SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
Filed by 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 Section 240.14a-11(c) or Section 240.14a-12
BIOPHAN TECHNOLOGIES, INC.
(Name of Registrant as Specified in its Charter)
BIOPHAN TECHNOLOGIES, INC.
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: n/a
(2) Aggregate number of securities to which transaction applies: n/a
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: n/a.
(4) Proposed maximum aggregate value of transaction: n/a
(5) Total fee paid: -0-
[_] 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:
Biophan Technologies, Inc.
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 13, 2004
-------------------------------
TO THE STOCKHOLDERS OF BIOPHAN TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of BIOPHAN
TECHNOLOGIES, INC., a Nevada corporation (the "Company"), will be held on July
13, 2004, at 10:00 a.m., local time, at the Company's principal executive
offices, 150 Lucius Gordon Drive, West Henrietta, NY 14586, for the following
purposes (as more fully described in the Proxy Statement accompanying this
Notice):
1. To elect five (5) members of the Board of Directors to serve until
the 2005 Annual Meeting of Stockholders or until a successor is
elected.
2. To amend the Company's Articles of Incorporation to increase the
number of shares of Common Stock authorized to be issued from
80,000,000 to 125,000,000 shares.
3. To amend the 2001 Stock Option Plan to increase the number of shares
of Common Stock available for awards from 7,000,000 to 13,000,000
shares.
4. To ratify the appointment of Goldstein Golub Kessler LLP as the
independent auditors of the Company for the fiscal year ending
February 28, 2005.
5. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only stockholders of record at the close of business on June 7, 2004 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
WE HOPE YOU WILL ATTEND THIS ANNUAL MEETING IN PERSON, BUT IF YOU CANNOT, PLEASE
SIGN AND DATE THE ENCLOSED PROXY. RETURN THE PROXY IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE RETURNED A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
Guenter H. Jaensch
Chairman of the Board
West Henrietta, New York
Date: June_____, 2004
- 2 -
BIOPHAN TECHNOLOGIES, INC.
150 LUCIUS GORDON DRIVE
WEST HENRIETTA, NEW YORK 14586
___________________________
PROXY STATEMENT
___________________________
2004 ANNUAL MEETING OF STOCKHOLDERS
JULY 13, 2004
INFORMATION CONCERNING VOTING AND PROXY SOLICITATION
GENERAL
This Proxy Statement is being furnished to the stockholders of BIOPHAN
TECHNOLOGIES, INC. ("Biophan" or the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board").
The proxies are for use at the Annual Meeting of Stockholders of the Company to
be held on Tuesday, July 13, 2004, at 10:00 a.m., local time, or at any
adjournment thereof (the "Annual Meeting"). The Annual Meeting will be held at
the Company's principal executive offices, 150 Lucius Gordon Drive, West
Henrietta, New York 14586. Our telephone number is (585) 214-2441.
The shares represented by your proxy, if the proxy is properly executed and
returned, and not revoked, will be voted at the Annual Meeting as therein
specified. You may revoke your proxy at any time before the proxy is exercised
by delivering to the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date. You may also revoke your proxy by attending
the Annual Meeting and voting in person.
The shares represented by your proxy will be voted as indicated on your properly
executed proxy. If no directions are given on the proxy, the shares represented
by your proxy will be voted:
FOR the election of the director nominees named herein (Proposal No. 1), unless
you specifically withhold authority to vote for one or more of the director
nominees.
FOR amending the Company's article of incorporation to increase the number of
shares of Common Stock authorized to be issued from 80,000,000 to 125,000,000
shares (Proposal No. 2), unless you designate otherwise.
FOR amending the 2001 Stock Option Plan to increase the number of shares
available for awards from 7,000,000 shares to 13,000,000 shares (Proposal No.
3), unless you designate otherwise.
FOR the ratification of the appointment of Goldstein Golub Kessler LLP as the
Company's independent auditors for the fiscal year ending February 28, 2005
(Proposal No. 4).
The Company knows of no other matters to be submitted to the Annual Meeting. If
any other matters properly come before the Annual Meeting, it is the intention
of the persons named in the accompanying form of proxy to vote the shares they
represent as the Board may recommend.
These proxy solicitation materials and the Annual Report on Form 10-KSB for the
fiscal year ended February 29, 2004 (the "Last Fiscal Year") are first being
mailed to stockholders on or about June ____, 2004.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on June 7, 2004 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. At the
Record Date, 67,074,610 shares of the Company's Common Stock, $.005 par value
(the "Common Stock"), were issued and outstanding and held of record by
approximately 370 stockholders.
- 3 -
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Attending the
Annual Meeting in and of itself will not constitute a revocation of a proxy.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share held as of the Record
Date. Stockholders will not be entitled to cumulate their votes in the election
of directors.
The cost of soliciting proxies will be borne by the Company. The Company expects
to reimburse brokerage firms and other persons representing beneficial owners of
shares for their expense in forwarding solicitation material to such beneficial
owners. Proxies may be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, in person or by
telephone, e-mail or facsimile.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
Holders of a majority of the outstanding shares entitled to vote must be
present, in person or by proxy, at the Annual Meeting in order to have the
required quorum for the transaction of business. Votes cast by proxy or in
person at the Annual Meeting will be tabulated by the Inspector of Elections,
appointed for the Annual Meeting, who, with the assistance of Continental Stock
Transfer & Trust Company, the Company's transfer agent, will determine whether
or not a quorum is present. If the shares present, in person and by proxy, at
the Annual Meeting do not constitute the required quorum, the Annual Meeting may
be adjourned to a subsequent date for the purpose of obtaining a quorum.
Shares that are voted "FOR," "AGAINST" or "ABSTAIN" are treated as being present
at the Annual Meeting for purposes of establishing a quorum. Shares that are
voted "FOR," "AGAINST" or "ABSTAIN" with respect to a matter will also be
treated as shares entitled to vote (the "Votes Cast") with respect to such
matter. While no definitive statutory or case law authority exists in Nevada as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the number of Votes Cast
with respect to a proposal (other than the election of directors). In the
absence of a controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote "AGAINST" the proposal.
Broker non-votes (i.e., votes from shares held of record by brokers as to which
the beneficial owners have given no voting instructions) will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining the number of
Votes Cast with respect to the particular proposal on which the broker has
expressly not voted. Accordingly, broker non-votes will not affect the outcome
of the voting on a proposal that requires a majority of the Votes Cast (such as
Proposal No. 3, the approval of an amendment to increase the number of shares
available for awards under the option plan). With respect to a proposal that
requires a majority of the outstanding shares (such as Proposal No. 2, the
approval of an amendment to the certificate of incorporation to increase the
authorized number of shares of common stock), however, a broker non-vote has the
same effect as a vote "AGAINST" the proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE 2005 ANNUAL
MEETING
In order for any stockholder proposal submitted pursuant to Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended (the "Act"),
to be included in the Company's Proxy Statement to be issued in connection with
the 2005 Annual Meeting of Stockholders, such proposal must be received by the
Company no later than April 22, 2005. Any notice of a proposal submitted outside
the processes of Rule 14a-8 promulgated under the Act, which a stockholder
intends to bring forth at the Company's 2005 Annual Meeting of Stockholders,
will be untimely for purposes of Rule 14a-4 of the Act and the By-laws of the
Company if received by the Company after May 4, 2005.
- 4 -
ANNUAL REPORT ON FORM 10-KSB
Our Annual Report on Form 10-KSB for the last Fiscal Year (the "Annual Report")
which is mailed to stockholders with this Proxy Statement, contains financial
and other information about us and such financial information is incorporated by
reference into this Proxy Statement. See "Other Information" below.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board currently consists of five directors each of whom serves until the
Annual Meeting and until his successor is elected and has qualified. The
Company's By-Laws provide that the Board consist of three to nine persons. The
Board has fixed five as the number of directors for purposes of this year's
Annual Meeting who will serve a one year term until the Annual Meeting of
Stockholders to be held in 2005, or until a successor is elected or appointed
and qualified or until such director's earlier resignation or removal. The Board
reserves the right to increase the size of the Board as provided in the
Company's By-Laws.
At this year's Annual Meeting, you are requested to vote for the election of
Guenter H. Jaensch, Michael L. Weiner, Robert S. Bramson, Steven Katz and Ross
B. Kenzie. Each of these nominees has consented to serve, and the Board has no
reason to believe that the nominees will be unable or unwilling to serve as
nominees or as directors if elected. However, if any nominee is unable or
unwilling to serve as a director, the Board may, by resolution, provide for a
lesser number of directors or designate a substitute. If the Board designates a
substitute, shares represented by proxies may be voted for the substitute
nominee. Proxies received will be voted "FOR" the election of all nominees
unless otherwise directed. Pursuant to applicable Nevada corporation law,
assuming the presence of a quorum, five directors will be elected from among
those persons duly nominated for such positions by a plurality of the votes
actually cast by stockholders entitled to vote at the Annual Meeting who are
present in person or by proxy. The age of each nominee is as of June 7, 2004.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING FOR THE NOMINEES NAMED
BELOW.
Director
Name Age Position Since
--------------------------------------------------------------------------
Guenter H. Jaensch 65 Chairman of the Board 2002
Michael L. Weiner 56 Chief Executive Officer and
Director 2000
Robert S. Bramson 65 Director 2001
Steven Katz 56 Director 2001
Ross B. Kenzie 72 Director 2000
GUENTER H. JAENSCH, PH.D. is the former Chairman and CEO of Siemens Pacesetter,
Inc., a manufacturer of pacemakers. During his more than 25 years at Siemens,
Dr. Jaensch held various senior executive positions prior to running Siemens
Pacesetter, including President of Siemens Communications Systems, Inc. from
August 1983 to March 1985, Chairman and President of Siemens Corporate Research
and Support, Inc. from April 1982 to September 1991, and Chairman and CEO of
Siemens Pacesetter, Inc. and Head of the Cardiac Systems Division of Siemens AG
Medical Engineering Group from October 1991 to September 1994. Dr. Jaensch holds
a Master's Degree in Business Administration and a Ph.D. in Business and Finance
from the University of Frankfurt and taught business and statistics at the
University prior to joining Siemens in 1969. In 1994, he joined St. Jude Medical
as Chairman and CEO of Pacesetter, Inc., a St. Jude Medical Company, and retired
in 1995 to manage his personal investments. Since December 1997, he has been a
director of MRV Communications, a publicly traded company which is a leading
company in the fiber-optic technology business. Dr. Jaensch has been a director
of Biophan since March 2002.
- 5 -
MICHAEL L. WEINER began his career at Xerox Corporation in 1975, where he served
in a variety of capacities in sales and marketing, including Manager of Software
Market Expansion and Manager of Sales Compensation Planning. In 1985, after a
ten-year career at Xerox, Mr. Weiner founded Microlytics, a Xerox spin-off
company which developed technology from the Xerox Palo Alto Research Center into
a suite of products with licenses to many companies. In January 1995, Weiner
co-founded and became CEO of Manning & Napier Information Services, a
Rochester-based company providing patent analytics, prior art searches, and
other services. He held this position until January of 1999. In February 1999,
he formed Technology Innovations, LLC to develop and expand certain intellectual
property assets. In August, 2000, Technology Innovations, LLC created a
subsidiary, Biomed Solutions, LLC, to pursue certain biomedical and
nanotechnology opportunities. Mr. Weiner serves on the Boards of Biomed
Solutions, LLC, Technology Innovations, LLC, Speech Compression Technologies, LP
(an R&D partnership commenced in 1989 to pursue compression technologies),
Nanoset, LLC, Myotech, LLC and Nanocomp, LLC. Mr. Weiner holds seven issued
patents for inventions which are owned by other companies that employed Mr.
Weiner prior to the formation of Biophan. These patents do not involve
technology that is competing or will compete with Biophan. Mr. Weiner has been
the CEO and a director of Biophan since December 2000.
ROBERT S. BRAMSON is an engineer and patent attorney and, since 1996, has been a
partner in Bramson & Pressman, a law firm that focuses on patent and technology
licensing matters. Since 1996, he has also been President of VAI Management
Corp., a consulting firm that specializes in patent and technology licensing. He
is a former head of the Computer and Technology law group of Schnader, Harrison,
Segal & Lewis (where he worked from 1968 to 1989); former Vice President and
General Patent and Technology Counsel for Unisys (from 1989 to 1990); founder
and former CEO of InterDigital Patents Corporation, a patent licensing company
(from 1992 to 1995); former Licensing Counsel for Abbott Laboratories (from 1963
to 1966); and has been Adjunct Professor of Patent Law, Computer Law and
(presently) Licensing Law at Temple Law School, Rutgers Law School and Villanova
Law School at different times (from 1980 to date). Mr. Bramson has been a
director of Biophan since July 2001.
STEVEN KATZ is President of Steven Katz & Associates, Inc., a technology-based
management consulting firm specializing in strategic planning, corporate
development, new product planning, technology licensing, and structuring and
securing various forms of financing since 1982. From January 2000 until October
2001, Mr. Katz was President and Chief Operating Officer of Senesco
Technologies, Inc., a public company engaged in the development of proprietary
genes with application to agro-biotechnology. From 1983 to 1984, he was the
co-founder and Executive Vice President of S.K.Y. Polymers, Inc., a biomaterials
company. Prior to S.K.Y. Polymers, Inc., Mr. Katz was Vice President and General
Manager of a non-banking division of Citicorp. From 1976 to 1980, he held
various senior management positions at National Patent Development Corporation,
including President of three subsidiaries. Prior positions were with Revlon,
Inc. (1975) and Price Waterhouse & Co. (1969 to 1974). Mr. Katz received a
Bachelor of Business Administration degree in Accounting from the City College
of New York in 1969. He is presently a member of the Board of Directors of USA
Technologies, Inc., a publicly held corporation, and several other private
companies. Mr. Katz has been a director of Biophan since July 2001.
ROSS B. KENZIE is a former Chairman and Chief Executive Officer of Goldome Bank,
from which he retired in June 1989. He was previously Executive Vice President
of Merrill Lynch & Co., in its New York worldwide headquarters, and is a former
member of the Merrill Lynch & Co. Board of Directors. He is a former director of
the Federal Home Loan Bank of New York (from 1984 to 1988) and served on the
boards of the National Council of Savings Institutions (from 1982 to 1986), the
Federal Reserve Bank of New York, Buffalo Branch (from 1985 to 1987), and the
Savings Banks Association of New York State (from 1984 to 1987). Mr. Kenzie was
a director of Millard Fillmore Hospitals (from 1982 to 1995)and is currently
Past Chairman Emeritus. He served on the Board of the Kaleida Health, Education
and Research Foundation (from 1998 to 2000) and is currently on its Investment
Committee. He was a director of the Health Systems Agency of Western New York
(from 1988 to 1991) and was a member of the Western New York Commission on
Health Care Reform (from 1987 to 1990). Mr. Kenzie was a member of the College
Council of the State University College at Buffalo (from 1981 to 1998) and
served as Chairman. He was a director of the College's Foundation and a member
of its Finance Committee (from 1984 to 1998) and is currently on its Investment
Committee. He served on the Council of the Burchfield-Penney Art Center (from
1990 to 2001) and the Albright Knox Art Gallery (from 1983 to 1985). He is also
a member of the Board and the Chairman of the Investment Committee of the State
- 6 -
University at Buffalo Foundation. Mr. Kenzie currently serves on the boards of
several companies, including the publicly held Rand Capital Corporation and many
entrepreneurial ventures that are privately held, including the Boards of
Members of Biomed Solutions, LLC and Technology Innovations, LLC. Mr. Kenzie has
been a director of Biophan since December 2000.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES.
UNLESS AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES IS SPECIFICALLY
WITHHELD, THE SHARES REPRESENTED BY YOUR PROXY, IF PROPERLY EXECUTED AND
RETURNED, AND NOT REVOKED, WILL BE VOTED FOR THE ELECTION OF ALL THE NOMINEES
FOR WHOM YOU ARE ENTITLED TO VOTE.
THE BOARD AND COMMITTEES OF THE BOARD
The Board held six (6) meetings during the Company's fiscal year ended February
29, 2004. The standing committees of the Board are the Audit Committee and the
Compensation Committee. The Board does not currently have a nominating committee
and has not established any specific procedure for selecting candidates for
director. There is no established procedure for shareholder communications with
members of the Board or the Board as a whole. During fiscal 2004, each of the
incumbent directors, during his period of service, attended at least 75% of the
total number of meetings held by the Board and each committee of the Board on
which he served.
AUDIT COMMITTEE. The Audit Committee is currently composed of Messrs. Katz
(Chairman), Bramson and Kenzie. The Audit Committee makes recommendations
concerning the engagement of independent auditors, reviews with the independent
auditors the results of the audit engagement, approves professional services
provided by the auditors, including the scope of non-audit services, if any, and
reviews the adequacy of our internal accounting controls. The Audit Committee
met one time during the Company's fiscal year ended February 29, 2004. Each
member of the Audit Committee attended the meeting. The Board of Directors of
the Company has determined that Messrs.Katz and Kenzie meet the criteria of the
Securities and Exchange Commission as an "audit committee financial expert" and
that each member of the Audit Committee is "Independent" as such term is used in
Section 10A(m)(3) of the Securities and Exchange Act of 1934.
COMPENSATION COMMITTEE. The Compensation Committee is currently composed of
Messrs. Kenzie (Chairman), Bramson and Katz. The Compensation Committee reviews
the Company's compensation policies, establishes executive officer compensation
and administers the Company's Stock Option Plan. The Compensation Committee met
one time during the Company's fiscal year ended February 29, 2004. Each member
of the Compensation Committee attended the meeting.
COMPENSATION OF THE BOARD
Directors who are employees of Biophan do not receive additional compensation
for serving on the Board or its committees. Non-employee directors, for their
services as directors, are paid an annual cash fee of $3,500 and a per-meeting
fee of $1,000. Mr. Jaensch receives an additional $1,500 per month for serving
as Chairman of the Board. In addition, non-management directors receive options
under the Company's Stock Option Plan. Each director, upon first being elected
to the Board, receives an initial grant of options to purchase 20,000 shares,
vesting on the first anniversary of the grant, and additional grants of options
to purchase 20,000 shares on each succeeding anniversary of such director's
election. On October 31, 2003, the board of directors made a special, one-time
grant of options to purchase 60,000 shares at an exercise price of $0.18 per
share to each non-employee director. All directors are reimbursed for their
reasonable expenses incurred in attending Board meetings. Steven Katz receives
an additional $3,000 per year for serving as Chairman of the Audit Committee.
Otherwise, no additional compensation is paid to directors for serving as
members of committees of the Board.
The Company maintains directors and officers liability insurance.
- 7 -
PROPOSAL NO. 2
AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
COMMON STOCK AUTHORIZED TO BE ISSUED FROM 80,000,000 TO 125,000,000 SHARES.
The Company's Articles of Incorporation as currently in effect (the "Articles")
provide that the Company is authorized to issue eighty million (80,000,000)
Common Stock, with a par value of $.005 per share. On May 10, 2004, the Board of
Directors authorized an amendment to the Articles to increase the authorized
number of Common Stock to one hundred twenty-five million (125,000,000) shares
(the "Amendment"). The stockholders are being asked to approve the increase in
the number of shares of Common Stock authorized by the Amendment at the Annual
Meeting.
As of June 7, 2004, there were 67,074,610 shares of Common Stock issued and
outstanding. If all outstanding rights to acquire Common Stock pursuant to
outstanding options, warrants, and a stock purchase agreement with SBI
Brightline Consulting, LLC, there would be an insufficient number of shares
available for other corporate purposes.
The additional Common Stock that would be authorized by the proposed Amendment
would have the same rights and privileges as the shares of Common Stock
currently authorized and outstanding.
During the fiscal year ended February 29, 2004, the Company engaged in a number
of transactions which involved issuance of its Common Stock. In the aggregate
during fiscal 2004, the Company issued 9,988,621 shares of Common Stock in
connection with the conversion of outstanding debt and contractual obligations.
In addition, the Company sold 18,321,697 shares of Common Stock for cash
pursuant to various stock purchase agreements and outstanding options and
warrants in fiscal 2004. See Item 5 and Item 6 of our Annual Report on Form
10-KSB, delivered with this Proxy Statement, for additional detail regarding the
issuances of shares of Common Stock in the last Fiscal Year. Under the currently
effective stock purchase agreement with SBI Brightline Consulting, LLC, upon
compliance with the terms and conditions set forth in the agreement, the Company
may sell up to an additional six million (6,000,000) shares of its Common Stock
in the current fiscal year.
In the opinion of the Board, the additional authorized Common Stock will benefit
the Company by providing flexibility to the Board, without requiring further
action or authorization by the Company's stockholders (except as may be required
by law or the rules of any stock exchange on which the Company's securities may
then be listed), to issue additional Common Stock from time to time in
responding to business needs and opportunities as they arise, or for other
proper corporate purposes. These opportunities, needs and purposes might
include, for example, the obtaining of capital funds through public and private
offerings of Common Stock or of securities convertible into Common Stock and the
use of Common Stock in connection with structuring possible acquisitions of
businesses and assets. Additionally, the Board, in its discretion, could in the
future declare stock splits or stock dividends or, subject to shareholder
approval, increase, establish or extend stock option and other stock award
plans. The Company evaluates potential acquisitions from time to time. However,
the Company has no present plans, arrangements or understandings with respect to
possible acquisitions using Company stock and has no present plans for
financings other than our existing stock purchase agreement with SBI Brightline
Consulting, LLC. The Company is also requesting that stockholders approve an
additional six million shares of Common Stock be available for grants under the
Company's 2001 Stock Option Plan (see Proposal No. 3, below). No stock splits,
dividends or other actions requiring the availability of the additional
authorized shares of Common Stock are currently planned.
There are no preemptive rights with respect to the Company's Common Stock and,
accordingly, existing stockholders would not have any preferential right to
purchase any of the additional shares of Common Stock if and when issued.
Although the Board would only authorize the issuance of additional Common Stock
based on its judgment as to the best interests of the Company and its
stockholders, the issuance of additional authorized shares could have the effect
of diluting the voting power or book value per share of the outstanding Common
Stock. The issuance of any additional shares will be on terms deemed to be in
the best interests of the Company and its stockholders.
- 8 -
If the Amendment is approved by the stockholders at the Annual Meeting, the
increase in the number of Common Stock would become effective upon the filing of
the Certificate of Amendment to the Certificate of Incorporation with the Nevada
Secretary of State, which filing would take place shortly after the Annual
Meeting.
Approval of the proposal to increase the number of authorized Common Stock
requires the affirmative vote of the holders of a majority of the outstanding
Common Stock entitled to vote at the Annual Meeting. Abstentions and
broker non-votes are not considered Votes Cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE ARTICLES OF INCORPORATION. UNLESS OTHERWISE DIRECTED THEREIN,
THE SHARES REPRESENTED BY YOUR PROXY, IF PROPERLY EXECUTED AND RETURNED, AND NOT
REVOKED, WILL BE VOTED FOR SUCH PROPOSAL.
PROPOSAL NO. 3
AMEND THE 2001 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES AVAILABLE FOR AWARDS
The Company's stockholders are being asked to approve an amendment to the
Company's 2001 Stock Option Plan (the "Plan") to increase the number of shares
available for awards under the Plan from 7,00,000 shares to 13,000,000 shares.
On May 10, 2004, the Board adopted a resolution to increase the shares available
for award under the Plan.
The Plan, which provides for the granting of options to purchase up to an
aggregate of 7,000,000 shares of the Company's authorized but unissued Common
Stock (subject to adjustment in certain cases, including stock splits,
recapitalization and reorganizations) to the Company's officers, directors,
employees and consultants, was first adopted at the Annual Meeting of
Stockholders held on July 19, 2001 and amended at the Annual Meeting on August
20, 2003.
The Plan is intended to enhance the Company's ability to provide individuals
with awards and incentives commensurate with their contributions to the Company
and compete with those offered by other employers, and to increase stockholder
value by further aligning the interests of these individuals with the interests
of the Company's stockholders by providing an opportunity to benefit from stock
price appreciation that generally accompanies improved financial performance.
The Company believes that this amendment to increase the number of shares of
Common Stock authorized for issuance under the Plan is necessary to ensure that
a sufficient reserve of Common Stock is available under the Plan. The Board
believes that the Company's long-term success is dependent upon the ability of
the Company to attract and retain highly qualified individuals who, by virtue of
their ability and qualifications, make important contributions to the Company.
Directors and executive officers of the Company are eligible to participate in
the Plan and may be considered interested in increasing the number of shares.
The following summary of the Plan, including the proposed amendment, is subject
in its entirety to the specific language of the 2001 Plan, as amended. A copy of
the Plan is available to any stockholder upon request to the Company's Secretary
at the Company's headquarters: 150 Lucius Gordon Drive, Suite 215, West
Henrietta, NY 14586, or by calling (585) 214-2441. A copy may also be found with
the Company's filings with the Securities and Exchange Commission on its website
at www.sec.gov (as Exhibit 10.53 to the Company's Registration Statement on Form
SB-2 (No. 333-112678), filed on February 10, 2004).
PURPOSE. The purpose of the Plan is to advance the interests of the
Company and its shareholders by strengthening the Company's ability to
attract and retain individuals of training, experience and ability as
officers, key employees, directors and consultants and to furnish
additional incentives to such key individuals to promote the Company's
financial success by providing them with an equity ownership in the
Company commensurate with Company performance, as reflected in increased
shareholder value. It is the intent of the Company that such individuals
be encouraged to obtain and retain an equity interest in the Company, and
each Participant will be specifically apprised of said intent.
- 9 -
ADMINISTRATION. The Plan will be administered by the Compensation
Committee, composed of not less than two directors appointed by the Board.
Each member of the Compensation Committee shall, at all times during their
service as such, be a "non-employee director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934. The Compensation
Committee shall have conclusive authority to construe and interpret the
Plan and any Award Agreement (as defined in the Plan) entered into
thereunder, and to establish, amend and rescind administrative policies
for the administration of the Plan and such additional authority as the
Board may from time to time determine is necessary or desirable.
ELIGIBILITY. Those persons eligible to participate in the Plan shall
include officers and other key employees, directors and consultants of the
Company and its subsidiaries.
SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in the Plan,
the total number of shares of Common Stock available under the Plan shall
be 13,000,000 (assuming approval of the proposed amendment).
PARTICIPATION. The Compensation Committee shall select, from time to time,
key employees and consultants who, in the opinion of the Compensation
Committee, can further the Plan's purposes, and the Compensation Committee
shall determine the type or types of awards to be made to the
participants. The terms, conditions and restrictions of each award shall
be set forth in an award agreement.
STOCK OPTIONS. Awards may be granted in the form of non-statutory stock
options and incentive stock options.
RESTRICTED STOCK AWARDS. Awards may also be granted in the form of
Restricted Stock (as defined in the Plan). Restricted Stock Awards are
subject to such terms, conditions, restrictions or limitations as the
Compensation Committee deems appropriate.
CHANGE IN CONTROL. In the event of a "change in control" of the Company,
stock options not otherwise exercisable shall become fully exercisable and
all restrictions previously established with respect to Restricted Stock
Awards will conclusively be deemed to have been satisfied.
TAX MATTERS. Section 162(m) of the Internal Revenue Code (the "Code")
prohibits a publicly held corporation, such as the Company, from claiming
a deduction on its federal income tax return for compensation in excess of
$1 million paid for a given fiscal year to the chief executive officer (or
person acting in that capacity) at the end of the corporation's fiscal
year and the four most highly compensated officers of the corporation,
other than the chief executive officer, at the end of the corporation's
fiscal year. The $1 million compensation deduction limitation does not
apply to "performance-based" compensation under Section 162(m) of the
Code. Awards under the Plan qualify as "performance-based" for purposes of
Section 162(m).
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal anticipated federal income tax
consequences of grants under the Plan to recipients and the Company. This
summary is not intended to be exhaustive and does not describe all federal,
state or local tax laws.
OPTION GRANTS. Options granted under the Plan may be either incentive stock
options which satisfy the requirements of Section 422 of the Code or
non-statutory options which are not intended to meet such requirements. The
federal income tax treatments for the two types of options are as follows:
INCENTIVE OPTIONS. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at
the time the option is exercised, provided that the optionee may incur
alternative minimum tax liability upon exercise. The optionee will,
however, recognize taxable income in the year in which the purchased
- 10 -
shares are sold or otherwise made the subject of a taxable disposition.
For federal tax purposes, dispositions are divided into two categories:
(i) qualifying and (ii) disqualifying. A qualifying disposition occurs if
the sale or other disposition is made after the optionee has held the
shares for more than two (2) years after the option grant date and more
than one (1) year after the exercise date. If either of these two holding
periods is not satisfied, then a disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized
upon the sale or other disposition of the purchased shares over (ii) the
exercise price paid for the shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of
those shares on the exercise date over (ii) the exercise price paid for
the shares will be taxable as ordinary income to the optionee. Any
additional gain or loss recognized upon the disposition will be recognized
as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the
taxable year in which such disposition occurs, equal to the excess of (i)
the fair market value of such shares on the option exercise date over (ii)
the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition
of the purchased shares.
NON-STATUTORY OPTIONS. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general
recognize ordinary income in the year in which the option is exercised,
equal to the excess of the fair market value of the purchased shares on
the exercise date over the exercise price paid for the shares, and the
optionee will be required to satisfy the tax withholding requirements
applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the
optionee's termination of service prior to vesting in those shares, then
the optionee will not recognize any taxable income at the time of exercise
but will have to report as ordinary income, as and when the Company's
repurchase right lapses, an amount equal to the excess of (i) the fair
market value of the shares on the date the repurchase right lapses over
(ii) the exercise price paid for the shares. The optionee may, however,
elect under Section 83(b) of the Code to include as ordinary income in the
year of exercise of the option an amount equal to the excess of (i) the
fair market value of the purchased shares on the exercise date over (ii)
the exercise price paid for such shares. If the Section 83(b) election is
made, the optionee will not recognize any additional income as and when
the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed
for the taxable year of the Company in which such ordinary income is
recognized by the optionee.
RESTRICTED STOCK. Generally, a recipient will not recognize income and the
Company will not be entitled to a deduction with respect to an award of
Restricted Stock until the first to occur of the vesting or the free
transferability of such shares. The amount to be included in the recipient's
income (and, subject to the discussion of Section 162(m) of the Code below,
which may be deductible by the Company) will equal the fair market value of the
Restricted Stock on the first day it is freely transferable or vested, not when
it is first issued to a recipient, over the amount, if any, paid for such stock.
The Company will be entitled to withhold tax from a recipient's salary or from
the shares that are no longer subject to restriction in order to satisfy any tax
withholding obligation arising from the taxability of the Restricted Stock. A
recipient receiving Restricted Stock can elect to include the value of the
Restricted Stock, over the amount, if any, paid for such stock, in income at the
time it is awarded by making a "Section 83(b) Election" within 30 days after the
Restricted Stock is transferred to the recipient.
PLAN BENEFITS. As of June 7, 2004, a total of 6,869,993 options have been
awarded under the Plan, of which 3,000,000 have been exercised. Awards of
options to purchase 1,475,000 shares of Common Stock have been made under the
Plan, subject to stockholder approval of this amendment to the Plan increasing
the number of shares of Common Stock available.
- 11 -
NEW PLAN BENEFITS
2001 Stock Option Plan
Name and Position Number of Shares*
----------------- -----------------
Michael L. Weiner
Chief Executive Officer 300,000
Robert J. Wood
Chief Financial Officer 125,000
Stuart G. MacDonald
Vice President - Research 200,000
Jeffrey L. Helfer
Vice President - Engineering 200,000
Executive Officers as a Group 825,000
Directors (excluding Executive Officers)
as a Group 240,000
Employees (excluding Executive Officers)
as a Group 125,000
__________________
* Each award was made subject to stockholder approval of the amendment to the
Plan increasing the number of shares of Common Stock available for award under
the Plan. Each award consisted of stock options to purchase shares of Common
Stock at the fair market value on the date of grant, $0.18 per share, vesting in
equal annual installments over four years commencing October 31, 2003.
Approval of the amendment to increase the share allocation to the Plan requires
the affirmative vote of a majority of Votes Cast. Abstentions and broker
non-votes are not considered Votes Cast.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE 2001 STOCK OPTION PLAN INCREASING THE NUMBER OF SHARES
AVAILABLE FOR AWARDS FROM 7,000,000 SHARES TO 13,000,000 SHARES. UNLESS
OTHERWISE DIRECTED THEREIN, THE SHARES REPRESENTED BY YOUR PROXY, IF PROPERLY
EXECUTED AND RETURNED, AND NOT REVOKED, WILL BE VOTED FOR SUCH PROPOSAL.
- 12 -
PROPOSAL NO. 4
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Based on the recommendation of the Audit Committee, the Board has appointed
Goldstein Golub Kessler LLP, independent auditors, to audit the financial
statements of the Company for the fiscal year ending February 28, 2005 and
recommends that the stockholders vote FOR confirmation of such appointment. In
the event of a negative vote on such ratification, the Audit Committee and the
Board will reconsider their appointment. Even if the appointment is ratified,
the Audit Committee and the Board in their discretion may direct the appointment
of different independent auditors at any time during the year.
It is not anticipated that a representative from Goldstein Golub Kessler LLP,
which is located in New York City, Members of the Company's Audit Committee are
expected to attend the meeting and will be available to answer questions.
Goldstein Golub Kessler LLP has audited the Company's financial statements
annually since the year ended February 28, 2001. The Company has not consulted
with Goldstein Golub Kessler LLP regarding either (i) the application of
accounting principles to a specified transaction, either completed or proposed
or the type of audit opinion that might be rendered on the Company's financial
statements, and neither a written report nor oral advice was provided to the
Company that was an important factor considered by the Company in reaching a
decision as to the accounting, auditing or financial reporting issue or (ii) any
matter that was either the subject of a disagreement, as that term is defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of
Regulation S-K, or a reportable event, as that term is defined in Item
304(a)(1)(v) of Regulation S-K.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) Audit Fees
The aggregate fees billed by Goldstein Golub Kessler LLP, our principal
accountants, for professional services rendered for the audits of the Company's
annual financial statements for the last two fiscal years and for the reviews of
the financial statements included in the Company's quarterly reports on Form
10-QSB and for services in connection with SEC registration statements during
the last two fiscal years ended February 29, 2004 and February 28, 2003 was
$69,386 and $41,500 respectively.
(2) Audit-Related Fees
The Company did not engage its principal accountants to provide assurance and
related services during the last two fiscal years.
(3) Tax Fees
The Company did not engage its principal accountants to provide tax compliance,
tax advice and tax planning services during the last two fiscal years.
(4) All Other Fees
The Company did not engage its principal accountants to render services to the
Company during the last two fiscal years, other than as reported above.
(5) Pre-approval Policies and Procedures
In accordance with its charter, the Audit Committee is required to approve all
audit and non-audit services provided by the independent auditors and shall not
engage the independent auditors to perform the specific non-audit services
proscribed by law or regulation.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTNG FOR THE
RATIFICATION OF THE APPOINTMENT OF GOLDSTEIN GOLUB KESSLER LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING FEBRUARY 28, 2005. UNLESS
OTHERWISE DIRECTED THEREIN, THE SHARES REPRESENTED BY YOUR PROXY, IF PROPERLY
EXECUTED AND RETURNED, AND NOT REVOKED, WILL BE VOTED FOR SUCH PROPOSAL.
- 13 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below lists the beneficial ownership of our common stock, as of
February 29, 2004, by each person known by us to be the beneficial owner of more
than 5% of our common stock, by each of our directors and officers and by all of
our directors and officers as a group.
Name and Address of Number of Shares
Beneficial Owner Beneficially Owned Percent of Class(2)
(1)(2)
------------------------------ ------------------ -------------------
+Guenter H. Jaensch (3) 801,667 1.19%
964 Allamanda Drive
Delray Beach, FL 33483
+Michael L. Weiner (4) 7,058,029 10.30%
693 Summit Drive
Webster, NY 14580
Wilson Greatbatch (5) 4,944,461 7.35%
5935 Davison Road
Akron, NY 14001
+Robert S. Bramson (6) 65,000 *
1100 East Hector Street
Suite 410
Consohocken, PA 19428
+Ross B. Kenzie (7) 65,000 *
Cyclorama Bldg. Suite 100
369 Franklin Street
Buffalo, NY 14202
+Steven Katz (8) 120,000 *
20 Rebel Run Drive
East Brunswick, NJ 08816
Robert J. Wood (9) 214,583 *
12 Peachtree Lane
Pittsford, NY 14534
Stuart G. MacDonald (10) 266,667 *
4663 East Lake Road
Pultneyville, NY 14538
Jeffrey H. Helfer (11) 306,667 *
1153 Hidden Valley Trail
Webster, NY 14580
- 14 -
Technology Innovations, 5,656,501 8.31%
LLC(12)
150 Lucius Gordon Drive
Suite 215
West Henrietta, NY 14586
Biomed Solutions, LLC(13) 5,355,857 7.87%
150 Lucius Gordon Drive
Suite 215
West Henrietta, NY 14586
All Officers and Directors as 8,897,613 12.74%
a group (8 persons)(14)
----------
* Denotes less than one percent.
+ Denotes Member of the Board of Directors.
(1) Except as may be set forth below, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
(2) Applicable percentage of ownership is based on 66,864,610 shares outstanding
as of May 31, 2004, together with applicable options for such shareholder.
Beneficial ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to shares. Shares subject to
options or warrants currently exercisable or exercisable within 60 days after
February 29, 2004 are included in the number of shares beneficially owned and
are deemed outstanding for purposes of computing the percentage ownership of the
person holding such options or warrants, but are not deemed outstanding for
computing the percentage of any other stockholder.
(3) Includes 501,667 shares issuable upon exercise of options and warrants
granted to Dr. Jaensch.
(4) Michael L. Weiner is a member and the manager of Technology Innovations,
LLC, which is the majority owner of Biomed Solutions, LLC. Mr. Weiner is also
the Manager of Biomed. Mr. Weiner's calculation includes 4,175,857 shares owned
beneficially and of record by Biomed and 300,644 shares owned beneficially and
of record by Technology Innovations. Includes 1,180,000 shares issuable upon
exercise of warrants held by Biomed and 491,667 shares issuable upon exercise of
options held by Mr. Weiner.
(5) Includes 4,459,468 shares owned of record and beneficially by Greatbatch
Gen-Aid, Ltd., an entity owned by Wilson Greatbatch, and 109,993 shares owned by
E. & W.G. Foundation, a private foundation of which Mr. Greatbatch is
co-trustee. Also includes 225,000 shares issuable upon exercise of options held
by Mr. Greatbatch and 150,000 shares issuable upon exercise of warrants held by
Mr. Greatbatch.
(6) Includes 65,000 shares issuable upon exercise of options held by Mr.
Bramson.
(7) Includes 65,000 shares issuable upon exercise of options held by Mr. Kenzie.
Does not include shares owned beneficially or of record by Biomed or by
Technology Innovations. Mr. Kenzie is the Manager and an equity member of
Biophan Ventures, LLC, which is the 43% equity member in Biomed; he is also the
Manager of Patent Ventures LLC, which is the Class A Member of Technology
Innovations. Mr. Kenzie and Mr. Weiner comprise the Board of Members of Biomed;
Mr. Kenzie serves on the Board of Members of Technology Innovations.
(8) Includes 120,000 shares issuable upon exercise of options held by Mr. Katz.
- 15 -
(9) Includes 154,583 shares issuable upon exercise of options and warrants held
by Mr. Wood.
(10) Includes 206,667 shares issuable upon exercise of options and warrants held
by Mr. MacDonald.
(11) Includes 206,667 shares issuable upon exercise of options and warrants held
by Mr. Helfer.
(12) Includes 4,175,857 shares owned beneficially and of record by Biomed and
1,180,000 shares issuable upon exercise of warrants held by Biomed. Technology
Innovations, LLC is the majority owner of Biomed Solutions, LLC.
(13) Includes 1,180,000 shares issuable upon exercise of warrants held by
Biomed.
(14) Does not include options granted to directors and officers that are
contingent on stockholder approval of a proposed increase in the shares reserved
for issuance under the 2001 Stock Option Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires our executive officers and directors and persons who own more
than ten percent of our Common Stock to file reports of ownership and changes in
ownership with the SEC. Such executive officers, directors and greater than ten
percent stockholders are also required by SEC rules to furnish us with copies of
all Section 16(a) forms they file. Based upon our records and other information,
the Company believes that, with respect to the year ended February 29, 2004, all
filings applicable to our executive officers, directors and greater than ten
percent stockholders required by Section 16(a) have been made in a timely
manner.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(1) Michael L. Weiner, President and Chief Executive Officer of Biophan, is the
Manager and a 42.7% equity member of Technology Innovations, LLC., a 57% equity
member of Biomed Solutions, LLC (formerly Biophan, LLC). Mr. Weiner is also the
Manager of Biomed. He and Ross Kenzie make up the Board of Members of Biomed.
Biomed is the record owner of 662,857 shares of common stock of Biophan;
Technology Innovations is the record owner of 300,644 shares of common stock of
Biophan. As Manager of Technology Innovations and Biomed, Mr. Weiner has control
over these entities. Mr. Weiner is also on the board of Nanoset, LLC, an entity
owned in part by Biomed Solutions, and with which we have entered into a
technology license agreement.
(2) On December 1, 2000, Biomed received 10,759,101 shares of Biophan's common
stock in exchange for its shares of LTR Antisense Technology, Inc. Most of those
shares have been distributed to the members of Biomed and their members.
(3) On December 1, 2000, Biomed transferred its MRI-compatible pacemaker patent
pending and related technology to Biophan for a future payment of $500,000. This
obligation bears interest at 8% per annum from February 28, 2002, and has been
extended several times, to June 1, 2004. After June 1, 2004, principal and
interest are payable in 12 equal monthly installments. Since November 30, 2002,
this entire obligation has been convertible into Common Stock of Biophan at a
conversion price equal to the lowest of (i) the closing bid price on June 4,
2002; (ii) the closing bid price on the date of exercise; or (iii) the lowest
per share purchase price paid by any third party between June 4, 2002 and the
exercise date. On February 10, 2004, Biomed transferred $300,000 of this
obligation to SBI Brightline Consulting, LLC and converted the remaining balance
of $200,000 into shares of our common stock common. On the same date, SBI
converted the $300,000 obligation transferred to it into shares of our common
stock.
(4) On June 4, 2002, we executed a line of credit agreement with Biomed
providing for borrowings up to $250,000. On August 19, 2002, the line was
increased by $100,000 and the expiration date thereof for that portion of the
line was set at August 19, 2003. The payment date of amounts borrowed under the
original line was extended to December 1, 2002. On November 7, 2002, the
- 16 -
maturity date of the line was extended until such time as the financing
contemplated by the Spectrum stock purchase agreement commenced. It was later
extended to June 1, 2004. On February 10, 2004, all outstanding balances under
the line of credit were converted to common stock in accordance with the terms
of the credit agreement.
(5) Biomed holds warrants to purchase a total of 1,180,000 shares of our common
stock. On March 1, 2001, it received warrants to purchase 200,000 shares at an
exercise price of $1.00 in consideration of management effort and expense
incurred on our behalf. On June 4, 2002, it received warrants to purchase
100,000 shares at an exercise price of $1.00 in consideration of the extension
of the due date for the Transfer Agreement payment, and warrants to purchase
75,000 shares at an exercise price of $1.00 in consideration of the grant of the
line of credit. (Wilson Greatbatch also received 150,000 warrants in
consideration of the extension of the due date of the Transfer Agreement
payment. Mr. Greatbatch is the beneficial owner of approximately 7.5% of our
outstanding common stock). On August 19, 2002, Biomed received warrants to
purchase 30,000 shares in consideration of the increase in the line of credit
commitment, and warrants to purchase 275,000 shares for additional extensions of
the payment terms of the Transfer Agreement payment. On that date, the exercise
price for all 680,000 warrants then held by Biomed was set at the lowest of (i)
the closing bid price on June 4, 2002; (ii) the closing bid price on the date of
exercise; or (iii) the lowest per share purchase price paid by any third party
between June 4, 2002 and the exercise date. On November 7, 2002, Biomed was
granted warrants to purchase an additional 500,000 shares at an exercise price
of $.50 per share in consideration of another extension of the Transfer
Agreement payment. Each extension of the Transfer Agreement payment enabled us
to retain the MRI-compatible technology that we acquired under the Transfer
Agreement. In connection with each issuance of warrants to Biomed, our board of
directors determined, without the vote of Mr. Weiner or Mr. Kenzie, that the
consideration received by us was fair and adequate consideration for the
warrants issued.
(6) During the year ended February 29, 2004, the Company charged Biomed for
services of certain Company personnel and charged both Biomed and Technology
Innovations for expenses allocable to and paid on their behalf. The total of
these charges was $120,081. During the year ended February 28, 2003, Biomed and
Technology Innovations paid expenses on our behalf aggregating $128,411. These
advances did not bear interest and were subsequently repaid.
(7) On January 1, 2001, Wilson Greatbatch was granted 250,000 options at an
exercise price of $.50 for his consulting services to us and 8,333 options at an
exercise price of $.50 as former Chairman of the Scientific Advisory Board. As a
consultant Mr. Greatbatch assisted us in the development of our photonic
pacemaker by providing design and engineering services. The board of directors
determined that the value of the consulting services was fair and adequate
consideration for the options issued. We recorded compensation expense of $9,200
with respect to those options. Through his ownership of Greatbatch Gen-Aid, Ltd.
and his co-trusteeship of a private foundation, E.& W.G. Foundation, he is the
beneficial owner of 4,919,509 Common Stock of our common stock. He also received
consideration from Biomed in connection with transfer of the MRI-compatible
pacemaker technology to Biophan. On June 4, 2002, he received warrants to
purchase 150,000 shares of our common stock with an exercise price of $1.00 in
consideration of the extension of the payment due under the Transfer Agreement.
Greatbatch Gen-Aid holds a 3.5% membership interest (11 Units) in Technology
Innovations.
On February 28, 2001, we entered into a research and development agreement with
Greatbatch Enterprises Corporation. Mr. Greatbatch is the CEO and majority
stockholder of Greatbatch Enterprises. Under the agreement, Greatbatch
Enterprises undertook certain technology development and testing, for which we
paid Greatbatch Enterprises an aggregate of $297,000. The agreement terminated
in December 2002 with the completion of animal testing by Greatbatch
Enterprises.
(8) On March 1, 2002, Dr. Guenter H. Jaensch was granted options to purchase
250,000 shares at an exercise price of $.10 per share and on July 16, 2002 was
granted additional options to purchase 100,000 shares at an exercise price of
$.43 per share, in each case for consulting services he provided to us. As a
consultant, Dr. Jaensch assisted us in developing our strategic plan, attended
trade shows, and arranged and met with potential customers and strategic
partners. The Board of Directors determined that the value of the consulting
services was fair and adequate consideration for the options issued. We valued
the options at $36,900 and $592,500, respectively.
- 17 -
(9) All transactions discussed above are considered by the Board of Directors to
have been consummated on terms approximately equivalent to those that might have
prevailed in arms-length transactions with unaffiliated parties under similar
circumstances.
EXECUTIVE COMPENSATION
The following table summarizes the annual compensation paid to our executive
officers ("named executives") during the three years ended February 29, 2004:
Securities
Underlying
Name and Principal Position Year Ended Salary options/SARs
--------------------------- ---------- ------ ------------
Michael L. Weiner, CEO 2/29/04 $175,000 300,000
2/28/03 $175,000 250,000
2/28/02 $150,600 --
Robert J. Wood, CFO 2/29/04 $129,000 125,000
2/28/03 $109,461 50,000
Stuart G. MacDonald,
Vice-President-Research 2/29/04 $153,846 200,000
2/28/03 $116,057 100,000
Jeffrey L. Helfer,
Vice-President-Engineering 2/29/04 $153,846 200,000
2/28/03 $113,461 100,000
Columnar information required by Item 402(a)(2) has been omitted for categories
where there has been no compensation awarded to, earned by or paid to the named
executive required to be reported in the table during fiscal years 2002 through
2004. The securities underlying the stock options consist of Common Stock.
STOCK OPTIONS
On June 22, 2001, the Board of Directors adopted the Biophan Technologies, Inc.
2001 Stock Option Plan. The Option Plan was amended on August 20, 2003. The
Option Plan provides for the grant of incentive and non-qualified stock options
to selected employees, the grant of non-qualified options to selected
consultants and to directors and advisory board members. The Option Plan is
administered by the Compensation Committee of the Board of Directors and
authorizes the grant of options for 7,000,000 shares. The Compensation Committee
determines the individual employees and consultants who participate under the
Plan, the terms and conditions of options, the option price, the vesting
schedule of options and other terms and conditions of the options granted
pursuant thereto. Non-employee directors participate pursuant to the formula set
forth in the Option Plan. Each director receives an initial grant of options to
purchase 20,000 shares, vesting on the first anniversary of the grant, and
additional grants of options to purchase 20,000 shares on each succeeding
anniversary of such director's election. On October 31, 2003, the board of
directors made a special, one-time grant of options to purchase 60,000 shares to
each non-employee director. As of February 29, 2004, we had granted options to
purchase 6,869,993 shares of common stock under the option plan and 3,869,993
were outstanding.
The following table summarizes information concerning stock options granted to
the named executives through the last completed fiscal year ended February 29,
2004:
- 18 -
The following table summarizes information concerning stock options granted to
the named executive officers during the last completed fiscal year ended
February 29, 2004:
Percent of
Number of total
securities options/SARs Exercise
underlying granted to or base
options/SARs employees in price Expiration
Name granted (#) fiscal year ($/Sh) date
------------------- -------------- ------------ --------- ----------
Michael L. Weiner 300,000 shares 31.58% $.18 10/31/13
Robert J. Wood 125,000 shares 13.16% $.18 10/31/13
Stuart G. MacDonald 200,000 shares 21.05% $.18 10/31/13
Jeffrey L. Helfer 200,000 shares 21.05% $.18 10/31/13
No named executive officer exercised options in the fiscal year ended February
29, 2004. The following table presents the number and values of exercisable and
unexercisable options as of February 29, 2004:
Number of
Securities Value of
underlying unexercised
unexercised in-the-money
Shares options/ SARs at options/SARs at
acquired FY-end (#) FY-end ($)
on Value Exercisable/ Exercisable/
Name exercise realized Unexercisable Unexercisable
------------------- -------- -------- ---------------- ---------------
Michael L. Weiner None -- 401,667/308,333 $384,750/$296,750
Robert J. Wood None -- 124,583/150,417 $100,787/$137,963
Stuart G. MacDonald None -- 176,667/223,333 $146,100/$208,900
Jeffrey L. Helfer None -- 156,667/243,333 $131,900/$223,100
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Each of Michael L. Weiner, President and Chief Executive Officer; Stuart G.
MacDonald, Vice President of Research and Development; Robert J. Wood, Treasurer
and Chief Financial Officer;+ and Jeffrey L. Helfer, Vice President of
Engineering has entered into Employment Agreements with the Company.
Mr. Weiner's employment agreement dated December 1, 2000, (the "Employment
Agreement") has an initial term of three years with subsequent one-year renewal
periods. The Employment Agreement may be terminated by the Company for cause (as
defined in the Agreement) or upon his death or disability (as defined in the
Agreement). In the event of the disability of Mr. Weiner, termination of the
Employment Agreement by the Company following a change in control or termination
of the Employment Agreement by the Employee for Good Reason, the employee is
entitled to receive (i) the unpaid amount of the base salary earned through the
date of termination; (ii) any bonus compensation earned but not yet paid; and
(iii) a severance payment equal to one (1) year of his then current salary. In
addition, Mr. Weiner will be immediately vested in any options, warrants,
retirement plan or agreements then in effect. Good Reason means (i) material
change of employee's duties, (ii) material breach by the Company, or (iii)
termination of Mr. Weiner related to a change in control.
As used in Mr. Weiner's Employment Agreement, "change in control" means (1) the
date of the merger or consolidation of the Company with another entity where the
members of the Board, immediately prior to the merger or consolidation, would
not, immediately after the merger or consolidation, constitute a majority of the
Board of the entity issuing cash or securities in the merger or consolidation or
(2) the date of the sale or other disposition of all or substantially all of the
assets of the Company.
- 19 -
In the event of termination for cause, all unexercised warrants and options,
whether or not vested, will be canceled, and Mr. Weiner will not be eligible for
severance payments. In the event of voluntary termination, all unvested warrants
and options shall be canceled and he will have three (3) months from the date of
termination to exercise his rights with respect to any unexercised but vested
options. He will not be eligible for severance payments
The Employment Agreements for each of Mr. MacDonald, Mr. Wood and Mr. Helfer are
terminable by either the employee or the Company upon thirty (30) days' notice
or by the Company for cause (as defined in their Employment Agreements) or upon
the death or disability of the employee. However, each of the aforementioned
employees is entitled to receive severance equal to six (6) months' base salary,
payable in six (6) equal consecutive monthly installments in the event that the
employee is terminated by the Company within ninety (90) days following a change
in control. In addition, the employee will be immediately vested in any options,
warrants, retirement plan or agreements then in effect.
For purposes of the Employment Agreements for Mr. MacDonald, Mr. Wood and Mr.
Helfer, "change in control" means (1) on the date of the merger or consolidation
of the Company with another entity where the members of the Board, immediately
prior to the merger or consolidation, would not, immediately after the merger or
consolidation, constitute a majority of the Board of the entity issuing cash or
securities in the merger or consolidation; 2) on the date Michael L. Weiner is
terminated as CEO of the Company; or (3) on the date of the sale or other
disposition of all or substantially all of the assets of the Company.
In the event of termination for cause, all unexercised warrants and options,
whether or not vested, shall be canceled, and the employee will not be eligible
for severance payments. In the event of voluntary termination, all unvested
warrants and options shall be canceled and the employee shall have three (3)
months from the date of termination to exercise his rights with respect to any
unexercised but vested options.
EQUITY COMPENSATION PLAN INFORMATION
The Company has only one equity compensation plan pursuant to which it has
granted or is authorized to grant shares of common stock, options to purchase
common stock, or similar awards to officers, directors, employees and
consultants. The 2001 Stock Option Plan (described above under Proposal No. 3)
was approved by stockholders on July 19, 2001.
No. of Securities Number of Securities
to be Issued Weighted Average Remaining Available for
Upon Exercise of Exercise Price of Future Issuance under
Outstanding Options Outstanding Options Equity Compensation Plan (1)
------------------- ------------------- ----------------------------
Equity Compensation
Plans Approved by
Stockholders 3,869,993 $.39 130,007
Equity Compensation
Plans Not Approved
by Stockholders -0- -0- -0-
(1) Does not include the shares to be made available under the Plan in the event
stockholders approve Proposal No. 3.
- 20 -
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The following report is required by the SEC's executive compensation rules in
order to standardize the reporting of executive compensation by public
companies.
GENERAL
The Board's Compensation Committee (the "Compensation Committee") reviews the
Company's compensation policies, establishes executive officer compensation and
administers the Company's Stock Option Plan. The Compensation Committee is
composed of Messrs. Kenzie (Chairman), Bramson and Katz, each of whom is a
non-employee director. None of these individuals has ever been an officer or
employee of the Company.
The objectives of the Company's executive compensation policies are (i) to be
competitive with pay practices of other companies of comparable size and status,
including those in the biotechnology industry and (ii) to attract, motivate and
retain key executives who are vital to the long-term success of the Company. The
Company's executive compensation currently consists of both fixed annual salary
and stock based compensation which align the interests of the Company's
executives with the interests of its stockholders.
BASE SALARY
With respect to annual compensation, the fundamental objective in setting base
salary levels for the Company's senior management is to pay competitive rates to
attract and retain high quality, competent executives. Competitive pay levels
are determined based upon independent industry surveys, proxy disclosures,
individual leadership, level of responsibility, management skills and industry
activities. The Company does not currently have a bonus program for its
executives.
STOCK OPTIONS AND RESTRICTED STOCK
In connection with the executive compensation program, long-term incentive
awards in the form of stock options and Restricted Stock are available for
grant under the Plan. Awards have been solely in the form of non-qualified stock
options granted under the Plan. The Compensation Committee and the Board grant
these stock-based incentive awards from time to time for the purpose of
attracting and retaining key executives, motivating them to attain the Company's
long-range financial objectives, and closely aligning their financial interests
with long-term stockholder interests and share value.
The Company believes that, through the use of stock options, executives'
interests are directly tied to enhanced stockholder value. The Compensation
Committee has the flexibility of awarding non-qualified stock options, incentive
stock option and restricted stock under the Plan. This flexibility enables the
Company to fine-tune its grants in order to maximize the alignment of the
interests of the stockholders and management.
Awards of stock options were made to executive officers of the Company in fiscal
year 2004, including the Company's Chief Executive Officer, in order to provide
appropriate incentive to such persons.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal year 2004, the compensation of Michael L. Weiner, the Company's
President and Chief Executive Officer, consisted of the same components as the
compensation of the other senior executives. As described above, Mr. Weiner
received a stock option grant in fiscal 2004. Mr. Weiner's base salary is
$175,000, which is believed to be in line with salaries of executives of similar
companies and chief executive officers with similar responsibilities.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code provides that certain compensation in excess of $1
million per year paid to a company's chief executive office and the four other
most highly paid executive officers may not be deductible by accompany unless it
qualifies as performance-based compensation. The Compensation Committee
recognizes the benefits of structuring executive compensation so that Section
- 21 -
162(m) does not limit the Company's tax deductions for such compensation, and
the Plan has been designed so that the Compensation Committee may award
performance-based compensation that is not subject to the limits imposed by
Section 162(m). Under certain circumstances, the Compensation Committee may
decide to award executive compensation in an amount and form that is not
deductible under Section 162(m), but it has not done so to date.
The foregoing report is given by the members of the Compensation Committee.
Respectfully submitted,
The Compensation Committee of the Board of Directors
Ross B. Kenzie, Chairman
Steven Katz
Robert S. Bramson
THE FOREGOING COMPENSATION COMMITTEE REPORT SHALL NOT BE "SOLICITING MATERIAL"
OR BE DEEMED "FILED" WITH THE SEC, NOR SHALL SUCH INFORMATION BE INCORPORATED BY
REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES
IT BY REFERENCE INTO SUCH FILING.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Board's Audit Committee ("Audit Committee") oversees the Company's financial
reporting process on behalf of the Board. The Audit Committee is governed by a
written charter approved by the Board. Management has the primary responsibility
for the financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed with management the audited financial statements in the
Annual Report, including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of significant
judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Audit Committee
under generally accepted auditing standards.
In addition, the Audit Committee has discussed with the independent auditors the
auditors' independence from management and the Company, including receiving the
written disclosures and letter from the independent auditors and discussing the
matters in the written disclosures required by the Independence Standards Board
Standard No. 1, and has considered the compatibility of any non-audit services
with the auditors' independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board, and the Board has approved that the audited
financial statements be included in the Annual Report on Form 10-KSB for the
year ended February 29, 2004 for filing with the SEC. The Audit Committee and
the Board have also recommended, subject to shareholder approval, the
appointment of the Company's independent auditors.
Respectfully submitted,
The Audit Committee of the Board of Directors
Steven Katz, Chairman
Ross B. Kenzie
Robert S. Bramson
- 22 -
THE FOREGOING AUDIT COMMITTEE REPORT SHALL NOT BE "SOLICITING MATERIAL" OR BE
DEEMED "FILED" WITH THE SEC, NOR SHALL SUCH INFORMATION BE INCORPORATED BY
REFERENCE INTO ANY FUTURE FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT THE COMPANY SPECIFICALLY INCORPORATES
IT BY REFERENCE INTO SUCH FILING.
OTHER INFORMATION
The Company filed its Annual Report on Form 10-KSB with the Securities and
Exchange Commission on May 13, 2004. A copy of the Annual Report is included
with this Proxy Statement. Specifically, we have incorporated by reference into
this Proxy Statement the following information from our Annual Report:
1. Item 7 - Financial Statements: Consolidated Financial Statements for
the year ended February 29, 2004 and the Notes thereto and the
Independent Auditor's Report on such Consolidated Financial
Statements.
2. Item 8 - Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. [None]
Additional information concerning the Company is available on the Company's
website, www.biophan.com. These materials are also available free of charge in
print to investors who request them in writing from the Company's Secretary (at
the address on the cover page). Filings which the Company makes with the
Securities and Exchange Commission also contain additional information and may
be obtained on the SEC's website at www.sec.gov.
BY ORDER OF THE BOARD OF DIRECTORS
Guenter H. Jaensch
Chairman of the Board
Dated: June __, 2004
West Henrietta, New York
- 23 -
PROXY
BIOPHAN TECHNOLOGIES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Michael L. Weiner and Robert J. Wood, or either
of them, with full power of substitution, as proxies to vote at the Annual
Meeting of Stockholders of BIOPHAN TECHNOLOGIES, INC. (the "Company") to be held
on July 13, 2004 at 10:00 a.m., local time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of the Company held or owned by the undersigned as
directed on the reverse side of this proxy card, and, in their discretion, upon
such other matters as may come before the meeting. If no direction is made,
shares will be voted FOR the election of directors named in the proxy and FOR
Proposals 2, 3, and 4. In addition, the shares will be voted as the Board of
Directors of the Company may recommend with respect to any other business as may
properly come before the meeting or any adjournment thereof.
1. Election of five (5) directors (INSTRUCTION:
TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME IN THE LIST
BELOW)
FOR all nominees listed to the right [__] Michael L. Weiner
(except as marked to the contrary) Guenter H. Jaensch
Steven Katz
WITHHOLD AUTHORITY to vote [__] Ross B. Kenzie
for all nominees listed to the right Robert S. Bramson
FOR AGAINST ABSTAIN
2. Proposal to amend the Company's Articles [__] [__] [__]
of Incorporation to increase the number of authorized
shares of Common Stock to 125,000,000.
(Continued and to be signed on reverse side)
FOR AGAINST ABSTAIN
3. Proposal to amend the Company's 2001 Stock Option Plan to [__] [__] [__]
Increase the number of shares available for awards to 13,000,000.
4. Proposal to ratify the appointment of Goldstein Golub Kessler LLP as the [__] [__] [__]
Company's independent auditors for the year ending February 28, 2005.
5. Transaction of such other business as may properly come [__] [__] [__]
before the meeting or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Dated: _________________, 2004
------------------------------ --------------------------------
Signature Signature
I will [_] will not [_] attend the Meeting.
IMPORTANT: Sign the Proxy exactly as your name or names appear on
your Common Stock certificate; in the case of Common Stock held
in joint tenancy, each joint tenant must sign. Fiduciaries should
indicate their full titles and the capacity in which they sign.
Please complete, sign, date, and return this Proxy promptly in
the enclosed envelope.
- 24 -