EXHIBIT 99
LUNA TECHNOLOGIES INTERNATIONAL, INC.
Shares Common Stock
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus relates to shares of this common stock of Luna
Technologies International, Inc. (the "Company") which may be issued pursuant to
certain employee incentive plans adopted by the Company. The employee incentive
plans provide for the grant, to selected employees of the Company and other
persons, of either stock bonuses or options to purchase shares of the Company's
common stock. Persons who receive shares pursuant to the Plans and who are
offering such shares to the public by means of this Prospectus are referred to
as the "Selling Shareholders".
The Company has an Incentive Stock Option Plan, a Non-Qualified Stock
Option Plan and a Stock Bonus Plan. In some cases the plans described above are
collectively referred to as the "Plans". The terms and conditions of any stock
bonus and the terms and conditions of any options, including the price of the
shares of common stock issuable on the exercise of options, are governed by the
provisions of the respective Plans and the stock bonus or stock option
agreements between the Company and the Plan participants.
The Selling Shareholders may offer the shares from time to time in
negotiated transactions in the over-the-counter market, at fixed prices which
may be changed from time to time, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through securities broker/dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker/dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker/dealer might be in excess of
customary commissions). See "Selling Shareholders" and "Plan of Distribution".
The Company's common stock is quoted on the OTC Bulletin Board under the
symbol "LTII." On February __, 2004 the closing bid price for one share of the
Company's common stock was $______.
The date of this Prospectus is February 3, 2004.
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by the Company. The Company has agreed to bear all
expenses (other than underwriting discounts, selling commissions and fees and
expenses of counsel and other advisers to the Selling Shareholders). The Company
has agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Proxy statements, reports and other information concerning the
Company can be inspected and copied at Room 1024 of the Commission's office at
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Certain information
concerning the Company is also available at the Internet Web Site maintained by
the Securities and Exchange Commission at www.sec.gov. The Company has filed
with the Commission a Registration Statement on Form S-8 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), with respect to the securities
offered hereby. This Prospectus does not contain all information set forth in
the Registration Statement of which this Prospectus forms a part and exhibits
thereto which the Company has filed with the Commission under the Securities Act
and to which reference is hereby made.
DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into this Prospectus).
Requests should be directed to:
Luna Technologies International, Inc.
61A Fawcett Road
Coquitlam, British Columbia
Canada V3K 6V2
(604) 526-5890
Attention: Secretary
The following documents filed with the Commission by the Company
(Commission File No. 0-26947) are hereby incorporated by reference into this
Prospectus:
(1) Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002.
(2) Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003.
(3) Quarterly Report on Form 10-QSB for the quarter ended June 30, 2003.
(4) Quarterly Report on Form 10-QSB for quarter ended September 30, 2003.
All documents filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering registered hereby
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for the purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
TABLE OF CONTENTS
PAGE
THE COMPANY...................................................
RISK FACTORS .................................................
COMPARATIVE SHARE DATA .......................................
USE OF PROCEEDS ..............................................
SELLING SHAREHOLDERS .........................................
PLAN OF DISTRIBUTION .........................................
DESCRIPTION OF COMMON STOCK ..................................
EXPERTS.......................................................
GENERAL ......................................................
THE COMPANY
The Company was incorporated on March 25, 1999 in Delaware to develop,
manufacture and sell photoluminescent products (High Performance
Photoluminescent Lighting) used for emergency lighting, signs and markings,
wayfinding systems and novelty products with applications in marine, commuter,
rail, subway, building and toy markets. The Company conducts business in Canada
through its wholly-owned Canadian subsidiary, Luna Technologies (Canada) Ltd.
Although many people associate the word "photoluminescence" with
"glow-in-the-dark" toys and novelties, in the lighting industry,
photoluminescent products such as marker tapes and signs are commonly used to
delineate emergency escape routes and danger areas, and to mark equipment,
pipes, tools and working and accident prevention clothing.
Most photoluminescent products are composed of inorganic pigments that can
be incorporated into paint, plastic films, enamels, and flexible and rigid
molded plastics. Typical products include adhesive vinyl tapes, rigid polyvinyl
chloride (PVC) marker strips, and silk-screened plastic signage.
Photoluminescent enamel-coated sheet metal and ceramic products are also
available.
The main pigment commonly used in photoluminescent glow-type products is a
zinc sulphide compound emitting a yellowish-green light. This material performs
well when subjected to high ambient lighting levels but the decay rate is rather
rapid. Strontium Aluminate is more expensive than zinc sulphide and takes
slightly longer to charge, but can "store" more light, making it much more
suitable for use in locations where ambient light levels are low. Strontium
Aluminate also offers much brighter and longer-lasting photoluminescence. The
decay curve for strontium-based products is measured in hours as opposed to
minutes for zinc-based items.
The Company's product, Lunaplast, uses Strontium Aluminate as a pigment,
which is up to 20 x times brighter than commercial zinc sulphide products, and
is clearly visible after many hours of total darkness.
During the year ended December 31, 2002 the Company had sales of $332,285.
During the nine months ended September 30, 2003 the Company had sales of
$268,982.
During the year ended December 31, 2002 one customer accounted for 73% of
the Company's gross revenues. During the nine months ended September 30, 2003
one customer accounted for 84% of the Company's gross revenues. The loss of
either of these customers would have a material adverse effect on the Company.
The Company's executive offices are located at 61-A Fawcett Road,
Coquitlam, British Columbia, Canada V3K 6V2. The Company's telephone number is
(604) 526-5890, its facsimile number is (604) 526-8995, its email address is
luna_technologies@telus.net, and its web page address is www.lunaplast.com.
RISK FACTORS
The securities being offered hereby are highly speculative and prospective
investors should consider, among others, the following factors related to the
business, operations and financial position of the Company.
History of Losses: The Company has never earned a profit. From the date of its
incorporation and through September 30, 2003 the Company had cumulative losses
of $(1,607,215). The Company expects to incur additional losses for an
indefinite period thereafter. No assurance can be given that the Company's
products will be manufactured and marketed successfully, or that the Company
will ever earn a profit.
Offering Proceeds - Need for Additional Capital. This offering is being made on
behalf of certain selling shareholders. The Company will not receive any
proceeds from the sale of the shares offered by the selling shareholders. The
Company will need additional capital in order to fund its operations. There can
be no assurance that the Company will be able to obtain any additional funding
which it may require.
Limited Operations: The likelihood of the success of the Company must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with the start up of new businesses
and the particular problems associated with pharmaceutical companies.
Technological Change: The field in which the Company is involved may undergo
rapid and significant technological change. The successful marketing of the
Company's products will depend on its ability to be in the technological
forefront of this field. There can be no assurance that the Company will achieve
or maintain such a competitive position or that other technological developments
will not cause the Company's proprietary technologies to become uneconomical or
obsolete.
No Patent Protection: The Company's technology is not protected by any patent.
Accordingly, there is no assurance that others may not acquire or independently
develop the same or similar technology.
Dependence on Management: The Company is dependent upon the services and
experience of its officers. The loss of the services of any officer could
adversely affect the conduct of the Company's business.
Limited Market for Common Stock: There is, at present, only a limited market for
the Company's common stock and there is no assurance that this market will
continue. Trades of the Company's common stock are subject to Rule 15g-9 of the
Securities and Exchange Commission, which rule imposes certain requirements on
broker/dealers who sell securities subject to the rule to persons other than
established customers and accredited investors. For transactions covered by the
rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser's written agreement to
the transaction prior to sale. The Securities and Exchange Commission also has
rules that regulate broker/dealer practices in connection with transactions in
"penny stocks". Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in that security is provided by the
exchange or system). The penny stock rules require a broker/dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker/dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker/dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. These disclosure requirements have the effect
of reducing the level of trading activity in the secondary market for the
Company's common stock. As a result of the foregoing, investors may find it
difficult to sell their shares.
Dividends: The payment of dividends on the common stock rests with the
discretion of the Board of Directors. Payment of dividends is contingent upon,
among other things, future earnings, if any, and the financial condition of the
Company, capital requirements, general business conditions, and other factors
which cannot now be predicted. There can be no assurance that the future
operations of the Company will be profitable or that dividends will ever be paid
by the Company
Preferred Stock: The Company's Articles of Incorporation permit the Company's
Board of Directors to issue up to 5,000,000 shares of Preferred Stock. The
provisions of the Company's Articles of Incorporation relating to the Preferred
Stock allow the Company's directors to issue Preferred Stock with multiple votes
per share and dividend rights which would have priority over any dividends paid
with respect to the Company's common stock. The issuance of Preferred Stock with
such rights may make the removal of management difficult even if such removal
would be considered beneficial to shareholders generally, and will have the
effect of limiting shareholder participation in certain transactions such as
mergers or tender offers if such transactions are not favored by incumbent
management.
USE OF PROCEEDS
All of the shares offered by this Prospectus are being offered by certain
owners of the Company's common stock (the Selling Shareholders) and were issued
by the Company in connection with the Company's Incentive Stock Option,
Non-Qualified Stock Option or Stock Bonus Plans. None of the proceeds from the
sale of the shares offered by this Prospectus will be received by the Company.
Expenses expected to be incurred by the Company in connection with this offering
are estimated to be approximately $10,000. The Selling Shareholders have agreed
to pay all commissions and other compensation to any securities broker/dealers
through whom they sell any of the Shares.
SELLING SHAREHOLDERS
The Company has issued (or may in the future issue) shares of its common
stock to various persons pursuant to certain employee incentive plans adopted by
the Company. The Company has an Incentive Stock Option Plan, a Non-Qualified
Stock Option Plan and a Stock Bonus Plan. In some cases these Plans are
collectively referred to as the "Plans". A summary description of these Plans
follows. The Plans provide for the grant, to selected employees of the Company
and other persons, of either stock bonuses or options to purchase shares of the
Company's common stock.
Incentive Stock Option Plan. The Company's Incentive Stock Option Plan
authorizes the issuance of shares of the Company's Common Stock to persons that
exercise options granted pursuant to the Plan. Only Company employees may be
granted options pursuant to the Incentive Stock Option Plan.
Non-Qualified Stock Option Plan. The Company's Non-Qualified Stock Option
Plan authorizes the issuance of shares of the Company's Common Stock to persons
that exercise options granted pursuant to the Plans. The Company's employees,
directors, officers, consultants and advisors are eligible to be granted options
pursuant to the Plans, provided however that bona fide services must be rendered
by such consultants or advisors and such services must not be in connection with
the offer or sale of securities in a capital-raising transaction. The option
exercise price is determined by the Company's Board of Directors.
Stock Bonus Plan. The Company's Stock Bonus Plan allows for the issuance
of shares of Common Stock to the Company's employees, directors, officers,
consultants and advisors, provided however that bona fide services must be
rendered by consultants or advisors and such services must not be in connection
with the offer or sale of securities in a capital-raising transaction.
Summary
The following sets forth certain information as of December 31, 2003
concerning the stock options and stock bonuses granted by the Company pursuant
to the Plans. Each option represents the right to purchase one share of the
Company's common stock.
Total Shares Remaining
Shares Reserved for Shares Options/
Reserved Outstanding Issued As Shares
Name of Plan Under Plans Options Stock Bonus Under Plans
- ------------ ----------- ------------ ----------- -----------
Incentive Stock Option Plan 750,000 -- N/A 745,000
Non-Qualified Stock
Option Plan 1,350,000 185,000 N/A 782,330
Stock Bonus Plan 1,000,000 N/A 200,000 800,000
The persons listed below have received options or shares of the Company's
common stock as a stock bonus:
Incentive Stock Options
Shares Expiration Options Expired/
Subject Exercise Date of Date of Exercised as of
Option Holder To Option Price Grant Option December 31, 2003
- ------------- --------- -------- ------- ---------- -----------------
Employee 5,000 $0.50 03/04/03 03/04/04 5,000
Non-Qualified Stock Options
Shares Expiration Options Expired/
Subject Exercise Date of Date of Exercised as of
Option Holder To Option Price Grant Option December 31, 2003
- ------------- --------- -------- ------- ---------- -----------------
Brian Fiddler 40,000 $0.10 08/15/03 08/30/08 40,000
Brian Fiddler 40,000 $0.18 08/15/03 08/30/08 20,000
Brian Fiddler 20,000 $0.50 08/15/03 08/30/08
Brian Fiddler 20,000 $0.25 08/15/03 08/30/08
Brian Fiddler 20,000 $0.40 08/15/03 08/30/08
Brian Fiddler 20,000 $0.60 08/15/03 08/30/08
Other employees and
consultants 407,000 $0.05/$0.50 * * 322,670
------- -------
567,670 382,670
======= =======
* Various dates
Stock Bonuses
Shares Issued
Name as Stock Bonus Date Issued
Brian Fiddler 18,000 8/15/03
Other employees and consultants 182,000 Various dates
-------
200,000
Selling Shareholders
Officers, directors and affiliates of the Company who may acquire shares
of common stock pursuant to the Plans, and who are offering these shares of
common stock to the public by means of this Prospectus, are referred to as the
"Selling Shareholders".
The following table provides certain information concerning the share
ownership of the Selling Shareholders and the shares offered by the Selling
Shareholders by means of this Prospectus.
Number of
Shares to
Number of Number of Shares be Beneficially
Shares Being Offered owned on Com- Percent
Name of Selling Beneficially Option Bonus pletion of the of
Shareholder Owned Shares(1) Shares(2) Offering Class
- --------------- ------------ --------- --------- ------------- --------
Kimberly Landry 1,930,000 -- -- 1,930,000 29%
Douglas Sinclair 1,000 -- -- 1,000 --
Brian Fiddler 78,000 80,000 -- 78,000 1%
Robert Humber 790,000 -- -- 790,000 12%
(1) Represents shares issuable upon exercise of stock options granted pursuant
to the Plans.
(2) Represents shares granted as a stock bonus.
To allow the Selling Shareholders to sell their shares when they deem
appropriate, the Company has filed a Form S-8 registration statement under the
Securities Act of 1933, of which this Prospectus forms a part, with respect to
the resale of the shares from time to time in the over-the-counter market or in
privately negotiated transactions.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares offered by this Prospectus
from time to time in negotiated transactions in the over-the-counter market at
fixed prices which may be changed from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Shareholders may effect such transactions by
selling the Shares to or through broker/ dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for which such
broker/dealers may act as agent or to whom they may sell, as principal, or both
(which compensation as to a particular broker/ dealer may be in excess of
customary compensation).
The Selling Shareholders and any broker/dealers who act in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of ss.2(11) of the Securities Acts of 1933, and any commissions received
by them and profit on any resale of the Shares as principal might be deemed to
be underwriting discounts and commissions under the Securities Act. The Company
has agreed to indemnify the Selling Shareholders and any securities
broker/dealers who may be deemed to be underwriters against certain liabilities,
including liabilities under the Securities Act as underwriters or otherwise.
The Company has advised the Selling Shareholders that they and any
securities broker/dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under the
Securities Act of 1933. The Company has also advised each Selling Shareholder
that in the event of a "distribution" of the shares owned by the Selling
Shareholder, such Selling Shareholder, any "affiliated purchasers", and any
broker/ dealer or other person who participates in such distribution may be
subject to Rule 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their participation in that distribution is completed. A "distribution" is
defined in Rule 102 as an offering of securities "that is distinguished from
ordinary trading transactions by the magnitude of the offering and the presence
of special selling efforts and selling methods". The Company has also advised
the Selling Shareholders that Rule 101 under the 1934 Act prohibits any
"stabilizing bid" or "stabilizing purchase" for the purpose of pegging, fixing
or stabilizing the price of the Common Stock in connection with this offering.
Rule 102 makes it unlawful for any person who is participating in a
distribution to bid for or purchase stock of the same class as is the subject of
the distribution. If Rule 102 applies to the offer and sale of any of the
Shares, then participating broker/dealers will be obligated to cease
market-making activities nine business days prior to their participation in the
offer and sale of such Shares and may not recommence market-making activities
until their participation in the distribution has been completed. If Rule 102
applies to one or more of the principal market makers in the Company's Common
Stock, the market price of such stock could be adversely affected. See "RISK
FACTORS".
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 30,000,000 shares of common stock.
Holders of common stock are entitled to cast one vote for each share held of
record on all matters presented to shareholders. Cumulative voting is not
allowed, which allows the holders of a majority of the outstanding common stock
to elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available for the
payment of dividends and, in the event of liquidation, to share pro rata in any
distribution of the Company's assets after payment of liabilities. The board is
not obligated to declare a dividend. It is not anticipated that dividends will
be paid in the foreseeable future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares issued by the Company
The shares of common stock offered by this prospectus are fully paid and
non-assessable.
Preferred Stock
The Company's Articles of Incorporation authorize the issuance of up to
5,000,000 shares of preferred stock. The Company's Board of Directors have the
authority to issue the preferred stock from time to time, with such
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, qualifications, limitations, or
restrictions thereof as they determine, within the limitations provided by
statute.
The provisions in the Company's Certificate of Incorporation relating to
the preferred stock will allow the Company's directors to issue preferred stock
with multiple votes per share and dividend rights which would have priority over
any dividends paid with respect to the Company's common stock. The issuance of
preferred stock with such rights may make the removal of management difficult
even if such removal would be considered beneficial to shareholders generally,
and will have the effect of limiting shareholder participation in certain
transactions such as mergers or tender offers if such transactions are not
favored by incumbent management.
Transfer Agent
Corporate Stock Transfer
3200 Cherry Creek Drive South
Suite 430
Denver, CO 80209
Telephone Number (303) 282-4800
Facsimile Number (303) 282-5800
LEGAL PROCEEDINGS
The Company is not involved in any pending or threatened legal proceeding.
EXPERTS
The financial statements as of December 31, 2002 and for each of the two
years in the period ended December 31, 2002 incorporated by reference in this
prospectus from the Company's annual report on Form 10-KSB have been audited by
LaBonte & Co., independent auditors, as stated in their report dated March 7,
2003 which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of LaBonte & Co. given upon their authority as experts
in accounting and auditing.
Effective January 1, 2004, LaBonte & Co. merged with Dale Matheson
Carr-Hilton Chartered Accountants. The name of the Company's principal
independent accountant is now Dale Matheson Carr-Hilton LaBonte.
GENERAL
The Delaware General Corporation Law provides that the Company may
indemnify its directors and officers against expense and liabilities they incur
to defend, settle or satisfy any civil or criminal action brought against them
as a result of their being or having been Company directors or officers unless,
in any such action, they have acted with gross negligence or willful misconduct.
Officers and Directors are not entitled to be indemnified for claims or losses
resulting from a breach of their duty of loyalty to the Company, for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law or a transaction from which the director derived an improper
personal benefit. Insofar as indemnification for liabilities arising under the
Securities Act of l933 may be permitted to the Company's directors and officers,
the Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of l933, and is, therefore, unenforceable.
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus in connection with this offering and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or the selling shareholders. This prospectus does not constitute
an offer to sell, or a solicitation of any offer to buy, the securities offered
in any jurisdiction to any person to whom it is unlawful to make an offer or
solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the affairs of L.A.M. since the date hereof or that any
information contained herein is correct as to any time subsequent to its date.
All dealers effecting transactions in the registered securities, whether
or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.