SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [ X ]
Filed by 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
LIFESTREAM TECHNOLOGIES, INC.
(Name of Registrant as Specified in Its Charter
and of Person Filing Proxy Statement)
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 transactions
applies: (3) Per unit price or other underlying value of transaction
computed pursuant to
Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid
[ ] 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:
LIFESTREAM TECHNOLOGIES, INC.
510 Clearwater Loop, Suite 101, Post Falls, Idaho 83854
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 21, 2001
To our Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders ("Annual Meeting") of Lifestream Technologies, Inc. ("Company"), a
Nevada corporation, which will be held at West Coast Templin's Resort located at
414 East First Avenue, Post Falls, Idaho, on December 21, 2001 at 8:30 a.m.
Pacific Time, or at any and all adjournments thereof, for the following
purposes:
1. To elect three directors to the Company's Board of Directors
("Board");
2. To approve, in accordance with applicable requirements of the
American Stock Exchange, the issuance of more than 20% of the
Company's outstanding Common Stock, at a below-market price, upon
the possible conversion of outstanding Convertible Term Notes and
exercise of detachable stock purchase Warrants;
3. To ratify the appointment of BDO Seidman, LLP as the Company's
independent public accountants for the fiscal year ending June
30, 2002; and
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
These matters are more fully discussed in the Proxy Statement
accompanying this Notice.
The Board has fixed the close of business on October 19, 2001 as the
record date for determining those stockholders who will be entitled to notice
of, and to vote at, the Annual Meeting. The stock transfer books will not be
closed between the record date and the date of the meeting.
Representation of at least a majority of the outstanding shares of the
Company's Common Stock entitled to vote, whether present in person or
represented by proxy, is required to constitute a quorum. Accordingly, it is
important that your shares be represented at the meeting. THE PROMPT RETURN OF
PROXIES WILL SAVE YOUR COMPANY THE EXPENSE OF FURTHER REQUESTS IN ORDER TO
OBTAIN A QUORUM. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
Your proxy may be revoked at any time prior to the time it is voted. You may
also revoke your proxy by attending the meeting and voting in person.
The financial statements of the Company for the most recently completed
fiscal year ended June 30, 2001 are contained in the accompanying Annual Report
on Form 10-KSB, which are incorporated herein by reference to the Company's Form
10-KSB filed October 12, 2001.
Please read the proxy materials carefully. Your vote is important and
the Company appreciates your cooperation in considering and acting on the
matters presented.
Very truly yours,
/s/ Christopher Maus
------------------------------------------
Christopher Maus, Chairman of the Board of
Directors, President and Chief Executive
Officer
Post Falls, Idaho
October 22, 2001
Stockholders Should Read The Entire Proxy Statement
Carefully Prior To Returning Their Proxies
PROXY STATEMENT FOR THE 2001 ANNUAL MEETING OF STOCKHOLDERS OF
LIFESTREAM TECHNOLOGIES, INC.
To Be Held December 21, 2001
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors ("Board") of Lifestream Technologies, Inc.
("Company"), a Nevada corporation, of proxies to be voted at the 2001 Annual
Meeting of Stockholders ("Annual Meeting") to be held at West Coast Templin's
Resort located at 414 East First Avenue, Post Falls, Idaho on December 21, 2001
at 8:30 a.m. Pacific Time or at any and all adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders ("Notice"). The Annual Report on Form 10-KSB of the Company for
the most recently completed fiscal year ended June 30, 2001 ("Fiscal 2001") is
being mailed together with this Proxy Statement and form of Proxy. This Proxy
Statement and the proxy card were first mailed to stockholders on or about
November 9, 2001.
VOTING RIGHTS AND SOLICITATION
The close of business on October 19, 2001 was the record date for
stockholders entitled to notice of, and to vote at, the Annual Meeting. As of
that date, 20,394,790 shares of the Company's common stock, $.001 par value per
share ("Common Stock"), were issued and outstanding. The Company did not have
any other class of equity securities outstanding as of the record date. All
shares of the Company's Common Stock outstanding on the record date are entitled
to vote at the Annual Meeting, and stockholders of record entitled to vote at
the Annual Meeting will have one vote for each share so held on the matters to
be voted upon.
Management does not know of any matters to be presented at the Annual
Meeting other than those set forth in this Proxy Statement and accompanying
Notice. If other matters should properly come before the Annual Meeting, the
proxy holders will vote on such matters in accordance with their best judgment.
Any stockholder has the right to revoke his or her proxy at any time before it
is voted by either delivering to the Company at its principal executive offices
at 510 Clearwater Loop, Suite 101, Post Falls, Idaho 83854, Attn: Chief
Financial Officer, a written notice of revocation or duly executed proxy bearing
a later date or by attending the Annual Meeting and voting in person. Approval
of each of the above proposals shall be determined by a majority of the votes
cast by the stockholders entitled to vote at the election present in person or
represented by proxy.
The quorum necessary to conduct business at the Annual Meeting consists
of a majority of the outstanding Common Stock of the Company as of the record
date. Abstentions and broker non-votes are counted and included in the
determination of the number of shares present for quorum purposes but are
excluded in tabulating the vote for directors and in the determination of
whether a proposal has been approved.
The cost of this solicitation will be borne by the Company. Proxies
will be solicited principally through the use of the mails, but, if deemed
desirable, may be solicited personally or by telephone, electronic mail,
telegraph, or personal interview by directors, officers and employees of the
Company for no additional compensation. Arrangements may be made with brokerage
houses and other custodians, nominees and fiduciaries to send proxies and proxy
material to the beneficial owners of the Company's Common Stock, and such
persons may be reimbursed for their expenses.
PROPOSAL 1
ELECTION OF DIRECTORS
Each member of the Board ("Director") is assigned to one of two
classes. One class is elected at each successive Annual Meeting to hold office
for a two-year term and until successors for such class have been qualified and
elected, or until the death, resignation or removal of any such Director.
Election to the Board requires the approval of a majority of the shares voting,
assuming a quorum of the outstanding shares are present or represented at the
Annual Meeting. Currently, the Board consists of six Directors. The current
Class II nominees to the Board are set forth below. Proxies solicited by the
Board and returned in the accompanying form will be voted in accordance with
each respective shareholder's instructions. Any returned proxies that do not set
forth a shareholder's instructions will be voted by the proxy holders for the
nominees for Director listed below. In the event that any other Director is
unable, or declines, to serve as a Director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board to fill the vacancy, or alternatively, the Board may reduce the number of
directors to eliminate the vacancy. In the event that additional persons are
nominated for election as Directors, the proxy holders intend to vote all
proxies received by them for each nominee listed below. As of the date of this
Proxy Statement, the Board is not aware of any nominee that is unable or
unwilling to serve as a Director.
The Company's Board recommends that stockholders vote FOR the nominees
listed below.
Class and Year
Director in Which Term
Name Principal Occupation(s) Since Will Expire Age
---- ----------------------- ----- ------- ---
Robert Boyle............... Certified Public Accountant, Secretary 1999 Class II - 2003 55
and Treasurer of the Company;
William Gridley........... Retired Corporate Executive 1997 Class II - 2003 72
Boyd D. Lyles, Jr.......... President of LylesMed, Inc. 2001 Class II - 2003 52
Robert Boyle has served as a Director since June 1999, at which time he
was also appointed as the Company's Secretary and Treasurer. Since 1995, Mr.
Boyle has served as President of Robert Boyle, Certified Public Accountant, a
local public accounting firm located in Idaho. From 1980 to 1995, Mr. Boyle
served as President of Boyle and Stoyle, Certified Public Accountants, a local
public accounting firm, located in California. Prior thereto, Mr. Boyle served
with the consulting, tax and audit staffs of a predecessor to KPMG, a major
international accounting and consulting firm. Mr. Boyle has a Bachelor of Arts
degree in accounting from San Diego State University and is licensed as a
Certified Public Accountant in the State of Idaho.
William Gridley has served as a Director since April 1997. Since
November 1995, Mr. Gridley has served as the Chairman of the Board of Directors
of Hymedix Inc., a privately held polymer chemicals company, for which he
previously served as its President and Chief Executive Officer from August 1993
to November 1995. Since 1980, Mr. Gridley has also continuously served as either
Chairman or Vice-Chairman of Tuskegee University's FinanceCommittee. Mr. Gridley
has a Bachelor of Arts degree from Yale University.
Boyd D. Lyles, Jr., a licensed medical doctor, has served as Chairman
of the Company's Medical Advisory Board since its establishment in June 2001. In
July 2001, Dr. Lyles founded LylesMed Inc., a privately held company
specializing in preventative medicine and corporate executive health programs,
for which he serves as its President. From 1984 to 2001, Dr. Lyles served as
Associate Medical Director for the Cooper Clinic, a prominent preventive
medicine clinic. During his tenure with the Cooper Clinic, Dr. Lyles also served
in various affiliated roles with The Cooper Aerobics Center, including Medical
Director of its Living Lean Weight Control Program from 1988 to 1990 and
Director of its Cardiac Rehabilitation
-2-
Program from 1984 to 1986. Prior to joining the Cooper Clinic, Dr. Lyles was in
the private practice of internal medicine. Dr. Lyles has a medical degree from
the University of Texas Medical School at Galveston and performed his internal
medicine residency at the University of Oklahoma Medical College.
Directors Not Standing For Election
Directors not standing for election at this year's Annual Meeting, but
who will serve for another year, are set forth below.
Class and Year
Director in Which Term
Name Principal Occupation(s) Since Will Expire Age
- ---- ----------------------- ----- ------ ---
Christopher Maus.......... President, Chief Executive Officer and 1994 Class I - 2002 48
Chairman of the Board
Michael Crane............. Chief Executive Officer and Chairman of 1998 Class I - 2002 46
the Board of Dulles Greenway, Trip II
(Toll Investors Partnership II, L.P.);
President of Alchemy International
David M. Hurley........... Chief Executive Officer of HealthNexis 2000 Class I - 2002 42
Christopher Maus has served as the Company's President, Chief Executive
Officer and Chairman of the Board since February 1994, except for a brief period
from September 1998 to March 1999 when he served only as Chairman of the Board.
From June 1996 until its acquisition by the Company in September 1999, Mr. Maus
served on the Board of Directors of Secured Interactive Technologies, Inc., a
privately held company co-founded by Mr. Maus that developed the Company's
Privalink software technology. From June 1992 to February 1994, Mr. Maus served
as President of Lifestream Diagnostics, Inc., the privately held legal
predecessor to the Company. From 1989 to June 1992, Mr. Maus was a General
Partner in Lifestream Development Partners, the privately held legal predecessor
to Lifestream Diagnostics, Inc. Mr. Maus attended North Texas State University.
Michael Crane has served as a Director since April 1998. Since
September 1993, Mr. Crane has served as Chief Executive Officer and Chairman of
the Board of Directors of privately held Dulles Greenway, Trip II (Toll
Investors Partnership II, L.P.). Since October 1996, Mr. Crane has also served
as President of Alchemy International, a privately held developer of
non-evasive, passive chemistry treatments for various forms of cancer. Mr. Crane
has also served on the Board of Directors of Discflo Corporation, a privately
held manufacturer of medical and industrial pumps, since 1988, and as Chairman
of the Board of Directors for Lochnau, Inc., a privately held investment
management corporation, since 1985. Mr. Crane has a Bachelor of Science degree
in Banking from the University of Richmond.
David M. Hurley has served as a Director since September 2000. Since
June 2000, Mr. Hurley has served as Chief Executive Officer of HealthNexis, a
privately held company that develops and markets technological solutions for
healthcare product and contract information. From January 1999 to May 2000, Mr.
Hurley served as President, Chief Executive Officer and a member of the Board of
Directors of Geneva Pharmaceuticals Inc., a subsidiary of publicly held Novartis
Corporation. From November 1994 to January 1999, Mr. Hurley served as President,
Chief Executive Officer and a member of the Board of Directors of Norvartis
Nutrition, a subsidiary of Novartis Corporation. Mr. Hurley has a Masters degree
in International Management from the American Graduate School of International
Management and a Bachelor of Arts degree in General Studies from the University
of Iowa.
-3-
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are set forth below:
Name Age Position(s) Held
- ---- --- ----------------
Christopher Maus 48 President, Chief Executive Officer and Chairman of
the Board
Robert Boyle 55 Director, Secretary and Treasurer
Michael Crane 46 Director
William Gridley 72 Director
David M. Hurley 42 Director
Boyd D. Lyles, Jr. 52 Director
Edward Siemens 47 Chief Operating Officer - Devices
Paul Beatty 54 Vice President - Consumer Sales
Douglas Robinson 42 Chief Operating Officer - The Data Concern &
Business Development
Brian Packard 31 Vice President - Marketing
Brett Sweezy 36 Chief Financial Officer
Ken Clegg 32 Chief Technology Officer
Robert Presutti 49 Vice President - Professional Sales
Jackson Connolly 53 Vice President - Product Development
Edward Siemens has served as Chief Operating Officer - Devices since
joining the Company in August 2000. From April 1999 to June 2000, Mr. Siemens
served as President of Omron Healthcare, Inc. ("Omron"), a publicly held
manufacturer and marketer of personal-use medical diagnostic products. Mr.
Siemens previously served as Omron's Senior Vice President of Sales and
Marketing from April 1994 to April 1999 and as Omron's Vice President of Sales
and Marketing from April 1992 to April 1994. Prior thereto, Mr. Siemens was
employed by McKesson Corporation, a publicly held wholesale distributor of
medical products and supplies, where he served as Vice President of Sales from
1987 to 1992 and as Product Manager from 1985 to 1987. Mr. Siemens has a Masters
degree in Business Administration from Pepperdine University and a Bachelor of
Fine Arts degree from the California College of Arts and Crafts.
Paul Beatty has served as Vice President - Consumer Sales since joining
the Company in October 2000. From July 1994 to September 2000, Mr. Beatty served
as Director of Retail Sales for Optiva Corporation, privately held manufacturer
and marketer of the Sonicare sonic toothbrush. From 1992 to 1994, Mr. Beatty
served as National Accounts Manager for High Performance Appliances, a privately
held marketer of consumer appliances. From 1988 to 1992, Mr. Beatty served as
National Field Sales Manager for Hamilton Beach, Inc., a publicly held marketer
of consumer household appliances. Mr. Beatty has a Bachelor of Arts degree in
Business and Economics from Central Washington University.
-4-
Douglas Robinson has served as Chief Operating Officer - The Data
Concern since joining the Company in September 2000. In June 2001, Mr. Robinson
was additionally given primary responsibility for the Company's Business
Development functions. From September 1996 to September 2000, Mr. Robinson
served as Vice President of Sales and Marketing for Source Information
Management Co./Myco, Inc., a publicly held company specializing in the
management of retail categories and the design and manufacturing of custom store
fixtures and point-of-purchase displays. From 1991 to 1996, Mr. Robinson served
in various positions at Newell Company, a publicly held manufacturer and
marketer of various consumer household products. Mr. Robinson has a Bachelor of
Science degree in Construction Management from Washington State University.
Brian Packard has served as Vice President - Marketing since June 2001.
Prior thereto, Mr. Packard served as Vice President - Business Development since
joining the Company in September 2000. From August 1999 to September 2000, Mr.
Packard served as Market Development Manager for the New Ventures Division of
publicly held Agilent Technologies. Mr. Packard, as an inaugural member of
Agilent's consumer healthcare initiative, was responsible for conducting market
research to identify unmet health monitoring needs, preparing a business plan
for the launch of a new consumer-focused chronic disease management service, and
developing various business partnerships. From August 1997 to August 1999, Mr.
Packard served as Product Manager of ThermScan Professional, a division of The
Gillette Company, a publicly held consumer products company. From March 1996 to
July 1997, Mr. Packard served as an Assistant Brand Manager for Bayer
Corporation, a publicly held pharmaceutical company. Mr. Packard has a Masters
degree in Business Administration, with majors in Marketing and International
Business, and a Bachelor of Science degree in Business Administration, from the
University of Notre Dame.
Brett Sweezy has served as Chief Financial Officer since joining the
Company in June 1999. From June 1996 until its acquisition by the Company in
September 1999, Mr. Sweezy served as Chief Financial Officer and Treasurer of
Secured Interactive Technologies, Inc. From March 1994 to August 2000, Mr.
Sweezy also served as President of Brett R. Sweezy, Certified Public Accountant,
P.A., a local public accounting firm, located in Idaho. Mr. Sweezy has a
Bachelor of Science degree in Economics and Business from the New England
College and is licensed as a Certified Public Accountant in the State of Idaho.
Ken Clegg has served as Chief Technology Officer since joining the
Company in July 1998. Mr. Clegg also continues to serve, as he has since 1994,
as a professional consultant to Interlink Services, a privately held regional
Internet service provider, advising on website development projects and on
marketing and sales strategies. From May 1997 to October 1999, Mr. Clegg
co-owned 5Away, a privately held developer and marketer of Internet-based
advertising solutions. In 1992, Mr. Clegg founded Clegg Enterprises, a privately
held developer and marketer of database driven interactive Internet-based web
sites, which he continues to own. Mr. Clegg has a Bachelor of Arts degree, with
majors in Computer Science, Mathematics, and Education, from Whitworth College.
Robert Presutti has served as Vice President - Professional Sales since
joining the Company in March 2001. Prior to joining the Company, Mr. Presutti
was employed by Optiva Corporation, privately held manufacturer and marketer of
the Sonicare sonic toothbrush, where he served as Director of Professional Sales
from March 1996 to March 2001 and as National Sales Manager from March 1995 to
March 1996. From September 1990 to February 1995 , Mr. Presutti held various
sales management positions with publicly held ThermoScan, Inc., where he helped
launch both the consumer and professional versions of the ThermoScan infrared
ear thermometer. From December 1983 to August 1990, Mr. Presutti held various
positions with Nortech, a division of Medtronic, a publicly held company devoted
to providing lifelong medical solutions for individuals with chronic diseases.
From February 1982 to December 1983, Mr. Presutti served as an independent sales
representative for Marquest Medical Products, a division of Vital Signs, a
publicly held company that develops, manufactures and markets single-use medical
products for anesthesia and critical care. Mr. Presutti has a Bachelor of Arts
degree in Business Administration from Monmouth College.
-5-
Jackson Connolly has served as Vice President - Product Development
since November 2000. Mr. Connelly previously served as the Company's Vice
President - Operations from January 1998 to November 2000 and as Director of
Operations from January 1997 to January 1998. Prior to joining the Company, Mr.
Connolly served as a Senior Sales Engineer at Advanced Input Devices, a
subsidiary of publicly held Esterline Technologies, from January 1994 to April
1997. Mr. Connolly has a combined Bachelor of Arts and Science degree in
Industrial Technology and Arts from California State University at Fresno.
There are no family relationships among any of the Company's directors and
executive officers.
BOARD MEETINGS AND COMMITTEES
The Company's Board held a total of six meetings during fiscal 2001 for
which there was 100% attendance by its members. The Board's Audit Committee held
a total of three meetings during fiscal 2001 for which there was 100% attendance
by its members. The Compensation Committee held a total of four meetings during
fiscal 2001 for which there was 100% attendance by its members
The Audit Committee primarily is responsible for recommending to the
Board the appointment of the Company's independent public accountants, reviewing
and approving the scope of audit and review activities to be performed by the
independent public accountants, reviewing significant accounting policies,
practices and controls, performing independent director duties and reviewing
audit and review results. The Audit Committee currently consists of William
Gridley (Chairman), Michael Crane and David Hurley.
The Compensation Committee primarily is responsible for reviewing and
recommending to the Board the compensation structure for the Company's Board
members and executive officers, including salary rates, participation in
incentive compensation and benefit plans and other forms of compensation, and
administering the Company's stock option plans. The Compensation Committee
similarly reviews and approves the compensation of other management personnel.
The Compensation Committee is currently comprised of Michael Crane (Chairman),
Robert Boyle and David Hurley.
DIRECTOR REMUNERATION
In April 1998, the Board adopted the recommendation of its Compensation
Committee that each employee and non-employee member of the Board be
prospectively compensated with 2,000 shares of the Company's Common Stock for
each month of Board service. In April 2001, the Board adopted the recommendation
of its Compensation Committee to retroactively terminate the existing Board
compensation plan effective January 1, 2001 and to alternatively grant,
retroactive to January 1, 2001, each employee and non-employee member of the
Board stock options exercisable for 72,000 common shares at $1.50 per share.
Each option vests, and becomes exercisable, on a ratable basis over the
subsequent twenty-four (24) months of Board service, with any unexercised
options to expire on January 1, 2011. Directors currently receive no additional
compensation for service on the Board's Audit and Compensation Committees.
Audit Committee Report on the Fiscal Year Ended June 30, 2001
The Audit Committee is comprised solely of independent, non-employee
directors, as the term "independent" is proscribed by the American Stock
Exchange ("AMEX"). The Audit Committee is currently governed by a written
charter adopted and approved by the Board on February 27, 2001, a copy of which
is attached as Appendix A to this Proxy Statement. The Company's management is
responsible for the Company's internal controls and financial reporting
-6-
processes. The Company's independent public accountants, BDO Seidman, LLP, are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America and to issue a report thereon. The independent
public accountants have full and unimpeded access to the Audit Committee and
periodically meet with the Audit Committee, without management being present, to
discuss appropriate matters.
Based on its (i) review of the audited consolidated financial
statements, (ii) its discussions with management regarding the audited
consolidated financial statements, (iii) its receipt from BDO Seidman, LLP of
disclosures and the letter required by Independence Standards Board Standard No.
1, and (iv) its discussions with BDO Seidman, LLP regarding their independence,
the audited financial statements, the matters required to be discussed by the
Statement on Auditing Standards No. 61, as amended, and other matters, the Audit
Committee recommended to the Board that the audited consolidated financial
statements for the fiscal year ended June 30, 2001 be included in the Company's
Annual Report on Form 10-KSB for such fiscal year.
October 10, 2001
FROM THE MEMBERS OF THE AUDIT COMMITTEE
William Gridley
Michael Crane
David M. Hurley
-7-
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT (1)
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 19, 2001 by (i)
each person known by the Company to be the beneficial owner of more than five
percent of the outstanding shares of Common Stock, (ii) each director and
nominee for director, (iii) each officer listed in the Summary Compensation
Table of the section of this Proxy Statement entitled "Executive Compensation"
and (iv) all current directors and executive officers as a group. A person is
also deemed to be a beneficial owner of any securities to which the person has
the right to acquire beneficial ownership within 60 days. All shares are subject
to the named person's sole voting and investment power unless otherwise
indicated.
Shares Percent of Shares
Beneficially Beneficially
Name and Address Of Beneficial Owner (2) Owned Owned (3)
- --------------------------------------------- ---------------- ----------------
Directors and Officers:
Christopher Maus (4)..................... 3,052,950 14.66%
Michael Crane (5)........................ 1,250,973 5.93%
Robert Boyle (6)......................... 219,200 1.07%
William Gridley (7)...................... 166,000 Less than 1%
David M. Hurley (8)...................... 60,000 Less than 1%
Boyd D. Lyles, Jr. (9)................... 4,164 Less than 1%
Edward Siemens (10)...................... 81,885 Less than 1%
Paul Beatty (11)......................... 78,806 Less than 1%
Douglas Robinson (12).................... 41,250 Less than 1%
Brian Packard (12)....................... 41,250 Less than 1%
Brett Sweezy (13)........................ 181,402 Less than 1%
Ken Clegg (14)........................... 71,941 Less than 1%
Robert Presutti (15)..................... 35,000 Less than 1%
Jackson Connolly (16).................... 120,871 Less than 1%
----------- ---------------
All Directors and Officers as a Group
(14 persons) (17)....................... 5,405,692 24.36%
----------- ---------------
Other Beneficial Owners:
- ------------------------
RAB Europe Fund Limited (18)............. 7,189,699 26.49%
c/o RAB Capital Limited
No. 1 Adam Street
London W2CN 6LE
United Kingdom
-8-
RAB Europe Partners (19)................. 1,439,501 6.62%
c/o RAB Capital Limited
No. 1 Adam Street
London W2CN 6LE
United Kingdom
Mercer Management (20)................... 2,955,393 13.60%
5820 East Mercer Way
Seattle, WA 98040
Commodity Management and Research, Inc... 1,500,750 7.36%
1050 17th Street, Suite 2000
Denver, Colorodo 80265
- ---------------------
(1) Based upon information furnished to the Company by the beneficial
owners or otherwise obtained from the stock transfer books of the
Company.
(2) Unless otherwise indicated, the business address for each beneficial
owner is c/o Lifestream Technologies, Inc., 510 Clearwater Loop,
Suite 101, Post Falls, Idaho 83854.
(3) Percentage of ownership includes 20,394,790 actual shares of Common
Stock outstanding on October 19, 2001. Shares of Common Stock subject
to stock options or warrants that are currently exercisable or will
become exercisable within 60 days after October 19, 2001, and shares of
Common Stock subject to convertible term notes that are currently
convertible or will become convertible within 60 days of October 19,
2001, are deemed outstanding for computing the beneficial ownership
percentage of the person or group holding such options, warrants and
notes, but are not deemed outstanding for computing the percentage of
any other person or group.
(4) Includes 430,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(5) Includes 227,295 shares issuable upon exercise of options and warrants
that are currently exercisable or will become exercisable within 60
days after October 19, 2001. Also includes 469,984 shares issuable upon
conversion of convertible term notes that are currently convertible or
will become convertible within 60 days after October 19, 2001. Excludes
152,000 common shares held by Lochnau, Inc., a privately held
investment management corporation for which Mr. Crane serves as
Chairman of the Board of Directors, to which Mr. Crane disclaims any
beneficial ownership.
(6) Includes 80,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(7) Includes 30,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(8) Includes 60,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(9) Includes 4,164 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(10) Includes 77,500 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
-9-
(11) Includes 59,375 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(12) Includes 41,250 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(13) Includes 94,263 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(14) Includes 71,941 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(15) Includes 30,000 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(16) Includes 79,871 shares issuable upon exercise of options that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001.
(17) Includes 1,326,909 shares issuable upon exercise of options and
warrants that are currently exercisable or will become exercisable
within 60 days after October 19, 2001. Also includes 469,984 shares
issuable upon conversion of convertible term notes that are currently
convertible or will become convertible within 60 days after October 19,
2001.
(18) Includes 2,250,000 shares issuable upon exercise of warrants that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001. Also includes 4,500,000 shares issuable upon
conversion of convertible term notes that are currently convertible or
will become convertible within 60 days after October 19, 2001.
(19) Includes 450,000 shares issuable upon exercise of warrants that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001. Also includes 900,000 shares issuable upon conversion
of convertible term notes that are currently convertible or will become
convertible within 60 days after October 19, 2001.
(20) Includes 586,667 shares issuable upon exercise of warrant that are
currently exercisable or will become exercisable within 60 days after
October 19, 2001. Also includes 750,000 shares issuable upon conversion
of convertible term notes that are currently convertible or will become
convertible within 60 days after October 19, 2001
-10-
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth certain information regarding
compensation earned by the Company's Chief Executive Officer and each of the
Company's four other most highly compensated executive officers for the fiscal
year ended June 30, 2001, the fiscal year ended June 30, 2000 and the
twelve-month fiscal period ended June 30, 1999. The persons named in the table
are hereinafter referred to as the "Named Executive Officers."
Summary Compensation Table
--------------------------
Long Term
Compensation -
Annual Compensation Awards
------------------- ------
Fiscal Securities All Other
Name and Year Salary Bonus Other Underlying Compen-sation
Principal Position(s) (1)(2) ($) ($) ($) Options (#) ($)
- --------------------- ------ --- --- --- ----------- ---
Christopher Maus............... 2001 $150,000 $35,000 $12,000 872,000 --
President, Chief Executive 2000 150,000 -- 27,000 250,000 --
Officer and Chairman of the 1999 99,460 69,455 25,800 -- --
Board (3)(4)
Edward Siemens................. 2001 102,731 -- 15,000 360,000 --
Chief Operating Officer - 2000 -- -- -- -- --
Devices (5) 1999 -- -- -- -- --
Paul Beatty....................... 2001 84,997 -- 15,000 300,000 --
Vice President - Consumer 2000 -- -- -- -- --
Sales (6) 1999 -- -- -- -- --
Doug Robinson.................. 2001 80,025 -- 15,000 240,000 --
Chief Operating Officer - 2000 -- -- -- -- --
The Data Concern and 1999 -- -- -- -- --
Business Development (7)
Brian Packard.................... 2001 78,333 -- 15,000 240,000 --
Vice President - Marketing 2000 -- -- -- -- --
(8) 1999 -- -- -- -- --
- --------------------------
(1) References to a fiscal year refer to the calendar year in which such fiscal
year ends. Fiscal years 2001 and 2000 ended on June 30th.
(2) On July 2, 1999, the Company changed its fiscal year-end from December 31st
to June 30th, beginning with and retroactively effective for the six-month
transition period ended June 30, 1999. So as to facilitate comparability
and present a consecutive three-year period ended June 30, 2001, the above
fiscal year 1999 periods actually represent a composite of the last six
months of the fiscal year ended December 31, 1998 and the subsequent
six-month transition period ended June 30, 1999.
(3) The Board, acting upon the recommendation of its Compensation Committee,
executed an employment agreement on behalf of the Company with Mr. Maus on
May 1, 2001 that formally established his annual salary at $150,000 for the
fiscal year ending June 30, 2001 and granted him 800,000 stock options with
an exercise price of $1.50 per common share that vest, and become
exercisable, as follows: 100,000 on December 31, 2001, 100,000 on December
31, 2002, 100,000 on December 31, 2003, 100,000 on December 31, 2004,
-11-
100,000 upon the Company achieving a $100 million market capitalization,
100,000 upon the Company achieving a $200 million market capitalization,
and 200,000 upon the Company achieving a $400 million market
capitalization, with any unexercised options to expire on May 1, 2011. On
January 3, 2000, the Board, acting upon the recommendation of its
Compensation Committee, granted Mr. Maus 250,000 stock options with an
exercise price of $1.50 per common share that vest, and become exercisable,
as follows: 50,000 immediately, 50,000 on January 3, 2001, 50,000 on
January 3, 2002, 50,000 on January 3, 2003, an 50,000 on January 3, 2004,
with any unexercised options to expire on January 3, 2010. The Board,
acting upon the recommendation of its Compensation Committee, has increased
Mr. Maus' annual salary to $180,000 for the fiscal year ending June 30,
2002.
(4) In connection with his Board service, Mr. Maus received a grant, effective
January 1, 2001, for 72,000 stock options with an exercise price of $1.50
per common share that vest, and become exercisable, on a ratable monthly
basis over with his subsequent twenty-four months of Board service, with
any unexercised options to expire on January 1, 2011. The Other Annual
Compensation amounts represent the then aggregate fair market value of
12,000, 24,000 and 24,000 common shares awarded to Mr. Maus for his Board
service during the six months ended December 31, 2000, fiscal year ended
June 30, 2000 and fiscal year ended June 30, 1999, respectively.
(5) Mr. Siemens' employment with the Company began on August 21, 2000 pursuant
to a Board-approved compensation package providing him with an initial
annual salary of $125,000, an initial grant of 300,000 stock options with
an exercise price of $3.00 per common share and a $15,000 relocation
allowance. The stock options, which were formally granted on October 4,
2000, vest and become exercisable, as follows: 50,000 immediately, 12,500
on October 4, 2001, 40,000 on December 31, 2001, 12,500 on October 4, 2002,
40,000 on December 31, 2002, 12,500 on October 4, 2003, 40,000 on December
31, 2003, 12,500 on October 4, 2004, 40,000 on December 31, 2004 and 40,000
on December 31, 2005, with any unexercised options to expire on October 4,
2010. On May 1, 2001, Mr. Siemens received an additional grant of 60,000
stock options with an exercise price of $1.50 per common share that vest,
and become exercisable, as follows: 15,000 immediately, 15,000 on December
31, 2001, 15,000 on December 31, 2002 and 15,000 on December 31, 2003, with
any unexercised options to expire on May 1, 2011. The Board, acting upon
the recommendation of its Compensation Committee, has increased Mr.
Siemens' annual salary to $150,000 for the fiscal year ending June 30,
2002.
(6) Mr. Beatty's employment with the Company began on October 1, 2000 pursuant
to a Board-approved compensation package providing him with an initial
annual salary of $120,000, an initial grant of 250,000 stock options with
an exercise price of $3.00 per common share and a $15,000 relocation
allowance. The stock options, which were formally granted on October 4,
2000, vest and become exercisable, as follows: 37,500 immediately, 9,375 on
October 4, 2001, 35,000 on December 31, 2001, 9,375 on October 4, 2002,
35,000 on December 31, 2002, 9,375 on October 4, 2003, 35,000 on December
31, 2003, 9,375 on October 4, 2004, 35,000 on December 31, 2004, and 35,000
on December 31, 2005, with any unexercised options to expire on October 4,
2010. On May 1, 2001, Mr. Beatty received an additional grant of 50,000
stock options with an exercise price of $1.50 per common share that vest,
and become exercisable, as follows: 12,500 immediately, 12,500 on December
31, 2001, 12,500 on December 31, 2002 and 12,500 on December 31, 2003, with
any unexercised options to expire on May 1, 2011. The Board, acting upon
the recommendation of its Compensation Committee, has increased Mr.
Beatty's annual salary to $145,000 for the fiscal year ending June 30,
2002.
(7) Mr. Robinson's employment with the Company began on September 25, 2000
pursuant to a Board-approved compensation package providing him with an
initial annual salary of $110,000, an initial grant of 200,000 stock
options with an exercise price of $3.00 per common share and a $15,000
reloaction allowance. The stock options, which were formally granted on
October 4, 2000, vest and become exercisable, as follows: 25,000
immediately, 6,250 on October 4, 2001, 30,000 on December 31, 2001, 6.250
on October 4, 2002, 30,000 on December 31, 2002, 6,250 on October 4, 2003,
30,000 on December 31, 2003, 6,250 on October 4, 2004, 30,000 on
-12-
December 31, 2004, and 30,000 on December 31, 2005, with any unexercised
options to expire on October 4, 2010. On May 1, 2001, Mr. Robinson received
an additional grant of 40,000 stock options with an exercise price of $1.50
per common share that vest, and become exercisable, as follows: 10,000
immediately, 10,000 on December 31, 2001, 10,000 on December 31, 2002 and
10,000 on December 31, 2003, with any unexercised options to expire on May
1, 2011. The Board, acting upon the recommendation of its Compensation
Committee, has increased Mr. Robinson's annual salary to $138,000 for the
fiscal year ending June 30, 2002.
(8) Mr. Packard's employment with the Company began on October 1, 2000 pursuant
to a Board-approved compensation package providing him with an initial
annual salary of $110,000, an initial grant of 200,000 stock options with
an exercise price of $3.00 per common share and a $15,000 home office
allowance. The stock options, which were formally granted on October 4,
2000, vest and become exercisable, as follows: 25,000 immediately, 6,250 on
October 4, 2001, 30,000 on December 31, 2001, 6.250 on October 4, 2002,
30,000 on December 31, 2002, 6,250 on October 4, 2003, 30,000 on December
31, 2003, 6,250 on October 4, 2004, 30,000 on December 31, 2004, and 30,000
on December 31, 2005, with any unexercised options to expire on October 4,
2010. On May 1, 2001, Mr. Packard received an additional grant of 40,000
stock options with an exercise price of $1.50 per common share that vest,
and become exercisable, as follows: 10,000 immediately, 10,000 on December
31, 2001, 10,000 on December 31, 2002 and 10,000 on December 31, 2003, with
any unexercised options to expire on May 1, 2011. The Board, acting upon
the recommendation of its Compensation Committee, has increased Mr.
Packard's annual salary to $138,000 for the fiscal year ending June 30,
2002.
-13-
Stock Options
The Company has reserved 600,000 shares of its Common Stock for
issuance upon the exercise of options granted or available for grant under its
1993 Incentive Stock Option Plan ("1993 Plan"). The 1993 Plan is administered by
either the Board of Directors, or its Compensation Committee, which determines,
without limitation, the selection of the persons who will be granted options
under the 1993 Plan, the number of optioned shares and the option exercise price
per share. Options granted under the 1993 Plan fall within the meaning of, and
conform to, Section 422 of the Internal Revenue Code of 1986, as amended. Under
the terms of the 1993 Plan, all officers, employees, consultants, and advisors
of the Company are eligible for incentive stock options. The Board of Directors
determines at its discretion which persons receive incentive stock options, the
applicable vesting provisions, and the exercise terms thereof. The terms and
conditions of each option grant may differ and will be set forth in the
optionee's individual incentive stock option agreement. As of October 19, 2001,
the Company has not granted any options under the 1993 Plan.
The Company has reserved 2,000,000 shares of its Common Stock for
issuance pursuant to stock options or stock appreciation rights granted under
its 1998 Employee Stock Option Plan ("1998 Plan"). The 1998 Plan is administered
by either the Board of Directors, or its Compensation Committee, which
determines, without limitation, the selection of the persons who will be granted
options under the 1998 Plan, the type of options to be granted, the number of
optioned shares and the option exercise price per share. The terms and
conditions of each option grant may differ and will be set forth in the
optionee's individual stock option agreement. Officers, directors, key employees
and consultants of the Company and its subsidiaries are eligible to receive
non-qualified stock options under the 1998 Plan. Only officers, directors and
employees of the Company or its subsidiaries are eligible to receive incentive
stock options. As of October 19, 2001, the Company had issued 1,639,926 options,
with 257,949 of these options vested and exercisable, under the 1998 ISOP Plan.
The following table contains information concerning stock options
granted to the Named Executive Officers during the most recently completed
fiscal year ended June 30, 2001. All grants were made under the Company's 1998
Employee Stock Option Plan.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to Exercise or
Name Option/SARs Employees in Base Price Expiration
Granted (#) Fiscal Year (%) ($/Share) Date
- ------------------------------------ ---------------- ------------------- ---------------- ----------------
Christopher Maus (1)(2)......... 800,000 30.46% $1.50 2/15/11
72,000 2.74% $1.50 1/01/11
Edward Siemens (3).............. 300,000 11.42% $3.00 10/4/10
60,000 2.28% $1.50 5/1/11
Paul Beatty (4)................. 250,000 9.52% $3.00 10/4/10
50,000 1.90% $1.50 5/1/11
Doug Robinson (5)............... 200,000 7.62% $3.00 10/4/10
40,000 1.52% $1.50 5/1/11
Brian Packard (6)............... 200,000 7.62% $3.00 10/4/10
40,000 1.52% $1.50 5/1/11
- --------------------------
(1) The Board, acting upon the recommendation of its Compensation
Committee, executed an employment agreement on behalf of the Company
with Mr. Maus on May 1, 2001 that included a grant of 800,000 stock
options with an exercise price of $1.50 per common share that vest, and
become exercisable, as follows: 100,000 on December 31, 2001, 100,000
on December 31, 2002, 100,000 on December 31, 2003, 100,000 on December
31, 2004, 100,000 upon the Company achieving a $100 million market
-14-
capitalization, 100,000 upon the Company achieving a $200 million
market capitalization, and 200,000 upon the Company achieving a $400
million market capitalization, with any unexercised options to expire
on May 1, 2011.
(2) In connection with his Board service, Mr. Maus received a grant,
effective January 1, 2001, for 72,000 stock options with an exercise
price of $1.50 per common share that vest, and become exercisable, on a
ratable monthly basis over with his subsequent twenty-four months of
Board service, with any unexercised options to expire on January 1,
2011.
(3) Mr. Siemens' employment with the Company began on August 21, 2000
pursuant to a Board-approved compensation package that included an
initial grant of 300,000 stock options with an exercise price of $3.00
per common share. The stock options, which were formally granted on
October 4, 2000, vest and become exercisable, as follows: 50,000
immediately, 12,500 on October 4, 2001, 40,000 on December 31, 2001,
12,500 on October 4, 2002, 40,000 on December 31, 2002, 12,500 on
October 4, 2003, 40,000 on December 31, 2003, 12,500 on October 4,
2004, 40,000 on December 31, 2004 and 40,000 on December 31, 2005, with
any unexercised options to expire on October 4, 2010. On May 1, 2001,
Mr. Siemens received an additional grant of 60,000 stock options with
an exercise price of $1.50 per common share that vest, and become
exercisable, as follows: 15,000 immediately, 15,000 on December 31,
2001, 15,000 on December 31, 2002 and 15,000 on December 31, 2003, with
any unexercised options to expire on May 1, 2011.
(4) Mr. Beatty's employment with the Company began on October 1, 2000
pursuant to a Board-approved compensation package that included an
initial grant of 250,000 stock options with an exercise price of $3.00
per common share. The stock options, which were formally granted on
October 4, 2000, vest and become exercisable, as follows: 37,500
immediately, 9,375 on October 4, 2001, 35,000 on December 31, 2001,
9.375 on October 4, 2002, 35,000 on December 31, 2002, 9,375 on October
4, 2003, 35,000 on December 31, 2003, 9,375 on October 4, 2004, 35,000
on December 31, 2004, and 35,000 on December 31, 2005, with any
unexercised options to expire on October 4, 2010. On May 1, 2001, Mr.
Beatty received an additional grant of 50,000 stock options with an
exercise price of $1.50 per common share that vest, and become
exercisable, as follows: 12,500 immediately, 12,500 on December 31,
2001, 12,500 on December 31, 2002 and 12,500 on December 31, 2003, with
any unexercised options to expire on May 1, 2011.
(5) Mr. Robinson's employment with the Company began on September 25, 2000
pursuant to a Board-approved compensation package that included an
initial grant of 200,000 stock options with an exercise price of $3.00
per common share. The stock options, which were formally granted on
October 4, 2000, vest and become exercisable, as follows: 25,000
immediately, 6,250 on October 4, 2001, 30,000 on December 31, 2001,
6.250 on October 4, 2002, 30,000 on December 31, 2002, 6,250 on October
4, 2003, 30,000 on December 31, 2003, 6,250 on October 4, 2004, 30,000
on December 31, 2004, and 30,000 on December 31, 2005, with any
unexercised options to expire on October 4, 2010. On May 1, 2001, Mr.
Robinson received an additional grant of 40,000 stock options with an
exercise price of $1.50 per common share that vest, and become
exercisable, as follows: 10,000 immediately, 10,000 on December 31,
2001, 10,000 on December 31, 2002 and 10,000 on December 31, 2003, with
any unexercised options to expire on May 1, 2011.
(6) Mr. Packard's employment with the Company began on October 1, 2000
pursuant to a Board-approved compensation package that included an
initial grant of 200,000 stock options with an exercise price of $3.00
per common share. The stock options, which were formally granted on
October 4, 2000, vest and become exercisable, as follows: 25,000
immediately, 6,250 on October 4, 2001, 30,000 on December 31, 2001,
6.250 on October 4, 2002, 30,000 on December 31, 2002, 6,250 on October
4, 2003, 30,000 on December 31, 2003, 6,250 on October 4, 2004, 30,000
on December 31, 2004, and 30,000 on December 31, 2005, with any
unexercised options to expire on October 4, 2010. On May 1, 2001, Mr.
Packard received an additional grant of 40,000 stock options with an
exercise price of $1.50 per common share that vest, and become
exercisable, as follows: 10,000 immediately, 10,000 on December 31,
2001, 10,000 on December 31, 2002 and 10,000 on December 31, 2003, with
any unexercised options to expire on May 1, 2011.
-15-
Option Exercises and Holdings
The following table provides information with respect to the Named
Executive Officers regarding exercises of options/SARs during the most recently
completed fiscal year ended June 30, 2001 and unexercised options/SARs held as
of June 30, 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
- --------------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-The-Money
Shares FY-End (#) Options/SARs at
Acquired FY-End (#)
on Value Exercisable/
Name Exercise Realized ($) Unexercisable Exercisable/
(#) Unexercisable (1)
- --------------------------- ------------ ------------- ------------------------- -----------------------
Christopher Maus...... -- -- 430,000/1,092,000 $36,000/$18,000
Edward Siemens....... -- -- 77,500/282,500 --
Paul Beatty............. -- -- 59,375/240,625 --
Doug Robinson........ -- -- 41,250/198,750 --
Brian Packard......... -- -- 41,250/198,750 --
- --------------------
(1) Based upon the market price of $1.37 per share on June 30, 2001, determined
on the basis of the closing selling price per share of the Company's Common
Stock on the American Stock Exchange, less the option exercise price
payable per share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In recent years, the Board has periodically approved the advancement of
funds to Christopher Maus, the Company's President, Chief Executive Officer and
Chairman of the Board. During fiscal 2001, Mr. Maus received advances totaling
$87,136 and made principal repayments totaling $5,623. During fiscal 2000, Mr.
Maus received no advances but made principal repayments totaling $6,695. The
underlying promissory note, which had an outstanding principal balance of
$100,349 and $18,836 at June 30, 2001 and June 30, 2000, respectively, is
unsecured, has a stated interest rate of 8.75% and requires bi-weekly repayments
of principal and interest through May 23, 2014.
On June 30, 2001, the Company extended by one year the expiration dates
of 342,500 stock purchase warrants with an exercise price of $1.25 that had been
previously granted to three shareholders during fiscal 1999. Mercer Management
is the holder of 200,000 of these warrants. In connection with the above
extension, the Company recognized a $36,928 financing cost in fiscal 2001 for
the incremental increase in the aggregate fair value of these warrants.
During June 2001, the Company commenced a private offering of
convertible notes with detachable stock purchase warrants from which it had
received proceeds of $3,225,000 as of June 30, 2001. The Company subsequently
received additional proceeds of $3,322,500 through September 2001. RAB Europe
Fund Limited, RAB Europe Partners LP and Mercer Management purchased convertible
term notes totaling $4,500,000, $900,000 and $750,000, respectively, that had
detachable stock purchase warrants totaling 2,250,000, 450,000 and 375,000,
-16-
respectively. The notes are unsecured, accrue interest at the prime rate plus
two percent , and mature on either July 1, 2003 or July 1, 2006, as applicable.
The notes are immediately convertible at the option of the holders into common
stock of the Company at a rate of $1.00 per share. The Company has the right to
force conversion of the notes if the market price of its common stock exceeds
$3.00 per share for 20 consecutive trading days. Each note holder received one
detachable stock purchase warrant for every two dollars of note principal. Each
warrant allows the holder to purchase a share of the Company's common stock at
$2.50 per share. As the accompanying detachable warrants, in effect, created a
beneficial conversion feature, the Company was required by U.S. generally
accepted accounting principles to reduce the carrying value of notes by an
amount equal to the estimated fair value of the beneficial conversion feature.
This fair value discount, amounting to $2,165,064 at June 30, 2001, was recorded
as additional paid-in capital.
During fiscal 2001, the Company obtained $140,000 in unsecured loans
from Michael Crane, a principal shareholder and member of the Board. Each loan
had a stated interest rate of 20% and a term of 90 days. During fiscal 2001, the
Company also executed an agreement with Mr. Crane whereby he established a
$500,000 personal line of credit with a financial institution for use by the
Company. Borrowings under the agreement were unsecured, accrued interest at the
financial institution's prevailing prime rate plus two percent (6.98% at June
30, 2001), and required the repayment of all outstanding principal and interest
on or before September 13, 2001. Subsequent to the fiscal 2001 year-end, the
Company executed an agreement with Mr. Crane whereby the Company repaid $184,200
in outstanding principal and interest against the above obligations and
consolidated the remaining $469,984 aggregate principal balance into a two-year
convertible term note due August 1, 2003. The note accrues interest at the prime
rate plus two percent (6.98% at June 30, 2001) and is immediately convertible at
Mr. Crane's option into common stock of the Company at a stated rate of $1.00
per share. In connection with this agreement, the Company issued Mr. Crane
40,000 common shares with an aggregate fair value of $54,000 and a warrant
allowing him to purchase 134,000 additional common shares at $1.00 per share.
The agreement also stipulates that for every subsequent quarter the note remains
outstanding that the Company will issue Mr. Crane an additional warrant for the
purchase of 23,500 common shares at $1.00 per share.
In March 2001, the Company obtained a $1.0 million short-term loan from
Mercer Management, a principal shareholder. The loan was secured by all the
unencumbered assets of the Company, other than accounts receivable, accrued
interest at the prime rate plus two percent and had a 90-day maturity. In
connection therewith, the Company issued Mercer Management warrants allowing it
to purchase 100,000 shares of the Company's common stock at $1.00 per share. At
the end of the 90-day term, the Company and Mercer Management agreed to convert
the above short-term loan into an unsecured convertible term note with a stated
interest rate of prime plus two percent (6.98% at June 30, 2001) and maturity
date of March 5, 2003. The note is immediately convertible at the option of
Mercer Management into common stock of the Company at a rate of $1.00 per share.
In connection therewith, the Company issued Mercer Management additional
warrants allowing it to purchase another 100,000 shares of the Company's common
stock at $1.00 per share. The Company assigned these warrants an estimated fair
value of $138,444 that was recognized as a financing cost. The agreement also
stipulates that for every subsequent quarter the convertible debt remains
outstanding that the Company will issue Mercer Management additional warrants
for the purchase of 37,500 common shares at $1.00 per share. Subsequent to June
30, 2001, the Company repaid $250,000 of the outstanding note balance.
In February 2000, the Company commenced a private offering of
convertible notes from which it subsequently received $200,000 in proceeds,
including $150,000 from Michael Crane, a principal shareholder and member of the
Board of Directors. The notes are unsecured, have a stated 9% interest rate, and
mature two years from their respective dates of issuance. The notes are
immediately convertible at the option of the holder into common stock of the
Company at the rate of $3.00 per share. On June 30, 2000, Mr. Crane converted
his notes, as well as certain accrued interest, into 51,000 common shares
In July 1999, the Company obtained $270,000 in short-term bridge note
financing from Commodity Management and Research, Inc., a principal shareholder,
that enabled it to fully repay an outstanding convertible promissory note. In
connection therewith, the Company issued the Commodity Management and Research,
-17-
Inc. 25,000 common shares with an aggregate fair value of $29,750 that was
recognized as a financing cost in fiscal 2000.
Subsequently, in July 1999, the Company obtained three short-term loans
from three individuals totaling $270,000, including $70,000 from Michael Crane,
a principal shareholder and member of the Board of Directors, the proceeds from
which were used to fully repay the above short-term bridge financing. In
connection therewith, the Company issued Michael Crane 14,000 common shares with
an aggregate fair value of $17,780 that was recognized as a financing cost in
fiscal 2000. In December 1999, the Company induced the above three individuals,
including Michael Crane, to collectively convert their short-term loans into a
total of 540,000 common shares. In connection therewith, the Company recognized
a $270,000 inducement expense as the conversion rate was below the then market
price of the Company's common stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's directors and executive officers, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the United States Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon a review of the copies of such reports furnished to
the Company during and subsequent to the most recently completed fiscal year
ended June 30, 2001 by such persons, the Company believes that there was
compliance for the fiscal year ended June 30, 2001 with all Section 16(a) filing
requirements applicable to the Company's directors, executive officers and
greater than ten percent shareholders, except for the following non-timely
filings: Mr. Gridley was non-timely in the filing of (i) a Form 4 reporting a
single purchase of common shares in November 2000 and (ii) a Form 4 reporting a
series of sales of common shares in August 2001. Mr. Crane was non-timely in the
filing of (i) a Form 4 reporting a single purchase of common shares in March
2001 and (ii) a Form 4 reporting common shares received from the Company as
compensation for providing certain short-term bridge financing, and the
subsequent transferring of those shares as gifts, all occurring in August 2001.
Mr. Beatty was non-timely in the filing of a Form 4 reporting a single purchase
of common shares in November 2000. All of the aforementioned transactions have
been subsequently reported and filed with the SEC on either a Form 4 or Form 5.
PROPOSAL 2
APPROVAL OF THE ISSUANCE OF SHARES OF COMMON STOCK
UPON THE POSSIBLE CONVERSION OF TERM NOTES
AND
THE POSSIBLE EXERCISE OF DETACHABLE STOCK PURCHASE WARRANTS
Background Information
In June 2001, the Company's Board authorized a "best efforts" private
placement offering ("Offering") of investment units consisting of convertible
term notes ("Notes") with detachable stock purchase warrants ("Warrants"). The
Offering, which was directed to conventional private placement financing
sources, was deemed by the Board to be a necessary source of additional working
capital to fund the marketing efforts and inventory build-up critical to the
-18-
Company's continuing national rollout of its over-the-counter, personal-use
cholesterol monitor.
The Board initially sought gross aggregate proceeds of five million
dollars ($5,000,000) from the Offering, through minimum investments of $250,000
per investor. The Notes are unsecured, accrue interest at the prime rate plus
two percent, adjusted quarterly, and mature on either July 1, 2003 or July
1,2006. The Notes are immediately convertible at the option of the holders into
common stock of the Company ("Common Stock") at a rate of $1.00 per share. The
Company has the right to force conversion of the Notes if the market price of
its Common Stock exceeds $3.00 per share for 20 consecutive trading days. Each
Note holder received one Warrant for every two dollars of Note principal. Each
Warrant allows the holder to purchase a share of the Company's Common Stock at
$2.50 per share. The Notes and Warrants are transferable subject to certain
minimal restrictions. See "Description of Convertible Term Notes" and
"Description of Detachable Stock Purchase Warrants" below for further details.
In this proposal, the Company's shareholders are being asked to vote to
approve the conversion features of the Notes and the exercise feature of the
Warrants, although shareholder approval was not required for the Offering.
During the course of the Offering, the Company's Board determined that
the Company would, in fact, be able to raise in excess of the initially sought
five million dollars ($5,000,000). After appropriate deliberation, the Company's
Board concluded on July 5, 2001 that it would be in the Company's best interests
to extend the Offering and to increase its targeted gross proceeds to seven
million dollars ($7,000,000) as the additional proceeds would further assist the
Company in the continuing national roll out of its over-the-counter,
personal-use cholesterol monitor. As of October 29, 2001 the Company has issued
Notes with an aggregate gross principal amount of $6,987,500 (with 3,493,750
Warrants), including $50,000 and $10,000 in Notes issued to RAB Europe Fund
Limited and RAB Europe Partners, respectively, as finder's fees. In connection
with the Offering, the Company is also currently obligated to pay three
individuals, including two less-than-five-percent shareholders, cash finder's
fees aggregating $642,250.
Should all of Notes be voluntarily or involuntarily converted into
6,987,500 shares of Common Stock, should all of the Warrants be exercised to
purchase 3,493,750 shares of Common Stock, and should all accrued interest
payable on the Notes as of July 1, 2003 or July 1, 2006 (estimated based on the
prevailing prime rate plus two percent), as applicable, be converted at $1.00
per share into 2,272,125 shares of Common Stock and should certain finder's fees
be paid in common stock, an aggregate of 12,865,193 shares of Common Stock would
be issued to the Note and Warrant holders. The common shares that would be
issued have no preemptive rights. Although the Company has sufficient authorized
and unissued shares of Common Stock to accommodate such conversions and
exercises in the aggregate, the rules of the AMEX, on which the common shares of
the Company are listed, require that explicit shareholder approval be given for
any transaction pursuant to which the Company may issue Common Stock, or
securities convertible or exercisable into Common Stock, at a price less than
the then market value, which in the aggregate could potentially equal or exceed
20% of the Company's presently outstanding shares of Common Stock. As the Notes
were issued with a stated conversion price of $1.00 per common share, which was
below the $1.15 closing price of the Company's common shares on June 1, 2001,
when the Offering commenced, and the Notes may potentially be converted into
shares constituting more than 20% of the Company's outstanding Common Stock, the
Notes cannot be converted into shares of the Company's Common Stock, in
accordance with the AMEX rules, unless and until the shareholders approve this
transaction.
Description of Convertible Term Notes
The Notes bear interest at the prime rate plus two percent, adjusted
quarterly, and provide for a maturity date (subject to certain, standard default
provisions which could accelerate the maturity) of July 1, 2003 for $ 1,647,500
of the Notes and July 1, 2006 for $5,340,000 of the Notes, at which time the
principal together with all accrued interest shall be paid or, at the discretion
of the holder, converted into Common Stock of the Company. The conversion price
is $1.00 per common share, subject to standard, partial ratchet, anti-dilution
-19-
provisions. The Company may prepay the Notes following notice to the holder and
can force conversion of the Notes into Common Stock at the $1.00 conversion
price at any time after the Company's shares have maintained a market price of
$3.00 or more per share for twenty consecutive trading days. The Notes stipulate
that they may not be converted by any person who, following the conversion of
the Notes, would beneficially own more than 9.99% of the shares of the Company's
Common Stock outstanding immediately after giving effect to the conversion.
Description of Detachable Stock Purchase Warrants
Purchasers of the Notes also received a Warrant issued on the basis of
the right to purchase 125,000 shares of Common Stock of the Company at $2.50 per
share (subject to standard partial ratchet anti-dilution provisions) for each
$250,000 of principal amount of Notes acquired. Warrants for 823,750 shares may
be exercised at any time prior to July 1, 2003, and Warrants for 2,670,000
shares may be exercised at any time prior to July 1, 2006. The Warrants provide
that they may not be exercised by any person who, following the exercise of the
Warrant, would beneficially own more than 9.99% of the shares of the Company's
Common Stock outstanding immediately after giving effect to the exercise.
Registration Rights Agreement
In connection with the issuance of the Notes and Warrants, the Company
also entered into a Registration Rights Agreement with each Note purchaser
whereby the Company agreed to register the Common Stock into which the Notes,
Accrued Interest and Warrants could be converted or exercised. Pursuant to the
Registration Rights Agreement, the Company agreed to submit a registration
document to register such Shares with the United States Securities and Exchange
Commission ("SEC") and state blue-sky authorities within 120 days after the sale
of the Notes and Warrants. The Notes and the Registration Rights Agreements
provide that the Company shall pay an additional penalty interest ("Registration
Delay Payments") if a Registration Statement covering all of the Common Stock
into which the Notes, Accrued Interest and Warrants may be converted is not
filed with the SEC on or before the end of the 120 day period deadline. The
Registration Delay Payment amount is based on the amount of shares of Common
Stock which the holder could receive upon conversion of the Note and the
exercise of the Warrant, times .00033 multiplied by the number of days the
registration is not filed for the first 30 days after the filing deadline and
equal to the conversion or exercise price per Share for each day thereafter. The
Registration Agreement also provides that it shall be kept current by the
Company until the Note holders have an opportunity to sell their shares without
registration pursuant to Rule 144 adopted by the SEC under the Securities Act of
1933, as amended. The Registration Rights Agreement contains certain standard
standstill and blackout provisions. The Registration Right Agreement also has
standard joint indemnification provisions providing that that Company will
indemnify the seller of the Common Stock if the seller is subject to liability
because of any misstatement by the Company in the prospectus. The Company also
has the responsibility to use all reasonable efforts to list the Common Stock
held by the Note holders on the AMEX exchange or other exchange in which the
Company's securities are listed.
Effect of Failure to Approve the Transaction
In the event that the Company's shareholders do not approve this
proposal, the Company could incur the substantial Registration Delay Payment
penalties described above or have to repay the Notes prior to their maturity.
Therefore the failure of the shareholders to approve this proposal could have a
material adverse affect on the Company's business, financial position, results
of operations, and cash flows since the Company does not presently have
sufficient liquid assets available to repay the amount of the Notes. Furthermore
there can be no assurances that the Company will be able to secure financing on
reasonable terms, if at all, that will provide it with the funds necessary to
repay the Notes in full.
-20-
Effect of Approval of Proposal
If this Proposal is approved, and if all holders were to convert their
Notes and Accrued Interest and exercise their Warrants, as portrayed above
(yielding $17,994,000 in aggregate gross proceeds for the Company, including the
$6,987,500 received for Notes issued through October 29, 2001, $8,734,375 in
cash received upon the exercise of the Warrants, and $2,272,125 in Accrued
Interest that would not then be subject to cash payment)and should certain
finder's fees be paid in common stock, the number of shares of Common Stock
outstanding would increase by 12,865,193 shares, an amount equal to
approximately 63.1% of the currently existing outstanding common shares. The new
shares of Common Stock issued pursuant to such transactions would result in a
dilution of the equity and voting interests of the current common shareholders
and would represent approximately 38.7% of the then to be outstanding shares of
Common Stock authorized to vote on future shareholder matters.
Vote Required for Approval
The affirmative vote of a majority of the holders of the Common Stock
present, in person or by proxy, at the Meeting is required for the approval of
the transaction in which the Notes and Warrants were issued. Abstention or
failure to vote on this proposal is not an affirmative vote and therefore will
have the same affect as a negative on this proposal at the Meeting.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE TRANSACTION
IN WHICH THE NOTES AND WARRANTS WERE ISSUED.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of BDO Seidman, LLP has served as independent public
accountants for the Company since fiscal 1997. The Board, acting upon the
recommendation of its Audit Committee, has appointed BDO Seidman, LLP to serve
in the same capacity for the fiscal year ending June 30, 2002 and is asking
stockholders to ratify such appointment through the required affirmative vote of
a majority of the shares presented and voting at the Annual Meeting. In the
event that stockholders fail to ratify the appointment of BDO Seidman, LLP, the
Board will reconsider such appointment. The Board reserves the right, even after
stockholder approval, to subsequently replace BDO Seidman, LLP as the Company's
independent public accountants for the fiscal year ending June 30, 2002 should
it deem such replacement to be in the best interest of the Company.
Audit and Review Fees: The aggregate fees billed for professional audit
and review services rendered by BDO Seidman, LLP for services performed related
to the fiscal year ended June 30, 2001 were $87,493. Such fees included audit
services performed for the annual consolidated financial statements of the
Company for the fiscal year ended June 30, 2001, review services for the interim
condensed consolidated financial statements of the Company for the fiscal
quarters ended September 30, 2000, December 31, 2000, March 31, 2001 and June
30, 2001, and reviews of the respective Forms 10-QSB and 10-KSB as filed with
the United States Securities and Exchange Commission.
Financial Information Systems Design and Implementation Fees: BDO
Seidman, LLP did not provide the Company any financial information systems
design and implementation services for the fiscal year ended June 30, 2001.
-21-
All Other Fees: The aggregate fees billed for all other services
rendered BDO Seidman, LLP for the fiscal year ended June 30, 2001 were $5,951.
The Audit Committee believes the provision of these services is compatible with
maintaining the indepenence of BDO Seidman LLP.
A representative of BDO Seidman, LLP is expected to attend the Annual
Meeting. The representative will have the opportunity to make a statement if he
or she desires to do so and will be available to respond to appropriate
questions from stockholders.
The Company's Board recommends that stockholders vote FOR the
ratification of the appointment of BDO Seidman, LLP as the Company's independent
public accountants for the fiscal year ending June 30, 2002.
INTEREST OF CERTAIN PERSONS IN
OPPOSITION TO MATTERS TO BE ACTED UPON
Management is not aware of any substantial interest, direct or
indirect, by securities holdings or otherwise of any director, officer or their
associates in any matter to be acted on, as described herein, other than the
proposed nominees for election to the Company's Board.
OTHER MATTERS
Management does not know of any matters to be presented at this Annual
Meeting other than those set forth herein and in the Notice accompanying this
Proxy Statement. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed form of proxy to vote
the shares they represent as the Board may recommend. Discretionary authority
with respect to such matters is granted by the execution of the enclosed proxy.
STOCKHOLDERS' PROPOSALS TO BE PRESENTED AT THE
COMPANY'S NEXT ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented at the 2002 Annual
Meeting of Stockholders of the Company must be received by the Company at its
principal executive offices at 510 Clearwater Loop, Suite 101, Post Falls, Idaho
83854, Attn: Chief Financial Officer not later than June 30, 2002 for inclusion
in the Proxy Statement and Proxy relating to the 2002 Annual Meeting of
Stockholders.
-22-
AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
A copy of the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 2001 accompanies this Proxy Statement, but is exclusive of
certain related exhibits filed with the Securities and Exchange Commission.
These exhibits are available, without charge, to stockholders upon request to
Brett Sweezy, Chief Financial Officer. The financial statements included in the
Form 10-KSB are incorporated by reference into this Proxy Statement.
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares that you hold. YOU ARE URGED TO PROMPTLY
EXECUTE AND RETURN THE ACCOMPANYING PROXY IN THE ENVELOPE THAT HAS BEEN ENCLOSED
FOR YOUR CONVENIENCE. Stockholders who are present at the Annual Meeting may
revoke their proxies and vote in person or, if they prefer, may abstain from
voting in person and allow their proxies to be voted.
By Order of the Board of Directors,
/s/ Christopher Maus
---------------------------------------
Christopher Maus
Chairman of the Board of Directors,
President and Chief Executive Officer
October 22,2001
Post Falls, Idaho
-23-
AUDIT COMMITTEE CHARTER
The Lifestream Technologies, Inc., Audit Committee shall be nominated and
elected by the Board of Directors every three years at an organizational meeting
of the Board. The Audit Committee will be composed of from 3 to 5 non-management
directors, 3 of which must be independent and possess financial expertise as
described by the NASD. Other personnel shall attend the Audit Committee meetings
as directed by the Chairman of the Board and CEO.
The following shall be the major functions of the Audit Committee:
Provide an opportunity for direct communication between the Board of Directors
and the corporation's internal and outside auditors, thereby strengthening their
independence and objectivity.
Monitor the design and maintenance of a system of internal accounting controls
sufficient to protect the Company.
The Audit Committee shall have the authority and responsibility to select,
evaluate and replace the outside auditor. The outside auditors shall be
accountable to the Board of Directors and the Audit Committee of the Company.
Review the results obtained from internal and outside auditors as to:
o reliability and integrity of financial and operating
information and the means used to identify, measure,
classify and report such information.
o systems established to monitor compliance with those
policies, plans, procedures, laws and regulations which
could have a significant impact on operations and reports,
and whether the organization is in compliance.
Receive annually from the outside auditors, a formal written statement
delineating all relationships between the auditor and the company, consistent
with Independence Standards Board Standard 1, and actively engage in a dialogue
with the auditor with respect to any disclosed relationships or services that
may impact the objectivity and independence of the auditor.
In order to carry out these major functions, the Audit Committee shall:
Request that the internal and outside auditors have full and complete access to
any of the Company's records, properties and personnel.
Recommend to the directors, the firm to be employed by the corporation as its
outside auditors and oversee the independence of the outside auditor.
Consider the proposed scope of the outside auditor's work for the current year,
consider any proposed non-audit functions to be performed, and review the audit
plan and proposed engagement letter.
Review, in consultation with the outside auditors, their report of audit, or
proposed report of audit, and the accompanying management letter, if any.
Consult with the outside and internal auditors (periodically, as appropriate,
out of the presence of management) with regard to the adequacy of the internal
accounting controls by establishing a schedule of regular audit committee
meetings.
-24-
Review the summaries of work performed by internal audit.
Review periodically, with internal and outside auditors, the adequacy of the
corporation's audit, accounting and financial personnel resources.
Review with management and the outside auditors, before publication, the annual
financial statements (including footnotes and any special disclosure or
adjustment problems) , to be included in the Annual Report on Form 10-KSB to be
filed with the SEC, or similar publicly filed documents, and review and/or
discuss disputes (resolved or unresolved) between management and the independent
auditors that arose in connection with the preparation of the financial
statements.
Review with the outside auditors the effect of any important new pronouncements
of the accounting profession and other regulatory bodies on the corporation's
accounting policies.
Review and update the Audit Committee Charter annually or as circumstances
dictate.
-25-
This Proxy is solicited by and on behalf of the Board of Directors
LIFESTREAM TECHNOLOGIES, INC.
Proxy - Annual Meeting of Stockholders - December 21, 2001
The undersigned, revoking all previous proxies, hereby appoints Christopher Maus
as Proxy, with full power of substitution, to represent and to vote all Common
Stock of Lifestream Technologies, Inc. owned by the undersigned at the Annual
Meeting of Stockholders to be held at the West Coast Templin's Resort located at
414 East First Avenue, Post Falls, Idaho, on December 21, 2001 at 8:30 a.m,
Pacific Time, including any original or subsequent adjournment thereof, with
respect to the election of Directors and other proposals set forth in the Notice
of Annual Meeting and Proxy Statement. No business other than the matters
described below is expected to come before the meeting, but should any other
matter requiring a vote of stockholders arise, the Proxy named herein will vote
thereon in accordance with his best judgment. All powers may be exercised by
said Proxy. Receipt of the notice of Annual Meeting and Proxy Statement is
hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
1. Election of Directors
Nominees: Robert Boyle William Gridley Boyd D. Lyles, Jr.
(Instructions: To withhold authority to vote for any individual nominee, please
draw a line through that nominee's name)
[ ] WITHOLDING AUTHORITY to vote for all nominees listed above
2. To approve, in accordance with applicable requirements of the American Stock
Exchange, the issuance of more than 20% of the Company's outstanding Common
Stock, at a below market price, upon the possible conversion of outstanding
Convertible Term Notes and Exercise of Detachable Stock Purchase Warrants
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of BDO Seidman, LLP as the Company's independent
public accountants for the fiscal year ending June 30, 2002
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The shares represented by this proxy will be voted as directed. IF NO SPECIFIC
DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1. FOR PROPOSAL 2 AND PROPOSAL 3 AN affirmative vote
of a majority of the holders of the Common Stock present, in person or by proxy,
at the Meeting is required for the approval of the transaction in which the
Notes and Warrants were issued. Abstention or failure to vote on this proposal
is not an affirmative vote and therefore will have the same affect as a negative
on this proposal at the Meeting.
The undersigned stockholder hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement and hereby revokes any proxy or proxies heretofore
given. This proxy may be revoked at any time prior to the Annual Meeting. If you
received more than one proxy card, please date, sign an return all cards in the
accompanying envelope.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in the corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: , 2001
------------------------------
-------------------------------------------
Signature
-------------------------------------------
Signature if held jointly
-------------------------------------------
(Please print name)
-------------------------------------------
(Number of shares subject to proxy)
PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE