dated July 12, 2002, between Tag-It Pacific, Inc. and Levi Strauss & Co. 10.25 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. 10.26 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. 10.27 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. 10.28 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. 10.29 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. 10.30 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. 10.31 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. 10.32 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. 10.33 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. EX-3 EXHIBIT NUMBER EXHIBIT DESCRIPTION - ------- ------------------- 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 Singer Lewak Greembaum & Goldstein LLP. (3) 23.2 Consent of BDO Seidman, LLP. (3) 24.1 Power of Attorney (included on signature page). (3) 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 with the Original Filing. EX-4 EX-31 2 ex31-1n.txt EX-31.1 EXHIBIT 31.1 Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) I, Stephen P. Forte, certify that: 1. I have reviewed this Annual Report on Form 10-K/A of Tag-It Pacific, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 28, 2006 /S/ STEPHEN P. FORTE ----------------------- Stephen P. Forte Chief Executive Officer EX-31 3 ex31-2n.txt EX-31.2 EXHIBIT 31.2 Certification of CEO Pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) I, Lonnie D. Schnell, certify that: 1. I have reviewed this Annual Report on Form 10-K/A of Tag-It Pacific, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: April 28, 2006 /S/ LONNIE D. SCHNELL ----------------------- Lonnie D. Schnell Chief Financial Officer EX-32 4 ex32-1n.txt EX-32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), each of the undersigned officers of Tag-It Pacific, Inc., a Delaware corporation (the "Company"), do hereby certify with respect to the Annual Report of the Company on Form 10-K/A for the fiscal year ended December 31, 2005 as filed with the Securities and Exchange Commission (the "10-K/A Report") that: (1) the 10-K/A Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the 10-K/A Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 28, 2006 /S/ STEPHEN P. FORTE ----------------------- Stephen P. Forte Chief Executive Officer Date: April 28, 2006 /S/ LONNIE D. SCHNELL ----------------------- Lonnie D. Schnell Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----