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:
[_] 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 Rule 14a-11(c) or Rule 14a-12
PROTOSOURCE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
PROTOSOURCE CORPORATION
One Bethlehem Plaza
Bethlehem, Pennsylvania 18018
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 11, 2007
Bethlehem, Pennsylvania
November 6, 2007
The Special Meeting of Stockholders (the "Special Meeting") of ProtoSource
Corporation, a California corporation (the "Company"), will be held at the
offices of the Company, One Bethlehem Plaza, Bethlehem, Pennsylvania on December
11, 2007 at 10:00 AM (local time) for the following purposes:
1. 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 500,000,000 (Proposal No. 1);
2. To transact such other business as may properly come before the
Special 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 October 26, 2007
as the record date for determining the stockholders entitled to notice of and to
vote at the Special Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Special Meeting in
person. However, whether or not you expect to attend the Special 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 Special Meeting. If you send
in your proxy card and then decide to attend the Special 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
Peter Wardle
President
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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 Special Meeting of Stockholders (the "Special Meeting") to be held at the
offices of the Company, One Bethlehem Plaza, Bethlehem, Pennsylvania 18018 on
December 11, 2007 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") and Series B Preferred Stock on October 26, 2007 (the
"Record Date") will be entitled to vote at the Meeting. At the close of business
on the Record Date, the Company had outstanding 9,927,329 shares of Common Stock
and 193,836 shares of Series B Preferred 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 November 6, 2007.
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 Special
Meeting of Stockholders has been approved will be determined as follows. 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 Special
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
APPROVAL OF AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK TO 500,000,000
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 193,836
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
500,000,000 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
given the relatively low trading price of the Company's common stock, a capital
structure consisting of 500,000,000 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
9,927,329shares of Common Stock and 193,836 shares of Preferred Stock
outstanding. The proposed amendment of the Certificate was approved by the Board
effective on October 22, 2007, subject to stockholder approval at the Special
Meeting.
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 490,000,000 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 19,383,531
shares of Common Stock upon conversion of the outstanding 193,836 shares of
Series B Preferred Stock issued to P2i, Inc., the former stockholder of P2i
Newspaper, Inc. Peter Wardle, our president, exercises voting and dispositive
power over the shares owned by P2i, Inc. Protosource is 19.8% shareholder of
P2i, Inc. In the event the Company is unable to increase its authorized shares
of common stock, the Series B Preferred Stock will remain outstanding. The only
preference afforded to the Series B Preferred stock is the right to 100 votes
per share which vote with the common stock.
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
4
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. In particular, as a result in the
large increase in authorized shares from 10,000,000 to 500,000,000, this is a
strong likelihood that current shareholders will experience a large dilution of
the holdings which will result in such shareholders owning a relatively small
percentage of the Company's outstanding common stock. 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 no provisions in the Company's Certificate of
Incorporation, by-laws or any contractual relationships which would prohibit or
be affected by any take-over of the Company, should such occur.
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 shares issuable:
o upon conversion of the Series B Preferred Stock (19,383,531) issued to
P2i, Inc.;
o upon conversion of outstanding common stock purchase warrants
(1,070,000) issued as fees to a registered broker dealer for services
in connection with the placement and sale of securities by the
Company;
o upon issuance of shares to convertible note holders for prior
obligations (2,750,000), arising from shares issuable to the note
purchasers as part of their initial investment which were not then
available for issuance;
o upon conversion of outstanding convertible notes in the current
principal amount of $2,425,000 (32,875,000); and
o payable for prior investment banking fees to a registered
broker-dealer in connection with the acquisition of P2i Newspaper,
Inc. by the Company (813,688).
Description of Transactions Giving Rise to Shares Issuable
P2i Newspaper Acquisition
On January 1, 2004, ProtoSource acquired the newspaper division of P2i,
Inc.'s business through the acquisition of specific assets which include the
entire newspaper related customer base, technology, intellectual property and
P2i's production company located just south of Kuala Lumpur, Malaysia. In
addition, key P2i employees transitioned with the business. These assets and the
key employees have been transferred to P2i Newspaper, Inc. a wholly-owned
subsidiary of P2i formed specifically for this purpose. In exchange for all of
the issued and outstanding shares of P2i newspaper, the Company issued 193,836
shares of Series B Preferred Stock. Upon authorization of sufficient shares of
common stock, holders of the Series B Preferred Stock are entitled to convert
each share of Series B Stock into 100 shares of common stock. Series B
stockholders are not entitled to receive dividends. In a liquidation, the
holders would be treated as if they were owners of the number of shares of
common stock into which the Series B Preferred Stock is convertible. Peter
Wardle, the CEO of ProtoSource at the time of the acquisition of P2i Newsapsper,
was also the CEO of P2i at the time of the acquisition by ProtoSource.
ProtoSource and P2i both used the same investment banker, Andrew Alexander
Wise & Company, a registered broker dealer ("AAWC"), to represent them in the
transaction and each paid the investment banker a fee based on the value of the
transaction using a pre-set formula. The investment banking fees paid are
$406,844 by ProtoSource and $413,422 by P2i. The amounts paid to the investment
banker will be paid through the issuance of common stock, which is restricted
for a three-year period, based on an agreed-upon value of $.50 per share at the
time of signing the term sheet, or 813,688 shares for ProtoSource and 826,844
shares for P2i. The number of shares was determined based on the closing trading
price of the Company's common stock on September 5, 2002, the date of the
agreement with AAWC. The shares to be issued for P2i's investment banking fees
will be subtracted from the shares to be issued to the P2i for the acquisition.
5
Sale of Notes and Warrants
During the period beginning March 2002 and continuing through April 2004,
the Company sold a series of secured convertible promissory notes with an
aggregate principal amount of $2,425,000 to 32 accredited investors. These
notes, which are secured by the assets of ProtoSource and P2i Newspaper, range
between $25,000 and $200,000 on their face. All notes are one-year renewable 10%
interest (per annum) convertible promissory notes. Each note can be prepaid, in
whole or in part, without premium or penalty, at any time. Upon prepayment of
the entire principle amount of a note, all accrued, but unpaid interest shall be
paid to the holder on the date of prepayment. At any time prior to or at the
time of repayment, the holder may elect to convert some or all of the principal
and interest owing into shares of the Company's common stock. The conversion
rate shall equal the amount to be converted, divided by each note's
predetermined conversion price established at note issuance or renewal.
Conversion prices, after a series of renewals, range between $0.0667 and $0.10.
The notes are secured by ProtoSource's stock in P2i and by ProtoSource's assets.
In connection with the issuance of these notes, as an added inducement to loan
funds to the Company, the Company entered into accompanying subscription
agreements to provide each note holder certain shares of common stock. As a
result, the Company issued an aggregate of 4,256,226 of common stock and will
issue an additional 2,750,000 shares of common stock upon approval of the
increased number of authorized shares of common stock.
Most of the above referenced note sales were made through AAWC. In
consideration for services provided in connection with such placements, AAWC was
paid an aggregate of $82,250 in cash and received an aggregate of 1,070,000
common stock purchase warrants. The warrants have a five-year term from their
original issue dates and are exercisable at prices that range between $0.067 and
$0.10 per share and expire at various times through April 28, 2009.
The following table set forth information before and after the proposed
increase in authorized common stock:
Shares Outstanding Committed for Authorized but
Authorized Shares Issuance Unreserved
---------- ------ -------- ----------
Currently: 10,000,000 9,927,329 56,892,219 0
Upon
Increase: 500,000,000 32,874,548 33,945,000 433,180,452
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.
6
RECOMMENDATION OF THE BOARD:
----------------------------
THE BOARD RECOMMENDS A VOTE FOR AN INCREASE TO 500,000,000 AUTHORIZED
SHARES OF COMMON STOCK OF THE COMPANY.
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for the year ended December 31,
2006 and Quarterly Report on Form 10-QSB for the six months ended June 30, 2007
are hereby incorporated by reference into this Proxy Statement and are being
delivered herewith.
AVAILABILITY OF CERTAIN DOCUMENTS
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) 814-0550. In order to ensure timely delivery of the documents, such
requests should be made by November 23, 2007.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented to
the Special Meeting. If any other business is properly brought before the
Special 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
November 6, 2007
7
PROXY PROXY
PROTOSOURCE CORPORATION
PROXY FOR SPECIAL MEETING TO BE HELD ON DECEMBER 11, 2007
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
Special Meeting of Stockholders to be held on December 11, 2007 and at any
adjournments thereof, subject to the directions indicated 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.
IMPORTANT--This Proxy must be signed and dated.
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
We cordially invite you to attend the Special Meeting of Stockholders of
ProtoSource Corporation to be held at the offices of the Company, on December
11, 2007 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 PROPOSAL 1
For Against Abstain
1 Proposal to approve an increase in the [_] [_] [_]
number of authorized shares of
Common Stock to 500,000,000.
If you plan to attend the Special Meeting please mark this box [_]
Dated:________________, 2007
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.