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.
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(Name of Registrant as Specified in its Charter)
John W. Kellogg, Esq.
RaLea, Sluga, 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
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Notice of Annual Meeting of Stockholders
To Be Held on December 27, 2002
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November 27, 2002
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 1775 Sherman Street, Twenty-first Floor, Denver,
Colorado, 80203, on December 27, 2002 at 9:00 a.m. Mountain Standard Time, to
consider and take action on the following matters:
1. The election of five directors to serve until the next annual meeting
of stockholders and until their successors have been elected and
qualified.
2. A proposal to amend Paragraph Four of the Certificate of Incorporation
to cause a one share for six share reverse stock split of Equitex's
common stock to reduce the number of outstanding shares of Equitex's
common stock from 25,166,850 shares to approximately 4,194,500 shares
and the number of treasury shares of Equitex's common stock from
415,857 shares to approximately 69,310 shares, and to keep the
authorized shares of common stock of Equitex at 50,000,000 shares.
Fractional shares resulting from the reverse stock split will be
rounded to the closest whole share of common stock.
3. A proposal to ratify the appointment of Gelfond Hochstadt Pangburn,
P.C. as the independent auditors of Equtiex for the year ending
December 31, 2002.
4. 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 22, 2002, 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
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Proxy Statement
Annual Meeting of Stockholders
December 27, 2002
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To our Stockholders:
This proxy statement is furnished to stockholders of Equitex, Inc.
("Equitex"), 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 27, 2002 at the
offices of Friedlob Sanderson Paulson & Tourtillott, LLC located at 1775 Sherman
Street, Twenty-first Floor, Denver, Colorado, 80203, 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 27, 2002.
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 22, 2002, the record date for
entitlement to notice of a vote at the annual meeting, Equitex had outstanding
25,166,850 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.
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 September 30, 2002, 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:
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Name and Address of Shares of Shares of Shares of Total Percentage of
Beneficial Owner Common Common Stock Common Common Stock
Stock Owned Underlying Stock Owned (6)
(1) Options (1) Underlying
Warrants (1)
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Henry Fong 606,375 (3) 945,700 (2) 49,239 1,601,314 6.36%
7315 East Peakview Ave.
Englewood, CO 80111
Russell L. Casement 121,795 365,900 (4) 759 488,454 1.99%
1355 S. Colorado Blvd.,
Suite 320
Denver, CO 80222
Aaron A. Grunfeld 32,700 379,500 (5) 0 412,200 1.68%
10390 Santa Monica
Blvd., Fourth Floor
Los Angeles, CA 90025
Joseph W. Hovorka 6,477 11,000 477 17,954 0.07%
1930 S. Kearney Way
Denver, CO 80224
Thomas Olson 0 66,300 0 66,300 0.27%
7315 East Peakview
Avenue
Englewood, CO 80111
James P. Welbourn 859,467 0 373,206 1,232,673 5.02%
11100 Wayzata Blvd.
Suite 111
Minnetonka, MN 55305
Scott A. Lucas 1,088,367 0 579,001 1,667,368 6.73%
934 Skye Lane
Palm Harbor, Florida
34683
Charles R. Darst 902,097 0 485,026 1,387,123 5.62%
734 Weadon Drive
Clearwater, FL 34625
Dia Erickson 896,897 0 488,026 1,384,923 5.61%
2196 Feather Sound Dr.
Clearwater, FL 33762
All officers and directors 2,715,181 1,768,400 1,002,682 5,486,263 20.35%
as a group (seven
persons)
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(1) The beneficial owners exercise sole voting and investment power.
(2) Shares underlying options granted under the 1999 Stock Option Plan.
(3) Includes shares owned by a corporation in which Mr. Fong is an officer and
director.
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(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 September 30, 2002, 24,183,565 shares of Equitex's common stock were
outstanding.
PROPOSAL 1
ELECTION OF DIRECTORS
The following five 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
and James P. Welbourn. These five directors will constitute the entire board of
directors of Equitex. Mr. Scott A. Lucas is not standing for re-election. The
persons named in the proxy intend to vote for Messrs. Fong, Casement, Grunfeld,
Hovorka 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 66
Mr. Fong has been the president, treasurer and a director of Equitex
since its inception. Mr. Fong has been President and a Director of Torpedo
Sports USA, Inc. since March 2002. Torpedo Sports USA, Inc. is a manufacturer
and distributor of recreational equipment. From December 2000 to January 2002,
Mr. Fong was a director of Popmail.com, Inc., a publicly traded Internet
marketing company. 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."
THOMAS B. OLSON, Age 36
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.
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AARON A. GRUNFELD, Age 55
Mr. Grunfeld has been a director of Equitex since November 1991. Mr.
Grunfeld has been engaged in the practice of law for the past 29 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 58
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 72
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.
JAMES P. WELBOURN, Age 53
Mr. Welbourn became a director of Equitex in December 2001 and has been
the chief executive officer, president and director of Equitex's wholly owned
subsidiary Chex Services, Inc., since June of 1992. 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.
SCOTT A. LUCAS, Age 51
Mr. Lucas became a directors of Equitex in December 2001. 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.
-5-
MEETINGS OF THE BOARD OF DIRECTORS
During the last full fiscal year, Equitex held six meetings of the
board of directors and took action through unanimous consent on fifteen 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, 2001, the audit committee formally
met six 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 accountants' independence. The audit
committee has reviewed and discussed the financial information for the quarters
ended March 31, 2001, June 30, 2001 and September 30, 2001, as well as the
quarters ended March 31, 2002, June 30, 2002 and September 30, 2002 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, 2001 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 for the year ended December 31, 2001.
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.
The compensation committee reviews Equitex's compensation arrangements
as necessary and makes recommendations to the board of directors.
During the year ended December 31, 2001, the compensation committee
took action through unanimous written consent on one occasion.
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BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In January 1998, the compensation committee of our board of directors
retained an independent consultant to review the President's compensation. The
compensation committee directed the consultant to review both the salary and
bonus structure. The independent consultant analyzed the compensation structure
and compared it to the compensation structures of companies similar to us. The
consultant recommended no change in the President's salary but did recommend an
annual bonus plan equal to 1% of our total assets combined with 5% of the
increase in the market value of our common stock not held by the President. The
bonus was 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 felt this compensation arrangement, tied primarily to the market
performance of our common stock while including incentives for increases in
assets, was the most equitable method for compensating the President. This
provided 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 us and our stockholders.
This plan was in place until June 30, 2001. At that time, the President
approached the compensation committee and voluntarily proposed an end to the
bonus portion of his compensation in connection with the acquisition of Key
Financial Systems and Nova Financial Systems. The compensation committee agreed
and therefore for the period from July 1, 2001 until the compensation committee
reviews the compensation arrangements in 2002, the President will receive an
annual salary of $183,013 and no bonus.
Aaron A. Grunfeld
Russell L. Casement
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Henry Fong, the President and only officer of Equitex whose total
compensation exceeded $100,000 for the fiscal year ended December 31, 2001,
received an annual salary of $183,013. Beginning July 1, 2001, the only
compensation Mr. Fong receives from Equitex is his annual salary, which
presently remains $183,013 for the year ending December 31, 2002. Of the
compensation expense to Mr. Fong during 2001, $76,255 was expensed during the
period from August 6, 2001 to December 31, 2001 following our merger with Key
and Nova, $61,004 of which was accrued and remains unpaid.
In January 1998, the compensation committee of our 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 and ended June 30, 2001, Mr. Fong
received an annual bonus equal to 1% of the total assets combined with 5% of the
increase in the market value of Equitex's common stock, excluding shares owned
by him, calculated quarterly from January 1 to December 31 of any fiscal year.
If there was a negative computation in any given quarter, no bonus was accrued
and that negative amount was carried forward to offset the subsequent quarter's
bonus during the fiscal year. Negative amounts were not accumulated nor carried
into subsequent fiscal years. During the year ended December 31, 2001, this
bonus totaled $223,294. Following the acquisition of Nova and Key in August
2001, Mr. Fong, in consultation with the compensation committee, agreed to end
the bonus plan beginning July 1, 2001. In addition, all accrued bonuses due
under the plan became the responsibility of Equitex 2000 following the spin-off
in August 2001.
There is no retirement or pension plan for Equitex President, Mr. Fong.
In April 1992, we 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, provided
he is at least 65, utilizing the cash value of the policy at that time. This
benefit was provided to Mr. Fong in consideration of his nineteen years of
service to Equitex and in anticipation of his serving until retirement. All
liabilities under this plan were transferred to Equitex 2000 in the spin-off
transaction that took place effective August 6, 2001. The annual premium on this
policy was $105,414 per year for such period as may be necessary to fully fund
the policy, and was considered other future compensation to Mr. Fong in previous
years.
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Long-Term
Compensation
Annual Compensation Awards
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Name and principal Other annual Securities underlying All other
position Year Salary Bonus compensation Options/SARs compensation
($) ($) ($) (#) ($)
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Henry Fong, 2001 76,255 0 0 0 0
President, Treasurer 2000 183,013 161,668 0 476,000 165,000(2)
Principal Executive 1999 183,013 883,164 0 469,700 165,000(2)
Officer and
Accounting Officer
Scott A. Lucas 2001 130,000 0 0 0 0
President-Key 2000 130,000 0 0 0 0
1999 130,000 0 0 0 0
Robert Darst 2001 130,000 0 0 0 0
Director of 2000 130,000 0 0 0 0
Marketing-Key 1999 130,000 0 0 0 0
(1) Includes salary paid and accrued during the period from August 6, 2001 to
December 31, 2001 following our merger with Key and Nova.
(2) Includes payments and tax liability on the life insurance policy as
discussed above in "Compensation of Directors and Executive Officers."
AGGREGATED OPTION/SAR EXERCISES IN 2001 AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Options/SARs
Options/SARs at Year-End at Year-End(#)
Shares
acquired on Value Realized (#) Exercisable (#) Exercisable /Unexercisable
Name exercise (#) ($) /Unexercisable
- --------------------------------------------------------------------------------------------------------
Henry -0- -0- 945,700/-0- $-0-/-0-
Fong
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PERFORMANCE GRAPH
12/29/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
Nasdaq US 100.00 122.48 172.68 320.83 192.98 153.12
Nasdaq Financial 100.00 152.93 148.57 147.58 159.40 175.37
Equitex 100.00 44.84 379.21 441.26 265.47 199.67
COMPENSATION OF DIRECTORS
Each independent member of our board of directors, Messrs. Russell L.
Casement, Aaron A. Grunfeld and Joseph W. Hovorka, 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, 2001, Messrs. Casement
and Grunfeld each received a total of $16,000 while Mr. Hovorka received
$14,500. Members of our board of directors also receive reimbursement for
expenses incurred in attending board meetings.
The 1993 Stock Option Plan for Non-Employee Directors reserved an
aggregate of 250,000 shares of common stock for issuance pursuant to the
exercise of stock options that may be granted to non-employee directors. On July
5, 1995, an order was issued by the Securities and Exchange Commission
authorizing the 1993 Stock Option Plan for Non-Employee Directors and the
options granted thereunder. The 1993 Stock Option Plan for Non- Employee
Directors was for a ten-year term commencing July 5, 1995. Each non-employee
director automatically, as of the July 5, 1995, was granted an option to
purchase 50,000 shares of common stock at $3.00 per share. This plan was
terminated effective with the creation of the 1999 Stock Option Plan described
below.
On June 2, 1998, our board of directors authorized the granting of
75,000 options to purchase common stock to each of our two independent directors
at $3.19 per share for a period of five years. The grant of these options was
contingent upon the successful withdrawal as a business development company. On
January 4, 1999, we filed for withdrawal as a business development company.
On January 5, 1999, our board of directors adopted a new stock option
plan, the 1999 Stock Option Plan. On January 5, 1999, our two independent
directors each received options to purchase 158,700 shares of 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 authorized on June
2, 1998, which were canceled. In addition, each director received 86,800 options
to purchase 86,800 shares of common stock at an exercise price of $6.75 per
share under the 1999 Plan.
On April 17, 2000, our board of directors granted 84,000 options to
purchase common stock to each of our two independent directors at that time.
These options, granted under the 1999 Stock Option Plan, are exercisable at
$5.50 per share and expire on April 17, 2005. On June 21, 2001, our board of
directors granted 11,000 options to purchase common stock to Mr. Hovorka. These
options, granted under the 1999 Stock Option Plan, are exercisable at $6.00 per
share and expire on June 21, 2006.
-9-
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There is no 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. There is 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 requires our
officers, directors and persons who own more than ten percent of our voting
securities to file reports of their ownership and changes in such ownership with
the Securities and Exchange Commission. The Securities and Exchange Commission's
regulations also require that such persons provide Equitex with copies of all
Section 16 reports they file. Based solely upon our review of such reports
received by us, or written representations from certain persons that they were
not required to file any reports under Section 16, we believe that, during 2001,
our officers and directors have complied with all Section 16 filing
requirements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
We currently lease approximately 1,800 square feet of office space in
Greenwood Executive Park, 6400 South Quebec, Englewood, Colorado from a
partnership in which our President is the sole partner, on terms comparable to
the existing market for similar facilities.
During 2001, Equitex's President, Henry Fong, and two companies in
which he is the sole officer and director, loaned us a total of $88,150 of which
$26,525 was repaid prior to year end. Additional loans totaling $80,050 were
made between January 1, 2002 and September 30, 2002. Payments on these loans
totaling $82,682 were made during the nine months ended September 30, 2002
resulting in a remaining principal balance of $58,993 as of that date. These
notes bear interest at either 10% or 8% per annum and are due on demand.
In November 2001, Scott Lucas, a director of Equitex and President of
Key loaned $100,000 to us. This note is due in November 2002, bears interest at
9% per annum payable quarterly and may be converted to common stock at any time
at 80% of the average closing price of the common stock as reported by the
Nasdaq Stock Market for the 10 days immediately preceding conversion. The total
principal and interest balance on this note remains outstanding as of the filing
of this report. In connection with this note, Mr. Lucas also received warrants
to purchase 10,000 shares of our common stock at $4.00 per share and warrants to
purchase 10,000 shares of our common stock at $5.00 per share both exercisable
until November 2004.
PROPOSAL 2
TO AMEND PARAGRAPH FOUR OF THE
CERTIFICATE OF INCORPORATION
TO CAUSE A ONE-FOR-SIX REVERSE STOCK SPLIT
OF THE COMMON STOCK
Our board of directors recommends an amendment to Equitex's Certificate
of Incorporation to cause an exchange of each outstanding six shares of common
stock for one share of common stock. Because of a recent decline in our share
price and for the reasons discussed below in the section entitled "Description
of and Reasons for the Proposed Reverse Stock Split", our board of directors
recommends this one-for-six reverse stock split. Adoption of the proposed
amendment to Paragraph Four of Equitex's Certificate of Incorporation will
effect a one-for-six reverse stock split whereby every six shares of our
currently authorized and outstanding common stock, our old common stock, will be
exchanged for one share of newly created common stock, our new common stock. To
the extent affected by the proposed reverse stock split, the number of shares of
our new common stock into which the
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authorized and outstanding shares of our Series D preferred stock, Series G
preferred stock, Series I preferred stock and Series J preferred stock will
convert, shall be adjusted in accordance with the antidilution provisions
contained in their respective Certificates of Designation.
Equitex has an authorized capital of 50,000,000 shares of common stock.
The authorized capital of Equitex will not be reduced or otherwise affected by
the reverse split. The number of issued and outstanding shares of our common
stock on November 22, 2002, the record date for entitlement to notice of a vote
at the annual meeting, was 25,166,850. Based upon our best estimate, the
aggregate number of shares of common stock that will be issued and outstanding
on December 27, 2002, after giving effect to the reverse split, is 4,194,500 and
the number of treasury stock will be 69,310. A copy of Paragraph Four of the
Certificate of Incorporation as it would read following adoption of this
proposal is included herewith as Exhibit 1.
DESCRIPTION OF AND REASONS FOR THE PROPOSED REVERSE STOCK SPLIT
The continued listing requirements of the Nasdaq SmallCap Market for our
common stock require, among other things, a company to maintain, a minimum bid
price per share of $1.00. As of the date of this proxy statement, we are not in
compliance with this requirement. Our board of directors believe that a reverse
stock split may have the effect of increasing the market price per share of our
common stock and allowing the common stock to continue to be included on the
Nasdaq system, although there can be no assurance that the market price of our
common stock will rise in proportion to the reduction in the number of
outstanding shares resulting from the reverse stock split or that the
post-reverse stock split market price can be maintained.
Our board of drectors has determined that continued listing of our
common stock on the Nasdaq system is in the best interest of the stockholders.
If our stock were removed from the Nasdaq system, trading, if any, would
thereafter be conducted in the over-the-counter market on an electronic bulletin
board established for securities that do not meet the Nasdaq inclusion
requirements. As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, our common stock. In
addition, if our common stock were removed from the Nasdaq system, it would be
subject to so-called "penny stock" rules that impose additional sales practice
requirements on broker-dealers who sell such securities. Consequently, removal
from the Nasdaq system, if it were to occur, could affect the ability or
willingness of broker-dealers to sell our common stock and the ability of
purchasers to sell our common stock in the secondary market. Delisting by Nasdaq
also could adversely affect our performance under certain agreements with some
investors relating to maintenance of the Nasdaq listing and to registration of
certain shares for sale.
We also believe that low trading prices of our common stock may have an
adverse impact upon the efficient operation of the trading market in the
securities. In particular, brokerage firms often charge a greater percentage
commission on low-priced shares than that which would be charged on a
transaction in the same dollar amount of securities with a higher per share
price. A number of brokerage firms will not recommend purchases of low-priced
stock to their clients or make a market in such shares, which tendencies may
adversely affect us. Stockholders should note that the effect of the reverse
split upon the market prices for our common stock cannot be accurately
predicted. In particular, there is no assurance that prices for shares of our
new common stock after the reverse stock split will be six times the prices for
shares of our old common stock immediately prior to the reverse stock split.
Holders of our old common stock will not be required to recognize any
gain or loss as the result of any exchange of securities which occurs upon
approval of the reverse stock split. The tax basis of the aggregate shares of
new common stock received by present stockholders will be equal to the basis of
the aggregate shares of our old common stock exchanged for such new common
stock. The holding period for shares of our new common stock will include the
holding period of our old common stock when calculated for purposes of taxation
or sales under Rule 144 of the rules and regulations promulgated under the
Securities Act of 1933, as amended. Rule 144 requires that "restricted
securities" as defined in Rule 144, be held at least one year before routine
sales can be made in accordance with the provisions of the rule. Rule 144
provides that shares issued in a reverse stock split are deemed to have been
held from the date of acquisition of the shares involved in the reverse stock
split. Therefore, the reverse stock split, if approved, will not effect the
beginning of a new holding period for the shares of our new common stock, which
will be deemed to have been held from the date of acquisition of the shares of
our old common stock exchange therefor.
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EXCHANGE OF STOCK CERTIFICATES AND DETERMINATION OF NUMBER OF SHARES ISSUABLE
UPON SUCH EXCHANGE
If this Proposal Number Two is adopted by the stockholders, one share of
our new common stock would be exchanged for each six shares of our old common
stock. Shares of our new common stock may be obtained by surrendering
certificates representing shares of our old common stock to our transfer agent,
Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver,
Colorado 80209.
WE HAVE ESTABLISHED JUNE 30, 2003 AS THE DEADLINE FOR THE EXCHANGE OF
CERTIFICATES AT NO EXPENSE TO OUR CURRENT STOCKHOLDERS. THEREAFTER, CERTIFICATES
OF OUR OLD COMMON STOCK WILL BE EXCHANGEABLE FOR SHARES OF OUR NEW COMMON STOCK
FOR A FEE TO BE PAID BY THE STOCKHOLDER TO OUR TRANSFER AGENT, WHICH IS
PRESENTLY $30.00 PER CERTIFICATE.
To determine the number of shares of our new common stock issuable to
any record holder, the total number of shares represented by certificates issued
in the name of that record holder as set forth on the records of our transfer
agent (on the date upon which the reverse split becomes effective) will be
divided by six; provided, however, no fractional shares of our new common stock
will be issued as a result of the reverse split. In lieu thereof, each
stockholder whose shares of our old common stock are not evenly divisible by six
will receive one additional share of our new common stock for the fractional
share of our new common stock that such stockholder would otherwise be entitled
to receive as a result of the reverse stock split. The holder will, upon
surrender of the share certificate(s) representing shares of our old common
stock, receive a share certificate representing the appropriate number of shares
of our new common stock. Holders of certificates of our old common stock may
transmit their certificates to our transfer agent whenever they wish to obtain
shares of our new common stock. We will not require any stockholder to exchange
his certificate(s) of our old common stock for our new common stock.
The reverse stock split would become effective upon the filing of a
Certificate of Amendment to the Certificate of Incorporation related thereto
with the Delaware Secretary of State. If the reverse stock split is approved by
the stockholders, our board of directors intends to cause the Certificate of
Amendment to be filed as soon as practicable thereafter; however, our board of
directors may without further action of the stockholders abandon the amendment.
EFFECTS OF APPROVAL OF PROPOSAL NUMBER TWO
Theoretically, the market price of our common stock should increase
approximately six-fold following the proposed reverse stock split. It is hoped
that this will comply with Nasdaq's minimum bid price requirement and result in
a price level which will overcome the reluctance, policies and practices of
broker-dealers referred to above and increase interest in our securities by
investors. However, there can be no assurance that the foregoing will occur or
that the per share price level of our new common stock immediately after the
proposed reverse stock split actually will increase six-fold or be maintained at
that level for any period of time.
A further effect of the reverse stock split would be a proportionate
adjustment to the exercise price or conversion rate of our outstanding warrants
and options.
VOTE REQUIRED
The affirmative vote of the majority of the outstanding shares entitled
to vote thereon will be required to adopt the proposed amendment to Paragraph
Four of the Certificate of Incorporation.
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PROPOSAL 3
APPOINTMENT OF INDEPENDENT AUDITORS
Our board of directors has appointed the firm of Gelfond Hochstadt
Pangburn, P.C. as independent auditor of Equitex for the year ending December
31, 2002. A representative of Gelfond Hochstadt Pangburn, P.C. is not expected
to be present at the meeting.
AUDIT FEES
Gelfond Hochstadt Pangburn, P.C. served as Equitex's auditors for the
year ended December 31, 2001. Fees billed by Gelfond Hochstadt Pangburn, P.C.
for audit and review services rendered with respect to the year ended December
31, 2001 were $99,119, which includes out-of-pocket costs incurred in connection
with these service. Fees billed by Gelfond Hochstadt Pangburn, P.C. for reviews
of the financial statements included in our quarterly reports on Form 10-Q
duirng 2001 were $22,762. 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.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the year ended December 31, 2001, we paid no fees to Gelfond
Hochstadt Pangburn, P.C. for financial information systems design and
implementation.
ALL OTHER FEES
All other fees billed by Gelfond Hochstadt Pangburn, P.C. with respect
to the year ended December 31, 2001 were $75,490. 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 other than those
on Forms 10-K and 10-Q.
The audit committee of our board of directors has reviewed the fees
charged by Gelfond Hochstadt Pangburn, P.C. and determined they are compatible
with maintaining auditor independence.
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 for the year ended
December 31, 2001, 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.
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STOCKHOLDER PROPOSALS
Any stockholder proposing to have any appropriate matter brought before
the 2003 Annual Meeting of Stockholders, tentatively scheduled for June 30,
2003, 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, 2003.
EQUITEX, INC.
By Order of the Board of Directors:
Thomas B. Olson
Secretary
Date: November 27, 2002
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EXHIBIT 1
4. After the stock split described in the following paragraph, the total
number of shares of stock which the corporation shall have authority to issue is
fifty-two million (52,000,000) shares, of which fifty million (50,000,000)
shares shall be common stock having a par value of $.04 per share, and two
million (2,000,000) shares shall be preferred stock, having a par value of $.01
per share (the "Preferred Stock").
The common stock of Equitex will be reverse split on a one-for-six basis so that
each share of common stock, $.02 par value, issued and outstanding immediately
prior to the effective date shall automatically be converted into and
reconstituted as one-sixth of a share of Equitex's common stock, $.04 par value.
No fractional shares will be issued by Equitex as a result of the reverse split.
In lieu thereof, each stockholder whose shares of common stock are not evenly
divisible by six will receive one additional share of common stock for the
fractional share that such stockholder would otherwise be entitled to as a
result of the reverse stock split.
The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:
(I) The Board of Directors is expressly authorized at any time, and from
time-to-time, to provide for the issuance of shares of Preferred Stock
in one or more series, with such voting powers, full or limited, or
without voting powers and with such designations, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing for
the issue thereof adopted by the Board of Directors, and as are not
stated and expressed in this Certificate of Incorporation, or any
amendment thereto, including (without limiting the generality of the
foregoing) the following:
(a) The designation of the number of shares of such series.
(b) The dividend rate of such series, the conditions and dates upon
which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any
other class or classes or of any other series of capital stock,
whether such dividends may be paid in cash, shares of common
stock or Preferred Stock or in assets of the corporation, and
whether such dividends shall be cumulative or noncumulative.
(c) Whether the shares of such series shall be subject to redemption
by the corporation and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption.
(d) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series.
(e) Whether or not the shares of such series shall be convertible
into or exchangeable for any other class or classes or for any
other series of any class or classes or capital stock of the
Corporation and, if provision be made for conversion or exchange,
the times, prices, rates, adjustments and other terms and
conditions of such conversion or exchange.
(f) To the extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with
respect to the election of directors or otherwise.
(g) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock.
(h) The rights of the holders of the shares of such series upon the
dissolution or winding up of, or upon the distribution of assets
of, the corporation.
(II) Except as otherwise required by law and except for such voting powers
with respect to the election of directors or other matters as may be
stated in the resolutions of the Board of Directors creating any
series of Preferred Stock, the holders of any such series shall have
no voting power whatsoever.
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PROXY
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EQUITEX, INC.
7315 East Peakview Avenue
Greenwood Executive Park, Building 8
Englewood, Colorado 80111
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER 27, 2002
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 2002
Annual Meeting of Stockholders on December 27, 2001, at 9:00 Mountain Standard
Time, and at any postponements or adjournments that may take place:
1. To elect the following five 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 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 amend Paragraph Four of the Certificate of Incorporation
to cause a one share for six share reverse stock split of the
common stock.
For ______ Against ______ Abstain ______
3. To ratify the appointment of Gelfond Hochstadt Pangburn, P.C.
as the independent auditor of the Company for the year ending
December 31, 2002.
For ______ Against ______ Abstain ______
4. 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: ______