Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
AMENDMENT
NO. 1
Proxy
Statement Pursuant To Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by the Registrant
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x
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|
Filed
by a Party other than the Registrant
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¨
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Check the
appropriate box:
x
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Preliminary
Proxy Statement
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¨
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Confidential,
for use of the Commission only (as permitted by Rule
14a-6(e)(2)
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¨
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Definitive
Proxy Statement
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¨
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Definitive
additional materials
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¨
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Soliciting
material under Rule 14a-12
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NEOMEDIA TECHNOLOGIES,
INC.
(Name
of Registrant as Specified in Charter)
Payment
of filing fee (Check the appropriate box):
x
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No
fee required.
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¨
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Fee
computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials:
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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NEOMEDIA
TECHNOLOGIES, INC.
Two
Concourse Parkway, Suite 500
Atlanta,
Georgia 30328
Dear
stockholder:
You are
cordially invited to attend a special meeting (the “Meeting”) of the
stockholders of NeoMedia Technologies, Inc., a Delaware corporation (the “Company”). The
Meeting will be held on March ___, 2010, at 11:00 a.m., local time, at
____________________, Atlanta, Georgia 30328.
Your vote
is important. We encourage you to vote your proxy either on the
Internet at www.wwstr.com or
by mailing in your enclosed proxy card so that your shares will be presented and
voted at the meeting even if you cannot attend. Accordingly, please
return your proxy as soon as possible.
We hope
to see you at the meeting.
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Sincerely,
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/s/Iain
A. McCready
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Iain
A. McCready
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Chief
Executive Officer
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Atlanta,
Georgia
February
__, 2010
NEOMEDIA
TECHNOLOGIES, INC.
Two
Concourse Parkway, Suite 500
Atlanta,
Georgia 30328
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
TO
BE HELD MARCH ___, 2010, AT 11:00 A.M.
NOTICE IS HEREBY GIVEN that a
special meeting (the “Meeting”) of
stockholders of NeoMedia Technologies, Inc., a Delaware corporation (the “Company”), will be
held on March ____, 2010 at 11:00 a.m., local time, at _______________ Atlanta,
Georgia 30328 for the following purposes, as more fully described in the
attached Proxy Statement:
1. To
approve an amendment to the Company’s Certificate of Incorporation to authorize
a 1 share for 100 shares reverse split of the Company’s outstanding common stock
(“Common
Stock”);
2. To
approve an amendment to the Company’s Certificate of Incorporation to fix the
amount of authorized shares of Common Stock at 5,000,000,000
shares;
3. To
approve an amendment to the Company’s Certificate of Incorporation to effect a
decrease in the par value of Common Stock from $0.01 to $0.001; and
4. To
consider and act on any other matters that may properly come before the Meeting
or any postponement or adjournment thereof.
The
Company’s Board of Directors has fixed the close of business on February 1, 2010
as the record date (the “Record Date”) for the
determination of the stockholders entitled to notice of, and to vote at, the
Meeting or any postponement or adjournment thereof. Only those
stockholders of record of the Company as of the close of business on the Record
Date will be entitled to vote at the Meeting or any postponement or adjournment
thereof.
The
Company’s Board of Directors is making this proxy
solicitation. Subject to the restrictions described in the attached
Proxy Statement, all shares of Common Stock that are presented by properly
executed and unrevoked proxies received by the Company’s selected vendor
(Worldwide Stock Transfer, LLC) to tabulate the vote of the Company’s common
stockholders, prior to the Meeting, will be voted, and all shares of the
Company’s Series D Convertible Preferred Stock that are presented by properly
executed and unrevoked proxies received by the Company, prior to the Meeting,
will be voted.
A
complete list of stockholders entitled to vote at the Meeting will be open for
examination by any stockholder of record during ordinary business hours
commencing two days after the date of this notice at the Company’s offices
located at Two Concourse Parkway, Suite 500, Atlanta, Georgia
30328.
IMPORTANT
All
stockholders entitled to vote are cordially invited to attend the Meeting in
person. Whether or not you plan to attend the Meeting, please sign
and return the enclosed proxy card (the “Proxy”) as promptly
as possible in the envelope enclosed for your convenience. Should you
receive more than one Proxy because your shares are registered in different
names and addresses, each Proxy should be signed and returned to ensure that all
your shares will be voted. You may also vote via the Internet at
www.wwstr.com.
You may revoke your Proxy at any time prior to the Meeting by executing and
submitting a Proxy bearing a later date. If you attend the Meeting
and vote by ballot, your Proxy will be revoked automatically and only your vote
at the Meeting will be counted.
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By
Order of the Board of Directors,
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/s/Iain
A. McCready
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Iain
A. McCready
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February
__, 2010
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Chief
Executive Officer
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YOUR
VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND, AS SOON
AS POSSIBLE, COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE, OR, IF YOU ARE A COMMON
STOCKHOLDER, YOU MAY ALSO VOTE YOUR PROXY VIA INTERNET.
PROXY STATEMENT
TABLE
OF CONTENTS
ABOUT
THE MEETING
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1
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What
is the purpose of the Meeting?
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1
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Who
is entitled to vote?
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1
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Who
can attend the Meeting?
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2
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What
constitutes a quorum?
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2
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How
do I vote by proxy?
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2
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What
if I do not specify how my shares are to be voted?
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2
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Can
I change my vote after I return my proxy card?
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2
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What
if other matters come up at the Meeting?
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2
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Can
I vote in person at the Meeting rather than by completing the Proxy
Card?
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2
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What
do I do if my shares are held in “street name”?
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3
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How
are votes counted?
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3
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Who
pays for this proxy solicitation?
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3
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What
vote is required to approve each item?
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3
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What
are the Board’s recommendations?
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4
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STOCKHOLDER
PROPOSALS
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5
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PROPOSAL
NO. 1 – AUTHORIZATION OF AN AMENDMENT TO THE COMPANY’S
CERTIFICATE OF INCORPORATION TO AUTHORIZE A 1 SHARE FOR 100 SHARES REVERSE
SPLIT OF THE COMPANY’S OUTSTANDING COMMON STOCK
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5
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Reverse
Stock Split in General
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5
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Certain
Disadvantages Associated With the Reverse Split
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6
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Principal
Effects of the Reverse Split
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7
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Procedure
for Effecting the Reverse Stock Split and Exchange of Stock
Certificates
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8
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No
Dissenters' Rights
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8
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Federal
Income Tax Consequences of the Reverse Stock Split
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8
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Anti-Takeover
Effects
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9
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Required
Vote
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10
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Recommendation
of the Board
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10
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PROPOSAL
NO. 2 – AUTHORIZATION OF AN AMENDMENT TO THE COMPANY’S
CERTIFICATE OF INCORPORATION TO FIX THE AMOUNT OF AUTHORIZED SHARES OF
COMMON STOCK AT 5,000,000,000 SHARES
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10
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Fixing
of Authorized Shares in General
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10
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Certain
Disadvantages of the Adjustment
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11
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Principal
Effects of the Adjustment
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11
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Procedure
for Effecting the Adjustment
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11
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No
Dissenters' Rights
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11
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Anti-Takeover
Effects
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11
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Required
Vote
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12
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Recommendation
of the Board
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12
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PROPOSAL
NO. 3 – AUTHORIZATION OF AN AMENDMENT TO THE COMPANY’S
CERTIFICATE OF INCORPORATION TO DECREASE THE PAR VALUE OF THE COMPANY’S
COMMON STOCK FROM $0.01 TO $0.001
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13
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Reduction
in Par Value in General
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13
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Certain
Disadvantages Associated With Change in Par Value
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13
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Procedure
for Effecting Change in Par Value
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13
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No
Dissenters' Rights
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13
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Required
Vote
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14
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Recommendation
of the Board
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14
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
COMPANY
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15
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Change
in Control of the Company
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16
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MANNER
IN WHICH THE PROXIES WILL BE SOLICITED AND VOTED
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16
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STOCKHOLDER
PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
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17
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OTHER
MATTERS
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17
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WHERE
YOU CAN FIND MORE INFORMATION
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17
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APPENDIX A – PROXY
CARD SPECIMEN
EXHIBIT A – FORM OF
CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION
EXHIBIT B – MARKED
COPY OF CHANGES TO CERTIFICATE OF INCORPORATION
NEOMEDIA
TECHNOLOGIES, INC.
Two
Concourse Parkway, Suite 500
Atlanta,
Georgia 30328
PROXY
STATEMENT
This
Proxy Statement contains information related to the special meeting (the “Meeting”) of
stockholders of NeoMedia Technologies, Inc., a Delaware corporation (the “Company”), to be held
on March ___, 2010, at 11:00 a.m., local time, at __________________________,
Atlanta, Georgia 30328, and any postponements or adjournments
thereof. The Company is making this proxy solicitation. It
is anticipated that this Proxy Statement and the enclosed proxy card (the “Proxy”) will be sent
to the Company’s stockholders on or about February 19, 2010.
ABOUT
THE MEETING
What
is the purpose of the Meeting?
At the
Meeting, stockholders will act upon the matters outlined in the “Notice of
Special Meeting of Stockholders”, which appears as the cover page of this Proxy
Statement, including (1) the approval of an amendment to the Company’s
Certificate of Incorporation to authorize a 1 share for 100 shares reverse split
of the Company’s outstanding common stock, par value $0.01 per share (“Common Stock”), (2)
the approval of an amendment to the Company’s Certificate of Incorporation to
fix the amount of authorized shares of the Company’s common stock at
5,000,000,000 shares, (3) the approval of an amendment to the Company’s
Certificate of Incorporation to decrease the par value of the Company’s common
stock from $0.01 to $0.001, and (4) any other matters that may properly come
before the Meeting or any postponement or adjournment thereof.
Who
is entitled to vote?
Only
stockholders of record on the close of business on February 1, 2010 (the “Record Date”), are
entitled to receive notice of the Meeting and to vote the shares of Common
Stock, shares of Series C convertible preferred stock, par value $0.01 per share
(“Series C Preferred
Stock”) and shares of Series D convertible preferred stock, par value
$0.01 per share (“Series D Preferred
Stock”), that they held on the Record Date at the Meeting, or any
postponements or adjournments thereof. At the Meeting, the holders of
the Common Stock and the Series D Preferred Stock may vote on all matters
presented to the holders of Common Stock and will vote together as a
class. Each outstanding share of Common Stock entitles the holder to
one vote. Generally, each outstanding share of Series C Preferred
Stock (on an as converted basis as described below) entitles the holder to the
number of votes equal to the number of shares of Common Stock issuable upon
conversion of the Series C Preferred Stock. However, due to
contractual restrictions, currently, no shares of Series C Preferred Stock can
be converted into shares of Common Stock or voted at the
Meeting. From January 5, 2010 until April 5, 2010, each
share of Series D Preferred Stock entitles its holder to one hundred thousand
(100,000) votes per share of Series D Preferred Stock voting together with the
Common Stock.
As of the
Record Date, there were 2,267,567,835 shares of Common Stock, 8,642 shares of
Series C Preferred Stock, and 25,000 shares of Series D Preferred Stock issued
and outstanding. Due to contractual restrictions on the
convertibility of Series C Preferred Stock and related voting rights, the
current holders of Series C Preferred Stock are not entitled to cast any votes
at the Meeting with respect to such Series C Preferred Stock. On an as converted
basis, the holders of Series D Preferred Stock are entitled to cast votes
equivalent to an aggregate of 2,500,000,000 shares of Common Stock. Accordingly,
there are a total of 4,767,567,835 shares entitled to vote at the
Meeting. For information regarding security ownership by management
and by 5% or greater stockholders, see “Security Ownership of Certain Beneficial
Owners and Management of the Company,” below.
Who
can attend the Meeting?
All
stockholders of the Company as of the Record Date, or their duly appointed
proxies, may attend the Meeting. Seating, however, is
limited. Admission to the meeting will be on a first-come,
first-serve basis. Registration will begin at 10:00 a.m. and seating
will begin at 10:30 a.m. Each stockholder will be required to present valid
picture identification, such as a driver’s license or
passport. Cameras, recording devices and other electronic devices
will not be permitted at the Meeting.
What
constitutes a quorum?
One-third
(1/3) of the issued and outstanding shares entitled to vote, represented in
person or by Proxy, constitutes a quorum for the Meeting.
How
do I vote by Proxy?
Follow
the instructions on the enclosed Proxy to vote on each proposal to be considered
at the Meeting. Sign and date the Proxy and mail it back to the
Company in the enclosed envelope. If you own shares of Common Stock
as of the Record Date then you may also vote with respect to those shares by
Internet as described in the Proxy. The proxy holders named on the
Proxy will vote your shares as you instruct. If you sign and return
the Proxy but do not vote on a proposal, the proxy holders will vote for you on
that proposal.
What
if I do not specify how my shares are to be voted?
For
“Proposal No. 1 – Reverse Stock Split of Outstanding Common Stock”, if you
submit a Proxy but do not indicate any voting instructions, your shares will be
counted as a vote for
the amendment of the Company’s Certificate of Incorporation to authorize a 1
share for 100 shares reverse split of the outstanding Common Stock. For
“Proposal No. 2 – Adjustment of Authorized Common Stock”, if you submit a Proxy
but do not indicate any voting instructions, your shares will be counted as a
vote for
the amendment of the Company’s Certificate of Incorporation to fix the amount of
authorized Common Stock at 5,000,000,000 shares. For “Proposal No. 3 – Change in
Par Value”, if you submit a Proxy but do not indicate any voting instructions,
your shares will be counted as a vote for
the amendment of the Company’s Certificate of Incorporation to decrease the par
value of the Common Stock from $0.01 to $0.001.
Can
I change my vote after I return my proxy card?
Yes. Even
after you have submitted your Proxy, you may change your vote at any time before
the Proxy is exercised by filing with the Secretary of the Company either a
notice of revocation or a duly executed Proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend
the Meeting in person and so request, although attendance at the Meeting will
not by itself revoke a previously granted Proxy.
What
if other matters come up at the Meeting?
The
matters described in this Proxy Statement are the only matters we know will be
voted on at the Meeting. If other matters are properly presented at
the Meeting, the proxy holders will vote your shares as they see fit in
accordance with any applicable laws.
Can
I vote in person at the Meeting rather than by completing the Proxy
Card?
Although
we encourage you to complete and return the Proxy to ensure that your vote is
counted, you can attend the Meeting and vote your shares in person by
ballot.
What
do I do if my shares are held in “street name”?
If you
hold your shares in “street name” through a broker or other nominee, and you do
not tell the nominee by the tenth day preceding the Meeting, how to vote your
shares, the nominee can vote them as it sees fit only on matters that are
determined to be routine, and not on any other proposal. None of the matters
presented in this Proxy Statement are “routine” items. If you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such “broker non-votes,” however,
will be counted in determining whether there is a quorum. If you hold
your shares in street name, you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the Record Date and check in at
the registration desk at the Meeting. If you intend to vote your
street name shares in person at the Meeting, you will need to obtain a “Legal
Proxy” from your brokerage firm.
How
are votes counted?
We will
hold the Meeting if holders of one-third (1/3) of the total shares of voting
capital stock of the Company either sign and return their Proxies or attend the
Meeting. If you sign and return your Proxy, your shares will be
counted to determine whether the Company has a quorum even if you abstain or
fail to vote on any of the proposals listed on the Proxy.
Who
pays for this proxy solicitation?
The
Company will pay all the costs of solicitation, including the preparation,
assembly, printing and mailing of this Proxy Statement, the Proxy, and any
additional solicitation materials furnished to
stockholders. Stockholders will not be charged fees for voting via
Internet. Copies of solicitation materials will be furnished to brokerage
houses, fiduciaries, and custodians holding shares in their names that are
beneficially owned by others so that they may forward this solicitation material
to such beneficial owners. In addition, the Company may reimburse
such persons for their costs in forwarding the solicitation materials to such
beneficial owners. In addition to sending you these materials, some
of the Company’s employees may contact you by telephone, by mail, or in
person. None of these employees will receive any extra compensation
for doing this.
What
vote is required to approve each item?
Amendment to
Certificate of Incorporation – Reverse Stock Split of Outstanding Common
Stock. For the approval of an amendment to the Company’s
Certificate of Incorporation to authorize a 1 share for 100 shares reverse split
of the Company’s outstanding Common Stock, the affirmative vote of a majority,
as of the Record Date, of the outstanding shares of Common Stock and Series D
Preferred Stock (on an as converted basis) voting together as a single class
will be required. A properly executed Proxy marked “Abstain” with
respect to such matter will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
Amendment to
Certificate of Incorporation – Adjustment of Authorized Common
Stock. For the approval of an amendment to the Company’s
Certificate of Incorporation to fix the amount of authorized Common Stock at
5,000,000,000 shares, the affirmative vote of a majority, as of the Record Date,
of the outstanding shares of Common Stock and Series D Preferred Stock (on an as
converted basis) voting together as a single class will be
required. A properly executed Proxy marked “Abstain” with respect to
such matter will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Accordingly, an abstention
will have the effect of a negative vote.
Amendment to
Certificate of Incorporation – Change in Par Value. For the
approval of an amendment to the Company’s Certificate of Incorporation to
decrease the par value of the Common Stock from $0.01 to $0.001, the affirmative
vote of a majority, as of the Record Date, of the outstanding shares of Common
Stock and Series D Preferred Stock (on an as converted basis) voting together as
a single class will be required. A properly executed Proxy marked
“Abstain” with respect to such matter will not be voted, although it will be
counted for purposes of determining whether there is a
quorum. Accordingly, an abstention will have the effect of a negative
vote.
Other
Matters. For most other matters that properly come before the
Meeting, the affirmative vote of a majority of shares of voting capital stock,
present in person or represented by Proxy and voted at the Meeting, will be
required. With respect to certain matters that may come before the
Meeting a separate class vote of the Series C Preferred Stock or Series D
Preferred Stock may be required. A properly executed Proxy marked
“Abstain” with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a
quorum. Accordingly, an abstention will have the effect of a negative
vote.
What
are the Board’s recommendations?
The
recommendation of the Company’s board of directors (the “Board”) is set forth
together with the description of each item in this Proxy
Statement. In summary, the Board recommends a vote:
|
·
|
For the approval of an amendment to
the Company’s Certificate of Incorporation to authorize a 1 share for 100
shares reverse split of the Company’s outstanding Common
Stock;
|
|
·
|
For the approval of an amendment to
the Company’s Certificate of Incorporation to fix the amount of authorized
shares of Common Stock at 5,000,000,000
shares;
|
|
·
|
For
the approval of an
amendment to the Company’s Certificate of Incorporation to decrease the
par value of the Common Stock from $0.01 to $0.001;
and
|
With
respect to any other matter that properly comes before the Meeting, the proxy
holders will vote as recommended by the Board or, if no recommendation is given,
in their own discretion.
STOCKHOLDER
PROPOSALS
PROPOSAL
NO. 1 – AUTHORIZATION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF
INCORPORATION TO AUTHORIZE A 1 SHARE FOR 100 SHARES REVERSE SPLIT OF THE
COMPANY’S OUTSTANDING COMMON STOCK
Reverse
Stock Split in General
As of
February 1, 2010, we had 2,267,567,835 shares of our Common Stock outstanding
and an additional 1,307,031,375 shares of Common Stock reserved for issuance
upon the exercise of issued and outstanding options and warrants. The large
number of shares of Common Stock outstanding combined with our low share price
makes our Common Stock unattractive to investors. We believe that a
reverse stock split of our outstanding Common Stock will have the effect of
increasing both the visibility and marketability of our stock to future
investors.
Our Board
has adopted a resolution seeking authorization of our stockholders to amend our
Certificate of Incorporation to effect a reverse split of our outstanding Common
Stock at a ratio of 1-for-100 (the “Reverse
Split”). If this proposal is approved by our stockholders at
the Meeting, we may effect the Reverse Split, within one year after the Meeting.
If we determine to effect the Reverse Split as proposed, we will file an
amendment to our Certificate of Incorporation, as set forth in Exhibit A, with the
Secretary of State of Delaware which will provide that our shares of Common
Stock then issued and outstanding will be combined at a ratio of
1-for-100. Except for any changes resulting from the treatment of
fractional shares, each stockholder will hold the same percentage of Common
Stock outstanding immediately after the Reverse Split as such stockholder did
immediately prior to the Reverse Split. We may abandon the proposed Reverse
Split if our Board deems it advisable.
The
number of outstanding shares of Series C Preferred Stock and Series D Preferred
Stock will not change as a result of the Reverse Split. The
conversion price of the Series C Preferred Stock and Series D Preferred Stock,
however, will be adjusted as a result of the Reverse Split which will result in
the number of shares of Common Stock issuable upon conversion of the Series C
Preferred Stock and Series D Preferred Stock being reduced in proportion to the
Reverse Split.
The
following table presents the impact of Proposal 1, as well as the cumulative
effect of Proposals 1 and 2 and the cumulative effect of Proposals
1, 2 and 3 on our Common Stock authorized, issued and outstanding,
reserved for issuance and authorized but unissued, if such proposals are
approved by our shareholders*:
|
|
As of
February 1, 2010 (1)
|
|
|
Effect of
Proposal 1 (2)
|
|
|
Cumulative
Effect of
Proposals 1and 2 (3)
|
|
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Cumulative
Effect of
Proposals 1, 2 and 3 (4)
|
|
Authorized
|
|
|
5,000,000,000 |
|
|
|
50,000,000 |
|
|
|
5,000,000,000 |
|
|
|
5,000,000,000 |
|
Issued
and outstanding
|
|
|
2,267,567,835 |
|
|
|
22,675,678 |
|
|
|
22,675,678 |
|
|
|
22,675,678 |
|
Reserved
for issuance
|
|
|
2,732,432,165 |
|
|
|
27,324,322 |
|
|
|
91,951,478 |
|
|
|
132,831,808 |
|
Authorized
but unissued
|
|
|
- |
|
|
|
- |
|
|
|
4,885,372,844 |
|
|
|
4,844,492,513 |
|
|
*
|
All
of the data presented above is based upon our Common Stock as of the
Record Date, February 1, 2010. As of the Record Date we had 5,000,000,000
authorized shares of Common Stock; 2,267,567,835 issued and
outstanding shares of Common Stock; outstanding options to acquire
172,561,241 shares of Common Stock and shares available to issue under our
stock option plans; 850,610 shares of Common Stock issuable upon
conversion related to our acquisition of BSD Software, Inc. in 2006;
9,021,735,956 shares of Common Stock issuable upon the conversion of all
our outstanding convertible subordinated debentures based upon the terms
of each debenture and the market factors related to such conversions;
1,231,195,834 shares of Common Stock issuable upon the exercise of all our
outstanding warrants based upon the terms of each warrant and the market
factors related to each exercise; 2,215,811,538 shares of Common Stock
issuable upon the conversion of all our outstanding Series C Preferred
Stock based upon the terms of conversion and the market factors related to
such conversion; and 641,025,641 shares of Common Stock issuable upon the
conversion of all our outstanding Series D Preferred Stock based upon the
terms of conversion and the market factors related to such
conversion.
|
(1)
|
As
of the Record Date, we do not have sufficient authorized and unissued
shares of Common Stock to provide for the exercise and conversion of all
of our potentially convertible and exercisable instruments. Therefore the
number of shares of Common Stock reserved for issuance is limited to the
remaining balance of our authorized shares, less our issued and
outstanding shares.
|
(2)
|
Upon
the approval by our shareholders of Proposal 1, the Reverse Split, all of
our Common Stock authorized, issued and outstanding, and reserved for
issuance shall be reduced by a factor of 1 share for 100 shares. As of the
Record Date, we would not have sufficient authorized and unissued shares
of Common Stock to provide for the exercise and conversion of all of our
potentially convertible and exercisable instruments. Therefore the number
of shares of Common Stock reserved for issuance is limited to the
remaining balance of our authorized shares, less our issued and
outstanding shares.
|
(3)
|
Upon
the approval by our shareholders of Proposal 1, the Reverse Split, all of
our Common Stock authorized, issued and outstanding, and reserved for
issuance shall be reduced by a factor of 1 share for 100 shares. Upon the
approval by our shareholders of Proposal 2, the fixing of our authorized
shares of Common Stock at 5,000,000,000, our reserves for issuance would
then include potential exercise of our stock options, the potential
conversion of our conversion shares related to our acquisition, and the
potential conversion of our convertible subordinated
debentures.
|
(4)
|
Upon
the approval by our shareholders of Proposal 1, the Reverse Split, all of
our Common Stock authorized, issued and outstanding, and reserved for
issuance shall be reduced by a factor of 1 share for 100 shares. Upon the
approval by our shareholders of Proposal 2, the fixing of our authorized
shares of Common Stock at 5,000,000,000, our reserves for issuance would
then include potential exercise of our stock options, the potential
conversion of our conversion shares related to our acquisition, and the
potential conversion of our convertible subordinated debentures. Upon the
approval by our shareholders of Proposal 3, the reduction in par value of
our Common Stock from $0.01 to $0.001, our reserves for issuance would
then include potential conversion of the Company’s Warrants, Series C
Preferred Stock and Series D Preferred
Stock.
|
Certain
Disadvantages Associated With the Reverse Split
There can
be no assurance that the total market capitalization of our Common Stock after
the proposed Reverse Split will be equal to or greater than the total market
capitalization before the proposed Reverse Split or that the per share market
price of our Common Stock following the Reverse Split will either exceed or
remain higher than the current per share market price. There can be no assurance
that the market price per new share of our Common Stock after the Reverse Split
will rise or remain constant in proportion to the reduction in the number of old
shares of our Common Stock outstanding before the Reverse Split. For example,
based on the market price of our Common Stock on February 1, 2010 of $0.007 per
share, following a 1-for-100 reverse split of the outstanding Common Stock there
can be no assurance that the post-split market price of our Common Stock would
be $0.70 per share or greater. Accordingly, the total market capitalization of
our Common Stock after the proposed Reverse Split may be lower than the total
market capitalization before the proposed Reverse Split and, in the future, the
market price of our Common Stock following the Reverse Split may not exceed or
remain higher than the market price prior to the proposed Reverse Split. In many
cases, the total market capitalization of a company following a reverse stock
split is lower than the total market capitalization before the reverse stock
split.
A decline
in the market price for our Common Stock after the Reverse Split may result in a
greater percentage decline than would occur in the absence of such action and
the liquidity of our Common Stock could be adversely affected following the
Reverse Split.
The
market price of our Common Stock will also be based on our performance and other
factors, some of which are unrelated to the number of shares outstanding. If the
Reverse Split is effected and the market price of our Common Stock declines, the
percentage decline as an absolute number and as a percentage of our overall
market capitalization may be greater than would occur in the absence of the
Reverse Split. In many cases, both the total market capitalization of a company
and the market price of a share of such company's common stock following a
reverse stock split are lower than they were before the reverse stock split.
Furthermore, the liquidity of our Common Stock could be adversely affected by
the reduced number of shares that would be outstanding after the Reverse
Split.
If the
authorized number of shares of Common Stock remains at 5,000,000,000 shares as
proposed by Proposal No. 2 herein, but the number of outstanding shares of
Common Stock immediately after the Reverse Split will be reduced by a factor of
one hundred (100), the Company will be able to issue more shares of Common Stock
which could result in additional dilution and which could have a negative effect
on the market price of our Common Stock. At this time, the Company does not have
any plans, proposals or arrangements, written or otherwise, to issue any of the
shares of authorized Common Stock that will be newly available (pursuant to the
Company maintaining the amount of such authorized shares at 5,000,000,000 in
connection with the Reverse Split) for any purpose, including future
acquisitions and/or financings.
Principal
Effects of the Reverse Split
Corporate
Matters. If our
common stockholders approve this Proposal No. 1 authorizing a reverse stock
split of our outstanding Common Stock at a ratio of 1-for-100, the Reverse Split
would have the following effects:
|
·
|
every 100 shares of Common Stock
outstanding prior to the effective time of the Reverse Split would be
automatically combined into one (1) share of Common
Stock;
|
|
·
|
the number of shares of our
Common Stock issued and outstanding will be reduced proportionately based
on the 1-for-100 split
ratio;
|
|
·
|
in connection with the approval
of Proposal No. 2 herein, the number of authorized shares of our Common
Stock would remain 5,000,000,000. Also, the number of authorized shares of
preferred stock would remain
25,000,000;
|
|
·
|
based on the 1-for-100 ratio,
proportionate adjustments will be made to the per share exercise price and
the number of shares issuable upon the exercise of all outstanding
options, convertible debentures and warrants entitling the holders thereof
to purchase shares of our Common Stock, which will result in approximately
the same aggregate price being required to be paid for such options,
convertible debentures or warrants upon exercise of such options,
convertible debentures or warrants immediately preceding the Reverse
Split; and
|
|
·
|
the number of shares reserved for
issuance under our existing stock option plans will be reduced
proportionately based on the 1-for-100 split
ratio.
|
When
effected, the Reverse Split will be effected simultaneously for all of our
Common Stock and the ratio will be the same for all of our Common Stock. The
Reverse Split will affect all of our common stockholders uniformly and will not
affect any stockholder's percentage ownership interests in our Company, except
to the extent that the Reverse Split results in any of our common stockholders
owning a fractional share. As described below, common stockholders holding
fractional shares will be entitled to cash payments in lieu of such fractional
shares. Such cash payments would reduce the number of post-split common
stockholders to the extent there are common stockholders presently holding fewer
than 100 shares. Common Stock outstanding following the Reverse Split will
remain fully paid and non-assessable. We will continue to be subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended (the “’34
Act”).
Fractional
Shares. No scrip
or fractional certificates will be issued in connection with the Reverse Split.
Common stockholders who otherwise would be entitled to receive fractional shares
because they hold, as of a date prior to the effective time of the Reverse
Split, a number of shares of our Common Stock not evenly divisible by 100 will
be entitled, upon surrender of certificate(s) representing such shares, to a
cash payment in lieu thereof. The cash payment will equal the product obtained
by multiplying (a) the fraction to which the stockholder would otherwise be
entitled by (b) the per share closing sales price of our Common Stock on the day
immediately prior to the effective time of the Reverse Split, as reported on the
OTC Bulletin Board. The ownership of a fractional interest will not give the
holder thereof any voting, dividend or other rights except to receive payment
therefore as described herein.
Common
stockholders should be aware that, under the escheat laws of the various
jurisdictions where our common stockholders reside, where we are domiciled and
where the funds will be deposited, sums due for fractional interests that are
not timely claimed after the effective time may be required to be paid to the
designated agent for each such jurisdiction. Thereafter, common stockholders
otherwise entitled to receive such funds may have to seek to obtain them
directly from the state to which they were paid.
If
approved and effected, the Reverse Split will result in some common stockholders
owning "odd lots" of less than 100 shares of our Common Stock. Brokerage
commissions and other costs of transactions in odd lots are generally somewhat
higher than the costs of transactions in "round lots" of even multiples of 100
shares.
Accounting
Matters. The per
share net income or loss and net book value of our Common Stock will be restated
because there will be fewer shares of Common Stock outstanding.
Procedure
for Effecting the Reverse Stock Split and Exchange of Stock
Certificates
In order
to effect the Reverse Split, we will file an amendment to our Certificate of
Incorporation with the Secretary of State of Delaware to amend our existing
Certificate of Incorporation. The Reverse Split will become effective at the
time specified in the amendment, which is referred to below as the "effective
time". Beginning at the effective time, each certificate representing shares of
Common Stock prior to the effective time of the Reverse Split will be deemed for
all corporate purposes to evidence ownership of resulting combined number of
shares following such Reverse Split. The text of the amendment to effect the
Reverse Split will be in substantially the form attached hereto as Exhibit A; provided,
however, that the form of amendment attached hereto is subject to modification
to include such changes as may be required by the office of the Secretary of
State of Delaware and as the Board deems necessary and advisable to effect the
Reverse Split, including the insertion of the effective time as determined by
the Board.
As soon
as practicable after the effective time, common stockholders will be notified
that the Reverse Split has been effected. We expect that our transfer agent,
Worldwide Stock Transfer, LLC, will act as exchange agent for purposes of
implementing the exchange of stock certificates. Holders of pre-split
common shares will be asked to surrender to the exchange agent certificates
representing such shares in exchange for certificates representing post-split
shares of Common Stock in accordance with the procedures to be set forth in the
letter of transmittal that we send to our common stockholders. No new
certificates will be issued to a stockholder until such stockholder has
surrendered such stockholder's outstanding certificate(s), together with the
properly completed and executed letter of transmittal, to the exchange agent.
Any pre-split share certificates submitted for transfer, whether pursuant to a
sale, other disposition or otherwise, will automatically be exchanged for
certificates representing post-split shares. COMMON STOCKHOLDERS SHOULD NOT
DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL
REQUESTED TO DO SO.
No
Dissenters' Rights
Under the
Delaware General Corporation Law, our common stockholders are not entitled to
dissenters' rights with respect to the Reverse Split, and we will not
independently provide common stockholders with any such right.
Federal
Income Tax Consequences of the Reverse Stock Split
The
following is a summary of certain material federal income tax consequences of
the Reverse Split, does not purport to be a complete discussion of all of the
possible federal income tax consequences of the Reverse Split, and is included
for general information only. Further, it does not address any state, local or
foreign income or other tax consequences. Also, it does not address the tax
consequences to holders that are subject to special tax rules, such as banks,
insurance companies, regulated investment companies, personal holding companies,
foreign entities, nonresident alien individuals, broker-dealers and tax-exempt
entities. The discussion is based on the provisions of the United States federal
income tax law as of the date hereof, which is subject to change retroactively
as well as prospectively. This summary also assumes that the pre-split shares of
Common Stock were, and the post-split shares of Common Stock will be, held as
"capital assets," as defined in the Internal Revenue Code of 1986, as amended
(the “Code”)
(i.e., generally, property held for investment). The tax treatment of a
stockholder may vary depending upon the particular facts and circumstances of
such stockholder. Each stockholder is urged to consult with such stockholder's
own tax advisor with respect to the tax consequences of the Reverse
Split.
The
Reverse Split is intended to qualify as a reorganization under Section
368(a)(1)(E) of the Code.
A
stockholder that receives only post-split shares in the Reverse Split (i.e., a
stockholder that does not receive any cash for fractional shares) should
recognize no gain or loss upon such stockholder’s exchange of certificates
representing pre-split shares for post-split shares pursuant to the Reverse
Split. In such a case, the aggregate tax basis of the post-split
shares received in the Reverse Split should be the same as the stockholder’s
aggregate tax basis in the pre-split shares exchanged therefor. In
addition, the stockholder’s holding period for the post-split shares should
include the period during which the stockholder held the pre-split shares
surrendered in the Reverse Split.
A
stockholder that receives both post-split shares and cash for fractional shares
in the Reverse Split should recognize no gain or loss upon such stockholder’s
exchange of certificates representing pre-split shares for post-split shares
pursuant to the Reverse Split. However, such a stockholder should
recognize dividend income in an amount equal to the cash received for such
stockholder’s fractional shares in the Reverse Split. Generally, the
aggregate tax basis of the post-split shares received in the Reverse Split
should be the same as the stockholder’s aggregate tax basis in the pre-split
shares exchanged therefor. The stockholder’s holding period for the
post-split shares should include the period during which the stockholder held
the pre-split shares surrendered in the Reverse Split.
A
stockholder that receives no post-split shares in the Reverse Split (i.e., a
stockholder that receives only cash for fractional shares because such
stockholder owns fewer than 100 pre-split shares) should recognize gain or loss
based on such stockholder’s adjusted basis in the fractional share interest
redeemed for cash in the Reverse Split. In such a case, the gain or
loss should constitute long-term capital gain or loss if the stockholder has
held its shares for more than one year.
Our view
regarding the tax consequences of the Reverse Split is not binding on the
Internal Revenue Service or the courts. ACCORDINGLY, EACH STOCKHOLDER SHOULD
CONSULT WITH SUCH STOCKHOLDER’S OWN TAX ADVISOR WITH RESPECT TO ALL OF THE
POTENTIAL TAX CONSEQUENCES TO SUCH STOCKHOLDER WHICH MIGHT ARISE FROM THE
REVERSE SPLIT.
Circular
230 Statement. To ensure
compliance with requirements imposed by the IRS, we inform you that any U.S.
federal tax advice contained in this communication (including any attachments)
is not intended or written to be used, and cannot be used, for the purpose of
(i) avoiding penalties under the Code or (ii) promoting, marketing or
recommending to another party any transaction or matter addressed
within.
Anti-Takeover
Effects
Release
No. 34-15230 of the staff of the SEC requires disclosure and discussion of
the effects of any proposal that may be used as an anti-takeover device.
Although not a factor in the decision by our Board to effect the effective
increase of our authorized shares of common stock, one of the effects of having
increased additional shares of our authorized common stock available for
issuance may be to enable the Board to render more difficult or to discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest, or otherwise, and thereby protect the continuity of then present
management. Unless prohibited by the regulations of applicable law or other
agreements or restrictions, a sale of shares of Common Stock by us or other
transactions in which the number of our outstanding shares of Common Stock would
be increased could dilute the interest of a party attempting to obtain control
of us. The effective increase in available authorized Common Stock may make it
more difficult for, prevent or deter a third-party from acquiring control of the
Company or changing our Board and management, as well as inhibit fluctuations in
the market price of our shares that could result from actual or rumored takeover
attempts.
The
effective increase of our authorized shares of common stock is not being
proposed in response to any effort of which we are aware to accumulate shares of
Common Stock or obtain control of the Company. While it is possible
that our management could use the effective increase of authorized shares of
Common Stock to resist or frustrate a third-party transaction providing an
above-market premium that is favored by a majority of stockholders, we do not
intend to construct or enable any anti-takeover defense or mechanism on its
behalf. We have no intent or plans to employ the effective increase of our
authorized shares of common stock as an anti-takeover device and do not have any
plans or proposals to adopt any other provisions or enter into other
arrangements that may have material anti-takeover consequences.
In
addition to the effective increase of our authorized shares of common stock,
provisions of our governing documents and applicable provisions of Delaware law
may also have anti-takeover effects, making it more difficult for or preventing
a third-party from acquiring control of the Company or changing our Board and
management. These provisions may also have the effect of deterring hostile
takeovers or delaying changes in the Company’s control or in our
management.
Undesignated
Preferred Stock.
Our Certificate of Incorporation currently authorizes the issuance of up
to 25,000,000 shares of preferred stock with such designations, rights and
preferences as may be determined from time to time by our Board. Our Board can
also fix the number of shares constituting a series of preferred stock, without
any further vote or action by the Company’s stockholders. The issuance of
undesignated preferred stock with voting, conversion or other rights or
preferences, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of
(i) delaying or preventing a change in control, (ii) causing the
market price of the Common Stock to decline or (iii) impairing the voting
power and other rights of the holders of the Common Stock.
No
Cumulative Voting.
The Company’s Certificate of Incorporation and By-laws do not provide for
cumulative voting in the election of directors. The combination of the present
ownership by a few stockholders of a significant portion of the Company’s voting
capital stock and lack of cumulative voting makes it more difficult for other
stockholders to replace the members of the Board or for another party to obtain
control of the Company by replacing our Board.
Required
Vote
Approval
to amend the Company’s Certificate of Incorporation to authorize a 1 share for
100 shares reverse split of the outstanding Common Stock will require that the
holders of at least a majority of the outstanding shares entitled to vote
thereon vote “FOR” the proposal.
Recommendation
of the Board
The Board
recommends that the stockholders vote “FOR” an amendment to the
Company’s Certificate of Incorporation to authorize a 1 share for 100 shares
reverse split of the outstanding Common Stock.
Amended
Certificate of Incorporation
The
proposed changes to the Company’s Certificate of Incorporation, pursuant to the
above Proposal No. 1, are set forth in a marked copy of Article IV of the
Company’s Certificate of Incorporation, attached hereto as Exhibit
B.
PROPOSAL
NO. 2 – AUTHORIZATION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE
OF
INCORPORATION
TO FIX THE AMOUNT OF AUTHORIZED SHARES OF COMMON STOCK AT
5,000,000,000
SHARES
Fixing
of Authorized Shares in General
As of
February 1, 2010, we had a total of 5,000,000,000 authorized shares of Common
Stock. We believe that maintaining the number of shares of authorized Common
Stock, in connection with the approval of the Reverse Split, will enable the
Company to issue more shares of Common Stock in connection with financing
projects and attracting potential investors, if necessary. At this time, the
Company does not have any plans, proposals or arrangements, written or
otherwise, to issue any of the shares of authorized Common Stock that will be
newly available (pursuant to the Company maintaining the amount of such
authorized shares at 5,000,000,000 in connection with the Reverse Split) for any
purpose, including future acquisitions and/or financings.
Our Board
has adopted a resolution seeking authorization of our stockholders to amend our
Certificate of Incorporation to fix our number of authorized shares of Common
Stock at 5,000,000,000 shares (the “Adjustment”). To
effect the Adjustment as proposed, we will file an amendment to our Certificate
of Incorporation, as set forth in Exhibit A, with the
Secretary of State of Delaware which will provide that our authorized Common
Stock will be set at 5,000,000,000 shares. We may
subsequently abandon the proposed Adjustment if our Board deems it
advisable.
The
number of outstanding shares of Series C Preferred Stock and Series D Preferred
Stock will not change as a result of the Adjustment. The Adjustment
will not reduce the number of authorized shares of preferred stock, Series C
Preferred Stock or Series D Preferred Stock, which will remain 25,000,000,
30,000 and 25,000, respectively.
Certain
Disadvantages of the Adjustment
If the
authorized number of shares of Common Stock remains at 5,000,000,000 shares as
proposed by this Proposal No. 2, but the number of outstanding shares of Common
Stock immediately after the Reverse Split will be reduced by a factor of one
hundred (100) as proposed by Proposal No. 1 herein, the Company will be able to
issue more shares of Common Stock which could result in additional dilution and
which could have a negative effect on the market price of our Common
Stock.
Principal
Effects of the Adjustment
If our
common stockholders approve this Proposal No. 2 authorizing the fixing of the
amount of our authorized shares of Common Stock at 5,000,000,000 shares, the
Adjustment would effectively maintain the Company’s current amount of authorized
shares of Common Stock which is set at 5,000,000,000 shares. When effected, the
Adjustment will be effected simultaneously with the Reverse Split. The
Adjustment will affect all of our common stockholders uniformly and will not
affect any stockholder's percentage ownership interests in our Company. We will
continue to be subject to the periodic reporting requirements of the ‘34
Act, as amended.
Procedure
for Effecting the Adjustment
In order
to effect the Adjustment, we will file an amendment to our Certificate of
Incorporation with the Secretary of State of Delaware to amend our existing
Certificate of Incorporation. The Adjustment will become effective at the time
specified in the amendment. The text of the amendment to effect the Adjustment
will be in substantially the form attached hereto as Exhibit A; provided,
however, that the form of amendment attached hereto is subject to modification
to include such changes as may be required by the office of the Secretary of
State of Delaware and as the Board deems necessary and advisable to effect the
Adjustment. As soon as practicable our common stockholders will be notified that
the Adjustment has been effected.
No
Dissenters' Rights
Under the
Delaware General Corporation Law, our common stockholders are not entitled to
dissenters' rights with respect to the Adjustment, and we will not independently
provide common stockholders with any such right.
Anti-Takeover
Effects
Release
No. 34-15230 of the staff of the SEC requires disclosure and discussion of
the effects of any proposal that may be used as an anti-takeover device.
Although not a factor in the decision by our Board to effect the effective
increase of our authorized shares of common stock, one of the effects of having
increased additional shares of our authorized common stock available for
issuance may be to enable the Board to render more difficult or to discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest, or otherwise, and thereby protect the continuity of then present
management. Unless prohibited by the regulations of applicable law or other
agreements or restrictions, a sale of shares of Common Stock by us or other
transactions in which the number of our outstanding shares of Common Stock would
be increased could dilute the interest of a party attempting to obtain control
of us. The effective increase in available authorized Common Stock may make it
more difficult for, prevent or deter a third-party from acquiring control of the
Company or changing our Board and management, as well as inhibit fluctuations in
the market price of our shares that could result from actual or rumored takeover
attempts.
The
effective increase of our authorized shares of common stock is not being
proposed in response to any effort of which we are aware to accumulate shares of
Common Stock or obtain control of the Company. While it is possible
that our management could use the effective increase of authorized shares of
Common Stock to resist or frustrate a third-party transaction providing an
above-market premium that is favored by a majority of stockholders, we do not
intend to construct or enable any anti-takeover defense or mechanism on its
behalf. We have no intent or plans to employ the effective increase of our
authorized shares of common stock as an anti-takeover device and do not have any
plans or proposals to adopt any other provisions or enter into other
arrangements that may have material anti-takeover consequences.
In
addition to the effective increase of our authorized shares of common stock,
provisions of our governing documents and applicable provisions of Delaware law
may also have anti-takeover effects, making it more difficult for or preventing
a third-party from acquiring control of the Company or changing our Board and
management. These provisions may also have the effect of deterring hostile
takeovers or delaying changes in the Company’s control or in our
management.
Undesignated
Preferred Stock.
Our Certificate of Incorporation currently authorizes the issuance of up
to 25,000,000 shares of preferred stock with such designations, rights and
preferences as may be determined from time to time by our Board. Our Board can
also fix the number of shares constituting a series of preferred stock, without
any further vote or action by the Company’s stockholders. The issuance of
undesignated preferred stock with voting, conversion or other rights or
preferences, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of
(i) delaying or preventing a change in control, (ii) causing the
market price of the Common Stock to decline or (iii) impairing the voting
power and other rights of the holders of the Common Stock.
No
Cumulative Voting.
The Company’s Certificate of Incorporation and By-laws do not provide for
cumulative voting in the election of directors. The combination of the present
ownership by a few stockholders of a significant portion of the Company’s voting
capital stock and lack of cumulative voting makes it more difficult for other
stockholders to replace the members of the Board or for another party to obtain
control of the Company by replacing our Board.
Required
Vote
Approval
to amend the Company’s Certificate of Incorporation to fix the amount of
authorized Common Stock at 5,000,000,000 shares will require that the holders of
at least a majority of the outstanding shares entitled to vote thereon vote
“FOR” the proposal.
Recommendation
of the Board
The Board
recommends that the stockholders vote “FOR” an amendment to the
Company’s Certificate of Incorporation to fix the amount of authorized Common
Stock at 5,000,000,000 shares.
Amended
Certificate of Incorporation
The
proposed changes to the Company’s Certificate of Incorporation, pursuant to the
above Proposal No. 2, are set forth in a marked copy of Article IV of the
Company’s Certificate of Incorporation, attached hereto as Exhibit
B.
PROPOSAL
NO. 3 – AUTHORIZATION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF
INCORPORATION TO DECREASE THE PAR VALUE OF THE COMPANY’S COMMON STOCK FROM $0.01
TO $0.001
Reduction
in Par Value in General
The Board
has adopted a resolution seeking approval to amend the Company’s Certificate of
Incorporation to reduce the par value of the Common Stock. The Certificate of
Incorporation currently authorizes the issuance of shares of Common Stock with a
par value of $0.01 per share. The Board believes it is in the best interests of
the Company to reduce the par value of the Common Stock to $0.001 per share. The
reduction in par value is intended to bring the Company in line with the
practice of other public companies with respect to par value.
We
further believe that a change from a par value of $0.01 per share to $0.001 per
share will provide the Company with greater flexibility with respect to the
issuance of stock and stock-based compensation because Delaware law requires
that we receive at least the par value per share as consideration for the
issuance of Common Stock.
Historically,
the concept of par value served to protect creditors and senior security holders
by ensuring that a company received at least the par value as consideration for
issuance of stock. Over time, the concept of par value has lost its
significance, generally. Many companies that incorporate today use a nominal par
value or have no par value.
Certain
Disadvantages Associated With Change in Par Value
There are
possible negative ramifications associated with lowering the par value of the
Common Stock. For example, the ability to issue shares of Common Stock at a
lower price may afford the Company added flexibility to deter a potential
takeover of the Company that may otherwise be beneficial to stockholders by
diluting the shares held by a potential suitor or issuing shares to a
stockholder that will vote in accordance with the Board’s desires. A takeover
may be beneficial to independent stockholders because, among other reasons, a
potential suitor may offer such stockholders a premium for their shares of
Common Stock compared to the then-existing market price. The Company does not
have any plans or proposals to adopt provisions or enter into agreements that
may have material anti-takeover consequences. Although there are these negative
possibilities, and possibly others, the Company’s management and Board believe
that the benefits to the Company’s stockholders outweigh the
negatives.
Procedure
for Effecting Change in Par Value
In order
to effect the change in par value, we will file an amendment to our Certificate
of Incorporation with the Secretary of State of Delaware to amend our existing
Certificate of Incorporation. The text of the amendment to effect the
change in par value will be in substantially the form attached hereto as Exhibit A; provided,
however, that the form of amendment attached hereto is subject to modification
to include such changes as may be required by the office of the Secretary of
State of Delaware and as the Board deems necessary and advisable to effect
change in par value.
No
Dissenters' Rights
Under the
Delaware General Corporation Law, our common stockholders are not entitled to
dissenters' rights with respect to the change in par value, and we will not
independently provide common stockholders with any such right.
Required
Vote
Approval
to amend the Company’s Certificate of Incorporation to decrease the par value of
the Common Stock from $0.01 to $0.001 will require that the holders of at least
a majority of the outstanding shares entitled to vote thereon vote “FOR” the
proposal.
Recommendation
of the Board
The Board
recommends that the stockholders vote “FOR” an amendment to the
Company’s Certificate of Incorporation to decrease the par value of Common Stock
from $0.01 to $0.001.
Amended
Certificate of Incorporation
The
proposed changes to the Company’s Certificate of Incorporation, pursuant to the
above Proposal No. 3, are set forth in a marked copy of Article IV of the
Company’s Certificate of Incorporation, attached hereto as Exhibit
B.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
COMPANY
The
following table sets forth certain information regarding beneficial ownership of
our Common Stock as of February 1, 2010: (i) by each of our directors, (ii) by
each of the named executive officers, (iii) by all of our executive officers and
directors as a group, and (iv) by each person or entity known by us to
beneficially own more than five percent (5%) of any class of our outstanding
shares. As of February 1, 2010 there were 2,267,567,835 shares of our Common
Stock outstanding:
|
|
Common
Stock
|
|
|
Series
C
Convertible
Preferred Stock (11)
|
|
|
Series
D
Convertible
Preferred
Stock
|
|
|
Combined
Voting
percent
of
Common
Stock
and
Series
D
|
|
Name
and Address of Beneficial
Owner
|
|
Beneficial
Ownership(1)
|
|
|
Percent
of
Class(1)
|
|
|
Beneficial
Ownership(1)
|
|
|
Percent
of
Class (1)
|
|
|
Beneficial
Ownership(1)
|
|
|
Percent
of
Class (1)
|
|
|
Convertible
Preferred
Stock(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors
and Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Iain A. McCready
(2)
(3)
|
|
|
32,863,691 |
|
|
|
1.4 |
% |
|
|
- |
|
|
|
*
|
|
|
|
- |
|
|
|
* |
|
|
|
*
|
|
Michael W. Zima (2)
(4)
|
|
|
1,731,250 |
|
|
|
*
|
|
|
|
- |
|
|
|
*
|
|
|
|
- |
|
|
|
* |
|
|
|
*
|
|
Christian
Steinborn (2)
(5)
|
|
|
4,546,176 |
|
|
|
*
|
|
|
|
-
|
|
|
|
*
|
|
|
|
- |
|
|
|
* |
|
|
|
*
|
|
James J. Keil (2)
(6)
|
|
|
5,552,292 |
|
|
|
*
|
|
|
|
- |
|
|
|
*
|
|
|
|
- |
|
|
|
* |
|
|
|
*
|
|
George G. O'Leary
(2)
(7)
|
|
|
3,056,930 |
|
|
|
*
|
|
|
|
- |
|
|
|
*
|
|
|
|
-
|
|
|
|
* |
|
|
|
*
|
|
Laura A. Marriott
(2)
(8)
|
|
|
1,412,708 |
|
|
|
* |
|
|
|
- |
|
|
|
* |
|
|
|
- |
|
|
|
* |
|
|
|
* |
|
Directors and Named
Executive Officers as a Group (6 Persons)
(9)
|
|
|
49,163,047 |
|
|
|
2.2 |
% |
|
|
- |
|
|
|
* |
|
|
|
- |
|
|
|
* |
|
|
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Beneficial Owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YA Global
Investments, LP (10)
|
|
|
36,331,729 |
|
|
|
1.6 |
% |
|
|
8,642 |
|
|
|
100.0 |
% |
|
|
25,000 |
|
|
|
100.0 |
% |
|
|
53.2 |
% |
Total
|
|
|
36,331,729 |
|
|
|
1.6 |
% |
|
|
8,642 |
|
|
|
100.0 |
% |
|
|
25,000 |
|
|
|
100.0 |
% |
|
|
53.2 |
% |
*
Indicates less than 1%.
(1)
|
Applicable
percentage of ownership is based on 2,267,567,835 shares of Common Stock
outstanding; 25,000 shares of Series D Convertible Preferred Stock
outstanding; and the combined voting power of the Common Stock and Series
D Convertible Preferred Stock in the amount of 4,767,567,835 shares as of
February 1, 2010. Percentage ownership is determined based on shares owned
together with securities exercisable or convertible into shares of Common
Stock within 60 days of February 1, 2010 for each stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting or investment power with respect to
securities. Shares of Common Stock subject to securities
exercisable or convertible into shares of Common Stock that are currently
exercisable or exercisable within 60 days of February 1, 2010 are deemed
to be beneficially owned by the person holding such securities for the
purpose of computing the percentage of ownership of such person, but are
not treated as outstanding for the purpose of computing the percentage
ownership of any other person. Our Common Stock, Series C
Preferred Stock and Series D Preferred Stock are our only issued and
outstanding classes of securities eligible to vote. From January 5, 2010
until April 5, 2010, each share of Series D Preferred Stock is
entitled to vote on an as-converted basis with the Common
Stock multiplied by one hundred thousand (100,000). Due to
contractual restrictions, Series C Preferred Stock is not eligible to vote
at the Meeting.
|
(2)
|
Address
of the referenced individual is c/o NeoMedia Technologies, Inc., Two
Concourse Parkway, Suite 500, Atlanta, GA,
30328.
|
(3)
|
Iain
A. McCready is our Chief Executive Officer and Chairman of our Board of
Directors. Ownership includes shares of Common Stock issuable
upon exercise of stock options that are exercisable within 60 days of
February 1, 2010.
|
(4)
|
Michael
W. Zima is our Chief Financial Officer. Ownership includes
shares of Common Stock issuable upon exercise of stock options that are
exercisable within 60 days of February 1,
2010.
|
(5)
|
Christian
Steinborn is Chief Executive officer of our subsidiary NeoMedia Europe,
AG. Ownership includes 2,116,326 shares of Common Stock and
2,429,850 shares of Common Stock issuable upon exercise of stock options
that are exercisable within 60 days of February 1,
2010.
|
(6)
|
James
J. Keil is a member of our Board of Directors. Ownership
includes 2,500,000 shares of Common Stock and 3,052,292 shares of Common
Stock issuable upon exercise of stock options that are exercisable within
60 days of February 1, 2010.
|
(7)
|
George
O'Leary is a member of our Board of Directors. Ownership
includes 1,022,028 shares of Common Stock owned by SKS Consulting of South
Florida Corp, a company that Mr. O'Leary currently serves as President,
and 2,034,902 shares of Common Stock issuable upon exercise of
stock options that are exercisable within 60 days of February 1,
2010.
|
(8)
|
Ms.
Laura Marriott is a member of our Board of Directors. Ownership includes
shares of Common Stock issuable upon exercise of stock options that are
exercisable within 60 days of February 1,
2010.
|
(9)
|
Includes
an aggregate of 43,524,693 options to purchase shares of Common Stock
which will have vested within 60 days of February 1, 2010 and 5,638,354
shares owned directly by our named executive officers and
directors.
|
(10)
|
The
address of YA Global Investments, L.P. (“YA”) is 101 Hudson Street, Suite
3700, Jersey City, NJ 07302. The information presented herein is based on
information provided by YA and based on the records of the Company.
Ownership includes 36,331,729 shares of Common Stock; 8,548 shares of
Series C Preferred Stock; 94 shares of Series C Preferred Stock owned by
an affiliate, Yorkville Advisors GP, LLC; and 25,000 shares of Series D
Preferred Stock.
|
(11)
|
Series
C Preferred Stock is entitled to vote on an as-converted basis with
holders of our Common Stock with respect to the amount of Common Shares
receivable upon conversion of such preferred stock. However the holders of
our Series C Preferred Stock are subject to contractual limitations in
regards to their beneficial ownership, including their ability to exercise
their voting rights, to the extent that they can not exceed 9.99% combined
beneficial ownership. If such holders were to declare us in default or if
they issue a notice waiving the 9.99% limitation, upon 61 days notice, and
comply with the SEC’s beneficial ownership reporting requirements for
affiliates, they would be able to vote their Series C Preferred Stock on
an as-converted basis.
|
Change
in Control of the Company
On January 5, 2010, the Company entered
into an investment agreement (the “Investment
Agreement”) with YA. Pursuant to the Investment Agreement, the Company
issued and sold to YA 25,000 shares the Series D Preferred Stock for a
subscription price of $2,500,000. Each share of Series D Preferred Stock
entitles the holder thereof to vote on an as-converted basis with the holders of
the Common Stock from January 5, 2010 until April 5, 2010 (the “Voting Period”),
resulting in one hundred thousand (100,000) votes for each one (1) share of the
Series D Preferred Stock. Pursuant to the consummation of the transaction
contemplated by the Investment Agreement, during the Voting Period, YA may be
deemed to have control of the Company due to its beneficial ownership, during
such period, of 53.2% of the outstanding voting securities of the Company
related to the issuance of the Series D Preferred Stock. YA did not assume such
control from any identifiable person or entity.
MANNER
IN WHICH THE PROXIES WILL BE SOLICITED AND VOTED
The cost
of soliciting proxies will be borne by the Company. Officers and
regular associates of the Company may, but without compensation other than their
regular compensation, solicit proxies by additional mailings, personal
conversations, telephone, facsimile, or electronically. The Company
will, upon request, reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners of Common
Stock. Other proxy solicitation expenses that the Company will pay
include those for preparation, mailing and tabulating the
proxies.
Management
knows of no other matter that may come up for action at the
Meeting. However, if any other matter properly comes before the
Meeting, the proxies named on the enclosed Proxy will vote in accordance with
their judgment upon such matter. Votes cast by Proxy or in person at
the Meeting will be tabulated by the Inspector of Elections with the assistance
of the Company’s transfer agent.
STOCKHOLDER
PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
In order
to be considered for inclusion in the Company's proxy materials for the
Company’s next annual meeting of the stockholders, any proposal to be presented
at such meeting must be received at the Company's principal office by a
reasonable time before the Company begins to print and send its proxy materials.
Any such proposals must comply with the requirements of Rule 14a-8 under
the Exchange Act, and be submitted in writing and addressed to the attention of
the Company's Corporate Secretary at Two Concourse Parkway, Suite 500, Atlanta,
Georgia 30328. Inclusion of stockholder proposals in the Company’s
Proxy Statement for a meeting also requires satisfaction of certain conditions
established by the Commission.
OTHER
MATTERS
The Board
knows of no other business which will be presented at the Meeting. If
any other business is properly brought before the Meeting, proxies in the
enclosed form will be voted in respect thereof in accordance with the judgments
of the persons voting said proxies. It is important that the proxies
be returned promptly and that your shares are represented. You are
urged to sign, date and promptly return the enclosed Proxy in the enclosed
envelope. As of the date of this Proxy Statement, we know of no
business that will be presented for consideration at the Meeting other than the
items referred to above. If any other matter is properly brought
before the Meeting for action by stockholders, Proxies in the enclosed form
returned to the Company will be voted in accordance with the recommendations of
the Board or, in the absence of such a recommendation, in accordance with the
judgment of the Proxy holder.
WHERE
YOU CAN FIND MORE INFORMATION
The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and files reports and other information with the
SEC. Such reports and other information filed by the company may be
inspected and copied at the SEC’s public reference room at One Station Place,
100 F Street NE, Washington, DC 20549, as well as in the SEC’s public
reference rooms in New York, New York and Chicago Illinois. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings, including this Proxy
Statement, are also available to you on the SEC’s website at www.sec.gov
..
|
By
Order of the Board of Directors,
|
|
|
|
/s/
Michael W. Zima
|
|
Michael
W. Zima
|
|
Chief
Financial Officer and Secretary
|
Atlanta,
Georgia
|
|
February
__, 2010
|
|
APPENDIX
A
NeoMedia
Technologies, Inc.
Special
Meeting of Shareholders
March
____, 2010
Revocable
Proxy
*
SPECIMEN *
|
|
SHARES
VOTING:
90.00
|
1
MAIN STREET
|
|
PROXY
SEQUENCE #: 0-99
|
ANYWHERE
NY 99999-9999
|
|
|
The
undersigned, revoking all prior proxies, hereby appoints Iain A. McCready, CEO
and Michael W. Zima, CFO & Secretary with full power of substitution in each
as proxies for the undersigned, to represent the undersigned & to vote all
the shares of Common Stock of NeoMedia Technologies, Inc. (the “Company”) which
the undersigned would be entitled to vote, fully as the undersigned could vote
and act if personally or present, at the Special Meeting of Stockholders (the
“Meeting”) to be held on March ____ 2010 at 11:00 A.M.,
local time, or at any adjournments postponements thereof. Should the
undersigned be present and elect to vote at the Meeting or at any adjournments
or postponement thereof, and after notification to the Secretary of the Company
at the Meeting of the stockholder’s decision to terminate this proxy, then the
power of such attorneys or proxies shall be deemed and of no further force and
effect. This proxy may also be revoked by filing a written notice of
revocation with the Secretary of the Company or termination by duly executing a
proxy bearing a later date.
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE LISTED PROPOSALS.
Proposal
(1) To amend the Company’s certificate of incorporation to effect a 1 share for
100 shares reverse stock split of the company’s outstanding Common
Stock.
Proposal
(2) To amend the Company’s certificate of incorporation to fix the amount of
authorized shares of Common Stock at 5,000,000,000 shares.
Proposal
(3) To amend the Company’s certificate of incorporation to effect a change in
the company’s Common Stock par value from $0.01 to $0.001.
THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS (1, 2, & 3). IF
ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGEMENT. At the present time,
the Board of Directors knows of no other business to be presented at the
Meeting. The undersigned acknowledges receipt from the Company, prior
to the execution of this proxy of the Notice of Special Meeting and accompanying
Proxy Statement relating to the Meeting.
NOTE: PLEASE
MARK, DATE AND SIGN AS YOUR NAME(S) APPEAR(S) HEREON AND RETURN IN THE ENCLOSED
ENVELOPE. IF ACTING AS AN EXECUTORS, ADMINISTRATORS, TRUSTEES,
GUARDIANS, ETC., YOU SHOULD SO INDICATE WHEN SIGNING, IF THE SIGNER IS
CORPORATION, PLEASE SIGN THEFULL CORPORATE NAME, BY DULY AUTHORIZED OFFICER IF
SHARES ARE HELD JOINTLY, EACH SHAREHOLDER SHOULD SIGN.
Signature:
Today’s Date:
Joint
Owners Signature (where applicable):
Today’s
Date: ___________
Deliveries
of proxy cards, properly completed & duly executed, should be made to
NeoMedia Technologies, Inc. stock transfer agent at the address set forth
below. A prepaid, return envelope is included herewith to return this
proxy sheet for tabulation.
You may
also vote your shares via the internet at www.wwstr.com and
clicking on Shareholder On-Line Services.
(registration
& access codes are required for On-Line Services; please contact WST as per
the information below)
NeoMedia
Technologies, Inc. c/o Worldwide Stock Transfer, LLC
433
Hackensack Ave – Level L – Hackensack, NJ 07601
Ph: 201-820-2008 Fax: 201-820-2010
EXHIBIT
A
FORM
OF CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
OF
NEOMEDIA TECHNOLOGIES, INC.
The Corporation organized and existing
under and by virtue of the Delaware General Corporation Law (the “DGCL”) does hereby
certify:
FIRST: That at a
meeting of the Board of Directors of NeoMedia Technologies, Inc., resolutions
were duly adopted setting forth proposed amendments to the Certificate of
Incorporation of said corporation, declaring said amendments to be advisable and
calling for a vote of the stockholders of said Corporation for consideration
thereof at the next annual meeting of stockholders. The resolutions
setting forth the proposed amendments are as follows:
RESOLVED, that the Certificate
of Incorporation of the Corporation shall be amended by deleting Article IV
thereof in its entirety and replacing it with the following provision, so that,
as amended, Article IV shall read in its entirety as follows:
ARTICLE
IV. (a) The total number of shares of capital stock that the
Corporation is authorized to issue is 5,025,000,000, which are to be divided
into two classes as follows: 5,000,000,000 shares of common stock, par value
$0.001 per share (“Common Stock”), and
25,000,000 shares of preferred stock, par value $0.01 per share.
(b)
Effective as of the close of business on the day that the Certificate of
Amendment which contains this provision is filed with the Office of the
Secretary of State of the State of Delaware (the ''Effective Time''),
each one hundred (100) shares of Common Stock issued and outstanding at such
time (''Existing
Common Stock'') shall be and hereby are automatically reclassified and
changed into one share of Common Stock (''New Common
Stock''), provided that no fractional shares of New Common Stock shall be
issued, and in lieu of a fractional share of New Common Stock to which any
holder is entitled, such holder shall receive a cash payment in an amount equal
to the product obtained by multiplying (a) the fraction to which the stockholder
would otherwise be entitled by (b) the per share closing sales price of the
Corporation’s Existing Common Stock on the day immediately prior to the
Effective Time, as reported on the OTC Bulletin Board. From and after
the Effective Time, the term ''New Common Stock'' as used in this Article IV
shall mean Common Stock as provided in this Certificate of
Incorporation.
SECOND: That
thereafter, the special meeting of the stockholders of the Corporation was duly
called and held upon notice in accordance with Section 222 of the DGCL at which
meeting the necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: That said
amendment was duly adopted in accordance with the provisions of Section 242 of
the DGCL.
IN WITNESS WHEREOF, said
Corporation has caused this certificate to be signed this __ day of March,
2010.
|
|
|
By:
|
|
Michael W. Zima
Chief
Financial Officer and
Secretary
|
EXHIBIT B. MARKED COPY
CHANGES TO CERTIFICATE OF INCORPORATION
(1)
Current Article IV of the Company’s Certificate of Incorporation:
IV.
The total number of shares of capital
stock that the Corporation is authorized to issue is 5,025,000,000, which are to
be divided into two classes as follows: 5,000,000,000 shares of common stock,
par value $0.01 per share, and 25,000,000 shares of preferred stock, par value
$0.01 per share.
(2)
Changes to the Company’s Certificate of Incorporation pursuant to Proposal No. 1
(Proposal No. 1 only):
IV.
(a)
The total number of shares of capital stock that the Corporation is
authorized to issue is 5,025,000,000,75,000,000, which are
to be divided into two classes as follows: 5,000,000,00050,000,000 shares of
common stock, par value $0.01 per share (“Common Stock”), and 25,000,000 shares of preferred
stock, par value $0.01 per share.
(b) Effective as of the close of business on the day
that the Certificate of Amendment which contains this provision is filed with
the Office of the Secretary of State of the State of Delaware (the ''Effective
Time''), each one hundred (100) shares of Common Stock issued and outstanding at
such time (''Existing Common Stock'') shall be and hereby are automatically
reclassified and changed into one share of Common Stock (''New Common Stock''),
provided that no fractional shares of New Common Stock shall be issued, and in
lieu of a fractional share of New Common Stock to which any holder is entitled,
such holder shall receive a cash payment in an amount equal to the product
obtained by multiplying (a) the fraction to which the stockholder would
otherwise be entitled by (b) the per share closing sales price of the
Corporation’s Existing Common Stock on the day immediately prior to the
Effective Time, as reported on the OTC Bulletin Board. From and after
the Effective Time, the term ''New Common Stock'' as used in this Article IV
shall mean Common Stock as provided in this Certificate of
Incorporation.
(3)
Changes to the Company’s Certificate of Incorporation pursuant to Proposals No.
1 and No. 2 (cumulative)*:
IV.
(a)
The total number of shares of capital stock that the Corporation is
authorized to issue is 5,025,000,000, which are to be divided into two classes
as follows: 5,000,000,000 shares of common stock, par value $0.01 per share (“Common
Stock”), and
25,000,000 shares of preferred stock, par value $0.01 per share.
(b) Effective as of the close of business on the day
that the Certificate of Amendment which contains this provision is filed with
the Office of the Secretary of State of the State of Delaware (the ''Effective
Time''), each one hundred (100) shares of Common Stock issued and outstanding at
such time (''Existing Common Stock'') shall be and hereby are automatically
reclassified and changed into one share of Common Stock (''New Common Stock''),
provided that no fractional shares of New Common Stock shall be issued, and in
lieu of a fractional share of New Common Stock to which any holder is entitled,
such holder shall receive a cash payment in an amount equal to the product
obtained by multiplying (a) the fraction to which the stockholder would
otherwise be entitled by (b) the per share closing sales price of the
Corporation’s Existing Common Stock on the day immediately prior to the
Effective Time, as reported on the OTC Bulletin Board. From and after
the Effective Time, the term ''New Common Stock'' as used in this Article IV
shall mean Common Stock as provided in this Certificate of
Incorporation.
* Please
note that approval of Proposal No. 2 would maintain the amount of shares of
authorized common stock at 5,000,000,000 shares, effectively negating any change
in the amount of authorized shares of common stock that would result from the
adoption of Proposal No. 1 as displayed in (2) above. Absent the amendment of
the Company’s Articles of Incorporation pursuant to Proposal No. 1, Proposal No.
2 would not effect any change to the Company’s current Articles of
Incorporation.
(4)
Changes to the Company’s Certificate of Incorporation pursuant to Proposal No. 3
(Proposal No. 3 only):
IV.
The total
number of shares of capital stock that the Corporation is authorized to issue is
5,025,000,000, which are to be divided into two classes as follows:
5,000,000,000 shares of common stock, par value $0.010.001 per share, and 25,000,000 shares of preferred stock, par value
$0.01 per share.
(5)
Changes to the Company’s Certificate of Incorporation pursuant to Proposal Nos.
1, 2 and 3 (cumulative):
IV.
(a)
The total number of shares of capital stock that the Corporation is
authorized to issue is 5,025,000,000, which are to be divided into two classes
as follows: 5,000,000,000 shares of common stock, par value $0.010.001 per share (“Common
Stock”), and
25,000,000 shares of preferred stock, par value $0.01 per share.
(b) Effective as of the close of business on the day
that the Certificate of Amendment which contains this provision is filed with
the Office of the Secretary of State of the State of Delaware (the ''Effective
Time''), each one hundred (100) shares of Common Stock issued and outstanding at
such time (''Existing Common Stock'') shall be and hereby are automatically
reclassified and changed into one share of Common Stock (''New Common Stock''),
provided that no fractional shares of New Common Stock shall be issued, and in
lieu of a fractional share of New Common Stock to which any holder is entitled,
such holder shall receive a cash payment in an amount equal to the product
obtained by multiplying (a) the fraction to which the stockholder would
otherwise be entitled by (b) the per share closing sales price of the
Corporation’s Existing Common Stock on the day immediately prior to the
Effective Time, as reported on the OTC Bulletin Board. From and after
the Effective Time, the term ''New Common Stock'' as used in this Article IV
shall mean Common Stock as provided in this Certificate of
Incorporation.