SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
Only (As Permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PROTOSOURCE CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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PROTOSOURCE CORPORATION
One Bethlehem Plaza
Bethlehem, Pennsylvania 18018
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL , 2004
Bethlehem, Pennsylvania
February , 2004
The Annual Meeting of Stockholders (the "Annual Meeting") of ProtoSource
Corporation, a California corporation (the "Company"), will be held at the
offices of the Company, One Bethlehem Plaza, Bethlehem, Pennsylvania on March ,
2004 at 10:00 AM (local time) for the following purposes:
1. To elect five directors to the Company's Board of Directors, each to
hold office until his successor is elected and qualified or until his
earlier resignation or removal (Proposal No. 1);
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the authorized number of shares of common stock from
10,000,000 to 100,000,000 (Proposal No. 2);
3. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
The Board of Directors has fixed the close of business on February , 2004
as the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
/s/ PETER WARDLE
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Peter Wardle
President
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IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY
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PROTOSOURCE CORPORATION
One Bethlehem Plaza
Bethlehem, Pennsylvania 18018
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of ProtoSource Corporation, a California
corporation (the "Company"), of proxies in the enclosed form for use in voting
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
offices of the Company, One Bethlehem Plaza, Bethlehem, Pennsylvania 18018 on
March , 2004 at 10:00 AM (local time), and any adjournment or postponement
thereof. Only holders of record of the Company's common stock, no par value per
share (the "Common Stock"), on February , 2004 (the "Record Date") will be
entitled to vote at the Meeting. At the close of business on the Record Date,
the Company had outstanding [ ] shares of Common Stock.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to its exercise. Any proxy given is revocable prior
to the Meeting by an instrument revoking it or by a duly executed proxy bearing
a later date delivered to the Secretary of the Company. Such proxy is also
revoked if the stockholder is present at the Meeting and elects to vote in
person.
The Company will bear the entire cost of preparing, assembling, printing
and mailing the proxy materials furnished by the Board of Directors to
stockholders. Copies of the proxy materials will be furnished to brokerage
houses, fiduciaries and custodians to be forwarded to the beneficial owners of
the Common Stock. In addition to the solicitation of proxies by use of the mail,
some of the officers, directors and regular employees of the Company may
(without additional compensation) solicit proxies by telephone or personal
interview, the costs of which the Company will bear.
This Proxy Statement and the accompanying form of proxy is being sent or
given to stockholders on or about February , 2004.
Stockholders of the Company's Common Stock are entitled to one vote for
each share held. Such shares may not be voted cumulatively. Stockholders of the
Company's Series B Preferred Stock are entitled to 100 votes for each such share
held.
Each validly returned proxy (including proxies for which no specific
instruction is given) which is not revoked will be voted "FOR" each of the
proposals as described in this Proxy Statement and, at the proxy holders'
discretion, on such other matters, if any, which may come before the Meeting
(including any proposal to adjourn the Meeting).
Determination of whether a matter specified in the Notice of Annual Meeting
of Stockholders has been approved will be determined as follows. Those persons
will be elected directors who receive a plurality of the votes cast at the
Meeting in person or by proxy and entitled to vote on the election. Accordingly,
abstentions or directions to withhold authority will have no effect on the
outcome of the vote. For all matters affecting the Company's certificate of
incorporation, the affirmative vote of a majority of all shares of Common Stock
issued and outstanding is required for approval. For each other matter specified
in the Notice of Annual Meeting of Stockholders, the affirmative vote of a
majority of the shares of Common Stock present at the Meeting in person or by
proxy and entitled to vote on such matter is required for approval. In any
event, prior to any vote, a quorum of holders of at least 50% of the shares of
Common Stock outstanding on the Record Date is required to conduct the Meeting.
Abstentions will be considered shares present in person or by proxy and entitled
to vote and, therefore, will have the effect of a vote against the matter.
Broker non-votes will be considered shares not present for this purpose and will
have no effect on the outcome of the vote.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, the stockholders will elect five directors to serve
until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the size of the Board may be reduced in accordance with the
Bylaws of the Company. The Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected.
Assuming a quorum is present, the five nominees receiving the highest
number of affirmative votes of shares entitled to be voted for them will be
elected as directors of the Company for the ensuing year. Unless marked
otherwise, proxies received will be voted "FOR" the election of each of the four
nominees named below. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner as will ensure the election of as many of the nominees
listed below as possible, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders.
NAME AGE POSITION
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Peter Wardle 49 Chief Executive Officer, Chief Financial Officer,
President and Director
Thomas Butera 37 Chief Operating Officer and Director
Joseph DiMarino 61 Director
Mark Blanchard 51 Director
Stewart Kalter 33 Director
The following information with respect to the principal occupation or
employment of each nominee for director, the principal business of the
corporation or other organization in which such occupation or employment is
carried on, and such nominee's business experience during the past five years,
has been furnished to the Company by the respective director nominees:
Peter Wardle became a director in December 2001 and was appointed as Chief
Executive Officer, Chief Financial Officer and President in May 2002. Mr. Wardle
was Chief Executive Officer of P2i, Inc. from May 2000 through December 2003.
Mr. Wardle served as Chief Executive Officer of 2020 Marketing and Design from
1993 when he co-founded the company until December 2003. Prior to that, Mr.
Wardle served as a database marketing consultant from 1990 to 1993. From 1987 to
1990, he was Chief Executive Officer of Autoroos, Inc. Mr. Wardle received a
degree in accounting from Stockport College in the UK in 1978.
Thomas C. Butera was appointed as Chief Operating Officer and a director of
the Company in January 2004. From 1993 until December 2003, Mr. Butera was
creative director of 2020 Marketing and Design. From December 2001 through
December 2003, Mr. Butera served as an executive of P2i, Inc. Since May 2003,
Mr. Butera has served as Chief Operating Officer of P2i Newspaper, Inc. Mr.
Butera is a graduate of Parsons School of Design in New York City.
Joseph DiMarino was appointed as a director of the Company in August 2003.
Mr. DiMarino began his newspaper career in 1970 with the Philadelphia Inquirer,
which a Knight Ridder newspaper. Mr. DiMarino held various executive positions
with Knight Ridder, Inc. from 1970 until June 2002. From August 2002 until May
2003, Mr. DiMarino was Chief Operating Officer of P2i Newspaper, Inc. Since May
2003, Mr. DiMarino has provided consulting services to the newspaper industry.
Mr. DiMarino is a graduate of Villanova University.
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Mark Blanchard has been a member of the Company's Board since May 2002. Mr.
Blanchard was a co-founder and has been President of Resort TV Services since
July 2003. Prior to that he was Vice President and General Manager of
ProtoSource's former Suncoast division, a business he helped found in 1998. From
1995 to 1998 he was founder and President of Internet Stock Market Inc., which
facilitated the promotion of public companies. From 1992 to 1995, Mr. Blanchard
was founder and President of Pension Specialists Management Group, a company
that advised pension funds on investments. From 1979 to 1992, Mr. Blanchard held
several positions with Raymond James and Associates, and Smith Barney, full
service brokerage firms. His final position with Smith Barney was Senior Vice
President of Municipals. He graduated from Rutgers University with a degree in
business in 1976.
Stewart Kalter became a director in October 2001. Since May 2003, Mr.
Kalter has served as President of Vision Securities. From May 2001 through May
2003, Mr. Kalter served as Director of Corporate Finance and Research of Andrew,
Alexander, Wise & Company, Inc. Prior to that, he was Director of Research at
Global Capital Securities from February 2000 to March 2001. Mr. Kalter was a
Research Analyst with Spencer Clarke from November 1997 to January 2000. From
1995 until 1997, he served as a Research Associate with Bishop Allen. Mr. Kalter
has a BS in Accounting from Widener College and an MBA in Finance and Banking
from Hofstra University.
No director or executive officer of the Company has any family relationship
with any other director or executive officer of the Company.
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the discretion of
the Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2002, the Board of Directors of
the Company took action at a meeting or by unanimous written consent on five
occasions. No director nominated for election at the Annual Meeting attended
fewer than 75% of the total number of meetings of the Board of Directors during
such member's tenure during the last fiscal year.
Margolis has acted as the Company's independent public accountants since
January 27, 2003, and has been appointed by the Board to continue as the
Company's independent auditors for the fiscal year ending December 31, 2003. A
representative of Margolis is not expected to be present at the Annual Meeting.
The Board did not have any committees during the 2002 fiscal year.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, officers and stockholders of more than 10% of the Company's Common
Stock to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and any other
equity securities of the Company. To the Company's knowledge, based solely upon
a review of forms, reports and certificates furnished to the Company by such
persons, not all such reports were filed on a timely basis.
See "Certain Transactions" for additional information on certain members of
management.
EXECUTIVE COMPENSATION
Compensation to Outside Directors
All of the Company's non-employee directors receive reimbursement of their
reasonable out-of-pocket expenses incurred in connection with such meetings.
Additionally, all non-employee directors will receive and retain 15,000 stock
options per fiscal.
3
Compensation of Executive Officers
The information required by this Heading is incorporated by reference to
the information presented in Item 10. Executive Compensation of the Registrant,
in the Company's December 31, 2002 Form-10KSB as filed with the Securities and
Exchange Commission on April 15, 2003.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The information required by this Heading is incorporated by reference to
the information presented in Item 11. Security Ownership of Certain Beneficial
Owners and Management of the Registrant, in the Company's December 31, 2002
Form-10KSB as filed with the Securities and Exchange Commission on April 15,
2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Heading is incorporated by reference to
the information presented in Item 12. Certain Relationships and Related
Transactions of the Registrant, in the Company's December 31, 2002 Form-10KSB as
filed with the Securities and Exchange Commission on April 15, 2003.
The proxy holders intend to vote the shares represented by proxies for all
of the board's nominees, except to the extent authority to vote for the nominees
is withheld.
RECOMMENDATION OF THE BOARD:
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THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK TO 100,000,000
The present capital structure of the Company authorizes 10,000,000 shares
of Common Stock. It also authorizes 5,000,000 shares of "blank check" Preferred
Stock, which may be issued from time to time in one or more series with such
rights, preferences and privileges as may be determined by the Board of
Directors. Currently the only designated shares of Preferred Stock are 210,266
shares which have been designated as Series B Preferred Stock. The Board of
Directors believes that this capital structure is inadequate for the future
needs of the Company. Therefore, the Board of Directors has approved the
amendment of the Company's Certificate of Incorporation (the "Certificate") to
increase the authorized number of shares of Common Stock from 10,000,000 to
100,000,000 shares. No change is proposed to be made with respect to the number
of authorized shares of Preferred Stock. The Board of Directors believes that a
capital structure consisting of 100,000,000 authorized shares of Common Stock
and 5,000,000 authorized shares of Preferred Stock more appropriately reflects
the present and future needs of the Company and recommends such amendment to the
Company's stockholders for adoption. On the Record Date, there were [ ]
shares of Common Stock and [ ] shares of Preferred Stock outstanding. The
proposed amendment of the Certificate was approved by the Board on December 22,
2003, subject to stockholder approval at the Annual Meeting.
4
Purpose of Authorizing Additional Common Stock
The Company has what the Board of Directors considers to be an insufficient
number of authorized but unissued shares of Common Stock available for future
issue. Authorizing an additional 90,000,000 shares of Common Stock would give
the Board of Directors the authority to issue such Common Stock from time to
time as the Board of Directors deems necessary, without further action of the
stockholders, unless such stockholder action is specifically required by
applicable laws or any stock exchange on which the Company's securities may then
be listed. In particular, the Company is obligated to issue up to 21,026,60
shares of Common Stock in exchange for the 210,266 shares of Series B Preferred
Stock issued in connection with the Company's recent acquisition of P2i
Newspaper, Inc. In addition, the Board of Directors believes it is necessary to
have the ability to issue such additional shares of Common Stock for general
corporate purposes, including:
o stock splits, dividends or distributions;
o equity financings - although the Company has no present plans or
arrangements, the Company is presently seeking to raise additional
capital by selling and issuing shares of its Common Stock as dictated
by prevailing market conditions or the Company's capital needs, and
the Board of Directors believes it prudent to have shares available
for such issuances on an as-needed basis, without the delay inherent
in seeking stockholder approval for a specific transaction; and
o acquisition transactions - the Company may make additional future
acquisitions and may use its capital stock as currency in such
acquisitions if appropriate opportunities arise.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal. The Board of Directors is not aware of any attempt, or contemplated
attempt, to acquire control of the Company, and this proposal is not being
presented with the intent that it be utilized as a type of anti- takeover
device.
There are currently no plans, arrangements, commitments or understandings
for the issuance of the additional shares of Common Stock which are proposed to
be authorized, except for the P2i transaction described below.
Stockholders do not have any preemptive or similar rights to subscribe for
or purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
Acquisition of P2i Newspaper, Inc.
On February 13, 2003, the Company entered into an agreement and plan of
merger to acquire all of the outstanding capital stock of P2i Newspaper, Inc.
("P2i Newspaper") and a wholly owned subsidiary of P2i, Inc. ("P2i"), in
exchange for the issuance of up to 19,383,531 shares of Protosource common stock
(the "Agreement"). The 19,383,531 shares were to be reduced by the number of
shares equal to the total fees incurred to audit the financial statements of P2i
or P2i Newspaper, divided by $0.50 (the "Adjusted Shares"). The Adjusted Shares
were to be subject to a three-year lock-up, which could be released upon the
stock price and volume reaching established thresholds.
On January 1, 2004, the Company, P2i Newspaper and P2i amended the terms of
the Agreement (the "Amendment"). Pursuant to the terms of the Amendment, in
exchange for all of the issued and outstanding shares of P2i Newspaper, the
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Company issued 198,836 shares of series B preferred stock (the "Preferred
Stock"), which shares shall be reduced by the total fees incurred to audit the
financial statements of P2i or P2i Newspaper, divided by $50.00. In addition,
the Company issued 16,430 shares of Preferred Stock in payment of investment
banking fees related to the transaction. Each share of Preferred Stock is
exchangeable for 100 shares of the Company's common stock at any time after the
Company increases its authorized number of shares of common stock to
100,000,000.
The acquisition of P2i Newspaper became effective on January 1, 2004, at
which time P2i Newspaper became a wholly owned subsidiary of the Company.
Business of P2i, Newspaper Inc.
Introduction
P2i converts previously created print content, (text and graphics), into
interactive web content for multiple market sectors. These include newspaper and
magazine publishers, and retail companies. These services extend P2i clients'
reach and presence, help drive increased revenues and deliver quantifiable
profits; and do so while preserving the brand identity manifest in the original
print content.
Recent Developments
In May 2001, P2i successfully completed the transition of its data
conversion facility from Yorkshire, England to Kuala Lumpur, Malaysia. The
result is a business unit that is better equipped to handle current and future
workloads, ideally located geographically to deliver to a global client base,
and with labor cost savings of 75%.
In December 2001, P2i launched its new technology platform. This
incorporates many more features than the prior platform and delivers a far
broader product offering from both a customer and end-user perspective.
In January 2002, P2i moved its corporate headquarters from 528 North New
Street, Bethlehem PA to One Bethlehem Plaza, Bethlehem, PA. This is larger,
better-equipped office space that can facilitate future expansion.
In September 2002 P2i, Newspaper, Inc was formed: a wholly owned subsidiary
that became the business unit focusing exclusively on the publishing sector
In 2003 P2i signed production agreements with Nando Media and PowerOne
Media. Nando is the online arm of McClatchy Newspaper Group. PowerOne has over
1,000 newspaper clients utilizing its web solutions.
Overview
P2i's core competency is the breaking down and databasing of print content,
text and graphics, and its distribution back to the client and client's partners
in multiple formats with a host of additional features. Currently P2i's customer
base comprises newspapers, magazines and retailers in the US and UK and clients
include Newspapers from the Tribune, McClatchy and Gannett media groups in the
US and Northcliffe in the UK.
Today virtually all printed material is first created electronically,
usually using desktop publishing software on Mac and PC systems. Those
electronic files are sent to P2i and processed into web content for clients. The
actual processing is undertaken at P2i's production facility located just south
of Kuala Lumpur, Malaysia. US based technical teams and account managers work
directly with clients in support of the sales effort. The `sale' is a long-term
relationship by nature.
For newspapers, P2i has historically converted print advertising and
editorial into web content, hosted by P2i, but seamlessly integrated into the
newspaper website. The past twelve months have seen the demand for data-feeds of
the processed content back to newspapers and their business partners expand.
Once the relationship is established the newspaper feeds P2i data on a daily
basis: data is converted overnight and delivered as online content by
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start-of-business the following day. The newspaper, still the largest local
portal, sells the online version of the print content to its advertisers and
pays P2i to convert it. The advertiser gets proven, quantifiable reach online,
above and beyond the print circulation.
Through 2003 the Newspaper industry has been P2i's almost exclusive focus.
Starting in 2004 the company intends exploring other business verticals in
addition to newspapers. Although there are approximately 6000 daily and weekly
newspapers in the US the conversion of content has become a commodity, primarily
the result of eager competition for a finite customer base. The Nanado Media and
PowerOne Media contracts with P2i are a part of this long-term strategy.
Industry and Competition
E-commerce overview
For most businesses, the Internet has created a new communication and sales
channel that enables companies to interact with large numbers of geographically
dispersed consumers and businesses. Traditional businesses are implementing
sophisticated web sites to drive customers to brick-and-mortar stores, effect
electronic commerce initiatives that offer competitive advantages and mine
customer data. These businesses are deploying an expanding variety of
Internet-enabled applications, ranging from web site marketing and recruiting
programs to on-line customer interaction systems and integrated purchase order
and just-in-time inventory solutions for key customers and suppliers. These
capabilities require increasingly complex web sites and support operations. In
addition, advances in on-line security and payment mechanisms are alleviating
concerns associated with conducting transactions in an open-platform
environment, thus prompting more consumers and businesses to use the Internet in
conjunction with purchases and more businesses to offer a greater breadth of
electronic commerce services. (Source: US Census Bureau).
More importantly, companies today recognize that the Internet is not going
to replace other media, but it is going to change traditional shopping and
purchasing habits. Today, companies are implementing integrated marketing
strategies that tie print, TV, Radio and Internet together to generate revenues
either via, traditional shopping or e-commerce.
Newspapers
In 2002, just over $50billion was spent on newspaper advertising across the
1,500 daily and 4,500 weekly newspapers published in the U.S. (Source: Veronis
Suhler Stevenson). This is projected to grow to almost $69billion through 2007
(Source: Veronis Suhler Stevenson, PQ Media LLC, Newspaper Association of
America, Kagan World Media, Editor & publisher). Newspapers have been putting
virtually all their classified liner advertising online for several years,.
The online publishing of display advertising, run-of-print advertising
("ROP"), special sections and free-standing-inserts ("FSIs") is now beinmg
posted online and has evolved into an ASP business model whereby newspapers want
a technology driven solution with a high level of service and support from their
vendor. Much of this content is printed in color, has a high profile within the
print publication and is very costly to the advertiser.
Web site visitors demand a high level of interactivity and enhanced
features from online versions of this print content. Developing and enabling
these solutions requires a substantial financial investment in both R&D and
servers, connectivity and processes that is best justified when amortized across
many newspapers. Indications are that these costs are deemed prohibitive to
individual newspapers, and even newspaper groups, but that they are keen to use
an outside resource to deliver these solutions. P2i has proprietary processes
and a patent on format and functionality that position us well to acquire a
significant share of this market.
Over the past two years these solutions have become increasingly more
sophisticated, evolving into online shopping centers or channels where newspaper
site visitors can search and browse across many ads from multiple sources:
display classified, ROP, FSIs and special sections.
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Competition - Newspapers
Infosis, a company P2i acquired in September 2000, was the first company to
establish a presence in the business space. As the revenue models have proved to
be viable, competitors have emerged. Some, such as Harvest and Print2Web have
adopted very similar strategies to those of P2i: sell directly to the newspapers
and deliver ever increasingly sophisticated solutions. Others, such as WSN and
Trivedia are approaching the retailers directly to convert their FSI content and
then act as the distributor of this content to newspapers.
Companies such as DS Retail Technologies and Cross Media Services are also
moving into this space. They have developed ASP solutions that are retailer
focused and view the newspaper as the means to distribute this online content.
Secondary competition comes from the software companies that have developed
ad management systems for newspapers, such as Mactive and MediaSpan. Newspapers
use their solutions to manage their ad content and they could include modules
that would publish the content online. There are certainly many applications
that can publish classified liner ads online automatically from the ad
management function, but none currently provide the level of sophistication that
P2i solutions feature.
There are many obstacles to newspapers adopting pure software solutions to
compete with P2i services. Firstly, ads are created in many different ways, even
within a single newspaper. Some are submitted electronically from advertising
agencies and design firms. Others are created by the newspaper's own creative
departments. Some are in color, some in black and white. FSI's are usually
created by agencies or print companies specializing in that field, and the
newspaper only receives the printed versions, rarely the electronic versions.
The "normalization" of incoming data is a key component of the proprietary
processes P2i has developed. Once the content has been processed, the
functionality requires the various applications that power those features to be
running on the host server. Finally there is a human element to the publishing
of this content: every individual ad and page needs to be viewed by an operator
to ensure that the multiple images and text boxes that are incorporated in a
single newspaper page are matched.
As difficult as it would be for a newspaper to take the services and
solutions that P2i has available in-house using a software solution only, in the
years ahead, as the volume of online advertising content increases, more and
more newspapers and newspaper groups will look for such a solution. P2i
recognizes that it may need to modify its services to meet the newspaper's
evolving needs.
Finally, as volumes have increased and more competitors seek to move into
this space, prices drop. Since January 2001 production volumes have increased
five-fold, and pricing has fallen to a fifth of where it was . P2i has been able
to remain competitive and viable, only by virtue of the reduced costs of
operations in Malaysia and the development of its new technology platform.
Employees
As of December 31, 2003, P2i employed seven US based full-time employees
and fifty-three employees at its production facility in Malaysia. The Company
believes it maintains good relations with its employees. None of the Company's
employees are represented by a labor union or covered by a collective bargaining
agreement.
Financial Statement Information
Financial statements of P2i and pro forma combined financial information of
P2i and the Company are attached hereto as Schedule A.
8
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR AN INCREASE TO 100,000,000 AUTHORIZED
SHARES OF COMMON STOCK OF THE COMPANY.
Audit and Related Fees
Audit Fees. The aggregate fees billed by Angell & Deering, for professional
services rendered for the audit of the Company's annual financial statements for
the year ended December 31, 2002 and for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-QSB during that fiscal
year were $48,565.
Financial Information Systems Design and Implementation Fees. The Company
did not engage Angell & Deering to provide professional services to the Company
regarding financial information systems design and implementation during the
fiscal year ended December 31, 2002.
All Other Fees. The aggregate fees billed by Angell & Deering for services
rendered to the Company, other than the services covered in "Audit Fees" and
"Financial Information Systems Design and Implementation Fees" for the fiscal
year ended December 31, 2002 were $3,095.
STOCKHOLDER PROPOSALS FOR
PRESENTATION AT THE ANNUAL MEETING
Any stockholder intending to present a proposal at the Annual Meeting in
accordance with Rule 14a-8 under the Securities Exchange Act of 1934 for
inclusion in the Company's proxy materials for such meeting must, in addition to
meeting other applicable requirements under the rules and regulations of the
Securities and Exchange Commission and the Company's By-Laws, submit such
proposal to Kenneth DiStefano, Secretary, in writing no later than February ,
2004. The complete By-Law provisions governing stockholder proposals are
available to any stockholder without charge upon request from the Secretary of
the Company.
AVAILABILITY OF CERTAIN DOCUMENTS
Included herewith are copies of the Company's form 10-KSB for the year
ended December 31, 2002. This proxy statement also refers to certain documents
of the Company that are not presented herein or delivered herewith. Such
documents are available to any person, including any beneficial owner, to whom
this proxy statement is delivered, upon oral or written request, without charge,
directed to ProtoSource Corporation, One Bethlehem Plaza, Bethlehem,
Pennsylvania 18018, telephone number (610) 332-2893. In order to ensure timely
delivery of the documents, such requests should be made by April , 2004.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ PETER WARDLE
----------------
Peter Wardle,
President
Bethlehem, Pennsylvania
February , 2004
9
PROXY PROXY
PROTOSOURCE CORPORATION
PROXY FOR ANNUAL MEETING TO BE HELD ON APRIL , 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter Wardle and Thomas Butera, or either
of them, as proxies, each with the power to appoint his substitute, to represent
and to vote all the shares of common stock of ProtoSource Corporation (the
"Company"), which the undersigned would be entitled to vote, at the Company's
Annual Meeting of Stockholders to be held on April , 2004 and at any
adjournments thereof, subject to the directions indicated on the reverse side
hereof.
In their discretion, the Proxies are authorized to vote upon any other
matter that may properly come before the meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF
NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
- --------------------------------------------------------------------------------
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
ProtoSource Corporation to be held at the offices of the Company, on April ,
2004 at 10:00 a.m. (local time).
Please read the proxy statement which describes the proposals and presents
other important information, and complete, sign and return your proxy promptly
in the enclosed envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1-3
1. ELECTION OF DIRECTORS -- For Withhold
Nominees:
---------
Peter Wardle [_] [_]
Thomas Butera [_] [_]
Joseph DiMarino [_] [_]
Mark Blanchard [_] [_]
Stewart Kalter [_] [_]
- --------------------------------------------------------------------------------
(Except nominee(s) written above)
For Against Abstain
2. Proposal to approve an increase in the [_] [_] [_]
number of authorized shares of
Common Stock to 100,000,000.
If you plan to attend the Annual Meeting please mark this box [_]
Dated:________________, 2004
Signature ______________________________________________________________________
Name (printed) _________________________________________________________________
Title __________________________________________________________________________
Important: Please sign exactly as name appears on this proxy. When signing as
attorney, executor, trustee, guardian, corporate officer, etc., please indicate
full title.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
SCHEDULE A
Pro Forma Financial Information
The following unaudited pro forma consolidated financial information presents
the pro forma consolidated balance sheet of ProtoSource Corporation and
Subsidiary at December 31, 2002 and 2001, and September 30, 2003, giving effect
to the agreement and Plan of Merger with P2i Newspaper, Inc., a Delaware
corporation, as if it had been consummated on those dates. Also presented are
the pro forma consolidated statements of operations for the years ended December
31, 2002 and 2001, and nine-month period ended September 30, 2003 of ProtoSource
Corporation and Subsidiary, giving effect to the agreement and Plan of Merger
with P2i Newspaper, Inc. as if it had been consummated as of the beginning of
the respective periods presented. For purposes of the computation of pro forma
weighted average number of basic and diluted common shares outstanding, it is
assumed that 19,300,000 of ProtoSource Corporation common shares will be
exchanged for P2i Newpaper, Inc. Also, no goodwill has been reflected in this
pro forma presentation as management believes that any goodwill acquired in this
transaction would be fully impaired.
The pro forma data is based on the historical combined statements of ProtoSource
Corporation and P2i Newspaper, Inc. giving effect to the purchase method of
accounting and to the assumptions and adjustments (which the Company believes to
be reasonable) described in the accompanying notes to the unaudited pro forma
consolidated financial information.
The pro forma data is provided for comparative purposes only. It does not
purport to be indicative of the results that actually would have occurred if
such agreement and Plan of Merger had been consummated on the dates indicated or
that may be obtained in the future. The unaudited pro forma combined financial
information should be read in conjunction with the notes thereto, the audited
financial statements of P2i Newspaper, Inc. for the years ended December 31,
2002 and 2001 and notes thereto, and the Company's consolidated financial
statements and related notes thereto, incorporated herein by reference.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
Historical Pro forma
-------------------------------------------- -------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
ASSETS
Current assets:
Cash $ 118,265 $ 4,013 $ 122,278 $ 122,278
Marketable securities 447,611 447,611 447,611
Accounts receivable 40,729 40,729 40,729
Notes receivable, P2i Newspaper, Inc. 50,000 50,000 (A) $ (50,000) --
Prepaid expenses and other current assets 41,214 2,281 43,495 43,495
------------ ------------ ------------ ------------ ------------
Total current assets 697,819 6,294 704,113 (50,000) 654,113
Property and equipment, net 116,949 244,801 361,750 361,750
Deposits 8,564 4,368 12,932 12,932
Goodwill, net 77,857 77,857 77,857
Investment in corporation 226,000 226,000 226,000
------------ ------------ ------------ ------------ ------------
$ 1,127,189 $ 255,463 $ 1,382,652 $ (50,000) $ 1,332,652
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable $ 12,236 $ -- $ 12,236 $ 12,236
Current portion of obligations
under capital leases 24,666 23,713 48,379 48,379
Notes payable, ProtoSource Corporation 50,000 50,000 (A) $ (50,000) --
Due to P2i, Inc. -- 416,471 416,471 416,471
Accounts payable and accrued expenses 258,699 41,690 300,389 300,389
Deferred revenue 9,845 9,845 9,845
Due to related company 73,461 73,461 73,461
------------ ------------ ------------ ------------ ------------
Total current liabilities 305,446 605,335 910,781 (50,000) 860,781
------------ ------------ ------------ ------------ ------------
Obligations under capital leases,
non-current portion 49,414 32,675 82,089 82,089
------------ ------------ ------------ ------------
Stockholders' equity (deficiency):
Preferred stock -- -- -- --
Common stock 24,554,293 -- 24,554,293 24,554,293
Additional paid-in capital 392,745 392,745 392,745
Accumulated other comprehensive (loss) (161,637) (161,637) (161,637)
Accumulated deficit (24,013,072) (382,547) (24,395,619) (24,395,619)
------------ ------------ ------------ ------------
772,329 (382,547) 389,782 389,782
------------ ------------ ------------ ------------
$ 1,127,189 $ 255,463 $ 1,382,652 $ (50,000) $ 1,332,652
============ ============ ============ ============ ============
Notes:
(A) Represents elimination of intercompany note payable/receivable.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
Historical Pro forma
-------------------------------------------- ------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
Net revenues $ -- $ 1,023,291 $ 1,023,291 $ 1,023,291
Cost of revenues -- 606,883 606,883 606,883
------------ ------------ ------------ ------------
Gross profit -- 416,408 416,408 416,408
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 588,592 646,972 1,235,564 1,235,564
Research and development 81,784 81,784 81,784
Depreciation and amortization 4,363 63,396 67,759 67,759
Impairment of investment 404,000 404,000 404,000
Stock compensation expense 283,882 283,882 283,882
------------ ------------ ------------ ------------
1,280,837 792,152 2,072,989 2,072,989
------------ ------------ ------------ ------------
Operating loss (1,280,837) (375,744) (1,656,581) (1,656,581)
------------ ------------ ------------ ------------
Other (charges):
Interest expense (880,866) (5,717) (886,583) (886,583)
Loss on sale of marketable securities (128,494) (128,494) (128,494)
Other expenses -- (1,086) (1,086) (1,086)
------------ ------------ ------------ ------------
(1,009,360) (6,803) (1,016,163) (1,016,163)
------------ ------------ ------------ ------------
Net loss from continuing operations $ (2,290,197) $ (382,547) $ (2,672,744) $ (2,672,744)
------------ ------------ ------------ ------------
Net loss per basic and diluted share
of common stock from continuing operations $ (0.47) $ (0.11)
============ ============
Weighted average number of basic and
diluted common shares outstanding 4,912,026 (B) 19,300,000 24,212,026
============ ============ ============
Notes:
(B) Represents estimated number of shares of ProtoSource common shares to be exchanged for P2i Newspaper, Inc.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
Historical Pro forma
-------------------------------------------- -------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
ASSETS
Current assets:
Cash $ 2,671 $ 22,231 $ 24,902 $ 24,902
Marketable securities 10,924 10,924 10,924
Accounts receivable 188,405 188,405 188,405
Interest receivable 49,556 49,556 (B) $ (49,556) --
Notes receivable, P2i Newspaper, Inc. 1,045,280 1,045,280 (A) (1,045,280) --
Assets held for sale 178,115 178,115 178,115
Prepaid expenses and other current assets 2,651 2,508 5,159 5,159
------------ ------------ ------------ ------------ ------------
Total current assets 1,289,197 213,144 1,502,341 (1,094,836) 407,505
Property and equipment, net 48,005 256,341 304,346 304,346
Debt issuance costs, net 543,543 56,981 600,524 600,524
Investment in corporation 105,000 105,000 105,000
------------ ------------ ------------ ------------ ------------
$ 1,985,745 $ 526,466 $ 2,512,211 $ (1,094,836) $ 1,417,375
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable $ 1,125,000 $ -- $ 1,125,000 $ 1,125,000
Current portion of obligations
under capital leases 13,775 22,258 36,033 36,033
Notes payable, ProtoSource Corporation 1,045,280 1,045,280 (A) $ (1,045,280) --
Due to P2i, Inc. 418,039 418,039 418,039
Accounts payable and accrued expenses 396,786 291,284 688,070 (B) (49,556) 638,514
Deferred revenue 9,000 9,000 9,000
Liabilities to be assumed upon sale 155,332 155,332 155,332
Due to related company 76,434 76,434 76,434
------------ ------------ ------------ ------------ ------------
Total current liabilities 1,699,893 1,853,295 3,553,188 (1,094,836) 2,458,352
------------ ------------ ------------ ------------ ------------
Obligations under capital leases,
non-current portion 35,639 10,417 46,056 46,056
------------ ------------ ------------ ------------
Stockholders' equity (deficiency):
Preferred stock -- -- -- --
Common stock 25,635,960 -- 25,635,960 25,635,960
Additional paid-in capital 1,487,891 1,487,891 1,487,891
Accumulated other comprehensive (loss) (62,069) (62,069) (62,069)
Accumulated deficit (26,811,569) (1,337,246) (28,148,815) (28,148,815)
------------ ------------ ------------ ------------
250,213 (1,337,246) (1,087,033) (1,087,033)
------------ ------------ ------------ ------------
$ 1,985,745 $ 526,466 $ 2,512,211 $ (1,094,836) $ 1,417,375
============ ============ ============ ============ ============
Notes:
(A) Represents elimination of intercompany note payable/receivable.
(B) Represents elimination of accrued interest associated with the intercompany note payable/receivable.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
Historical Pro forma
-------------------------------------------- ------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
Net revenues $ -- $ 1,050,293 $ 1,050,293 $ 1,050,293
Cost of revenues -- 956,793 956,793 956,793
------------ ------------ ------------ ------------
Gross profit -- 93,500 93,500 93,500
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 703,920 670,779 1,374,699 1,374,699
Research and development 181,952 181,952 181,952
Depreciation and amortization 8,726 101,465 110,191 110,191
Impairment of investment 121,000 121,000 121,000
------------ ------------ ------------ ------------
833,646 954,196 1,787,842 1,787,842
------------ ------------ ------------ ------------
Operating loss (833,646) (860,696) (1,694,342) (1,694,342)
------------ ------------ ------------ ------------
Other income (charges):
Interest expense (1,734,346) (89,213) (1,823,559) (A) $ 49,556 (1,774,003)
Interest income 49,615 49,615 (A) (49,556) 59
Loss on sale of marketable securities (272,944) (272,944) (272,944)
Other income 20,157 20,157 20,157
Other expenses -- (4,790) (4,790) (4,790)
------------ ------------ ------------ ------------ ------------
(1,937,518) (94,003) (2,031,521) -- (2,031,521)
------------ ------------ ------------ ------------ ------------
Net loss from continuing operations $ (2,771,164) $ (954,699) $ (3,725,863) $ -- $ (3,725,863)
============ ============ ============ ============ ============
Net loss per basic and diluted share
of common stock from continuing operations $ (0.44) $ (0.15)
============ ============
Weighted average number of basic and
diluted common shares outstanding 6,268,183 (B) 19,300,000 25,568,183
============ ============ ============
Notes:
(A) Represents elimination of interest income/expense associated with the intercompany note payable/receivable.
(B) Represents estimated number of shares of ProtoSource common shares to be exchanged for P2i Newspaper, Inc.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
Historical Pro forma
-------------------------------------------- ------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
ASSETS
Current assets:
Cash $ 40,428 $ 14,794 $ 55,222 $ 55,222
Accounts receivable 198,148 198,148 198,148
Interest receivable 125,214 125,214 (B) $ (125,214) --
Notes receivable, P2i Newspaper, Inc. 1,393,953 1,393,953 (A) (1,393,953) --
Assets held for sale 178,115 178,115 178,115
Prepaid expenses and other current assets 2,151 8,167 10,318 10,318
------------ ------------ ------------ ------------ ------------
Total current assets 1,739,861 221,109 1,960,970 (1,519,167) 441,803
Property and equipment, net 41,460 206,785 248,245 248,245
Deposits 1,500 7,500 9,000 9,000
Debt issuance costs, net 402,084 36,541 438,625 438,625
Investment in corporation 105,000 105,000 105,000
------------ ------------ ------------ ------------ ------------
$ 2,289,905 $ 471,935 $ 2,761,840 $ (1,519,167) $ 1,242,673
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Notes payable $ 1,725,000 $ -- $ 1,725,000 $ 1,725,000
Current portion of obligations
under capital leases 12,611 26,452 39,063 39,063
Notes payable, ProtoSource Corporation 1,393,953 1,393,953 (A) $ (1,393,953) --
Due to P2i, Inc. 193,758 193,758 193,758
Accounts payable and accrued expenses 524,951 464,990 989,941 (B) (125,214) 864,727
Deferred revenue 29,688 29,688 29,688
Liabilities to be assumed upon sale 155,332 155,332 155,332
Due to related company 72,231 72,231 72,231
------------ ------------ ------------ ------------ ------------
Total current liabilities 2,447,582 2,151,384 4,598,966 (1,519,167) 3,079,799
------------ ------------ ------------ ------------ ------------
Obligations under capital leases,
non-current portion 25,997 27,085 53,082 53,082
------------ ------------ ------------ ------------
Stockholders' equity (deficiency):
Preferred stock -- -- -- --
Common stock 26,235,960 -- 26,235,960 26,235,960
Additional paid-in capital 2,087,891 2,087,891 2,087,891
Accumulated deficit (28,507,525) (1,706,534) (30,214,059) (30,214,059)
------------ ------------ ------------ ------------
(183,674) (1,706,534) (1,890,208) (1,890,208)
------------ ------------ ------------ ------------
$ 2,289,905 $ 471,935 $ 2,761,840 $ (1,519,167) $ 1,242,673
============ ============ ============ ============ ============
Notes:
(A) Represents elimination of intercompany note payable/receivable.
(B) Represents elimination of accrued interest associated with the intercompany note payable/receivable.
PROTOSOURCE CORPORATION AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2003
Historical Pro forma
-------------------------------------------- -------------------------------------
Adjustments
ProtoSource P2i Newspaper, Increase/
Corporation Inc. Total Notes (Decrease) Consolidated
------------ ------------ ------------ ----- ------------ ------------
Net revenues $ -- $ 1,081,077 $ 1,081,077 $ 1,081,077
Cost of revenues -- 677,076 677,076 677,076
------------ ------------ ------------ ------------
Gross profit -- 404,001 404,001 404,001
------------ ------------ ------------ ------------
Operating expenses:
Selling, general and administrative 254,061 490,131 744,192 744,192
Research and development -- 81,850 81,850 81,850
Depreciation and amortization 6,545 110,893 117,438 117,438
------------ ------------ ------------ ------------
260,606 682,874 943,480 943,480
------------ ------------ ------------ ------------
Operating loss (260,606) (278,873) (539,479) (539,479)
------------ ------------ ------------ ------------
Other income (charges):
Interest expense (1,461,267) (80,803) (1,542,070) (A) $ 75,658 (1,466,412)
Interest income 75,658 75,658 (A) (75,658) --
Loss on sale of marketable securities (65,942) (65,942) (65,942)
Other income 16,201 16,201 16,201
Other expenses -- (9,612) (9,612) (9,612)
------------ ------------ ------------ ------------ ------------
(1,435,350) (90,415) (1,525,765) -- (1,525,765)
------------ ------------ ------------ ------------ ------------
Net loss from continuing operations $ (1,695,956) $ (369,288) $ (2,065,244) $ -- $ (2,065,244)
============ ============ ============ ============ ============
Net loss per basic and diluted share
of common stock from continuing operations $ (0.21) $ (0.08)
============ ============
Weighted average number of basic and
diluted common shares outstanding 7,943,410 (B) 19,300,000 27,243,410
============ ============ ============
Notes:
(A) Represents elimination of interest income/expense associated with the intercompany note payable/receivable.
(B) Represents estimated number of shares of ProtoSource common shares to be exchanged for P2i Newspaper, Inc.