UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant X Filed by a party other than the Registrant
----- -----
Check the appropriate box:
Preliminary Proxy Statement
- -----
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
- ----- BY RULE 14A-6(E)(2)
X Definitive Proxy Statement
- -----
Definitive Additional Materials
- -----
Soliciting Material Pursuant to ss.240.14a-12
- -----
BSI 2000, 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:
BSI2000, INC.
12600 W. COLFAX AVENUE, SUITE B410
LAKEWOOD, COLORADO 80215
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
BSI2000, Inc. The special meeting will be held on Wednesday, September 22, 2004,
at 11:00 a.m., local time, at the offices of the Company located at 12600 W.
Colfax Avenue, Suite B410, Lakewood, Colorado 80215.
Your vote is important and I urge you to vote your shares by proxy, whether
or not you plan to attend the meeting. After you read this proxy statement,
please indicate on the proxy card the manner in which you want to have your
shares voted. Then date, sign and mail the proxy card in the postage-paid
envelope that is provided. If you sign and return your proxy card without
indicating your choices, it will be understood that you wish to have your shares
voted in accordance with the recommendations of the Company's Board of
Directors.
We hope to see you at the meeting.
Sincerely,
/s/ Jack Harper
Jack Harper
Chairman and President
August 24, 2004
BSI2000, INC.
12600 W. COLFAX AVENUE, SUITE B410
LAKEWOOD, COLORADO 80215
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 24, 2004
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders (the
"Special Meeting") of BSI2000, Inc. (the "Company"), will be held on Wednesday,
September 22, 2004, at 11:00 a.m., local time, at the offices of the Company
located at 12600 W. Colfax Avenue, Suite B410, Lakewood, Colorado 80215, for the
following purposes, as more fully described in the attached Proxy Statement:
1. To elect four directors, each until the next annual meeting of the
Company's shareholders or until their successors are duly elected and qualified;
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the authorized common stock of the Company to 200,000,000; and
3. To consider any other matters that may properly come before the
Special Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on August 6, 2004,
as the record date for determining the shareholders entitled to notice of and to
vote at the Special Meeting or at any adjournment thereof. A complete list of
the shareholders entitled to vote at the Special Meeting will be open for
examination by any shareholder during ordinary business hours for a period of
ten days prior to the Special Meeting at BSI2000, Inc., located at 12600 W.
Colfax Avenue, Suite B410, Lakewood, Colorado 80215.
IMPORTANT
You are cordially invited to attend the Special Meeting in person. In order
to ensure your representation at the meeting, however, please promptly complete,
date, sign and return the enclosed proxy in the accompanying envelope. If you
should decide to attend the Special Meeting and vote your shares in person, you
may revoke your proxy at that time.
By Order of the Board of Directors,
Jack Harper
Chairman and President
August 24, 2004
TABLE OF CONTENTS
PAGE NO.
--------
ABOUT THE MEETING..............................................................1
What is the purpose of the special meeting?...............................1
Who is entitled to vote?..................................................1
Who can attend the special meeting?.......................................1
What constitutes a quorum?................................................1
How do I vote?............................................................2
What if I do not specify how my shares are to be voted?...................2
Can I change my vote after I return my proxy card?........................2
What are the Board's recommendations?.....................................2
What vote is required to approve each item?...............................2
STOCK OWNERSHIP................................................................3
Beneficial Owners.........................................................3
PROPOSAL 1 - ELECTION OF DIRECTORS.............................................4
Directors Standing for Election...........................................4
Recommendation Of The Board Of Directors..................................4
Directors - Present Term Expires at the Special Meeting...................4
Meetings..................................................................5
Committees of the Board of Directors......................................5
Compensation Of Directors.................................................5
Executive Compensation....................................................5
Stock Option Grants In The Past Fiscal Year...............................6
Employment Agreements.....................................................6
Certain Relationships And Related Transactions............................6
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION.....................7
DESCRIPTION OF CAPITAL STOCK...................................................9
General...................................................................9
Common Stock..............................................................9
Preferred Stock...........................................................9
Convertible Debentures....................................................9
Transfer Agent............................................................9
Disclosure Of SEC Position On Indemnification
For Securities Act Liabilities..........................................9
Anti-Takeover Effects Of Provisions Of The Certificate
Of Incorporation Authorized And Unissued Stock.........................10
Equity Line of Credit....................................................10
Other Matters............................................................10
Independent Accountants..................................................10
Additional Information...................................................11
i
BSI2000, INC.
12600 W. COLFAX AVENUE, SUITE B410
LAKEWOOD, COLORADO 80215
_____________________
PROXY STATEMENT
AUGUST 24, 2004
_________________________
This proxy statement contains information related to the special meeting of
shareholders of BSI2000, Inc., to be held on Wednesday, September 22, 2004, at
11:00 a.m., local time, at the offices of the Company located at 12600 W. Colfax
Avenue, Suite B410, Lakewood, Colorado 80215, and any postponements or
adjournments thereof. The Company is making this proxy solicitation.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE SPECIAL MEETING?
At the Company's special meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
including the election of directors and the approval of an amendment to the
Company's Certificate of Incorporation to increase the authorized common stock
of the Company to 200,000,000 shares. In addition, the Company's management will
report on the performance of the Company during fiscal 2003 and respond to
questions from shareholders.
WHO IS ENTITLED TO VOTE?
Only shareholders of record on the close of business on the record date,
August 6, 2004, are entitled to receive notice of the special meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponements or adjournments of the meeting. Each outstanding share of
capital stock will be entitled to the number of votes set forth in the following
table on each matter to be voted upon at the meeting. The holders of common
stock vote together as a single class. See "Description of Securities."
DESCRIPTION OF CAPITAL STOCK NUMBER OF VOTES TOTAL VOTES
- ------------------------------------- -------------------- -------------
Common Stock One Vote Per Share 81,961,287
WHO CAN ATTEND THE SPECIAL MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend the meeting, and each may be accompanied by one guest. Seating,
however, is limited. Admission to the meeting will be on a first-come,
first-serve basis. Registration will begin at 11:00 a.m., and seating will begin
at 10:30 a.m. Each shareholder may be asked to present valid picture
identification, such as a driver's license or passport. Cameras, recording
devices and other electronic devices will not be permitted at the meeting.
Please note that if you hold your shares in "street name" (that is, through
a broker or other nominee), you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the record date and check in at
the registration desk at the meeting.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 81,961,287 shares of common stock of the Company were outstanding.
As such, holders of at least 40,980,646 shares (i.e., a majority) must be
present at the meeting, in person or by proxy, to obtain a quorum. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
1
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct. If you are a registered
shareholder and attend the meeting, you may deliver your completed proxy card in
person or vote by ballot at the meeting. "Street name" shareholders who wish to
vote at the meeting will need to obtain a proxy form from the institution that
holds their shares.
WHAT IF I DO NOT SPECIFY HOW MY SHARES ARE TO BE VOTED?
If you submit a proxy but do not indicate any voting instructions, then
your shares will be voted in accordance with the Board's recommendations.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the Secretary of
the Company either a notice of revocation or a duly executed proxy bearing a
later date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendation
of the Board of Directors. The Board's recommendation is set forth together with
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
o FOR the election of the nominated slate of directors (see page 5);
o FOR the approval of an amendment to the Company's Certificate of
Incorporation to increase the authorized common stock of the Company
to 200,000,000 shares. (see page 10).
With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no
recommendation is given, in their own discretion.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. This means that
the six nominees will be elected if they receive more affirmative votes than any
other person. A properly executed proxy marked "Withheld" with respect to the
election of any director will not be voted with respect to such director
indicated, although it will be counted for purposes of determining whether there
is a quorum.
INCREASE IN AUTHORIZED SHARES. For the approval of an amendment to the
Company's Certificate of Incorporation to increase the authorized common stock
of the Company to 200,000,000 shares and any other item that properly comes
before the meeting, the affirmative vote of the holders of a majority of the
outstanding shares, as of the record date, will be required for approval. A
properly executed proxy marked "Abstain" with respect to any such matter will
not be voted, although it will be counted for purposes of determining whether
there is a quorum. Accordingly, an abstention will have the effect of a negative
vote.
If you hold your shares in "street name" through a broker or other nominee,
your broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be voted on those
matters and will not be counted in determining the number of shares necessary
for approval. Shares represented by such "broker non-votes," however, will be
counted in determining whether there is a quorum.
2
STOCK OWNERSHIP
BENEFICIAL OWNERS
The following table presents certain information regarding the beneficial
ownership of all shares of common stock at August 6, 2004 for each executive
officer and director of our Company and for each person known to us who owns
beneficially more than 5% of the outstanding shares of our common stock. The
percentage ownership shown in such table is based upon the 81,961,287 common
shares issued and outstanding at August 6, 2004 and ownership by these persons
of options or warrants exercisable within 60 days of such date. Unless otherwise
indicated, each person has sole voting and investment power over such shares.
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES OWNED PERCENT OWNED
- -------------------------------------------- ------------ -------------
Jack Harper 10,403,102 12.69%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215
Richard Kirk 4,351,340 5.31%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215
Dr. Vincent Fulginiti 82,728 *
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215
Fritz Keefner -- 0%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215
Marshall Kaplan -- 0%
12600 West Colfax Ave. Suite B410
Lakewood, Colorado 80215
Bernhard Nann
12600 West Colfax Ave. Suite B410 -- 0%
Lakewood, Colorado 80215
ALL OFFICERS AND DIRECTORS 14,837,170 18.10%
AS A GROUP (6 PERSONS)
______________
<FN>
* Represents less than 1%.
(1) Applicable percentage of ownership is based on 81,961,287 shares of common
stock outstanding as of August 6, 2004, together with securities
exercisable or convertible into shares of common stock within 60 days of
August 6, 2004 for each stockholder. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Shares of common stock subject
to securities exercisable or convertible into shares of common stock that
are currently exercisable or exercisable within 60 days of August 6, 2004
are deemed to be beneficially owned by the person holding such options for
the purpose of computing the percentage of ownership of such person, but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
</FN>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We are not aware of any instance since January 1, 2002, when an executive
officer, director or owner of more than ten percent of the outstanding shares of
common stock failed to comply with reporting requirements of Section 16(a) of
the Securities Exchange Act of 1934.
3
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS STANDING FOR ELECTION
The Board of Directors of the Company consists of six seats. Each director
holds office until the first special meeting of shareholders following their
election or appointment and until their successors have been duly elected and
qualified.
The Board of Directors has nominated Jack Harper, Richard A. Kirk, Fritz
Keefner and Bernard Nann for election as directors. The accompanying proxy will
be voted for the election of these nominees, unless authority to vote for one or
more nominees is withheld. In the event that any of the nominees is unable or
unwilling to serve as a director for any reason (which is not anticipated), the
proxy will be voted for the election of any substitute nominee designated by the
Board of Directors. Messrs. Harper, Kirk, Keefner and Nann have previously
served as a member of the Board of Directors and have consented to such terms.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE NOMINEES
DIRECTORS - PRESENT TERM EXPIRES AT THE SPECIAL MEETING
JACK HARPER Mr. Harper has been President and Chairman of the
CHAIRMAN AND PRESIDENT Board of BSI2000, Inc. since late1995. Previously,
AGE 51 from 1989 until 1994, Mr. Harper was President of
TechnologyFusion, Inc., a company that specialized
in low-cost add-in video hardware products for the
Apple Macintosh. Mr. Harper received an MBA from
the University of Denver in 2000, having completed
all studies therefore in 1992. In 1975, Mr. Harper
received a B.S. Electrical Engineering and a B.A.
Mathematics with a Minor in Russian Language from
the University of Houston (1975).
RICAHRD A. KIRK Mr. Kirk has been a director of BSI2000, Inc.
DIRECTOR since August 1995 and acting secretary since July
AGE 73 1999. He was Chairman of the Board of Access Long
Distance, a longdistance provider that was sold in
2001. Mr. Kirk worked for United Bank of
Denver/Norwest Bank/Wells Fargo from 1958 through
1990, ultimately serving as Chairman, President
and Chief Executive Officer. In 1986, Mr. Kirk was
elected Vice Chairman of the United Banks of
Colorado, Inc. (now Wells Fargo). In 1992, he
retired from the Norwest Bank Denver but continues
as chairman emeritus and serves on its Advisory
Board. He is a graduate of the Haverford College;
the Advanced Management Program of the Harvard
Business School; and the Stonier Graduate School
of Banking at Rutgers University. Mr. Kirk serves
on boards of several nonprofit institutions and is
an appointed Commissioner of the Denver Water
Board.
FRITZ KEEFNER Mr. Keefner has served as a director of BSI2000,
DIRECTOR Inc. since January 1998. Mr.Keefner served from
AGE 64 July 1997 to April 2000 as the principal of Peak
Asset Management, L.L.C., a Louisville, Colorado
registered investment advisory company that
manages in excess of $40-million of assets. In
1986, Mr. Keefner founded and continues to serve
as the president of Vencap Resources, Inc., a
private investment company that engages in
seed-level financing and private placements for
early stage technology companies. Mr. Keefner
received a B.A. Sociology and Psychology from
State University of Iowa.
4
BERNHARD NANN Mr. Nann has been a director of BSI2000, Inc.
DIRECTOR since August 2004. Mr. Nann is Vice-President,
AGE 42 Global Account Management Solutions, at Fair
IsaacCorporation ("FIC"). He is responsible for
product management, operations and delivery for
this business segment. Mr. Nann was CEO of NAREX
Inc. prior to its acquisition by FIC in July 2003.
Mr. Nann founded NAREX in 1995 and grew it into
the largest provider of artificial
intelligence-based predictive-modeling solutions
and services in the collections industry with
about 70 employees. From 1990 until 1996, Mr. Nann
was director, International Operations for TRW's
Information Systems and Services (now Experian)
where he conceived and built a state-of-the-art
credit reporting system and where he started and
grew the first credit reporting business in
Mexico. Bernard has a graduate degree in
engineering from the University of Stuttgart
(Germany) and, as a Fulbright Scholar, earned an
MBA from Ohio State University. Bernard is
frequently cited as an expert on collections and
recovery solutions.
MEETINGS
During the Company's fiscal year ending December 31, 2003, the Board of
Directors met on 8 occasions. Each director attended more than 75% of the total
number of meetings of the Board and Committees on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. We currently do not have an Audit Committee.
COMPENSATION COMMITTEE. We currently do not have a Compensation Committee.
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 2003, the Company did not pay its
directors any remuneration.
EXECUTIVE COMPENSATION
The following table sets forth compensation for the fiscal year ended
December 31, 2003 for our executive officers:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ---------------------------------
AWARDS PAYOUTS
--------------------- --------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SAR'S PAYOUTS COMPENSATION
NAME AND ---------- ------ ------------ ---------- -------- -------- ------------
PRINCIPAL POSITION YEAR ($) ($) ($) (#) (#) ($) ($)
- ------------------ ---- ---------- ------ ------------ ---------- -------- -------- ------------
Jack Harper 2003 $90,000 -- -- -- -- -- --
Chairman and 2002 $80,000 -- -- -- -- -- --
President 2001 $80,000(1) -- -- -- -- -- --
<FN>
____________
(1) Mr. Harper was issued 2,500,000 shares of the Company's common stock in
consideration for $2,500 and the forgiveness of accrued wages.
</FN>
5
The following table contains information regarding options granted
during the year ended December 31, 2003 to BSI2000's named executive officer.
OPTION/SAR GRANTS TABLE
% TOTAL
OPTIONS/SAR'S
GRANTED TO
NO. OF SECURITIES EMPLOYEES IN YEAR
UNDERLYING ENDED DECEMBER 31
OPTIONS/SAR'S 2002 EXERCISE OR BASE PRICE
NAME GRANTED (#) (%) ($ PER SHARE) EXPIRATION DATE
- ----------------------------- ------------------ ------------------ ---------------------- ---------------
Jack Harper None N/A N/A N/A
Chairman and President
The following table contains information regarding options exercised in the
year ended December 31, 2003, and the number of shares of common stock
underlying options held as of December 31, 2003, by BSI2000's named executive
officer.
AGGREGATED OPTIONS/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS/SAR VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SAR'S IN-THE-MONEY OPTIONS/SAR'S
SHARES ACQUIRED AT FY-END AT FY-END
ON VALUE ------------------------------- --------------------------
EXERCISE REALIZED (#) ($)
--------------- -------- ------------------------------- --------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- -------- -------------- -------------- ----------- ------------
Jack Harper -- -- -- -- -- --
Chairman and President
STOCK OPTION GRANTS IN THE PAST FISCAL YEAR
We have not issued any grants of stock options in the past fiscal year to
any officer or director.
EMPLOYMENT AGREEMENTS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We believe that all prior related party transactions have been entered into
upon terms no less favorable to us than those that could be obtained from
unaffiliated third parties. Our reasonable belief of fair value is based upon
proximate similar transactions with third parties or attempts to obtain the
consideration from third parties. All ongoing and future transactions with such
persons, including any loans or compensation to such persons, will be approved
by a majority of disinterested members of the Board of Directors.
During the past two (2) years, BSI2000 has not entered into a transaction
with a value in excess of $60,000 with a director, officer or beneficial owner
of 5% or more of BSI2000's common stock, except as disclosed in the following
paragraphs.
Stock Issued To An Officer And Employee. On September 11, 2001, BSI2000
issued 2,500,000 shares of common stock to Jack Harper, Chairman and President,
for $2,500.00 ($0.001 per share) and forgiveness of $59,643 accrued wages. Also
in 2001, BSI2000 issued 212,045 shares of common stock to Robert B. Lumen for
$212.05 ($0.001 per share). When these shares were issued, BSI2000 was insolvent
with negative working capital, and unable to pay salaries to employees.
Loans By Director. From March 30, 2000 through December 31, 2001, Richard
A. Kirk, a director of BSI2000, had loaned $259,000 to BSI2000, all with annual
interest at 10% (accrued interest at March 31, 2002 was $19,935). Of the total
debt, $64,000 plus interest is currently due, and $195,000 is due when BSI2000
has received cumulative funding of $3,000,000. In December 2002, BSI2000 issued
301,104 restricted shares of common stock to Mr. Kirk, for his cancellation of
$301,104 of debt (principal and all interest) owed to him by BSI2000.
6
PROPOSAL 2 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION
Our Company's Board of Directors proposes an amendment to our Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock, par value $0.001 per share, from 100,000,000 to 200,000,000
shares. Our Company desires to increase its authorized capital stock because (i)
management believes that the Company will need significant authorized capital
stock available for issuance and (ii) it desires to raise capital by issuing
shares of stock. The amendment to our Company's Certificate of Incorporation
shall provide for the authorization of 200,000,000 shares of our Company's
common stock. As of August 6, 2004, 81,961,287 shares of the Company's common
stock were issued and outstanding. In addition, the Company previously filed a
registration statement on Form SB-2, as amended, with the Securities and
Exchange Commission on November 4, 2003, among other things, registering
39,839,286 shares of common stock that could be issued in connection with an
Equity Line of Credit Agreement, dated October 31, 2003. As of August 6, 2004,
the Company has issued 23,374,427 shares of common stock pursuant to such Equity
Line of Credit.
There are certain advantages and disadvantages of voting for an increase in
the Company's authorized common stock. The advantages include:
o The ability to raise capital by issuing capital stock, including under
the Equity Line of Credit.
o To have shares available to pursue business expansion opportunities.
The disadvantages include:
o Dilution to the existing shareholders, including a decrease in our net
income per share in future periods. This could cause the market price
of our stock to decline.
o Provoking short-selling in our common stock, which would put downward
pressure on the market price of our common stock.
o Increasing the supply of shares of stock. This supply of stock without
a corresponding demand could cause the market price of our stock to
decline.
o A potential change of control if all or a significant block of the
shares to be issued are held by one or more shareholders working
together.
Other than the Equity Line of Credit, our Company does not currently have
written or oral plans, arrangements or understandings to issue any of the
additional shares of common stock that would be authorized by this proposed
amendment to our Certificate of Incorporation.
If the amendment to our Company's Certificate of Incorporation is adopted,
an amendment to the Certificate of Incorporation of BSI2000, Inc. shall be filed
with the Delaware Secretary of State so that Article V shall be as follows:
"The maximum number of shares of stock that this corporation
is authorized to have outstanding at any one time is
200,000,000 shares. Of such shares, 200,000,000 shall be
common stock having par value $0.001 per share. The
remaining shares shall be shares of Preferred Stock, par
value $0.001 per share. The Preferred Stock may be issued
from time to time by authorization of the Board of Directors
of this Corporation with such rights, designations,
preferences and other terms as the Board of Directors shall
determine from time to time."
In additional to the reasons specified above, the Company's Board
of Directors believes that it is desirable to have additional
authorized shares of common stock available for possible future
financings, possible future acquisition transactions and other general
corporate purposes. Having such additional authorized shares of common
stock available for issuance in the future would give our Company
greater flexibility and may allow such shares to be issued without the
expense and delay of a special shareholders' meeting. Although such
issuance of additional shares with respect to future financings and
acquisitions would dilute existing shareholders, management believes
that such transactions would increase the value of our Company to our
shareholders.
7
RECOMMENDATION OF THE BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF AN AMENDMENT TO OUR COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, PAR VALUE
$0.001 PER SHARE, FROM 100,000,000 TO 200,000,000 SHARES.
8
DESCRIPTION OF CAPITAL STOCK
GENERAL
BSI2000's authorized capital consists of 100,000,000 shares of
common stock, par value $0.001 per share and 20,000,000 shares of
undesignated preferred stock. At August 6, 2004, there were 81,961,287
outstanding shares of common stock and no outstanding shares of
preferred stock. Set forth below is a description of certain
provisions relating to the Company's capital stock.
COMMON STOCK
Each outstanding share of common stock has one vote on all
matters requiring a vote of the stockholders. There is no right to
cumulative voting; thus, the holder of fifty percent or more of the
shares outstanding can, if they choose to do so, elect all of the
directors. In the event of a voluntary or involuntary liquidation, all
stockholders are entitled to a pro rata distribution after payment of
liabilities and after provision has been made for each class of stock,
if any, having preference over the common stock. The holders of the
common stock have no preemptive rights with respect to future
offerings of shares of common stock. Subject to the declaration and
payment of dividends upon any preferred stock at the time outstanding,
to the extent of any preference to which that preferred stock is
entitled and after the provision for any sinking or purchase fund or
funds for any series of any preferred stock has been complied with,
the board of directors may declared and pay dividends on the common
stock, payable in cash or other consideration, out of the funds
legally available therefore. It is BSI's present intention to retain
earnings, if any, for use in its business. The payment of dividends on
the common stock are, therefore, unlikely in the foreseeable future.
PREFERRED STOCK
BSI2000 is authorized to issue 20,000,000 shares of preferred
stock, none of which is outstanding. As of August 6, 2004, there were
no shares of preferred stock outstanding. The preferred stock is
undesignated. The Board of Directors does not have the right to set
forth the rights, designations, preferences or other terms of the
preferred stock. Such rights and preferences must be authorized by the
stockholders in accordance with Delaware law.
CONVERTIBLE DEBENTURES
BSI2000 had outstanding convertible debentures, which were issued
in the original principal amount of $250,000. These debentures accrued
interest at a rate of 5% per year and mature two years from the
issuance date. The debentures were convertible at the holder's option
any time up to maturity at a conversion price equal to the lower of
(i) 120% of the closing bid price of the common stock as of the
closing date (ii) 80% of the lowest closing bid price of the common
stock for the five trading days immediately preceding the conversion
date. At maturity, BSI2000 had the option to either pay the holder the
outstanding principal balance and accrued interest or to convert the
debentures into shares of common stock at a conversion price equal to
the lower of (i) 120% of the closing bid price of the common stock as
of the closing date or (ii) 80% of the lowest closing bid price of the
common stock for the five trading days immediately preceding the
conversion date. BSI2000 had the right to redeem the debentures upon
thirty days notice for 120% of the amount redeemed. As of August 6,
2004, the entire $250,000 principal amount of the convertible
debentures had been converted into 3,400,183 shares of the Company's
common stock.
TRANSFER AGENT
The Transfer Agent for the common stock is Corporate Stock
Transfer, Inc. located at 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209.
DISCLOSURE OF SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Certificate of Incorporation, as well as our By-Laws provide
for the indemnification of directors, officers, employees and agents
of the corporation to the fullest extent provided by the Corporate Law
of the State of Delaware, as well as is described in the Certificate
of Incorporation and the By-Laws. These sections generally provide
that the Company may indemnify any person who was or is a party to any
threatened, pending or completed action, suit or proceeding whether
civil, criminal, administrative or investigative except for an action
by or in right of the corporation by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation.
Generally, no indemnification may be made where the person has been
determined to be negligent or guilty of misconduct in the performance
of his or her duties to the Company.
9
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling
persons of BSI2000, pursuant to the foregoing provisions, or
otherwise, we have been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy
as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION
AUTHORIZED AND UNISSUED STOCK
The authorized but unissued shares of our common and preferred
stock are available for future issuance without our shareholders'
approval. These additional shares may be utilized for a variety of
corporate purposes including but not limited to future public or
direct offerings to raise additional capital, corporate acquisitions
and employee incentive plans.
EQUITY LINE OF CREDIT
On July 7, 2003, our Company entered into an Equity Line of
Credit Agreement with Cornell Capital Partners, L.P. Pursuant to the
Equity Line of Credit, our Company may, at its discretion,
periodically sell to Cornell Capital Partners shares of common stock
for a total purchase price of up to $15.0 million. For each share of
common stock purchased under the Equity Line of Credit, Cornell
Capital Partners will pay 99% of the lowest closing bid price of the
common stock on the Over-the-Counter Bulletin Board or other principal
market on which the common stock is traded for the 5 days immediately
following the notice date. Cornell Capital Partners is a private
limited partnership whose business operations are conducted through
its general partner, Yorkville Advisors, LLC. Further, Cornell Capital
Partners will be paid a fee of 4% of each advance under the Equity
Line of Credit. In addition, we engaged Newbridge Securities
Corporation, a registered broker-dealer, to advise our Company in
connection with the Equity Line of Credit. For its services, Newbridge
Securities Corporation received 35,714 shares of our common stock.
We have already received $2,300,000 pursuant to the Equity Line
of Credit. We previously registered a total of 39,839,286 shares of
our common stock for Cornell Capital Partners pursuant to a
Registration Statement (No 333-110237) which was declared effective by
the Securities and Exchange Commission and have issued 23,374,427
shares of common stock pursuant to this Equity Line of Credit.
Based on our current stock price of $0.10, we would receive
approximately $1,646,485 out of a total available of $12,700,000
remaining under the Equity Line of Credit. In order for our Company to
receive the remaining $12,700,000 available under the Equity Line of
Credit based on our current stock price of $0.10, we would have to
issue 128,282,828 shares of our common stock. Our current Certificate
of Incorporation authorized us to issue 100 million shares of common
stock. Upon the issuance of the 39,839,286 shares being sold pursuant
to that registration statement, we will have approximately 100,000,000
shares issued and outstanding. As a result, if we need to issue more
than 39,839,286 shares to draw down the entire $12,700,000 available
under the Equity Line of Credit, and if the amendment to our
Certificate of Incorporation is approved at the Special Meeting
increasing our authorized common stock to 200,000,000 shares, we will
need to file a new registration statement covering any additional
shares.
OTHER MATTERS
As of the date of this proxy statement, our Company knows of no
business that will be presented for consideration at the meeting other
than the items referred to above. If any other matter is properly
brought before the meeting for action by shareholders, proxies in the
enclosed form returned to our Company will be voted in accordance with
the recommendation of our Board of Directors or, in the absence of
such a recommendation, in accordance with the judgment of the proxy
holder.
INDEPENDENT ACCOUNTANTS
The firm of Ehrhardt Keeffe Steiner & Hottman, PC served as our
Company's independent accountants for Fiscal 2003. A representative of
the firm will be available to respond to questions at the Special
Meeting of the Shareholders. This representative will have an
opportunity to make a statement if he desires to do so. The Company
has selected Ehrhardt Keeffe Steiner & Hottman, PC as its independent
accountants for Fiscal 2004.
AUDIT FEES. The aggregate fees billed for professional services
rendered was $47,139 for the audit of the Company's annual financial
statements for the year ended December 31, 2003 and the reviews of the
financial statements included in the Company's Forms 10-QSB for that
fiscal year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES.
None of the professional services described in Paragraphs (c)(4)(ii)
of Rule 2-01 of Regulation S-X were rendered by the principal
accountant for the year ended December 31, 2002.
10
ALL OTHER FEES. Other than the services described above under the
captions "Audit Fees" and "Financial Information Systems Design and
Implementation Fees," the aggregate fees billed for services rendered
by the principal accountant was $9,016 for the year ended December 31,
2003.
ADDITIONAL INFORMATION
PROXY SOLICITATION COSTS. Our Company is soliciting the enclosed
proxies. The cost of soliciting proxies in the enclosed form will be
borne by our Company. Officers and regular employees of our Company
may, but without compensation other than their regular compensation,
solicit proxies by further mailing or personal conversations, or by
telephone, telex, facsimile or electronic means. Our Company will,
upon request, reimburse brokerage firms for their reasonable expenses
in forwarding solicitation materials to the beneficial owners of
stock.
INCORPORATION BY REFERENCE. Certain financial and other
information required pursuant to Item 13 of the Proxy Rules is
incorporated by reference to the Company's Annual Report, which is
being delivered to the shareholders with this proxy statement. In
order to facilitate compliance with Rule 2-02(a) of Regulation S-X,
one copy of the definitive proxy statement will include a manually
signed copy of the accountant's report.
BY ORDER OF THE BOARD OF DIRECTORS
Jack Harper
Chairman and President
Lakewood, Colorado
August 24, 2004