The opinion of the court was delivered by: Hayes, Judge
The matter before the Court is the Motion for Summary Judgment filed by Plaintiff Securities and Exchange Commission ("SEC" or "Commission") against Defendant Ran H. Furman. (Doc. # 33).
On September 4, 2008, the SEC initiated this action by filing a Complaint in this Court. (Doc. # 1). The Complaint alleges:
3. This case involves a fraudulent scheme by Island Pacific, Inc. ('Island Pacific' or the 'Company') and its then senior management to overstate the Company's financial results for the quarters ended September 20, 2003 ('Q2 2004'), and December 31, 2003 ('Q3 2004'), and its fiscal year ended March 31, 2004 ('FY 2004'). The Company's senior management responsible for the fraud were defendants Barry M. Schechter..., a controlling person and de facto officer; Ran H. Furman..., the Chief Financial Officer; and Harvey Braun..., the Chief Executive Officer.
4. In Q2 2004, Schechter, Furman and Braun caused Island Pacific to improperly record and report $3.9 million in revenue from a sham transaction with an Australian software company, QQQ Systems Pty Limited ('QQQ'). The transaction had no economic substance or business purpose and instead was entered into in order to artificially inflate Island Pacific's revenues reported in its financial statements. Subsequently, in the third quarter, Island Pacific improperly recorded an offsetting transaction whereby it purchased from QQQ $3.9 million of software. In fact, no contract finalizing this offsetting transaction was signed until the fourth quarter. Island Pacific and QQQ never exchanged any money as a result of these offsetting agreements. In addition, neither Island Pacific nor QQQ made any effort to sell the other's software or to determine the fair market value of their software licensing rights as required by applicable accounting principles.
5. As a result of improperly recognizing and reporting the $3.9 million as revenue, Island Pacific overstated its revenues by 140% for Q2 2004, 29% for the nine months ending Q3 2004, and 22% for the 2004 fiscal year, and reported a small profit instead of a massive loss for Q2 2004. The defendants also failed to disclose the sham nature of the QQQ transaction and actively concealed their fraud from Island Pacific's outside auditors, and the public, by creating forged and/or fabricated documents which they used in an attempt to demonstrate that the recognition of revenue from the transaction was proper. Additionally, Furman fired a company whistleblower who expressed concern in an email that the offsetting transactions were 'structured in a manner that is intended to inflate revenues for the purpose of boosting the corporation's share price.'
6. As part of the fraudulent scheme, Schechter sold 637,750 shares of Island Pacific stock, receiving $488,410 in ill-gotten gains.
7. By engaging in this conduct, the defendants variously violated and aided and abetted violations of the antifraud, issuer reporting and record-keeping, internal controls, and prohibition against misrepresentations to accountants provisions of the federal securities laws. The Commission seeks to obtain injunctions from future violations, civil penalties, and officer and director bars against Schechter, Furman, and Braun, and additionally to obtain disgorgement of ill-gotten gains from Schechter. (Doc. # 1 ¶¶ 3-7). The Complaint alleges the following claims: (1) fraud in the offer or sale of securities against Schechter pursuant to 15 U.S.C. § 77q(a); (2) fraud in connection with the purchase or sale of securities against all Defendants pursuant to 15 U.S.C. § 78j(b); (3) violations of issuer reporting requirements against Defendant Retail Pro, Inc. formerly known as Island Pacific, Inc. ("Island Pacific") and aiding and abetting issuer reporting violations against the individual Defendants pursuant to 15 U.S.C. § 78m(a); (4) record-keeping violations against all Defendants pursuant to 15 U.S.C. § 78m(b)(2)(A) and related regulations; (5) misrepresentations to accountants against the individual Defendants pursuant to 17 C.F.R. § 240.13b2-2; (6) internal control violations against all Defendants pursuant to 15 U.S.C. § 78m(b)(2)(B) and related regulations; and (7) false certification violations against Furman and Braun pursuant to 17 C.F.R. § 240.13a-14.
On September 4, 2008, Defendants Schechter, Braun and Island Pacific each entered appearances, waived service of process, and consented to the entry of final judgment. (Doc. # 3, 4, 5). The consent to the entry of final judgment signed by Schechter states:
Without admitting or denying the allegations of the complaint..., Defendant hereby consents to the entry of the Final Judgment in the form attached hereto..., which... permanently enjoins and restrains Defendant from [Securities Act] violation[s]...;... orders Defendant to pay disgorgement in the amount of $488,410...;... orders Defendant to pay a civil penalty in the amount of $120,000...; and... bars Defendant from serving as an officer or director of a public company for a period of ten years.... (Doc. # 5 ¶ 2). The consent to the entry of final judgment signed by Braun states:
Without admitting or denying the allegations of the complaint..., Defendant hereby consents to the entry of the Final Judgment in the form attached hereto..., which... permanently enjoins and restrains Defendant from [Securities Act] violation[s]...;... orders Defendant to pay a civil penalty in the amount of $75,000...; and... bars Defendant from serving as an officer or director of a public company for a period of five years.... (Doc. # 4 ¶ 2). The consent to the entry of final judgment signed by Island Pacific's general counsel states: "Without admitting or denying the allegations of the complaint..., Defendant hereby consents to the entry of the Final Judgment in the form attached hereto..., which... permanently enjoins and restrains Defendant from [Securities Act] violation[s]...." (Doc. # 3 ¶ 2).
On October 8, 2008, Furman filed an Answer to the Complaint and Jury Demand. (Doc. # 9).
On October 15, 2008, the Court entered final judgments against Island Pacific, Schechter and Braun, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. (Doc. # 12, 14, 16).
On August 10, 2009, the SEC filed the Motion for Summary Judgment against Furman, the sole remaining Defendant. (Doc. # 33).
On September 14, 2009, Furman filed a response in opposition to the Motion for Summary Judgment. (Doc. # 36). On September 16, 2009, Furman filed Objections to the SEC's evidence proferred in support of the Motion for Summary Judgment. (Doc. # 40).
On September 25, 2009, the SEC filed a reply. (Doc. # 41).
On October 13, 2009, the Court heard oral argument on the Motion for Summary Judgment. (Doc. # 43).
At all relevant times, Island Pacific, a Delaware Corporation, was headquartered in Irvine, California, and also had offices in La Jolla, California. (Undisputed Fact # 5).*fn1 During all relevant times, Island Pacific developed and sold computer software to the retail industry. (Id.) During the relevant period, Island Pacific's common stock was registered with the Commission pursuant to Section 12(b) of the Exchange Act and traded on the American Stock Exchange. (Id.)
Defendant Schechter founded Island Pacific (then known as SVI Solutions, Inc.) in 1994 and, at various times, has been its Chief Executive Officer ("CEO") and its Chairman of the Board of Directors. (Undisputed Fact # 6). During the relevant period, Schechter was designated as a consultant to Island Pacific. (Id.) Defendant Braun was Island Pacific's CEO from April 2003 to April 2004, and the Chairman of the Board of Directors from July 2003 to February 2004. (Undisputed Fact # 7). Braun and Steven Beck, Island Pacific's President, were the "daily operators" of Island Pacific during the relevant time. (Furman Test. at 52, Furman Ex. 77).
Defendant Furman was a CPA in Washington State but allowed his CPA license to expire in 1993. (Undisputed Fact # 3). From 1990 to 1992, Furman worked for the accounting firm Deloitte & Touche, where he participated in audits of public companies. (Id.) From approximately 2001 to 2003, Furman was Chief Financial Officer ("CFO") of Edigital, a public company. (Undisputed Fact # 2). Furman was the CFO of Island Pacific from September 2003 to January 2005. (Undisputed Fact # 1).
In September 2003, Island Pacific and QQQ, a newly-formed Australian corporation, negotiated a software license agreement (the "License Agreement"). (Furman Decl., Doc. # 36-3, ¶ 16; Furman Dep. at 74, Pl.'s Ex. 3).*fn2 Defendant Schechter negotiated the License Agreement on behalf of Island Pacific, and Shaun Rosen, the CEO of QQQ, negotiated the License Agreement on behalf of QQQ. (Rosen Dep. at 43, Furman Ex. 3; Furman Decl., Doc. # 36-2, ¶ 16). Furman had no involvement in the negotiation of the License Agreement. (Rosen Dep. at 43-44, Furman Ex. 3; Furman Decl. ¶ 16, Doc. # 36-2).
On September 25, 2003, Defendant Braun sent Rosen a letter, which states: This letter serves to confirm that Island Pacific is currently in negotiations with QQQ to acquire the rights to certain intellectual property owned and held by QQQ.
Island Pacific is simultaneously negotiating the sale of its point of sale division to QQQ and has completed the sale of an unrestricted license to QQQ of Island Pacific's enterprise application, version 1.5.
This letter further confirms that the payment terms extended to QQQ for the sale of version 1.5 will be changed to coincide with the closing of the other transactions contemplated in this letter, when completed. (Pl.'s Ex. 10 at 222; Rosen Dep. at 75, Pl.'s Ex. 6). Schechter asked Braun to sign the letter; Braun "presume[d]" that the letter was drafted by Schechter. (Braun Dep. at 17-18, Moser Decl. Ex. 2, Doc. # 41-4). Rosen testified that he has never spoken to Braun, and he has not had "any contact whatsoever with Furman." (Rosen Dep. at 44, 76, Pl.'s Ex. 6). Furman states in his affidavit:
In 2003, I had no knowledge of a letter dated September 25, 2003 from Braun to Shaun Rosen.... I was never told that there was an agreement or letter sent to Mr. Rosen that indicated payments due from QQQ would coincide with payments due to QQQ. The first time I saw or had knowledge of such a letter... was when the SEC presented it to me for review while taking my investigative testimony in March 2007. (Furman Decl., Doc. # 36-3, ¶ 14).
Furman signed a version of the License Agreement on behalf of Island Pacific. (Pl.'s Ex. 8 at 197; Furman Dep. at 79-80, Pl.'s Ex. 3). The version of the License Agreement signed by Furman granted QQQ a non-exclusive license to distribute Island Pacific's "Host Retail Merchandising Program" software ("Host software") in Australia and New Zealand.*fn3 (Pl.'s Ex. 8 at 194-98).
Although Furman, on behalf of Island Pacific, and Shaun Rosen..., on behalf of QQQ, signed the same signature page of the License Agreement, Rosen signed a different version of the License Agreement than the one pursuant to which revenue was recognized by Island Pacific. Specifically, according to the terms of the License Agreement executed by QQQ, QQQ agreed to pay Island Pacific, at QQQ's option, either: (1) $3.25 million in two equal installments of $1.625 million on November 15, 2003, and December 31, 2003; or (2) 20% of QQQ's net sublicensing fees to a maximum of $4 million. In contrast, Exhibit B to the License Agreement which bears the signatures of both Rosen and Furman provided that QQQ would pay both (1) $3.25 million in two equal installments of $1.625 million on November 15, 2003 and December 31, 2003; and (2) per copy royalty payments for a period of thirty-six months. Unlike the rest of the License Agreement, Exhibit B to the latter version does not bear the fax footprint which is on each of the remaining pages, and which sets forth the date of September 29, 2003, the name "Shaun Rosen," and Rosen's home fax number. In fact, Rosen never agreed to the terms set forth in this version of Exhibit B. (SEC's Statement of Material Facts ¶ 10 (emphasis in original) (citing Pl.'s Ex. 6, Rosen Dep. at 50-51, 67-69; Pl's Ex. 7; Pl.'s Ex. 8), Doc. # 33-3).
Shaun Rosen... in fact did agree to the terms requiring payment of (1) $3.25M and (2) royalty payments of 10% for 36 mos. as evidenced by his signature to the... License... Agreement entered into September 19, 2003. [Pl.'s Ex. 8] is a separate agreement from [Pl.'s Ex. 7] evidenced by the fact that there is no colon after the word 'By' on the signature page of [Pl.'s Ex. 8], while there is a colon in the same location in [Pl.'s Ex. 7]. Furman is certain that when [Island Pacific] recorded revenue for the License Agreement for the quarter ended September 30, 2003, that [Island Pacific] had a signed agreement documenting the $3.9 million sale price. (Furman's Statement of Genuine Issues at 5 (emphasis in original) (citing Pl's Ex. 7; Pl.'s Ex. 8; Furman Decl. ¶ 13 ("When [Island Pacific] recorded revenue for the Second Quarter 2004, I believed that [Island Pacific] had an agreement signed during that quarter documenting the $3.9 million sale price."), Doc. # 36-2; Pl.'s Ex. 35)).*fn4
On September 30, 2003, Island Pacific shipped software to QQQ in accordance with the License Agreement. (Rosen Dep. at 62, Pl's Ex. 6.) Furman believed this shipment included "both the Host Retail Merchandise Software and the Direct Software," and "the cost of the shipment was included in the $3.9 million dollar software sales price." (Furman Decl., ¶ 15, Doc. # 36-3).
On October 3, 2003, Furman sent an email to Schechter and Braun with a subject line, "Revenue forecast for Q2," which states: "Currently, we have booked $5.22mm revenues for the quarter (including $3.25mm for QQQ)." (Pl.'s Ex. 11).
On October 10, 2003, Furman sent an email to Schechter. (Pl.'s Ex. 12). Attached to the email is an unsigned copy of the License Agreement, which grants QQQ a license to distribute two Island Pacific programs, "Host" and "Direct," and provides that QQQ agrees to pay Island Pacific $3.05 million for Host and $650,000 for Direct, payable in two equal installments due on November 15, and December 31, 2003, plus 10% of QQQ's net sublicensing fees. (Pl.'s Ex. 12 at 233). Furman's email to Schechter states:
Barry, in the spirit (and language) of the original executed document, the only thing we did was change Exhibit A and B to broaden the definition of 'Software' to include Direct, in addition to [Island Pacific] Host. Exhibit B (License and Royalties) also has 2 sections to it - [Island Pacific] Host and Direct. Since everything else is the same and consistent, this is the easiest and I believe the cleanest way to do this. If you want us to change it, please let us know. (Pl.'s Ex. 12 at 227).
October 10, 2003, Joseph Dietzler, Island Pacific's Contract Administrator, sent an email to Furman and Schechter stating, "Gents, Please ensure that the attached version of the QQQ license is used. The only changes are to the Exhibits and the exec summary. No one had advised me that the Merchandising license fee was increased from 3,050,000 to 3,250,000.
When I added the Direct program to the license, I was using a draft with the old figure for Merchandising." (Furman Ex. 71 at 1098; Dietzler Test. at 17-18, Pl.'s Ex. 30). Furman responded with an email to Schechter and Dietzler: "Thanks. Barry [Schechter], from my side, we have already booked $3.25mm and I plan to book the additional $650k as well. Please make sure these are correct." (Furman Ex. 71 at 1098).
On Friday, October 10, 2003 at 4:41 p.m., Jacqueline Tran, Island Pacific's Controller, sent an email to Furman stating, "When can we book the additional revenue?" (Pl.'s Ex. 13A at 234; Tran Decl. ¶¶ 2-3). Furman replied to Tran three minutes later, stating: "We amended the agreement." (Pl.'s Ex. 13A at 234). On Monday, October 13, 2003, Tran replied: "Do you have the revised agreement?" (Id.) On October 13, 2003, Furman replied: "This should have both parts." (Id.) Attached to Furman's October 13, 2003 email was an unsigned copy of the License Agreement, with the same provisions as the copy attached to Furman's October 10, 2003 email to Schechter, except QQQ is required to pay Island Pacific $3.25 million for Host and $650,000 for Direct, payable in two equal installments due on November 15, and December 31, 2003, plus 10% of QQQ's net sublicensing fees. (Pl.'s Ex. 13A at 241).
Furman testified that it was his understanding that the final "sale price of $3,900,000" in the License Agreement "was arrived at prior to the close of September 30, 2003." (Id. at 98). When asked if the "final sale price" was "documented as of September 30, 2003," Furman responded, "That I'm not sure of." (Id.) Furman states in his affidavit:
I understood the document marked as [Pl's Ex. 8] to be the authoritative license agreement, as of September 30, 2003, between [Island Pacific] and QQQ Systems Pty Limited..., with the exception that [Pl's Ex. 8] did not accurately represent the details of the License Agreement as negotiated between [Island Pacific] and QQQ, while [Pl.'s Ex. 13A, i.e., the version of the License Agreement attached to Furman's October 13, 2003 e-mail to Tran] did present the details of the License Agreement between [Island Pacific] and QQQ as of September 20, 2003.... The License Agreement granted QQQ a license to distribute both Host Retail Merchandise Software... and the Direct Software.... Specifically, I understood the agreed upon terms of the License Agreement, as of September 30, 2003, granted QQQ a license to distribute both Host and Direct software, and required that QQQ pay [Island Pacific] $3.25 million for Host and $650,000 for Direct (payable in two equal installments due on November 15, and December 31, 2003), plus 10% of QQQ's net sublicensing fees.... When [Island Pacific] recorded revenue for the Second Quarter 2004, I believed [Island Pacific] had an agreement signed during that quarter documenting the $3.9 million sale price.
(Furman Decl. ¶¶ 11-13 (emphasis in original), Doc. # 36-3).
"As far as [Furman] knew," QQQ was a newly formed corporation with no payment history with Island Pacific. (Furman Dep. at 74, Pl.'s Ex. 3). Furman did not review QQQ's financial statements or perform any other due diligence to determine whether QQQ had any ability to pay the $3.9 million. (Furman Dep. at 19, 22 & 40, Pl.'s Ex. 3.) Instead, Furman relied on representations by Schechter that the funds were collectable from QQQ. (Id. at 20-21; Furman Decl., Doc. # 36-3, ¶ 16). In September 2003, Schechter told Furman:
(1) that he had known Mr. Rosen (the CEO of QQQ) and the principals of QQQ for many years, and that they had done business together; (2) that Mr. Rosen was a majority shareholder in QQQ and had made a large investment into QQQ; (3) that Mr. Rosen was a very wealthy individual; and (4) that QQQ was looking to grow into a larger company. (Furman Decl., Doc. # 36-3, ¶ 16). "As of September 2003, [Furman] believed that (1) QQQ had access to sufficient funds to honor the terms of the License Agreement on the required due dates, (2)... QQQ intended to pay, and (3)... Rosen had the ability to pay on behalf of QQQ, if needed." (Id. ¶ 17). Rosen testified that he could not recall having entered into an agreement with Island Pacific to pay $650,000 for Island Pacific's Direct software. (Rosen Dep. at 73, Pl.'s Ex. 6). Rosen testified that QQQ "never had that kind of cash" necessary to pay a $3.9 million invoice. (Id. at 66).
On November 11, 2003, Braun, Furman and Tran signed a management representation letter sent to Island Pacific's auditors in connection with the auditors' review of the Company's financial statements for its quarter ended September 30, 2003 (i.e., Q2 2004). (Furman Dep. at 168-69; Pl.'s Ex. 19.) The letter states:
We confirm, to the best of our knowledge and belief, the following representations made to you during your review:
1. The interim financial information... is presented in accordance with accounting principles generally accepted in the United States....
6. We have no knowledge of any fraud or suspected fraud affecting the Company involving Management... [or] Employees who have significant roles in internal controls....
12. There are no material transactions that have not been properly recorded in the accounting records underlying the interim financial information....
(Pl.'s Ex. 19 at 801-02).
On November 12, 2003, Island Pacific filed its quarterly report on Form 10-Q with the SEC for its quarter ended September 30, 2003 (i.e., Q2 2004). (Pl.'s Ex. 15). Tran provided "the numbers that [Island Pacific] put in the [Form 10-Q]" and then Furman supplied "pretty much all the verbiage" in Island Pacific's Form 10-Q. (Furman Test. at 57, Pl.'s Ex. 4). Furman signed the Form 10-Q, and signed a required certification which asserted that to his knowledge: (1) the Form 10-Q did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading; and (2) the Form 10-Q fairly presented, in all material respects, Island Pacific's financial condition and results of operations. (Id. at 180-81; Pl.'s Ex. 15 at 416-17, 419). Island Pacific's Q2 2004 Form 10-Q disclosed that the transaction with QQQ accounted for 46% of Island Pacific's accounts receivable, and 32% of Island Pacific's net sales for the six months ended September 30, 2003, and represented that the License Agreement was a one-time transaction. (Pl.'s Ex. 15 at 368, 395).
After the market closed on November 12, 2003, at or about 4:00 p.m. Eastern Standard Time ("EST"), Island Pacific announced its Q2 2004 financial results in a press release headlined "Company Reports 76% Increase in Revenues," which represented that Island Pacific earned $6.7 million in revenues-a 76% increase over revenues of $3.8 million for the same period in the previous year. (Pl.'s Ex. 20; Undisputed Fact # 31). Island Pacific also reported gross profit (revenues minus cost of goods sold) of $5.6 million, and income from continuing operations of $699,000. (Undisputed Fact # 31).
When Island Pacific issued a press release "that had some numbers attached to them," Tran "supplied the numbers to [Furman]... and then a lot of times [Furman wrote] a lot of the verbiage concerning... just the numbers themselves." (Furman Dep. at 68, Pl.'s Ex. 4). In his affidavit, Furman states:
I was only partially involved in the drafting of the [earnings] press releases, as I received input, assistance and final approval from other parties.... Any figures I inserted into [Island Pacific]'s press releases for [Island Pacific]'s Second Quarter 2004, Third Quarter 2004 and Fiscal Year End 2004 were those taken from the financial statements, account reconciliations and/or draft 10-Qs or 10-Ks that had already been reviewed and signed off by the auditors....
As another 'check and balance,' [Island Pacific]'s Chief Executive Officer, attorneys, [Island Pacific] audit committee, auditors at SingerLewak and others would review and sign-off on both the earnings press releases and final 10-Qs and 10-Ks prior to publication. The figures inserted into IP's Second Quarter 2004, Third Quarter 2004 and Fiscal Year End 2004 public filings were all reviewed and signed-off on by the auditors and all of the above listed, including Mr. Schechter and Harvey Braun. (Furman Decl. ¶¶ 9-10, Doc. # 36-3; see also Tran Decl. ¶¶ 5-6, Doc. # 36-4 (same)).
On November 12, 2003, at 4:30 p.m. EST, Island Pacific broadcast an earnings conference call with securities analysts and shareholders over the Internet. (Compl. ¶ 24, Doc. # 1; Furman Answer ¶ 24, Doc. # 9.) Furman was present and spoke during the earnings conference call. Furman spoke from a script, which he drafted. (Furman Test. at 69, Pl.'s Ex. 4). Furman stated, in part:
We reported revenues of approximately $6.7 million, a 75.9% increase versus revenues of $3.8 million for the year-earlier period.... The increase in gross profit [from $2.2 million in the same quarter in the prior year to $5.6 million] is due primarily to an increase in higher margin software sales and a reduction in professional services....
(Pl.'s Ex. 21 at 2-3; see also Furman Test. at 177, Pl.'s Ex. 4). During the November 12, 2003 earnings conference call, Braun stated:
We showed solid sequential revenue growth during the second quarter even while we took important steps to position the company for the second half of the year to ensure that we meet the Fiscal 2004 guidance we outlined in the first quarter and are reaffirming today.... [W]e expect to report annual sales revenues of $31 to $33 million... which is the same guidance we announced during our first quarter call. Obviously this implies that we will generate significant third and fourth quarter revenues to reach this target. We are comfortable with those expectations.... (Pl.'s Ex. 21 at 5 & 8). Braun's comments were also from a script, which Furman, among others, reviewed in advance of the call. (Furman Test. at 70, Pl.'s Ex. 4). The QQQ transaction was not mentioned during the conference call. (Furman Test. at 178, Pl.'s Ex. 4).
On November 13, the day following the positive earnings release, Island Pacific's stock closed at $2.25, up 8.2% from the prior day's close, and trading volume increased to 1.75 million shares, up from the prior five-day average trading volume of 100,160 shares. (Undisputed Fact # 37).
Island Pacific and QQQ negotiated an agreement ("Sublicense Agreement") whereby Island Pacific agreed to purchase a sublicense to market QQQ's "Pyramid" software for $3.9 million "payable on the Effective Date in the form of a set off against indebtedness of QQQ to [Island Pacific], plus revenue sharing...." (Undisputed Fact # 38; Pl.'s Ex. 24 at 858). The Sublicense Agreement is signed by Rosen on behalf of QQQ and Steven Beck, Island Pacific's President, on behalf of Island Pacific. (Pl.'s Ex. 24 at 867). The Sublicense Agreement is dated December 14, 2003, and states that its effective date is December 31, 2003. (Id. at 854-55).
As early as August 26, 2003 (prior to Furman joining Island Pacific), Schechter and Beck were interested in pursuing the Pyramid software for Island Pacific. (Furman Ex. 59). By September of 2003, Beck was directing Island Pacific employees to include the Pyramid software in Island Pacific's proposals to potential clients. (Furman Ex. 60, 61; Malik Dep. at 183, Furman Ex. 58). On September 16, 2003, Defendant Braun, Island Pacific's CEO, sent an email to multiple Island Pacific employees (but not Furman) referencing the "under development" "Pyramid system," and stating that Beck "is going to drive this oppty [sic]." (Furman Ex. 65 at 1065). According to Rosen, Island Pacific was selling the Pyramid software "into Island Pacific's customer base even before the [Sublicense] [A]greement was finalized." (Rosen Dep. at 195, Furman Ex. 3). QQQ's Pyramid software, version 1.0 was released in March of 2004. (Pl.'s Ex. 46 at 1408). As of March of 2004, version 1.1 of the Pyramid software, known as "The Island Pacific Version," was due in November of 2004. (Id.) However, "in the software industry people sell software that they don't have [because it's still under development]." (Malik Dep. at 181-82, Furman Ex. 58).
On January 16, 2004, Rosen sent Schechter an email, which stated: "1st draft of pyramid technology agreement[.] [L]et me have your comments." (Pl.'s Ex. 23 at 837). Attached to the email is an undated and unsigned version of the Sublicense Agreement, which contains different terms from the signed version dated December 14, 2003. (Id.). The "Sub-Licensing Fee" in the unsigned version is twenty million South African Rands. (Id. at 843).
On January 28, 2004, Tran, Island Pacific's Controller, sent Furman an email, with the subject "QQQ", which stated: "Do you have the latest copy so we can prepare the journal entry?" (Pl.'s Ex. 26 at 879). On the same day, Furman forwarded Tran's email to Joseph Dietzler, Island Pacific's Contract Administrator, and asked him to forward "what you have for QQQ [to Tran] so she can book it"; and Dietzler responded to Tran, copying Furman, by forwarding an unsigned copy of the Sublicense Agreement (which is dated December 14, 2003 and contains the same terms as the signed version of the Sublicense Agreement). (Id.)
Furman testified that, "based on" the evidence recounted above, it does not "seem possible that there could have been a final agreement on December 31, 2003." (Furman Test. at 143, Pl.'s Ex. 5). However, Furman states in his affidavit: "I believed that the Technology Purchase Agreement between QQQ and [Island Pacific] ('Pyramid Sublicense Agreement') dated December 14, 2003 was finalized prior to December 31, 2003.... I was not aware that a 'first draft' of the Pyramid Sublicense Agreement was being circulated in January 2004." (Furman Decl. ¶¶ 18-19, Doc. # 36-3).
In a note initialed by auditors Sally Aubury and Marc Abrams on February 11, 2004, Aubrey wrote that "On 12/31/03 QQQ sold the licensing rights to market and sell Pyramid POS software in Europe and the U.S. to [Island Pacific]," and "Consideration was as follows[:] $3.9M (Paid by offsetting cost of ...