Re: proxy out vote to increase authorized to 350,000,000
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Message: Re: proxy out vote to increase authorized to 350,000,000
On July 8, 2008, the Board of Directors of the Company adopted, subject to stockholder approval, an amendment to the Company’s Certificate of Incorporation (the “Certificate”) to increase the total authorized shares of Common Stock of the Company from 300 million to 350 million. Such increase in the number of authorized shares of Common Stock of the Company would be affected by restating the first paragraph of current Article Fourth of the Certificate to read as follows:
“FOURTH: The aggregate number of shares which the Corporation shall have authority to issue is Three Hundred Fifty-Five Million (355,000,000), divided into Three Hundred Fifty Million (350,000,000) shares of Common Stock of the par value of $.001 per share, and Five Million (5,000,000) shares of preferred stock of the par value of $.001 per share.”
The additional shares of Common Stock for which authorization is sought herein would be part of the existing class of Common Stock and, if and when issued, would have the same rights and privileges as the shares of Common Stock presently outstanding. Holders of Common Stock have no preemptive or other subscription rights.
As of July 21, 2008, [276,527,941] shares of Common Stock were issued and outstanding, [1,590,000] shares were reserved for issuance pursuant to outstanding options under the Company’s 1994 Stock Option Plan, [6,953,000] shares were reserved for issuance pursuant to outstanding options under the Company’s 2005 Equity Based Compensation Plan, [1,750,000] shares were reserved for issuance pursuant to other outstanding options, [2,331,572] shares were reserved for issuance upon exercise of warrants issued in 2006, [2,347,398] shares were reserved for issuance upon conversion of convertible debt and [5,534,734] shares were reserved for issuance pursuant to the Company’s equity line with Fusion Capital Fund II, LLC. Therefore, of the 300,000,000 shares of Common Stock currently authorized by the Certificate, only [2,965,355] shares are presently available for general corporate purposes. The Board of Directors has not yet reserved [15,750,000] shares for issuance in connection with Series AA Preferred Stock and related warrants. Assuming this Proposal Two is approved by the stockholders and such additional shares are reserved, a total of [312,784,645] shares of Common Stock will be outstanding or reserved for issuance upon exercise of outstanding options, convertible debt, convertible preferred stock and warrants, and [37,215,355] shares will be available for general corporate purposes.
Purposes and Effects of the Authorized Shares Amendment
The increase in authorized shares of Common Stock is recommended by the Board of Directors in order to provide a sufficient reserve of such shares for the present and future needs and growth of the Company. Prior increases in the authorized shares have primarily been used for equity financing transactions and for stock options and warrants. The Board of Directors believes that the number of authorized shares currently available for issuance will not be sufficient to enable us to respond to potential business opportunities and to pursue important objectives that may be anticipated. Accordingly, the Board believes that it is in the best interests of the Company and its stockholders to increase the number of authorized shares of Common Stock, and the total authorized shares of capital stock, as described above.
On June 27, 2008 the Company sold 75,000 shares of Series AA Preferred Stock at a per share price of $10 for an aggregate amount of $750,000. Dividends of 5% per annum are payable, with certain exceptions, either in cash or in shares of Common Stock at the election of the Company. The stated dollar amount of Series AA Preferred Stock is convertible into fully paid and nonassessable shares of Common Stock at a conversion price of $0.10 per share. The Series AA Preferred Stock shall be subject to automatic conversion on or about June 30, 2010 subject to certain conditions.
At the option of holders, the Series AA Preferred Stock is redeemable at June 30, 2009 should sufficient shares of Common Stock not be authorized and reserved for conversion of all shares of Series AA Preferred Stock by such date. The cash redemption price shall be the greater of (i) $20.00 per share of Series AA Preferred Stock plus a sum equal to all accrued but unpaid dividends, or (ii) the five day average closing price immediately preceding June 30, 2009 multiplied by the number of shares of Common Stock that could be obtained on conversion of the Series AA Preferred Stock.
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Jul 10, 2008 12:17PM
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