SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
CALYPTE BIOMEDICAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[GRAPHIC OMITTED]
CALYPTE BIOMEDICAL
5000 Hopyard Road, Suite 480
Pleasanton, California 94588
November __, 2004
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Calypte
Biomedical Corporation's Stockholders on Tuesday, December 14, 2004. The meeting
will begin promptly at 10:00 a.m. local time, at the Company's headquarters
offices located at 5000 Hopyard Road, Suite 480, Pleasanton, CA 94588. The
telephone number at that location is (925)730-7200.
The official Notice of Special Meeting of Stockholders, Proxy Statement,
and form of proxy are included with this letter. The Company has previously
furnished its 2003 Annual Report to Stockholders in conjunction with the Annual
Meeting of Stockholders held earlier this year. The matters listed in the Notice
of Special Meeting of Stockholders are described in detail in the Proxy
Statement.
Your vote is important. Whether or not you plan to attend the special
meeting, I urge you to complete, sign and date the enclosed proxy card and
return it in the accompanying envelope or vote by telephone or on-line as soon
as possible so that your stock may be represented at the meeting.
Sincerely,
/s/ J. Richard George
-------------------------------------
J. Richard George
President and Chief Executive Officer
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CALYPTE BIOMEDICAL
5000 Hopyard Road, Suite 480
Pleasanton, California 94588
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 14, 2004
November __, 2004
A Special Meeting of Stockholders of Calypte Biomedical Corporation (the
"Company") will be held at the Company's headquarters offices located at 5000
Hopyard Road, Suite 480, Pleasanton, California, 94588, on Tuesday, December 14,
2004, at 10:00 a.m. local time, for the following purposes:
1. To authorize the Company's Board of Directors to enter into a
financing transaction to raise up to $16.5 million by the issuance
of Common Stock or equivalents and/or the issuance of warrants to
purchase shares of Common Stock within 90 days from the date of the
Special Meeting on terms and conditions that may result in dilution
to stockholders and may trigger certain anti-dilution protections
provided to certain existing stockholders. Stockholder approval of
the within proposal is required for the Company to maintain its
listing on the American Stock Exchange in the event that it issues
shares of Common Stock or warrants that results in the issuance in
excess of 20% of its currently issued and outstanding Common Stock
or if the anti-dilution provisions provided to certain stockholders
are triggered.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Stockholders of record on October 22, 2004 will be eligible to vote at
this meeting. Only stockholders of record at the close of business on that date
will be entitled to notice of and to vote at the meeting. To ensure your
representation at the meeting, you are urged to mark, sign, date and return the
enclosed proxy as promptly as possible in the envelope provided or to vote by
telephone or via the internet. If you attend the meeting, you may vote in person
even if you return a proxy.
By order of the Board of Directors,
/s/ Jerrold Dotson
-------------------------------------
Jerrold Dotson
Corporate Secretary
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN THE
PROXY CARD IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
3
CALYPTE BIOMEDICAL
5000 Hopyard Road, Suite 480
Pleasanton, California 94588
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of Calypte Biomedical
Corporation ("Calypte" or the "Company") for the Special Meeting of Stockholders
(the "Special Meeting"), and any postponements or adjournments thereof, to be
held at the Company's headquarters offices located at 5000 Hopyard Road, Suite
480, Pleasanton, California 94588, on Tuesday December 14, 2004, at 10:00 a.m.
local time. The telephone number at that address is (925) 730-7200. Every
stockholder shall have the right to vote whether in person or by one or more
agents authorized by a written proxy signed by the stockholder and filed with
the secretary of the Company. The shares represented by the proxies received,
properly dated and executed, and not revoked will be voted at the Special
Meeting. A proxy may be revoked at any time before it is exercised by delivering
to the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Special Meeting and voting in person.
INFORMATION CONCERNING SOLICITATION AND VOTING
The close of business on October 22, 2004 has been fixed as the record
date (the "Record Date") for determining the holders of shares of common stock
of the Company, par value $0.03 per share, ("Common Stock") entitled to notice
of and to vote at the Special Meeting. At October 22, 2004, the Company had
169,321,669 shares of Common Stock outstanding and entitled to vote at the
Special Meeting. The holders of a majority of voting power of the Common Stock
issued and outstanding and entitled to vote, present in person or represented by
proxy, shall constitute a quorum at the Special Meeting except as otherwise
provided by statute. Each holder of Common Stock on the Record Date is entitled
to one vote for each share of Common Stock held by such stockholder, and
stockholders shall not be entitled to cumulate their votes with respect to any
matter submitted to a vote of the stockholders.
Shares represented by proxies that reflect abstentions or broker non-votes
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. The proposal to come before the Special
Meeting requires the approval of a majority of the shares of stock having voting
power present. Abstentions with respect to the proposal will have the same
effect as votes against the proposal. Broker non-votes, however, will be treated
as not voted for purposes of determining approval of the proposal and will not
be counted as votes for or against such proposal.
The shares represented by all valid proxies received will be voted in the
manner specified on the proxies. Where specific choices are not indicated, the
shares represented by all valid proxies received will be voted FOR authorization
to enter into a prospective financing transaction(s) of up to $16.5 million.
Should any matter not described above be acted upon at the meeting, the
persons named in the proxy form will vote in accordance with their judgment.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitations may
be made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid for such solicitation. The Company may also, at its discretion, retain the
services of a paid solicitor to solicit proxies. If the Company retains a
solicitor, it is anticipated that the cost will be approximately $5,500 and will
be paid by the Company. The Company will request brokers and nominees who hold
stock in their names to furnish proxy material to beneficial owners of the
shares and will reimburse such brokers and nominees for their reasonable
expenses incurred in forwarding solicitation material to such beneficial owners.
PROSPECTIVE ISSUANCE OF SHARES OF COMMON STOCK OR EQUIVALENTS IN
CONNECTION WITH A CAPITAL RAISING TRANSACTION OF UP TO $16.5 MILLION
(PROPOSAL)
By unanimous vote of all Directors on September 22, 2004, the Company's Board of
Directors adopted, subject to stockholder approval, a resolution authorizing the
Company to enter into one or more financing transactions aggregating up to $16.5
million at such time and under such terms and conditions as the Board deems to
be in the best interest of the Company to continue its business as more fully
described below.
DESCRIPTION OF PROPOSAL
To successfully implement our business plans, we must obtain sustainable cash
flow and profitability. Our future liquidity and capital requirements will
depend on numerous factors, including successful completion of the development
and/or commercialization of our new rapid tests, acquisition and protection of
intellectual property rights, costs of developing our new products, ability to
transfer technology, set up manufacturing and obtain regulatory approvals for
our new rapid tests, market acceptance of our products and competing products in
our current and anticipated markets, actions by the FDA and other international
regulatory bodies, and the ability to raise additional capital as required to
meet our cash flow needs. Prior to achieving positive cash flow from our
exsisting business with which we can sustain our current operations, we will
need to raise additional capital.
In the section entitled "Background of the Proposal" which follows, we summarize
the financing arrangements we have entered between 2002 to present. Although
management believes that our current financial position is adequate to sustain
our operations at expected levels through 2004 in the absence of any
unanticipated material costs and expenses that are not factored into our cash
flow projections, we expect that we will need to raise additional capital to
sustain our operations and achieve our business milestones in 2005 and
thereafter. We may not, however, be able to obtain additional financing on
acceptable terms, or at all. The terms of an additional financing could involve
a change of control and/or trigger anti-dilution protection rights that are
contained in existing financing agreements. We would or might be required to
consider strategic opportunities, such as a merger, consolidation, sale or other
comparable transactions, to sustain our operations. We do not currently have any
agreements in place with respect to any strategic opportunity, and there can be
no assurance that any such opportunities will be available to us on acceptable
terms, or at all. If additional financing is not available when required or is
not available on acceptable terms, or if we are unable to arrange a suitable
strategic opportunity, we will be in significant financial jeopardy and may be
unable to continue our operations at current levels, or at all.
Although we currently have no agreements with respect to a prospective financing
transaction, we have historically raised money through the sale of shares of our
common stock at a discount to the current market price, through convertible
debentures, and through equity lines of credit. Such arrangements have included
the private sale of shares and warrants to purchase shares to investors on the
condition that we register such shares for resale by the investors to the
public. Some of our prior arrangements contain both price and share
anti-dilution protection provisions.
These arrangements have most recently been in the form of private investments in
public equity ("PIPE") transactions. Approval of this proposal authorizes the
Company to raise up to $16.5 million in a PIPE transaction for general corporate
purposes as we build distribution and execute on our plan to generate revenues
from our rapid HIV-1/2 products under development and/or currently being
commercialized. The anticipated prospective terms are as follows:
Common Stock or equivalents:
a. Discount to market not to exceed 25%;
b. Sold as a unit with warrant coverage, warrant priced at no less than
25% discount to market;
c. Anti-dilution provisions having a threshold price not to exceed that
of the Common Stock in the offering;
d. We would seek to use our best efforts to file a registration
statement within 30 days of closing, with standard penalties for
failure to file and register the securities in a timely manner; and
e. Expenses are the normal expenses of registration plus financial
consulting fees of up to 7% of the gross proceeds, plus fee warrants
as an incentive to maximize the pricing of the prospective
transaction to the benefit of Calypte.
2
Alternatively, we may elect to raise additional capital by issuing shares of our
Preferred Stock under terms similar to those described above. The Preferred
Stock could be convertible into shares of our Common Stock and could be dividend
bearing, with dividends payable in kind, cash or Common Stock or warrants.
Should we raise $16.5 million in a prospective financing, we would expect to
receive net proceeds of approximately $15.0 million, however we are uncertain as
to the terms of any PIPE we may undertake.
Under the terms of our existing Marr Credit Facility, through May 31, 2005, Marr
Technologies BV ("Marr"), our largest stockholder, has the right to participate
in any prospective transaction on the same terms and conditions as the other
investors in a prospective financing. The Marr Credit Facility, dated as of
November 13, 2003, provides as follows with respect to Marr's participation
rights:
"Subsequent Financings: During the term of this Agreement,
Issuer [Calypte] will notify Purchaser [Marr] of all offerings
for equity financing which it may undertake. Equity financings
shall, for the purposes of this Agreement, be defined as cash
received by Issuer from the sale of Issuer's common stock,
$0.03 par value, or such other equity security as it may offer
from time to time, for cash, specifically excluding cash
received from the exercise of currently outstanding or
subsequently granted options or warrants issued to employees,
consultants, or other parties for services or in lieu of cash
for services or for intellectual property rights.
i. Issuer will grant Purchaser the right of first
refusal to participate in any such subsequent
equity financings on the same key terms and
conditions, which shall include the dollar
investment amount or number of shares to be
purchased, pricing, number of warrants and their
terms, if any, registration rights and fees, as
applicable to the subject offer."
Under the terms of the respective Securities Purchase Agreements, the investors
in our May 2004 PIPE, which also includes Marr, and our July 2004 PIPE also have
the right to participate in a prospective financing on the same terms and
conditions as other investors, through May 28, 2005 and July 9, 2005,
respectively. The Securities Purchase Agreements for both transactions provide
as follows:
"Right of Participation. If at any time prior to the one year
anniversary of the Closing Date, the Company proposes to issue
any equity Common Stock or Common Stock Equivalents
(collectively, "NEW ISSUE SECURITIES"), the Company shall also
offer the New Issue Securities to the Investors so that they
can maintain their then ownership percentage."
A prospective transaction contemplated by this Proposal would qualify as New
Issue Securities under the terms of these agreements. For a transaction at less
than $0.40 per share, the right of participation operates in conjunction with
the anti-dilution protection provisions, as described below, to enable the
investor to maintain it's pre-transaction ownership percentage of Calypte.
Depending on the specific pricing and format of a prospective capital raising
transaction, the transaction may result in (1) the issuance of an aggregate
number of shares of our Common Stock which exceeds 20% of the number of our
currently issued and outstanding shares of Common Stock, and, (2) the
requirement that we issue additional shares and warrants, and re-price currently
outstanding warrants, in accordance with anti-dilution protection provisions
defined in the Securities Purchase Agreements and Warrants dated as of May 28,
2004 and July 9, 2004. The Securities Purchase Agreements provide anti-dilution
protection as follows:
"Additional Shares. If, prior to the first year anniversary of
the Closing Date, the Company issues any shares of Common
Stock or the Company or any Subsidiary issues any Common Stock
Equivalents entitling any Person to acquire shares of Common
Stock at a price per share less than less than [sic] the
Threshold Price [defined as $0.40 per share] (if the holder of
the Common Stock or Common Stock Equivalent so issued shall at
any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights
issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price less than the
Threshold Price, such issuance shall be deemed to have
occurred for less than the Threshold Price),
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then, in connection with each such issuance of Common Stock or
Common Stock Equivalents for a purchase price that is less
than the Threshold Price, the Company shall immediately issue
additional shares of Common Stock (the "ADDITIONAL SHARES") to
each Investor for no additional consideration. The number of
Additional Shares issuable to each Investor will equal: (a)
the Threshold Price minus the lowest price per share of the
Common Stock or Common Stock Equivalents offered or sold that
trigger an obligation under this Section divided by (b) the
Threshold Price, multiplied by (c) the number of Shares issued
to such Investor at the Closing pursuant to Section
2.2(a)(i)."
A prospective transaction as contemplated by this Proposal and priced at less
than $0.40 per share would require us to issue Additional Shares under the terms
of these agreements.
The warrants issued to the investors in our May 2004 PIPE and our July 2004 PIPE
contain the following provisions with respect to resetting of the exercise price
to provide anti-dilution protection:
"Subsequent Equity Sales.
If the Company or any subsidiary thereof, as applicable with
respect to Common Stock Equivalents, at any time while this
Warrant is outstanding, shall issue any securities of the
Company or any Subsidiary which entitle the holder thereof to
acquire Common Stock at any time, including without
limitation, any debt, preferred stock, rights, options,
warrants or any other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common
Stock, at a price per share less than $0.40 (appropriately
adjusted for any stock splits, stock combinations or similar
events occurring prior to such time) (if the holder of the
Common Stock or Common Stock Equivalent so issued shall at any
time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights
issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price less than $0.40
(appropriately adjusted for any stock splits, stock
combinations or similar events occurring prior to such time),
such issuance shall be deemed to have occurred for less than
$0.40 (appropriately adjusted for any stock splits, stock
combinations or similar events occurring prior to such time)),
then, at the option of the Holder for such exercises as it
shall indicate, the Exercise Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance
of such shares of Common Stock or such Common Stock
Equivalents plus the number of shares of Common Stock which
the offering price for such shares of Common Stock or Common
Stock Equivalents would purchase at the Exercise Price, and
the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock so issued
or issuable. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued."
Further, the warrants issued in our May 2004 PIPE and our July 2004 PIPE contain
the following provision with respect to additional warrants which we would be
required to issue to the investors at the revised exercise price to provide
anti-dilution protection:
"Number of Warrant Shares. Simultaneously with any adjustment
to the Exercise Price pursuant to this Section 9, the number
of Warrant Shares that may be purchased upon exercise of this
Warrant shall be increased or decreased proportionately, so
that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares
shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment."
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At a price of $0.40 per share or greater, if Marr and all of the other investors
in the May 2004 PIPE and the July 2004 PIPE invested in a prospective $16.5
million transaction on a basis so as to maintain their current ownership
percentage in Calypte, they would acquire approximately $6.4 million worth of
the shares issued in such financing. We do not know if any of these investors
will participate in a prospective financing. The ownership interest in Calypte
of any investors having participation rights who elect not to participate in a
prospective financing at a price above $0.40 will be diluted. The ownership
interest of investors in the May and July 2004 PIPE transactions will be
partially preserved in a prospective financing at a price below $0.40 per share
as a result of the anti-dilution protection provisions of those agreements,
however, the investors would also be required to exercise their participation
rights at some level to completely maintain their pre-transaction ownership
percentage.
Approval of this Proposal explicitly authorizes the Board of Directors, if so
required under the terms of a prospective capital raising transaction, to issue
shares of Common Stock or equivalents in excess of 20% of the number of shares
then currently issued and outstanding according to the specific terms as defined
above and to issue such additional shares and both additional and re-priced
warrants as may be required under the terms of prior financing agreements as
noted above.
The authority of the Board to proceed under this proposal will be withdrawn 90
days from the date of approval of this Proposal at the Special Meeting if the
transaction(s) has not closed.
The closing market price of our Common Stock on the October 22, 2004 Record Date
was $0.33 per share. At this market price, we would issue a maximum of
approximately 77.0 million shares of our Common Stock pursuant to a prospective
$16.5 million financing, including the shares issuable under the anti-dilution
protection provisions of our May 2004 and July 2004 PIPEs. Although we plan to
maximize the pricing of the prospective transaction to the benefit of Calypte,
there are no circumstances under which we would issue more than 135 million
shares of our Common Stock pursuant to a prospective $16.5 million financing,
including shares of Common Stock which may be or become issuable upon exercise
of warrants and/or payment of dividends (assuming the prospective transaction is
structured using preferred stock), but excluding any shares issuable under the
anti-dilution protection provisions of our previous financings.
ILLUSTRATIVE EXAMPLE
The following table is presented FOR ILLUSTRATIVE PURPOSES ONLY, to calculate
the maximum shares that would be issued under this financing based on the market
price of the stock at the record date and the maximum discount of 25%. See
Certain Risks Related to Our Financial Condition, below.
SHARES POTENTIALLY ISSUABLE FOR A $16.5 MILLION FINANCING
BASED ON A MARKET PRICE OF $0.33 AS OF THE OCTOBER 22, 2004 RECORD DATE
(shares in millions)
---------------------------------------------------------------
MARKET - 25% MARKET
---------------------------------------------------------------
Share Price $0.2475 $0.330
---------------------------------------------------------------
Shares outstanding at
October 22, 2004 169.3 169.3
Shares issuable for $16.5
million financing (1) 66.7 50.0
Anti-dilution shares due 10.3 4.7
and issuable (2)
-----------------------------
Shares outstanding after 246.3 224.0
financing
=============================
% dilution compared to
October 22, 2004 shares 45.5% 32.3%
outstanding
---------------------------------------------------------------
- ----------
(1) Excludes warrants which may be issued with the Common Stock as a unit in
conjunction with any prospective financing and any additional shares which
might be required due to a subsequent decline, if any, in the market price
of the Common Stock. We would reduce the amount of the offering if the
pricing of a prospective transaction required the issuance of more than
135 million shares, including warrant shares.
5
(2) Anti-dilution shares issuable in conjunction with our May 2004 PIPE and
our July 2004 PIPE are only calculated at financing prices below $0.40 per
common share and warrant unit. In addition to the anti-dilution shares we
would be required to issue, we would also be required to reset the
exercise price of the currently outstanding warrants from $0.50 per share
to $0.4612 per share in the case of a financing at $0.33 or to $0.4287 per
share in the case of a financing at $0.2475. Further, we would also be
required to issue approximately 0.9 million additional warrants
exercisable at $0.4612 in the case of a financing at $0.33 or
approximately 1.8 million additional warrants exercisable at $0.4287 per
share in the case of a financing at $0.2475.
STOCK EXCHANGE CONSIDERATIONS
Section 713 of the American Stock Exchange's (the "Exchange") Company Guide
provides that stockholder approval is required for "a transaction involving the
sale, issuance or potential issuance by the company of common stock (or
securities convertible into common stock) equal to 20 percent or more of
presently outstanding stock for less than the greater of book or market value of
the stock."
Further, as a condition of our listing on the Exchange, we agreed to obtain
stockholder approval prior to the listing with the Exchange and issuance of any
such shares of our Common Stock as may become issuable under the terms of
anti-dilution protection provisions contained in agreements entered into with
respect to our May 2004 and July 2004 PIPEs.
Accordingly, in anticipation that we may consummate a capital-raising PIPE
transaction that may result in the issuance of shares of our Common Stock in
excess of 20% of the number of shares then outstanding at a discount to the
then-current market price for our Common Stock and/or that may trigger the
anti-dilution protection provisions of the agreements with investors in our May
2004 and July 2004 PIPEs, we are submitting this proposal to our stockholders
and requesting approval thereof.
CERTAIN RISKS RELATED TO OUR FINANCIAL CONDITION
IF, UNDER THE TERMS OF A PROSPECTIVE FINANCING, WE ARE REQUIRED TO ISSUE
ADDITIONAL SHARES TO INVESTORS IN PRIOR FINANCINGS UNDER THE TERMS OF
ANTI-DILUTION PROTECTION PROVISIONS AND DO NOT OBTAIN STOCKHOLDER APPROVAL TO DO
SO AS REQUIRED BY THE AMERICAN STOCK EXCHANGE, WE MAY BE FORCED TO DE-LIST FROM
THE AMERICAN STOCK EXCHANGE.
The anti-dilution protection provisions granted to investors in our May 2004
PIPE and July 2004 PIPE require that we issue additional shares of our Common
Stock and reprice and grant additional warrants to purchase our Common Stock to
those investors if we issue additional shares of stock at less than $0.40 per
share pursuant to financing(s) completed within one year of the May and July
2004 transactions, respectively. As a condition of our listing on the American
Stock Exchange, we agreed to obtain stockholder approval prior to listing with
the Exchange and issuing any shares of our Common Stock that may become issuable
under the terms of the anti-dilution protection provisions contained in these
financing agreements. If our stockholders do not approve this Proposal to
authorize, if so required, the issuance of additional shares and new and
re-priced warrants under the terms of anti-dilution protection provisions in
previous financing agreements, and if a prospective financing triggers the
anti-dilution protection provisions and one or more of the PIPE investors do not
waive their anti-dilution rights, we will be delisted by the American Stock
Exchange or be forced to withdraw our listing from the American Stock Exchange
in order to complete a financing transaction, at which time our Common Stock
would again trade on the Over-the Counter Bulletin Board.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FINANCING WHEN REQUIRED, WE MAY HAVE TO
SIGNIFICANTLY CURTAIL THE SCOPE OF OUR OPERATIONS AND ALTER OUR BUSINESS MODEL.
We believe that the aggregate of approximately $10.2 million of net proceeds of
our 2004 private placements and the availability of approximately $3.6 million
of borrowing capability from 9% promissory notes that we may issue through
December 31, 2004 under the terms of the amended Marr Credit Facility, should
our Board of Directors unanimously approve the issuance of one or more such
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notes before the commitment period expires, will be adequate to sustain our
operations at expected levels through 2004. There can, however, be no assurance
that such resources will be adequate. Further, there can be no assurance that we
will be able to achieve expanded acceptance of or realize significant revenues
from our current or potential new products, including our rapid tests, or that
we will achieve significant improvements in the efficiency of our manufacturing
processes. In addition, there is no assurance that we will achieve or sustain
profitability or positive cash flows in the future. We expect to raise
additional capital; however, we may not be able to obtain additional financing
on acceptable terms, or at all. We might be required to consider strategic
opportunities, including merger, consolidation, sale or other comparable
transaction, to sustain our operations. We do not currently have any agreements
in place with respect to any such additional financing or strategic opportunity,
and there can be no assurance that any such opportunity will be available to us
on acceptable terms, or at all. If additional financing is not available to us
when required or is not available to us on acceptable terms, or we are unable to
arrange a suitable strategic opportunity, we will be in significant financial
jeopardy and we may be unable to continue our operations at current levels, or
at all. The terms of a subsequent financing may involve a change of control and
require the stockholder approval requested in this Proposal, due to the size
and terms of the financing, including terms that trigger anti-dilution
protection clauses contained in existing financing agreements that would result
in substantial dilution to our existing stockholders.
BACKGROUND OF PROPOSAL
PRIOR INCREASES IN AUTHORIZED SHARES
In September 2001, we requested and received stockholder approval to amend
our Certificate of Incorporation to increase the number of authorized shares of
our Common Stock from 50 million to 200 million shares. In February 2003, we
requested and received stockholder approval for a further increase in authorized
shares of Common Stock from 200 million to 800 million shares. Our Amended and
Restated Certificate of Incorporation currently authorizes the issuance of 805
million shares, of which 800 million are authorized for issuance as Common Stock
and 5 million are authorized for issuance as Preferred Stock.
As of October 22, 2004, we had 800 million shares of authorized common
stock and approximately 169 million shares of common stock issued and
outstanding. We will continue to have 5 million authorized shares of preferred
stock. Authorized but unissued shares are available for issuance, and we expect
to issue such shares in future financing transactions.
In the past, we have maintained our operations through the issuance of
equity and convertible securities. Although we currently do not have any
definitive plans for the issuance of a substantial number of shares, we expect
that we will be required to issue a significant number to complete the
prospective financing contemplated in the Proposal herein, in which we are
requesting stockholder authorization to enter into an equity financing of up to
$16.5 million. Depending on the price of the Common Stock implicit in a
prospective financing, such a transaction could require us to issue shares of
Common Stock in an amount in excess of 20% of our currently outstanding shares
of Common Stock. We will, however, issue no more than 135 million shares of our
Common Stock pursuant to a $16.5 million financing, including shares of Common
Stock which may be or become issuable upon exercise of warrants and/or payment
of dividends (assuming the prospective transaction is structured using preferred
stock). Further, such a prospective financing may require us to issue additional
shares of our Common Stock to investors in previous financings based on
anti-dilution protection clauses in those investment agreements. If we are
successful in arranging additional equity-related financing and issue additional
shares of our common stock, the ownership interest of holders of Calypte common
stock will be diluted.
The remainder of this page is intentionally left blank.
7
USAGE OF SHARES
At December 31, 2001, we had issued approximately 1.3 million shares of
our Common Stock. As of the October 22, 2004 record date, we had approximately
169.3 million shares outstanding, primarily as a result of our financing
activities and the issuance of options, warrants and stock grants. The following
table summarizes these financing activities by major category and the subsequent
table provides the details of these financings. All amounts are in thousands,
except per share closing prices in the second table.
SUMMARY OF RECENT FINANCINGS - JANUARY 2002 TO OCTOBER 22 2004
TOTAL
GROSS NET SHARES
FINANCING SOURCE PROCEEDS PROCEEDS ISSUES
---------------------------------- -------- -------- ---------
Bristol 12% Convertible Debentures $ 562 $ 505 1,476.1
and Warrants
8% Convertible Notes 3,232 2,594 46,084.3
Other Restart Financings 750 730 2,720.3
Mercator 12% and 10% Debentures (1) 4,550 3,650 37,529.5
Marr 2003 Private Placements 12,500 11,900 28,333.3
May 2004 PIPE 9,300 8,769 23,250.0
July 2004 PIPE 1,488 1,384 3,720.0
-------- ------- ---------
Total $ 32,382 $29,532 143,113.5
======== ======= =========
(1) At October 22, 2004, the holders have converted all but $60,000 of
principal of the convertible debentures issued since September 2002.
Based on current market prices, we estimate that we would be
required to issue approximately 0.2 million additional shares of our
common stock if the holders elected to convert the remaining
principal and accrued interest of their debentures at this time. The
holders of these 12% convertible debentures claim a transaction date
which we dispute. These debentures have not yet been converted
pending resolution of the transaction date dispute, which may impact
the number of shares of our stock to which the holder is entitled
upon conversion. See Note 12 to Detail of Financings.
The remainder of this page is intentionally left blank.
8
DETAIL OF RECENT FINANCINGS - JANUARY 2002 TO OCTOBER 22, 2004
CALYPTE
FINANCING TYPE AND CONVERSION GROSS NET TRANSACTION CLOSING SHARES
INVESTOR (1) FEATURE PROCEEDS PROCEEDS DATE PRICE ISSUED/$REDEEMED(3)
- --------------------------------------- --------------- -------- -------- ----------- --------- -----------------
12% CONVERTIBLE DEBENTURE AND WARRANTS
Bristol Investment Fund, Ltd. Lesser of (i) $ 425 2/11/02 $ 7.50 1,019.4/ $525
60% of the 100 5/10/02 $ 0.90
--------
average of 3 $ 525 $ 468
lowest closing
bid prices for
22 days
preceding
conversion or
(ii)$1.50
Class A Warrant Lesser of (i) $ 4 $ 4 2/11/02 $ 7.50 56.7/ N/A
70% of the
average of
lowest 3
trading prices
for 20 days
preceding
conversion or
(ii)$3.45
Class B Warrant Lesser of (i) $ 33 $ 33 2/11/02 $ 7.50 400/ N/A
-------- -------- -----------------
70% of the
average of
lowest 3
trading pricing
for 20 days
preceding
conversion or
(ii) $6.45.
Total Bristol $ 562 $ 505 1,476.1/ $525
======== ======== =================
8% CONVERTIBLE NOTES
Alpha Capital Aktiengesellshaft Lesser of $ 500 5/24/02 $ 3.60 7,260.7/ $500
Stonestreet Limited Partnership (i) $3.00 or $ 500 5/24/02 $ 3.60 7,075.7/ $500
Filter International Ltd. (ii) 70% of $ 150 5/24/02 $ 3.60 2,452.4/ $150
Camden International Ltd. the average of $ 350 5/24/02 $ 3.60 5,279.1/ $350
Domino International Ltd. the 3 lowest $ 150 5/24/02 $ 3.60 1,767.4/ $150
Thunderbird Global Corporation trades for 30 $ 75 5/24/02 $ 3.60 1,083.1/ $75
BNC Bach International Ltd. days $ 200 5/24/02 $ 3.60 2,463.8/ $200
Excalibur Limited Partnership preceding $ 200 5/24/02 $ 3.60 1,678.9/ $200
Standard Resources Ltd. conversion $ 100 5/24/02 $ 3.60 1,542.5/ $100
SDS Capital International Ltd. $ 300 7/10/02 $ 10.20 4,189.8/ $300
Camden International Ltd. $ 100 7/10/02 $ 10.20 1,707.9/ $100
Excalibur Limited Partnership $ 250 7/24/02 $ 6.60 4,238.3/ $250
Stonestreet Limited Partnership $ 250 8/21/02 $ 3.90 4,042.2/ $250
Alpha Capital Aktiengesellshaft $ 107 5/9/03 $ 0.63 1,302.5/ $107
-------- -----------------
Total 8% Convertible Notes $ 3,232 $ 2,594 46,084.3/ $3,232
======== ======== =================
9
CALYPTE
FINANCING TYPE AND CONVERSION GROSS NET TRANSACTION CLOSING SHARES
INVESTOR (1) FEATURE PROCEEDS PROCEEDS DATE PRICE ISSUED/$REDEEMED(3)
- --------------------------------------- --------------- -------- -------- ----------- --------- -----------------
OTHER RESTART FINANCINGS:
10% CONVERTIBLE NOTE
BNC Bach International Ltd. (Note: on 50% of the $ 150 $ 150 5/14/02 $ 4.20 2,217.8/ $150
7/14/02 the maturity date was extended average of 3 $10.80 on
until 12/31/02; on December 27, 2002, lowest closing 7/14/02;
the maturity date was extended until bid prices for $1.92 on
January 15, 2003; on January 15, 2003 22 days 12/27/02;
the maturity date was extended until preceding $1.80 on
March 17, 2003, on March 17, 2003 the conversion 1/15/03;
maturity date was extended until April $1.50 on
4, 2003; on April 2, 2003, the 3/17/03;
maturity date was extended until May $0.99 on
5, 2003; on April 30, 2003, the 4/2/03
maturity date was subsequently $0.75 on
extended until May 10, 2004)(5) 4/30/03
8% CONVERTIBLE DEBENTURES
Su So 80% of the $ 100 $ 90 6/17/02 $ 4.20 36.7 (4)/ $100
lower of the
average closing
bid or trade
price for the 5
days preceding
conversion, but
not less than
$3.00
Jason Arasheben 70% of the $ 100 $ 90 7/03/02 $ 8.10 15.8 (4)/ $100
lower of the
average closing
bid or trade
price for the 5
days preceding
conversion, but
not less than
$3.00
PIPE AT $1.50 PER SHARE
Careen Ltd. $1.50 per $ 200 $ 200 8/28/02 $ 4.80 225.0/ N/A
Caledonia Corporate Group Limited share $ 200 $ 200 8/28/02 $ 4.80 225.0/ N/A
-------- -------- -----------------
Total Other Restart Financings $ 750 $ 730 2,720.3/ $350
======== ======== =================
10
CALYPTE
FINANCING TYPE AND CONVERSION GROSS NET TRANSACTION CLOSING SHARES
INVESTOR (1) FEATURE PROCEEDS PROCEEDS DATE PRICE ISSUED/$REDEEMED(3)
- --------------------------------------- --------------- -------- -------- ----------- --------- -----------------
MERCATOR 12% AND 10% DEBENTURES (2)(3)
12% CONVERTIBLE DEBENTURES
Mercator Momentum Fund, L.P. ($2,000 total 85% of the $ 550 $ 345(6) 9/12/02 $ 3.00 4,866.4(4)/$550
commitment) average of the
3 lowest
Mercator assigned its rights to: trading prices
Alpha Capital AG for the 20 250 250 7/24/03 $ 0.115 2,673.8/ $250
Gamma Opportunity Capital Partners, LP trading days 250 250 7/24/03 $ 0.115 2,685.6/ $250
Goldplate Investment Partners preceding
Marr Technologies, B.V. (11) conversion (8) 250 250 7/24/03 $ 0.115 2,673.8/ $250
570 570 9/1/03 $ 0.498 5,181.8/ $570
-------- --------
Dr. Khalid Ahmed 1,870 1,665
Roger Suyama 50 50 10/2/03 $ 1.310 84.6/ $50
Logisticorp, Inc. 20 20 10/2/03 $ 1.310 33.8/ $20
Southwest Resource Preservation Inc. 20 20 10/2/03 (12) $ 1.310 --
10/2/03 (12) $ 1.310
40 40 --
-------- -------- -----------------
$ 2,000 $ 1,795 18,199.8/ $1,940
-------- -------- -----------------
Mercator Momentum Fund, L.P. 80% of the $ 300 $ 260 10/22/02 $ 3.90 0/ $300(7)
average of the
3 lowest
trading prices
for the 20
trading days
preceding
conversion, but
not less than
$1.50
Mercator Momentum Fund L.P. (10) 70% of the $ 300 $ 245 4/29/03 $ 0.825 3,475.7/ $300
average of the
3 lowest
trading prices
for the 20
trading days
preceding
conversion, but
not more than
$1.20
Mercator warrant $3.00 per share $ 0 $ 0 10/22/02 $ 3.90 0
10% CONVERTIBLE DEBENTURES
Mercator Focus Fund, L.P. (10) 80% of the $ 1,000 $ 510(6) 1/14/03 $ 1.92 7,941.1/ $1,000
average of the
3 lowest
trading prices
for the 20
trading days
preceding
conversion, but
not more than
$3.00
11
CALYPTE
FINANCING TYPE AND CONVERSION GROSS NET TRANSACTION CLOSING SHARES
INVESTOR (1) FEATURE PROCEEDS PROCEEDS DATE PRICE ISSUED/$REDEEMED(3)
- --------------------------------------- --------------- -------- -------- ----------- --------- -----------------
Mercator Momentum Fund, L.P. (10) 80% of the $ 450 $ 440 1/30/03 $ 1.86 2,857.7/ $450
average of the
3 lowest
trading prices
for the 20
trading days
preceding
conversion, but
not more than
$3.00
Mercator Focus Fund, L.P. (10) $ 400 3/13/03 $ 1.47 3,428.9/ $400
Mercator Momentum Fund III, L.P. 65% of the 100 1,626.3/ $100
-------- -----------------
average of the $ 500 $ 400 5,055.2/ $500
-------- -------- -----------------
3 lowest
trading prices
for the 20
trading days
preceding
conversion, but
not more than
$2.10
Total Mercator Debentures $ 4,550 $ 3,650 37,529.5/ $4,490
======== ======== =================
MARR PRIVATE PLACEMENTS
PIPE at $0.30 per share
Marr Technologies B.V. (9)(11) $0.30 per $ 2,500 $ 2,300 8/1/03 $ 0.152 8,333.3
share
PIPE at $0.50 per share
Marr Technologies B.V. (9)(11) $0.50 per $ 10,000 $ 9,600 9/1/03 $ 0.498 20,000.0
-------- -------- -----------------
share
Total Marr Private Placements $ 12,500 $ 11,900 28,333.3
======== ======== =================
MAY 2004 PRIVATE PLACEMENT
PIPE AT $0.40 PER SHARE (13) Units
SF Capital Partners LP issued at $ 4,000 $ 3,720 5/28/04 $ 0.50 10,000.0
Marr Technologies BV $0.40, 3,000 2,910 5/28/04 $ 0.50 7,500.0
Proximity Fund LP including 500 465 5/28/04 $ 0.50 1,250.0
Proximity Partners LP shares 500 465 5/28/04 $ 0.50 1,250.0
MTB Small Cap Growth Fund and 5 year 500 465 5/28/04 $ 0.50 1,250.0
MTB Multi Cap Growth Fund warrant 500 465 5/28/04 $ 0.50 1,250.0
Bridges & PIPES LLC exercisable 300 279 5/28/04 $ 0.50 750.0
-------- --------
at $0.50 per
Total May 2004 PIPE share $ 9,300 $ 8,769 23,250.0
======== ======== =================
JULY 2004 PRIVATE PLACEMENT
PIPE AT $0.40 PER SHARE (13) Units
Sunrise Equity Partners, L.P. issued at $ 750 $ 698 7/9/04 $ 0.615 1,875.0
Amnon Mandelbaum $0.40, 80 74 7/9/04 $ 0.615 200.0
David I. Goodfriend including 8 7 7/9/04 $ 0.615 20.0
TCMP3 Partners shares 150 140 7/9/04 $ 0.615 375.0
United Capital Partners, LLC and 5 year 500 465 7/9/04 $ 0.615 1,250.0
-------- -------- -----------------
warrant
Total July 2004 PIPE exercisable $ 1,488 $ 1,384 3,720.0
======== ======== =================
at $0.50 per
share
12
(1) The Bristol Debentures and Warrants, the 8% Convertible Notes, the
Other Restart Financings, the Mercator 12% and 10% Debentures and warrants, and
the Common Stock underlying MTBV's 2003 PIPE's, the May 2004 and the July 2004
PIPEs were issued under exemptions provided by Regulation S or Regulation D.
With the exception of Marr Technologies B.V., which is an affiliate of the
Company based on its August and September 2003 PIPE investments and
participation in the May 2004 PIPE, none of the entities listed above is or has
been an affiliate of the Company. Other than Marr Technologies B.V., all of the
listed investors were subject to ownership limitations restricting their
ownership of our stock to a maximum of 4.9% or 9.9%, depending on the specific
agreement.
(2) At October 22, 2004, the holders have converted all but $60,000 of
principal of the convertible debentures issued since September 2002. Based on
current market prices, we estimate that we would be required to issue
approximately 0.2 million additional shares of our common stock if the holders
elected to convert the remaining principal and accrued interest of their
debentures at this time. See also Note 12.
(3) On July 18, 2003, the registration statement for 52,500,000 shares
underlying the 8% Convertible Notes, the Other Restart Financings and $1,300,000
of the Mercator 12% and 10% Convertible Debentures became effective (File No.
333-106862). As a result of a decline in the market price of our stock
subsequent to the effective date of the July 2003 registration statement, the
number of shares registered was insufficient to permit the complete conversion
of the notes and debentures into registered shares. The shares underlying
certain of the convertible securities have become eligible for resale under Rule
144, and certain investors have availed themselves of that eligibility to
convert restricted shares issued pursuant to conversions into free-trading
shares. On July 8, 2004, the registration statement for 83,056,050 shares
underlying Marr Private Placements, the May 2004 PIPE, certain of the Mercator
12% Convertible Debentures, approximately 12.2 million additional shares
attributable to financings included in the July 2003 registration statement and
approximately 3.3 million shares issued or issuable to vendors consultants and
other parties who agreed to accept shares of our Common Stock in lieu of cash
became effective (File No. 333-116491). On July 28, 2004, the registration
statement for 6,472,800 shares of our Common Stock underlying the July 2004 PIPE
and related warrants became effective (File No. 333-117439).
(4) Includes fee shares.
(5) On April 30, 2003, when the market price of the common stock was
$0.75, we and BNC Bach amended the conversion price to eliminate a conversion
price ceiling of $1.50 per share and to increase the discount applicable to the
conversion price from 40% to 50%. In return for this modification of the
conversion price, BNC Bach agreed to extend the maturity of the note until May
10, 2004. BNC Bach subsequently converted the outstanding principal and accrued
interest into shares of our common stock.
(6) Reflects a 10% cash commitment fee on the entire $2 million commitment
paid to The Mercator Group less additional fees and expenses. We registered
shares underlying $1,300,000 of the total $2,000,000 commitment in July 2003 and
the shares underlying the final $700,000 of this commitment in our June 2004
registration statement.
(7) In conjunction with the issuance of the $1 million 10% convertible
debenture to Mercator Focus Fund, L.P., we used the proceeds to repay the $0.3
million outstanding principal balance of the 12% convertible debenture
previously issued to Mercator Momentum Fund, L.P. plus accrued interest. The
balance of costs incurred represents transactional and legal fees.
(8) On March 31, 2003, when the market price of our Common Stock was
$0.885, we amended the conversion price to eliminate a conversion price floor of
$1.50 per share in return for an extension of time in which to register the
shares of common stock underlying the various Mercator financings.
(9) The Securities Purchase Agreements for both transactions between the
Company and Marr Technologies B.V. required that we provide cost-free
registration rights to Marr; however, Marr was subject to a one-year lock-up
provision following the transaction date with respect to the shares purchased.
(10) On January 14, 2004, when the market price of our common stock was
$0.60, we extended the maturity date of the following debentures until July 14,
2004:
o 10% Convertible Debenture dated January 14, 2003 issued to Mercator
Focus Fund, LP
o 10% Convertible Debenture dated January 30, 2003 issued to Mercator
Momentum Fund, LP
o 10% Convertible Debentures dated March 13, 2003 issued to Mercator
Focus Fund, and
o 12% Convertible Debenture dated April 29, 2003 issued to Mercator
Momentum Fund, LP.
In return for the extension of the maturity dates, we agreed to pay an extension
fee equal to 2% of the outstanding principal balance per month until the earlier
of the extended maturity date or conversion. The extension fee is payable 1% in
cash and 1% in shares of our common stock. Additionally, we agreed to file a
registration statement including the shares potentially applicable to the
conversion of the outstanding debenture balances by no later than April 29,
2004. On April 23, 2004, when the market price of our Common Stock was $0.625,
we and the various Mercator Funds agreed to extend until May 14, 2004 the period
for filing the registration statement including the shares issued or potentially
issuable upon conversion. On May 7, 2004, when the market price of our common
stock was $0.48 per share, we and the various Mercator Funds agreed to further
extend from May 14, 2004 until 21 days following the closing of a private
placement of equity financing of at least $5,000,000, but in any case to no
later than June 30, 2004, the period in which we are required to file a
registration statement including shares of our common stock issued or
potentially issuable upon conversion. Such shares were included in our June 15,
2004 registration statement, which was declared effective on July 8, 2004. All
of the subject convertible debentures were converted prior to the extended
maturity date.
13
(11) On January 23, 2004, when the market price of our common stock was
$0.695, we and Marr agreed to extend the registration rights period attributable
to 5,181,818 shares of our common stock issued in conjunction with Marr's
conversion of $570,000 principal amount of the Company's 12% Convertible
Debentures from February 27, 2004 to April 29, 2004. In return for the
extension, we agreed to include in our next registration statement an aggregate
of 28,333,333 shares of our common stock purchased by Marr in PIPE transactions
in the third quarter of 2003. On April 23 2004, when the market price of the
Common Stock was $0.625, MTBV agreed to extend until May 14, 2004 the period for
filing the registration statement including the shares issued to MTBV upon
conversion of the 12% convertible debenture and in the 2003 PIPE transactions.
On May 7 2004, when the market price of our common stock was $0.48 per share,
MTBV agreed to further extend from May 14, 2004 until 21 days following the
closing of a private placement of equity financing of at least $5,000,000, but
in any case to no later than June 30, 2004, the period in which we are required
to file a registration statement including shares of our common stock issued to
MTBV upon conversion of the 12% convertible debenture and in the 2003 PIPE
transactions. Such shares were included in our June 15, 2004 registration
statement, which was declared effective on July 8, 2004.
(12) The holders claim an earlier transaction date with respect to a
conversion of the debentures, which we dispute. These debentures have not yet
been converted. Assuming immediate conversion at the earlier, disputed
transaction date, the number of shares of common stock issuable to Logisticorp
and Southwest Resource Preservation would be 213,903 and 427,807, respectively.
While reserving our rights with respect to the number of shares calculated as
issuable based on the disputed transaction date, we registered that number of
shares of Common Stock in our June 15, 2004 registration statement pending
resolution of the dispute. The ultimate resolution of the transaction date
dispute may determine the number of shares of our stock to which the holder is
entitled upon conversion.
(13) In conjunction with the May 2004 PIPE, we issued to each investor
5-year warrants at $0.50 per share to purchase shares of our common stock in an
amount equal to 35% of the number of shares purchased by the investor. In
conjunction with the July 2004 PIPE, we issued to each investor 5-year warrants
at $0.50 per share to purchase shares of our common stock in an amount equal to
70% of the number of shares purchased by the investor. The shares issued
pursuant to the May 2004 PIPE and the July 2004 PIPE and the related warrants
for each have an anti-dilution feature that will require us to issue additional
shares to the PIPE investors and modify their warrants if we subsequently issue
additional equity at a per share price of less than $0.40 for a period of one
year from the respective closing dates, except under the provisions of
previously outstanding convertible debt, option plans, or option or warrant
agreements.
WARRANTS, OPTIONS AND STOCK GRANTS FROM BOARD OF DIRECTORS APPROVED PLANS
Since January 2002, we have entered into various contracts and agreements with
consultants who have agreed to accept payment for their services in the form of
warrants, options and/or stock grants. We have obtained various services under
these arrangements, including legal, financial, business advisory, and other
services including business introductions and arrangements with respect to
potential domestic and international product placement and the development of
potentially synergistic relationships with appropriate public service or other
governmental and non-governmental organizations. We have generally issued the
warrants at a discount to the then-current market price and have registered the
shares underlying the warrants, options and stock grants on Form S-8
Registration Statements for resale by the consultants. We have, since January
2002, issued approximately 10.4 million shares of our common stock as a result
of warrant or option exercises and stock grants related to these consulting
agreements and related Registration Statements, of which approximately 7.9
million shares were issued during 2003.
In May 2002, we issued warrants and options to purchase 633,333 shares of our
common stock under agreements with consultants to perform legal, financial,
business advisory and other services associated with the restart of our
operations. The warrants were issued at $0.45 per share on May 9, 2002 when the
market price of our common stock was $0.90 per share. The option was granted at
$0.90 per share on May 10, 2002, when the market price of our common stock was
$0.90 per share. All of the warrant and option grants were non-forfeitable and
fully-vested at the date of issuance and were registered for resale by the
consultants under Form S-8. The consultants exercised all the warrants and
options and we issued 633,333 shares and received proceeds of $292,500. All but
one of the consulting agreements discussed above expired in August 2002 and we
entered into new agreements with certain of the consultants for legal,
financial, business advisory, and other services including introductions and
arrangements with respect to potential domestic and international product
development of synergistic relationships with appropriate public service
organizations. In November 2002, we issued warrants to purchase 950,000 shares
of our common stock and stock grants for 70,000 shares of our stock to
14
consultants under the terms of these new agreements. We issued 350,000 warrants
at an exercise price of $1.50 per share on November 1, 2002, when the market
price of our stock was $4.20 per share. We issued an additional 600,000 warrants
at an exercise price of $1.50 on November 20, 2002, when the market price of our
common stock was $2.70. All of the warrant grants were non-forfeitable and
fully-vested at the date of issuance and were registered for resale by the
consultants under Form S-8. By February 2003, the consultants had exercised all
the warrants and we had received aggregate proceeds of $1.425 million. We issued
986,667 shares of our common stock pursuant to the exercises of the November
2002 warrant and stock grants. In January and February 2003, we entered into new
contracts and extended certain other contracts with existing consultants to
perform services as described above. On February 14, 2003, when the market price
of our stock was $2.01, we issued warrants exercisable at $1.50 per share and
stock grants for an aggregate of 975,216 shares of our common stock as
compensation for these services. The warrants were non-cancelable and
fully-vested at the date of issuance. By May 31, 2003, the consultants had
exercised warrants to purchase all of the shares granted to them and we had
received proceeds of $0.8 million.
During March 2003, when the market price of our stock ranged from $1.32 to $1.50
per share, we issued warrants exercisable at $0.75 per share and stock grants
for an aggregate of 1,350,400 as compensation for services under new or extended
contracts. The warrants were non-cancelable and fully-vested at the date of
issuance. By May 31, 2003, the consultants had exercised warrants to purchase
all of the shares granted to them and we had received proceeds of approximately
$0.9 million.
In April 2003, when the price of our stock ranged from $0.81 to $0.885 per
share, we entered into additional contracts, extended certain contracts, and
modified certain other contracts with existing consultants who agreed to settle
a portion of the outstanding balance due for services under their contracts in
stock. We issued warrants at $0.75 per share and stock grants for an aggregate
of 1,490,600 shares of our common stock as compensation or settlement for these
services. The warrants were non-cancelable and fully-vested at the date of
issuance. By May 31, 2003, the consultants had exercised warrants to purchase
all of the shares granted to them and we had received proceeds of approximately
$0.1 million.
In May 2003, when the price of our stock ranged from $0.552 to $0.576 per share,
we again entered into new contracts, extended certain contracts, and modified
certain other contracts with existing consultants who agreed to settle a portion
of the outstanding balance due for services under their contracts in shares of
stock. We issued warrants at $0.30 per share and stock grants for an aggregate
of 2,080,305 shares of our common stock as compensation or settlement for these
services. The warrants were non-cancelable and fully-vested at the date of
issuance. By September 30, 2003, the consultants had exercised warrants to
purchase all of the shares granted to them and we had received proceeds of
approximately $0.5 million.
In July 2003, when the price of our stock ranged from $0.11 to $0.30 per share,
we extended a contract for consulting and other services and granted the
consultant a warrant to purchase 722,500 shares of our common stock at 50% of
the closing market price on the date of any exercise as compensation under the
contract. The warrant was granted as fully-vested and expired on September 30,
2003. By September 30, 2003, the consultant had exercised the entire warrant at
prices ranging from $0.08 to $0.61 per share and we had received proceeds of
approximately $0.4 million. Also during July 2003, we issued stock grants to
consultants for an aggregate of 356,344 shares of our common stock as
compensation under their contracts.
On August 20, 2003, when the price of our stock was $0.18 per share, we issued
consulting contracts to two new consultants pursuant to which we issued warrants
for 100,000 shares each, exercisable at $0.18 per share. The warrants were
non-cancelable and fully-vested at the date of issuance. To date, the
consultants have exercised none of the warrants.
In September 2003, when the price of our stock ranged from $0.50 to $1.80 per
share, we issued an aggregate of 800,000 shares of our common stock to
consultants and other service providers who agreed to take shares of stock in
lieu of cash as compensation under their contracts.
In October and November 2003, when the price of our stock ranged from $0.53 to
$1.65 per share, we issued an aggregate of 125,000 shares of our common stock to
consultants and other service providers who agreed to take shares of stock in
lieu of cash as compensation under their contracts.
In February 2004, when the price of our stock was $0.67 per share, we issued
500,000 shares of our common stock to a consultant who had agreed to accept
shares of stock as a portion of its compensation under a consulting agreement.
We issued approximately 67,000 additional shares of our common stock during the
first quarter of 2004 to another consultant under the terms of a long-term
consulting agreement.
15
In May 2004, when the price of our stock was $0.465 per share, we issued
warrants to purchase 150,000 shares of our common stock at an exercise price of
$0.50 as a portion of the compensation under a consulting contract. The warrants
were exercisable immediately and remain so for a period of five years. These
warrants do not have registration rights and have not been exercised to date.
In June 2004, when the price of our stock was $0.52 per share, we issued 250,000
shares of our common stock to a consultant who had agreed to accept shares of
stock as compensation under a consulting agreement.
Further, in June 2003, our Board of Directors authorized and we registered a
total of 10,000,000 shares of our common stock under a Form S-8 Registration
Statement for issuance under our 2003 Non-Qualified Stock Option Plan (the "2003
Plan"). Under the 2003 Plan, we awarded stock options at market or at a discount
to market or direct stock grants to consultants in consideration of services
rendered to the Company. Between July 2003 and December 2003, we granted
consultants options to purchase 7,227,500 shares of our Common Stock at a
weighted average price of $0.16 per share. The consultants had exercised all of
the options by December 31, 2003. Between July 2003 and August 2004, we issued a
total of 2,772,500 shares of our Common Stock as direct stock grants to various
consultants. All of the shares registered under the 2003 Plan are now issued and
outstanding.
To conserve cash and to obtain goods and services, the Company may continue to
issue options and warrants at discounts to market or issue direct stock grants.
In the event that the Company issues additional options and warrants, it is
anticipated that the securities will contain cost-free registration rights which
will be granted to holders of the options and warrants, and that there may be
dilution to the Company's existing stockholders.
LICENSE AGREEMENT AND TECHNOLOGY TRANSFER AGREEMENT ("LICENSE AGREEMENT") WITH
ANI BIOTECH OY
On September 30, 2004, when the market price of our Common Stock was $0.39 per
share and pursuant to Regulation S, we entered into a licensing, technology
transfer and equipment purchase agreement with Ani Biotech Oy ("Ani") pursuant
to which we are required to pay to Ani an aggregate of 1,232,840 Euros
(approximately US $1,500,000) in either our Common Stock or cash to acquire
certain licenses and manufacturing equipment. On September 30, 2004, we issued
1,172,205 restricted shares of our Common Stock to Ani, representing the first
installment under the License Agreement. The subsequent installments will be
payable in shares of our Common Stock or in cash, over the next several months
following the effectiveness of a registration statement on Form SB-2 filed on
October 8, 2004 (SEC File No.: 333-119646). The License Agreement provides that
we will issue shares of our Common Stock to Ani at a price equal to the average
closing price of our Common Stock as quoted on the American Stock Exchange for
the five days immediately preceding the transfer, but not less than $0.40 per
share. The License Agreement further provides that the conversion rate from
Euros into US dollars will be the 12 Noon Eastern Time buying rate on the day of
the transfer as reported by the Federal Reserve Bank of New York. The October
registration statement included a total of 4,200,000 shares of our Common Stock,
which assumes that all payments are made in shares of our Common Stock at a
share price of $0.40 and that the current exchange rate between Euros and US
dollars will not fluctuate by more than 10% from its level at the time of
filing.
MARR CREDIT FACILITY
On November 13, 2003, when the market price of our common stock was $0.88 per
share, the Company and Marr Technologies BV ("Marr"), our largest stockholder,
entered into an agreement in which Marr agreed to provide us up to an aggregate
of $10,000,000 (the "Marr Credit Facility") pursuant to promissory notes we may
issue to Marr on an as-needed basis (the "Notes"). Each Note would bear interest
at the rate of 5% per annum and have a 12-month term. The Marr Credit Facility
was available during the period beginning on February 28, 2004 and ending on May
31, 2004. The aggregate amount available under the Marr Credit Facility is
proportionally reduced by the amount of any equity financing we obtain during
the term of the Marr Credit Facility. Marr has participation rights in any such
equity financing on the same terms as the other investors. The Marr Credit
Facility provided for earlier termination as of March 31, 2004, if we failed to
have our common stock listed on an established stock exchange by that date.
Moreover, upon the failure to obtain such stock exchange listing, any
outstanding Notes would be due and payable on April 30, 2004. As consideration
for the Marr Credit Facility, we issued to a party designated by Marr a warrant
to purchase 375,000 shares of its common stock at an exercise price of $0.80 per
share. The warrant is immediately exercisable and expires two years after
issuance, on November 12, 2005.
16
On March 19, 2004, when the market price of our common stock was $0.575 per
share, we and Marr amended the Marr Credit Facility to increase the aggregate
amount available under the Marr Credit Facility to $15,000,000 and to eliminate
the termination provision upon failure to have our common stock listed on an
established stock exchange by March 31, 2004. As additional consideration for
the amendment of the Marr Credit Facility, we issued to a party designated by
Marr an additional warrant to purchase 400,000 shares of our common stock at an
exercise price of $0.46 per share. This warrant is immediately exercisable and
expires two years from its date of issuance, on March 18, 2006.
On May 26, 2004, when the market price of our Common Stock was $0.46 per share,
we and Marr again amended the Marr Credit Facility whereby Marr has committed to
purchase up to $5,000,000 of Promissory Notes that we may issue through December
31, 2004, should our Board of Directors unanimously approve the issuance of one
or more such notes before the commitment period expires. Any Notes issued
pursuant to this second amendment will bear interest at 9% per annum and will
have a maturity date of May 31, 2005. The $5,000,000 commitment available under
the amended Marr Credit Facility is reduced by the amount of any equity
financing we obtain after the May 26, 2004 effective date of the second
amendment and through the December 31, 2004 commitment period, exclusive of the
proceeds from the May 2004 Private Placement. Accordingly, the commitment has
been reduced to approximately $3.6 million as a result of the closing of the
July 2004 PIPE. At October 22, 2004, the Company has issued no Notes under the
Marr Credit Facility. As consideration for the extension of the commitment
period reflected in the second amendment of the Marr Credit Facility, we issued
to Marr a warrant to purchase 500,000 shares of our Common Stock at an exercise
price of $0.40 per share. This warrant is immediately exercisable and expires
two years from its date of issuance, on May 26, 2006. The shares underlying
these three warrants were included in our June 15, 2004 registration statement.
SUMMARY OF SHARE ISSUANCES AND POTENTIAL ISSUANCES
In addition to the shares previously issued, as noted in the tables above
summarizing the Company's recent financings and other transactions, the Company
may be required to issue additional shares upon the exercise of warrants or
options relating to its financings, contracts for services with consultants, or
pursuant to its employee benefit plans or other agreements. To summarize the
above, from 2002 through October 22, 2004 Calypte has issued shares of its
Common Stock as follows and projects the following potential additional
issuances of shares of its authorized common stock, most of which has been
registered.
SHARES POTENTIALLY
SHARE USAGE SHARES ISSUED ISSUABLE
- ------------------------------------------------------------------------- -------------- ------------------
Shares outstanding at January 1, 2002 1.3 million 0.1 million
Shares issued pursuant to Recent Financing arrangements 143.1 million 11.6 million
Shares issued pursuant to warrants, options and stock grants to obtain
services and licenses
20.4 million 0.7 million
Shares issued pursuant to License Agreement with Ani Biotech 1.2 million 3.0 million
Shares issued pursuant to employee and director option plans and employee
stock purchase plan
2.0 million 40.4 million
Other general business purposes 1.3 million --
-------------- ------------------
Shares outstanding at October 22, 2004 169.3 million 55.8 million
============== ==================
Although management believes that our current financing arrangements will
be adequate to sustain our operations at expected levels through 2004 in the
absence of any unanticipated material costs and expenses that are not factored
into our cash flow projections, we expect that we will need to raise additional
capital to sustain our operations and achieve our business milestones in 2005
and thereafter. We are requesting stockholder approval of this Proposal to
authorize additional equity financing of up to $16.5 million. We do not
currently have any agreements in place with respect to a prospective financing
and we will continue to seek such financing on terms that are negotiated in
arms-length transactions. We expect, however, based on current market prices for
our Common Stock, that the need to raise additional funds through the sale of
equity will result in the issuance of a significant number of shares of Common
Stock and/or attached warrants. The contemplated prospective financing, if at
less than $0.40 per share of Common Stock, would also require the issuance of
additional shares and both additional and re-priced warrants to previous
investors under the terms of anti-dilution protection provisions in previous
financing arrangements. These issuances will have a dilutive effect on the
interest of current stockholders.
17
In the past, Calypte has raised money through the sale of shares of its
common stock at a discount to the current market price. Such arrangements have
included the private sale of shares to investors on the condition that the
Company register such shares for resale by the investors to the public. These
arrangements have taken various forms including private placements commonly
known as PIPE transactions, equity lines of credit and convertible debentures.
At the present time, the Company intends to use the proceeds from future
offerings or financings, including any prospective financing for which approval
is requested in this Proposal for general working capital purposes as we build
distribution and execute on our plan to generate revenues from our rapid HIV-1/2
products under development and/or currently being commercialized.
The Company expects that its future financing arrangements could include:
(i) PIPE Transactions; (ii) equity lines; (iii) convertible debentures; and (iv)
bank or institutional financings, if qualified in the future. Due to our
continuing need to conserve our cash resources, Calypte continues to look for
ways to minimize the use of cash while obtaining required services. Accordingly,
we may continue to issue options, warrants, or stock grants in consideration for
additional services, and we may issue these options and warrants in return for
services at discounts to market.
APPROVAL REQUIRED
Approval of this Proposal requires the affirmative vote of a majority of
the outstanding shares of Common Stock of the Company represented in person or
by proxy and voting at the Special Meeting.
If the stockholders do not approve this proposal, the Company may not be
able to arrange the financing necessary to sustain its current operations beyond
2004 and/or it may have to withdraw its listing on the American Stock Exchange.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE AUTHORIZATION OF A
FINANCING OF UP TO $16.5 MILLION. PROXIES SOLICITED BY THE BOARD WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE IN THEIR PROXIES.
18
STOCK PERFORMANCE CHART
The graph below compares the cumulative total stockholder return on the
Common Stock assuming an initial investment on December 31, 1998. The
Corporation's return is shown with the cumulative total return of the NASDAQ
Stock Market--U.S. Index and the Nasdaq Biotechnology Index. The graph assumes a
$100 investment made at the beginning of the respective period and reinvestment
of all dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CALYPTE BIOMEDICAL CORPORATION, THE NASDAQ STOCK MARKET (U.S.)
INDEX
AND THE NASDAQ BIOTECHNOLOGY INDEX
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Cumulative Total Return
-------------------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03
CALYPTE BIOMEDICAL CORPORATION 100.00 48.90 36.42 6.43 1.88 0.54
NASDAQ STOCK MARKET (U.S.) 100.00 186.20 126.78 96.96 68.65 108.18
NASDAQ BIOTECHNOLOGY 100.00 226.87 291.54 245.15 150.17 220.05
* $100 invested on 12/31/98 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as set forth in the footnotes to this table, the following table
sets forth information known to the Company with respect to the beneficial
ownership of its Common Stock as of October 22, 2004 for (i) all persons known
by the Company to own beneficially more than 5% of its outstanding Common Stock,
(ii) each of the Company's directors, (iii) each Named Executive Officer and
(iv) all directors and executive officers of the Company as a group.
SHARES
BENEFICIALLY % OF
5% STOCKHOLDERS, DIRECTORS AND OFFICERS(1) OWNED TOTAL(2)
- ------------------------------------------ ------------ ----------
Marr Technologies BV (3) 49,540,151 28.73
Strawinskylaan 1431
1077XX, Amsterdam
The Netherlands
SF Capital Partners Ltd. (4) 10,322,000 6.10
3600 South Lake Drive
St. Francis, WI 53235
Anthony J. Cataldo (5) 5,022,341 2.88
J. Richard George (6) 2,555,717 1.49
Richard D. Brounstein (7) 1,507,371 *
John DiPietro (8) 307,977 *
Paul Freiman (9) 309,901 *
Julius Krevans, M.D.(10) 308,468 *
Maxim A. Soulimov (11) 200,000 *
All current directors and executive officers as a group (7 persons) 10,211,775 5.70
- ----------
* Represents beneficial ownership of less than 1%.
(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person named
in this table has sole voting and investment power with respect to the
shares set forth opposite such person's name. Except as otherwise
indicated, the address of each of the persons in this table is as follows:
c/o Calypte Biomedical Corporation, 5000 Hopyard Road, Suite 480,
Pleasanton, California 94588.
(2) Based on 169,321,669 shares outstanding as of October 22, 2004.
(3) As reported in Amendment No. 4 to Schedule 13D dated August 9, 2004 filed
with the Securities and Exchange Commission. Includes 3,125,000 shares
subject to warrants exercisable within 60 days. Marat Safin has voting and
investment control over shares held by Marr Technologies BV.
(4) As reported in Schedule 13G dated June 3, 2004 filed with the Securities
and Exchange Commission. Excludes 3,500,000 shares subject to warrants
held by SF Capital Partners Ltd. Such warrants are subject to conversion
caps that preclude SF Capital Partners Ltd. from utilizing its exercise
rights within 60 days to the extent that it would beneficially own
(determined in accordance with Section 13(d) of the Securities Act of
1934) in excess of 4.999% of the Company's common stock, giving effect to
such exercise. Michael A. Roth and Brian J. Stark are the founding members
and direct the management of Staro Asset Management, LLC, a Wisconsin
limited liability company ("Staro"), which acts as investment manager and
has sole power to direct the management of SF Capital Partners Ltd.
Through Staro, Messrs. Roth and Stark possess sole voting and dispositive
power over all of the shares owned by SF Capital Partners Ltd.
(5) Includes 4,765,556 shares subject to options exercisable within 60 days
(6) Includes 2,555,717 shares subject to options exercisable within 60 days.
(7) Includes 1,507,371 shares subject to options exercisable within 60 days.
20
(8) Includes 307,734 shares subject to options exercisable within 60 days.
(9) Includes 309,901 shares subject to options exercisable within 60 days.
(10) Includes 308,001 shares subject to options exercisable within 60 days.
(11) Includes 200,000 shares subject to options exercisable within 60 days.
Marr Technologies BV ("Marr"), the beneficial owner of 49,540,151 shares
of Calypte Common stock (the "Marr Holdings") has the right to nominate
two (2) candidates to serve on the Calypte Board of Directors. Mr.
Soulimov was nominated by Marr and subsequently appointed as a director on
April 2, 2004 upon approval of the Calypte Board of Directors. He was
re-elected as a Director at the annual Meeting of Stockholders on June 22,
2004. Mr. Soulimov disclaims any direct or indirect beneficial ownership
of Marr Holdings and does not exercise any control nor does he take part
in any investment decisions undertaken by Marr and does not have a direct
or indirect pecuniary interest in Marr Holdings.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
executive officers, directors, and persons who own more than 10% of the
Company's Common Stock (collectively, "Reporting Persons") to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Commission. Such Reporting Persons are also required by the Securities and
Exchange Commission rules to furnish the Company with copies of all Section
16(a) forms that they file. The Company believes that during fiscal year 2003,
all the Reporting Persons complied with all applicable filing requirements.
The remainder of this page is intentionally left blank.
21
OTHER MATTERS
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S
PROXY STATEMENT FOR THE 2005 ANNUAL MEETING
Under the rules of the Securities and Exchange Commission, stockholder
proposals submitted for next year's Proxy Statement must be received by the
Company no later than the close of business on February 7, 2005, to be
considered. Proposals should be addressed to Jerrold Dotson, Secretary, Calypte
Biomedical Corporation, 5000 Hopyard Road, Suite 480, Pleasanton, CA 94588.
Any stockholder who wishes to bring a proposal before the Calypte
Biomedical Corporation 2005 Annual Meeting of Stockholders, but does not wish to
include it in the Company's proxy materials, must provide written notice of the
proposal to Calypte's Secretary, at the above address, by March 10, 2005.
OTHER INFORMATION
The Company does not know of any matters other than those referred to in
the accompanying Notice of Special Meeting of Stockholders that may properly
come before the meeting or other matters incident to the conduct of the meeting.
As to any other matter or proposal that may properly come before the meeting,
including voting on a proposal omitted from this Proxy Statement pursuant to the
rules of the Securities and Exchange Commission, it is intended that proxies
received will be voted in accordance with the discretion of the proxy holders.
There are no matters on the agenda that involve rights of appraisal of a
stockholder. The Company incorporates by reference all items and matters
contained in its Form 10-KSB for the Fiscal Year ended December 31, 2003 as
filed with the Securities and Exchange Commission in addition to its Form
10-QSBs and Form 8-K Reports as filed with the Commission.
By order of the Board of Directors,
/s/ J. Richard George
--------------------------------------
J. Richard George
President and Chief Executive Officer
Pleasanton, California
November __, 2004
22
CALYPTE BIOMEDICAL CORPORATION
5000 HOPYARD ROAD, SUITE 480
PLEASANTON, CALIFORNIA 94588
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. RICHARD GEORGE and RICHARD D. BROUNSTEIN, and
each of them, with full power of substitution, as the proxy or proxies of the
undersigned to vote all shares of Common Stock of Calypte Biomedical Corporation
which the undersigned is entitled to vote at the special meeting of stockholders
of Calypte Biomedical Corporation to be held at the Company's offices at 5000
Hopyard Road, Suite 480, Pleasanton, California 94588 on December 14, 2004, at
10:00 a.m. local time, and at any adjournments or postponements thereof, with
all powers that the undersigned would have if personally present thereat:
(CONTINUED ON OTHER SIDE)
/*\ FOLD AND DETACH HERE /*\
================================================================================
PLEASE MARK [X]
YOUR VOTES
AS THIS
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the Proposal.
1. Proposal to authorize the Company's Board of Directors to enter into a FOR AGAINST ABSTAIN
financing transaction to raise up to $16.5 million by the issuance of [_] [_] [_]
Common Stock or equivalents and/or the issuance of warrants to purchase
shares of Common Stock within 90 days from the date of the Special
Meeting on terms and conditions that may result in dilution to
stockholders and may trigger certain anti-dilution protections provided to
certain existing stockholders. Stockholder approval of the within proposal
is required for the Company to maintain its listing on the American Stock
Exchange in the event that it issues shares of Common Stock or warrants
that results in the issuance in excess of 20% of its currently issued and
outstanding Common Stock or if the anti-dilution provisions provided to
certain stockholders are triggered.
(The Board of Directors recommends a vote FOR.)
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting and at any adjournment or postponement
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature of Stockholder____________________ Signature if held jointly
___________________ Dated: ________, 2004
Please sign exactly as name appears above. 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 full corporate name by President or other authorized person.