SCHEDULE 14C
(RULE 14C-101)
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
Check the appropriate box:
|_| Preliminary Information Statement
|X| Definitive Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
EARTHFIRST TECHNOLOGIES, INCORPORATED
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which the 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:
EARTHFIRST TECHNOLOGIES, INCORPORATED
2515 E Hanna Avenue, Tampa, Florida 33610
INFORMATION STATEMENT
PURSUANT TO SECTION 14
OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE NOT REQUESTED TO SEND US A PROXY
Tampa, Florida
May 25, 2005
This information statement has been mailed on or about May 27, 2005 to
the stockholders of record on May 24, 2005 (the "Record Date") of EarthFirst
Technologies, Incorporated, a Florida corporation (the "Company") in connection
with certain actions to be taken pursuant to the written consent of the
stockholders of the Company holding a majority of the outstanding shares of
common stock, dated as of May 24, 2005. The actions to be taken pursuant to the
written consent shall be taken on or about June 16, 2005, 20 days after the
mailing of this information statement.
THIS IS NOT A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO STOCKHOLDER
MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH WILL BE DESCRIBED HEREIN.
By Order of the Board of Directors,
/s/ John D. Stanton
Chairman of the Board
1
NOTICE OF ACTION TO BE TAKEN PURSUANT TO THE WRITTEN CONSENT OF STOCKHOLDERS
HOLDING A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK OF THE COMPANY IN
LIEU OF A SPECIAL MEETING OF THE STOCKHOLDERS, DATED MAY 24, 2005
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the following action will be taken pursuant
to the written consent of stockholders holding a majority of the outstanding
shares of common stock dated May 24, 2005, in lieu of a special meeting of the
stockholders. Such action will be taken on or about June 16, 2005:
1. The Company's Articles of Incorporation, as amended, will be amended
to increase the number of authorized shares of common stock, par value $.0001
per share (the "Common Stock"), of the Company from 500,000,000 shares to
750,000,000 shares.
OUTSTANDING SHARES AND VOTING RIGHTS
As of the Record Date, the Company's authorized capitalization
consisted of 500,000,000 shares of Common Stock, of which 491,413,360 shares
were issued and outstanding as of the Record Date. Holders of Common Stock of
the Company have no preemptive rights to acquire or subscribe to any of the
additional shares of Common Stock.
Each share of Common Stock entitles its holder to one vote on each
matter submitted to the stockholders. However, because stockholders holding at
least a majority of the voting rights of all outstanding shares of capital stock
as at the Record Date have voted in favor of the foregoing proposals by
resolution dated May 24, 2005; and having sufficient voting power to approve
such proposals through their ownership of capital stock, no other stockholder
consents will be solicited in connection with this Information Statement.
Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as
amended, the proposals will not be adopted until a date at least 20 days after
the date on which this Information Statement has been mailed to the
stockholders. The Company anticipates that the actions contemplated herein will
be effected on or about the close of business on June 16, 2005.
The Company has asked brokers and other custodians, nominees and
fiduciaries to forward this Information Statement to the beneficial owners of
the Common Stock held of record by such persons and will reimburse such persons
for out-of-pocket expenses incurred in forwarding such material.
This Information Statement will serve as written notice to stockholders
pursuant to Section 607.0704 of the Florida Business Corporation Act.
2
AMENDMENT TO THE ARTICLES OF INCORPORATION
On May 24, 2005, the stockholders of the Company holding a majority of
the outstanding shares of common stock of the Company approved an amendment to
the Company's Articles of Incorporation, as amended, to replace Paragraph One of
Article III in its entirety, which will result in an increase to the number of
authorized shares of Common Stock. The Company's Articles of Incorporation, as
amended, currently authorizes for issuance of 510,000,000 shares consisting of
500,000,000 of common stock and 10,000,000 shares of preferred stock. The
approval of this amendment to the Articles of Incorporation will increase the
Company's authorized shares of common stock to 750,000,000. The Company
currently has authorized common stock of 500,000,000 shares and approximately
491,413,360 shares of Common Stock are outstanding as of the Record Date and
authorized preferred stock of 10,000,000 and no shares of preferred stock
outstanding. The Board believes that the increase in authorized common shares
would provide the Company greater flexibility with respect to the Company's
capital structure for such purposes as additional equity financing and stock
based acquisitions.
Paragraph One of Article III of the Company's Articles of Incorporation
currently is as follows:
"This corporation is authorized to issue 500,000,000
(five-hundred million) shares of Common Stock having a par
value of $0.0001 per share, which shares will be and hereby
are designated as "Common Shares." Without action by the
shareholders, any or all of the authorized shares may be
issued by the Corporation from time to time for such
consideration as may be fixed by the Board of Directors of
this Corporation."
Upon approval of the amendment to increase the Company's authorized
shares of common stock from 500,000,000 to 750,000,000, Paragraph One of Article
III of the Company's Articles of Incorporation will be as follows:
"This corporation is authorized to issue 750,000,000
(seven-hundred fifty million) shares of Common Stock having a
par value of $0.0001 per share, which shares will be and
hereby are designated as "Common Shares." Without action by
the shareholders, any or all of the authorized shares may be
issued by the Corporation from time to time for such
consideration as may be fixed by the Board of Directors of
this Corporation."
INCREASE IN AUTHORIZED COMMON STOCK
The terms of the additional shares of Common Stock will be identical to
those of the currently outstanding shares of Common Stock. However, because
holders of Common Stock have no preemptive rights to purchase or subscribe for
any unissued stock of the Company, the issuance of additional shares of Common
Stock will reduce the current stockholders' percentage ownership interest in the
total outstanding shares of Common Stock. This amendment and the creation of
additional shares of authorized common stock will not alter the current number
of issued shares. The relative rights and limitations of the shares of Common
Stock will remain unchanged under this amendment.
As of the Record Date, a total of 491,413,360 shares of the Company's
currently authorized 500,000,000 shares of Common Stock are issued and
outstanding. The increase in the number of authorized but unissued shares of
Common Stock would enable the Company, without further stockholder approval, to
issue shares from time to time as may be required for proper business purposes,
such as raising additional capital for ongoing operations, business and asset
acquisitions, stock splits and dividends, present and future employee benefit
programs and other corporate purposes.
The proposed increase in the authorized number of shares of Common
Stock could have a number of effects on the Company's stockholders depending
upon the exact nature and circumstances of any actual issuances of authorized
but unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal. The Board of Directors is not aware of any attempt, or contemplated
attempt, to acquire control of the Company, and this proposal is not being
presented with the intent that it be utilized as a type of anti- takeover
device.
3
Except for the following, there are currently no plans, arrangements,
commitments or understandings for the issuance of the additional shares of
Common Stock which are proposed to be authorized:
On March 30, 2005, the Company entered into agreements with Laurus
Master Funds, Ltd, a Cayman Islands corporation ("Laurus"), pursuant to which
the Company sold convertible debt, an option and a warrant to purchase common
stock of the Company to Laurus in a private offering pursuant to exemption from
registration under Section 4(2) of the Securities Act of 1933, as amended. The
securities being sold to Laurus include the following:
o a secured convertible minimum borrowing note and a secured revolving
note with an aggregate principal amount not to exceed $5,000,000;
o a secured convertible term note with a principal amount of
$3,000,000;
o a common stock purchase warrant to purchase 11,162,790 shares of
common stock of the Company, at a purchase price of $0.23 for the
first 5,581,395 shares and $0.28 for any additional shares,
exercisable for a period of seven years; and
o an option to purchase 24,570,668 shares of common stock of the
Company, at a purchase price equal to $0.01 per share, exercisable
for a period of six years
At the closing of the foregoing financing from Laurus, on March 31,
2005, the Company received $3,000,000 in connection with the convertible term
note. In addition, the Company is permitted to borrow an amount based upon its
eligible accounts receivable and inventory, pursuant to the convertible minimum
borrowing note and the revolving note. Accordingly at the closing, the Company
received an additional $3,600,000 for an aggregate of $6,600,000 in financing
from Laurus.
The notes mature on March 30, 2008. Annual interest on the convertible
minimum borrowing note and the revolving note is equal to the "prime rate"
published in The Wall Street Journal from time to time, plus 2.0%, provided,
that, such annual rate of interest may not be less than 7.0%, subject to certain
downward adjustments resulting from certain increases in the market price of the
Company's common stock. Annual interest on the convertible term note is equal to
the "prime rate" published in The Wall Street Journal from time to time, plus
2.5%, subject to certain downward adjustments resulting from certain increases
in the market price of the Company's common stock.
The principal amount of the secured convertible term note is repayable
at the rate of $100,000 per month together with accrued but unpaid interest,
commencing on October 1, 2005. Such amounts may be paid, at the holder's option
(i) in cash with a 2% premium; or (ii) in shares of common stock, assuming the
shares of common stock are registered under the Securities Act of 1933. If paid
in shares of common stock the number of shares to be issued shall equal the
total amount due, divided by $0.19. If the average closing price of the common
stock for five consecutive trading days prior to an amortization date is equal
4
to or greater than $.209, the Company may require the holder to convert into
common stock an amount of principal, accrued interest and fees due under the
term note equal to a maximum of 25% of the aggregate dollar trading volume of
the common stock for the 22 consecutive trading days prior to a notice of
conversion. The Company in cash may redeem the term note by paying the holder
125% of the principal amount, plus accrued interest during the first year of the
note, 115% of the principal amount, plus accrued interest during the second year
of the note and 110% of the principal amount, plus accrued interest thereafter.
The holder of the term note may require the Company to convert all or a portion
of the term note, together with interest and fees thereon at any time. The
number of shares to be issued shall equal the total amount to be converted,
divided by $0.19.
The principal amount of the secured convertible minimum borrowing note,
together with accrued interest thereon is payable on April 1, 2005. The secured
convertible minimum borrowing note may be redeemed by the Company in cash by
paying the holder 103% of the principal amount, plus accrued interest during the
first year of the note, 102% of the principal amount, plus accrued interest
during the second year of the note and 101% of the principal amount, plus
accrued interest thereafter. The holder of the term note may require the Company
to convert all or a portion of the term note, together with interest and fees
thereon at any time. The number of shares to be issued shall equal the total
amount to be converted, divided by $0.19.
Upon an issuance of shares of common stock below the fixed conversion
price, the fixed conversion price of the notes will be reduced accordingly. The
conversion price of the secured convertible notes may be adjusted in certain
circumstances such as if we pay a stock dividend, subdivide or combine
outstanding shares of common stock into a greater or lesser number of shares, or
take such other actions as would otherwise result in dilution.
120% of the full principal amount of the convertible notes are due upon
default under the terms of convertible notes. Laurus has contractually agreed to
restrict its ability to convert the convertible notes if such conversion would
exceed the difference between the number of shares of common stock beneficially
owned by the holder or issuable upon exercise of the warrant and the option held
by such holder and 4.99% of the outstanding shares of common stock of the
Company.
In addition to the above financing transaction, we may enter into
additional investments in order to develop our operations. Financing
transactions may include the issuance of equity or debt securities, obtaining
credit facilities, or other financing mechanisms. We will be required to issue
additional shares of Common Stock which are proposed to be authorized if we
elect to issue equity securities. If we issue additional equity or debt
securities, stockholders may experience additional dilution or the new equity
securities may have rights, preferences or privileges senior to those of
existing holders of our common stock. If additional financing is not available
or is not available on acceptable terms, we will have to curtail our operations
again.
Stockholders do not have any preemptive or similar rights to subscribe
for or purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
Risks Relating to Our Current Financing Arrangements:
There are a large number of shares underlying warrants and options that may be
available for future sale and the sale of these shares may depress the market
price of our common stock.
As of the date of this prospectus, we had approximately 491,413,360
shares of common stock issued and outstanding and we had convertible notes which
could require the issuance of approximately 45,000.000 additional shares of
common stock to Laurus Master Fund, Ltd., and options and warrants which could
require the issuance of 35,733,458 additional shares of common stock. All of the
shares, including all of the shares issuable upon conversion of the convertible
notes and upon exercise of our warrants and option, are being registered
hereunder. Upon registration such shares may be sold without restriction. The
sale of these shares may adversely affect the market price of our common stock.
The Issuance of Shares Upon Conversion of the Convertible Notes and Exercise of
Outstanding Warrants and Options May Cause Immediate and Substantial Dilution to
Our Existing Stockholders.
The issuance of shares upon conversion of the convertible notes and
exercise of warrants and options may result in substantial dilution to the
interests of other stockholders since the selling stockholders may ultimately
convert and sell the stock at a price lower than the current market prices.
Although Laurus may not convert their convertible notes and/or exercise their
warrants if such conversion or exercise would cause them to beneficially own
more than 4.99% of our outstanding common stock, this restriction does not
prevent Laurus from converting and/or exercising some of their holdings and then
converting the rest of their holdings. In this way, Laurus could sell more than
this limit while never holding more than this limit.
5
If We Are Required for any Reason to Repay Our Outstanding Secured Convertible
Notes to Laurus at an Unexpected Time, We Could Deplete Our Working Capital. Our
Inability to Repay the Secured Convertible Notes, If Required, Could Result in
Legal Action Against Us, Which Could Require the Sale of Substantial Assets.
In March 2005, we entered into various agreements with Laurus for the
sale of convertible debt, an option and a warrant to purchase common stock of
the Company. The $3,000,000 of secured convertible term notes are due and
payable, with interest, on a monthly basis over a three-year period, unless
sooner converted into shares of our common stock. The secured revolving note and
minimum borrowing note in the maximum amount of $5,000,000 are due in three
years, unless sooner converted into shares of our common stock. Any event of
default such as our failure to repay the principal or interest when due, our
failure to pay any taxes when due, our failure to perform under and or commit
any breach of the security agreements or any ancillary agreement, any event of
default under any other indebtedness by us or any of our subsidiaries could
require the early repayment of the secured convertible notes at a rate of 120%,
including a default interest rate on the outstanding principal balance of the
notes if the default is not cured within the specified grace period. If we are
required to repay the secured convertible notes, we would be required to use our
limited working capital and we would need to raise additional funds. If we were
unable to repay the notes when required, the note holders could commence legal
action against us and foreclose on all of our assets to recover the amounts due.
Any such action would require us to curtail or cease operations.
If an Event of Default Occurs under the Security Agreement, Secured Convertible
Notes, Warrants, Stock Pledge Agreement or Subordination Agreement, the
Investors Could Take Possession of all Our and Our Subsidiaries' Assets.
In connection with the security agreement we entered into in March 2005
we executed a stock pledge agreement in favor of Laurus granting them a first
priority security interest in the common stock of our subsidiaries all of our
and our subsidiaries' goods, inventory, contractual rights and general
intangibles, receivables, documents, instruments, chattel paper, and
intellectual property. The security agreement and stock pledge agreement state
that if an event of default occurs under any agreement with the lenders, the
lenders have the right to take possession of the collateral, to operate our
business using the collateral, and have the right to assign, sell, lease or
otherwise dispose of and deliver all or any part of the collateral, at public or
private sale or otherwise to satisfy our obligations under these agreements.
If we Sell any Securities at a an Effective Price below $0.19 Per Share, the
Conversion Price of Our Laurus Notes and Exercise Price of Our Laurus Warrants
Will be Lowered, Resulting in Additional Dilution to Shareholders.
We shall allocate approximately 81,000,000 shares of common stock to
cover the conversion of the notes and exercise of warrants and options by Laurus
in this offering. If we engage in a lower priced transaction than our current
financing arrangements with Laurus while the convertible notes or warrants are
outstanding, then the conversion price of the notes and exercise price of the
warrants will be adjusted to the lower transaction price and we may be required
to issue additional shares of common stock to the investors. If this occurs, the
number of shares which are registered pursuant to this prospectus may not be
adequate. Accordingly, we may be required to file a subsequent registration
statement covering additional shares. If the shares we have allocated and are
registering herewith are not adequate and we are required to file an additional
registration statement, we may incur substantial costs in connection therewith.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of our common stock as of May 24, 2005. The information in this table
provides the ownership information for:
o each person known by us to be the beneficial owner of more than 5%
of our Common Stock;
o each of our directors;
o each of our executive officers; and
o our executive officers and directors as a group.
6
Beneficial ownership has been determined in accordance with the rules and
regulations of the SEC and includes voting or investment power with respect to
the shares. Unless otherwise indicated, the persons named in the table below
have sole voting and investment power with respect to the number of shares
indicated as beneficially owned by them. Common Stock beneficially owned and
percentage ownership is based on 491,413,360 shares outstanding on May 24, 2005,
and assuming the exercise of any options or warrants or conversion of any
convertible securities held by such person, which are presently exercisable or
will become exercisable within 60 days after May 24, 2005.
Number of Shares Percentage
Name and Address of Beneficial Owner Beneficially Owned Outstanding
- --------------------------------------- ------------------ -----------
John D. Stanton
P.O. Box 24567
Tampa, Florida 33623 268,795,260(1) 54.70%
Leon H. Toups
418 Harbor View Lane
Largo, Florida 33770 16,786,949 3.42%
Jaime Jurado
2515 E Hanna Avenue
Tampa, Florida 33610 39,377,897(3) 8.02%
Nicholas R. Tomassetti
853 Vanderbilt Beach Road
Naples, Florida 34108 1,000,000(2) .20%
David E Crow
2515 E Hanna Avenue
Tampa, Florida 33610 600,000 .12%
Ralph W. Hughes Revocable Family Trust
P.O. Box 24567
Tampa, Florida 33623 32,016,719 6.52%
Frank W. Barker
10396 57th Way North
Pinellas Park, Florida 33782 1,500,000 .30%
------------------ -----------
All Officers and Directors (five persons) 328,060,106 66.76%
- ----------
(1) Includes options to purchase 2,000,000 shares of Common Stock at
prices ranging from $.195 to $.2145 per share. Includes all shares
owned by entities with which Mr. Stanton is affiliated.
(2) Includes options to purchase 100,000 shares of Common Stock at an
exercise price of $.20 per share granted in 2001.
(3) Includes 12,688,949 shares owned by spouse.
7
ADDITIONAL INFORMATION
The Company will provide upon request and without charge to each
stockholder receiving this Information Statement a copy of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2004, including the
financial statements and financial statement schedule information included
therein, as filed with the SEC. The Annual Report is incorporated in this
Information Statement. You are encouraged to review the Annual Report together
with subsequent information filed by the Company with the SEC and other publicly
available information.
By Order of the Board of Directors,
/s/ John D. Stanton
John D. Stanton
Chairman of the Board of Directors
Tampa, Florida
May 25, 2005
8