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
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ADVANCED AERODYNAMICS AND STRUCTURES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________
2) Form, Schedule or Registration Statement No.: __________
3) Filing Party: __________________________________________
4) Date Filed: ____________________________________________
ADVANCED AERODYNAMICS & STRUCTURES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 22, 2002
TO THE SHAREHOLDERS OF ADVANCED AERODYNAMICS & STRUCTURES, INC.:
You are cordially invited to attend the Annual Meeting of Shareholders
("Annual Meeting") of Advanced Aerodynamics & Structures, Inc. ("AASI" or the
"Company"), which will be held in the Multi-Purpose Room, AASI Headquarters,
3205 Lakewood Blvd., Long Beach, California 90808, on Monday, July 22, 2002, at
11:00 a.m. Pacific time, to consider and act upon the following matters:
1. The election of six (6) directors;
2. The ratification of the selection of Ernst & Young LLP to serve as
auditors of the Company for the fiscal year ending December 31, 2002;
and
3. Such other business as may properly come before the Annual Meeting or
any adjournments of the Annual Meeting.
Only holders of record our Common Stock at the close of business on May 23,
2002, will be entitled to notice of, and to vote at, the Annual Meeting and any
adjournments of the Annual Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS
OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE MEETING IN
PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND THE MEETING,
YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
/s/ Roy H. Norris
Roy H. Norris
Chairman of the Board,
President and Chief Executive Officer
3205 Lakewood Blvd.
Long Beach, California 90808
(562) 938-8618
May 23, 2002
PROXY STATEMENT
ADVANCED AERODYNAMICS & STRUCTURES, INC.
3205 LAKEWOOD BOULEVARD
LONG BEACH, CALIFORNIA 90808
________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 22, 2002
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Advanced Aerodynamics & Structures, Inc., a
Delaware corporation (the "Company") for use at the Annual Meeting of
Shareholders to be held in the Multi-Purpose Room, AASI Headquarters, 3205
Lakewood Blvd., Long Beach, California 90808, on Monday, July 22, 2002, at 11:00
a.m. Pacific time, and at any and all adjournments thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting of Shareholders. Accompanying this Proxy Statement is the Board of
Directors' Proxy for the Annual Meeting, which you may use to indicate your vote
as to the proposals described in this Proxy Statement. In addition to
solicitation by use of the mail, certain of our officers and employees may,
without receiving additional compensation therefor, solicit the return of
proxies by telephone, telegram or personal interview. We have requested that
brokerage houses and custodians, nominees and fiduciaries forward soliciting
materials to their principals, the beneficial owners of Common Stock, and has
agreed to reimburse them for reasonable out-of-pocket expenses in connection
therewith.
Revocation of Proxies
All Proxies which are properly completed, signed and returned to us prior
to the Annual Meeting, and which have not been revoked, will be voted in favor
of the proposals described in this Proxy Statement unless otherwise directed. A
Shareholder may revoke his or her Proxy at any time before it is voted either by
filing with the Secretary of the Company, at its principal executive offices, a
written notice of revocation or a duly-executed proxy bearing a later date or by
attending the Annual Meeting and expressing a desire to vote his or her shares
in person.
Record Date and Voting Securities
The close of business on May 23, 2002, has been fixed as the record date
for the determination of Shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment of the Annual Meeting. As of April 23, 2002,
we had outstanding: 62,984,965 shares of Class A Common Stock, par value $.0001
per share; 1,900,324 shares of Class B Common Stock, par value $.0001 per share;
4,000,000 shares of Class E-1 Common Stock, par value $.0001 per share;
4,000,000 shares of Class E-2 Common Stock, par value $.0001 per share; and
41,512 shares of Series A Preferred Stock. The Class A Common Stock, Class B
Common Stock, Class E-1 Common Stock and Class E-2 Common Stock are
substantially identical, except that the holders of Class A Common Stock have
the right to cast one vote, and the holders of Class B Common Stock, Class E-1
Common Stock, and Class E-2 Common Stock have the right to cast five votes, for
each share held of record on all matters submitted to a vote of the holders of
Common Stock, including the election of directors. The Class A Common Stock,
Class B Common Stock, Class E-1 Common Stock and Class E-2 Common Stock vote
together as a single class on all matters on which stockholders may vote,
including the election of directors, except when voting by individual class is
required by applicable law. The Series A Preferred Stock does not vote, except
on matters where a separate vote of the Series A Preferred Stock would be
required by the Delaware General Corporation Law. Subject to the preferential
rights of the holders of the Series A Preferred Stock, holders of the Class A
Common Stock, Class B Common Stock, Class E-1 Common Stock and Class E-2 Common
Stock have equal ratable rights to dividends from funds legally available
therefor, when, as and if declared by the Board of Directors and are entitled to
share ratably, as a single class, in all of our assets available for
distribution to the holders of shares of Common Stock upon the liquidation,
dissolution or winding up of our affairs. Except as described herein, no
preemptive,
subscription, or conversion rights pertain to the Common Stock and no redemption
or sinking fund provisions exist for the benefit thereof.
Pursuant to the General Corporation Law of the State of Delaware, only
votes cast "FOR" a matter constitute affirmative votes, except proxies in which
the stockholder fails to make a specification as to whether he votes "FOR,"
"AGAINST," "ABSTAINS" or "WITHHOLDS" as to a particular matter shall be
considered as a vote "FOR" that matter. Votes will be tabulated by an inspector
of election appointed by the Board of Directors. Votes in which the stockholder
specified that he is "WITHHOLDING" or "ABSTAINING" from voting is counted for
quorum purposes, but are not considered as votes "FOR" a particular matter.
Broker non-votes (shares held by a broker or nominee which are represented at
the meeting, but with respect to which the broker or nominee is not empowered to
vote on a particular proposal) are counted for quorum purposes, but are not
considered as votes "FOR" a particular matter.
Mailing of Proxy Statement and Proxy Card
Our Annual Report for 2001 is enclosed for your convenience but is not to
be considered part of the solicitation material. We will pay the cost for
preparing, printing, assembling and mailing this Proxy Statement and the Proxy
Card and all of the costs of the solicitation of the Proxies.
Our principal executive offices are located 3205 Lakewood Blvd., Long
Beach, California 90808. This Proxy Statement and the accompanying proxy is
first being mailed to Shareholders on or about May 23, 2002.
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Certificate of Incorporation and Bylaws of the
Company, the Board of Directors consists of not less than three nor more than
seven members, the exact number to be determined by the Board of Directors. At
each annual meeting of the Shareholders of the Company, directors are elected
for a one-year term, or until their successors are elected or appointed. The
Board of Directors is being set at six members. The Board of Directors proposes
the election of the nominees named below.
Unless marked otherwise, proxies received will be voted FOR the election of
each of the nominees named below, unless authority is withheld. If any such
person is unable or unwilling to serve as a nominee for the office of director
at the date of the Annual Meeting or any postponement or adjournment thereof,
the proxies may be voted for a substitute nominee, designated by the proxy
holders or by the present Board of Directors to fill such vacancy. The Board of
Directors has no reason to believe that any such nominee will be unwilling or
unable to serve if elected a director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF THE DIRECTORS NOMINATED HEREIN.
The Board of Directors proposes the election of the following nominees as
members of the Board of Directors:
Roy H. Norris
Shalom Babad
C.M. Cheng
Hon. Robert P. Kaplan
Arie Rabinowitz
Samuel Rothman
If elected, the nominees are expected to serve until the 2003 Annual
Meeting of Shareholders.
2
INFORMATION WITH RESPECT TO EACH NOMINEE AND EXECUTIVE OFFICERS.
The following table sets forth certain information with respect to each
nominee and executive officer of the Company as of April 23, 2002.
Name Age Position
---- --- --------
Roy H. Norris 57 Chairman of the Board, President, Chief
Executive Officer, Director and Director
Nominee
Shalom Babad 27 Director and Director Nominee
C.M. Cheng 54 Consultant to the Company, Director and
Director Nominee
Hon. Robert P. Kaplan 65 Director and Director Nominee
Arie Rabinowitz 30 Director and Director Nominee
Samuel Rothman 48 Director and Director Nominee
OTHER OFFICERS:
Gene Comfort 58 Executive Vice President of Marketing and
Sales
J. Nelson Happy 58 Executive Vice President and General Counsel
L. Peter Larson 52 Executive Vice President and Chief Financial
Officer
Dale Ruhmel 67 Executive Vice President of Operations and
Engineering
David M. Turner, CPA 66 Vice President of Corporate Finance,
Secretary and Treasurer
Directors serve until the next annual meeting or until their successors are
elected or appointed. All officers are appointed by and serve at the discretion
of the Board of Directors, although Mr. Norris, Mr. Larson, Mr. Nelson and Mr.
Ruhmel are currently negotiating employment agreements with the Company. See
"Management - Employment Agreements." There are no family relationships between
any of our directors or officers.
Roy H. Norris was elected as the President, Chief Executive Officer and
Chairman of the Board effective January 8, 2002. He was previously elected as a
director of the Company on June 1, 2001. He was previously a private business
consultant with extensive experience in the aviation industry. From 1994 to
1997, he served as President of Raytheon Aircraft (formerly Beech Aircraft), a
$2.3 billion enterprise. Previously, Mr. Norris was President and Chief
Executive Officer of Raytheon Corporate Jets, a division of Raytheon which
merged into Raytheon Aircraft in 1994. He has also served as Vice President of
Sales and Marketing for Gulfstream Aerospace and Senior Vice President for
Marketing and Sales for Cessna Aircraft Company. Mr. Norris has a degree in
Chemical Engineering from Auburn University and was named its Outstanding
Engineering Graduate for 1997.
Shalom Babad is a consultant to the Company and was appointed as a director
in April 2002. He has been self-employed as a consultant in fund raising and
security investments during the past five years.
3
C.M. Cheng has served as a director of the Company since June 1996. Since
April 1996, Mr. Cheng has been a Vice President of Eurotai International, Ltd.,
a private company located in Taipei, Taiwan, which distributes health food
products. From 1984 to April 1996, Mr. Cheng served as a Vice President,
Director of the Office of the President, and Manager of Corporate Planning with
Taiwan Yeu Tyan Machinery, Mfg. Co. Ltd., a public company located in Taipei,
Taiwan, which manufactures automobiles and heavy equipment. From 1980 to 1983,
Mr. Cheng was an Associate Professor of Economics and Management at Taiwan
National Sun-Yet-Sen University. Mr. Cheng is the director of Harpa Limited, a
corporation organized under the laws of the Cayman Islands (Harpa), a principal
stockholder of the Company. See "Certain Relationships and Related Transactions
and Principal Shareholders."
Hon. Robert P. Kaplan was elected as a director of the Company in June
2001. He was previously the Canadian Solicitor General and also was a member of
the Parliament of Canada from 1968 until 1993, when he retired from elective
politics. Since leaving public life in 1993, Mr. Kaplan has, among other things,
engaged in trade and investment in the Former Soviet Union. He serves as a
director of Hurricane Hydrocarbons Limited, a Calgary-based company which owns
oil fields and a major refinery in Kazakhstan, producing 10% of that country's
oil. It is listed on the Toronto, Frankfurt and Alberta Stock Exchanges.
Hurricane Hydrocarbans Limited was under bankruptcy protection from May 1999 to
March 2000, and emerged successfully. Mr. Kaplan served as a director, chairman
and acting CEO during this period. He also serves as a director of Rex Diamond
Corp., Ltd. Mr. Kaplan graduated with an Honours B.A. in Sociology (Criminology)
and an LL.B from the University of Toronto in 1961. He was called to the Bar in
Ontario in 1963, and practiced law with Toronto law firms doing tax and
corporate work until 1968.
Arie Rabinowitz has served as a director of the Company since December
2001. He has been a vice president at LH Financial during the past five years.
Sam Rothman has served as a director of the Company since December 2001. He
has been self-employed in real estate and security investments during the past
five years.
Gene Comfort has been an Executive Vice President and General Manager of
the Company since September 1995. He was made the Executive Vice President of
Marketing and Sales effective January 8, 2002. He served as a director of the
Company from May 1996 through March 2000. From July 1993 to September 1995, Mr.
Comfort was the Vice President - Marketing of the Company, and he was the
Director of Marketing of the Company from April 1991 to July 1993. Mr. Comfort
has been involved in the aircraft industry for over 25 years in a variety of
marketing, sales and management positions.
J. Nelson Happy has been the General Counsel and an Executive Vice
President of the Company since January 8, 2002. He was previously the CEO of
Conco Refining Company from September 1999 to December 2001. From September 1993
to August 1999, he served as the chief executive of Regent University School of
Law.
L. Peter Larson has been the Chief Financial Officer and an Executive Vice
President of the Company since January 8, 2002. He was previously the CEO of
Telkonet Communications from November 1999 to January 2002 and was self-employed
as a consultant from April 1996 to October 1999.
Dale Ruhmel has been the Executive Vice President of Operations and
Engineering since January 8, 2002. For the past seventeen years he has been a
consultant in aeronautical engineering for companies such as Boeing, Beechcraft,
Raytheon, Twin Commander, Tracor, Liberty Aircraft, Eclipse Aviation, Century
Aerospace and Toyota Aviation. Prior to his work as a consultant, he held
positions as Vice President - Engineering & Flight Test of Falcon Jet
Corporation; Vice President - Engineering for Rohr Industries; Manager of
Technical Services for the Wallace Division of Cessna Aircraft Company and Chief
of Stability & Control for the DC-10 and DC-8-60 Series transports for McDonnell
Douglas Aircraft.
David M. Turner, CPA, joined the Company in January 1997. Prior to that,
from 1994, he served as the Chief Financial Officer of Taitron Incorporated, a
publicly held company that distributes discrete semiconductors. From 1991 to
1994, Mr. Turner was President and sole owner of Maynard Enterprises,
Incorporated, a privately held consulting business working primarily in the
health care industry. From 1988 to 1991, Mr. Turner was the Chief Financial
Officer and Corporate Vice President of Finance of the Greater Southeast
Management Company, a Washington D.C. company that operated an inner city health
care system, which included two hospitals, three nursing homes and several
subsidiary health care companies in the Mid Atlantic area. During the same
period, Mr. Turner was President and a Director of Greater Southeast Asset
Management Company, the asset-holding subsidiary of the Greater Southeast
Healthcare System. Mr. Turner received a Master of Business of Administration
from the University of Cincinnati.
4
The Board of Directors held two meetings in 2001 and all Directors were
present at each meeting. No director attended fewer than seventy-five percent
(75%) of the aggregate number of meetings held by the Board of Directors and the
committees on which he served during 2001. The Board of Directors has an Audit
Committee which reviews the results and scope of the audit and other accounting
related matters. The members of the Audit Committee are currently Messrs. Babad,
Kaplan and Rothman. The Audit Committee held two meetings during 2001.
AUDIT FEES
The aggregate fees billed by Ernst & Young for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2001, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB for that
fiscal year were $115,000. All other fees were $80,000 including audit-related
services of $64,000 and non-audit services, primarily tax compliance services,
of $16,000. Audit-related services generally include fees for accounting
consultations and work related to equity offerings. The Audit Committee has
considered whether the provision of non-audit services is compatible with
maintaining the principal accountant's independence.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
There were no fees billed by Ernst & Young for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended December 31, 2001.
AUDIT COMMITTEE CHARTER
The Company's Board of Directors has adopted a written charter for the
Audit Committee, which established operating guidelines for the Audit Committee.
A copy of the Charter of the Audit Committee was filed as an appendix to last
year's Proxy Statement.
AUDIT COMMITTEE REPORT
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's audited
financial statements with Company management and has discussed certain required
matters with the Company's independent auditors, in accordance with Statement of
Auditing Standards No. 61.
The Company's independent auditors also provided written documentation to
the Audit Committee, describing all relationships between the auditors and the
Company that might bear on the auditors' independence as required by
Independence Standards Board Standard No. 1. The Audit Committee discussed with
the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence.
Based on the above-mentioned reviews and discussions with management and
the independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-KSB for the fiscal year ended December 31, 2001. The Audit Committee also
recommended the re-appointment of the independent auditors and the Board
concurred in such recommendation. All members of the Audit Committee are
considered to be "independent directors," as defined in NASDAQ Marketplace Rule
4200.
AUDIT COMMITTEE
Shalom Babad, Robert Kaplan and Samuel Rothman
5
MANAGEMENT
EXECUTIVE COMPENSATION
The following tables set forth certain information as to our Chief
Executive Officer and each of our four most highly-compensated executive
officers whose total annual salary and bonus for the fiscal year ending December
31, 2001, exceeded $100,000:
SUMMARY COMPENSATION TABLE
Annual Compensation/(1)/
--------------------------
Other
Name and Principal Position Year Salary Bonus Compensation
- --------------------------------------------------------------------------------
Carl L. Chen, Ph.D. 2001 $200,000 $0 $39,248/(2)/
Chairman and Chief Executive 2000 $200,000 $0 $39,248/(2)/
Officer 1999 $191,000 $0 $39,248/(2)/
Gene Comfort 2001 $153,000 $0 $ 0
Executive Vice President 2000 $153,000 $0 $ 0
1999 $143,000 $0 $ 0
____________________
/(1)/ The compensation described in this table does not include medical
insurance, retirement benefits and other benefits which are available
generally to all employees of the Company and certain perquisites and
other personal benefits, the value of which did not exceed the lesser of
$50,000 or 10% of the executive officer's compensation in the table.
/(2)/ Represents premium for life insurance paid by the Company on behalf of Dr.
Chen.
EMPLOYMENT AGREEMENTS
Employment agreements are currently being negotiated with Mr. Norris, Mr.
Happy, Mr. Larson and Mr. Ruhmel. It is anticipated that the agreements will
provide for an annual salary of $200,000 each and the granting among the four
officers of a 13% interest in the Company which is nondilutable over the next
three years. We entered into an eight-year employment agreement (the "Chen
Employment Agreement") with Dr. Carl Chen as Chairman, Chief Executive Officer
and President commencing in May 1996. The Chen Employment Agreement provided
that, in consideration for Dr. Chen's services, he was to be paid an annual
salary of $200,000. Dr. Chen resigned effective January 8, 2002, under the terms
of a severance agreement with the following terms: (i) a $300,000 payment with
the first half paid during the first six months of 2002 and the second half paid
on January 8, 2004; (ii) eighteen months of health insurance; (iii) 2,000,000
warrants with an exercise price of $0.25 and a three-year term; and (iv) Dr.
Chen's granting of an irrevocable proxy for his Class E-1 and Class E-2 Common
Shares to Samuel Rothman, a director.
COMPENSATION OF DIRECTORS
Non-employee directors receive $2,500 for each Board of Directors meeting
attended. We pay all out-of-pocket expenses of attendance.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of April 23, 2002, by (i) each person who is
known by us to own beneficially more than 5% of any class of our
6
outstanding voting securities, (ii) each of our directors and executive
officers, and (iii) all of our officers and directors as a group. Calculations
are based upon 62,984,965 Common Stock shares issued and outstanding as of April
23, 2002.
Common Stock
Name and Address of Beneficially Percent of
Title of Class Beneficial Owner(1) Owned/(2)/ Ownership
- --------------------------------------------------------------------------------------
Class A Common Stock Roy H. Norris/(3)/ 3,149,248 5%
Class A Common Stock Shalom Babad/(4)/ 1,889,549 3%
Class A Common Stock C.M. Cheng/(5)(6)/ 15,000 *1%
Class B Common Stock 1,013,572 53%
Class E-1 Common Stock 2,027,144 51%
Class E-2 Common Stock 2,027,144 51%
Class A Common Stock Hon. Robert P. Kaplan/(7)/ 350,413 *1%
Class A Common Stock S.B. Lai, Ph.D./(8)/ 28,000 *1%
Class A Common Stock Arie Rabinowitz/(9)/ 1,889,549 3%
Class A Common Stock Samuel Rothman/(10)/ 1,889,549 3%
Class E-1 Common Stock 1,653,503 41%
Class E-2 Common Stock 1,653,503 41%
Class A Common Stock Gene Comfort/(11)/ 33,800 *1%
Class B Common Stock 60,001 3%
Class E-1 Common Stock 120,000 3%
Class E-2 Common Stock 120,000 3%
Class A Common Stock J. Nelson Happy/(12)/ 1,889,549 3%
Class A Common Stock L. Peter Larson/(13)/ 1,889,549 3%
Class A Common Stock Dale Ruhmel/(14)/ 1,259,699 2%
Class A Common Stock David Turner/(15)/ 31,100 *1%
Class A Common Stock All executive officers 14,315,005 23%
Class B Common Stock and directors as a group 1,073,573 56%
Class E-1 Common Stock (12 persons) 3,800,647 95.02%
Class E-2 Common Stock 3,800,647 95.02%
Class A Common Stock Carl. L. Chen, Ph.D. /(16)/ 75,000 *1%
Class B Common Stock 826,751 43.5%
Class E-1 Common Stock 1,653,503 41.34%
Class E-2 Common Stock 1,653,503 41.34%
Class B Common Stock Harpa Limited/(6)/ 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
* = Less than
7
Common Stock
Name and Address of Beneficially Percent of
Title of Class Beneficial Owner/(1)/ Owned/(2)/ Ownership
- --------------------------------------------------------------------------------------
Class B Common Stock Shih Jen Yeh/(6)/ 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
Class B Common Stock Chyao Chi Yeh/(6)/ 1,013,572 53.33%
Class E-1 Common Stock 2,027,144 50.67%
Class E-2 Common Stock 2,027,144 50.67%
Class A Common Stock Alpha capital 6,292,198 9.99%
Akteingesellschaft/(17)/
Class A Common Stock Austinvest Anstalt 6,292,198 9.99%
Balzers/(18)/
Class A Common Stock The Endeavour Capital 6,292,198 9.99%
Investment Fund, S.A./(19)/
Class A Common Stock Esquire Trade & Finance 3,468,234 5.5%
Inc./(20)/
* = Less than
_____________________
/(1)/ Except as otherwise indicated, the address of each principal stockholder
is c/o the Company at 3205 Lakewood Blvd., Long Beach, California 90808.
The Company believes that all persons named have sole voting power and
sole investment power, subject to community property laws where
applicable.
/(2)/ The Common Stock of the Company is divided into four classes. Each share
of Class B Common Stock, Class E-1 Common Stock and Class E-2 Common
Stock is entitled to five votes per share, and Class A Common Stock is
entitled to one vote per share. The shares of Class E Common Stock are
subject to redemption by the Company if the Company does not achieve
certain income or market price levels.
/(3)/ An employment agreement pursuant to which Mr. Norris will be granted a 5%
interest in the Company which is nondilutable for three years is
currently being negotiated.
/(4)/ We entered into a consulting agreement pursuant to which Mr. Babad will
be granted a 3% interest in the Company which is nondilutable.
/(5)/ Includes 5,067,860 shares of Common Stock held by Harpa Limited, a Cayman
Island corporation (Harpa). C.M. Cheng is a director of Harpa and has
sole voting and investment control over the shares of Common Stock held
by Harpa and thus may be deemed to beneficially own such shares. Mr.
Cheng disclaims beneficial ownership of such shares. The address of Harpa
is c/o Coutts Co. (Cayman) Ltd., Coutts House, P.O. Box 707, West Bay
Road, Grand Cayman, Cayman Islands.
/(6)/ The voting stock of Harpa is currently held equally by Shih Jen Yeh and
Chyao Chi Yeh, who are children of Song Gen Yeh, the former Chairman and
principal stockholder of the Company. See Certain Transactions. The
address of Mr. Shih Jen Yeh and Mr. Chyao Chi Yeh is 14th Floor, No. 55,
Section 2, Chung-Cheng Road, Shih-Lin District, Taipei, Taiwan.
/(7)/ This amount includes 325,413 shares issued upon the conversion of $50,000
of debentures but does not include common stock issuable upon the
conversion of $310,000 in convertible debentures which remain
outstanding.
/(8)/ Excludes 7,000 shares of Class A Common Stock issuable upon the exercise
of options which are not exercisable within 60 days and includes options
for 28,000 shares of Class A Common Stock issuable upon the exercise of
options which are currently exercisable.
8
/(9)/ We entered into a consulting agreement pursuant to which Mr. Rabinowitz
will be granted a 3% interest in the Company which is nondilutable.
/(10)/ We entered into a consulting agreement pursuant to which Mr. Rothman will
be granted a 3% interest in the Company which is nondilutable. Mr.
Rothman disclaims beneficial ownership of the shares underlying the 3%
interest which will all be issued in his wife's name. Mr. Rothman holds
an irrevocable proxy from Dr. Chen to vote the Class E-1 and Class E-2
shares Dr. Chen previously controlled. This amount does not include
common stock issuable upon the conversion of $170,775 in convertible
debentures which remain outstanding.
/(11)/ Excludes 2,200 shares of Class A Common Stock issuable upon the exercise
of options which are not exercisable within 60 days and includes 33,800
shares of Class A Common Stock issuable upon the exercise of options.
/(12)/ An employment agreement pursuant to which Mr. Happy will be granted a 3%
interest in the Company which is nondilutable for three years is
currently being negotiated.
/(13)/ An employment agreement pursuant to which Mr. Larson will be granted a 3%
interest in the Company which is nondilutable for three years is
currently being negotiated.
/(14)/ An employment agreement pursuant to which Mr. Ruhmel will be granted a 2%
interest in the Company which is nondilutable for three years is
currently being negotiated.
/(15)/ Excludes 200 shares of Class A Common Stock issuable upon the exercise of
options which are not exercisable within 60 days and includes 30,800
shares of Class A Common Stock issuable upon the exercise of options.
/(16)/ Pursuant to a severance agreement, Dr. Chen has granted an irrevocable
proxy to Mr. Rothman to vote the Class E1 and Class E-2 shares which Dr.
Chen formerly controlled.
/(17)/ The address for Alpha Capital Aktiengesellschaft is Pradafant 7,
Furstentums 9490, Vaduz, Lichtenstein. Includes an estimated 6,292,198
shares of Class A Common Stock issuable upon the conversion or exercise
of debentures and warrants. Excludes an estimated 8,801,188 shares of
Class A Common Stock issuable upon the conversion or exercise of
debentures and warrants, which may not be converted or exercised pursuant
to a contractually stipulated 9.99% ownership restriction. The full
conversion and exercise of all debentures and warrants would exceed this
restriction.
/(18)/ The address for Austinvest Anstalt Balzers is Landstrasse 938, 9494
Furstentums, Balzers, Liechtenstein. Includes an estimated 6,292,198
shares of Class A Common Stock issuable upon the conversion of Series A
Preferred Stock or exercise of warrants. Excludes an estimated 179,848
shares of Class A Common Stock issuable upon conversion of Series A
Preferred Stock or exercise of warrants, which may not be converted or
exercised pursuant to a contractually stipulated 9.99% ownership
restriction. The full conversion of all Series A Preferred Stock and
exercise of all warrants would exceed this restriction.
/(19)/ The address for The Endeavour Capital Investment Fund, S.A. is Cumberland
House, 27 Cumberland Street, Nassau, New Providence, The Bahamas.
Includes an estimated 6,292,198 shares of Class A Common Stock issuable
upon the exercise or conversion of Series A Preferred Stock, debentures,
and warrants. Excludes an estimated 1,953,523 shares of Class A Common
Stock issuable upon conversion or exercise of Series A Preferred Stock,
debentures, and warrants, which may not be converted or exercised
pursuant to a contractually stipulated 9.99% ownership restriction. The
full conversion and exercise of all Series A Preferred Stock, debentures,
and warrants would exceed this restriction.
/(20)/ The address for Esquire Trade & Finance Inc. is Trident Chambers, Road
Town, Tortola, B.V.I. Includes an estimated 3,468,234 shares Class A
Common Stock issuable upon conversion of Series A Preferred Stock and
exercise of warrants.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Form 3s are being filed by the following individuals as indicated: Roy
Norris and Robert Kaplan, due April 19, 2001; Arie Rabinowitz and Sam Rothman,
due December 23, 2001; J. Nelson Happy, L. Peter Larson and Dale Ruhmel, due
January 18, 2002; and Shalom Babad, due April 26, 2001. Form 4s are being filed
by the following individuals as indicated: Robert Kaplan for three transactions
due September 10, 2001, November 10, 2001, and March 10, 2002, respectively; Sam
Rothman, for one transaction due November 10, 2001, and April 10, 2002,
respectively. Based solely upon a review of copies of reports on Form 3, Form 4
and Form 5 furnished to us, and written representations to us from reporting
persons, we believe that no other officers, directors or beneficial owners of
over 10% of the Company's Common Stock failed to timely file required reports
under Rule 16(a) of the Securities and Exchange Act of 1934, as amended, during
2001 or previous fiscal years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2001, we entered into a consulting agreement to issue a 6%
nondilutable interest in the Company to a group of consultants, three of whom
later became members of our Board of Directors. In October 2001, this agreement
was amended to increase the nondilutable interest in the Company to be issued to
the consultants to 12%.
Certain of our directors hold or have held convertible debentures issued by
us to them for their investment.
Mr. Babad, a director, received $29,032 in finder's fees in 2001 and has a
consulting agreement with us that provides for payments to him of $10,000 a
month from December 2001 through March 2002, and $7,000 a month from April 2002.
Mr. Rothman, a director, received $170,775 in finder's fees in 2001 prior
to his appointment as a director.
Mr. Rabinowitz is a vice president at LH Financial. LH Financial's clients
have invested in the Company. LH Financial also receives reimbursement from us
for certain expenses incurred on our behalf.
PROPOSAL 2
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has authorized the firm of Ernst & Young LLP,
independent public accountants, to serve as auditors for the fiscal year ending
December 31, 2002. A representative of Ernst & Young LLP will be present at the
Annual Meeting and will have the opportunity to make a statement if he or she
desires to do so. Further, the representative of Ernst & Young LLP will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF THE SELECTION OF ERNST AND YOUNG AS THE AUDITORS OF THE
COMPANY.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matter shall properly come
before the Annual Meeting, the proxy holders named in the proxy accompanying
this statement will have discretionary authority to vote all proxies in
accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
Any stockholder who wishes to present a proposal for consideration at the
annual meeting of stockholders to be held in 2003 must submit such proposal in
accordance with the rules promulgated by the Securities and Exchange Commission.
In order for a proposal to be included in the Company's proxy materials relating
to the 2003 Annual Meeting of Stockholders, the stockholder must submit such
proposal in writing to the Company so that it is received no later than January
23, 2003. Any stockholder proposal submitted with respect to the Company's 2003
Annual Meeting of Stockholders which proposal is received by the Company after
March 25, 2003, will be
10
considered untimely for purposes of Rule 14a-4 and 14a-5 under the Exchange Act
and the Company may vote against such proposal using its discretionary voting
authority as authorized by proxy.
ANNUAL REPORT TO SHAREHOLDERS
Our Annual Report for the fiscal year ended December 31, 2001, is being
mailed to Shareholders along with this Proxy Statement. The Annual Report is not
to be considered part of the soliciting material.
By Order of the Board of Directors
Long Beach, California
May 23, 2002
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