SCHEDULE 14A
(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
Filed by the Registrant x
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-12
Lancer Orthodontics, 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 No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
Fee paid previously with preliminary materials
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 be registration statement number or the Form or Schedule
and date of its filing.
(1) Amount previously paid:
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LANCER ORTHODONTICS, INC.
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 19, 2004
AND PROXY STATEMENT
The 2004 Annual Meeting of Shareholders of Lancer Orthodontics, Inc.
(the "Company") will be held at 2:00 p.m. on Friday, November 19, 2004 at
Lancer Orthodontics, Inc. Corporate Offices, 253 Pawnee Street, San Marcos
California 92078.
The purposes of the meeting are:
1. To elect a Board of Directors of the Company for the ensuing year.
2. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on October 4, 2004,
are entitled to notice of and to vote at the Annual Meeting of Shareholders
and any adjournment thereof.
Your attention is directed to the accompanying Proxy Statement.
Shareholders who do not expect to attend the meeting in person are requested
to date, sign, and mail the enclosed proxy as promptly as possible in the
enclosed envelope.
By Order of the Board of Directors
/s/ Allen Barbieri
Allen Barbieri
Chief Executive Officer
San Marcos, California
September 28, 2004
LANCER ORTHODONTICS, INC.
253 PAWNEE STREET
SAN MARCOS, CALIFORNIA 92069
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 19, 2004
PROXY STATEMENT
INTRODUCTION
The Annual Meeting of Shareholders of Lancer Orthodontics, Inc., a
California Corporation, (the "Company") will be held at 2:00 p.m. on November
19, 2004, at Lancer Orthodontics, Inc. Corporate Offices, 253 Pawnee Street,
San Marcos, California 92078, for the purposes set forth on the accompanying
Notice of 2004 Annual Meeting of Shareholders. This Proxy Statement and the
enclosed Proxy are being mailed on or about October 19, 2004, to shareholders
of the Company in connection with the solicitation, by the Company's Board of
Directors, of proxies to be used at the 2004 Annual Meeting of Shareholders
and any adjournment thereof (the "Annual Meeting").
The presence at the Annual Meeting of Shareholders, in person or by
Proxy, of the holders of a majority of the outstanding shares of Common Stock
is necessary to constitute a quorum. The holder of each share of Common
Stock held of record on the record date is entitled to one vote on each
matter to be considered at the Annual Meeting.
If a Proxy in the accompanying form is duly executed and returned the
shares represented thereby will be voted as directed. If no direction is
given, the shares represented by the Proxy will be voted for the election of
the nominees for Director named herein. However, giving of the enclosed proxy
does not preclude the right to vote in person should the shareholder giving
the proxy so desire. Any shareholder may revoke his or her Proxy at any time
prior to its exercise by notifying the Secretary of the Company in writing of
such revocation, by submitting a Proxy bearing a later date to the Secretary
of the Company, or by voting in person at the meeting. Abstentions and broker
non-votes are not counted as votes cast on any matter to which they relate.
The cost of this solicitation of proxies will be borne by the Company.
In addition to solicitation by mail, officers, directors, and regular
employees of the Company may solicit proxies personally or by telephone or
telegraph. The Company will, upon request, reimburse banks, brokerage firms,
and other custodians and nominees for their reasonable expenses in sending
proxy materials to beneficial shareholders.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record as of the close of business on October 4,
2004, are entitled to vote at the meeting or any adjournment thereof. As of
September 17, 2004, the Company had outstanding 2,819,861 shares of Common
Stock, without par value. Holders of record of the Stock are entitled to one
vote for each share held. Shareholders are entitled to cumulative voting,
pursuant to which a shareholder may multiply the number of shares owned by
the number of Directors to be elected and cast a total number of votes equal
to the resulting product for any one candidate, or distribute the total
number of votes in any proportion among as many candidates as the shareholder
desires. However, a shareholder may not cumulate his or her votes for a
candidate unless such candidate's name has been placed in nomination prior to
the voting and unless the shareholder has given notice at the meeting, prior
to voting, of his or her intention to cumulate his or her votes. If any
shareholder gives such notice, all shareholders may then cumulate their votes.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of the date of this Proxy
Statement, by (i) each person known to the Company to own beneficially more
than 5% of the outstanding shares of the Common Stock, (ii) each director,
including the nominees for director, and each executive officer of the
Company, and (iii) all executive officers and directors as a group. Unless
otherwise indicated, each person listed has sole voting and investment power
over the shares beneficially owned by him or her.
Name and Address Amount and Nature of Percent of
of Beneficial Owner (1)(2) Beneficial Ownership (3) Class (2)
Biomerica, Inc. 683,562 (4) 24.2%
Allen Barbieri 237,916 (5) 8.2%
Zackary Irani 532,033 (6) 17.4%
Janet Moore 314,163 (7) 11.1%
Dr. Robert Orlando 36,042 (8) 1.3%
Dr. Francis Cano 70,834 (9) 2.5%
Dan Castner 280,000 (10) 9.4%
Scott Godfrey 279,667 (11) 9.4%
All executive officers,
directors and management,
as a group (7 persons) 1,750,655 (12) 49.2%
(1) The address for Mr. Barbieri, Mr. Irani, Ms. Moore, Dr. Orlando, and Dr.
Cano is 1533 Monrovia Avenue, Newport Beach CA 92663. The address for Mr.
Castner and Mr. Godfrey is 253 Pawnee Street, San Marcos CA 92078.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934. Any shares of Common Stock that each named
person and group has the right to acquire within 60 days pursuant to options,
warrants, conversion privileges or other rights, are deemed outstanding for
purposes of computing shares beneficially owned by and the percentage
ownership of each such person and group. However, such shares are not deemed
outstanding for purposes of computing the shares beneficially owned by or
percentage ownership of any other person or group. Percentage ownership for
each named beneficial owner, and the beneficial ownership of the directors and
executive officers as a group, is based on 2,819,861 issued and outstanding
shares of Common Stock.
(3) Except as otherwise indicated and subject to applicable community
property and similar statutes, the persons listed as beneficial owners of the
shares have sole voting and depositive power with respect to such shares.
(4) Biomerica, Inc.'s address is 1533 Monrovia Avenue, Newport Beach, CA
92663.
(5) Includes 92,083 shares of Common Stock underlying options and warrants
exercisable by Mr. Barbieri at or within 60 days after the date of the proxy.
(6) Includes 246,333 shares of Common Stock underlying options and warrants
exercisable by Mr. Irani at or within 60 days after the date of the proxy.
(7) Includes 2,771 shares in the name of Ms. Moore's minor sons and 17,500
shares of Common Stock underlying options exercisable by Ms. Moore at or
within 60 days after the date of the proxy.
(8) Includes 17,500 shares of Common Stock underlying options exercisable
by Dr. Orlando at or within 60 days after the date of the proxy.
(9) Includes 54,167 shares of Common Stock underlying options and warrants
exercisable by Dr. Cano at or within 60 days after the date of the proxy.
(10) Includes 155,000 shares of Common Stock underlying options and warrants
exercisable by Mr. Castner at or within 60 days after the date of the proxy.
(11) Includes 154,667 shares of Common Stock underlying options and warrants
exercisable by Mr. Godfrey, Lancer's Director of Operations, at or within 60
days after the date of the proxy.
(12) Includes 737,250 shares of Common Stock underlying options and warrants
exercisable at or within 60 days after the date of the proxy.
Series D Preferred Stock
The Company has authorized shares of Series D Preferred Stock. Each
share is entitled to a $.04 non-cumulative dividend and is convertible at
the option of the holder into common stock at the rate of seven shares of
preferred stock for one share of common stock. The Company, at its option,
can redeem outstanding shares of the preferred stock for cash at $.50 per
share after December 31, 1994. In May 2000, all 370,483 issued and
outstanding shares were converted into 52,926 shares of common stock. As
of the date of this proxy statement, there were no shares issued and
outstanding.
Certain Related Transactions
In fiscal 2003, the Company's parent Biomerica entered into an agreement
with the Company whereby Biomerica agreed to pay an initial shelter fee of
$5,000 with additional monthly payments of $2,875 for use of its Lancer de
Mexico facilities to produce and manufacture Biomerica products. The monthly
payments are due as long as Biomerica produces its products at the Lancer de
Mexico facility. During the fiscal year ended May 31, 2004, Biomerica paid
shelter fees of $34,500 from this agreement.
The Lancer Board of Directors approved a private offering of common
stock, effective March 23, 2004, and ending April 12, 2004. The offering,
to officers, board members, and key employees resulted in the sale of 450,000
new shares at $.60 per share with total proceeds received of $270,000. In
addition, one warrant exercisable for each share purchased (450,000 warrants)
was issued at $.85 per share. These warrants shall be exercisable until
April 12, 2009.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Directors to be elected at the meeting will hold office until the
next annual meeting or until their successors shall be elected and qualified.
The persons named in the enclosed proxy card will vote the shares represented
by the proxies given to them for the election of the four (4) nominees listed
in the table below, unless authority to do so is withheld. The shares
represented by proxies will not be voted for a greater number of persons than
the number of nominees listed below; however, the proxy holders have the right
(subject to the same conditions as apply to cumulation of votes by a
shareholder) to cumulate the votes represented by proxies and to distribute
the votes among the listed nominees in such manner as they see fit to elect
the maximum number of such nominees. If any nominees should not be
available for election as Directors, which the Board of Directors and
management do not presently anticipate, the persons named in the enclosed
proxy will vote for the election of such other person as the Board of
Directors and management may recommend.
The Board of Directors has nominated the following four persons to serve
as Directors until the next annual meeting of shareholders or until their
successors have been duly elected and qualified. The Company does not pay a
fee to any third party to identify potential nominees. The Board has not
received during the 120-day period between the end of the fiscal year and the
date of the proxy, any recommended nominees from a shareholder owing more than
5% of the Company's stock for at least one year.
Name Age Position
Allen Barbieri 46 Chief Executive Officer and Director
Zackary Irani 38 Chairman of the Board and Director
Janet Moore 53 Secretary and Director
Dr. Francis Cano 59 Director
The following is a summary of the Directors' experiences with the Company
and their other business experience:
On April 12, 2004, Mr. Barbieri joined the Board of Directors of Lancer,
and was elected by the Board to serve as the part-time Chief Executive Officer
("CEO") of the Company. From 1999 to April 2004, Mr. Barbieri was semi-
retired while serving on several Boards of Directors (non public). Mr.
Barbieri has been a Director of Biomerica, Inc. since 1999. From 1998 to
1999, Mr. Barbieri served as President and the Chief Financial Officer ("CFO")
of BUY.COM, a large internet retailer financed with over $200 million in
venture capital. From 1994 to 1998, Mr. Barbieri served as the President and
CEO of Pacific National Bank, a highly successful commercial bank that was
sold to US Bank in 1998. Prior to that, Mr. Barbieri served as President of
Capital Bancorp, a commercial bank holding company, CFO of First Federal Bank,
and as an Investment Banking Associate of Merrill Lynch Capital Markets in New
York. Mr. Barbieri holds a Bachelors Degree in Business from Brigham Young
University and an MBA Degree from the Massachusetts Institute of Technology
(MIT). Mr. Barbieri is currently at the Lancer location two or three days per
week, sharing executive management responsibilities with Mr. Irani, the
Chairman of the Board.
Mr. Irani has been a Director of the Company since October 29, 1992.
Mr. Irani was elected Chairman of the Board effective April 30, 1997, and was
elected Chief Executive Officer effective October 24, 1997 until April 2004
when Mr. Barbieri was named part-time CEO. Mr. Irani has been the Chief
Executive Officer and Chairman of Biomerica since April 1997. Prior to that
time, Mr. Irani served as Vice President of Business Development of Biomerica
since July 1994 and Business Development Manager of Biomerica since 1986.
Mr. Irani also serves as a Director of Biomerica. Mr. Irani has been fully
employed by the Company since June 2002. Mr. Irani is currently at the Lancer
location one day per week, sharing executive management responsibilities with
Mr. Barbieri. The remainder of his time is devoted to Biomerica.
Ms. Moore has been a Director of the Company since October 25, 1996, and
was a Director of the Company from October 29, 1992 through November 4, 1994.
Ms. Moore has been an employee of Biomerica since 1976 and currently serves
as the CFO, Secretary, Treasurer, and as a Director of Biomerica.
Francis Cano, Ph.D. has served as a Director of the Company since May
2001. Since 2003 Dr. Cano has been serving as the Chief Executive Officer
and Chairman of the Board of Vaxin, Inc. From 1996 to 1997, Dr. Cano served
as Senior Vice President - Biotechnology of BDM, an information technology
company. From 1992 to 1996, he served as President and Chief Operating
Officer of Aviron, a public biotechnology company focused on developing
viral vaccines for disease prevention. Dr. Cano was also involved in
developing a vaccine business at a division of American Cynamid Corporation.
Lancer does not have a CFO, so the CEO, Mr. Barbieri, the Director of
Financial Planning, Mr. John Dodge, and the Accounting Manager, Ms. Cathy
Wyss, review financial reporting and sign certifications. Mr. Dodge is a CPA
with more than 20 years accounting experience, including serving as
Controller for Bear Creek Golf Club and Johnson Textile Ltd. He has been
employed by Lancer for 4 days a week since August 1999. He also consults for
Biomerica 1 day per week. Ms. Wyss has been employed in the accounting
department of Lancer since 1985. Her previous experience includes
employment as Field Auditor for the State of Indiana Department of Revenue.
The Board of Directors regularly assesses the appropriate size of the
Board of Directors and whether any vacancies on the Board of Directors are
expected due to retirement or otherwise. In the event that vacancies are
anticipated or otherwise arise, the Board utilizes a variety of methods for
identifying and evaluating director candidates. Candidates may come to the
attention of the Committee through current directors, professional search
firms, shareholders or other persons.
Once the Board has identified a prospective nominee, the Board will
evaluate the prospective nominee in the context of the then current
composition of the Board of Directors and will consider a variety of other
factors, including the prospective nominee's business, technology and
industry, finance and financial reporting experience, and other attributes
that would be expected to contribute to an effective Board of Directors. The
Board seeks to identify nominees who possess a diligent range of experience,
skills, areas of expertise, industry knowledge and business judgment.
Successful nominees should have a history of superior performance or
accomplishments in their professional undertakings and should have the
highest personal and professional ethics and values. The Board does not
evaluate shareholder nominees differently than any other nominee.
Our Board will consider shareholder nominations for directors if we
receive timely written notice, in proper form, of the intent to make a
nomination at a meeting of shareholders. To be timely, the notice must be
received within the time frame discussed below in this Proxy Statement under
the heading "Shareholder Proposals." To be in proper form, the notice must,
among other matters, include each nominee's written consent to serve as a
director if elected, a description of all arrangements or understandings
between the nominating shareholder and each nominee and information about
the nominating shareholder and each nominee.
Director Not Standing For Re-Election
Dr. Robert Orlando has been a Director of the Company since July 20,
1988. Dr. Orlando is a professor of pathology and has served as Chief
Pathologist of Beverly Hospital in Montebello, California since 1991. Dr.
Orlando has also been a professor at Southern California College of Optometry
in Fullerton, California since 1972.
On September 21, 2004, the Company and Board Director, Dr. Robert
Orlando, mutually agreed that he will not stand for re-election this year
when his term expires November 19, 2004, due to Dr. Orlando's time
constraints.
Other Officers
Mr. Dan Castner has been Executive Vice President of Marketing since
June 2, 2003 and is responsible for sales, marketing, and product development.
Mr. Castner has been employed in the dental device field for 16 years. From
1988-2003, Mr. Castner was employed at Sybron Dental Specialties and
Ormco-SDS in a variety of positions including sales, product management, and
then Vice President of Business Development, responsible for acquisitions,
clinical liaison, champions, and continuing education programs.
Meetings of the Board of Directors and its Committees
The Board of Directors met two times during the year, once in person and
once by telephone, and also executed written consents three times during the
fiscal year ended May 31, 2004 (the "2004 Fiscal Year"). Each outside
Director is to be paid $500 for each Board or Committee meeting attended and
$200 for each telephonic meeting. Currently accrued fees are $2,100 for Ms.
Moore and $4,400 for Dr. Cano.
All directors except Dr Orlando attended 75% or more of the aggregate of
all meetings of the Board of Directors and the committees, if any, upon which
the directors served during the year ended May 31, 2004.
Director Independence
Our Board of Directors has determined that Dr. Francis Cano and Dr.
Robert Orlando are independent within the meaning of Nasdaq Marketplace Rule
4200(a)(15) as adopted by the Nasdaq Stock Market, Inc., ("NASDAQ")..
Mr. Zack Irani and Mr. Allen Barbieri were not deemed to be "independent"
because of their respect employment relationships with us. Ms. Janet Moore
is deemed not to be independent because of her employment with Biomerica, Inc.
In 1979, the Board of Directors of the Company created an Executive
Committee, which is vested with all the authority of the Board of Directors
of the Company, except as restricted by the Company's Bylaws and the
California General Corporation Law. The Executive Committee is presently
composed by Mr. A. Barbieri and Mr. Z. Irani. The Executive Committee did
not officially meet during the 2004 Fiscal Year, however, they do meet weekly
to discuss issues relating to Lancer.
The Compensation Committee is responsible for assisting the Board of
Directors in discharging its responsibilities regarding the compensation of
our employees and directors. The specific duties of the Compensation
Committee include, among other matters: reviewing and approving executive
compensation; evaluating our executive officers' performance; setting the
compensation levels of our executive officers; setting our incentive
compensation plans, including our equity-based incentive plans; and making
recommendations to our Board of Directors regarding our overall compensation
structure, policies and programs.
In fiscal 2004 the Compensation Committee was comprised of Dr. Robert
Orlando and Ms. Janet Moore and the committee met once during the fiscal year.
Currently, the Committee is comprised of Dr. Cano and Ms. Moore.
The Audit Committee is responsible for overseeing our accounting and
financial reporting processes and the audits of our financial statements. In
addition, the Audit Committee assists the Board of Directors in its oversight
of our compliance with legal and regulatory requirements. The specific duties
of the Audit Committee include, among others: monitoring the integrity of our
financial process and systems of internal controls regarding finance,
accounting and legal compliance; selecting our independent auditor;
monitoring the independence and performance of our independent auditor; and
providing an avenue of communication among the independent auditor, our
management and our Board of Directors. The Audit Committee has the authority
to conduct any investigation appropriate to fulfilling its responsibilities,
and it has direct access to all of our employees and to the independent
auditor. The Audit Committee also has the ability to retain, at our expense
and without further approval of the Board of Directors, special legal,
accounting or other consultants or experts that it deems necessary in the
performance of its duties. The Audit Committee is comprised of Dr. Frank Cano
and Ms. Janet Moore and met once in the fiscal year ended May 31, 2004. Our
Board of Directors has determined that Dr. Cano is independent within the
meaning of Nasdaq Rule 4200(a)(15) as well as the enhanced independence
standards contained in Nasdaq Rule 4350(d) that relate to members of audit
committees. Ms. Janet Moore is deemed not to be independent because of her
employment with Biomerica, Inc.
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process
including the systems of internal controls. In fulfilling its oversight
responsibilities, the Committee reviewed the audited financial statements in
the Annual Report with management including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as
to the quality, not just the acceptability, of the Company's accounting
principles and such other matters as are required to be discussed with the
Committee under generally accepted auditing standards. In addition, the
Committee has discussed with the independent auditors the auditors'
independence from management and the Company including the matters in the
written disclosures required by the Independence Standards Board and
considered the compatibility of non-audit services with the auditors'
independence.
The Committee discussed with the Company's independent auditors the
overall scope and plans for their respective audit. The Committee meets with
the independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on
Form 10-KSB for the year ended May 31, 2004 for filing with the Securities
and Exchange Commission. The Committee and the Board have also recommended
the selection of the Company's independent auditors.
/s/ Janet Moore /s/ Dr. Francis Cano
Janet Moore Dr. Francis Cano
EXECUTIVE COMPENSATION
The following table presents, for each of the last three fiscal years,
the annual compensation earned by executive officers.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options/ LTIP Compen
Position Year Salary Bonus sation Awards SARs Payouts sation
Zackary Irani
Chairman 2004 $45,000 -- -- $15,000(7) 75,000(8) -- --
Of the 2003 $32,885 -- -- $20,250(6) -- -- --
Board(1) 2002 $30,000(3) -- -- $21,000(4) 113,000(5) -- --
Allen Barbieri
Chief 2004 $0 -- -- $18,750(9) 17,500(10) -- --
Executive 2003 $0 -- -- -- -- -- --
Officer(2) 2002 $0 -- -- -- -- -- --
Dan Castner
Executive 2004 $135,000 -- -- -- 120,000(11) -- --
V. P. of 2003 $0 -- -- -- -- -- --
Marketing 2002 $0 -- -- -- -- -- --
(1) Mr. Irani was elected Chairman of the Board effective April 30, 1997,
and was elected Chief Executive Officer effective October 24, 1997,
until March 2004.
(2) Mr. Barbieri was appointed Chief Executive Officer effective April 12,
2004.
(3) This sum includes directors fees which were paid with 1,500 shares of
restricted common stock at $1.00 per share..
(4) This sum represents 60,000 shares of restricted common stock at $.35 per
share issued September 25, 2002.
(5) This sum represents 113,000 options to purchase common stock at $.30,
exercisable at the rate of one-third per year.
(6) This sum represents 53,846 shares of restricted common stock at $.26 per
share and 15,625 shares of restricted common stock at $.40 per share
accrued in 2003 and issued in April 2004.
(7) This sum represents 31,250 shares of restricted common stock at $.40 per
share and 4,166 shares of restricted common stock at $.60 per share.
In April 2004, 21,875 shares at $.40 were issued. The remaining 13,541
shares are to be issued.
(8) This sum represents 75,000 options to purchase common stock at $.38 per
share, exercisable at the rate of one-third per year.
(9) This sum represents 31,250 shares of restricted common stock at $.60 per
share issued July 2004.
(10) This sum represents 17,500 options to purchase common stock at $.60 per
share, exercisable at the rate of one-half per year.
(11) This sum represents 120,000 options to purchase common stock at $.38 per
share, exercisable at the rate of one-fourth in June 2004, one-fourth in
June 2005, and one-twenty-fourth per month in June 2006 through May 2007.
Independent Accountants
Effective May 29, 2004, the Company engaged PKF, Certified Public
Accountants, A Professional Corporation (San Diego)("PKF"), to serve as the
Company's independent public accountants and to conduct the audit of the
Company's financial statements for the fiscal year end ending May 31, 2004.
In connection with the engagement of PKF, Certified Public Accountants, A
Professional Corporation (San Diego), the Company has discontinued its
association with BDO Seidman who had been engaged to audit the Company's
financial statements for the prior fiscal years. The audit report provided by
BDO Seidman for the fiscal year ended May 31, 2003, did not contain any
adverse opinion or a disclaimer of opinion nor was any report modified as to
uncertainty, audit scope, or accounting principles. Management of the Company
knows of no past disagreements between the Company and BDO Seidman on any
matter of accounting principles or practices, financial statement disclosure
or auditing, scope, or procedure.
Stock Option Grants in Last Fiscal Year
The following table sets forth information concerning stock options
granted in the fiscal year ended May 31, 2004, to executive officers.
Individual Grants
Percent
Number of of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
Zackary Irani 75,000 -- $.38 6-02-08
Allen Barbieri 17,500 -- $.60 4-12-09
Dan Castner 120,000 -- $.38 6-02-08
Options Exercises and Fiscal Year End Values
The following table presents information for the named officers in the
Summary Compensation Table with respect to options exercised during Fiscal
2004 and unexercised options held as of the end of the fiscal year.
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised in the Money Options
on Value Options at Fiscal Year End at Fiscal Year End(1)
Name Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
Zackary Irani -0- -0- 163,000 25,000 $84,020 $11,500
Allen Barbieri -0- -0- 8,750 8,750 $ 2,100 $ 2,100
Dan Castner -0- -0- 30,000 90,000 $13,800 $41,400
(1) Based on closing price for the Company's common stock on the last
business day of the fiscal year.
Stock Options
The Company has incentive stock option and non-qualified stock option
plans for directors, officers, and key employees. The 1993 Stock Option Plan
authorized 357,143 shares to be issued. Options granted under the 1993 plan
were required to be granted at an option price not less than 85% of the fair
market value for options granted to employees, or less than 100% of the fair
market value for options granted to non-employees. The fair market value of
the stock was the share price of the Company's common stock at the date the
options were granted. Most options granted under this Plan had an expiration
period of five years from the date of their respective grant and all were
granted at fair market value at the date of grant. At May 31, 2004 there
were 347,000 options outstanding under this plan. The 1993 Stock Option
Plan expired in March 2004 and no new options could be granted under this
Plan, but the outstanding options remain effective until exercised or
forfeited.
The 2000 Stock Incentive Plan authorized 450,000 initial shares to be
issued, increasing by the lower of 1.5% of the total number of common shares
outstanding or 225,000 shares, each year on January 1, beginning in 2001. The
total shares authorized at May 31, 2004 were 581,023. Incentive stock options
granted under the 2000 Plan are required to be granted at an option price not
less than 100% of the fair market value of the Company's common stock on the
date of grant, with an exercise period not exceeding ten years from grant
date. The option price of non-statutory stock options granted under the 2000
Plan are required to be granted at an option price not less than 85% of the
fair market value of the Company's common stock on the date of grant. Options
granted to non-executive directors under the 2000 Plan are required to be
granted at an option price not less than 100% of the fair market value
determined by the Board of Directors, with an exercise period not exceeding
ten years from grant date. The majority of options granted under this plan
vest pro rata over a period of three years. At May 31, 2004 there were
300,500 options outstanding under this plan.
SECTION 16 COMPLIANCE
The rules of the Securities and Exchange Commission require disclosure of
late Section 16 filings by the Company's directors, officers, and persons who
beneficially own more than 10% of the Company's stock. To the best of the
Company's knowledge and belief, there were no late filings under Section 16 by
or for any of the Company's directors and officers during Fiscal 2004.
It is expected that a representative of PKF will be present at the Annual
Meeting to respond to appropriate questions or to make a statement if he or
she so desires.
Audit Fees
The aggregate fees billed for professional services rendered for the
audit of the Company's annual financial statements for the year ended May 31,
2004 was $45,900, of which $28,500 was billed by the current auditors, PKF,
and $17,400 was billed by the former auditors, BDO Seidman, LLP. The Company
was billed a total of $21,000 for the reviews of the financial statements
included in the Company's Form 10-QSB by the Company's former auditors.
The audit committee has considered that the provision of the above
services has not impaired the principal accountant's ability to maintain
independence.
Financial Information Systems Design and Implementation Fees
There were no fees billed by the principal accountants for professional
services with respect to financial information systems design and
implementation for the fiscal year ended May 31, 2004.
All Other Fees
There were no other fees paid.
Other Business
Management is not aware of any matters to come before the Annual Meeting
other than those stated in the Proxy Statement. However, inasmuch as matters
of which management is not now aware may come before the meeting or any
adjournment thereof, the Proxy confers discretionary authority with respect
to acting thereon, and the persons named in such Proxy intend to vote, act,
and consent in accordance with their best judgment with respect thereto.
Director Attendance at Annual Meetings
Our Board of Directors has adopted a policy that encourages our directors
to attend our annual shareholder meetings. The annual meeting of shareholders
held on September 2, 2003 was attended by all of our incumbent directors.
Annual Report
The Annual Report to Shareholders and Form 10-KSB covering the Company's
fiscal year ended May 31, 2004, is being mailed to shareholders with this
Proxy Statement. The Annual Report does not form any part of the material
for the solicitation of the Proxy.
Date for Submission of Shareholder Proposals for Next Annual Meeting
Any eligible shareholder who desires to have a proposal considered for
inclusion in our 2005 proxy solicitation materials, including director
nominations, must cause their proposals to be received in writing by our
Secretary, c/o Biomerica, Inc., at 1533 Monrovia Ave, Newport Beach,
California 92663, no later than January 3, 2005. The Board of Directors will
review new proposals from eligible shareholders if they are received in
writing by January 3, 2005. Proposals must be submitted in accordance with
our bylaws and must comply with Securities and Exchange Commission regulations
promulgated under Rule 14a-8 of the Exchange Act of 1934, as amended.
Any notice to the Secretary must include as to each matter the
shareholder proposes to bring before the meeting: (a) a brief description of
the business desired to be brought before the meeting and the reason for
conducting the business at the Annual Meeting, (b) the shareholder's name
and address, as they appear on our records, (c) the class and number of shares
which the shareholder beneficially owns, (d) any material interest of the
shareholder in the business requested to be brought before the meeting and
(e) any other information that is required to be provided by the shareholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934 in his or
her capacity as a proponent of the shareholder proposal.
A shareholder's notice to the Secretary regarding a nomination for the
election of directors must set forth: (a) as to each person whom the
shareholder proposes to nominate for election or re-election as a director,
(i) the person's name, age, business address and residence address, (ii) the
person's principal occupation or employment, (iii) the class and number of
shares of capital stock beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934; and (b) as to the shareholder
giving the notice (i) the name and address of the shareholder, as they appear
on our records, and (ii) the class and number of shares of stock that are
beneficially owned by the shareholder on the date of the shareholder notice.
If the Board of Directors so requests, any person nominated for election to
the Board shall furnish to our Secretary the information required to be set
forth in the notice of nomination pertaining to the nominee.
Nothing in this section shall be deemed to require us to include in our
proxy solicitation materials relating to any annual meeting any shareholder
proposal or nomination that does not meet all of the requirements for
inclusion established by the Securities and Exchange Commission.
By Order of the Board of Directors,
/s/ Allen Barbieri
Allen Barbieri
San Marcos, California
September 28, 2004