SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Sectioin 240.14a-12
Equitex, Inc.
-------------
(Name of Registrant as Specified in its Charter)
John W. Kellogg, Esq.
Rachana Sastry, Esq.
Friedlob Sanderson Paulson & Tourtillott, LLC
1400 Glenarm Place
Denver, Colorado 80111
(303) 571-1400
(303) 595-3970
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] 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
pursuat to Exchange Act Rule 0-11:____________________________
(4) Proposed Maximum aggregate value of transaction:______________
(5) Total Fee Paid:_______________________________________________
[ ] Fee previously paid 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 by regitration 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:______________________________________________
EQUITEX, INC.
7315 EAST PEAKVIEW AVENUE
ENGLEWOOD, COLORADO 80111
- --------------------------------------------------------------------------------
Notice of Annual Meeting of Stockholders
To Be Held on December 20, 2001
- --------------------------------------------------------------------------------
November 26, 2001
To the Stockholders of Equitex, Inc.
An Annual Meeting of Stockholders of Equitex, Inc., a Delaware
corporation, will be held at the offices of Friedlob Sanderson Paulson &
Tourtillott, LLC located at 1400 Glenarm Place, Third Floor, Denver, Colorado,
on December 20, 2001 at 9:00 a.m. Mountain Standard Time, to consider and take
action on the following matters:
1. The election of six directors to serve until the next annual
meeting of stockholders and until their successors have been
elected and qualified.
2. Such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.
Stockholders holding shares of common stock of record at the closing of
business on November 21, 2001, will be entitled to receive notice of and vote at
the meeting.
Stockholders, whether or not they expect to be present at the meeting,
are requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in this proxy
statement.
By Order of the Board of Directors:
Thomas B. Olson
Secretary
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY
DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
Your vote is important.
EQUITEX, INC.
7315 EAST PEAKVIEW AVENUE
ENGLEWOOD, COLORADO 80111
- --------------------------------------------------------------------------------
Proxy Statement
Annual Meeting of Stockholders
December 20, 2001
- --------------------------------------------------------------------------------
To our Stockholders:
This proxy statement is furnished to stockholders of Equitex, Inc., a
Delaware corporation in connection with the solicitation of proxies by and on
behalf of Equitex's board of directors for use at the Annual Meeting of
Stockholders of Equitex to be held on December 20, 2001 at the offices of
Friedlob Sanderson Paulson & Tourtillott, LLC located at 1400 Glenarm Place,
Third Floor, Denver, Colorado, at the time and for the purposes set forth in the
accompanying notice of annual meeting of stockholders. This proxy statement, the
accompanying proxy card and the notice of annual meeting, hereinafter referred
to as the proxy materials, will be first sent to stockholders on or about
November 26, 2001.
AVAILABLE INFORMATION
Equitex is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended, and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission. Such reports, proxy statements and other information filed with the
Securities and Exchange Commission can be inspected and copied at the public
reference facilities maintained by the Securities and Exchange Commission at
Room 1024, 450 Fifth Street, NW, Washington, DC 20549 or at the Regional Offices
of the Securities and Exchange Commission which are located as follows:
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained from the Securities
and Exchange Commission at prescribed rates. Written requests for such material
should be addressed to the Public Reference Section, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, DC 20549. The Securities and
Exchange Commission maintains a Web site that contains reports, proxy statements
and other information filed electronically by Equitex with the Securities and
Exchange Commission which can be accessed over the Internet at
http://www.sec.gov.
GENERAL INFORMATION
As of the close of business on November 21, 2001, the record date for
entitlement to notice of an vote at the annual meeting, Equitex had outstanding
18,564,354 shares of common stock, $.02 par value per share. The presence, in
person or by proxy, of holders of one-third of the shares of common stock
entitled to vote at the annual meeting constitutes a quorum for the transaction
of business at the annual meeting.
Each share of common stock outstanding on the record date is entitled
to one vote on each matter presented at the annual meeting.
Abstentions will be treated as shares present or represented and
entitled to vote for purposes of determining the presence of a quorum, but will
not be considered as votes cast in determining whether a matter has been
approved by the stockholders. As to any shares a broker indicates on its proxy
that it does not have the authority to vote on any particular matter because it
has not received direction from the beneficial owner thereof, said shares will
not be counted as voting on a particular matter.
-1-
A stockholder who gives a proxy may revoke it at any time before it is
voted by giving notice of the revocation thereof to the secretary of Equitex, by
filing another proxy with the secretary or by attending the annual meeting and
voting in person. All properly executed and unrevoked proxies delivered pursuant
to this solicitation, if received in time, will be voted in accordance with the
instructions of the beneficial owners contained thereon.
Equitex will bear the cost of the solicitation. In addition to
solicitation by mail, Equitex will request banks, brokers and other custodian
nominees and fiduciaries to supply proxy materials to the beneficial owners of
Equitex's common stock for whom they hold shares and will reimburse them for
their reasonable expenses in so doing.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Set forth below is certain information as of October 31, 2001, with
respect to ownership of Equitex's common stock held of record or beneficially by
(i) Equitex's executive officers, (ii) each director of Equitex, (iii) each
person who owns beneficially more than five percent of Equitex's outstanding
common stock; and (iv) all directors and executive officers as a group:
-2-
Shares of
Shares of Shares of Common
Common Common Stock Stock Percentage of
Name and Address of Stock Owned Underlying Underlying Common Stock
Beneficial Owner (1) Options (1) Warrants (1) Total Owned (6)
- ---------------------------------------------------------------------------------------------------------------------
Henry Fong 777,875 (3) 945,700 (2) 49,239 1,772,814 9.61%
7315 East Peakview Ave.
Englewood, CO 80111
Russell L. Casement 121,795 365,900 (4) 759 488,454 2.65%
1355 S. Colorado Blvd.,
Suite 320
Denver, CO 80222
Aaron A. Grunfeld 32,700 379,500 (5) 0 412,200 2.23%
10390 Santa Monica
Blvd., Fourth Floor
Los Angeles, CA 90025
Joseph W. Hovorka 4,477 11,000 477 15,954 0.09%
1930 S. Kearney Way
Denver, CO 80224
Thomas Olson 19,000 66,300 0 85,300 0.46%
7315 East Peakview
Avenue
Englewood, CO 80111
James P. Welbourn 21,634 0 0 21,634 0.12%
11100 Wayzata Blvd.
Suite 111
Minnetonka, MN 55305
Scott A. Lucas 1,088,367 0 579,001 1,667,368 9.04%
934 Skye Lane
Palm Harbor, Florida
34683
Charles R. Darst 902,097 0 468,026 1,370,123 7.43%
734 Weadon Drive
Clearwater, FL 34625
Dia Erickson 896,897 0 468,026 1,364,923 7.40%
2196 Feather Sound Dr.
Clearwater, FL 33762
All officers and 2,065,848 1,768,400 629,476 4,463,724 24.19%
directors as a group
(seven persons)
- ----------------
(1) The beneficial owners exercise sole voting and investment power.
(2) Shares underlying options granted under the 1999 Stock Option Plan.
-3-
(3) Shares owned by a corporation in which Mr. Fong is an officer and
director.
(4) Includes 36,400 shares underlying options granted under our 1993 Stock
Option Plan for Non-Employee Directors and 329,500 shares underlying
options granted under the 1999 Stock Option Plan.
(5) Includes 50,000 shares underlying options granted under our 1993 Stock
Option Plan for Non-Employee Directors and 329,500 shares underlying
options granted under our 1999 Stock Option Plan.
(6) As of October 31, 2001, 18,449,188 shares of Equitex's common stock
were outstanding.
PROPOSAL 1
ELECTION OF DIRECTORS
The following six persons are to be elected as directors of Equitex for
a term of one year and until the election and qualification of their successors:
Henry Fong, Russell L. Casement, Aaron A Grunfeld, Joseph W. Hovorka, Scott A.
Lucas and James P. Welbourn. These six directors will constitute the entire
board of directors. The persons named in the proxy intend to vote for Messrs.
Fong, Casement, Grunfeld, Hovorka, Lucas and Welbourn who have been recommended
for election by the board of directors unless a stockholder withholds authority
to vote for any or all of the nominees. If any nominee is unable to serve or,
for good cause, will not serve, the persons named in the proxy reserve the right
to substitute another person of their choice as nominee in his place. Each of
the nominees has agreed to serve, if elected.
VOTE REQUIRED
A majority of the votes cast at the meeting by stockholder entitled to
vote thereon will be required for election to the board of directors.
INFORMATION ABOUT DIRECTORS AND OFFICERS
HENRY FONG, Age 65
Mr. Fong has been the president, treasurer and a director of Equitex
since its inception. Since 1999 Mr. Fong has been a director of iGenisys, Inc.,
a business project management software company which is presently working to
complete its initial public offering. Since December 2000, Mr. Fong has been a
director of Popmail.com, Inc., a publicly traded Internet marketing company.
From 1987 to June 1997, Mr. Fong was chairman of the board and chief executive
officer of RDM Sports Group, Inc. (f/k/a Roadmaster Industries, Inc.) a publicly
held investee of us and was its president and treasurer from 1987 to 1996.
Subsequent to Mr. Fong's departure from RDM, it filed Chapter 11 bankruptcy
petitions for RDM and all of its subsidiaries with the U.S. Bankruptcy Court for
the Northern District of Georgia on August 29, 1997. From July 1996 to October
1997, Mr. Fong was a director of IntraNet Solutions, Inc., a publicly-held
investee company which provides internet/intranet solutions to Fortune 1000
companies and was the chairman of the board and treasurer of its predecessor
company, MacGregor Sports and Fitness, Inc. from February 1991 until the two
companies merged in July 1996. From January 1993 to January 20, 1999, Mr. Fong
was chairman of the board and chief executive officer of California Pro Sports,
Inc., a publicly traded manufacturer and distributor of in-line skates, hockey
equipment and related accessories. From 1959 to 1982 Mr. Fong served in various
accounting, finance and budgeting positions with the Department of the Air
Force. During the period from 1972 to 1981 he was assigned to senior supervisory
positions at the Department of the Air Force headquarters in the Pentagon. In
1978, he was selected to participate in the Federal Executive Development
Program and in 1981, he was appointed to the Senior Executive Service. In 1970
and 1971, he attended the Woodrow Wilson School, Princeton University and was a
Princeton Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious
Civilian Service Award in 1982. Mr. Fong has passed the uniform certified public
accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as
Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream
Team."
-4-
THOMAS B. OLSON, Age 35
Mr. Olson has been secretary of Equitex since January 1988. From
February 1990 to February 2000, Mr. Olson was a director, and from May 1994 to
February 2000 secretary, of Immune Response, Inc. a publicly held investee of
Equitex which merged with Opticon Medical, Inc., in February 2000. Mr. Olson has
attended Arizona State University and the University of Colorado at Denver.
AARON A. GRUNFELD, Age 54
Mr. Grunfeld has been a director of Equitex since November 1991. Mr.
Grunfeld has been engaged in the practice of law for the past 28 years and has
been of counsel to the firm of Resch Polster Alpert & Berger, LLP, Los Angeles,
California since November 1995. From April 1990 to November 1995, Mr. Grunfeld
was a member of the firm of Spensley Horn Jubas & Lubitz, Los Angeles,
California. Mr. Grunfeld received an A.B. in Political Science from UCLA in 1968
and a J.D. from Columbia University in 1971. He is a member of the California
Bar Association.
RUSSELL L. CASEMENT, Age 57
Dr. Casement has been a director of Equitex since February 1989. Since
1969, Dr. Casement has been the president of his own private dental practice,
Russell Casement, D.D.S., P.C., in Denver, Colorado. Dr. Casement earned a
Doctor of Dental Science degree from Northwestern University in 1967. Dr.
Casement is a member of the American Dental Association, the Colorado Dental
Association and the Metro Denver Dental Association.
JOSEPH W. HOVORKA, Age 71
Mr. Hovorka became a director of Equitex on June 21, 2001. From
September 1987 to February 2000, Mr. Hovorka was a director, and from February
1990 to February 2000 was president, chief executive officer, chief financial
officer, and treasurer of Immune Response, Inc., a publicly-held company which
merged with Opticon Medical, Inc. in February 2000. From 1989 to 1993, Mr.
Hovorka served as president, chief operating officer, and treasurer and was a
director of William's Controls, Inc., a publicly-held manufacturer of pneumatic,
electronic and hydraulic controls for trucks, buses, mining, construction and
refuse collection vehicles. Mr. Hovorka also served as president and was a
director of Enercorp, Inc., a publicly-held investment company from July 1986
until June 1993. From September 1990 until June 1993 Mr. Hovorka served as
president and was a director of Ajay Sports, Inc., a publicly-traded
manufacturer of golf bags and accessories. Mr. Hovorka had been engaged in
commercial and business banking for over thirty years.
SCOTT A. LUCAS, Age 50
Mr. Lucas has been a director of Key Financial Systems, Inc. and Nova
Financial Systems, Inc. since their inception. Since September of 1998 he has
served as president of Key Financial Systems, Inc. He has served in the same
capacities for Nova Financial Systems, Inc. since its inception. From 1993
through 1997 Mr. Lucas held various executive management positions with First
National Bank of Marin and its affiliates. In all, Mr. Lucas has more than 26
years experience in the financial services industry, where he has held positions
as president, chief operations officer, chief financial officer, vice president
and other management positions in banking and insurance. Mr. Lucas received a
B.S. in Business Administration from the University of California, Berkeley in
1973.
JAMES P. WELBOURN, Age 52
Mr. Welbourn has been the chief executive officer, president and
director of Chex Services, Inc., since June of 1992. On September 5, 2001,
Equitex signed a definitive agreement to acquire Chex Services, Inc., which is
expected to close on or before November 30, 2001. Chex Services, Inc., is a
privately-held company that
-5-
provides cash access products and services to the entertainment and hospitality
industries. From 1971 through 1985, Mr. Welbourn held various positions at AT&T,
where he last served as District Manager for New Product Introductions. From
1985 through 1992 Mr. Welbourn served as president of Gamest, Inc., a specialty
retailing company. Prior to joining Chex Services, Mr. Welbourne provided
financial consulting services to emerging companies in various industries from
1989 through 1992. Mr. Welbourn has consistently been awarded the distinction of
"Honored Professional" in the National Register's Who's Who in Executives and
Professionals from 1996 through 2002. Mr. Welbourn received a B.A. in Speech
Education from Marquette University in 1971 and an M.B.A. in Organizational
Development from George Williams College in 1985.
MEETINGS OF THE BOARD OF DIRECTORS
During the last full fiscal year, Equitex held four meetings of the
board of directors and took action through unanimous consent on seven separate
occasions.
AUDIT AND NOMINATING COMMITTEES
Equitex has appointed an audit committee currently consisting of Dr.
Casement as chairman, Mr. Hovorka and Mr. Grunfeld. All members of the audit
committee are independent, as that term is defined in Rule 4200(a)(14) of the
National Association of Securities Dealers' listing standards. Equitex does not
have a nominating committee of the board of directors, or any other committees
performing similar functions.
The audit committee has a written charter, which was filed as Exhibit A
to the 2000 Annual Meeting Proxy Statement, as filed with the Securities and
Exchange Commission on November 30, 2000 (File No. 000- 13374). The audit
committee reviews and approves the scope of the annual audit undertaken by
Equitex's independent public accountants and meets with them as necessary to
review the progress and results of their work as well as any recommendations
they may make. The audit committee also reviews the fees of the independent
public accountants and recommends to the board of directors the appointment of
independent public accountants. In connection with the internal accounting
controls of Equitex, the audit committee reviews internal control and reporting
systems in conjunction with management and the accountants.
During the year ended December 31, 2000, the audit committee formally
met three times.
REPORT OF AUDIT COMMITTEE
The audit committee has discussed with the independent auditors the
matters required to be discussed by SAS 61, as may be modified or supplemented.
The audit committee has received the written disclosures and the letter from the
independent accountants required by the Independence Standards Board Standard
No. 1, as may be modified or supplemented, and has discussed with the
independent accountant the independent accountant's independence. The audit
committee has reviewed and discussed the financial information for the quarters
ending March 31, 2000, June 30, 2000 and September 30, 2000, as well as the
quarters ended March 31, 2001, June 30, 2001 and September 30, 2001 with
management of Equitex. In accordance with its charter, the audit committee
reviewed and discussed the audited financial statements for the year ended
December 31, 2000 with management of Equitex. The audit committee recommended to
the board of directors that the audited financial statements be included in
Equitex's annual report on Form 10-K/A for the year ended December 31, 2000.
Russell L. Casement
Aaron A. Grunfeld
Joseph W. Hovorka
COMPENSATION COMMITTEE
Equitex has appointed a compensation committee currently consisting of
Mr. Grunfeld as chairman and Dr. Casement.
-6-
The compensation committee reviews Equitex's compensation arrangements
as necessary and makes recommendations to the board of directors.
During the year ended December 31, 2000, the compensation committee and
took action through unanimous written consent on one occasion.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In January, 1998, the compensation committee of Equitex's board of
directors retained an independent consultant to review the president's
compensation. The compensation committee directed the consultant to review both
the president's salary and bonus structure. The independent consultant analyzed
the compensation structure of Equitex and compared it to the compensation
structures of companies similar to Equitex. The consultant recommended no change
in the president's salary. The consultant did recommend a change in the bonus
component of the president's compensation from one based solely on the assets of
Equitex, to one based primarily on increases in the market value of Equitex's
common stock. The compensation committee agreed and directed the consultant to
provide a recommendation, based on its research, for a bonus plan tied to
Equitex's market performance.
As a result of that further review, the consultant recommended an
annual bonus plan equaling 1% of Equitex's total assets combined with 5% of the
increase in the market value of Equitex's common stock not held by Equitex's
president. The bonus is calculated and paid quarterly from January 1 to December
31 of any fiscal year based on a formula provided by the consultant. The
compensation committee feels this compensation arrangement, tied primarily to
the market performance of Equitex's common stock while including incentives for
increases in assets, is the most equitable method for compensating Equitex's
president. This provides a quantitative measure on which to reward the
president's performance, by directly emphasizing market performance, which
correlates directly with the expectations and goals of Equitex and its
stockholders.
During 2000, the compensation committee reviewed the compensation
structure and determined no changes should be made. Although this plan was
instituted during the period in which Equitex was operating as a business
development company, the compensation committee feels it is no less valid under
the operating company structure. In reviewing any issues related to that change,
the compensation committee determined the 1% bonus based on total assets would
be paid based upon Equitex's assets prior to consolidation with any subsidiary.
No further refinements were warranted.
Aaron A. Grunfeld
Russell L. Casement
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Henry Fong, the president of Equitex and the only officer of Equitex
whose total compensation exceeded $100,000 for the fiscal year ended December
31, 2000, received an annual salary of $183,013. In January, 1998, the
compensation committee of Equitex's board of directors retained an independent
consultant to review the president's compensation. As a result of that review, a
new compensation arrangement was instituted based on recommendations made by the
independent consultant. In addition to Mr. Fong's annual salary, beginning
January 1, 1998, Mr. Fong is to receive an annual bonus equaling 1% of Equitex's
total assets combined with 5% of the increase in the market value of Equitex's
common stock calculated quarterly from January 1 to December 31 of any fiscal
year. If there is a negative computation in any given quarter, no bonus is paid
and that negative amount is carried forward to offset the subsequent quarter's
bonus during the fiscal year. Negative amounts will not be accumulated nor
carried into subsequent fiscal years. During the year ended December 31, 2000,
this bonus totaled $161,668
On April 1, 1992, Equitex obtained a life insurance policy with
retirement benefits for Mr. Fong which pays his beneficiary $2,600,000 in the
event of Mr. Fong's death or provides for retirement benefits for Mr. Fong
upon his retirement at or after age 65 utilizing the cash value of the policy at
that time. This benefit is being provided to Mr. Fong in consideration of his 17
years of service to Equitex and in anticipation of his serving Equitex until
retirement. Equitex has no other retirement or pension plan for Mr. Fong. The
annual premium on this policy is $105,414 per year and may be considered other
-7-
future compensation to Mr. Fong. For the year ended December 31, 2000, $105,414
was paid toward the policy and an additional $59,586 was paid to Mr. Fong for
deferred income taxes on the policy. Concurrently, Equitex obtained a Key-man
Life Insurance policy which pays Equitex $3,000,000 in the event of Mr. Fong's
death. Equitex paid $27,846 on this policy in 2000 which is not considered
compensation to Mr. Fong.
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding compensation paid
to the officers of Equitex during the years ended December 31, 2000, 1999 and
1998:
SUMMARY COMPENSATION TABLE
Annual Compensation Awards Long-Term
----------------------------------- Compensation
Other All
Name & Annual Other
Principal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($) & SARs(#) ($)
- -------- ---- --- --- --- --------- ---
Henry Fong 2000 183,013 161,668 -0- 476,000 165,000(1)
President,
Treasurer
Principal 1999 183,013 883,164 -0- 469,700 165,000(1)
Executive
Officer and
Accounting 1998 183,013 1,208,042 -0- 469,655 165,000(1)
Officer
(1) Includes payments and tax liability on the life insurance policy as
discussed above in "Compensation of Directors and Executive Officers."
OPTION/SAR GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE
(a) (b) (c) (d) (e) (f)
Number of
Securities Percent of total
Underlying options/ SARs Exercise Grant
Options/ granted to of Base Date
SARs employees in Price Expiration Present
Name Granted (#) Fiscal Year ($/Sh) Date Value($)
- ---- ----------- ----------- ------ ---- --------
Henry Fong 476,000 74% $5.50 4/17/2005 2,588,488(1)
(1) Represents the value of the stock options based upon the closing stock
price of Equitex's common stock ($5.438) on the date of grant.
-8-
AGGREGATED OPTION/SAR EXERCISES IN 2000 AND FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at FY-End (#) at FY-End (#)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- ------------ ------------ ------------- -------------
Henry Fong -0- -0- 945,700/-0- $-0-/-0-
PERFORMANCE GRAPH
12/30/1995 12/29/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000
- ------------------------------------------------------------------------------------------------
Nasdaq US 100.00 123.04 150.69 212.51 394.92 237.62
Nasdaq Financial 100.00 128.36 196.31 190.73 189.46 207.03
Equitex 100.00 69.07 30.97 261.90 304.76 183.35
COMPENSATION OF DIRECTORS
Each independent member of Equitex's board of directors, Messrs. Russell
L. Casement and Aaron A. Grunfeld, receive $10,000 per year payable monthly and
$500 for each Board of Director's meeting attended either in person or by
telephone. For the year ended December 31, 2000, Messrs. Casement and Grunfeld
each received a total of $12,000. Members of the board of directors also receive
reimbursement for expenses incurred in attending board meetings.
1993 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Equitex has adopted the 1993 Stock Option Plan for Non-Employee
Directors, hereinafter referred to as the directors' plan, reserving an
aggregate of 250,000 shares of common stock for issuance pursuant to the
exercise of stock options, which may be granted to non-employee directors of
Equitex. On July 5, 1995, an order was issued by the Securities and Exchange
Commission authorizing the directors' plan and the options granted thereunder.
The directors' plan is for a ten-year term commencing July 5, 1995, hereinafter
referred to as the effective date. Each non-employee director automatically, as
of the effective date, was granted an option to purchase 50,000 shares of common
stock at $3.00 per share. Thereafter, each director who first becomes a
non-employee director shall automatically, as of the date 90 days following the
date such person becomes a non-employee director, be
-9-
granted an option to purchase 50,000 shares of common stock. No additional
options can be granted under the directors' plan except to an individual who
first becomes a non-employee director after the effective date. No discretionary
grants can be made under the directors' plan.
On June 2, 1998, Equitex's board of directors authorized the granting of
75,000 options to purchase common stock of Equitex to each of Equitex's two
independent directors at $3.19 per share for a period of five years. The grant
of these options was contingent upon Equitex's successful withdrawal as a
business development company. After obtaining the necessary vote of the
stockholders to change the business of Equitex, Equitex on January 4, 1999
withdrew its election to be treated as a business development company as defined
in the Investment Company Act of 1940.
1999 STOCK OPTION PLAN
On January 5, 1999, Equitex's board of directors adopted a new stock
option plan, the 1999 Stock Option Plan. On January 5, 1999, Equitex's two
independent directors each received options to purchase 158,700 shares of
Equitex's common stock at an exercise price of $6.75 per share expiring on
January 5, 2004. These options were granted in lieu of the 75,000 options at
$3.19 per share, which were cancelled. In addition, each director received
86,800 options to purchase 86,800 shares of Equitex's common stock at an
exercise price of $6.75 per share under the 1999 Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On April 1, 1992, Equitex obtained a life insurance policy on Equitex's
president, Henry Fong, which policy provides for a payment to Mr. Fong's
beneficiary of $2,600,000 in the event of his death or a retirement benefit to
Mr. Fong consisting of the cash value of the policy upon Mr. Fong's retirement
from Equitex at or after age 65. Equitex has no other compensation plan or
arrangement with respect to any executive officer which plan or arrangement
results or will result from the resignation, retirement or any other termination
of such individual's employment with Equitex. Equitex has no plan or arrangement
with respect to any such persons which will result from a change in control of
Equitex or a change in the individual's responsibilities following a change in
control.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, hereinafter
referred to as Section 16, requires Equitex's officers, directors and persons
who own more than ten percent of Equitex's voting securities to file reports of
their ownership and changes in such ownership with the Securities and Exchange
Commission. The Securities and Exchange Commission regulations also require that
such persons provide Equitex with copies of all Section 16 reports they file.
Based solely upon its review of such reports received by Equitex, or written
representations from certain persons that they were not required to file any
reports under Section 16, Equitex believes that, during 2000, its officers and
directors have complied with all Section 16 filing requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the years 2000 and 2001, Equitex's president and corporations in
which he is the sole officer and director, loaned Equitex a total of $942,500 of
which $291,077 was repaid as of August 6, 2001. The remaining principal balance
of $651,423 plus accrued interest was transferred to Equitex 2000, Inc. on
August 6, 2001 as a result of the spin-off of the assets and liabilities of
Equitex to Equitex 2000 on that date. Since August 6, 2001, and through November
21, 2001, Equitex's president loaned Equitex a total of $64,950. All of these
loans are due on demand and carry an interest rate of 10% per annum.
On August 2, 2001, in exchange for the purchase of certain notes
receivable and conversions of debt to equity, Equitex issued a total of 320,450
shares of common stock and 320,450 warrants to purchase common stock
-10-
at an exercise price of $5.76 per share (110% of the last sale price at close of
business on August 2, 2001) to the following:
o 78,645 shares of common stock and 78,645 warrants for the
purchase of $495,510 principal and accrued interest payable
from Equitex's subsidiary, Triumph Sports, Inc., to Equitex's
president, and corporations in which Equitex's president is a
principal;
o 12,156 shares of common stock and 12,156 warrants for the
conversion of $63,695 in principal and accrued interest owed
by Equitex to an unaffiliated third party;
o 78,339 shares of common stock and 78,339 warrants as
compensation to Equitex 2000 for costs and expenses incurred
by Equitex in connection with the acquisitions of Key
Financial Systems, Inc. and Nova Financial Systems, Inc.,
which were transferred to Equitex 2000 as a result of the
spin-off of the assets and liabilities of Equitex to Equitex
2000 on August 6, 2001;
o 150,038 shares of common stock and 150,038 warrants for the
conversion of $786,201 of debt payable by Equitex to Equitex's
president consisting of bonuses, salaries and expenses
payable;
o 795 shares of common stock and 795 warrants for the conversion
of $4,166 in directors fees payable by Equitex to Russell L.
Casement; and
o 477 shares of common stock and 477 warrants for the conversion
of $2,500 in directors fees payable by Equitex to Joseph W.
Hovorka.
INDEBTEDNESS OF MANAGEMENT
In August 1999, Equitex loaned a director, Aaron A. Grunfeld, $180,000.
The note bears interest at 9.75% annually, is collateralized by 32,700 shares of
Equitex's common stock, and was originally due on November 18, 1999. The note
has been extended to December 31, 2001.
The remaining principal balance due of $100,000 was transferred to
Equitex 2000 on August 6, 2001 as a result of the spin-off of the assets and
liabilities of Equitex to Equitex 2000 on that date.
APPOINTMENT OF INDEPENDENT AUDITORS
As a result of the Company's recent acquisitions of Key Financial
Systems, Inc. and Nova Financial Systems, Inc., the Audit Committee and Board of
Directors are evaluating the Company's options with respect to the appointment
of an independent auditor for 2001. Therefore, the Company's stockholders are
not being asked to ratify the appointment of an independent auditor at this
time.
Gelfond Hochstadt Pangburn, P.C. served as Equitex's auditors for the
year ended December 31, 2000. Fees billed by Gelfond Hochstadt Pangburn, P.C.
for audit and review services rendered with respect to the year ended December
31, 2000 were $78,800, which includes out-of-pocket costs incurred in connection
with these services. All other fees billed by Gelfond Hochstadt Pangburn, P.C.
with respect to the year ended December 31, 2000 were $62,800, which includes
out-of-pocket costs related to other services of $5,200. These fees were billed
for tax services, services related to mergers and acquisitions, and services
related to Equitex's filings with the Securities and Exchange Commission. There
are no existing direct or indirect understandings or agreements between Equitex
and Gelfond Hochstadt Pangburn, P.C. that place a limit on current or future
years' audit fees.
During Equitex's two most recent fiscal years or subsequent interim
periods Equitex has not consulted Gelfond Hochstadt Pangburn, P.C. regarding the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
Equitex's financial statements, or any matter that was the subject of a
disagreement or a reportable event.
-11-
The firm of Davis & Co., CPA's, P.C. provided services to Equitex during
the year ended December 31, 1999 relating principally to the examination of the
financial statements and related reporting which included the annual audit of
Equitex's financial statements.
On August 20, 1999, Equitex dismissed Davis & Co., CPA's, P.C. as its
independent certified public accountant. There have been no adverse opinions,
disclaimers of opinion or qualifications or modifications as to uncertainty,
audit scope or accounting principles regarding the reports of Davis & Co.,
CPA's, P.C. on Equitex's financial statements for each of the fiscal years ended
December 31, 1998 and 1997, or any subsequent interim period. The audit
committee of Equitex's board of directors approved the change of accountants and
that action was ratified by the board of directors. There were no disagreements
with Davis & Co., CPA's, P.C. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
leading to their dismissal.
There were no reportable events, in each case, during either of
Equitex's two most recent fiscal years or any subsequent interim period.
Simultaneously with the dismissal of its former accountants, Equitex
approved and engaged Gelfond Hochstadt Pangburn, P.C. to act as its independent
certified public accountant as successor to Davis & Co., CPA's, P.C.
VOTES REQUIRED
A majority of the votes cast at the meeting by stockholders entitled to
vote thereon will be required to ratify the appointment of the independent
auditors.
FINANCIAL INFORMATION
A copy of Equitex's Annual Report on Form 10-K/A for the year ended
December 31, 2000, is being sent to stockholders with this proxy statement.
OTHER MATTERS
Management of Equitex knows of no other matter which may come before the
annual meeting. However, if any additional matters are properly presented at the
annual meeting, it is intended that the person named in the enclosed proxy
statement, or his substitute, will vote such proxy in accordance with his
judgment on such matters.
STOCKHOLDER PROPOSALS
Any stockholder proposing to have any appropriate matter brought before
the 2002 Annual Meeting of Stockholders, tentatively scheduled for June 28,
2002, must submit such proposal in accordance with the proxy rules of the
Securities and Exchange Commission. Such proposals should be sent to Thomas B.
Olson, Secretary, Equitex, Inc., 7315 East Peakview Avenue, Englewood, Colorado
80111, for receipt no later than March 31, 2002.
EQUITEX, INC.
By Order of the Board of Directors:
Thomas B. Olson
Secretary
Date: November 26, 2001
-12-
- --------------------------------------------------------------------------------
PROXY
- --------------------------------------------------------------------------------
EQUITEX, INC.
7315 East Peakview Avenue
Greenwood Executive Park, Building 8
Englewood, Colorado 80111
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 20, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stock-holder of Equitex, Inc. appoints Henry Fong or Thomas B.
Olson as attorneys and proxies to attend and vote all of the shares of the
common stock of Equitex standing in the name of the undersigned at the 2001
Annual Meeting of Stockholders on December 20, 2001, at 9:00 Mountain Standard
Time, and at any postponements or adjournments that may take place:
1. To elect the following six directors to serve until the next
annual meeting of stockholders and until their successors have
been elected and qualified: Henry Fong, Russell L. Casement,
Aaron A. Grunfeld, Joseph W. Hovorka, Scott A. Lucas and James
P. Welbourn.
For all nominees: _____
Withhold authority to vote for all nominee(s): _____
Withhold authority to vote for the following nominee(s): _____
2. To transact such other business as may properly come before
the meeting.
The shares represented by this proxy card will be voted as specified by
you. This proxy will be voted in accordance with the discretion of the proxies
on any other business.
Please mark, date and sign your name exactly as it appears on the
label, and return it in the enclosed envelope as promptly as possible. It is
important to return this proxy properly signed to exercise your right to vote if
you choose not do not attend the meeting and vote in person. When signing as
agent, partner, attorney, administrator, guardian, trustee or in any other
fiduciary or official capacity, please indicate your title. If stock is held
jointly, each joint owner must sign.
Date:____________________ Signature(s):_________________________
Address, if different from that on label: ____________________________
Street Address
____________________________
City, State and Zip Code
____________________________
Number of shares
Please check if you intend to be present at the meeting: ______