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. )
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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
EXTEN INDUSTRIES, INC.
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(Name of Registrant as specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(I)(2) or
Item 22(a)(2) of Schedule 14A
[ ] Fee Computed on Table below per Exchange Act Rules 14a-6(i)(4) and 0- 11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
(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:
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EXTEN INDUSTRIES, INC.
9620 Chesapeake Drive, Suite 201
San Diego, CA 92123
(858) 496-0173
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of the Stockholders
of Exten Industries, Inc., a Delaware corporation ("Exten"), which will be held
July 11, 2001 at 10:00 a.m., local time, at the Holiday Inn Mission Valley
Stadium, 3805 Murphy Canyon Road, San Diego, CA 92123.
At this meeting, we will seek your approval of:
1. Election of a Board of Directors to serve until the next annual
meeting of stockholders.
2. Appointment of Swenson Advisors, LLP as Independent Auditors for the
fiscal year ending November 30, 2001.
Accompanying this letter is the formal Notice of the Annual Meeting,
together with a Proxy Statement, which describes the intended actions in
detail, and a form of proxy solicited by the Board of Directors of Exten
in connection with the Annual Meeting.
Accompanying this letter is the formal Notice of the Annual Meeting,
together with a Proxy Statement, which describes the intended actions in
detail, and a form of proxy solicited by the Board of Directors of Exten
in connection with the Annual Meeting.
To assure that your shares will be represented at the Annual Meeting,
please mark, sign, date and promptly return the accompanying proxy card in
the enclosed envelope. You may revoke your proxy at any time before it is
voted.
Your Board of Directors has carefully reviewed, and recommends approval
of, all proposals. On behalf of the board of directors, I would like to express
our appreciation for your continued interest in the affairs of Exten. We look
forward to seeing you at the Annual Meeting.
Sincerely yours,
W. Gerald Newmin
Chairman and CEO
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EXTEN INDUSTRIES, INC.
9620 Chesapeake Drive, Suite 201
San Diego, CA 92123
(858) 496-0173
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On July 11, 2001
To the Stockholders of Exten Industries, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of
Exten Industries, Inc., a Delaware corporation ("Exten" or the "Company"),
will be held on July 11, 2001 at 10:00 am local time, at Holiday Inn Mission
Valley Stadium, 3805 Murphy Canyon Road, San Diego, CA 92123, telephone
(858) 278-9300, for the following purposes:
1. To elect a Board of Directors consisting of four (4) directors to
serve until the next annual meeting of stockholders. The Proxy
Statement that accompanies this Notice includes the names of the
nominees to be presented by the Board of Directors for election.
2. To approve the appointment of Swenson Advisors, LLP as Independent
Auditors for the fiscal year ending November 30, 2001.
3. To consider and act upon any other matters which may properly come
before the meeting or any adjournment or adjournments thereof.
In accordance with the provisions of Section 213 of the Delaware General
Corporation Law, the Board of Directors has fixed the close of business on
May 22, 2001, as the record date for the determination of the holders of
Exten's common stock, $0.01 par value per share (the "Common Stock") entitled
to notice of and to vote at said Annual Meeting. To assure that your shares
will be represented at the Annual Meeting, please mark, sign, date and promptly
return the accompanying proxy card in the enclosed envelope. You may revoke
your proxy at any time before it is voted.
A list of the stockholders entitled to vote at the Annual Meeting will be
open for examination by any stockholder for any purpose germane to the meeting
during ordinary business hours for a period of ten (10) days prior to the
meeting at the offices of Exten, which address is set forth above, and will
also be available for examination at the Annual Meeting until its adjournment.
By Order of the Board of Directors,
W. Gerald Newmin
Chairman and Chief Executive Officer
San Diego, California
June 6, 2001
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| WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, PLEASE READ THE |
| ATTACHED PROXY STATEMENT CAREFULLY; COMPLETE, SIGN AND DATE AND PROMPTLY |
| RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED REPLY ENVELOPE. |
| |
| If you attend the Annual Meeting, |
| you may revoke the Proxy and vote in person. |
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EXTEN INDUSTRIES, INC.
9620 Chesapeake Drive, Suite 201
San Diego, CA 92123
Proxy Statement for Annual Meeting of Stockholders
to be held on July 11, 2001
GENERAL INFORMATION
This Proxy Statement is being furnished by the Board of Directors of
Exten Industries, Inc., a Delaware corporation ("Exten") in connection with
the solicitation of proxies for use at the Company's Annual Meeting of
Stockholders to be held on July 11, 2001, at the Holiday Inn Mission Valley
Stadium, 3805 Murphy Canyon Road, San Diego, CA 92123, at 10:00 a.m.
Pacific Time, and at any and all adjournments thereof (the "Annual Meeting").
The Annual Meeting has been called for the purposes set forth in the
accompanying Notice of the Annual Meeting of Stockholders (the "Notice").
This Proxy Statement, and the Annual Report of Exten for the fiscal year ended
November 30, 2000, will be mailed on or about June 6, 2001, to each stockholder
of record as of the close of business on May 22, 2001.
PERSONS MAKING THE SOLICITATION
The Proxy is solicited on behalf of the Board of Directors of Exten.
The solicitation of proxies is being made only by use of the mails. Exten will
pay the cost of preparing, assembling and mailing these proxy materials.
Following the mailing of this Proxy Statement, directors, officers and regular
employees of Exten, and ADP and U.S. Stock Transfer and Trust Company, may
solicit proxies by mail, telephone, e-mail, courier, telegraph or personal
interview. Officers and employees of Exten will receive no additional
compensation for such services. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of Exten's Common Stock of
record will be requested to forward proxy soliciting material to the beneficial
owners of such shares. Exten will, upon request, reimburse such parties for
their reasonable expenses in forwarding proxy materials to the beneficial
owners.
TERMS OF THE PROXY
The enclosed Proxy indicates the matters to be acted upon at the
Annual Meeting and provides boxes to be marked to indicate the manner in
which the stockholder's shares are to be voted with respect to such matters.
By appropriately marking the boxes, a stockholder may specify whether the
proxy shall vote for or against or shall be without authority to vote the
shares represented by the Proxy. The Proxy also confers upon the proxy
discretionary voting authority with respect to such other business as may
properly come before the Annual Meeting.
If the Proxy is executed properly and is received by the proxy prior
to the Annual Meeting, the shares represented by the Proxy will be voted.
Where a stockholder specifies a choice with respect to the matter to be
acted upon, the shares will be voted in accordance with such specification.
If no specification is made, shares will be voted FOR the appointment of
Swenson Advisors, LLP, as independent auditors and FOR the election of the
four (4) directors proposed. A Proxy may be revoked at any time prior to its
exercise by giving written notice of the revocation thereof to Gerald Newmin,
Chairman and Chief Executive Officer, Exten Industries, Inc., 9620 Chesapeake
Drive, Suite 201, San Diego, California 92123, by attending the meeting and
electing to vote in person, or by a duly executed Proxy bearing a later date.
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VOTING RIGHTS AND REQUIREMENTS
RECORD DATE AND OUTSTANDING SHARES
At the close of business on May 22, 2001, the record date for the
determination of stockholders entitled to notice of and vote at the Annual
Meeting (the "Record Date"), there was outstanding and entitled to vote an
aggregate of approximately 74,132,827 shares of Common Stock. Each share of
Common Stock outstanding on the Record Date is entitled to one (1) vote on each
matter presented.
QUORUM
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock held of record on the
Record Date is necessary to constitute a quorum. The holder of each share of
Common Stock held of record on the Record Date is entitled to one vote per
share on each matter to be considered at the Annual Meeting. Abstentions and
broker non-votes will each be counted as present for purposes of determining
the presence of a quorum.
VOTES REQUIRED
The affirmative vote of holders representing a majority of the shares of
Common Stock present and entitled to vote at the meeting at which a quorum is
present is required to approve the appointment of Swenson Advisors, LLP as
Exten's independent auditor. With respect to the election of directors, the
four (4) nominees receiving the highest number of votes shall be elected.
Abstentions will have the same effect as a negative vote. Broker non-votes,
on the other hand, will have no effect on the outcome of a vote.
CUMULATIVE VOTING
There will be no cumulative voting for the election of directors.
DISSENTERS' RIGHTS
Under Delaware law, stockholders are not entitled to any dissenters'
rights with respect to the approval of any of the proposals described in this
Proxy Statement.
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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 22, 2001, certain information
as to shares of Common Stock owned by (i) each person known to beneficially
own more than 5% of the outstanding Common Stock, (ii) each director,
including nominees for director, and each named executive officer of the
Company, and (iii) all executive officers and directors of the Company as a
group. Unless otherwise indicated, each person listed has sole voting and
investment power over the shares beneficially owned by him. Unless otherwise
indicated, the address of each named beneficial owner is the same as that of
the Company's principal executive offices located at 9620 Chesapeake Drive,
Suite 201, San Diego, California 92123.
SHARES PERCENTAGE
NAME (AND ADDRESS) OF BENEFICIALLY BENEFICIALLY
BENEFICIAL OWNER (1) TITLE OWNED (2) OWNED
- --------------------- ------------------- ------------ ------------
Farrest Loper Director 208,385 *
W. Gerald Newmin (3) Chairman, CEO, 12,271,426 16.6%
Secretary and Director
Jerry G. Simek (4) Director 2,135,723 2.9%
Gregory F. Szabo (4) President, Treasurer, 191,779 *
and Director Nominee
Ed Sigmond (4) Director 290,833 *
Kestrel Equity
Partners Ltd. (5) 5,000,000 6.7%
All executive officers
and directors as a
group (four persons) 14,906,367 20.1%
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<FN>
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
under the Securities Exchange Act of 1934. Pursuant to the rules of the
Securities and Exchange Commission, shares of Common Stock that each named
person and group has the right to acquire within 60 days pursuant to
options, warrants, conversion privileges or other rights, are deemed
outstanding for purposes of computing shares beneficially owned by and the
percentage ownership of each such person and group. However, such shares
are not deemed outstanding for purposes of computing the shares
beneficially owned by or percentage ownership of any other person or
group.
(2) Unless otherwise noted, all shares listed are owned of record and the
record owner has sole voting and investment power, subject to community
property laws where applicable and the information contained in the
footnotes to this table.
(3) Mr. Gerald Newmin disclaims beneficial ownership of shares owned by his
wife.
(4) Includes 83,333 shares issuable under options which are exercisable on or
within 60 days of May 22, 2001.
(5) Kestrel Equity Partners Ltd. is a limited partnership investment fund;
Ed Sigmond, one of the Company's Directors, is Managing Partner.
Its address is 2808 Cole Ave., Dallas, TX 75204.
* Less than 1%.
The Company currently has no arrangements that would result in a change in
control.
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PROPOSAL NO. 1: ELECTION OF DIRECTORS
DIRECTORS
The Company's Bylaws give the Board the power to set the number of
directors at no less than three (3) nor more than five (5). The size of
the Company's Board is currently set at five (5). Four (4) directors are
to be elected at the Annual Meeting to be held on July 11, 2001.
The directors so elected will serve until the next Annual Meeting of
Stockholders. The Board of Directors has nominated W. Gerald Newmin,
Ed Sigmond, Jerry Simek and Gregory F. Szabo for election to the Board as
directors. Messrs. Newmin, Sigmond and Simek are currently members of the
Board and have agreed to serve if elected. The Board knows of no reason why any
nominee for director would be unable to serve as a director. In the event that
any of them should become unavailable prior to the Annual Meeting, the Proxy
will be voted for a substitute nominee or nominee designated by the Board of
Directors or the number of directors may be reduced accordingly.
The following table sets forth the name and age of each director and each
nominee for director, the year he was first elected a director and his
position(s), if any, with the Company.
Name Age Director Since Positions Held
- ---------------- --- -------------- ----------------------
W. Gerald Newmin 63 1995 Chairman of the Board,
Chief Executive Officer,
Secretary and Director
Farrest Loper 63 1998 Director
Ed Sigmond 42 1999 Director
Jerry G. Simek 57 1998 Director
Gregory F. Szabo 47 President, Director nominee
FARREST LOPER was first elected to the Board of Directors in June of 1998.
For the past nine years Mr. Loper has been President of Loper & Associates,
a firm providing executive strategic management services to distribution,
manufacturing and service firms specializing in turnarounds and growth
acceleration. The firm also consults to capital-providing firms, providing
business valuation and due diligence services. Mr. Loper has served as
President and CEO of T-Systems International, Stripping Technologies, and
Ponsor Corporation. He also held several executive positions in Honeywell,
Inc., which included six years in cardiopulmonary instrumentation development.
He served as President of AiResearch Tucson, an AlliedSignal company.
Mr. Loper's education includes an OPM executive program from Harvard Business
School and a Master of Science in Engineering Administration from the
University of South Florida. He has served on non-profit and corporate boards
in the US, Mexico, Europe and Australia. He is Lead Faculty member for MBA
courses in Strategic Management and Management at the University of Phoenix.
He is a co-founder of the Corporate Governance Institute with San Diego State
University. Mr. Loper is not standing for re-election as a director.
W. GERALD "JERRY" NEWMIN began as a consultant to the Board of Directors
of Exten in June 1995. On December 1, 1995, he was elected Chairman, Chief
Executive Officer, and President of Exten. He currently serves as Exten's
Chief Executive Officer and Secretary. Mr. Newmin serves on the Board of and
is Chairman and CEO of SYS, a defense systems company in San Diego, California,
publicly traded on the Over-the-Counter Bulletin Board. Mr. Newmin is past
Chairman of the Board of the Corporate Directors Forum, a non-profit
organization of over 170 California Board members, which promotes excellence in
corporate governance. He serves on the board of the Corporate Governance
Institute at San Diego State University. From 1984 to 1987, Mr. Newmin was
President of HealthAmerica Corporation, then the nation's largest publicly held
HMO Management Company. From 1977 to 1984, he was President of International
Silver Company, a diversified multi-national manufacturing company that he
restructured. From 1973 to 1977, Mr. Newmin was Vice President and Western
Regional Director for American Medicorp, Inc., and managed 23 acute care
hospitals in the Western US. From 1962 to 1973, at Whittaker Corporation,
Newmin held senior executive positions, including CEO of Production Steel
Company, Whittaker Textiles Corporation, Bertram Yacht Corp., Narmco Materials
Corp., and Anson Automotive Corp., and was instrumental in Whittaker's entry
into the US and international health care markets. Mr. Newmin has a Bachelor's
degree in Accounting from Michigan State University. He is an avid boater.
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ED SIGMOND has been in sales, marketing and operations management for the
past 18 years. He has been President of Kestrel Development and, as such, an
entrepreneur, investor and real estate developer in the Dallas, Texas area
since 1994. From 1992 to 1996 Mr. Sigmond was President of American Machine
and Bearing of Dallas, TX. Prior positions included Assistant to President of
Alpha Aviation, Dallas, TX, 1990-1992; Founder and President of Specialty Food
Products, Arlington, TX, 1987-1990; and VP/Regional Manager of Geodata
Corporation, Houston, TX 1981-1987. He has varied negotiation, sales,
marketing, managerial and operational skills with existing and startup
operations. He studied Marketing and Chemistry at Duquesne University.
JERRY SIMEK was elected to the Board of Directors on March 20, 1998.
From June 16, 1998 to April 19, 2001, he served as President and COO of Exten.
Mr. Simek has been President of JGS Management Group since 1984, specializing
in strategic planning, financial management, business/corporate development and
international business. He has successfully directed and implemented company
reorganizations, refinancing programs and company turnarounds, as well as
market development, acquisition and divestiture programs. Mr. Simek was past
President of a San Diego public medical electronics manufacturing company and
facilitated its turnaround and funding. Mr. Simek has over thirty years of
management experience with major multinational companies in the medical,
energy, electronics and aerospace industries. He has worked for such medical
companies as Baxter and Johnson & Johnson. He has facilitated raising capital
in public, private and start-up ventures; has identified and established joint
venture transatlantic manufacturing, trading company and joint licensing
programs, and has established and implemented multimillion dollar project
management and manufacturing expansion programs. Mr. Simek has been a Director
and/or Management Advisor for other public and private companies in the US and
UK. He has a BS from Illinois Institute of Technology and MBA from Pepperdine
University.
GREGORY F. SZABO was appointed President, COO and Treasurer of Exten on
April 19, 2001. Since May of 2000 he has served as President of Xenogenics
Corporation, Exten's majority-owned subsidiary. He has 20 years of experience
in the medical device industry including FDA product submission and insurance
reimbursement experience plus sales, marketing and management responsibilities
Szabo was President and CEO of Titan Scan, Titan Corporation's sterilization
division, where he managed the medical sterilization and food pasteurization
business. He has also been President and CEO of Goulter Medical Inc., President
of Comfort Clinic Corporation, and VP of Bio-Clinic Corp., after holding senior
management positions at Zimmer, Sharpoint and Becton Dickinson. He holds a
Masters in Management from Drucker Graduate School, Claremont University,
Claremont, CA.
KEY EMPLOYEES
The key employees of the Company are as follows:
BARBARA CORBETT, age 53, has served as Exten's Marketing and Investor
Relations Manager since 1997. Ms. Corbett is a Certified Business Communicator
and past founder and owner of Corbett Advertising, Inc., in Detroit, providing
marketing communications and public relations for an international clientele
including hospitals and private medical groups. She has also held other
marketing positions, been president of three trade association groups, served
on community and non-profit boards, taught college level marketing, and has
extensive corporate communications and sales experience. Ms. Corbett has a BA
in Political Science from Antioch University.
FAMILY RELATIONSHIPS
There is no family relationship between any of Exten's directors and
executive officers.
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BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended November 30, 2000, there were ten (10)
meetings of the Board of Directors. Each nominee currently sitting on the
Board of Directors has attended 100% of all Board meetings and meetings of the
Board committees on which he has served, which have been held since his first
election to that position.
Nominating and Compensation Committee
The Board of Directors formed a Nominating and Compensation Committee
during fiscal year 2000. The members are Jerry Simek, Ed Sigmond and
Farrest Loper. One meeting was held.
Audit Committee
The Audit Committee of the Board of Directors reviews and monitors the
Company's internal accounting procedures, the corporate financial reporting
process, external and internal audits, the results and scope of the annual
audit and other services provided by the Company's independent auditors, and
the Company's compliance with legal matters that have a significant impact on
financial reports. The members of the Audit Committee are Farrest Loper,
Ed Sigmond and Jerry Simek. Two (2) Audit Committee meetings were held during
the fiscal year ended November 30, 2000. On February 16, 2001, the Audit
Committee adopted a written charter, which was approved by the Board of
Director April 19, 2001, a copy of which is attached as Exhibit A to the Proxy
Statement.
Audit Committee Report
1) The Audit Committee has reviewed and discussed the audited
financial statements with the company.
2) The Audit Committee has discussed with the independent auditors
the matters required to be discussed by SAS 61, as may be
amended or supplemented.
3) The Audit Committee has received the written disclosures and the
letter from Hutchinson and Bloodgood, LLP required by
Independence Standards Board Standard No. 1, as may be modified
or supplemented, and has discussed with the independent
accountant the independent accountant's independence; and
4) Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in the Form 10-KSB for the
fiscal year 2000.
Farrest Loper
Ed Sigmond
Jerry Simek
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the total compensation earned by the
Chief Executive Officer during the fiscal years ended November 30, 2000, 1999
and 1998. No executive officer earned in excess of $100,000 per annum during
the fiscal year ended November 30, 2000.
Annual Compensation Long Term Compensation
------------------------------ --------------------------------
Awards Payouts
----------------------- -------
Restricted Securities
Other annual stock Underlying LTIP All other
Name and Salary Bonus Compensation award(s) Options/ payouts compensation
principal position Year ($) ($) ($) ($) SARs (#) ($) ($)(1)
- -------------------- ---- ------- ----- ------------ ---------- ---------- ----- ------------
W. Gerald Newmin, 2000 -0- -0- -O- -0- 825,000 -0- $ 48,424
Chairman of the Board, 1999 -0- -0- -O- -0- -0- -0- $ 94,285
Chief Executive Officer, 1998 -0- -0- -0- -0- -0- -0- $187,351
Secretary and Director
<FN>
(1) Represents the fair market value of stock paid in lieu of cash based on
the closing market price on date of approval by the Board of Directors.
STOCK OPTION GRANTS IN FISCAL YEAR 2000
The following table sets forth information concerning stock options
granted in the fiscal year ended November 30, 2000 to the named officer in the
Summary Compensation table.
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
- ----------------- ------------ -------------- ------------ ---------
W. Gerald Newmin 825,000 100% $0.21 5/17/2004
- -------------
<FN>
(1) All options granted during the fiscal year ended November 30, 2000 vest
in accordance with the Company's standard vesting schedule.
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OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table presents information for the named officer in the
Summary Compensation Table with respect to options exercised during fiscal 2000
and unexercised options held as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR END OPTION
VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Shares Fiscal Year End 11/30/00 at Fiscal Year End ($)
Acquired Value ------------------------- -------------------------
Name On Exercise(#) Realized(1)($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------------- -------------- -------------- ------------------------- -------------------------
W. Gerald Newmin None -0- -0- / 825,000 -0- / -0-
COMPENSATION OF DIRECTORS
Beginning January 1, 1994, the Company paid all directors a salary of
10,000 shares of Common Stock per calendar year. On October 25, 1994, the
Board of Directors resolved to increase the salary to 45,000 shares per month.
On August 17, 1995, the Board of Directors adjusted the salary to 12,000 shares
per month. During fiscal year 2000 Ed Sigmond, Jerry Simek and Farrest Loper
were each granted stock options for 250,000 shares exercisable at $0.21 per
share; these options expire on May 17, 2004. The options vest over 3 years and
were valued at $0.11 per share.
Jerry Simek, a Director, works for Exten under a Contractor/Management
Consulting Agreement with JGS Management Group, Inc., of which Mr. Simek is
President. The agreement provides that Mr. Simek will be paid at the rate of
$50.00 per hour, which will be converted into Common Stock at the end of each
month using the Common Stock price on the last day of the month. Mr. Simek was
paid 1,668,140 shares in fiscal year 2000 under the terms of that agreement.
SECTION 16(A) - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% beneficial owners are
required by applicable regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to
the Company and information involving securities transactions of which the
Company is aware, the Company believes that during the fiscal year ended
November 30, 2000, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial stockholders
were made in a timely fashion.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
JGS Management Group, Inc. (JGS), of which Jerry G. Simek, the Company's
Treasurer and a Director of the Company, is the President, provides services to
the Company pursuant to a finders fee agreement with the Company. The agreement
provides that JGS will be compensated pursuant to an established formula for
the introduction of investors who actually invest in the Company or lend it
money.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
ELECT THE NOMINEES TO THE BOARD OF DIRECTORS.
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PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF SWENSON ADVISORS, LLP AS AUDITORS
Effective May 1, 2001, the Board of Directors approved the appointment of
Swenson Advisors, LLP as the Company's independent public accountants, to audit
the consolidated financial statements of the Company for the fiscal year ending
November 30, 2001 and to perform other appropriate services as directed by the
Company's management and Board of Directors.
Hutchinson and Bloodgood, LLP was the independent certifying accountant
previously engaged to audit the Registrant's financial statements for the
period ended November 30, 2000. On April 27, 2000, the Registrant notified
Hutchinson and Bloodgood, LLP of their dismissal.
Hutchinson and Bloodgood, LLP reports on the financial statements as of
and for the years ended November 30, 1999 and November 30, 2000 contained no
adverse opinions or disclaimers of opinion and were not modified or qualified
as to uncertainty, audit scope or accounting principles, but did contain
qualifications as to the Registrant's ability to continue as a going concern.
The Registrant's engagement of Swenson Advisors, LLP and the dismissal of
Hutchinson and Bloodgood, LLP were recommended by the Registrant's Audit
Committee and approved by the Registrant's Board of Directors.
During the two fiscal years ended November 30, 1999 and November 30, 2000
and through the subsequent interim period ending April 30, 2001, there were no
disagreements with Hutchinson and Bloodgood, LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of
Hutchinson and Bloodgood, LLP would have caused that firm to make reference to
the subject matter of the disagreement in connection with either of its reports
on the financial statements of the Registrant for such years.
Representatives of Hutchinson and Bloodgood, LLP and Swenson Advisors, LLP
will be present at the Annual Meeting and will have the opportunity to make a
statement if desired and respond to questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE THE APPOINTMENT OF SWENSON ADVISORS, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
FEES PAID TO INDEPENDENT AUDITORS
Audit Fees
The Company was billed aggregate fees of approximately $57,845.38 by
Hutchinson and Bloodgood, LLP for professional services rendered with
respect to the audit of its financial statements for the fiscal year ended
November 30, 2000.
Financial Information Systems Design and Implementation Fees
Hutchinson and Bloodgood, LLP did not bill the Company for any
professional services for financial information systems design or
implementation services for the fiscal year ended November 30, 2000.
All Other Fees
The Company was billed aggregate fees by Hutchinson and Bloodgood, LLP of
approximately $4781.53 for services, other than the services referred to above,
rendered for the fiscal year ended November 30, 2000.
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OTHER BUSINESS
Management is not aware of any matters to come before the Annual Meeting
other than those stated in this Proxy Statement. However, inasmuch as matters
of which management is not now aware may come before the meeting or any
adjournment thereof, the Proxy confers discretionary authority with respect to
acting thereon, and the persons named in such Proxy intend to vote, act, and
consent in accordance with their best judgment with respect thereto.
ANNUAL REPORT
The Annual Report to Stockholders including the Form 10-KSB for the
fiscal year ended November 30, 2000, and the financial statements and
schedules thereto, which the Company has filed with the Securities and
Exchange Commission, is being mailed to stockholders with this Proxy
Statement. The annual report does not form any part of the material for
the solicitation of the Proxy.
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
Any proposal relating to a proper subject which a stockholder may intend
to present for action at the next Annual Meeting of Stockholders and which such
stockholder may wish to have included in the Company's proxy materials for such
meeting must, in accordance with the provisions of Rule 14a-8 promulgated under
the Securities Exchange Act of 1934, be received in proper form by the Company
at its principal executive office not later than October 5, 2001. It is
suggested that any such proposal be submitted by certified mail, return receipt
requested. If a stockholder submits a proposal for the Company's Annual Meeting
of Stockholders to be held in 2002 other than in accordance with Rule 14a-8 and
that stockholder does not provide notice of his or her proposal to the Company
by January 12, 2002, the holders of any proxy solicited by the Board of
Directors for use at that meeting will have discretionary authority to vote
that proposal without a description of that proposal in the Company's proxy
statement for that meeting.
By Order of the Board of Directors,
W. GERALD NEWMIN
Chairman and Chief Executive Officer
San Diego, California
June 6, 2001
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EXHIBIT
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
* Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, accounting, and
legal compliance.
* Monitor the independence and performance of the Company's independent
auditors.
* Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access
to the independent auditors as well as anyone in the organization.
The Audit Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it deems
necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the requirements of the NASDAQ.
The Audit Committee shall be comprised of three or more directors as
determined by the Board, two-thirds of whom shall be independent
non-executive directors, free from any relationship that would interfere
with the exercise of his or her independent judgment. All members of the
Committee shall have a basic understanding of finance and accounting and
be able to read and understand fundamental financial statements, and at
least one member of the Committee shall have accounting or related
financial management expertise.
Audit Committee members shall be appointed by the Board on recommendation
of the Nominating Committee. If an Audit Committee Chair is not designated
or present, the members of the Committee may designate a Chair by majority
vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management,
the independent auditors, and as a committee to discuss any matters that
the Committee or each of these groups believe should be discussed.
In addition, the Committee, or at least its Chair, should communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors
limited review procedures.
III. Audit Committee Responsibilities and Duties
REVIEW PROCEDURES
1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have
the document published at least every three years in accordance with
SEC regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
3. In consultation with the management and the independent auditors,
consider the integrity of the Company's financial reporting processes
and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control, and report such
exposures. Review significant findings prepared by the independent
auditors together with management's responses.
4. Review with financial management and the independent auditors the
company's quarterly financial results prior to the release of
earnings and/or the company's quarterly financial statements prior to
filing or distribution, Discuss any significant changes to the
Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with SAS 61
(see item 9) The Chair of the Committee may represent the entire
Audit Committee for purposes of this review.
INDEPENDENT AUDITORS
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall
review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of auditors when
circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management and general audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to Audit Committees in accordance with
AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
LEGAL COMPLIANCE
11. On at least an annual basis, review with the Company's counsel,
any legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
12. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in
the Company's annual proxy statement.
13. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the Board
deems necessary or appropriate.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
15. Annually review policies and procedures as well as audit results
associated with directors' and officers expense accounts and
perquisites. Annually review a summary of director and officers'
related party transactions and potential conflicts of interest.
16. Establish, review, and update periodically a Code of Ethical Conduct
and ensure that management has established a system to enforce this
Code.