SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ]
Confidential, For Use of the the
Commission Only (As Permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
QUINTEK TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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QUINTEK TECHNOLOGIES, INC.
17951 Lyons Circle
Huntington Beach, CA 92647
(714) 848-7741
TO THE STOCKHOLDERS OF QUINTEK TECHNOLOGIES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Quintek Technologies, Inc., a California corporation (the "Company" or
"Quintek"), will be held at * (California time), on *, 2006 at *, for the
following purposes:
1. To elect two (2) directors of the Company to serve until the 2007 Annual
Meeting of Stockholders or until their successors have been duly elected and
qualified;
2. To amend the Company's articles of incorporation to increase the number of
authorized shares of common stock, par value $0.01 per share (the "Common
Stock"), of the Company from 200,000,000 shares to 500,000,000 shares;
3. To amend the Company's articles of incorporation to lower the par value of
common stock from $0.01 per share to $0.001 per share;
4. To ratify the selection of Kabani & Company, Inc. as our independent
registered public accounting firm for the fiscal year ending June 30, 2006;
5. To adopt the Company's 2006 Stock Incentive Plan; and
6. To transact such other business as may properly come before the Meeting and
any adjournment or postponement thereof.
Only stockholders who own shares of our common stock at the close of business on
* are entitled to notice of and to vote at the annual meeting. You may vote your
shares by marking, signing and dating the enclosed proxy card as promptly as
possible and returning it in the enclosed postage-paid envelope.
You may also vote in person at the annual meeting, even if you use the option
set forth above.
We have enclosed with this Notice of Annual Meeting, a proxy statement, a form
of proxy and a copy of our annual report to stockholders. Our annual report is
not a part of this proxy statement.
By Order of the Board of Directors,
/s/ ROBERT STEELE
-------------------------------
Robert Steele
Chairman of the Board
Huntington Beach, California
June 27, 2006
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QUINTEK TECHNOLOGIES, INC.
17951 Lyons Circle
Huntington Beach, CA 92647
(714) 848-7741
PROXY STATEMENT FOR 2006 ANNUAL MEETING OF STOCKHOLDERS
The board of directors is soliciting proxies to be used at our *, 2006 annual
meeting of stockholders. Please read and carefully consider the information
presented in this proxy statement and vote by completing, dating, signing and
returning the enclosed proxy in the enclosed postage-paid envelope.
This proxy statement, the form of proxy and our annual report will be mailed to
all stockholders on or about *, 2006. Our annual report is not a part of this
proxy statement.
INFORMATION ABOUT THE ANNUAL MEETING
WHEN IS THE ANNUAL MEETING?
*, 2006, * A.M. California time.
WHERE WILL THE ANNUAL MEETING BE HELD?
The meeting will be held at *.
WHAT ITEMS WILL BE VOTED UPON AT THE ANNUAL MEETING?
You will be voting on the following matters:
1. ELECTION OF DIRECTORS. To elect two directors to serve until the 2007 Annual
Meeting of stockholders or until their successors are duly elected and
qualified;
2. AMENDMENT OF THE ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES
OF COMMON STOCK. To consider adopting the amendment to the Articles of
Incorporation that would change the number of shares of authorized common stock
from 200,000,000 to 500,000,000.
3. AMENDMENT OF THE ARTICLES OF INCORPORATION TO DECREASE THE PAR VALUE PER
SHARE OF COMMON STOCK. To consider adopting the amendment to the Articles of
Incorporation that would reduce the par value of common stock from $0.01 per
share to $0.001 per share.
4. RATIFICATION OF AUDITORS. To ratify the selection of Kabani & Company, Inc.
as the independent registered public accounting firm of the Company for the
fiscal year ending June 30, 2006;
5. ADOPTION OF 2006 STOCK INCENTIVE PLAN. To adopt the 2006 Stock Incentive
Plan; and
6. OTHER BUSINESS. To transact such other business as may properly come before
the annual meeting or any adjournment of the annual meeting.
WHO CAN VOTE?
Only holders of record of our common stock at the close of business on *, 2006
will be entitled to notice of and to vote at the annual meeting and any
adjournments of the annual meeting. You are entitled to one vote for each share
of common stock held on that date. On *, 2006, there were * shares of our common
stock outstanding and entitled to vote at the Stockholders Meeting.
YOUR BOARD OF DIRECTORS HAS APPROVED EACH OF THE PROPOSALS SET FORTH HEREIN.
ACCORDINGLY, THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE
DIRECTORS, THE AMENDMENTS OF THE ARTICLES OF INCORPORATION, THE RATIFICATION OF
THE APPOINTMENT OF KABANI & COMPANY, INC. AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM AND THE ADOPTION OF THE 2006 STOCK INCENTIVE PLAN.
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HOW DO I VOTE BY PROXY?
You may vote your shares by mail by marking, signing and dating the enclosed
proxy card as promptly as possible and returning it in the enclosed postage-paid
envelope. A pre-addressed, postage-paid envelope is provided for this purpose.
If you return your signed proxy card before the annual meeting, we will vote
your shares as you direct. For each item of business, you may vote "FOR" or
"AGAINST" or you may "ABSTAIN" from voting.
If you return your signed proxy card but do not specify how you want to vote
your shares, we will vote them:
o "FOR" the election of all of our nominees for directors;
o "FOR" the amendment of the Company's Articles of Incorporation to increase
the number of authorized shares of common stock from 200,000,000 to 500,000,000;
o "FOR" the amendment of the Company's Articles of Incorporation to reduce
the par value of common stock from $0.01 per share to $0.001 per share;
o "FOR" the ratification of Kabani & Company, Inc. as our independent
registered public accounting firm; and
o "FOR" the adoption of our 2006 Stock Incentive Plan.
If any matters other than those set forth above are properly brought before the
annual meeting, the individuals named in your proxy card may vote your shares in
accordance with their best judgment.
HOW DO I CHANGE OR REVOKE MY PROXY?
You may revoke your Proxy at any time before it is voted either by filing with
the Secretary of the Company, at our principal executive offices, a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and expressing a desire to vote your shares in
person. Our principal executive offices are located at 17951 Lyons Circle,
Huntington Beach, CA 92647.
WHAT CONSTITUTES A "QUORUM" FOR THE ANNUAL MEETING?
The representation, in person or by proxy, of one-third of the outstanding
shares of our common stock entitled to vote is necessary to constitute a quorum
at the Annual Meeting. All Proxies that are returned will be counted by the
Inspector of Elections in determining the presence of a quorum and on each issue
to be voted on, except as noted below. An abstention from voting or a broker
non-vote will be used for the purpose of establishing a quorum, but will not be
counted in the voting process. All Proxies that are properly completed, signed
and returned to the Company before the Annual Meeting, and that have not been
revoked, will be voted in favor of the proposals described in this Proxy
Statement unless otherwise directed.
HOW MANY VOTES ARE REQUIRED?
o Directors nominees are elected by a plurality of the votes cast in person
or by proxy, provided that a quorum is present at the Meeting.
o The proposals to amend the Articles of Incorporation to increase the number
of authorized shares of common stock from 200,000,000 to 500,000,000 shares and
to reduce the par value per share of common stock from $0.01 per share to $0.001
per share will require the affirmative vote of at least a majority of the
Company's outstanding shares of Common Stock. Thus, any abstentions, "broker
non-votes" (shares held by brokers or nominees as to which they have no
discretionary authority to vote on a particular matter and have received no
instructions from the beneficial owners or persons entitled to vote thereon), or
other limited proxies will have the effect of a vote against amending the
Company's Articles of Incorporation.
o The ratification of the director's selection of Kabani & Company, Inc. as
the Company's independent registered public accounting firm will require an
affirmative vote of the majority of the votes cast in person or by proxy,
provided that a quorum is present at the annual meeting.
o The adoption of the 2006 Stock Incentive Plan will require an affirmative
vote of the majority of the votes cast in person or by proxy, provided that a
quorum is present at the annual meeting.
WHO PAYS FOR THE SOLICITATION OF PROXIES?
We will pay the cost of preparing, printing and mailing material in connection
with this solicitation of proxies. We will, upon request, reimburse brokerage
firms, banks and others for their reasonable out-of-pocket expenses in
forwarding proxy material to beneficial owners of stock or otherwise in
connection with this solicitation of proxies.
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WHEN ARE STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING DUE?
Any stockholder proposals for the 2007 annual meeting must be received by us,
directed to the attention of the Company's secretary, Mr. Andrew Haag, Quintek
Technologies, Inc., 17951 Lyons Circle, Huntington Beach, CA 92647 no later than
December 31, 2006. The use of certified mail, return receipt requested, is
advised. To be eligible for inclusion, a proposal must comply with our bylaws,
Rule 14a-8 and all other applicable provisions of Regulation 14A under the
Securities Exchange Act of 1934.
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PROPOSAL 1: ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
At the Meeting, two (2) directors are to be elected. Pursuant to the Company's
By-laws, all directors are elected to serve for the ensuing year and until their
respective successors are elected and qualified. Unless otherwise directed, the
persons named in the enclosed Proxy intend to cast all votes pursuant to proxies
received for the election of Messrs. Steele and Haag (collectively, the
"Nominees"). If any of the Nominees becomes unavailable for any reason, which
event is not anticipated, the shares represented by the enclosed proxy will be
voted for such other person designated by the Board.
Vote required: Directors must be elected by a plurality of all votes cast at the
meeting. Votes withheld for any director will not be counted.
Voting by the Proxies: The Proxies will vote your shares in accordance with your
instructions. If you have not given specific instructions to the contrary, your
shares will be voted to approve the election of the nominees named in the Proxy
Statement. Although the Company knows of no reason why the nominees would not be
able to serve, if a nominee were not available for election, the Proxies would
vote your Common Stock to approve the election of any substitute nominee
proposed by the Board of Directors. The Board may also choose to reduce the
number of directors to be elected as permitted by our Bylaws.
General Information about the Nominees: The following information regarding the
Nominees, their occupations, employment history and directorships in certain
companies is as reported by the respective Nominees.
Robert Steele has been the Company's Chief Executive Officer, President, and
Chairman of the Board of Directors since January 30, 2003. In 1999, Mr Steele
founded iBrite, a wireless information software company in Reston, VA, and from
May 1999 through June 2001 served as its Chief Executive Office. The company
established contractual partnerships with AOL and Global Knowledge. For nine
years, from 1988 through 1998, Mr. Steele served as Corporate Vice President &
Chief Technology Officer for CADD Microsystems, Inc. (CMI), currently the
leading provider of Autodesk Computer Aided Design software, consulting,
training and integration services in the Washington, DC Metropolitan Area.
During his time at CMI, the company grew from $50,000 in annual sales to more
than $3,000,000. Mr. Steele sold and supervised significant systems integration
contracts with clients such as Lucent Technologies, Long Airdox Mining (Division
of the Fortune 500 Marmon Group), ABB, GSA (General Services Administration),
FAA (Federal Aviation Administration) and NRO (National Reconnaissance Office).
Mr. Steele received a Bachelor of Science in Electronic and Computer Engineering
from George Mason University in 1988.
Andrew Haag has been the Company's Chief Financial Officer and a Director since
January 31, 2003. Prior to that, from December 2002, he was employed by the
Camelot Group, Inc., an investment banking firm, to assist its corporate clients
on capital structure, the structure of PIPE transactions and the preparation of
offering documents. From May 2001, Mr. Haag was employed by Aquasearch, Inc., a
publicly held company, where he raised significant funds from private sources,
advised its CEO on strategic business development issues and successfully
negotiated several contracts to benefit the company. Mr. Haag assisted in
drafting corporate business plan, terms of investment, press releases and other
corporate documents. From November 1998 through April 2001 he was employed by
Nutmeg Securities, Ltd., where he advised institutional and individual clientele
on corporate offerings and equity trading, and performed corporate advisory work
for both public and private companies. From June 1998 through October 1998
Mr.Haag was a Managing Director of Waldron & Co. Inc., an investment bank
located in Irvine, CA.
From 1992 through 1998 he was employed by Auerbach, Pollak & Richardson,
investment bankers, located in Stamford, CT and Beverly Hills, CA, rising to
Managing Director, where he: assisted in the development of the firm, attracting
and referring new hires and clients to all offices; developed a national and
international client base for the firm that participated in a majority of the
firm's corporate offerings; set up and managed road shows for firm's corporate
clientele; attracted a wide variety of corporate clientele; assisted in the
structuring and funding of offerings for corporate clientele; and increased
visibility of the firm through networking of research and offerings. Mr. Haag
attended the University of Maine and CUNY Hunter College.
Directors are elected annually and hold office until the next annual meeting of
the stockholders of the Company and until their successors are elected and
qualified. Officers are elected annually and serve at the discretion of the
Board of Directors.
ROLE OF THE BOARD
Pursuant to California law, our business, property and affairs are managed under
the direction of our board of directors. The board has responsibility for
establishing broad corporate policies and for the overall performance and
direction of Triangle, but is not involved in day-to-day operations. Members of
the board keep informed of our business by participating in board and committee
meetings, by reviewing analyses and reports sent to them regularly, and through
discussions with our executive officers.
2005 BOARD MEETINGS
During the fiscal year ended June 30, 2005, the board met six times and took
action seven times by unanimous written consent.
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BOARD COMMITTEES
The Board does not have any standing committees. As our stock is currently
quoted on the Over-the-Counter Bulletin Board, we are not required to have any
standing committees. In addition, we have a limited board that allows all board
members to participate in the functions ascribed to the standing committees. Our
Board of Directors intends to continually evaluate the need for an Audit,
Nominating and/or Compensation Committees.
ELECTION OF DIRECTORS REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A
PLURALITY OF THE SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING.
SHARES OF COMMON STOCK REPRESENTED BY PROXY CARDS RETURNED TO US WILL BE VOTED
FOR THE NOMINEES LISTED ABOVE UNLESS YOU SPECIFY OTHERWISE. THE BOARD OF
DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF DIRECTORS.
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PROPOSAL 2: TO CONSIDER AND VOTE UPON A PROPOSAL TO
AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 200,000,000 TO 500,000,000
(ITEM 2 ON THE PROXY CARD)
On June 1, 2006, the Board of Directors authorized an amendment to the
Company's Articles of Incorporation to increase the number of our authorized
shares of common stock. Subject to shareholder approval, Article Fourth would be
amended to read as follows and would be filed with the California Secretary of
State:
"FOURTH: The Corporation is authorized to issue two classes of
stock. One class of stock shall be Common Stock, par value
$0.001. The second class of stock shall be Preferred Stock, no
par value. The Preferred Stock, or any series thereof, shall
have such designations, preferences and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions thereof as shall
be expressed in the resolution or resolutions providing for
the issue of such stock adopted by the board of directors and
may be made dependent upon facts ascertainable outside such
resolution or resolutions of the board of directors, provided
that the matter in which such facts shall operate upon such
designations, preferences, rights and qualifications;
limitations or restrictions of such class or series of stock
is clearly and expressly set forth in the resolution or
resolutions providing for the issuance of such stock by the
board of directors.
The total number of shares of stock of each class which the
Corporation shall have authority to issue and the par value of
each share of each class of stock are as follows:
Class Par Value Authorized Shares
----- --------- -----------------
Common $0.001 500,000,000
Preferred $nil 5,000,000
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Totals: 505,000,000"
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 June 19, 2006, a total of 142,565,943 shares of the Company's
currently authorized 200,000,000 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. Except as further discussed herein, 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.
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.
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 to be authorized.
o Secured Convertible Debentures
To obtain funding for our ongoing operations, we entered into a
Securities Purchase Agreement with Cornell Capital Partners L.P., an accredited
investor, on May 17, 2006 for the sale of $2,000,000 in secured convertible
debentures and warrants. The investors are obligated to provide us with an
aggregate of $2,000,000 as follows:
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o $750,000 was disbursed on May 17, 2006;
o $750,000 will be disbursed two business days prior to the date a
registration statement registering for resale the shares of common stock
underlying the secured convertible debentures and warrants is filed by the
Company with the Securities and Exchange Commission; and
o $500,000 will be disbursed upon the effectiveness of the
registration statement registering the shares of common stock underlying the
secured convertible debentures and warrants.
Accordingly, we have received a total of $750,000 pursuant to the
Securities Purchase Agreement.
The secured convertible debentures bear interest at 10%, mature three
years from the date of issuance, and are convertible into our common stock, at
the investor's option, at the lower of (i) $0.0662 or (ii) 95% of the lowest
daily volume weighted average price of our common stock, as quoted by Bloomberg,
LP, during the 30 trading days immediately preceding the date of conversion.
Accordingly, there is in fact no limit on the number of shares into which the
secured convertible debentures may be converted. As of June 19, 2006, the lowest
intraday trading price for our common stock during the preceding 30 trading days
as quoted by Bloomberg, LP was $0.04 and, therefore, the conversion price for
the secured convertible debentures was $0.038. Based on this conversion price,
the $2,000,000 in secured convertible debentures, excluding interest, were
convertible into 52,631,257 shares of our common stock.
In connection with the securities purchase agreement, we agreed to
issue Cornell warrants to purchase an aggregate of 56,397,000 shares of our
common stock, exercisable for a period of five years; including warrants to
purchase 17,857,000 shares at an exercise price of $0.07, warrants to purchase
15,625,000 shares at an exercise price of $0.08, warrants to purchase 12,500,000
shares at an exercise price of $0.10 and warrants to purchase 10,415,000 shares
at an exercise price of $0.12. All of the warrants were issued upon closing. We
have the option to force the holder to exercise the warrants, as long as the
shares underlying the warrants are registered pursuant to an effective
registration statement, if the closing bid price of our common stock trades
above certain levels. In the event that the closing bid price of our common
stock is greater than or equal to $0.14 for a period of 20 consecutive days
prior to the forced conversion, we can force the warrant holder to exercise the
$0.07 warrants. In the event that the closing bid price of our common stock is
greater than or equal to $0.16 for a period of 20 consecutive days prior to the
forced conversion, we can force the warrant holder to exercise the $0.08
warrants. In the event that the closing bid price of our common stock is greater
than or equal to $0.20 for a period of 20 consecutive days prior to the forced
conversion, we can force the warrant holder to exercise the $0.10 warrants. In
the event that the closing bid price of our common stock is greater than or
equal to $0.24 for a period of 20 consecutive days prior to the forced
conversion, we can force the warrant holder to exercise the $0.12 warrants.
The investor has contractually agreed to restrict its ability to
convert the debentures or exercise the warrants and receive shares of our common
stock such that the number of shares of common stock held by it and its
affiliates after such conversion does not exceed 4.99% of the then issued and
outstanding shares of common stock.
In connection with the Securities Purchase Agreement dated May 17,
2006, we granted the investor registration rights. We are obligated to use our
best efforts to cause the registration statement to be declared effective no
later than November 12, 2006 and to insure that the registration statement
remains in effect until the earlier of (i) all of the shares of common stock
issuable upon conversion of the secured convertible debentures have been sold or
(ii) May 17, 2008. In the event of a default of our obligations under the
Registration Rights Agreement, including if the registration statement is not
filed by August 14, 2006 or declared effective by November 12, 2006, we are
required pay to Cornell, as liquidated damages, for each month that the
registration statement has not been declared effective, either a cash amount or
shares of our common stock equal to 2% of the liquidated value of the secured
convertible debentures.
In connection with the securities purchase agreement, we and our
subsidiaries executed security agreements in favor of the investor granting them
a first priority security interest in all of our goods, inventory, contractual
rights and general intangibles, receivables, documents, instruments, chattel
paper, and intellectual property. The security agreements state that if an event
of default occurs under the secured convertible debentures or security
agreements, the investor has 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.
The following are the risks associated with entering into the Securities
Purchase Agreement:
There Are a Large Number of Shares Underlying Our Secured Convertible Debentures
and Warrants That May be Available for Future Sale and the Resale of These
Shares May Depress the Market Price of Our Common Stock.
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As of June 19, 2006, we had 142,565,943 shares of common stock issued
and outstanding, secured convertible debentures issued and outstanding that may
be converted into 19,376,842 shares of common stock based on current market
prices and outstanding warrants to purchase 56,397,000 shares of common stock.
In addition, we have an obligation pursuant to a securities purchase agreement
we entered into in May 2006 to issue additional secured convertible debentures
that may be converted into 32,894,737 shares of our common stock based on
current market prices. Additionally, the number of shares of common stock
issuable upon conversion of the outstanding secured convertible debentures may
increase if the market price of our stock declines. All of the shares, including
all of the shares issuable upon conversion of the secured convertible debentures
and upon exercise of our warrants, may be sold without restriction upon the
effectiveness of the registration statement registering their resale. The resale
of these shares may adversely affect the market price of our common stock.
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The Continuously Adjustable Conversion Price Feature of Our Secured Convertible
Debentures Could Require Us to Issue a Substantially Greater Number of Shares,
Which Will Cause Dilution to Our Existing Stockholders.
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Our obligation to issue shares upon conversion of our secured
convertible debentures is essentially limitless. The following is an example of
the amount of shares of our common stock that are issuable, upon conversion of
our secured convertible debentures (excluding accrued interest), based on market
prices 25%, 50% and 75% below the market price as of June 19, 2006 of $0.04 per
share.
Number % of
% Below Price Per With Discount of Shares Outstanding
Market Share at 5% Issuable Stock
------ ----- ----- -------- -----
25% $0.03 $0.0285 70,175,439 30.15%
50% $0.02 $0.019 105,263,158 42.47%
75% $0.01 $0.0095 210,526,316 59.62%
As illustrated, the number of shares of common stock issuable upon
conversion of our secured convertible debentures will increase if the market
price of our stock declines, which will cause dilution to our existing
stockholders.
The Continuously Adjustable Conversion Price Feature of Our Secured Convertible
Debentures May Encourage Investors to Make Short Sales in Our Common Stock,
Which Could Have a Depressive Effect on the Price of Our Common Stock.
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The secured convertible debentures are convertible into shares of our
common stock at a 5% discount to the trading price of the common stock prior to
the conversion. The downward pressure on the price of the common stock as the
investor converts and sells material amounts of common stock could encourage
short sales by investors. This could place further downward pressure on the
price of the common stock. The investors could sell common stock into the market
in anticipation of covering the short sale by converting their securities, which
could cause the further downward pressure on the stock price. In addition, not
only the sale of shares issued upon conversion or exercise of the secured
convertible debentures, but also the mere perception that these sales could
occur, may adversely affect the market price of the common stock.
The Issuance of Shares Upon Conversion of the Secured Convertible Debentures and
Exercise of Outstanding Warrants May Cause Immediate and Substantial Dilution to
Our Existing Stockholders.
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The issuance of shares upon conversion of the secured convertible
debentures and exercise of warrants may result in substantial dilution to the
interests of other stockholders since the investors may ultimately convert and
sell the full amount issuable on conversion. Although the investor may not
convert its secured convertible debentures and/or exercise its warrants if such
conversion or exercise would cause it to own more than 4.99% of our outstanding
common stock, this restriction does not prevent the investor from converting
and/or exercising some of its holdings and then converting the rest of its
holdings. In this way, the investor could sell more than this limit while never
holding more than this limit. There is no upper limit on the number of shares
that may be issued which will have the effect of further diluting the
proportionate equity interest and voting power of holders of our common stock,
including investors in this offering.
In The Event That Our Stock Price Declines, The Shares Of Common Stock Allocated
For Conversion Of The Secured Convertible Debentures to be Registered Pursuant
To A Registration Statement May Not Be Adequate And We May Be Required to File A
Subsequent Registration Statement Covering Additional Shares. If The Shares We
Have Allocated And Plan to Register Are Not Adequate And We Are Required To File
An Additional Registration Statement, We May Incur Substantial Costs In
Connection Therewith.
--------------------------------------------------------------------------------
Based on our current market price and the potential decrease in our
market price as a result of the issuance of shares upon conversion of the
secured convertible debentures, we have made a good faith estimate as to the
amount of shares of common stock that we are required to register and allocate
for conversion of the secured convertible notes. Accordingly, we plan to
allocate and register, upon obtaining an increase in the authorized number of
shares of common stock, at least 150,000,000 shares to cover the conversion of
the secured convertible debentures. In the event that our stock price decreases,
the shares of common stock we have allocated for conversion of the secured
convertible debentures and plan to register may not be adequate. If the shares
we allocate and register pursuant to the registration statement are not adequate
and we are required to file an additional registration statement, we may incur
substantial costs in connection with the preparation and filing of such
registration statement.
If We Are Required for any Reason to Repay Our Outstanding Convertible
Debentures, We Would Be Required to Deplete Our Working Capital, If Available,
Or Raise Additional Funds. Our Failure to Repay the Secured Convertible
Debentures, If Required, Could Result in Legal Action Against Us, Which Could
Require the Sale of Substantial Assets.
--------------------------------------------------------------------------------
In May 2006, we entered into a Securities Purchase Agreement for the
sale of $2,000,000 principal amount of secured convertible debentures. The
secured convertible debentures are due and payable, with 10% interest, three
years from the date of issuance, unless sooner converted into shares of our
common stock. Although we currently have $750,000 secured convertible debentures
outstanding, the investors are obligated to purchase additional secured
convertible debentures in the aggregate of $1,250,000. In addition, any event of
default such as our failure to repay the principal or interest when due, our
-10-
failure to issue shares of common stock upon conversion by the holder, our
failure to timely file a registration statement or have such registration
statement declared effective, breach of any covenant, representation or warranty
in the Securities Purchase Agreements or related convertible debentures, the
assignment or appointment of a receiver to control a substantial part of our
property or business, the filing of a money judgment, writ or similar process
against our company in excess of $50,000, the commencement of a bankruptcy,
insolvency, reorganization or liquidation proceeding against our company and the
delisting of our common stock could require the early repayment of the secured
convertible debentures, including default interest rate on the outstanding
principal balance of the secured convertible debentures if the default is not
cured with the specified grace period. We anticipate that the full amount of the
secured convertible debentures will be converted into shares of our common
stock, in accordance with the terms of the secured convertible debentures. If we
were required to repay the secured convertible debentures, we would be required
to use our limited working capital and raise additional funds. If we were unable
to repay the secured convertible debentures when required, the debenture 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 Securities Purchase Agreement, Secured
Convertible Debentures or Security Agreement, the Investor Could Take Possession
of all Our Goods, Inventory, Contractual Rights and General Intangibles,
Receivables, Documents, Instruments, Chattel Paper, and Intellectual Property.
--------------------------------------------------------------------------------
In connection with the Securities Purchase Agreement, we executed a
Security Agreement in favor of the investor granting them a first priority
security interest in all of our goods, inventory, contractual rights and general
intangibles, receivables, documents, instruments, chattel paper, and
intellectual property. The Security Agreement states that if an event of default
occurs under the Securities Purchase Agreement, Secured Convertible Debentures
or Security Agreement, the Investor has 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.
RECOMMENDATION OF THE BOARD:
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM 200,000,000 TO 500,000,000.
-11-
PROPOSAL 3: TO CONSIDER AND VOTE UPON A PROPOSAL TO
AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO DECREASE THE AUTHORIZED PAR VALUE PER SHARE
OF COMMON STOCK FROM $0.01 TO $0.001
(ITEM 3 ON THE PROXY CARD)
On June 1, 2006, the Board of Directors authorized an amendment to the
Company's Articles of Incorporation to to decrease the par value of the common
stock of the Company from $0.01 per share to $0.001 per share. The Company
currently has authorized capital stock of 200,000,000 shares and approximately
142,565,943 shares of Common Stock are outstanding as of June 19, 2006.
The proposed reduction in the par value per share of the Company's
capital stock is intended to bring the Company in line with the practice of
other corporations that already have reduced par value stock. The proposed
reduction in par value for the common stock would be effected by a reduction in
the capital stock account on the Company's balance sheet and a corresponding
increase in the additional paid-in (or surplus) capital account and thus would
have no impact on the Company's capital structure. The reduction in par value
would not reduce the ownership interests of stockholders, nor would it have any
other impact on the rights and privileges of the holders of common stock (other
than in the reduction of par value). The reduction in par value per share
reduces the amount required to be carried by the Company as capital, thereby
potentially increasing the Company's surplus capital available for dividends and
other distributions and for other corporate purposes.
RECOMMENDATION OF THE BOARD:
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO DECREASE THE
AUTHORIZED PAR VALUE PER SHARE OF COMMON STOCK FROM $0.01 TO $0.001.
-12-
PROPOSAL 4: RATIFICATION OF APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
(ITEM 4 ON THE PROXY CARD)
The Board of Directors has appointed the firm of Kabani & Company, Inc.
as the independent registered public accounting firm of the Company for the year
ending June 30, 2006, subject to ratification of the appointment by the
Company's stockholders. A representative of Kabani & Company, Inc. is not
expected to attend the annual meeting.
The Company does not have an audit committee.
Review of the Company's audited financial statements for the fiscal year ended
June 30, 2005
The Board of Directors met and held discussions with management and the
independent auditors. Management represented to the Board of Directors that the
Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Board of
Directors reviewed and discussed the consolidated financial statements with
management and the independent auditors. The Board of Directors also discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 (Codification of Statements on Auditing Standards,
AU 380), as amended.
In addition, the Board of Directors discussed with the independent
auditors the auditors' independence from the Company and its management, and the
independent auditors provided to the Board of Directors the written disclosures
and letter required by the Independence Standards Board Standard No. 1
(Independence Discussions With Audit Committees).
The Board of Directors discussed with the Company's internal and
independent auditors the overall scope and plans for their respective audits.
The Board of Directors met with the internal and independent auditors, with and
without management present, to discuss the results of their examinations, the
evaluation of the Company's internal controls, and the overall quality of the
Company's financial reporting.
Based on the reviews and discussions referred to above, the Board of
Directors approved the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended June 30, 2005, for filing with
the Securities and Exchange Commission.
Audit Fees
The aggregate fees billed by our auditors, for professional services
rendered for the audit of the Company's annual financial statements for the
years ended June 30, 2005 and 2004, and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-QSB during the
fiscal years were $38,500 and $51,295, respectively.
Audit-Related Fees
Our independent registered public accounting firm billed the Company
$7,500 and $0 for any other audit-related work during fiscal years ended June
30, 2005 or 2004, respectively.
Tax Fees
Our independent registered public accounting firm did not bill the
Company for tax related work during fiscal years ended June 30, 2005 or 2004.
All Other Fees
Our independent registered public accounting firm did not bill the
Company for other services during fiscal years ended June 30, 2005 or 2004.
RECOMMENDATION OF THE BOARD:
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF KABANI & COMPANY, INC. AS THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 2006.
-13-
PROPOSAL NO. 5
APPROVAL OF THE 2006 STOCK INCENTIVE PLAN
(ITEM 5 ON THE PROXY CARD)
At the Annual Meeting, the Company's stockholders are being asked to approve the
2006 Stock Incentive Plan (the "2006 Incentive Plan") and to authorize
25,000,000 shares of Common Stock for issuance thereunder. The following is a
summary of principal features of the 2006 Incentive Plan. The summary, however,
does not purport to be a complete description of all the provisions of the 2006
Incentive Plan. Any stockholder of the Company who wishes to obtain a copy of
the actual plan document may do so upon written request to the Company's
Secretary at the Company's principal offices at 17951 Lyons Circle, Huntington
Beach, CA 92647.
General
The 2006 Incentive Plan was adopted by the Board of Directors. The Board of
Directors has initially reserved 25,000,000 shares of Common Stock for issuance
under the 2006 Incentive Plan. Under the Plan, options may be granted which are
intended to qualify as Incentive Stock Options ("ISOs") under Section 422 of the
Internal Revenue Code of 1986 (the "Code") or which are not ("Non-ISOs")
intended to qualify as Incentive Stock Options thereunder.
The 2006 Incentive Plan and the right of participants to make purchases
thereunder are intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The
2006 Incentive Plan is not a qualified deferred compensation plan under Section
401(a) of the Internal Revenue Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Purpose
The primary purpose of the 2006 Incentive Plan is to attract and retain the best
available personnel for the Company in order to promote the success of the
Company's business and to facilitate the ownership of the Company's stock by
employees. In the event that the 2006 Incentive Plan is not adopted the Company
may have considerable difficulty in attracting and retaining qualified
personnel, officers, directors and consultants.
Administration
The 2006 Incentive Plan, when approved, will be administered by the Company's
Board of Directors, as the Board of Directors may be composed from time to time.
All questions of interpretation of the 2006 Incentive Plan are determined by the
Board, and its decisions are final and binding upon all participants. Any
determination by a majority of the members of the Board of Directors at any
meeting, or by written consent in lieu of a meeting, shall be deemed to have
been made by the whole Board of Directors.
Notwithstanding the foregoing, the Board of Directors may at any time, or from
time to time, appoint a committee (the "Committee") of at least two members of
the Board of Directors, and delegate to the Committee the authority of the Board
of Directors to administer the Plan. Upon such appointment and delegation, the
Committee shall have all the powers, privileges and duties of the Board of
Directors, and shall be substituted for the Board of Directors, in the
administration of the Plan, subject to certain limitations.
Members of the Board of Directors who are eligible employees are permitted to
participate in the 2006 Incentive Plan, provided that any such eligible member
may not vote on any matter affecting the administration of the 2006 Incentive
Plan or the grant of any option pursuant to it, or serve on a committee
appointed to administer the 2006 Incentive Plan. In the event that any member of
the Board of Directors is at any time not a "disinterested person", as defined
in Rule 16b-3(c)(3)(i) promulgated pursuant to the Securities Exchange Act of
1934, the Plan shall not be administered by the Board of Directors, and may only
by administered by a Committee, all the members of which are disinterested
persons, as so defined.
ELIGIBILITY
Under the 2006 Incentive Plan, options may be granted to key employees,
officers, directors or consultants of the Company, as provided in the 2006
Incentive Plan.
Terms of Options
The term of each Option granted under the Plan shall be contained in a stock
option agreement between the Optionee and the Company and such terms shall be
determined by the Board of Directors consistent with the provisions of the Plan,
including the following:
(a) PURCHASE PRICE. The purchase price of the Common Shares subject to each ISO
shall not be less than the fair market value (as set forth in the 2006 Incentive
Plan), or in the case of the grant of an ISO to a Principal Stockholder, not
less that 110% of fair market value of such Common Shares at the time such
Option is granted. The purchase price of the Common Shares subject to each
Non-ISO shall be determined at the time such Option is granted, but in no case
less than 85% of the fair market value of such Common Shares at the time such
Option is granted.
-14-
(b) VESTING. The dates on which each Option (or portion thereof) shall be
exercisable and the conditions precedent to such exercise, if any, shall be
fixed by the Board of Directors, in its discretion, at the time such Option is
granted.
(c) EXPIRATION. The expiration of each Option shall be fixed by the Board of
Directors, in its discretion, at the time such Option is granted; however,
unless otherwise determined by the Board of Directors at the time such Option is
granted, an Option shall be exercisable for five (5) years after the date on
which it was granted (the "Grant Date"). Each Option shall be subject to earlier
termination as expressly provided in the 2006 Incentive Plan or as determined by
the Board of Directors, in its discretion, at the time such Option is granted.
(d) TRANSFERABILITY. No Option shall be transferable, except by will or the laws
of descent and distribution, and any Option may be exercised during the lifetime
of the Optionee only by him. No Option granted under the Plan shall be subject
to execution, attachment or other process.
(e) OPTION ADJUSTMENTS. The aggregate number and class of shares as to which
Options may be granted under the Plan, the number and class shares covered by
each outstanding Option and the exercise price per share thereof (but not the
total price), and all such Options, shall each be proportionately adjusted for
any increase decrease in the number of issued Common Shares resulting from
split-up spin-off or consolidation of shares or any like Capital adjustment or
the payment of any stock dividend.
Except as otherwise provided in the 2006 Incentive Plan, any Option granted
hereunder shall terminate in the event of a merger, consolidation, acquisition
of property or stock, separation, reorganization or liquidation of the Company.
However, the Optionee shall have the right immediately prior to any such
transaction to exercise his Option in whole or in part notwithstanding any
otherwise applicable vesting requirements.
(f) TERMINATION, MODIFICATION AND AMENDMENT. The 2006 Incentive Plan (but not
Options previously granted under the Plan) shall terminate ten (10) years from
the earlier of the date of its adoption by the Board of Directors or the date on
which the Plan is approved by the affirmative vote of the holders of a majority
of the outstanding shares of capital stock of the Company entitled to vote
thereon, and no Option shall be granted after termination of the Plan. Subject
to certain restrictions, the Plan may at any time be terminated and from time to
time be modified or amended by the affirmative vote of the holders of a majority
of the outstanding shares of the capital stock of the Company present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Nevada.
FEDERAL INCOME TAX ASPECTS OF THE 2006 INCENTIVE PLAN
THE FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES UNDER
THE 2006 INCENTIVE PLAN. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND DOES
NOT ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH SPECIAL TAX
STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT
MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT OR OTHER TAX CONSEQUENCES OTHER
THAN INCOME TAX CONSEQUENCES. THE COMPANY ADVISES EACH PARTICIPANT TO CONSULT
HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PARTICIPATION IN
THE 2006 INCENTIVE PLAN AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
The 2006 Incentive Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421, 422 and
423 of the Code. Under these provisions, no income will be recognized by a
participant prior to disposition of shares acquired under the 2006 Incentive
Plan.
If the shares are sold or otherwise disposed of (including by way of gift) more
than two years after the first day of the offering period during which shares
were purchased (the "Offering Date"), a participant will recognize as ordinary
income at the time of such disposition the lesser of (a) the excess of the fair
market value of the shares at the time of such disposition over the purchase
price of the shares or (b) 15% of the fair market value of the shares on the
first day of the offering period. Any further gain or loss upon such disposition
will be treated as long-term capital gain or loss. If the shares are sold for a
sale price less than the purchase price, there is no ordinary income and the
participant has a capital loss for the difference.
If the shares are sold or otherwise disposed of (including by way of gift)
before the expiration of the two-year holding period described above, the excess
of the fair market value of the shares on the purchase date over the purchase
price will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or a gift of the shares is made. The balance of any
gain or loss will be treated as capital gain or loss and will be treated as
long-term capital gain or loss if the shares have been held more than one year.
In the case of a participant who is subject to Section 16(b) of the Exchange
Act, the purchase date for purposes of calculating such participant's
compensation income and beginning of the capital gain holding period may be
deferred for up to six months under certain circumstances. Such individuals
should consult with their personal tax advisors prior to buying or selling
shares under the 2006 Incentive Plan.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
-15-
The Company is entitled to a deduction for amounts taxed as ordinary income to a
participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the two-year
holding period described above.
Restrictions on Resale
Certain officers and directors of the Company may be deemed to be "affiliates"
of the Company as that term is defined under the Securities Act. The Common
Stock acquired under the 2006 Incentive Plan by an affiliate may be reoffered or
resold only pursuant to an effective registration statement or pursuant to Rule
144 under the Securities Act or another exemption from the registration
requirements of the Securities Act.
Required Vote
The approval of the 2006 Incentive Plan and the reservation of 25,000,000 shares
for issuance requires the affirmative vote of the holders of a majority of the
shares of the Company's Common Stock present at the Annual Meeting in person or
by proxy and entitled to vote and constituting at least a majority of the
required quorum.
The proxy holders intend to vote the shares represented by proxies to approve,
the 2006 Stock Incentive Plan.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE 2006 STOCK INCENTIVE PLAN.
-16-
BENEFICIAL OWNERSHIP OF TRIANGLE COMMON STOCK OF PRINCIPAL
STOCKHOLDERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock as of June 19, 2006
o by each person who is known by us to beneficially own more than 5%
of our common stock;
o by each of our officers and directors; and
o by all of our officers and directors as a group.
NUMBER OF PERCENTAGE OF
NAME AND ADDRESS OF OWNER TITLE OF CLASS SHARES OWNED (1) CLASS OWNED (2)
-------------------------------------------------------------------------------------------------------
Robert Steele Common Stock 9,038,089 (3) 5.98%
17951 Lyons Circle
Huntington Beach, CA 92647
Andrew Haag Common Stock 8,554,616 (4) 5.74%
17951 Lyons Circle
Huntington Beach, CA 92647
All Officers and Directors Common Stock 17,592,705 (5) 11.17%
As a Group (2 persons)
Zubair Kazi Common Stock 9,720,536 (6) 6.75%
Langley Park Investments PLC Common Stock 14,000,000 (7) 9.82%
* Less than 1%.
(1) Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of June 19, 2006 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person.
(2) Based upon 142,565,943 shares issued and outstanding on June 19, 2006.
(3) Includes 1,000,000 shares issuable upon conversion of Series A convertible
preferred stock and 7,638,089 shares of common stock underlying options that are
currently exercisable or exercisable within 60 days.
(4) Includes 1,000,000 shares issuable upon conversion of Series A convertible
preferred stock and 5,362,792 shares of common stock underlying options that are
currently exercisable or exercisable within 60 days.
(5) Includes 2,000,000 shares issuable upon conversion of Series A convertible
preferred stock and 13,000,881 shares of common stock underlying options that
are currently exercisable or exercisable within 60 days.
(6) Includes 1,500,000 shares of common stock underlying warrants that are
currently exercisable or exercisable within 60 days.
(7) Shares are held in escrow until fulfillment of conditions by Langley Park
Investment pursuant to a July 29, 2004 agreement with the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more then 10 percent of
the Company's Common Stock, to file with the SEC the initial reports of
ownership and reports of changes in ownership of common stock. Officers,
directors and greater than 10 percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Specific due dates for such reports have been established by the Commission and
the Company is required to disclose in this Proxy Statement any failure to file
reports by such dates during fiscal 2005. Based solely on its review of the
copies of such reports received by it, or written representations from certain
-17-
reporting persons that no Forms 5 were required for such persons, the Company
believes that during the fiscal year ended June 30, 2005, there was no failure
to comply with Section 16(a) filing requirements applicable to its officers,
directors and ten percent stockholders.
POLICY WITH RESPECT TO SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
provides that, unless an appropriate exemption applies, a tax deduction for the
Company for compensation of certain executive officers named in the Summary
Compensation Table will not be allowed to the extent such compensation in any
taxable year exceeds $1 million. As no executive officer of the Company received
compensation during 2004 approaching $1 million, and the Company does not
believe that any executive officer's compensation is likely to exceed $1 million
in 2005, the Company has not developed an executive compensation policy with
respect to qualifying compensation paid to its executive officers for
deductibility under Section 162(m) of the Code.
EXECUTIVE COMPENSATION
The following tables set forth certain information regarding our CEO
and each of our most highly-compensated executive officers whose total annual
salary and bonus for the fiscal years ending June 30, 2005, 2004 and 2003
exceeded $100,000:
SUMMARY COMPENSATION TABLE
Long-Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
------------------------------------ ---------------------------- ---------
Other Restricted Securities
Name and Annual Annual Annual Stock Underlying LTIP All Other
Principal Fiscal Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Position Year ($) ($) ($) (1) ($) (#) ($) ($)
-------- ---- ------ ----- ------------ ---------- ------------ --------- -------------
Robert Steele, 2005 85,500 0 15,438 1,000,000 4,267,276 0 0
Chairman and CEO
2004 72,000 0 0 0 0 0 0
2003 30,000 (2) 0 2,500 0 0 0 0
Andrew Haag, CFO 2005 85,500 0 15,433 1,000,000 4,267,276 0 0
2004 72,000 0 0 0 0 0 0
2003 30,000 (3) 0 0 0 0 0 0
Robert Brownell, 2005 119,000 (4) 0 0 250,000 611,062 0 0
President
2004 37,500 (5) 0 0 0 0 0 0
2003 0 0 0 0 0 0 0
1) These amounts represent the Company's payments to provide an automobile and
health insurance for Mr. Steele and Mr. Haag.
2) Represents compensation received by Mr. Steele while serving as our President
and CEO from 2/1/03 to 6/30/03
3) Represents compensation received by Mr. Haag while serving as our CFO from
2/1/03 to 6/30/03.
4) Mr. Brownell resigned on March 31, 2005.
5) Represents compensation received by Brownell while serving as our President
from 3/12/04 to 6/30/04
Employment Agreements
None.
Option/SAR Grants in Last Fiscal Year
None.
Remuneration of Directors
None.
Stock Option Plans
On June 30, 2004, our stockholders approved our 2004 Stock Option Plan
and authorized 11,822,500 shares of common stock for issuance thereunder. As of
June 19, 2006, no options have been granted pursuant to the plan.
-18-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions, or proposed transactions, which have
materially affected or will materially affect us in which any director,
executive officer or beneficial holder of more than 10% of the outstanding
common stock, or any of their respective relatives, spouses, associates or
affiliates, has had or will have any direct or material indirect interest. We
have no policy regarding entering into transactions with affiliated parties.
ANNUAL REPORT ON FORM 10-KSB
The Company will provide upon request and without charge to each
stockholder receiving this Proxy Statement a copy of the Company's Annual Report
on Form 10-KSB for the fiscal year ended June 30, 2005, including the financial
statements and financial statement schedule information included therein, as
filed with the SEC.
OTHER BUSINESS
The Board of Directors is not aware of any matter other than the
matters described above to be presented for action at the Meeting. However, if
any other proper items of business should come before the Meeting, it is the
intention of the individuals named on your proxy card as the proxy holders to
vote in accordance with their best judgment on such matters.
By Order of the Board of Directors
/s/ ROBERT STEELE
----------------------------------
Robert Steele
Chairman of the Board
Dated: June 27, 2006
Huntington Beach, California
-19-
EXHIBIT A
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF
QUINTEK TECHNOLOGIES, INC.
The undersigned, President of Quintek Technologies, Inc. (the
"Corporation"), does hereby certify as follows:
FIRST: The name of the corporation is:
QUINTEK TECHNOLOGIES, INC.
SECOND: The articles of incorporation of the Corporation is hereby
amended by replacing Article Third, in its entirety, with the following:
"THIRD: The Corporation is authorized to issue two classes of
stock. One class of stock shall be Common Stock, par value $0.001. The
second class of stock shall be Preferred Stock, no par value. The
Preferred Stock, or any series thereof, shall have such designations,
preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof as shall
be expressed in the resolution or resolutions providing for the issue
of such stock adopted by the board of directors and may be made
dependent upon facts ascertainable outside such resolution or
resolutions of the board of directors, provided that the matter in
which such facts shall operate upon such designations, preferences,
rights and qualifications; limitations or restrictions of such class or
series of stock is clearly and expressly set forth in the resolution or
resolutions providing for the issuance of such stock by the board of
directors.
The total number of shares of stock of each class which the Corporation
shall have authority to issue and the par value of each share of each
class of stock are as follows:
Class Par Value Authorized Shares
----- --------- -----------------
Common $0.001 500,000,000
Preferred $nil 50,000,000
--------------
Totals: 550,000,000"
THIRD: The amendment of the articles of incorporation herein certified
has been duly adopted at a meeting of the Corporation's Board of Directors and
stockholders holding a majority of the outstanding shares of common stock of the
Corporation in accordance with the provisions of Section 602 of the Corporations
Code of the State of California.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate of Amendment of the Corporation's Articles
of Incorporation, as amended, to be signed by Robert Steele, its Chief Executive
Officer, this ___ day of ________, 2006.
QUINTEK TECHNOLOGIES, INC.
---------------------------------
/s/ Robert Steele
Chief Executive Officer
PROXY
QUINTEK TECHNOLOGIES, INC.
ANNUAL MEETING OF STOCKHOLDERS - TO BE HELD
*, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints ROBERT STEELE and
ANDREW HAAG and each of them, with full power of substitution in each, as
proxies for the undersigned, to represent the undersigned and to vote all the
shares of Common Stock of the Company which the undersigned would be entitled to
vote, as fully as the undersigned could vote and act if personally present, at
the Annual Meeting of Stockholders (the "Meeting") to be held on *, 2006, at *,
local time, at *, or at any adjournments or postponements thereof.
Should the undersigned be present and elect to vote at the Meeting or at any
adjournments or postponements thereof, and after notification to the Secretary
of the Company at the Meeting of the stockholder's decision to terminate this
proxy, then the power of such attorneys or proxies shall be deemed terminated
and of no further force and effect. This proxy may also be revoked by filing a
written notice of revocation with the Secretary of the Company or by duly
executing a proxy bearing a later date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES FOR DIRECTOR AND
EACH OF THE LISTED PROPOSALS.
Proposal (1) The election as directors of all nominees listed below to serve
until the 2006 Annual Meeting of Stockholders or until their successors have
been duly elected and qualified (except as marked to the contrary).
Nominees:
01) Robert Steele 02) Andrew Haag
FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT [ ]
To withhold authority to vote, mark "For All Except" and write the nominee's
number on the line below.
Proposal (2) Amending the Articles of Incorporation to increase the number of
authorized shares of common stock from 200,000,000 to 500,000,000
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal (3) Amending the Articles of Incorporation to decrease the par value of
common stock from $0.01 per share to $0.001 per share
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal (4) Ratification of the appointment of Kabani & Company, Inc. as the
independent registered public accounting firm of the Company for the fiscal year
ending January 31, 2006.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal (5) Adopting the 2006 Stock Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The shares represented by this proxy will be voted as directed by the
stockholder, but if no instructions are specified, this proxy will be voted for
the election of the Board nominees and for proposals (2), (3), (4) and (5). If
any other business is presented at the Meeting, this proxy will be voted by
those named in this proxy in their best judgment. At the present time, the Board
of Directors knows of no other business to be presented at the Meeting.
The undersigned acknowledges receipt from the Company, prior to the execution of
this proxy, of the Notice of Annual Meeting and accompanying Proxy Statement
relating to the Meeting and an Annual Report to Stockholders for fiscal year
ended June 30, 2005.
NOTE: PLEASE MARK, DATE AND SIGN AS YOUR NAME(S) APPEAR(S) HEREON AND RETURN IN
THE ENCLOSED ENVELOPE. IF ACTING AS AN EXECUTORS, ADMINISTRATORS, TRUSTEES,
GUARDIANS, ETC., YOU SHOULD SO INDICATE WHEN SIGNING. IF THE SIGNER IS
CORPORATION, PLEASE SIGN THE FULL CORPORATE NAME, BY DULY AUTHORIZED OFFICER. IF
SHARES ARE HELD JOINTLY, EACH SHAREHOLDER SHOULD SIGN.
Signature (Please sign within the box) [________________________________] DATE: _______, 2006
Signature (Joint owners) [________________________________] DATE: _______, 2006