UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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or Section 240.14a-12
ILINC COMMUNICATIONS, INC.
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[LOGO] ILINC
COMMUNICATIONS
2999 NORTH 44TH STREET, SUITE, 650
PHOENIX, ARIZONA 85018
July 19, 2007
TO THE STOCKHOLDERS OF iLINC COMMUNICATIONS, INC.:
You are cordially invited to attend the 2007 annual meeting of stockholders of
iLinc Communications, Inc., to be held on August 24, 2007, at 9:00 a.m., local
time, at our offices, 2999 North 44th Street, Suite 650, Phoenix, Arizona 85018.
All shares represented by properly executed proxies will be voted in accordance
with the specifications on the enclosed proxy. If no specification is made,
proxies will be voted for approval of the proposals. Detailed information
concerning the proposals are set forth in the attached proxy statement which we
urge you to read carefully.
Please read the enclosed 2007 Annual Report to Stockholders and Proxy Statement
and take the time to vote. Whether or not you plan to attend the annual meeting,
please sign, date, and return the proxy card in the enclosed envelope as soon as
possible so that your vote will be recorded.
If you attend the annual meeting having already returned the proxy card, you may
withdraw your proxy and vote your shares in person. Your vote is important so
please take the time to vote.
Sincerely,
/s/ James M. Powers, Jr.
------------------------
Chairman of the Board
and Chief Executive Officer
ILINC COMMUNICATIONS, INC.
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, ARIZONA 85018
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD AUGUST 24, 2007
TO OUR STOCKHOLDERS:
The 2007 annual meeting of stockholders of iLinc Communications, Inc. will be
held on August 24, 2007, at 9:00 a.m., local time, at our offices, 2999 North
44th Street, Suite 650, Phoenix, Arizona 85018, for the following purposes:
(1) To elect one Class C director to serve for a term of three years and
until his successor is duly elected and qualified;
(2) To consider and vote for a proposal to ratify the appointment of
Moss Adams LLP, as our Independent Registered Public Accounting Firm
for fiscal year ending March 31, 2008; and
(3) To consider such other matters as may properly come before the
annual meeting and at any and all adjournments or postponements
thereof.
Only stockholders of record at the close of business on July 6, 2007 are
entitled to notice of and to vote at the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James M. Powers, Jr.
------------------------
James M. Powers, Jr.
Chairman of the Board and Chief Executive
Officer
Phoenix, Arizona
July 19, 2007
A PROXY CARD IS ENCLOSED. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU
OWN. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE MEETING, PLEASE COMPLETE
AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE
PREPAID, ADDRESSED ENVELOPE. NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES. RETURNING YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IF YOU ATTEND THE MEETING.
ILINC COMMUNICATIONS, INC.
2999 NORTH 44TH STREET, SUITE 650
PHOENIX, ARIZONA 85018
PROXY STATEMENT
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of the Board of Directors of
iLinc Communications, Inc. for use at our 2007 annual meeting of stockholders to
be held at 9:00 a.m., local time, on August 24, 2007, at 2999 North 44th Street,
Suite 650, Phoenix, Arizona 85018, and at any and all adjournments or
postponements thereof. This Proxy Statement and the accompanying form of proxy
are first being mailed or given to our stockholders on or about July 19, 2007.
We are mailing our 2007 Annual Report to Stockholders, including consolidated
financial statements, simultaneously with this Proxy Statement to all our
stockholders of record as of the close of business on July 6, 2007. That annual
report does not constitute a part of this proxy solicitation material.
INFORMATION CONCERNING SOLICITATION AND VOTING
All voting rights are vested exclusively in the holders of our common stock.
Each share of our common stock is entitled to one vote. Cumulative voting in the
election of our directors is not permitted. Holders of a majority of shares
entitled to vote at the annual meeting, when present in person or by proxy,
constitute a quorum. On July 6, 2007, the record date for stockholders entitled
to vote at the annual meeting, 33,585,431 shares of our common stock were issued
and outstanding.
Proxies in the enclosed form will be effective if properly executed and returned
prior to the annual meeting in the enclosed envelope either to Broadridge
Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY 11717 as agent for the
Company or to us at 2999 N. 44th Street, Suite 650, Phoenix, Arizona 85018. Our
common stock represented by each effective proxy will be voted at the annual
meeting in accordance with the instruction on the proxy. If no instructions are
indicated on a proxy, all common stock represented by such proxy will be voted
(a) FOR election of the one nominee named in the proxy as the Class C director;
(b) FOR ratification of the appointment of Moss Adams LLP as our Independent
Registered Public Accounting Firm for fiscal year 2008; and (c) as to any other
matters of business which properly come before the annual meeting, by the named
proxies at their discretion.
Any stockholder signing and mailing the enclosed proxy may revoke it at any time
before it is voted by giving written notice of the revocation to us, by
attending the annual meeting in person and giving the inspector of elections
notice that you intend to vote your shares in person or by submitting another
valid proxy bearing a later date.
Unless a quorum is present at our annual meeting, no action may be taken at the
meeting except the adjournment thereof until a later time. The presence, in
person or by proxy, of holders of a majority of the voting power of all
outstanding shares of our common stock entitled to vote at the annual meeting
are necessary to constitute a quorum. The inspector of elections appointed for
the annual meeting will determine the number of shares of our common stock
present at the meeting, determine the validity of proxies and ballots, determine
whether or not a quorum is present, and count all votes and ballots.
If a quorum is present, in the election of directors, the nominees having the
highest number of votes cast in favor of their election will be elected to our
Board of Directors. Votes marked "For" the election of directors will be counted
in favor of the nominees, except to the extent the proxy withholds authority to
vote for a specified nominee. Votes "Withheld" from a nominee also have no
effect on the vote since a plurality of the votes cast at the annual meeting is
required for the election of each nominee. With respect to the proposal to
ratify the appointment of Moss Adams LLP as our Independent Registered Public
Accounting Firm for fiscal year 2008, the affirmative vote of a majority of the
shares present in person or represented by proxy at the annual meeting is
required. With respect to any other matter which may properly come before the
annual meeting, unless a greater number of votes is required by law or by our
restated certificate of incorporation, a matter will be approved by the
stockholders if the votes cast in favor of the matter exceed the votes cast in
opposition.
-1-
Shares that are represented at the annual meeting but abstain from voting on any
or all matters and "broker non-votes" (shares held by brokers or nominees for
which they have no discretionary power to vote on a particular matter and have
received no instructions from the beneficial owners or persons entitled to vote)
will be counted as shares present and entitled to vote in determining the
presence or absence of a quorum. Stockholders may not abstain from voting with
respect to the election of directors. Because the election of directors is a
routine matter for which specific instructions from beneficial owners will not
be required, "broker non-votes" will not arise in the context of the election of
directors. Abstentions and broker non-votes which may be specified on the
proposal to ratify the appointment of Moss Adams LLP as our Independent
Registered Public Accounting Firm for fiscal year 2008, will have the same
effect as a vote against that proposal.
We will pay the cost of soliciting proxies in the accompanying form. We have
retained the services of Broadridge Financial Solutions, Inc. as agent for the
Company to assist in distributing proxy materials to brokerage houses, banks,
custodians and other nominee holders. The estimated cost of such services is
approximately $25,000 plus out-of-pocket expenses. Although there are no formal
agreements to do so, proxies may be solicited by our officers and other regular
employees by telephone, fax, email or by personal interview for which employees
will not receive additional compensation. Arrangements also may be made with
brokerage houses and other custodians, nominees and fiduciaries to forward
solicitation materials to beneficial owners of the shares held of record by such
persons, and we may reimburse such persons for reasonable out-of-pocket expenses
incurred by them in so doing.
-2-
PROPOSAL ONE: ELECTION OF DIRECTORS
GENERAL
Our restated certificate of incorporation provides for the classification of our
Board of Directors into three classes. The term of office of the Class C
director expires at this annual meeting of our stockholders; the term of office
of the Class A directors expires at our 2008 annual meeting of stockholders and
the term of office of the Class B directors expires at our 2009 annual meeting
of stockholders. One Class C nominee is nominated to be re-elected at this
annual meeting to serve for a three-year term to last until the 2010 annual
meeting of stockholders and until his successor is duly elected and has been
qualified. The nominee for Class C director will be elected by a plurality of
the votes cast, assuming a quorum is present at the annual meeting. Votes marked
"For" the election of directors will be counted in favor of all nominees, except
to the extent the proxy withholds authority to vote for a specified nominee.
Votes "Withheld" from a nominee also have no effect on the vote since a
plurality of the votes cast at the annual meeting is required for the election
of each nominee. Stockholders may not abstain from voting with respect to the
election of directors. Because the election of directors is a routine matter for
which specific instructions from beneficial owners will not be required, "broker
non-votes" will not arise in the context of the election of directors. Proxies
cannot be voted for a greater number of persons than the number of nominees
named therein. Unless authority to vote is withheld, the persons named in the
enclosed form of proxy will vote the shares represented by such proxy for the
election of the nominee for director named below. If, at the time of the annual
meeting, the nominee shall have become unavailable for any reason for election
as a director, the persons entitled to vote the proxy will vote for such
substitute nominee, if any, as they determine in their discretion. Management is
currently unaware of any circumstances likely to render the nominee unavailable
for election or unable to serve.
NOMINEE FOR ELECTION AT THE ANNUAL MEETING
The person named below has been nominated to be elected at this annual meeting
to serve as a Class C director for a three-year term to last until the 2010
annual meeting of stockholders and until his successor is duly elected and has
been qualified.
DIRECTOR
NAME AGE POSITION CLASS - TERM SINCE
---- --- -------- ------------ -----
Kent Petzold 60 Director Class C - Expires 2007 2003
CONTINUING DIRECTORS
The persons named below will continue to serve as our directors until the annual
meeting of our stockholders in the year indicated below and until their
successors are elected and take office. Stockholders are not voting on the
election of the Class A and Class B directors. The following table shows the
names, ages and positions of each continuing director.
DIRECTOR
NAME AGE POSITION CLASS - TERM SINCE
---- --- -------- ------------ -----
Michael T. Flynn (1) 58 Director Class A - Expires 2008 2007
James M. Powers, Jr. 51 Chairman of the Board, President Class A - Expires 2008 1998
and Chief Executive Officer
James H. Collins 60 Director Class B - Expires 2009 2000
Daniel T. Robinson, Jr. 47 Director Class B - Expires 2009 2000
The following table sets forth certain information concerning our directors,
nominee to become a director and executive officers (ages are as of July 19,
2007):
NAME MUNICIPALITY OF RESIDENCE AGE POSITION
---- ------------------------- --- --------
James M. Powers, Jr. Phoenix 51 Chairman of the Board, President, Chief Executive Officer
James H. Collins San Diego 60 Current Director
Daniel T. Robinson, Jr. Memphis 47 Current Director
Kent Petzold Scottsdale 60 Current Director and Director Nominee
Michael T. Flynn (1) Little Rock 58 Current Director (1)
Craig W. Stull (2) Scottsdale 56 Prior Director (during fiscal 2007) (2)
James L. Dunn, Jr. Houston 45 Sr. Vice President, Chief Financial Officer, General Counsel
Gary Moulton Salt Lake City 39 Sr. Vice President, Audio Services
-3-
(1) Michael T. Flynn became a director and was appointed to our Audit
Committee and Compensation Committee on July 1, 2007 by nomination and
election of our Board upon the resignation of Mr. Stull. Mr. Flynn will
serve the remainder of Mr. Stull's term that expires at our annual meeting
of stockholders in 2008.
(2) Craig W. Stull served since 2004 and was a Director during fiscal 2007. He
resigned from our Board and our Audit Committee and Compensation Committee
effective July 1, 2007.
DR. JAMES M. POWERS, JR. has served as our Chairman, President and Chief
Executive Officer since December 1998. Dr. Powers led our Company through its
initial growth and acquisition phase and subsequent transformation to an
integrated communications company providing Web, audio, video, and Voice-over IP
solutions. Dr. Powers joined our Company through the merger with Liberty Dental
Alliance, Inc., a Nashville-based company where he was the founder, Chairman,
and President from 1997 to 1998. Dr. Powers was a founder and Chairman of
Clearidge, Inc., a privately held bottled water company in Nashville, Tennessee
from 1993 to 1999, where he led Clearidge through 13 acquisitions over three
years to become one of the largest independent bottlers in the Southeast, before
selling the company to Suntory Water Group, Inc. Dr. Powers also was a founder
and Director of Barnhill's Buffet, Inc., a privately held chain of 48
restaurants in the Southeast with over $100 million in annual revenues, which
was sold in early 2005. He received his Bachelor of Science Degree from the
University of Memphis, a Doctor of Dental Surgery Degree from The University of
Tennessee, and his M.B.A. from Vanderbilt University's Owen Graduate School of
Management.
JAMES H. COLLINS has served as a corporate executive in financial/operational
management for over 20 years completing twelve corporate
turnarounds/restructurings and start-ups, served as an investment banker for 10
years in the public/private capital markets, and served five years with an
international accounting firm. Mr. Collins is Chief Executive Officer of Janus
Health, Inc., an information technology and services company to physicians and
medical groups providing in-home care. He has been Managing Partner of Collins &
Company, a financial consulting firm since 2000. He was Managing Director of AFS
Industries, Inc. from 2002 to 2004. Previously, he was the Chairman and Chief
Executive Officer of Vindrauga Corporation, a private equity and financial
services firm and from 1998 until 2000, Mr. Collins served as President, Chief
Operating Officer, Chief Financial Officer, and Director of Scripps Clinic, La
Jolla, California. Industry experience includes technology, healthcare, consumer
electronics, financial services, food products, retailing, real estate,
construction, entertainment, and gaming. He serves as a Director of Girl Scouts,
San Diego-Imperial Council, Inc. Mr. Collins is a Certified Public Accountant
and a NASD General Securities Principal. He received his B.S. and M.B.A. degrees
from the University of Southern California.
MICHAEL T. FLYNN has thirty-six years of telecommunications experience in the
wire line, wireless, long distance and competitive local exchange
telecommunications services and equipment sectors with Southwestern Bell
Telephone, SBC, AT&T, Bell Communications Research, Inc. and Alltel. He served
as a Director of Webex (NASDQ:WEBX) from January 2004 until May 2007 (when Webex
was acquired by Cisco) and currently serves on the Board of Directors of Airspan
Networks (NASDQ:AIRN), a worldwide wireless broadband equipment manufacturer;
Equity Media Holdings Corporation (NASDQ:EMDA), a media company managing
television stations and broadcast programming services; GENBAND, a privately
held provider of VOIP infrastructure solutions; and Calix, a privately held
manufacturer of broadband access platforms. Mr. Flynn holds a B.S. in Industrial
Engineering from Texas A&M University.
DANIEL T. ROBINSON, JR. has been a member of the Bogatin Law Firm, PLC in
Memphis, Tennessee since September 2000. Mr. Robinson was previously with the
Glankler Brown law firm in Memphis, Tennessee. He is also an investor and
advisor in a number of private ventures, acting as an officer and director in
several businesses. When not in private law practice, Mr. Robinson acted as a
principal and manager in a number of private equity ventures. Mr. Robinson holds
a B.B.A. in Finance, an M.B.A. and J.D. from the University of Memphis. He is a
member of the Memphis and Tennessee Bar Associations.
KENT PETZOLD is a Senior Managing Director with Alare Capital Partners, LLC and
ACN Securities, Inc., providing investment banking and strategic advisory
services primarily to technology companies in the southwest U.S. Since 2001 Mr.
Petzold has been a principal of AZ Ventures, LLC, the general partner of Arris
Ventures, LLC, a venture capital firm. From 1998 thru 2001, he was Chairman and
Chief Executive Officer of Cyclone Commerce, Inc., a provider of supply chain
management software. Mr. Petzold has held positions in several public software
companies, including President and Chief Executive Officer of Novadigm, Inc.,
(NASD:NVDM) which provided digital assets management. He served as a Director of
Novadigm until its acquisition by Hewlett Packard in 2004. He was Senior Vice
President and General Manager of the $165 million Systems Software Division of
Pansophic Systems, Inc., a NYSE software company that was acquired by Computer
Associates, Inc. He also served as President and Chief Executive Officer of
privately held Viasoft, Inc. Mr. Petzold is a Director of Xenos Group, Inc.
(TSE:XNS), JRiver, Inc., and Precept Ministries International. He is on the
Advisory Boards of Arizona State University's College of Engineering and
Computer Science, Ethix Media, LLC, and the state board of the Fellowship of
Christian Athletes. Mr. Petzold holds a B.A. in Management from the University
of Texas.
-4-
CRAIG W. STULL is the Founder and Chief Executive Officer of Pragmatic
Marketing, Inc., an INC 500 company which he founded in 1993 to provide product
marketing training and consulting to firms by focusing on strategic,
market-driven techniques. He specializes in product roll-outs, turnarounds,
positioning, naming, and prospect need identification. Prior to 1993, Mr. Stull
was Vice President of Product Marketing, responsible for distributed systems
products at Legent Corporation, a $500 million, multi-platform software vendor.
Mr. Stull has also held the position of Vice President of Marketing at Viasoft,
a provider of COBOL code analysis, testing, and re-engineering tools based in
Phoenix, Arizona. Prior to Viasoft, Mr. Stull was Vice President of Marketing at
UCCEL in Dallas, Texas. He has eighteen years of software product marketing
experience, six years of exceptionally successful software sales experience and
eight years technical experience in operations and systems programming. This
unique combination of sales, marketing, and technical experience gives him
sensitivity to all aspects of software marketing. Mr. Stull holds a BSBA from
Roger Williams University.
JAMES L. DUNN, JR., assisted with the formation of the Company and was an
integral part of our initial public offering. Since our inception, Mr. Dunn has
been responsible for all corporate development activities, including most
recently the acquisition of its Web conferencing and audio conferencing assets.
Mr. Dunn is an attorney and assumed the role of General Counsel in March of
2000. He managed the legal transition of the Company from its legacy business
beginnings to its current Web and audio conferencing focus. Mr. Dunn is also a
CPA and assumed the role of Chief Financial Officer in June of 2005. He received
his law degree from Southern Methodist University School of Law in 1987 and his
Bachelor's Degree in Business Administration-Accounting from Texas A & M
University in 1984.
GARY L. MOULTON brings more than 15 years of sales, management and customer
service experience to iLinc Communications. Mr. Moulton brings a decades worth
of audio services and audio conferencing experience to iLinc, having founded
Glyphics Communications in 1995. Mr. Moulton grew Glyphics into a leading
provider of phone conferencing and audio conferencing events, developing a
proprietary online seminar registration system for large audio events. As a
member of the Glyphics' Board of Directors and as president and Chief Executive
Officer, he was responsible for developing and implementing corporate vision and
strategy. Prior to starting Glyphics, Mr. Moulton was manager of inside sales
and customer service for Cookietree Bakeries, Inc., a national food service
company. Mr. Moulton also served for four years in the United State Marine
Corps.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINATED
DIRECTOR. PROXIES SOLICITED AND GATHERED BY THE BOARD WILL BE VOTED IN FAVOR OF
THE NOMINEE UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
-5-
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee hereby reports as follows:
The Audit Committee assists the Board of Directors in its oversight
responsibilities and, in particular, is responsible for (1) monitoring the
integrity of our financial statements, financial reporting processes and systems
of internal control regarding finance, accounting and legal compliance, (2)
selecting and appointing our independent registered public accounting firm and
monitoring their independence and performance, pre-approving all audit and
permissible non-audit services to be provided, consistent with all applicable
laws, to us by our independent registered public accounting firm, and
establishing the fees and other compensation to be paid to the independent
registered public accounting firm, and (3) establishing procedures for the
receipt, retention, response to and treatment of complaints, including
confidential, anonymous submission by our employees, regarding accounting,
internal control over financial reporting or audit related matters.
Management is responsible for our financial reporting process, including its
system of internal controls over financial reporting, and for the preparation of
the consolidated financial statements in accordance with generally accepted
accounting principles. Our independent registered public accounting firm is
responsible for auditing those financial statements. The Audit Committee's
responsibility is to monitor and review these processes. It is not the Audit
Committee's duty or responsibility to conduct auditing or accounting reviews or
procedures. The members of the Audit Committee are independent and are not
employees of the Company. The members of the Audit Committee are not and do not
represent themselves to be, or to serve as, accountants or auditors by
profession. Therefore, the Audit Committee has relied, without independent
verification, on management's representation that the financial statements have
been prepared with integrity and objectivity and in conformity with accounting
principles generally accepted in the United States of America and on the
representations of the independent registered public accounting firm included in
their report on our financial statements.
1. The Audit Committee has reviewed and discussed the audited financial
statements with management.
2. The Audit Committee has discussed with our independent registered
public accounting firm the matters required to be discussed by
Statement of Auditing Standards No. 61 (Communication with Audit
Committees).
3. The Audit Committee has received the written disclosures and the
letter from Company's independent registered public accounting firm
required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and has discussed
with our independent registered public accounting firm their
independence.
4. Based on the review and discussion referred to above and in
paragraphs (1) through (3) above, the Audit Committee recommended to
the Board, and the Board has approved, that the audited financial
statements be included in our Annual Report on Form 10-K for fiscal
year ended March 31, 2007, for filing with the SEC.
This report is submitted by the members of the Audit Committee.
James H. Collins, Chairman
Kent Petzold
Craig W. Stull
-6-
PROPOSAL TWO: APPROVAL AND RATIFICATION OF INDEPENDENT ACCOUNTANTS
Our Audit Committee and Board of Directors participated in and approved the
decision to engage Moss Adams LLP (formerly Epstein, Weber & Conover, PLC) as
our Independent Registered Public Accounting Firm. Epstein, Weber & Conover, PLC
merged into Moss Adams LLP in January of 2007. Epstein, Weber & Conover, PLC
audited our financial statements for the fiscal years ended March 31, 2005 and
March 31, 2006. Epstein, Weber & Conover, PLC merged into Moss Adams LLP who
audited our financial statements for the fiscal year ended March 31, 2007. The
Audit Committee and the Board of Directors unanimously recommends that
stockholders vote to ratify the appointment of Moss Adams LLP as our Independent
Registered Public Accounting Firm for fiscal year 2008. Representatives of Moss
Adams LLP are expected to be present at the annual meeting, will have an
opportunity to make a statement if they desire, and will be available to respond
to appropriate questions.
VOTE REQUIRED
If a quorum is present, the affirmative vote of the holders of a majority of the
shares present or represented at the meeting and entitled to vote is needed to
ratify the appointment of Moss Adams LLP as our Independent Registered Public
Accounting Firm for fiscal year 2008. Votes marked "For" proposal two will be
counted in favor of ratification of the appointment of Moss Adams LLP as our
Independent Registered Public Accounting Firm for fiscal year 2008. An
"Abstention" with respect to proposal two will not be voted on that item,
although it will be counted for purposes of determining the number of shares
represented and entitled to vote. Accordingly, an "Abstention" will have the
effect of a vote "Against" proposal two. Neither stockholder approval nor
ratification of the appointment of Moss Adams LLP as our Independent Registered
Public Accounting Firm for fiscal year 2008 is required by our bylaws or
otherwise. However, the Board of Directors is submitting proposal two to the
stockholders for ratification. If the stockholders do not ratify the selection,
the Audit Committee will reconsider whether it is appropriate to select a
different independent registered public accounting firm. In such event, the
Audit Committee may retain Moss Adams LLP notwithstanding the fact that the
stockholders did not ratify the appointment, or may select another Independent
Registered Public Accounting Firm without re-submitting the matter to the
stockholders. Even if the selection is ratified, the Audit Committee reserves
the right in its discretion to select a different independent registered public
accounting firm at any time during the year if it determines that such a change
would be in the best interests of our Company and our stockholders.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF MOSS ADAMS LLP, AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR FISCAL YEAR 2008.
AUDIT AND NON-AUDIT FEES
Aggregate fees for professional services rendered to the Company by Moss Adams
LLP, the Company's principal auditors, Epstein, Weber & Conover, PLC and by BDO
Seidman, LLP for the year ended March 31, 2007 were $16,600, $73,230 and
$60,000, respectively. Total aggregate fees for professional services for the
years ended March 31, 2007 and 2006, respectively were as follows:
SERVICES PROVIDED 2007 2006
-------------------------
Audit Fees $80,780 $109,600
Audit Related Fees -- --
All Other Fees 9,050 1,680
-------------------------
Total $89,830 $111,280
=========================
AUDIT FEES
The aggregate fees billed for the years ended March 31, 2007 and 2006, were for
the audits of the Company's consolidated financial statements and reviews of the
Company's interim consolidated financial statements included in the Company's
annual and quarterly reports, and for services provided with respect to the
Company's other regulatory filings. The fees reflected above for 2007 do not
include audit fees of $30,000 and other fees of $30,000 paid to BDO Seidman, LLP
for the fiscal year ended March 31, 2007.
-7-
AUDIT RELATED FEES
The aggregate fees billed for the years ended March 31, 2007 and 2006 were
primarily for services provided for review and consultation on acquisition,
capital raising and tender offer transactions.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has implemented pre-approval policies and procedures related
to the provision of audit and permissible non-audit services to us. Under these
procedures, the Audit Committee pre-approves all audit and permissible non-audit
services to be provided by its independent registered public accounting firm and
the estimated fees related to these services. During the approval process, the
Audit Committee considers the impact of the types of services and the related
fees on the independence of the independent registered public accounting firm.
The services and fees must be deemed compatible with the maintenance of the
independent registered public accounting firm's independence, including
compliance with SEC rules and regulations. One hundred percent of all services
provided by our independent registered public accounting firm in fiscal year
ended March 31, 2007 and fiscal year ended March 31, 2006 were pre-approved by
the Audit Committee in accordance with this policy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows, as of July 6, 2007, the "beneficial ownership" of our
common stock based upon information received from the persons concerned of (i)
each of our directors and the nominee to become a director, (ii) each of our
named executive officers, (iii) all of our executive officers and directors as a
group and (iv) each person, or group of affiliated persons, known to us to
beneficially own more than 5% of our outstanding common stock. Except as
otherwise indicated, the beneficial owners named in the table below have sole
voting and investment power with respect to all shares of capital stock held by
them, and the address of each person in the table is c/o iLinc Communications,
Inc., 2999 N. 44th Street, Suite 650, Phoenix, Arizona 85018.
PERCENT OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME OWNED (1) OWNED
-------------------------------------------------------------- -------------- --------------
DIRECTORS AND EXECUTIVE OFFICERS:
James M. Powers, Jr. 6.0% 2,070,633 (2)
James L. Dunn, Jr. * 299,058 (3)
Gary Moulton 3.3% 1,109,718 (4)
Nathan Cocozza * 247,073 (5)
James H. Collins * 145,000 (6)
Daniel T. Robinson, Jr. * 161,307 (7)
Kent Petzold 1.7% 563,460 (8)
Craig W. Stull * 55,000 (9)
Michael T. Flynn * 10,000 (10)
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP (9 PERSONS) 13.0% 4,661,249
5% STOCKHOLDERS:
Renaissance Capital Growth and Income Fund III, Inc. 1.5% 523,266 (11), (12), (13)
Renaissance U.S. Growth and Income Trust PLC 2.9% 1,000,001 (11), (12), (13), (14)
US Special Opportunities Trust PLC 4.0% 1,399,999 (11), (12), (13), (15)
Herald Investment Trust PLC 7.6% 2,702,703 (16)
Benjamin James Taylor and Diane Wong Shoda 3.2% 1,081,081 (17)
Sophrosyne Technology Fund, Ltd. 4.8% 1,621,621 (17)
-8-
---------------
* LESS THAN 1%.
(1) CALCULATIONS ARE MADE IN ACCORDANCE WITH RULE 13D-3 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. IN DETERMINING THE PERCENT OF
OUTSTANDING COMMON STOCK BENEFICIALLY OWNED BY A PERSON, (A) THE NUMERATOR
IS THE NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED BY THE PERSON,
INCLUDING SHARES THE BENEFICIAL OWNERSHIP OF WHICH MAY BE ACQUIRED WITHIN
60 DAYS UPON THE EXERCISE OF OPTIONS OR WARRANTS OR CONVERSION OF
CONVERTIBLE SECURITIES, AND (B) THE DENOMINATOR IS THE TOTAL OF (I) THE
33,585,431 SHARES IN THE AGGREGATE OF COMMON STOCK OUTSTANDING ON JULY 6,
2007 AND (II) ANY SHARES OF COMMON STOCK WHICH THE PERSON HAS THE RIGHT TO
ACQUIRE WITHIN 60 DAYS UPON THE EXERCISE OF OPTIONS OR WARRANTS OR
CONVERSION OF CONVERTIBLE SECURITIES. NEITHER THE NUMERATOR NOR THE
DENOMINATOR INCLUDES SHARES WHICH MAY BE ISSUED UPON THE EXERCISE OF ANY
OTHER OPTIONS OR WARRANTS OR THE CONVERSION OF ANY CONVERTIBLE SECURITIES
OF ANY OTHER PERSON.
(2) INCLUDES 561,862 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(3) INCLUDES 246,033 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(4) INCLUDES 17,916 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(5) INCLUDES 227,073 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(6) INCLUDES 110,000 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007 AND A TOTAL OF 25,000 SHARES
THAT MAY BE ISSUED UPON THE CONVERSION OF A CONVERTIBLE NOTE HELD FOR THE
BENEFIT OF HIS DAUGHTER.
(7) INCLUDES 110,000 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(8) INCLUDES 75,000 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007 AND 50,000 SHARES THAT MAY BE
ISSUED ON EXERCISE OF WARRANTS AND 200,000 SHARES THAT MAY BE ISSUED UPON
CONVERSION OF PREFERRED STOCK.
(9) INCLUDES 55,000 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(10) INCLUDES 10,000 SHARES THAT MAY BE ACQUIRED UPON THE EXERCISE OF STOCK
OPTIONS THAT VEST ON OR BEFORE JULY 30, 2007.
(11) THE ADDRESS OF EACH OF THESE ENTITIES IS 8080 NORTH CENTRAL EXPRESSWAY,
SUITE 210-LB 59, DALLAS, TX 75206-1857.
(12) INCLUDES 500,000 SHARES THAT MAY BE ISSUED UPON CONVERSION OF CONVERTIBLE
NOTES PURCHASED IN OUR MARCH 2002 CONVERTIBLE NOTE PRIVATE PLACEMENT.
(13) NUMBERS ARE BASED ON INFORMATION OBTAINED FROM THE COMPLIANCE OFFICER OF
THE BENEFICIAL OWNERS.
(14) INCLUDES 400,000 SHARES THAT MAY BE ISSUED UPON CONVERSION OF PREFERRED
STOCK.
(15) INCLUDES 600,000 SHARES THAT MAY BE ISSUED UPON CONVERSION OF PREFERRED
STOCK.
(16) NUMBERS ARE BASED ON FORM SC 13G - STATEMENT OF ACQUISITION OF BENEFICIAL
OWNERSHIP BY INDIVIDUALS FILED BY THE BENEFICIAL OWNERS. THEIR ADDRESS IS
HARE AND CO., SUBCUSTODIAN TO HERALD INVESTMENT TRUST, PLC, FAO: ARNOLD
MUSELLA, 1 WALL STREET, NEW YORK, NY 10005.
(1)(7) THE ADDRESS OF EACH OF THESE ENTITIES IS SOPHROSYNE CAPITAL, LLC, 45
ROCKEFELLER PLAZA, SUITE 2570, NEW YORK, NY 10111.
There has been no change in control of our Company since the beginning of its
last fiscal year, and there are no arrangements known to us, including any
pledge of securities of our Company, the operation of which may at a subsequent
date result in a change in control of our Company.
-9-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have not been any related party transactions between the Company and our
directors, officers, or employees during the fiscal year ending March 31, 2007.
CORPORATE GOVERNANCE
We are managed under the direction of our Board. Our restated certificate of
incorporation provides for the classification of our Board of Directors into
three classes. The term of office of the Class C director expires at this annual
meeting of our stockholders; the term of office of the Class A directors expires
at our 2008 annual meeting of stockholders and the term of office of the Class B
directors expires at our 2009 annual meeting of stockholders. One Class C
nominee is nominated to be re-elected at this annual meeting to serve for a
three-year term to last until the 2010 annual meeting of stockholders and until
his successor is duly elected and has been qualified. The size of our Board is
currently set to be at least one, but not more than 19 members, and we currently
have five directors. During fiscal year 2007, our Board held four regular
meetings, three special meetings and acted by unanimous written consent on three
occasions.
The Board has an Audit Committee, a Compensation Committee and a Nominating and
Corporate Governance Committee each of which was initially constituted on March
30, 1998. The members of the Audit, Nominating and Corporate Governance and
Compensation Committees are not employees of our Company. During fiscal year
2007, each director attended one hundred percent of the aggregate of the total
number of Board meetings, three directors attended one hundred percent of the
meetings of committees of the Board on which they served, and one director
attended eighty-eight percent of the meetings of committees of the Board on
which he served. Our Board encourages, but does not require, directors to attend
the annual meeting of stockholders. At our 2006 annual meeting, all members of
the Board were present.
AUDIT COMMITTEE
The Audit Committee is responsible for the appointment, compensation, retention
and oversight of the work of any independent registered public accounting firms
for the purpose of preparing or issuing an audit report or performing other
audit review or attest services for our financial statements and acts on behalf
of the Board in reviewing with the independent registered public accounting
firm, the Chief Financial Officer and other corporate officers, various matters
relating to the adequacy of our accounting policies and procedures and internal
control over financial reporting and the scope of the annual audits by the
independent registered public accounting firm. During the fiscal year 2007 and
until July 1, 2007, the Audit Committee consisted of Mr. Collins (Chairman), Mr.
Petzold and Mr. Stull (with Mr. Stull resigning on July 1, 2007 and his position
filled by Michael T. Flynn on July 1, 2007). The members of the Audit Committee
are independent within the meaning of Section 121(A) of the American Stock
Exchange's listing standards and federal securities laws. The Board has
determined that Mr. James Collins is a financial expert as described in Item
407(d) of Regulation S-K and that each member of the Audit Committee is
financially literate. During fiscal year 2007, the Audit Committee held four
meetings. The Audit Committee operates under a written charter adopted by the
Board of Directors. A copy of the Audit Committee charter may be obtained from
our Web site located at WWW.ILINC.COM, or upon written request to our Corporate
Secretary at our principal executive offices located at 2999 N. 44th Street,
Suite 650, Phoenix, AZ 85018.
COMPENSATION COMMITTEE
The Compensation Committee is authorized to establish the general compensation
policy for our officers and directors and annually reviews and establishes or
makes recommendations to the entire Board regarding officers' salaries and
bonuses and the general participation of all employees in employee benefit
plans, including our Stock Compensation Plan. The Compensation Committee
prepares reports required by federal securities laws. The Compensation Committee
sets performance goals and objectives for the Chief Executive Officer and the
other executive officers, evaluates their performance with respect to those
goals and sets their compensation based upon the evaluation of their
performance. In evaluating executive officer pay, the Compensation Committee may
retain the services of a compensation consultant and consider recommendations
from our Chief Executive Officer with respect to goals and compensation of the
other executive officers.
In April of 2007, the Chief Financial Officer of the Company on behalf of the
Compensation Committee engaged the compensation consulting firm of Mercer & Co.
The Compensation Committee engaged the consulting firm to review the existing
compensation programs that had been in place for the senior management team over
the past two years and provide to the Compensation Committee a report. The
report described the median compensation levels and parameters of compensation
for companies of a like size, market capitalization, employee base within the
software industry sector. The analyst for the engaged consultant made
recommendations to the Compensation Committee in his report concerning the
appropriate dollar range of base pay and dollar range of monetary and
non-monetary incentive awards. The analyst also provided in his report a
comparison of the Company's existing compensation structure to those adopted by
the comparable companies selected. In setting the base pay and incentive
compensation structure for fiscal 2008, the Compensation Committee took into
account the analysis and recommendations of the engaged compensation consultant.
-10-
The Compensation Committee assesses the information it receives in accordance
with its business judgment. The Compensation Committee also periodically reviews
director compensation. All decisions with respect to executive and director
compensation are approved by the Compensation Committee and recommended to the
full Board for ratification. During fiscal year 2007 and until July 1, 2007, the
Compensation Committee consists of Mr. Petzold (Chairman) and Mr. Stull (with
Mr. Stull resigning on July 1, 2007 and his position filled by Mr. Michael T.
Flynn on July 1, 2007). During fiscal year 2007, the Compensation Committee held
three meetings. The members of the Compensation Committee are (1) independent
within the meaning of Section 121(A) of the American Stock Exchange's listing
standards, (2) "non-employee directors" as defined by Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended, and (3) "outside
directors" as defined by Section 162(m) of the Internal Revenue Code. A copy of
the Compensation Committee charter may be obtained from our Web site located at
WWW.ILINC.COM, or upon written request to our Corporate Secretary at our
principal executive offices located at 2999 N. 44th Street, Suite 650, Phoenix,
AZ 85018.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee, or Nominating Committee, is
authorized to develop policies on the size and composition of the Board and
criteria relating to candidate selection, propose to the Board a slate of
director nominees for election at annual meetings of stockholders, propose
candidates to fill vacancies on the Board and recommend board members to serve
on the various committees of the Board. The members of the Nominating Committee
are Mr. Robinson (Chairman), Mr. Collins and Mr. Petzold. During fiscal year
2007, the Nominating Committee held two meetings. The members of the Nominating
Committee are independent within the meaning of Section 121(A) of the American
Stock Exchange's listing standards. A copy of the charter of the Nominating
Committee may be obtained from our Web site located at www.iLinc.com, or upon
written request to our Corporate Secretary at our principal executive offices
located at 2999 N. 44th Street, Suite 650, Phoenix, AZ 85018.
The Nominating Committee will consider nominees proposed by stockholders in
accordance with guidelines for such consideration set forth in our bylaws.
Article II, Section 12 of our bylaws provides that persons nominated by
stockholders shall be eligible for election as directors only if nominated in
accordance with the following procedures. Such nominations shall be made
pursuant to timely notice in writing to our Corporate Secretary. To be timely, a
stockholder's notice shall be delivered to or mailed and received at our
principal executive offices (2999 N. 44th Street, Suite 650, Phoenix, AZ 85018)
not less than 90 days nor more than 180 days prior to the earlier of the annual
meeting or the one year anniversary of the prior year's annual meeting. Such
stockholder's notice to the Corporate Secretary must set forth (a) as to the
stockholder proposing to nominate a person for election or re-election as
director, (i) the name and address of the nominator, (ii) the class and number
of shares of our capital stock of which are beneficially owned by the nominator,
(iii) the name and address of any person with whom the nominator is acting in
concert and their beneficial ownership of our capital stock, and (b) as to the
nominee, (i) the information relating to the nominee that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Exchange Act and (ii) a notarized affidavit executed by
each such nominee to the effect that, if elected as a member of the Board, he
will serve and that he is eligible for election as a member of the Board. They
may require any proposed nominee to furnish such other information as they may
reasonably require to determine the eligibility of such proposed nominee to
serve as one of our directors.
The Nominating Committee has not developed specific, minimum qualifications that
must be met by a committee recommended director. Neither has the Nominating
Committee specified a particular set of qualities or skills one or more
directors must possess other than the need for the Board to include at least one
director who is a financial expert. The Nominating Committee does not currently
utilize the services of any third party search firm to assist in the
identification or evaluation of Board member candidates. The Nominating
Committee may engage a third party to provide such services in the future, as it
deems necessary or appropriate at the time in question. The Nominating Committee
determines the required selection criteria and qualifications of director
nominees based upon the needs of our Company at the time nominees are
considered. A candidate must possess the ability to apply good business judgment
and must be in a position to properly exercise his or her duties of loyalty and
care. Candidates should also exhibit proven leadership capabilities, high
integrity and experience with a high level of responsibility within their chosen
fields, and have the ability to quickly understand complex principles of, but
not limited to, business and finance. Candidates with potential conflicts of
interest or who do not meet independence criteria will be identified and
disqualified. The Nominating Committee will consider these criteria for nominees
identified by the Committee, by stockholders, or through some other source. When
current Board members are considered for nomination for reelection, the
Nominating Committee also takes into consideration their prior Board
contributions, performance and meeting attendance records.
-11-
The Nominating Committee conducts a process of making a preliminary assessment
of each proposed nominee based upon the resume and biographical information, an
indication of the individual's willingness to serve and other background
information. This information is evaluated against the criteria set forth above
as well as the specific needs of our Company at that time. Based upon a
preliminary assessment of the candidate(s), those who appear best suited to meet
our needs may be invited to participate in a series of interviews, which are
used for further evaluation. The Nominating Committee uses the same process for
evaluating all nominees, regardless of the original source of the
recommendation. The Nominating Committee met with Mr. Michael T. Flynn and
reviewed his background and experience. The Nominating Committee recommended Mr.
Flynn for nomination to the Board and appointment to the Audit Committee and the
Compensation Committee to fill the vacancy created by the resignation of Mr.
Craig Stull on July 1, 2007. The full board elected Mr. Flynn to the Board and
appointed Mr. Flynn to the Audit Committee and the Compensation Committee, to
serve the remainder of the term that expires at the annual meeting in 2008. No
candidates for director nominations were submitted to the Nominating Committee
by any stockholder in connection with the 2007 annual meeting.
CODE OF ETHICS
Our Board has adopted a Code of Ethics for our Company. While no code of conduct
can replace the thoughtful behavior of an ethical director, officer or employee,
we feel the Code of Ethics will, among other things, focus our board and
management on areas of ethical risk, provide guidance in recognizing and dealing
with ethical issues, provide mechanisms to report unethical conduct and
generally help foster a culture of honesty and accountability. Any amendment or
waiver of the Code of Ethics may only be made by the Board or an authorized
committee of the Board. A copy of the Code of Ethics may be obtained from us by
visiting our Web site located at www.iLinc.com, or upon written request to our
Corporate Secretary at our principal executive offices located at 2999 N. 44th
Street, Suite 650, Phoenix, AZ 85018. Any amendments to, or a waiver from, a
provision of our Code of Ethics that is applicable to our principal executive
officer, principal financial officer, principal accounting officer or controller
(or persons performing similar functions) and is required to be disclosed by the
relevant rules and regulations of the SEC will be posted on our Website.
STOCKHOLDER COMMUNICATIONS
We and our Board welcome communications from our stockholders. Stockholders who
wish to communicate with the Board, or one or more specified directors, may send
an appropriately addressed letter to the Chairman of the Board, at 2999 North
44th Street, Suite 650, Phoenix, Arizona 85018. The mailing envelope should
contain a clear notation indicating that the enclosed letter is a
"Stockholder-Board Communication." All such letters should identify the author
as a security holder, and, if the author desires for the communication to be
forwarded to the entire Board or one or more specified directors, the author
should so request, in which case the Chairman will arrange for it to be so
forwarded unless the communication is irrelevant or improper. Concerns relating
to accounting, internal control over financial reporting or auditing matters
will be immediately brought to the attention of the chairman of the Audit
Committee and handled in accordance with the Audit Committee's procedures
established with respect to such matters.
-12-
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION & ANALYSIS
We compensate our management through a combination of base salary, annual
incentive bonuses and long-term equity based awards which are designed to be
competitive with those of a peer group which we have selected for comparative
purposes and to align executive performance with the long-term interests of our
stockholders. This section discusses the principles underlying our executive
compensation policies and decisions and the most important factors relevant to
an analysis of these policies and decisions. It provides qualitative information
regarding the manner and context in which compensation is awarded to and earned
by our executive officers and places in perspective the data presented in the
tables and narrative that follow.
OUR COMPENSATION COMMITTEE
Our Compensation Committee approves, implements and monitors all compensation
and awards to executive officers including the Chief Executive Officer, Chief
Financial Officer and the other three executive officers named in the Summary
Compensation Table below, all of whom we refer to as the "named executive
officers." The Committee's membership is determined by the Board of Directors
and is composed of two non-management directors. The Committee has the authority
to delegate any of its responsibilities to subcommittees as the Committee may
deem appropriate in its sole discretion. During fiscal 2007, the Committee did
not delegate any of its responsibilities.
The Committee periodically approves and adopts, or makes recommendations to the
Board for, compensation decisions (including the approval of grants of stock
options to our named executive officers). Dr. Powers, the Chief Executive
Officer, submits to the Compensation Committee his recommendations for salary
adjustments and long-term equity incentive awards based upon his subjective
evaluation of individual performance and his subjective judgment regarding each
executive officer's salary and equity incentives, for each executive officer
except himself. For more information on our Compensation Committee, please refer
to the discussion under "Corporate Governance - Compensation Committee."
The Compensation Committee reviewed all components of compensation for our
executive officers, including salary, target bonus, equity incentives, the
dollar value to the executive and cost to our Company of all perquisites and all
severance and change of control arrangements. Based on this review, the
Compensation Committee determined that the compensation paid to our executive
officers reflected our compensation goals and objectives.
COMPENSATION PHILOSOPHY AND OBJECTIVES
Our underlying philosophy in the development and administration of our annual
and long-term compensation plans is to align the interests of senior management
with those of our stockholders. Key elements of this philosophy are:
o Establishing compensation plans that deliver base salaries which are
competitive with companies within our industry and within our peer group,
that are also within our budgetary constraints and commensurate with our
salary structure.
o Rewarding executive officers for outstanding performance particularly
where such performance is reflected by an increase in total revenue,
operating margin, or net income.
o Providing equity-based incentives for executive officers to ensure that
they are motivated over the long-term to respond to our business
challenges and opportunities as owners rather than just as employees.
ELEMENTS OF EXECUTIVE COMPENSATION
We compensate our management through a combination of base salary, annual
incentive bonuses and long-term equity based awards which are designed to be
competitive with those of a peer group which we have selected for comparative
purposes and to align executive performance with the long-term interests of our
stockholders.
Base Salary
The Compensation Committee seeks to keep base salary competitive. Base salaries
for the Chief Executive Officer and the other executive officers are determined
by the Compensation Committee based on a variety of factors. These factors
include the nature and responsibility of the position, the expertise of the
individual executive, the competitiveness of the market for the executive's
services and, except in the case of his own compensation, the recommendations of
the Chief Executive Officer. The Compensation Committee may also consider other
judgmental factors deemed relevant by the Compensation Committee in determining
base salary.
-13-
Annual Incentive Bonuses
In setting compensation, the Compensation Committee considers annual cash
incentives based on Company performance to be an important tool in motivating
and rewarding the performance of our named executive officers and other members
of our senior leadership team. Performance-based cash incentive compensation is
paid to our named executive officers and other members of our senior leadership
team pursuant to our incentive bonus program. Those performance based targets
are established at the discretion of our Board of Directors at the beginning of
each fiscal year.
Our fiscal 2007 incentive cash bonus plan provides named executive officers, and
other members of our senior leadership team consisting of each organizational
vice president, with a potential cash bonus of between 15% and 35% of their
annual base salary, depending upon their executive level (i.e., CEO, Sr. VP or
VP). Performance-based cash incentive compensation payouts to participants are
dependent upon our performance relative to a separate and independent revenue
target and an operating income target. Our fiscal 2007 incentive cash bonus plan
provided for an increasing target for each quarter during fiscal 2007. The bonus
was earned using a "cliff structure," meaning that if 100% of the target was
achieved then the quarterly potential bonus was paid, but no bonus was paid if
the revenue and/or operating income fell short of the target amount. There are
no discretionary components to the payments under our incentive cash bonus
program. We achieved the revenue and operating income target in the first
quarter of fiscal 2007 and achieved the operating income target in the second
quarter of fiscal 2007.
Our fiscal 2008 incentive bonus plan provides named executive officers, and
other members of our senior leadership team consisting of each organizational
vice president, with a potential cash bonus of between 20% and 50% of their
annual base salary, depending upon their executive level (i.e., CEO, Sr. VP or
VP). If the minimum total revenue threshold is met then the cash bonus earned is
60% of the potential bonus amount. If the minimum total revenue is not met then
no bonus is earned. If the intended ("on budget") total revenue target is met
then the cash bonus earned is 100% of the potential bonus amount. If the
"stretch goal" total revenue target is met then the cash bonus earned is 125% of
the potential bonus amount. Certain of the named executives have as an
additional performance target, minimum levels of operating income, with a
portion of their potential bonus subject to that additional requirement. If the
"on budget" target is exceeded but not to the level of the "stretch goal"
target, then the earned cash bonus is based upon the pro-rata proportion of the
"stretch goal" target actually achieved. There are no discretionary components
to the payments under our incentive bonus program.
Long Term Equity Based Awards
We believe that long-term performance is achieved through an ownership culture
that encourages such performance by our executive officers through the use of
stock and stock-based awards. In 1997, our Board of Directors and the majority
of our stockholders approved our incentive stock option plan. Our incentive
stock option plan was amended and approved by a majority of our stockholders at
our 2005 annual meeting of stockholders. Under our incentive stock option plan
5,500,000 shares of common stock were approved for issuance to our employees,
directors and consultants. The following awards may be granted under our
incentive stock option plan: (1) options intended to qualify as incentive stock
options under Section 422 of the Code, (2) non-qualified stock options not
specifically authorized or qualified for favorable federal income tax
consequences, and (3) restricted stock awards consisting of shares of common
stock that are subject to a substantial risk of forfeiture (vesting) restriction
for some period of time. Our incentive stock option plan was established to
provide certain of our employees, including our executive officers, with
incentives to help align those employees' interests with the interests of
stockholders. The Compensation Committee, in consultation with our Board of
Directors and the Chief Executive Officer, has the discretion to recommend the
grant of options to purchase our common stock or restricted stock awards to
eligible participants under our incentive stock option plan. The Compensation
Committee believes that the use of stock and stock-based awards offers the best
approach to achieving our compensation goals.
-14-
Perquisites
With limited exceptions, the Compensation Committee's policy is to provide
benefits and perquisites to our executives that are substantially the same as,
or similar to, those offered to our employees at or above the level of vice
president. The perquisites that may be available to our senior level staff, in
addition to those available to all employees, may include full family coverage
of health insurance premiums and life insurance.
IMPACT OF REGULATORY REQUIREMENTS
In 1993, the federal tax laws were amended to limit the deduction a
publicly-held company is allowed for compensation paid to the chief executive
officer and to the four most highly compensated executive officers other than
the chief executive officer. Generally, amounts paid in excess of $1 million to
a covered executive, other than performance-based compensation, cannot be
deducted. In order to constitute performance-based compensation for purposes of
the tax law, stockholders must approve the performance measures. Since we do not
anticipate that the compensation for any executive officer will exceed the $1
million threshold in the near term, stockholder approval necessary to maintain
the tax deductibility of compensation at or above that level is not being
requested. We will reconsider this matter if compensation levels approach this
threshold, in light of the tax laws then in effect. We will consider ways to
maximize the deductibility of executive compensation, while retaining the
discretion necessary to compensate executive officers in a manner commensurate
with performance and the competitive environment for executive talent. Beginning
on April 1, 2006, we began accounting for stock-based payments including its
2005 LTIP in accordance with the requirements of FASB Statement 123(R).
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board has reviewed and discussed the
Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K
with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.
This report is submitted by the members of the Compensation Committee.
KENT PETZOLD, CHAIRMAN
CRAIG STULL
-15-
COMPENSATION TABLES
SUMMARY COMPENSATION
The following table contains summary information concerning the total
compensation earned during the fiscal year ended March 31, 2007 by our Chief
Executive Officer, Chief Financial Officer, a senior vice president and two
other most highly compensated named executive officers serving in this capacity
as of March 31, 2007, whose total compensation exceeded $100,000 for the fiscal
year ended March 31, 2007 and one additional individual who was not serving as
an executive officer of the Company as of the end of fiscal 2007.
SUMMARY COMPENSATION TABLE FOR THE FISCAL YEAR ENDED MARCH 31, 2007
STOCK OPTION NON-EQUITY
AWARDS AWARDS INCENTIVE PLAN ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS (1) (1) COMPENSATION COMPENSATION TOTAL
POSITION YEAR ($) ($) ($) ($) ($) (2) ($) (3) ($)
-------------------------- --------- -------- --------- ---------- ---------- -------------- -------------- ------------
James M. Powers, Jr. 2007 $234,796 - $40,500 $5,584 $29,400 $10,425 $320,705
Chairman, President
and Chief Executive
Officer
James L Dunn, Jr. 2007 166,836 - - 2,482 15,312 2,315 186,945
Senior Vice President,
Chief Financial Officer
and General Counsel
Gary L. Moulton 2007 153,198 - - 1,241 5,000 1,638 161,076
Senior Vice President
of Audio Services
Mark Yeager 2007 134,195 - - 1,241 9,800 - 145,236
Vice President of
Marketing
Nathan Cocozza 2007 168,352 - - 1,241 37,500 2,067 209,160
Director of
Government Sales (4)
-----------
(1) These amounts represent the dollar amount of compensation cost we
recognized during fiscal 2007 for awards granted to the named executive
officers based on the grant date fair value the awards in accordance with
SFAS 123(R). See note 12 to our audited financial statements for fiscal
2007 for assumptions used in determining compensation expense on options
granted in accordance with SFAS 123R.
(2) Amounts accrued for performance based bonuses.
(3) Amounts include the employer matching portion accrued from the Company's
401(k) plan.
(4) Mr. Cocozza transitioned to a position of Director of Government Sales in
October of 2006 from the position of Senior Vice President of Sales.
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PLAN-BASED EQUITY AND NON-EQUITY AWARDS
GRANTS OF PLAN-BASED AWARDS
The following table sets forth certain information concerning plan-based awards
granted to our named executive officers during the fiscal year ended March 31,
2007 pursuant to our management incentive compensation plan.
GRANTS OF PLAN-BASED AWARDS TABLE FOR THE FISCAL YEAR ENDED MARCH 31, 2007
ALL
OTHER ALL OTHER
STOCK OPTION
PAYOUTS UNDER ESTIMATED FUTURE AWARDS: AWARDS: EXERCISE
NON-EQUITY INCENTIVE PAYOUTS UNDER EQUITY NUMBER OF NUMBER OF OR BASE
PLAN AWARDS INCENTIVE PLAN AWARDS SHARES OF SECURITIES PRICE OF
------------------------------ ------------------------------ STOCK UNDERLYING OPTION
GRANT THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM OR UNITS OPTIONS AWARDS
NAME DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH)
-------------------- ------------ ----------- -------- --------- ----------- -------- --------- ---------- ------------ ---------
James M. Powers, Jr. April 2006 -0- $29,400 -0- -0- -0- -0- -0- -0- -0-
James L. Dunn, Jr. April 2006 -0- 15,312 -0- -0- -0- -0- -0- -0- -0-
Nathan Cocozza April 2006 -0- 37,500 -0- -0- -0- -0- -0- -0- -0-
Gary L. Moulton April 2006 -0- 5,000 -0- -0- -0- -0- -0- -0- -0-
Mark Yeager April 2006 -0- 9,800 -0- -0- -0- -0- -0- -0- -0-
EMPLOYMENT AGREEMENTS
We are party to employment agreements with Dr. Powers, Mr. Dunn, and Mr.
Moulton. All are officers of our Company, and Dr. Powers is also Chairman of the
Board of Directors. Mr. Cocozza was a party to an employment agreement with us,
but that employment agreement expired on its own terms on January 6, 2006. Each
of these agreements provides for an annual base salary in an amount not less
than the initial specified amount and entitles the employee to participate in
all of our compensation plans. Each agreement establishes a base annual salary
and provides the eligibility for an annual award of bonuses based on the
management incentive compensation plan (as adopted and amended by the
Compensation Committee of the Board of Directors from year to year), and is
subject to our right to terminate their respective employment at any time
without cause. Dr. Powers' and Mr. Dunn's employment agreements provide for
continuous employment for a one-year term that renews automatically unless
otherwise terminated. Mr. Dunn's employment agreement permits him to work
outside the corporate offices and he relocated to Houston in June of 2005. Mr.
Moulton's agreement provides for continuous employment for a two-year term. Each
of the foregoing agreements contains a covenant limiting competition with our
Company for one year following termination of employment except for Mr.
Moulton's which limits competition with our Company for nine months following
termination. These employment agreements also contain termination and change of
control provisions which are discussed in more detail in "Potential Payments
Upon Termination or Change in Control."
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OUTSTANDING EQUITY AWARDS
The following table sets forth certain information concerning unexercised
options, stock that has not vested and equity incentive plan awards for each
named executive officer outstanding as of March 31, 2007.
OUTSTANDING EQUITY AWARDS AT MARCH 31, 2007
OPTION AWARDS
-----------------------------------------------------------------------------------
EQUITY
INCENTIVE PLAN
NUMBER OF NUMBER OF AWARDS: NUMBER
SECURITIES SECURITIES OF SECURITIES
UNDERLYING UNDERLYING UNDERLYING
UNEXERCISED UNEXERCISED UNEXERCISED OPTION
OPTIONS OPTIONS UNEARNED EXERCISE OPTION
(#) (#) OPTIONS PRICE EXPIRATION
NAME EXERCISABLE UNEXERCISABLE (#) ($) DATE
---------------------- --------------- ----------------- ---------------- ------------- --------------
James M. Powers, Jr. 22,500 67,500 -0- $0.40 8/15/2016
James L. Dunn, Jr. 10,000 30,000 -0- $0.40 8/15/2016
Gary L. Moulton 5,000 15,000 -0- $0.40 8/15/2016
Mark Yeager 5,000 15,000 -0- $0.40 8/15/2016
Nathan Cocozza 5,000 15,000 -0- $0.40 8/15/2016
OPTION EXERCISES AND STOCK VESTED
There were no exercises of stock options by the named executive officers during
fiscal 2007.
PENSION BENEFITS
We do not sponsor any pension benefit plans and none of the named executive
officers contribute to such a plan.
NON-QUALIFIED DEFERRED COMPENSATION
We do not sponsor any non-qualified defined compensation plans or other
non-qualified deferred compensation plans and none of the named executive
officers contributes to any such plans.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
We are a party to employment agreements with Dr. Powers, Mr. Dunn, and Mr.
Moulton. Under each of the employment agreements, if we terminate the employee's
employment without cause (as therein defined), Dr. Powers, Mr. Dunn, and Mr.
Moulton will be entitled to a payment equal to 12 months' salary. Additionally,
Dr. Powers' and Mr. Dunn's employment agreements provide for a severance payment
equal to one year's compensation in the event of termination of employment
following a "change in control" of our Company (as defined therein), except that
should Mr. Dunn obtain employment with the successor organization in a
comparable position, then we will not be responsible for the severance payment.
The table below contains certain information concerning termination and change
in control payments as if the event occurred on March 31, 2007 for Messrs.
Powers, Dunn and Moulton.
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BEFORE CHANGE AFTER CHANGE
IN CONTROL IN CONTROL
---------- ----------
TERMINATION TERMINATION VOLUNTARY DEATH / CHANGE IN
NAME TYPE OF BENEFIT W/O CAUSE W/O CAUSE TERMINATION DISABILITY CONTROL
----------------------- ---------------------- ----------------- --------------- ------------- -------------- -------------
James M. Powers, Jr. Severance pay $240,000 $240,000 $ - $ - $240,000
James M. Powers, Jr. Option acceleration 19,342 19,342 - - 19,342
James L. Dunn, Jr. Severance pay 175,000 175,000 - - 175,000
James L. Dunn, Jr. Option acceleration 12,363 12,363 - - 12,363
Gary L. Moulton Severance pay 160,000 - - - -
Gary L. Moulton Option acceleration - - - - 4,706
COMPENSATION OF DIRECTORS
All compensation paid to our directors is limited to our non-employee directors.
We use a combination of cash and stock-based incentive compensation to attract
and retain qualified individuals to serve on the Board. Directors who are
employees of our Company do not receive additional compensation for serving as
directors. Each director who is not an employee of our Company receives a fee of
$3,000 for attendance at each regular Board meeting and $1,000 for each
committee meeting (unless held on the same day as a Board meeting). The Chairman
of the Audit Committee receives $3,000 per quarter, but no other chairman of a
committee receives compensation as chairman. All of our directors are reimbursed
for out-of-pocket expenses incurred in attending meetings of the Board or
committees thereof, and for other expenses incurred in their capacity as
directors of our Company. Under our incentive stock option plan each
non-employee director is eligible to receive non-qualified options to purchase
shares of our common stock. Each newly elected non-employee director
automatically is granted non-qualified options to purchase 25,000 shares of our
common stock on the date that the person first becomes a director. The vesting
for the initial grant of 25,000 is 10,000 vested immediately on the date of
grant with 5,000 shares of the remaining shares vesting on the date of
subsequent annual meetings of stockholders each year from year to year until
fully vested. Thereafter, each non-employee director each year automatically is
granted non-qualified options to purchase 20,000 shares of our common stock on
the date of our annual meeting of stockholders. Each option has an exercise
price per share equal to the fair market value of our common stock on the date
of grant. All the options granted to the non-employee directors have a term of
ten years and options granted after the initial grant are fully exercisable on
the date of grant.
The following table sets forth a summary of compensation for fiscal year ended
March 31, 2007 that we paid to each director. We do not sponsor a pension
benefits plan, a non-qualified deferred compensation plan or a non-equity
incentive plan for our directors; therefore, these columns have been omitted
from the following table. Except for reimbursement of travel expenses to attend
board and committee meetings, no other or additional compensation for services
were paid to any of the directors.
DIRECTOR COMPENSATION TABLE FOR THE FISCAL YEAR ENDED MARCH 31, 2007
FEES EARNED OR PAID OPTION AWARDS ALL OTHER
IN CASH (1) (2) COMPENSATION TOTAL
NAME ($) ($) ($) ($)
-------------------- --------------------- ----------------- ---------------- -------------
Craig Stull 19,000 4,754 - 23,754
James Collins 24,000 4,754 - 28,754
Daniel Robinson 14,000 4,754 - 18,754
Kent Petzold 21,000 4,754 - 25,754
------------------
(1) This column represents the amounts earned by each director and
accordingly accrued as expense during fiscal 2007.
(2) These amounts represent the dollar amount of compensation cost we
recognized during the fiscal year ended 2007 for awards granted
during the fiscal year ended 2007 based on the grant date fair value
of the directors' option awards in accordance with SFAS 123(R). See
Note 12 to our financial statements for assumptions used in
determining compensation expense on options granted in accordance
with SFAS 123(R).
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The following amounts represent the total outstanding option awards at March 31,
2007 for each of our non-employee directors (exclusive of Dr. Powers whose
information as an employee may be found elsewhere in this proxy statement.
OPTION
NAME AWARDS
---------------------- ------------
Craig Stull 60,000
James Collins 110,000
Daniel Robinson 110,000
Kent Petzold 75,000
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of the end of fiscal 2007 with
respect to shares of our common stock that may be issued under our equity
compensation plans (Incentive Stock Option Plan) as of the end of fiscal 2007:
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER EQUITY
TO BE ISSUED UPON EXERCISE PRICE OF COMPENSATION PLANS (EXCLUDING
EXERCISE OF OUTSTANDING OUTSTANDING OPTIONS THOSE ASSOCIATED WITH
PLAN CATEGORY OPTIONS AND RIGHTS AND RIGHTS OUTSTANDING OPTIONS)
Equity compensation plans
approved by security holders 3,588,552 $0.98 1,710,810
Equity compensation plans
not approved by security holders - - -
Total 3,588,552 $0.98 1,710,810
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves, or has served during the past year, as a
member of the board of directors or compensation committee of any other company
that has one or more executive officers serving as a member of our Board of
Directors or Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors, executive officers and
beneficial owners of more than 10% of our outstanding shares to file with the
SEC reports regarding changes in their beneficial ownership of shares in our
Company. Those who own 10% or more of our outstanding shares have been
identified in the Security Ownership of Certain Beneficial Owners and Management
as well as on file with the SEC.
Based solely on a review of the copies of such reports furnished to us and
written representations that no other reports were required, we believe that all
of our directors, officers, or beneficial owners of more than 10% of any class
of our equity securities during fiscal year 2007 complied on a timely basis with
all applicable filing requirements under Section 16(a) of the Exchange Act.
STOCKHOLDER PROPOSALS
Under the rules of the SEC, stockholder proposals for inclusion in our proxy
materials relating to the next annual meeting of stockholders must be received
by us on or before March 15, 2008.
-20-
In addition, a stockholder may bring business before the 2008 annual meeting or
may submit nominations for election as a director at that meeting if the
stockholder complies with the requirements specified in our bylaws. The
requirements for nominations for director and stockholder proposals include: (i)
providing written notice to our principal executive offices at least 90 and not
more than 180 days prior to the annual meeting or the corresponding date for the
2008 annual meeting; and (ii) supplying the additional information listed in
Article II, Section 11 of our bylaws (in the case of stockholder proposals) and
Article II, Section 12 of our bylaws (in the case of director nominations).
2007 ANNUAL REPORT ON FORM 10-K
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 2007 WAS
FILED ELECTRONICALLY WITH THE SEC AND IS AVAILABLE ON THE COMPANY'S WEB SITE.
STOCKHOLDERS WHO WISH TO OBTAIN, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL
REPORT (WITHOUT EXHIBITS) ON FORM 10-K MAY EITHER VISIT THE COMPANY'S WEBSITE AT
WWW.ILINC.COM OR MAY ADDRESS A WRITTEN REQUEST TO iLINC COMMUNICATIONS, INC.,
2999 N. 44TH STREET, SUITE 650, PHOENIX, ARIZONA, 85018. THE COMPANY WILL
PROVIDE COPIES OF THE EXHIBITS TO THE FORM 10-K UPON PAYMENT OF A REASONABLE
FEE.
OTHER BUSINESS
As of the date of this Proxy Statement, management was not aware of any business
not described above that would be presented for consideration at the annual
meeting. If any other business properly comes before the annual meeting, it is
intended that the shares represented by proxies will be voted in respect thereto
in accordance with the judgment of the persons voting them.
The above Notice and Proxy Statement are sent by order of the Board.
/s/ James L. Dunn, Jr.
----------------------
James L. Dunn, Jr.
Sr. Vice President and Chief Financial Officer
July 19, 2007
Phoenix, Arizona
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