SCHEDULE 14A
(Rule
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment
(Amendment No. 1)
Filed by the Registrant |X|
x
Filed by a Party other than the Registrant |_|
o
Check the appropriate box:
|_|
x Preliminary Proxy Statement
|_|
o Confidential, For Use of the Commission Only
(as
(as permitted by Rule 14a-6(e)(2))
|X|
o Definitive Proxy Statement
|_|
o Definitive Additional Materials
|_|
o Soliciting Material Under Rule 14a-12
CDEX INC.
-------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
| CDEX INC. | |
| (Name of Registrant as Specified In Its Charter) | |
| | |
| (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) | |
Payment of Filing Fee (Check the appropriate box):
|X|
x No fee required.
|_|
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
___________________________________________________________________________
_______________________________
4) Proposed maximum aggregate value of transaction: __________________________
5) Total fee paid: ___________________________________________________________
|_|
o Fee paid previously with preliminary materials: ___________________________
|_|
o 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.
1) Amount previously paid: _______________________________________________
2) Form, Schedule or Registration Statement No.: ________________________
3) Filing Party: ________________________________________________________
4) Date Filed: __________________________________________________________
CDEX, INC.
4555 South Palo Verde Road
Suite 125
Tucson, Arizona 85714
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear CDEX Inc. Shareholders:
You are cordially invited to attend the fiscal year 20072009 Annual Meeting of Shareholders to be held at the Holiday Inn at 4550 South Palo VerdeSheraton Tucson Hotel, 5151 E. Grant Road, Tucson, Arizona 85712, on April 9 2008,September 29, 2010 at 9:00 AM, for the following purposes:
(i)
To elect Directors whose terms have expired or are scheduled to expire on or before the meeting date; and
(ii)
To ratify the appointment of S.E. Clark and Co. as the Company'sCompany’s independent registered public accounting firm for the Fiscalfiscal year ending October 31, 2008; and
2010,
(iii)
To approve a proposedan amendment to our Certificate of Incorporation to increase the Company's 2003 Stock
Incentive Plan limiting the amountnumber of stock that can be granted
under the Stock Incentive Plans to no more than 25% of the
authorized shares of the Company;Common Stock that we are authorized to issue from 100,000,000 shares to 250,000,000 shares; and
(iv)
To transact such other business as may properly come before the meeting or any adjournments thereof.
During the meeting we will review the results of the fiscal year ended October 31, 2007,2009, and report on significant aspects of our operations during the first quarterportion of fiscal year 2008.
Only holders2010.
The Board of record of the Common Stock of CDEX Inc. at the close of business
on February 25, 2008,Directors has fixed August 6, 2010, as the record date fixed byfor the Boarddetermination of Directors, will beshareholders entitled to vote on each matter submittednotice of and to a vote of shareholders at the meeting. To assure
Pursuant to Securities and Exchange Commission regulations, the Company’s Proxy Statement and Annual Report on Form 10-K for the fiscal year ended October 31, 2009 are available online at https://materials.proxyvote.com/12507E
We would appreciate your representationfollowing the voting instructions contained on your proxy card or completing, signing, dating and returning to the Company the enclosed proxy card in the envelope provided at your earliest convenience. If you decide to attend the annual meeting, you are urged to
castmay, of course, revoke your proxy and vote as instructed in the Notice of Internet Availability of Proxy
Materials, over the internet as promptly as possible. You may also request a
paper proxy card to submit your vote by mail, if you prefer.
IMPORTANT NOTICE
----------------
YOUR VOTE IS IMPORTANT.own shares.
IF YOU ARE UNABLE TO ENSURE YOUR VOTEBE PRESENT AT THE ANNUAL MEETING, YOU ARE REQUESTED TO VOTEFOLLOW THE VOTING INSTRUCTIONS CONTAINED ON YOUR PROXY CARD OR COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES AS PROMPTLY AS POSSIBLE. PLEASE VOTE OVER THE
INTERNET AT WWW.PROXYVOTE.COM. ALTERNATIVELY, YOU MAY REQUEST A PAPER PROXY
CARD, WHICH YOU MAY COMPLETE, SIGN, AND RETURN BY MAIL.
By Order of the Board of Directors,
/s/ Malcolm H. Philips, Jr.
---------------------------
Malcolm H. Philips, Jr.WILL BE REPRESENTED.
| By Order of the Board of Directors, | |
| | |
| | |
|  | |
| Carmen J. Conicelli | |
| Chairman | |
, Chairman
February 28, 2008
2010
CDEX, INC.
4555 South Palo Verde Road
Suite 125
Tucson, Arizona 85714
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board of Directors (the "Board"“Board”) of CDEX Inc. (the "Company"“Company”) in connection with the solicitation of proxies for use at the fiscal year 20072009 Annual Meeting of Shareholders of the Company (the "Annual Meeting"“Annual Meeting”) to be held at 9:00 AM, local time, April 9, 2008,September 29, 2010, at the Holiday Inn at 4550 South Palo VerdeSheraton Tucson Hotel, 5151 E. Grant Road, Tucson, Arizona 85712, and at any adjournments thereof. The Notice of Annual Meeting of Shareholders, this Proxy Statement, and the Noticeform of Internet Availability of Proxy Materialsproxy will be first mailed on or about February 28, 2008,August 20, to the shareholders of the Company (the "Shareholders"“Shareholders”) of record on the Record Date (as defined below).
THE BOARD OF DIRECTORS URGES YOU TO FOLLOW THE VOTING INSTRUCTIONS GIVENCONTAINED ON YOUR PROXY CARD OR COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
ENCLOSED POSTAGE PRE-PAID ENVELOPE.
SHARES ENTITLED TO VOTE
Each valid proxy given pursuant to this solicitation that is received in time for the Annual Meeting and not revoked will be voted with respect to all shares represented by it and will be voted in accordance with the instructions, if any, given in the proxy. If instructions are not given in the proxy, it will be voted (i) for the election as Directors of the nominees listed in this Proxy Statement; (ii) for ratification of the appointment of S.E. Clark and Co. as the Company'sCompany’s independent registered public accounting firm for the fiscal year ending October 31, 2008;2010; (iii) to approve a proposedan amendment to our Certificate of Incorporation to increase the Company's
2003 Stock Incentive Plan limiting the granting or issuingnumber of stock under the
Stock Incentive Plans to no more than 25% of the authorized shares of the
Company; andCommon Stock that we are authorized to issue from 100,000,000 shares to 250,000,000 shares, and (iv) in accordance with the best judgment of the proxy holders on any other matter that may properly come before the meeting. The submission of a signed proxy will not affect a Shareholder'sShareholder’s right to attend and to vote in person at the Annual Meeting. Shareholders who execute a proxy may revoke it at any time before it is voted by filing a written revocation with the Secretary of the Company at the following address: CDEX Inc., 4555 South Palo Verde Road, Suite 125,123, Tucson, Arizona 85714, Attn: Board of Directors; executing a proxy bearing a later date; or attending and voting in person at the Annual Meeting.
Only Shareholders of record as of the close of business on February 25, 2008August 6, 2010 (the "Record Date"“Record Date”), will be entitled to vote at the Annual Meeting. As of the close of business on the Record Date there were 54,002,555[65,239,634] shares of ClassCommon Stock and [6,675] shares of Series A CommonPreferred Stock outstanding. Each share of Class A Common Stock is entitled to one vote on all matters presented for Shareholder vote. Each share of Series A Preferred Stock is entitled to vote on an as-converted basis with the common stock on all matters presented for Shareholder vote. As of the Record Date, the Series A Preferred Stock outstanding was convertible into 398,504 shares of Common Stock. The affirmative vote of a majority of the votes of the shares of Common Stock and Series A Preferred Stock, voting together as a single class, duly cast, will be required to elect the directors, to ratify the appointment of the Company’s independent auditor and to amend the Corporation's Certificate of Incorporation.
According to the Bylaws of the Company (the "Bylaws"“Bylaws”), the holders of a majority of the shares of Class A Common Stock outstanding and entitled to be votedvote at the Annual Meeting must be present in person or be represented by proxy to constitute a quorum and to act upon proposed business. If a quorum is not present or represented by proxy at the Annual Meeting, the meeting will be adjourned and the Company will be subjected to additional expense. If a quorum is present or represented by proxy at the Annual Meeting, the Bylaws provide that the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting will decide the corporate action taken unless a different vote is required by Nevada law, the Articles of Incorporation or the Bylaws. Nevada law
and the Bylaws specify that directors shall be elected by the holders of eighty
percent (80%) of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting.
Abstentions and broker non-votes are counted for purposes of determining the presence or absence of a quorum for the transaction of business at the Annual Meeting. Because abstentions with respect to any matter are treated as shares present or represented and entitled to vote for the purposes of determining whether the matter has been approved by the Shareholders, abstentions have the same effect as negative votes for each proposal other than the election of directors. Broker non-votes are not deemed to be present or represented for purposes of determining whether Shareholder approval of that matter has been obtained, but they are counted as present for purposes of determining the existence of a quorum at the Annual Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board currently consists of fivefour members, each of whom serves three year
terms, or until their successor is elected. The current board consists of
Malcolm H. Philips, Jr. (Chairman), Timothy Shriver, George Dials, Donald W. Strickland, and Carmen J. Conicelli, and these individualsGregory Firmbach. Messrs. Dials, Strickland and Firmbach are seeking approval to serve as Directors until the Annual Meeting of Shareholders in the year each term expires, as set forth below, and until their successors have been duly elected and qualified or until their earlier death, resignation or removal. The Company'sCompany’s Bylaws were recently amended and restated on November 27, 2007, as disclosed in a Form 8-K filed December 4, 2007, with the amended and restated bylaws as an exhibit to the form 8-K, to provide for three-year terms for the directors. Accordingly, eachdirectors to provide for continuity in the oversight of the positions are up for election at thisCompany. The Company did not have a shareholder meeting forin 2009 and is presenting the terms of various lengthshere on a retroactive basis as specified below.
if the directors slate was presented in 2009.
Each nominee has consented to serve as a director of the Company if elected. If, at the time of the Annual Meeting, any of the nominees are unable or declines to serve as a director, the discretionary authority provided in the enclosed proxy card will be exercised to vote for a substitute candidate designated by the Board. The Board has no reason to believe that any of the nominees will be unable or will decline to serve as a director.
The Board recommends that the Shareholders vote FOR the election of the nominees named above as directors of the Company.
Name Age Position(s) Term
- ------------------------ ---------- -------------------------- -----------------
Malcolm H. Philips, Jr. 62 Chairman, President, 2008-2011
C.E.O., Director Three years
Timothy Shriver 57 C.O.O., Director 2008-2010
Two years
George Dials 62 Director 2008-2009
One year
Donald W. Strickland 58 Director 2008-2009
One year
Carmen J. Conicelli 55 Director 2008-2011
Three years
| | | | | |
| Name | | Age | | Position(s) | Term |
| | | | | |
| George Dials | | 65 | | Director | 2009-2012 |
| | | | | |
| Donald W. Strickland | | 60 | | Director | 2009-2012 |
| | | | | |
| Gregory Firmbach | | 58 | | Director | 2010-2013 |
NOMINEES FOR DIRECTOR
Mr. Malcolm H. Philips Jr. was appointed President, Chief Executive Officer and
The nominees for election to serve for a
Member of the Board of Directors of the Company on June 11, 2007. On October
9, 2007, Mr. Philips was appointed Chairman of the Board of Directors. He has
overall responsibility for directing the Company's activities. Mr. Philips was
the founding President, CEO and Chairman of the Board of the Company and served
in those positions from July 2001 until he left the Company in early 2006.
During his earlier tenure with the Company, Mr. Philips guided the Company
during its formation, technology acquisitions and development, transition to a
public company, and initial commercialization of its existing product lines.
Prior to his work with CDEX, Mr. Philips served as an attorney for 23 years
(ultimately as a senior partner with Winston and Strawn, one of the largest law
firms in the United States), an energy consultant for four (4) years, and an
army officer for eight (8) years (serving in various stations including Viet Nam
and various positions including OIC of the SM-1 Nuclear Power Plant). Mr.
Philips has a BS in engineering from the United States Military Academy (1967),
a Master of Engineering in Nuclear Engineering from Iowa State University (1971)
and a Juris Doctor from Georgetown University Law Center (1978). Mr. Philips was
a Professional Engineer (Texas) and has received various awards in the military
including the Bronze Star, Nuclear Plant Engineer Certification, Nuclear Plant
OIC Certification and Airborne/Ranger Certifications.
Timothy Shriver was appointed Chief Operating Officer of the Company on February
18, 2008. Prior to that appointment, he had served as the Company's Senior Vice
President of Technical Operations since July 2001. From 1999 until 2001 Mr.
Shriver provided outside consulting services to Ontario Hydro-Generation and
CAMOCO, a large uranium mining and processing company. Mr. Shriver's consulting
focused on overall business practices with particular emphasis on the
implementation of quality assurance programs and evaluation of management
capabilities and practices. From 1997 to 1999, Mr. Shriver served as Director of
Performance Assurance for Ontario Hydro-Generation (OPG), where he developed and
managed the implementation of the overall Quality Program at OPG's three CANDU
sites and OPG auxiliary sites supporting the Nuclear Program (at that time, the
largest in North America). His activities also included responsibility for the
development and implementation of an integrated Corrective Action Program, a
performance based Audit and Assessment program and the development of a process
oriented Quality Assurance Manual including the establishment and maintenance of
the required interface with the federal regulator to obtain approval. Between
OPG and CDEX, Mr. Shriver consulted for other utilities' quality assurance
programs.
three-year term are:
Mr. George Dials has been a director of the Company since July 2001. Mr. Dials is the Chairman of our Executive Compensation Committee. Currently Mr. Dials is serving as Executive Vice President of Babcock & Wilcox Technical Services Group, Inc., responsible for developing and operating business initiatives in the nuclear fuel cycle. Mr. Dials served in recent times as President and Chief Executive Officer of Y-12 National Security Complex in Oak Ridge, TN. From April 2003 until February 2006, Mr. Dials was theTN (2006-2008), Chief Operating Officer of Waste Control Specialists, a chemical waste repository. From July 2002 until May 2003, Mr. Dials wasrepository (2003-2006), President and CEO of LES, LLC a company seeking a license to build a nuclear fuel enrichment facility. From February 2001 to June 2002, Mr. Dials served asfacility (2002-2003), Senior Vice President of Consulting Services for Science and Engineering Associates responsible for its Consulting Services line of business where he provided(2001-2002), Managing Director of the Yucca Mountain Nuclear Fuel Storage Project (1999-2001), and the Managing Director of the DOE WIPP, bringing online the world’s first underground nuclear fuel waste repository. In addition, Mr. Dials has served in many other senior executive level direction in corporate mergers and acquisitionspositions in the consulting area. Mr. Dials managed the engineering, and scientific studies of
Yucca Mountain as a potential geologic repository for spent nuclear fuel and
high-level radioactive waste. Responsibilities include scheduling and cost
performance, technical and administrative performance, strategic operations plan
development, and resource allocation for a $250 million project.energy sector. Mr. Dials received a B.S. in Engineering in 1967 from West Point and Masters Degrees in Political Science and Nuclear Engineering from the Massachusetts Institute of Technology. He served in the U.S. Army for 10 years, and was awarded the Silver Star and Bronze Star for Valor.
Qualifications: Mr. Dials’ qualifications to serve on our Board include over four decades of business and operational experience in industry. His thorough and extensive knowledge of our operations, values and culture as well as a deep understanding of the issues and complexities we face at each level of our business units make Mr. Dials a valuable and qualified nominee with critical analytical, strategic and risk assessment skills.
Mr. Donald W. Strickland, the Company’s current CEO, was appointed to serve as a Director on February 3,in 2006. He comes to the Company from a 30-year career in successfully developing businesses internationally for both large public companies and technology startups. He has held executive positions at Eastman Kodak Company and Apple Computer, including heading product development, manufacturing, and sales. In 1996 he became CEO of PictureWorks Technology, a technology start up, which he sold for $200M in 2000 to IPIX Corporation, a public company traded on the NASDAQ exchange. Thereafter, he served as President and CEO of IPIX through 2004, during which time he led the company through a major restructuring, focusing on the security markets and taking the company to profitability. Over the past five years Mr. Strickland has been the President of Strickland & Associates, a consulting firm that advises companies on business strategies. Mr. Strickland holds a bachelor'sbachelor’s degree in physics from Virginia Tech, a master'smaster’s degree in physics from the University of Notre Dame, a master'smaster’s degree in optics from the University of Rochester, a master'smaster’s degree in management from the Stanford University and a law degree from George Washington University.
Qualifications: Mr. Strickland’s qualifications to serve on our Board include his over 30 years of business, operational and executive management experience. Mr. Strickland’s extensive experience permits him to contribute valuable strategic management and risk assessment insight to CDEX.
Mr. Gregory Firmbach was appointed to the position of our President and Director in 2010 focusing on marketing and sales of the Company’s products. Mr. Firmbach was our Senior Vice President of Sales from 2009 to 2010 and Mr. Firmbach joined CDEX in September 2008 as head of the Medication Safety Division's sales force for the Eastern Territory. Mr. Firmbach has served for over 25 years in senior sales and marketing positions in the healthcare industry. He has led divisions and companies (both public and private) in all aspects of successful development, launch and expansion of both software and hardware products related to the healthcare industry. He has won numerous awards for excellence in sales and marketing with multiple companies. From 2007 to 2008, Mr. Firmbach performed as a consultant to The Quantum Group and their subsidiary, Renaissance Health Systems, in Wellington FL in the building of their provider networks and in the development and proof of concept of their new generation Electronic Medical Record system, The Personal Wellness electronic Record. From 2004 to 2007, Mr. Firmbach was at Health Trio as Director, Sales Express and Connect products. Mr. Firmbach also served in aviation related leadership positions for over 25 years as a United States Naval Officer on Active and Reserve duty. Mr. Firmbach has a Bachelor’s Degree in Business Administration Marketing/Finance from the University of Cincinnati and advanced leadership training from various industry courses throughout the U.S.
Qualifications: Mr. Firmbach’s qualifications to serve on our Board include over three decades of business, operational and management experience. His extensive marketing and executive decision making experience and corporate governance work make Mr. Firmbach a valuable director.
DIRECTORS CONTINUING IN OFFICE
The following director has a term ending in 2011 and is not up for election at the shareholders meeting:
Mr. Carmen J. Conicelli, Jr., was appointed to serve as a Director on October 9,
2007.in 2007 and Chairman in 2010. He has served in senior management positions in a number of companies over the past 32 years, with a primary focus in national and international (Europe, Japan, Latin America and Asia) financial planning and management. He has directed financial operations involving SEC compliance and reporting, internal control and audit, strategic planning, financial systems control, and mergers/acquisitions/consolidations in a number of industries including precision optical manufacturing and distribution, cable and telecommunications, manufacturing, and software development. Mr. Conicelli has served in public company accounting and sincefrom 2004 hasto 2010 served as Chief Financial Officer of Edmund Optics, Inc. From 2003 to 2004, Mr. Conicelli served as a Senior Financial Consultant to VWR International. HeMr. Conicelli has a Bachelor of Science Degree in Business Administration (Accounting Major) from Drexel University (1974) with extensive postgraduate training and is a Certified Public Accountant.
Qualifications: Mr. Conicelli’s qualifications to serve on our Board include many years of financial management experience, including in the manufacturing industry. Additionally, his experience brings executive decision making and strategic skills to our Board as well as financial acumen as an “audit committee financial expert” as defined by SEC rules.
CORPORATE GOVERNANCE
Committees of the Board of Directors
On November 27,
In 2007, The Company'sthe Company’s Board of Directors formed and approved Charters for its Audit Committee, Executive Compensation Committee, and Corporate Governance and Nomination Committee. While theThe Audit Committee was not
in place inhas reviewed the subsequent 10-Ks and 10-KSBs each fiscal year 2007, it did reviewand conducted periodic reviews of the 10-KSB for fiscal year 2007. Company’s financial structure. Mr. Carmen J. Conicelli acts asis the Company'sCompany’s audit committee financial expert.
expert and Chairman of the Audit Committee. The Company is not required to maintain such committees under the rules applicable to it, because its shares are quoted on the over the counter bulletin board (“OTCBB”) and are not listed or quoted on a national securities exchange or national quotation system.
Corporate Governance and Nomination Committee
The Corporate Governance and Nominating Committee considers candidates for Board membership, including those suggested by shareholders, applying the same criteria to all candidates. Any such recommendations should provide whatever supporting material the shareholder considers appropriate, but should at a minimum include such background and biographical material as will enable the Nominating Committee to make an initial determination as to whether the nominee satisfies the criteria for directors.
If the Corporate Governance and Nominating Committee identifies a need to replace a current member of the Board, to fill a vacancy in the Board or to expand the size of the Board, the Committee considers candidates from a variety of sources. The process followed to identify and evaluate candidates includes meetings to evaluate biographical information and background material relating to candidates, and interviews of selected candidates by members of the Board. Recommendations of candidates for inclusion in the Board slate of director nominees are based upon criteria including business experience and skills, distinction in their activities, judgment, the ability to commit sufficient time and attention to Board activities and the absence of potential conflicts with CDEX’ interests. While the Corporate Governance and Nominating Committee does not have a formal diversity policy for Board membership, the Corporate Governance and Nominating Committee seeks directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions. The Nominating Committee considers, among other factors, diversity with respect to viewpoint, skills, experience and community involvement in its evaluation of candidates for Board membership.
After completing interviews and the evaluation process, the Corporate Governance and Nominating Committee makes a recommendation to the full Board as to persons who should be nominated by the Board. The Board determines the nominees after considering the recommendations and report of the Nominating Committee and such other evaluations as it deems appropriate.
Director Independence
As the Company is quoted on the OTCBB and not one of the national securities exchanges, it is not subject to any director independence requirements. With the exception of
Malcolm H. PhilipsMr. Strickland and
Timothy Shriver,Mr. Firmbach, all of the Company's Board of Directors consists of "independent" directors as independence is defined by the applicable rules of the SEC and the National Association of Securities Dealers' ("NASD").
Board Meetings
During the last fiscal year ended October 31, 2009, the Board of Directors held eleven meetings. Each of the directors is encouraged to attend meetings scheduled and all of the directors attended at least 75% of the meetings of the Board and of the committees on which he served in the aggregate.
Code of Business Conduct and Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct, provide full fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of our corporate code of ethics may be obtained, without charge, upon written request to: 4555 South Palo Verde Road, Suite 125,123, Tucson, Arizona, 85714. A copy of our code of ethics was included under Item 9 of our Form 10-KSB filed with the SEC on February 13, 2008. These filings may be viewed online at www.sec.gov.
Policy on Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Board of Directors pre-approves all audit and non-audit financial services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services. The Company'sCompany’s independent auditors may be engaged to provide non-audit services only after the appointed auditor has first considered the proposed engagement and has determined in each instance that the proposed services are not prohibited by applicable regulations and the auditors'auditors’ independence will not be materially impaired as a result of having provided these services. In making this determination, the Board of Directors takes into consideration whether a reasonable investor, knowing all relevant facts and circumstances, would conclude that the Directors'Directors’ exercise of objective and impartial judgment on all issues encompassed within the auditors'auditors’ engagement would be materially impaired.
Board Role in Risk Oversight Our Board of Directors, in exercising its overall responsibility to oversee the management of our business, considers risks generally when reviewing the Company’s strategic plan, financial results, merger and acquisition related activities, legal and regulatory matters and its public filings with the Securities and Exchange Commission. The Board’s risk management oversight includes full and open communications with management to review the adequacy and functionality of the risk management processes used by management. In addition, the Board of Directors uses its committees to assist in its risk oversight responsibility as follows:
The Audit Committee assists the Board of Directors in its oversight of the integrity of the financial reporting of the Company and its compliance with applicable legal and regulatory requirements. It also oversees our internal controls and compliance activities. The Audit Committee periodically discusses policies with respect to risk assessment and risk management, including appropriate guidelines and policies to govern the process, as well as the Company’s major financial and business risk exposures and the steps management has undertaken to monitor and control such exposures. It also meets privately with representatives from the Company’s independent registered public accounting firm
The Executive Compensation Committee assists the Board of Directors in its oversight of risk relating to the Company’s assessment of its compensation policies and practices.
OWNERSHIP OF SHARES
Security Ownership of Certain Beneficial Owners
The following table sets forth the stock ownership as of January 22, 2008June 19, 2010 of: (i) each person known by us, as of the date of this report, to be the beneficial owner of five percent (5%) or more of our common stock, (ii) each executive officer and director, individually, and (iii) our executive officers and directors as a group. Each person has sole voting and investment power with respect to the shares shown, unless otherwise indicated.
| Name And Address Of Beneficial Owner | | Position | | Amount Of Beneficial Ownership | | Percent Of Class (1) |
| | | | | | | |
| Mr. Jeffery K. Brumfield | | Investor | | 5,591,707 | (2) | 8.57% |
| | | | | | | |
| Malcolm H. Philips, Jr. | | Consultant and Investor | | 4,986,844 | (3) | 7.48% |
| | | | | | | |
| George Dials | | Director | | 812,034 | (4) | 1.24% |
| | | | | | | |
| Donald W. Strickland | | Executive Officer and Director | | 709,086 | (5) | * |
| | | | | | | |
| Carmen J. Conicelli | | Director | | 529,750 | (6) | * |
| | | | | | | |
| Gregory Firmbach | | Executive Officer and Director | | 50,000 | (7) | * |
| | | | | | | |
| Stephen McCommon | | Executive Officer | | 50,000 | (7) | * |
| | | | | | | |
| Shares of all named executives and | | | | | | |
| directors as a group (5 persons) | | | | 2,150,870 | | 3.24% |
| | | | | | | |
| * Less than 1% | | | | | | |
Name | (1) | Computed based upon the total number of shares of Class A common stock, shares of common stock underlying options and Addressshares of common stock underlying warrants held by that person that are exercisable within 60 days of June 19, 2010. |
| (2) | Based on information known by the Company, this represents 5,591,707 shares of Class A common stock. |
| (3) | Represents 3,572,342 shares of Class A common stock held by entities in which Mr. Philips has a controlling interest, 964,502 warrants exercisable within 60 days of June 19, 2010 held by entities in which Mr. Philips has a controlling interest and 450,000 options exercisable within 60 days of June 19, 2010. |
| (4) | Represents 467,034 shares of Class A common stock, 220,000 options exercisable within 60 days of June 19, 2010 and 125,000 warrants exercisable within 60 days of June 19, 2010. |
| (5) | Represents 179,543 shares of Class A common stock, 179,543 warrants exercisable within 60 days of June 19, 2010 and 350,000 options exercisable within 60 days of June 19, 2010. |
| (6) | Represents 307,750 shares of Class A common stock and 225,000 options exercisable within 60 days of June 19, 2010. |
| (7) | Represents 50,000 options exercisable within 60 days of June 19, 2010. |
EXECUTIVE COMPENSATION
The following table discloses for the periods presented the compensation for the persons who served as our Chief Executive Officer and our two most highly compensated other executive officers (not including the Chief Executive Officer) or significant employee whose total individual compensation exceeded $100,000 for the fiscal years October 31, 2009 and 2008 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
| Name and Principal Position | | Fiscal Year | | Salary (1) | | Option Awards (2) | | Total |
| | | | | | | | | |
| Malcolm H. Philips, Jr. | | 2009 | | $ 141,231 | (4) | $ 2,625 | | $ 143,856 |
| President and Chief Executive | | 2008 | | $ 231,461 | | $ 13,335 | | $ 244,796 |
| Officer and Chairman of the Board | | | | | | | | |
| of Directors | | | | | | | | |
| | | | | | | | | |
Timothy D. Shriver(3) | | 2009 | | $ 128,690 | (5) | $ 2,625 | | $ 131,315 |
| Chief Operating Officer and Director | | 2008 | | $ 201,769 | | $ 13,335 | | $ 215,104 |
| | | | | | | | | |
| Stephen Mccommon | | 2009 | | $ 78,732 | (6) | $ 18,120 | | $ 96,852 |
| Chief Financial Officer | | 2008 | | $ - | | $ 3,810 | | $ 3,810 |
| (1) | During fiscal years 2009 and 2008, Messrs. Philips and Shriver and during fiscal 2009, Mr. McCommon deferred a portion of their cash salary. See discussion under Employment Agreements below for greater detail on the terms of employment including compensation. |
| (2) | The amounts included in the "Option Awards" column represent the aggregate fair value of awards computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation (disregarding forfeiture assumptions). The fair value of each Position Amountstock option award is estimated on the date of Beneficial Percentagegrant using the Black-Scholes option valuation. For a discussion of Beneficial Owner (1) Ownership Class
- ----------------------------- ------------------ ------------------------ ------------------
Jeffrey Brumfield Investor 6,970,042 13.0%
Malcolm H. Philips, Jr. Chairman, 2,377,853 (2),valuation assumptions, see Note 8 of our 2009 Financial Statements. During fiscal year 2009, the company modified performance options previously awarded to all employees and active consultants. The amounts reported for the fiscal year 2009 include the incremental fair value computed as of the modification date in accordance with FASB ASC Topic 718, with respect to the modified awards. |
| (3) 4.4%
President,
C.E.O., Director
Timothy | On February 11, 2010, Mr. Shriver C.O.O., Director 1,259,322(2) 2.4%
George Dials Director 180,000(2) 0.3%
Donald W. Strickland Director 0(2) 0.0%
Carmen J. Conicelli Director 0(4) 0.0%
All Officers and Directors 3,817,175 7.1%stepped down as a Group (5 persons)
- --------------------------------------------------------------------------------------------
Director and as our Chief Operating Officer. Mr. Shriver continues with the Company as our Senior Manager of Technical Operations. |
(1) The address for each of the listed persons is c/o CDEX Inc., 4555 South Palo
Verde Road, Suite 125, Tucson, AZ 85714.
(2) The stock granted to each of the above-named directors and executive
officers may be subject to a vesting schedule and risk of forfeiture. CDEX has
the option to require that any unvested shares at termination be forfeited. Upon
termination of employment/provision of service, CDEX has the option to purchase
any vested shares of the employee/service provider at fair market value.
(3) Includes stock held by entities in which | (4) | During fiscal years 2009 and 2008, Mr. Philips has a controlling
interest.
(4) Mr. Carmen J. Conicelli was appointed a Director on October 9, 2007.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL FISCAL SALARY(1) OPTION ALL OTHER TOTAL
POSITION YEAR AWARDS (2) COMPENSATION (1)
- ------------------------------------------------------------------------------------------------------------
Malcolm Philips 2007 $ 62,999 $280,595 $343,594
President, CEOdeferred $141,231 and $85,384 of his salary, respectively. In February 2009, Mr. Philips stepped down as our Chairman 2006 $ 16,000 $ - $349,000 $365,000 of the Board of Directors Timothy D.and President.
| (5) | During fiscal year 2009, Mr. Shriver 2007 $201,560 $142,235 $343,795
Sr. VP Technical Operations 2006 $163,690 $ - $ 30,290 $193,980
Director
Dr. Wade Poteet 2007 $138,000 $ 88,115 $226,115
Principal Scientist 2006 $131,000 $ - $ 19,000 $150,000
deferred $76,197 of his salary. |
(1) During 2007, Mr. Philips and Mr. Shriver deferred a portion of their cash
salary. During 2006, pursuant to the terms of their respective Employment
Agreement Agreements and based upon CDEX's financial condition, the executive
officers have each foregone a portion of his stated salary, and have been paid
instead in the form of cash and shares of common stock. All share amounts are
subject to a vesting schedule with a risk of forfeiture in the event the
employee does not remain with CDEX for the required amount of time. Dr. Poteet
resigned from his employment position with the company effective January 1, 2006
and now serves on a full-time consultancy basis, continuing as the company's
Principal Scientist. See discussion under Employment Agreements below for
greater detail on the terms of employment including compensation.
(2) Stock option awards are exercisable within one or two years of the date of
grant. The fair value of each option is estimated using the Black-Scholes option
model with the following assumptions: volatility of 75%; dividend yield of 0%;
risk free interest rate of 4.2% and expected terms of 3 to 5 years.
| (6) | During fiscal year 2009, Mr. McCommon deferred $28,782 of his salary. |
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Messrs. Philips and Shriver
effective January 1, 2002. The agreements each continue for an indefinite period
unless terminated by CDEX for "cause," or by the employee for "good reason" (as
such terms are defined in the agreements), or upon two weeks prior written
notice by either party to the other. The agreements provide for salaries based
on annual amounts of $300,000 for Mr. Philips and $250,000 for Mr. Shriver,
which are subject to review on an annual basis. The salary shall be payable in
equal monthly installments, unless otherwise required by applicable state law
and, based on CDEX's economic posture, may be paid in cash and/or stock, at
CDEX's option. Each agreement provides for a minimum monthly cash payment to the
employee of $7,500 for Mr. Shriver and $3,000 for Mr. Philips. CDEX has availed
itself of this option for the past three fiscal years as reflected under
"Compensation of Executive Officers." Each of these agreements provides for the
forfeiture of restricted stock granted to the employee in the event of the
employee's termination before the stock is fully vested. Under the agreements,
each employee is entitled to a severance package in the event of termination by
CDEX other than for "cause" or by the employee for "good reason." In each case,
"good reason" includes a change in management of CDEX.
The agreements with Messrs. Philips and Shriver were amended on January 1, 2003
to increase the intended minimum monthly cash payment to the employee to $8,000,
and permit CDEX to pay the entire salary in common stock if paying cash is not
in the best interest of the Company.
Mr. Philips resigned from the positions of Chief Executive Officer and President
effective January 1, 2006, and the company entered into a Settlement and
Consulting Agreement, as of said date, with an entity controlled by Mr. Philips,
for Mr. Philips's continued services as the Company's Chairman of the Board and
additional services as a consultant in order to assure a smooth and settled
transition for the Company's new Chief Executive Officer. The agreement has a
term of one year, unless extended by mutual agreement of the parties, and may be
terminated by either party on two weeks' notice. Pursuant to the agreement, the
Company paid Mr. Philips 350,000 free-trading shares of Class A Common Stock.
Mr. Philips' agreement was terminated in April 2006.
Effective June 11, 2007, the Company entered into an employment agreement with Mr. Philips whereby Mr. Philips became the CEO and President. The agreement provides for an annual salary of $180,000. The agreement provides for an award of 350,000 stock options with a strikean exercise price as the fair market value of the shares on June 11, 2007. These options vestvested on June 11, 2008 and terminate five years after the grant date. Furthermore, ifEffective February 1, 2008, the Board of directors increased Mr. Philips' annual salary to $240,000. Effective June 1, 2009, Mr. Philips amended his employment agreement such that in Mr. Philips’ sole discretion he has elected to take no salary until economic conditions warrant. Effective February 10, 2010, the Company elects to terminateentered into a contract with Mr.
Philips' employment for any reason prior to June 11, 2009,Philips where Mr. Philips resigned as an employee and was engaged as a consultant of the Company shall pay
to continue in his role as the Company’s CEO until the Company finds a replacement. . Effective April 19, 2010 Mr. Philips resigned his positions as a severance fee of $200,000. In addition, on July 17, 2007,Director and as the Company granted to Mr. Philips 100,000 options with a strike price as of the
fair market value at the time of granting.
Company’s Chief Executive Officer.
Effective January 11, 2006, the Company entered into an amendment to the employment agreement of Mr. Shriver. The amendment to Mr. Shriver's employment agreement provides for an annual cash salary of $180,000 as well as options which will vest 1/3 on January 1, 2007, and 1/24th of the remainder on the first day of each month thereafter for the following two years, as long as he is providing to the Company substantial services pursuant to a contract with the Company at the time of vesting. The Company canceledcancelled all options granted to Mr. Shriver in 2006. On July 17, 2007, the Company granted to Mr. Shriver 200,000 options with a strikean exercise price at the fair market value of the stock at the time of grantingthe grant, with 50% vesting immediately and 25% vesting in both 12 and 24 months. Effective February 1, 2008, Mr. Shriver’s employment agreement was amended to increase Mr. Shriver's annual salary to $200,000 and added that if Mr. Shriver’s employment was terminated for other than “cause” or if Mr. Shriver resigns for “good reason” before February 18, 2010 his severance would be twice his annual salary. Effective February 10, 2010, Mr. Shriver stepped down as the Company’s COO and board member and accepted the position of Senior Manager of Technical Operations The Company entered into an employment agreement with Mr. McCommon effective November 11, 2008 as the Company’s Chief Financial Officer with an annual compensation of $105,000. The agreement is in effect for one year, or until terminated, and is automatically renewable on October 31 of each year unless terminated in writing by either party upon a 30 days written notice prior to October 31. In accordance with the agreement, the Company granted to Mr. McCommon 100,000 options with an exercise price equal to the fair market value at the time of grant, with 50% vesting in one year and the remaining 50% vesting in two years following such grant. Effective June 1, 2009, Mr. McCommon’s employment agreement was amended to reduce his salary to $4,166.67 per month until, in his sole discretion, economic conditions warrant the return to the pre-June 1, 2009 compensation level. Effective April 5, 2010, Mr. McCommon’s employment agreement was amended to adjust his compensation to $82,500 per year.
Effective April 19, 2010, the Board of Directors of CDEX INC appointed Donald W. Strickland as the Company’s Chief Executive Officer. Mr. Strickland has been a Director since February 3, 2006. Mr. Strickland’s employment agreement is renewable annually and includes a salary of $60,000 per year. Additionally, Mr. Strickland received 360,000 options to purchase shares of Class A common stock which vest 1/12 each month beginning on the 19th of May 2010 as long as the agreement is in effect. The exercise price of the options was the closing stock price of CDEX on the effective date. In addition, beginning on 19 May 2011 and continuing on the 19th day of each month thereafter, the Company agrees to provide to the Mr. Strickland 30,000 options to purchase shares of Class A common stock. The exercise price of these options shall be the closing price of the stock on the day of grant. Mr. Strickland will have two years from the date of termination or five years, whichever is earlier, to exercise the options granted under his employment agreement, irrespective of his employment status.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information regarding stock option awards to our
Executive Officers and significant officers:
Option Awardsdiscloses unexercised options held by the Named Executives at October 31, 2007
2009
| | | Option Awards | | NAME | | Number of Securities Underlying Unexercised Options Exercisable (#) | | | Number of Securities Underlying Unexercised Options Unexercisable (#) | | | Option Exercise Price ($) | | Option Expiration Date | | | | | | | | | | | | | | | | Malcolm H. Philips, Jr. | | | 100,000 | | | | - | | | | | | 0.15 | | 07/17/2010 | | | | | 350,000 | | | | - | | | | | | 0.22 | | 06/11/2012 | | | | | - | | | | 150,000 | | (1) | | | | 0.09 | | 08/01/2014 | | | | | | | | | | | | | | | | | | | Timothy D. Shriver | | | 200,000 | | | | - | | | | | | 0.15 | | 07/17/2010 | | | | | - | | | | 150,000 | | (1) | | | | 0.09 | | 08/01/2014 | | | | | | | | | | | | | | | | | | | Stephen McCommon | | | 50,000 | | | | 50,000 | | | | | | 0.15 | | 11/11/2013 | | | | | - | | | | 150,000 | | (1) | | | | 0.09 | | 08/01/2014 |
Name Number | (1) | Performance Options: Pursuant to an employee option incentive program covering all employees, the Board granted options based on the Company’s performance. 40% of Numberthe bonus options would vest when the Company has positive cash flow from operations for one fiscal quarter and the remaining 60% of Option Option
Securities Securities Exercise Exercise
Underlying Underlying Price Date
Unexercised Unexercised
Options (#) Options (#)
Exercisable Unexercisable
Malcolm H. Philips 100,000 - $ 0.15 7/17/the bonus would vest when the Company has positive operating cash flow for two quarters. If the Company does not accomplish both milestones by July 31, 2010, 350,000 - $ 0.22 6/11/2012
Timothy D. Shriver 100,000 100,000 $ 0.15 7/17/2010
Dr.Wade Poteet 50,000 50,000 $ 0.15 7/17/2010
any unvested part of the bonus options will lapse. |
DIRECTORS COMPENSATION
The following table sets forth information regarding stock baseddiscloses our director compensation granted to our Directors:
Director Summary
Compensation
Name Option Awards
- --------------------------------------------------
George Dials $32,713
Dr. BD Liaw $32,713
Donald W. Strickland $49,070
CERTAIN TRANSACTIONS
for the fiscal year ended October 31, 2009:
| NAME | | Option Awards (1) | | | | | | | | | Carmen J. Conicelli, Jr. | | $ | - | | (2) | | | | | | | | | | George Dials | | $ | - | | (3) | | | | | | | | | | Donald W. Strickland | | $ | - | | (4) | |
| (1) | The Company’s Directors did not receive any compensation during the fiscal year ended October 31, 2009. |
| (2) | Mr. Conicelli has options to purchase 315,000 shares of Class A common stock outstanding. |
| (3) | Mr. Dials has options to purchase 360,000 shares of Class A common stock outstanding. |
| (4) | Mr. Strickland has options to purchase 400,000 shares of Class A common stock outstanding. |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During the fiscal year ended October 31, 2007, certain2009, none of our executive officers served on the board of directors or the compensation committee of any other company whose executive officers also serve on our Board of Directors and Officers
loanedor our Compensation Committee. CERTAIN TRANSACTIONS
During the fiscal year ended October 31, 2009, the Company $158,000. These notes mature in one year fromsold 250,000 shares of restricted Class A common stock to a director for $25,000, or $0.10 per share and a warrant for the loan date
and pay interest at the ratepurchase of 9% or 10% per year. The notes are convertible
into125,000 shares of restricted Class A common stock with warrants.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Officers, Directors and 10% stockholdersan exercise price of CDEX, other then those listed
below, timely filed all reports subject to the reporting requirements of Section
16(a)$0.20 per share. Also during the fiscal year ended October 31, 2007.2009, the Company received $97,750 in proceeds under a number of 10.0%, 12 month convertible notes payable with an entity controlled by our former CEO. These notes are convertible at any time on terms given to Gemini Master Fund or the best terms given to an investor during the twelve months following the loan date, including warrants. However, the note holder shall receive the lowest price that does not cause a decrease in the conversion price or exercise price of the Gemini Convertible Note or Common Stock Purchase Warrant. Additionally, an entity controlled by our former CEO converted three notes payable and accrued interest in the amount of $39,326 into 327,740 Class A common shares, or $0.12 per share and warrants for the purchase of 327,740 shares of restricted Class A common stock, with an exercise price of $0.24 per share.
During the three months ended January 31, 2010, the Company received $49,800 in proceeds under 12.0%, 24 month convertible notes payable with an entity controlled by our former CEO and an additional $15,150 in proceeds under similar convertible notes payable with other Directors. These notes are convertible at the option of the note holders into common stock and warrants with terms similar to those above.
During February 2010, the Company entered into a Securities Purchase Agreement with its largest creditor, Gemini, and with three other investors including an entity controlled by our former CEO. Included in the agreement is the restructuring of the June 25, 2008 Senior Convertible Note held by Gemini where $1,151,100 of outstanding principal and accrued interest was capitalized into a new note bearing interest at 10% and convertible into Class A common stock at the rate of $0.05 per share for the first $800,000 of principal converted, and $0.08 per share for converted balances in excess of $800,000. The following table sets forthnote matures on February 1, 2012, but has accelerated payment provisions and a contingent security interest, if certain financial milestones are not met. Included in the restructuring was a $450,000 cash infusion consisting of $200,000 from an entity controlled by our former CEO and $250,000 from two other investors, for which the Company issued notes similar to that issued to Gemini. Additionally, as a part of February 28, 2008,this restructuring, $247,115 of principal and accrued interest of existing Convertible Notes Payables held by an entity controlled by our former CEO were consolidated and converted into a new convertible note similar to that issued to Gemini.
During March 2010, two directors and an entity controlled by our former CEO converted $15,462 and $10,000 principal and accrued interest of existing Convertible Notes Payables into new notes similar to that issued to Gemini. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the nameSecurities Exchange Act of 1934 requires certain officers and position of
Officers, Directors and 10% stockholdersdirectors of CDEX, and any persons who failedown more than ten-percent of the common stock outstanding to file forms reporting their initial beneficial ownership of shares and subsequent changes in that ownership with the SEC and the NASDAQ Global Market. Officers and directors of CDEX, and greater than ten-percent beneficial owners are also required to furnish us with copies of all such Section 16(a) forms they file. Based solely on a timely
basis any reports required pursuantreview of the copies of the forms furnished to Section 16(A)us, we believe that during the fiscal year ended October 31, 2007. As of February 13, 2008,2009 all section 16(a) filing requirements were met except that Malcolm H. Philips, has filed hisJr., Timothy D. Shriver and Stephen McCommon, were late filing Form 3 report and is now current with his required filings. The Company expects Dr.
BD Liaw and Jeffrey Brumfield to complete their filings by March 10, 2008.
Name Position Report to be Filed
- --------------------------------------------------------------------------------
Malcolm H. Philips President and Chief Executive Officer Form 3
and Chairman of the Board
Dr. BD Liaw Director Form 4
Jeffrey Brumfield Investor Form 3
4.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
For fiscal year 2007,years 2008-2009, S.E. Clark and Co. provided audit services to the Company that included examination of the Company'sCompany’s annual consolidated financial statements. The Company'sCompany’s Board of Directors has selected S.E. Clark and Co. to perform an audit of the consolidated financial statements of the Company and its
subsidiaries for the fiscal year ending October 31, 20082010 in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing a report thereon. The stockholders are being requested to ratify such selection at the Annual Meeting. No representative of S.E. Clark and Co. will attend the Annual Meeting to make a statement or to respond to stockholder questions.
The Board of Directors recommends a vote to ratify the appointment of S.E. Clark and Co. as the Company'sCompany’s Independent Auditors.
Fees to Independent Registered Public Account Firm for Fiscal Years 20062009 and 2007
2008
The following is a summary of the fees billed to us by S.E. Clark and Co., our independent auditor,registered public accounting firm, for professional services rendered for the yearfiscal years ended October 31, 20072009 and Aronson and Company, our prior independent auditors, for
audit and professional services rendered for the fiscal year ended October 31,
2006:
Description FY2006 FY2007
- ----------------------------------------------
Audit fees $58,000 $57,007
Other services 15,600 6,850
----------------------
Total $73,600 $63,857
----------------------
2008:
| Description | | 2009 | | | 2008 | | | | | | | | | | | Audit fees | | $ | 36,721 | | | $ | 46,206 | | | Other services | | | 675 | | | | 400 | | | | | | | | | | | | | Total | | $ | 37,396 | | | $ | 46,606 | |
Policy on Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Board of Directors pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services. The Company'sCompany’s independent auditors may be engaged to provide non-audit services only after the appointed auditor has first considered the proposed engagement and has determined in each instance that the proposed services are not prohibited by applicable regulations and the auditors'auditors’ independence will not be materially impaired as a result of having provided these services. In making this determination, the Board of Directors take into consideration whether a reasonable investor, knowing all relevant facts and circumstances, would conclude that the Directors'Directors’ exercise of objective and impartial judgment on all issues encompassed within the auditors'auditors’ engagement would be materially impaired.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO 2003 STOCK INCENTIVE PLANCERTIFICATE OF INCORPORATION
Economic conditions in 2008 and 2009 significantly impacted Company operations, causing the Company to implement a four phase restructuring plan. The 2003 Stock Incentive Plan providesfirst phase was to reduce expenses and focus on sales of ValiMed units and ongoing support for existing and new customers. The result is that average monthly operational expenses have decreased from approximately $200,000 to $80,000. The second phase was to restructure the Company’s short term notes and accounts payables into a pro-ratatwo year convertible note. The result is that the Company’s short term debt of $3,125,003 on October 31, 2009 has been reduced to $893,057 as of April 30, 2010. The third phase was to restructure the Company’s sales strategy by implementing multiple financing options including leasing and “pay per use” structures. The fourth phase is to restructure the Company’s equity to cover its note obligations and create an investment structure supportive of additional financing. To accomplish this, the Company needs to increase in the number of authorized shares permittedof Common Stock from 100,000,000 shares to be granted or issued250,000,000 shares and is asking shareholders to grant such approval. In particular, in February 2010 and March 2010, the Company entered into a financing restructure transaction (the “February 2010 Financing”). Specifically, during February 2010, the Company entered into a Securities Purchase Agreement with increasesits largest creditor, Gemini Master Fund, Ltd. (“Gemini”), and with three other investors including an entity controlled by our CEO. Included in the agreement is the restructuring of the June 25, 2008 Senior Convertible Note held by Gemini where $1,151,100 of outstanding principal and accrued interest was capitalized into a new note bearing interest at 10% and convertible into Class A common stock at the rate of $0.05 per share for the first $800,000 of principal converted, and $0.08 per share for converted balances in excess of $800,000. We accounted for this as a debt extinguishment. The note matures on February 1, 2012, but has accelerated payment provisions and a contingent security interest, if certain financial milestones are not met. Additionally because of the restructuring, the common Stock Purchase Warrant issued on June 25, 2008 to Gemini was increased from 2,717,391 shares to 5,000,000 shares. Included in the restructuring was a $450,000 cash infusion consisting of $200,000 from an entity controlled by our former CEO and $250,000 from two other investors, for which the Company issued notes similar to that issued to Gemini. Additionally, as a part of this restructuring, $247,115 principal and accrued interest of existing Convertible Notes Payables held by an entity controlled by our former CEO were consolidated and converted into a new convertible note similar to that issued to Gemini.
During March 2010, the Company, as a part of the February 2010 Financing, $200,695, $15,462 and $10,000 principal and accrued interest of existing Convertible Notes Payables held by three investors, two directors and an entity controlled by our former CEO, respectively, were converted into new convertible notes similar to that issued to Gemini. Also during March 2010, $832,126 of accounts payable balances were converted into new convertible notes similar to that issued to Gemini.
As a part of the February 2010 financing, the Company committed to reserve by September 30, 2010, for an additional 25,011,105 shares of common stock for convertible notes issued during the financing. Additionally, as a part of that financing, Gemini has note conversion and warrant rights to an additional 22,680,651.28 shares of common stock in excess of the 4.9% of Company stock outstanding that Gemini is limiting itself to hold at any time. Additionally, the Company committed to present this increase in authorized shares approved by the shareholders. At a special shareholders' meeting held on January
9, 2007,proposal to the shareholders approved anin the February 2010 financing.
RESERVATIONS AGAINST AUTHORIZED STOCK
The following table discloses the reservations against authorized but unissued shares of the Company’s own stock as of June 19, 2010:
| As of June 19, 2010 | | | Common Stock | | | | | | | Authorized | | | 100,000,000 | | | Outstanding June 19, 2010 | | | 65,239,634 | | | Authorized and unissued | | | 34,760,366 | | | | | | | | Reservations against Authorized Stock | | | | | | | | | | | Stock reserved for Preferred Stock | | | (199,252 | ) | | Subtotal of Warrants Issued | | | (5,796,434 | ) | | Subtotal of Issued but unexercised options | | | (4,025,000 | ) | | Stock reserved for convertible loans | | | (1,099,006 | ) | | Incentive Plan Remaining Authorized Grant Shares | | | (2,426,957 | ) | | Stock reserved for unissued warrants | | | (1,099,006 | ) | | June 19, 2010 number of shares available | | | 20,114,711 | |
The following table discloses the reservations against authorized but unissued shares of the Company’s own stock if this proposal was approved:
| June 19, 2010 number of shares available | | | 20,114,711 | | | | | | | | Expected increase in authorized shares | | | 150,000,000 | | | Commitment to reserve for notes convertible after Sept. 30, 2010 | | | (25,011,105 | ) | | Gemini Master Fund rights to additional stock thru convertible notes and warrants | | | (22,680,651 | ) | | Expected number of shares available after approval | | | 122,422,955 | |
The increase in the number of authorized shares from 50.2 millionof Common Stock will permit the Company to 100 million. This shareholder action resulted inreserve for issuance, or issue, shares of its Common Stock it will be obligated to reserve or issue but is unable to do so because of an automatic increase in theinsufficient number of authorized shares. Further, upon approval, the additional shares permitted towould be issued or granted
underavailable for issuance by the 2003 Stock Incentive Plan to approximately 26.9 million. The Board of Directors believeswithout the delay and expense of further stockholder approval at such time or times and for such proper corporate purposes as the Board may in the future deem advisable. Shares of Common Stock and preferred stock convertible into shares of Common Stock or other equity securities of the Company may be issued if, and when, the Board determines it to be in the best interest of CDEX to do so, which may include issuances to (i) obtain funds through the sale of common or convertible preferred stock; (ii) purchase technology licensing fees; (iii) cover expenses associated with research and development; (iv) pay general and administrative costs; (v) acquire companies; (vi) create strategic alliances; (vii) reserve shares for the Stock Option Plans; or (viii) for other appropriate corporate purposes. Unless required by applicable law, CDEX's Certificate of Incorporation or its By-Laws, it is not anticipated that this number shouldthe future vote of stockholders will be reduced and a ceiling placed onrequired prior to the numberissuance of Common Stock or convertible preferred stock. Given the financial condition of the Company, the Company will need to raise capital prior to the end of the year. In the event that the Company raises such capital through the issuance of shares of Common Stock or securities convertible into or exchangeable for such shares, the Company will use a portion of the shares authorized for that canpurpose. The Company has no present intention or plans to issue shares of Common Stock for any purpose other than as described herein. The availability of authorized but unissued shares of Common Stock might be deemed to have the effect of preventing or discouraging an attempt by another person to obtain control of the Company, because the additional shares could be issued underby the Plan.Board of Directors, which could dilute the stock ownership of such person. In addition, the Company's Certificate of Incorporation authorizes the issuance of "blank check” convertible preferred stock with the designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors proposesis empowered, without stockholder approval, to amendissue convertible preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the 2003 Stock Incentive
Plan limiting the grantingvoting power or issuing of stock under the Stock Incentive Plans
to no more than 25%other rights of the holders of our Common Stock. The issuance of convertible preferred stock could discourage, delay or prevent a change in control of the Company and also may have the effect of discouraging a third party from making a tender offer or otherwise attempting to obtain control of the Company even though the transaction might be economically beneficial to the Company and its stockholders. This proposal is not being proposed in response to a known effort to acquire control of the Company.
The additional shares of Common Stock to be authorized by adoption of the amendment to the Certificate of Incorporation would have rights identical to the current issued and outstanding shares of Common Stock of the Company. Currently, there
are 100 millionAdoption of the proposed amendment would not affect the rights of the holders of Common Stock. Like existing holders, holders of shares authorized. A vote for thisof Common Stock issued following adoption of the proposed amendment would not be entitled to pre-emptive rights with respect to any future issuances of Common Stock or convertible preferred stock, and such issuances would reduce the proportionate ownership interest in CDEX that each holder had immediately prior to the issuance. The Company has never paid a cash dividend on its Common Stock and does not anticipate paying cash dividends for the foreseeable future. CDEX intends to reinvest any funds that might otherwise be available for the payment of dividends in further development of its business.
Release No. 34-15320 of the staff of the Securities and Exchange Commission requires disclosure and discussion of the effects of any shareholder proposal that may be used as an anti-takeover device. However, as indicated above, the purpose of the increase in authorized shares is to permit the Company to reserve for issuance, or issue, shares of its Common Stock it will be obligated to reserve or issue but is unable to do so because of an insufficient number of authorized shares. The actions are not intended to construct or enable any anti-takeover defense or mechanism on behalf of the Company. While it is possible that management could use the additional shares to resist or frustrate a third-party transaction providing an above-market premium that are currently allowed under all Stock Incentive Plans from
about 26.9 millionis favored by a majority of the independent stockholders, the Company has no intent or plan to 25 million shares.
Asemploy the additional unissued authorized shares as an anti-takeover device.
If approved by the stockholders, the amendment to the Certificate of January 22, 2008, we have issued or granted 12,378,043 sharesIncorporation would become effective upon the filing of common
stock undera Certificate of Amendment to the plans to certainCertificate of our officers, directors, consultants and
employees, which are subject to forfeiture in accordanceIncorporation with the vesting
schedules set forth inSecretary of State of the granting agreements. Shares issued pursuantState of Nevada, which filing is expected to take place shortly after the plans, whether underlying options or as restricted stock, generally may not be
sold or transferred without the grantee first offering CDEX a right of first
refusal to purchase the shares sought to be sold.
Meeting.
The Board of Directors recommends a vote to approve the amendment to the 2003
Stock Incentive Plan.
STOCK INCENTIVE PLANS
2002 Stock Incentive Plan
- -------------------------
On May 27, 2002, our boardCertificate of directors adopted the 2002 Stock Incentive Plan,
under which stock options and restricted stock may be granted to such of our
officers, directors, employees or other persons providing services to CDEX as
our board of directors, or a committee designated by them for this purpose,
selects. The plan was approved by our stockholders on July 1, 2002.
Stock options granted under the plan may be nonqualified stock options or
incentive stock options, as provided in the plan. Incentive stock options are to
be issued in accordance with Section 422 of the Internal Revenue Code of 1986,
as amended. As such, incentive stock options may only be issued to employees of
CDEX or any subsidiary of CDEX, must have an exercise price of no less than the
fair market value of the common stock on the date of the grant; provided,
however, that in the event the grantee is a ten percent stockholder, the
exercise price shall not be less then 110% of fair market value of the common
stock on the date of the grant. The aggregate fair market value of the
underlying shares cannot exceed $100,000 for any individual option holder during
any calendar year. Incentive stock options granted to a ten percent stockholder
must expire no later than five years from the date of grant. Non-incentive
options are not subject to the restrictions contained in Section 422, except
that pursuant to the plan, such options cannot be exercisable at less than 85%
of fair market value and must expire no later than ten years from the date of
grant. The options are non-transferable and may not be assigned except that
non-incentive options may, in certain cases be assigned to family members of the
grantee.
Upon termination of the employment (other than for cause) of a grantee of
options under this plan, the grantee shall have 60 days following such
termination, or one year if such termination results from the grantee's death or
disability (as defined in the plan), to exercise the vested portion of any
option. Holders of options under the plan have no voting or other rights of
shareholders except and to the extent that they exercise their options and are
issued the underlying shares. Options under the plan may be exercised by the
issuance of a promissory note from the grantee, or on a cashless basis by the
grantee surrendering a portion of the shares issuable thereunder, as payment of
the exercise price in lieu of cash.
Restricted stock granted under this plan may be issued subject to any
restrictions set by our board of directors in its discretion except that the
vesting restrictions for restricted stock granted to individuals who are not
officers, directors or consultants of CDEX shall lapse no less rapidly than the
rate of 20% per year for each of the first five years from the grant date.
However, the board of directors in its discretion may shorten or eliminate the
restrictions. Generally, unless otherwise provided by the board of directors
with respect to a particular grant of restricted stock, holders of restricted
stock have the right to vote and receive dividends on their shares, including
shares not yet vested. Also, unless otherwise so provided, any unvested shares
are deemed forfeited by the grantee upon termination of such grantee's service
with CDEX.
2003 Stock Incentive Plan
- -------------------------
On July 1, 2003, our shareholders adopted the 2003 Stock Incentive Plan, which
has substantially the same terms as the 2002 Stock Incentive Plan. At the annual
meeting of stockholders held on June 30, 2004, the shareholders authorized
10,000,000 shares in the aggregate for issuance under both the 2002 and 2003
plans, including 3,000,000 available for the Board of Directors to allocate at
their discretion. At the annual meeting of the stockholders held on March 17,
2006, the shareholders approved an amendment to the 2003 Stock Incentive Plan
increasing the number of Class A common stock available for issuance by an
additional 3,500,000 shares. This amendment increased the aggregate number of
shares available for issuance under both the 2002 and 2003 Stock Incentive Plans
to 13,500,000. It should be noted that our 2005 Form 10-KSB correctly listed the
aggregate number of shares reserved for issuance under the 2002 and 2003 Stock
Incentive Plans as 10,000,000 shares and Form DEF 14A filed on February 14,
2006, as well as the second quarter 2006 10-QSB correctly noted an increase in
the reserved shares by 3.5 million as approved at the March 17, 2006 Shareholder
Meeting. However, the 2006 Form 10-KSB inadvertently listed the aggregate number
of shares reserved for issuance under both the 2002 and 2003 Stock Incentive
Plans as 10,000,000 shares. The 2003 Stock Incentive Plan provides for a
pro-rata increase in the number of shares permitted to be granted or issued for
an increase in the authorized shares approved by the shareholders. At a special
shareholders' meeting held on January 9, 2007, the shareholders approved an
increase in the number of authorized shares from 50.2 million to 100 million.
This shareholder action resulted in an automatic increase in the number of
shares permitted to be issued or granted under the 2003 Stock Incentive Plan to
approximately 26.9 million.
Incorporation.
SHAREHOLDER PROPOSALS FOR 20082011 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder of the Company wishing to submit a proposal for action at the Company's 2008Company’s 2010 Annual Meeting of Shareholders and its 2011 Annual Meeting of Shareholders must provide a written copy of the proposal to the management of the Company at its principal executive offices not later than March 17, 2008a reasonable time before the company begins to print and send its proxy materials and must otherwise comply with the rules and regulations of the Commission applicable to shareholder proposals.
ANNUAL REPORT
The Company's 2007Company’s 2009 Annual Report to Shareholders, which includes financial statements, is being made available to the Company'sCompany’s Shareholders with this Proxy Statement. The Annual Report is not part of the proxy soliciting material. Both the Annual report on Form 10-KSB10-K and the Proxy Statement are available online at www.proxyvote.com.
https://materials.proxyvote.com/12507E.
OTHER MATTERS
The Board does not know of any other matters to be presented at the Annual Meeting for action by Shareholders. If any other matters requiring a vote of the Shareholders arise at the Annual Meeting or any adjournment thereof, however, it is intended that votes will be cast pursuant to the proxies with respect to such matters in accordance with the best judgment of the persons acting under the proxies. The Company will pay the cost of soliciting proxies in the accompanying form. In addition to solicitation by mail, certain officers and regular employees of the Company may solicit the return of proxies by telephone, telegram or personal interview. The Company may request brokers and others to forward proxies and soliciting materials to the beneficial owners of Common Stock, and will reimburse them for their reasonable expenses in so doing.
A list of Shareholders entitled to be present and vote at the Annual Meeting will be available during the Annual Meeting for inspection by shareholders who are present.
If you cannot be present in person, you are requested to follow the voting instructions incontained on your proxy card or complete, sign, date and return the enclosed proxy promptly. An envelope has been provided for your convenience.
| By Order of the Board of Directors, | | | | | | | | | | | | Carmen J. Conicelli | | | Chairman | |
, 2010 Tucson, Arizona
CDEX INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Internet AvailabilityAnnual Meeting of Shareholders and Proxy Materials.
By OrderStatement, each dated [__________], 2010, and does hereby appoint Donald W. Strickland and Stephen A. McCommon, and either of them, with full power of substitution as proxy or proxies of the undersigned, to represent the undersigned and vote all shares of CDEX Inc. common stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of CDEX Inc., to be held at 4550 South Palo Verde Road, Tucson, Arizona, at 9:00 a.m., local time, on September 29, 2010, and at any and all adjournment(s) thereof:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE LISTED NOMINEES AND PROPOSALS.
The election as directors of the four nominees listed below to serve until the Annual Meeting of Shareholders of the Company in the year of the expiration of the term, as specified, or until their successors have been duly elected and qualified.
| Name | Term | For | Withhold | Abstain | | George Dials | 2009-2012 | o | o | o | | Donald W. Strickland | 2009-2012 | o | o | o | | Gregory Firmbach | 2010-2013 | o | o | o |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF S.E. CLARK AND CO., AS THE COMPANY’S INDEPENDENT AUDITORS FOR FISCAL 2010.
2. Proposal 2: Ratification of S.E. Clark and Co. to provide audit services to the Company that include the examination of the Company’s annual financial statements for fiscal year 2010.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION.
3. Proposal 3: Completion of the final phase of the Company’s restructuring by approving the proposed amendment to the Company’s Certificate of Incorporation increasing the number of Authorized Shares of Common Stock from 100,000,000 shares to 250,000,000 shares.
IF NO DIRECTION IS MADE TO WITHHOLD AUTHORITY TO VOTE FOR THE PROPOSALS ABOVE, THIS PROXY CARD WILL BE VOTED “FOR” SUCH PROPOSALS.
4. In their discretion, the proxies are authorized to vote upon such other business as properly may come before the Annual Meeting and any adjournments thereof. This proxy may be revoked at any time prior to the voting thereof.
(CONTINUED, AND TO BE SIGNED ON REVERSE SIDE)
(CONTINUED FROM THE OTHER SIDE)
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY
If any other business is properly presented at the Annual Meeting, this proxy card will be voted by the proxies in their discretion. At the present time, the Board of Directors /s/ Malcolm H. Philips, Jr.
---------------------------
Malcolm H. Philips, Jr.,
Chairmanknows of no other business to be presented to a vote of the shareholders at the Annual Meeting.
| Signature | | | | | | | | | | | | Signature, if shares held jointly | | | | | | | | | Date | | | , 2010 | | | | | | Please sign exactly as your name appears hereon. When shares are held jointly, both holders should sign. When signing as attorney, executor, administrator, trustee, custodian or guardian, please give your full title. If the holder is a corporation or partnership the full corporate or partnership name should be signed by a duly authorized officer or partner, respectively. |
|