SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
/ / Preliminary Information Statement / / Confidential, For Use
/X/ Definitive Information Statement of the Commission
CALIPSO, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/ X / No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g)
and 0-11 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 transactions 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:
/ / 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:
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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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[DEFINITIVE COPIES]
CALIPSO, INC.
NOTICE OF WRITTEN CONSENT OF STOCKHOLDERS IN LIEU OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE EFFECTIVE SEPTEMBER 12, 2000
TO OUR STOCKHOLDERS:
CALIPSO, INC., a Delaware corporation ("Calipso"), has entered into a
Merger Agreement dated as of August 7, 2000 (the "Merger Agreement"), with
KNOWLEDGE FOUNDATIONS, INC., a Delaware corporation ("KFI"). Pursuant to the
terms of the Merger Agreement, KFI will merge with and into Calipso. The
terms of the Merger Agreement provide that upon consummation of the Merger,
Calipso will issue Thirty-Three Million, Nine Hundred Eighteen Thousand and
Four Hundred (33,918,400) shares of Calipso's Rule 144 restricted common
stock to the stockholders of KFI. The Merger Agreement is attached as
Appendix E to the accompanying Information Statement. The closing of the
Merger is expected to occur on or about September 12, 2000. YOU WILL RECEIVE
ADDITIONAL INFORMATION AT A LATER TIME ON HOW TO EXCHANGE YOUR SHARES OF
COMMON STOCK IN CONNECTION WITH THE MERGER.
Additionally, the Board of Directors has unanimously approved the filing
of a Certificate of Correction to the Company's Charter with the Delaware
Secretary of State and the following three separate amendments to Calipso's
Certificate of Incorporation: (1) an amendment effecting a 36-for-1 split of
Calipso's outstanding shares of common stock effective as of June 8, 1999;
(2) an amendment effecting a 1.35-for-1 split of Calipso's outstanding shares
of common stock effective as of April 27, 2000; and (3) an amendment
increasing the authorized shares of common stock from 20,000,000 shares to
100,000,000 shares to become effective on the date that the merger of KFI
with and into Calipso occurs.
After careful consideration, the Board of Directors of Calipso, has
approved the above-described amendments to Calipso's Certificate of
Incorporation and the Merger Agreement and the transactions contemplated
thereby. The Board of Directors has determined that the terms of the Merger
and the other transactions contemplated by the Merger Agreement are fair to,
and in the best interests of, the stockholders of Calipso. Calipso has
received the written consent of a majority of shares of its common stock in
favor of the adoption of each of the amendments to its Certificate of
Incorporation and the Merger, thereby satisfying the stockholder approval
requirements of the Delaware General Corporation Law, Calipso's Certificate
of Incorporation and its Bylaws. For this reason, Calipso is not calling a
special meeting of the stockholders in respect of the proposed actions and is
not asking you for a proxy or consent.
The attached Information Statement is being provided to you pursuant to
Rule 14c-2 under the Securities Exchange Act of 1934, as amended. The
Information Statement contains a more detailed description of the Merger. I
encourage you to read the Information Statement thoroughly.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY
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BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------------------
Robert J. Ransom, Secretary
13525 Midland Road, Suite I
Poway, CA 92064
<PAGE>
[DEFINITIVE COPY]
CALIPSO, INC.
INFORMATION STATEMENT
RELATING TO WRITTEN CONSENT OF STOCKHOLDERS IN LIEU OF
A SPECIAL MEETING OF STOCKHOLDERS
EFFECTIVE SEPTEMBER 12, 2000
This Information Statement is being furnished by the Board of Directors
of CALIPSO, INC., a Delaware corporation ("Calipso" or the "Company"), to the
holders of the outstanding shares of the Company's common stock, par value
$0.001 per share (the "Common Stock" or the "Shares"), at the close of
business on August 11, 2000, (the "Record Date"), in connection with the
approval of the following corporate actions: (1) the filing of a Certificate
of Correction with the Secretary of State of the State of Delaware (the
"Certificate of Correction") to render null and void an amendment to the
Company's Certificate of Incorporation (the "Charter") that was filed on May
23, 2000; (2) to clarify the amendment of the Company's Charter to effect a
36-for-1split of outstanding shares of Common Stock effective as of June 8,
1999; (3) the amendment of the Company's Charter to effect a 1.35-for-1 split
of outstanding shares of Common Stock effective as of April 27, 2000 (4) the
approval of the Merger Agreement dated as of August 7, 2000 (the "Merger
Agreement"), by and among Calipso, and KNOWLEDGE FOUNDATIONS, INC., a
Delaware corporation ("KFI"); and (5) the amendment and restatement of
Calipso's Charter to increase the authorized capital stock from 20,000,000
shares of common stock to 100,000,000 shares of common stock and from no
shares of preferred stock to 20,000,000 shares of preferred stock.
Only stockholders of record at the close of business on the Record Date
are entitled to notice of and to approve and adopt the foregoing actions. As
of the Record Date, 9,039,600 shares of Common Stock were issued and
outstanding (assuming the effectiveness of the 36-for-1 split and 1.35-for-1
split of the Company's Common Stock described below). Each share of Common
Stock held of record on the Record Date represents one vote for purposes of
determining whether a majority of the issued and outstanding shares have
approved and adopted the foregoing actions.
On June 8, 1999, the Board of Directors of Calipso unanimously approved
an amendment to the Company's Charter to effect a 36-for-1 split of the
Company's outstanding common stock effective as of that date. On April 27,
2000, the Board of Directors of Calipso unanimously approved an amendment to
the Company's Charter to effect a 1.35-for-1 split of the Company's Common
Stock effective as of that date. On August 6, 2000, the Board of Directors of
Calipso unanimously approved the Merger Agreement and the transactions
contemplated thereby, the filing of a Certificate of Correction and the
amendment of its Charter increasing the authorized shares of Common Stock of
the Company from 20,000,000 shares of Common Stock to 100,000,000 shares of
Common Stock and from no shares of preferred stock to 20,000,000 shares of
preferred stock to become effective on the date that the merger of KFI with
and into the Company occurs. The holders of a majority of the outstanding
shares of Common Stock also approved these actions by written consent as of
August 11, 2000. Accordingly, your consent is not required and is not being
solicited in connection with the foregoing actions.
AMENDMENTS OF THE CHARTER; FILING OF CERTIFICATE OF CORRECTION
Effective June 8, 1999, the Board of Directors of Calipso approved the
amendment to the Company's Charter effecting a 36-for-1 split of the
Company's outstanding Common Stock. The Company anticipates filing this
amendment to the Charter with the Delaware Secretary of State on or about
September 12, 2000. This amendment will have the effect of splitting each
share of Common Stock outstanding on June 8, 1999 into 36 shares of Common
Stock. A copy of this amendment is attached hereto as Appendix A.
Effective April 27, 2000, the Board of Directors of Calipso approved the
amendment to the Company's Charter effecting a 1.35-for-1 split of the
Company's outstanding Common Stock. The Company anticipates filing this
amendment to the Charter with the Delaware Secretary of State on or about
<PAGE>
September 12, 2000. This amendment will have the effect of splitting each
share of Common Stock outstanding on April 27, 2000, into 1.35 shares of
Common Stock. A copy of this amendment is attached hereto as Appendix B.
Effective August 6, 2000, the Board of Directors of Calipso approved the
filing of a Certificate of Correction with the Delaware Secretary of State
and an amendment to the Company's Charter increasing the number of authorized
shares of Common Stock of the Company from 20,000,000 shares of Common Stock
to 100,000,000 shares of Common Stock and from no shares of preferred stock
to 20,000,000 shares of preferred stock. The Company anticipates filing this
amendment to the Charter with the Delaware Secretary of State on or about
September 12, 2000. The purpose of the filing of the Certificate of
Correction is to render null and void an amendment to the Company's Charter
that was prematurely filed with the Secretary of State on May 23, 2000. The
amendment of the Charter increasing the authorized number of shares of
capital stock of the Company is to accommodate the issuance of shares of the
Company's Common Stock to the stockholders of KFI as provided for in the
terms of the Merger Agreement. Copies of the Certificate of Correction and
the amendment to the Charter are attached hereto as Appendix D and C,
respectively.
Calipso inadvertently and prematurely filed the amendments in the
substantial formats of Appendices A and B on August 8, 2000 and the
Certificate of Correction in substantially the format of Appendix D on August
9, 2000. Certificates of Correction, nullifying and rescinding these
amendments were filed with the Delaware Secretary of State on or about August
17, 2000. The amendments to the Charter and the Certificate of Correction
set forth in Exhibits A, B, C and D will be filed on or about September 12,
2000 after the expiration of the time period required in 14c-5 of the
Securities Exchange Act of 1934.
Required Vote of Stockholders
In accordance with the Delaware General Corporate Law (the "DGCL"), the
written consent of a majority of the shares of common stock in favor of the
adoption of the proposed filing of a Certificate of Correction and each of
the Company's proposed amendments to its Charter was required for the
approval of these proposals. The required vote to approve these proposals was
obtained by the Company on August 11, 2000.
APPROVAL OF THE MERGER
The approval of the Merger Agreement is the final step in a transaction
provided for by the Merger Agreement. At the Effective Time (as defined
below) and upon the terms and subject to the conditions of the Merger
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), KFI shall be merged with and into Calipso (as defined
below) (the "Merger"). Following the Merger, Calipso shall continue as the
surviving corporation (the "Surviving Corporation"), shall continue to be
governed by the laws of the jurisdiction of its incorporation or organization
and the separate corporate existence of KFI shall cease to exist. Prior to
the Effective Time (as defined herein), the parties hereto shall mutually
agree as to the name of the Surviving Corporation; however, initially the
Surviving Corporation shall be named KNOWLEDGE FOUNDATIONS, INC., a Delaware
corporation. The Merger is intended to qualify as a tax-free reorganization
under Section 368(a)(1)(A) of the Code. A copy of the Merger Agreement is
attached hereto as Appendix E.
The effective date of the Merger will be the date and time of the filing
of the certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, which is expected to occur on or about
September 12, 2000, and in no event earlier than 20 days after the mailing of
this Information Statement to the Company's stockholders. A copy of the
Certificate of Merger is attached hereto as Appendix I.
<PAGE>
Required Vote of Stockholders
In accordance with the DGCL, the written consent of a majority of the
shares of common stock in favor of the Merger Agreement and the transactions
contemplated thereby was required for the approval of this proposal. The
required vote to approve this proposal was obtained by the Company on August
11, 2000.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. PLEASE DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES AT THIS TIME.
Under Delaware law, holders of Shares who do not vote to adopt the
Merger Agreement and who otherwise strictly comply with applicable
requirements of Section 262 of the DGCL may dissent from the Merger and
demand payment in cash from the Company of the fair value of their Shares.
This Information Statement constitutes notice of appraisal rights to holders
of Shares pursuant to the DGCL. Holders of Shares who wish to assert
appraisal rights, if available, should comply with the procedures set forth
in Section 262 of the DGCL, a copy of which is attached hereto as Appendix F.
This Information Statement is first being mailed on or about August 24,
2000. Calipso will pay the expenses of furnishing this Information Statement,
including the costs of preparing, assembling and mailing this Information
Statement. This Information Statement constitutes notice to the Company's
stockholders of corporate action by stockholders without a meeting as
required by Section 228(d) of the DGCL.
The Board of Directors does not know of any matters that require
approval by the stockholders of Calipso and for which notice is to be given
to the stockholder, other than (1) the filing of the Certificate of
Correction with the Secretary of State of the State of Delaware to render
null and void an amendment that was filed to the Company's Charter on May 23,
2000 (2) the amendment of the Company's Charter to effect a 36-for-1 split of
outstanding shares of Common Stock effective as of June 8, 1999; (3) the
amendment of the Company's Charter to effect a 1.35-for-1 split of
outstanding shares of the Common Stock effective as of April 27, 2000; (4)
the approval of the Merger Agreement and the transactions contemplated
thereby; (5) the amendment and restatement of the Charter.
The date of this Information Statement is August 24, 2000.
<PAGE>
TABLE OF CONTENTS
SUMMARY TERM SHEET 1
GENERAL 1
THE PARTIES 2
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING 2
POTENTIAL CONFLICTS OF INTERESTS OF CERTAIN PERSONS IN THE MERGER 2
CONDITIONS TO THE MERGER 3
MANAGEMENT AFTER MERGER 3
REGULATORY MATTERS 3
TAX CONSEQUENCES 3
SELECTED PROFORMA FINANCIAL DATA 4
REASONS FOR THE RECOMMENDATION 6
THE MERGER 6
REPRESENTATIONS AND WARRANTIES 8
KNOWLEDGE FOUNDATIONS, INC. 8
CALIPSO STOCK PRICE 9
SECURITIES ACT CONSEQUENCES 9
RISK RELATED TO THE MERGER 9
RISKS RELATING TO INTELLECTUAL PROPERTY 10
DESCRIPTION OF CAPITAL STOCK AND VOTING RIGHTS 10
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND CERTAIN BENEFICIAL HOLDERS 11
MANAGEMENT 11
MANAGEMENT CONTRACTS 12
APPLICABILITY OF CALIFORNIA LAW TO CALIPSO 15
CALIPSO STOCKHOLDER APPRAISAL AND DISSENTERS' RIGHTS 15
DELAWARE APPRAISAL RIGHTS 16
CALIFORNIA DISSENTERS' RIGHTS 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 20
ACCOUNTING TREATMENT 21
RECOMMENDATION OF THE CALIPSO BOARD 21
RECOMMENDATION OF THE KFI BOARD 21
PRICE RANGE OF SHARES AND DIVIDENDS 21
CHANGE OF CONTROL 22
ADDITIONAL AND AVAILABLE INFORMATION 22
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 22
OTHER MATTERS 23
APPENDIX A - AMENDMENT TO CERTIFICATE OF INCORPORATION
APPENDIX B - AMENDMENT TO CERTIFICATE OF INCORPORAITON
APPENDIX C - AMENDMENT TO CERTIFICATE OF INCORPORATION
APPENDIX D - CERTIFICATE OF CORRECTION
APPENDIX E - AGREEMENT AND PLAN OF MERGER BETWEEN KNOWLEDGE FOUNDATION, INC.
AND CALIPSO
APPENDIX F - SECTION 262 OF THE DELAWARE GENERAL CORPORATE LAW
APPENDIX G - CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW
APPENDIX H - FORM 10-KSB FILING OF CALIPSO
APPENDIX I - CERTIFICATE OF MERGER
<PAGE>
SUMMARY TERM SHEET
This summary term sheet does not contain all of the information that is
important to you. You should carefully read the entire Information Statement
and the Appendices, as well as the information we incorporate by reference.
GENERAL
This Information Statement is being delivered to you in connection with
the following actions (1) the filing of a Certificate of Correction with the
Secretary of State of Delaware to render null and void an amendment that was
filed to the Company's Charter on May 23, 2000; (2) the amendment of the
Company's Charter to effect a 36-for-1 split of outstanding shares of Common
Stock effective as of June 8, 1999; (3) the amendment of the Company's
Charter to effect a 1.35-for-1 split of outstanding shares of Common Stock
effective as of April 27, 2000; (4) the approval of the Merger Agreement and
the transactions contemplated thereby; and (5) the amendment of the Company's
Charter to increase the number of authorized shares of the Common Stock from
20,000,000 shares to 100,000,000 shares and the number of preferred shares
from no shares to 20,000,000 shares to be effective as of the date on which
the Merger occurs.
Amendments of the Charter
Effective June 8, 1999, the Board of Directors of Calipso approved the
amendment to the Company's Charter effecting a 36-for-1 split of the
Company's outstanding Common Stock. The Company anticipates filing this
amendment to the Charter with the Delaware Secretary of State on or about
September 12, 2000. This amendment will have the effect of splitting each
share of Common Stock outstanding on June 8, 1999, into 36 shares of Common
Stock. A copy of this amendment is attached hereto as Appendix A.
Effective April 27, 2000, the Board of Directors of Calipso approved the
amendment to the Company's Charter effecting a 1.35-for-1 split of the
Company's outstanding Common Stock. The Company anticipates filing this
amendment to the Charter with the Delaware Secretary of State on or about
September 12, 2000. This amendment will have the effect of splitting each
share of Common Stock outstanding on April 27, 2000, into 1.35 shares of
Common Stock. A copy of this amendment is attached hereto as Appendix B.
Effective August 6, 2000, the Board of Directors of Calipso approved the
filing of a Certificate of Correction and the amendment to the Company's
Charter increasing the number of authorized shares of Common Stock of the
Company from 20,000,000 shares of Common Stock to 100,000,000 shares of
Common Stock and from no shares of preferred stock to 20,000,000 shares of
preferred stock. The Company anticipates filing the Certificate of Correction
and the amendment to the Charter with the Delaware Secretary of State on or
about September 12, 2000. The purpose of the filing of the Certificate of
Correction is to render null and void an amendment that was filed to the
Company's Charter on May 23, 2000. The purpose of the amendment increasing
the authorized capital stock is to accommodate the issuance of shares of the
Company's Common Stock to the stockholders of KFI as provided for in the
terms of the Merger Agreement. Copies of the Certificate of Correction and
the amendment to the Charter are attached hereto as Appendix D and C,
respectively. The three amendments to the Company's Charter will sometimes
be collectively referred to herein as the "Charter Amendments."
Approval of the Merger
The Merger is the final step in a transaction provided for by the Merger
Agreement. Pursuant to the terms of the Merger Agreement, KFI will merge
with and into Calipso. The terms of the Merger Agreement provide that upon
consummation of the Merger, Calipso will issue Thirty-Three Million, Nine
<PAGE>
Hundred Eighteen Thousand, Four Hundred (33,918,400) shares of Rule 144
restricted common stock to the stockholders of KFI. Calipso will be the
Surviving Corporation of the Merger.
In accordance with the DGCL, all of the foregoing proposals require the
approval and adoption by the affirmative vote of the holders of a majority of
the outstanding Shares. Calipso has received the required vote for all of
the proposals, thereby satisfying the requirements of the DGCL and the
Company's Charter and Bylaws. For this reason, the Company is not calling a
special meeting of the stockholders in respect of the proposals and is not
asking you for a proxy or consent. Pursuant to Section 228 of the DGCL, the
Charter and the Bylaws, no additional approval by the Company's stockholders
is required with respect to the proposals.
THE PARTIES
Calipso was incorporated in Delaware on May 31, 1994 for the purpose of
developing software and an Internet web site focused on nature and biological
information. The mailing address of Calipso's executive offices are 13525
Midland Road, Suite I, Poway, California 92064.
KFI was incorporated in Delaware on April 6, 2000 for the purpose of
developing and marketing a revolutionary new mode of knowledge-based
computing. The mailing address of KFI executive offices is 7852 Colgate
Avenue, Westminster, California 92683.
Surviving Corporation. Calipso will be the Surviving Corporation in the
Merger. Pursuant to the Merger Agreement, the directors of KFI will be the
directors of the Surviving Corporation, and the officers of KFI will be the
officers of the Surviving Corporation.
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING
Pursuant to the Company's Bylaws and DGCL, the Certificate of
Correction, Charter Amendments and the Merger Agreement and the transactions
contemplated thereby must be approved and adopted by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock at a duly
convened meeting of the stockholders of the Company called for such purpose.
As a result of the ownership of Shares by the directors of the Company,
they own a sufficient number of Shares to cause the Certificate of
Correction, Charter Amendments and the Merger to be approved and adopted
without the concurrence of any other holder of shares of Common Stock.
Pursuant to the Company's Bylaws, any action required by Delaware Law
(Section 228) to be taken at any meeting of stockholders of the Company may
be taken without a meeting, without prior notice and without a vote of the
stockholders of the Company if a written consent, setting forth the action to
be taken, shall be signed by stockholders holding at least a majority of the
voting power. The Company has received a written consent (the "Consent") in
lieu of a meeting of stockholders approving and adopting the Certificate of
Correction, Charter Amendments and the Merger Agreement and the transactions
contemplated thereby. In accordance with Rule 14c-2(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the filing of the
Certificate of Correction, Charter Amendments and the consummation of the
Merger shall occur no earlier than 20 calendar days after this Information
Statement is first mailed to stockholders of the Company.
The Certificate of Correction and the Charter Amendments will become
effective upon the filing of such amendments with the Secretary of State of
the State of Delaware in accordance with DGCL. The Merger will become
effective upon the filing of a Certificate of Merger with the Secretary of
State of the State of Delaware in accordance with DGCL.
POTENTIAL CONFLICTS OF INTERESTS OF CERTAIN PERSONS IN THE MERGER
Each of the following executive officers of KFI has entered into
employment agreements with KFI which employment will transfer to Calipso upon
<PAGE>
completion of the Merger: Robert A. Dietrich, Richard Ballard and Michael
Dochterman. These executives are also members of the Board of Directors of
KFI and are also controlling stockholders of KFI. In addition, these board
members may serve on the Board of Directors of other public and non public
companies.
CONDITIONS TO THE MERGER
Pursuant to the Merger Agreement, the respective obligation of each
party to effect the Merger is subject to the satisfaction prior to the
Effective Time of the Merger of the following condition: no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any United States court or
United States governmental authority which prohibits, restrains, enjoins or
restricts the consummation of the Merger.
MANAGEMENT AFTER MERGER
Following the consummation of the Merger, the directors and officers of
KFI immediately prior to the Effective Time shall be the directors and
officers of Calipso from and after the Effective Time, until their successors
shall have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with Calipso's Charter
and Bylaws.
REGULATORY MATTERS
Other than the filing of appropriate merger documents with the Secretary
of State of the State of Delaware, no regulatory approvals are required for
the consummation of the Merger.
TAX CONSEQUENCES
We expect the Merger to be treated as a tax-free reorganization pursuant
to Section 368 of the Internal Revenue Code. If the Merger is treated as a
reorganization, no gain or loss will generally be recognized by the
stockholders of Calipso or KFI for federal income tax purposes.
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The summary financial information set forth below is derived from the
audited financial statements of (i) KFI for the period April 6, 2000 through
June 30, 3000 and (ii) Calipso for period ending March 31, 2000. This
information should be read in conjunction with such financial statements,
including the notes thereto.
<TABLE>
CALIPSO, INC.
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
Historical Historical Pro forma Pro forma
Calipso, Knowledge Adjustments Calipso,
Inc. Foundation, Inc.
Audited as Inc. Unaudited
of Audited as Adjusted
March 31, of (1)
2000 June 30,
2000
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $55 $182,503 $- $182,558
Prepaid expenses and other - 8,340 - 8,340
current assets
Other assets - 562 562
---------- ----------- ----------- ---------
Total current assets 55 191,405 191,460
---------- ----------- ----------- ---------
Property and equipment, net - 2,622 - 2,622
---------- ----------- ----------- ---------
Total non-current assets - 2,622 2,622
---------- ----------- ----------- ---------
Total assets $55 $194,027 $194,082
=========== =========== =========== =========
</TABLE>
<TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities
Accounts payable $- 15,345 - $15,345
Related party notes payable - 3,000 - 3,000
Payroll taxes payable - 2,398 - 2,398
Accrued interest expense - 4,867 - 4,867
---------- ----------- ---------- ----------
Total current liabilities - 25,610 25,610
---------- ----------- ---------- ----------
Non-current liabilities
Convertible subordinated note
payable - 300,000 - 300,000
---------- ----------- ---------- ----------
Total Liabilities - 325,610 - 325,610
---------- ----------- ---------- ----------
Stockholders' equity
Common stock, $.001 par value 6,696 3,362 (5,762) 4,296
Additional paid in capital 11,904 - (12,783) (879)
Accumulated (deficit) (18,545) (134,945) 18,545 (134,945)
---------- ----------- ---------- ----------
Total stockholders' equity 55 (131,583) (131,528)
(deficit) ---------- ----------- ---------- ----------
Total liabilities and $55 $194,027 $- $194,082
stockholders' equity ========== =========== ========== ==========
</TABLE>
(1) Adjusted to reflect the condensed consolidated balance sheet as of the
Effective Date of the Merger.
<PAGE>
<TABLE>
CALIPSO, INC.
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Historical Historical Pro forma Pro forma
Calipso, Knowledge Adjustments Calipso,
Inc. Foundation, Inc.
Audited as Inc. Unaudited
of March Audited as Adjusted
31, 2000 of June 30, (1)
2000
<S> <C> <C> <C> <C>
Sales $- $- $-
-
Cost of sales - - -
---------- --------- ---------- ---------
-
Gross Profit - - -
-
-
Selling general and
administrative
Expenses 8,159 130,832 - 138,991
---------- --------- ---------- ---------
Operating loss (8,159) (130,832) (138,991)
---------- --------- ---------- ---------
Other income (expense) -
Interest income - 754 754
Interest expense - (4,867) - (4,867)
---------- --------- ---------- ---------
- (4,113) (4,113)
---------- --------- ---------- ---------
Net loss $(8,159) $(134,945) $(143,104)
========== ========= ========== =========
Basic and diluted (loss) per $(0.001) $(0.012) $(0.003)
common share ========== ========= ========== =========
Weighted average number of
Common shares outstanding 6,696,000 33,618,500 42,398,000
========== ========== ==========
</TABLE>
(1) Adjusted to reflect the Condensed Consolidated Statement of Operations as
of the Effective Date of the Merger.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The following discussion regarding the financial statements of the KFI,
a development stage company, should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Information
Statement. The financial statements of Calipso are generally immaterial, as
Calipso has had limited operations, thus we have eliminated any discussion of
Calipso's operations. Further, Calipso's financial statements have had
limited changes since the filing of Calipso's Form 10-KSB for the period
ending March 31, 2000.
Financial Status of KFI from the commencement period from inception (April 6,
2000 through June 30, 2000.
Revenues. KFI is a development stage enterprise as defined in SFAS #7,
and has generated no revenues during the audited period from inception. KFI
is devoting substantially all of its present efforts in acquiring its
<PAGE>
technologies and completing its Merger with Calipso to assist KFI and Calipso
in capital raising functions.
Costs and Expenses. KFI had operating expenses of $130,832 during the
audited period from inception.
Net Loss. KFI's net loss for the period from inception (April 6, 2000)
to June 30, 2000 was $134,945.
Liquidity and Capital Resources
KFI, being a development stage enterprise, experienced negative cash
flows from operations during its initial months of operations, which cash
flows resulted in a net loss of $134,945. As KFI expands its technology base
it may continue to experience net negative cash flows from operations,
pending receipt of license or sales revenues. Additionally, KFI will more
likely than not be required to obtain additional financing to fund
operations. During KFI's first quarter of business, KFI obtained a $300,000
unsecured convertible subordinated note payable, which bears interest at 8%
per annum which is paid semi-annually in arrears and the principal matures on
April 18, 2003. It is anticipated that upon completion of the Merger
referenced herein, that KFI will obtain additional equity and/or debt
financing to assist KFI in covering its net negative cash flow until
operations provide sufficient cash flows.
REASONS FOR THE RECOMMENDATION
Calipso's Board
In reaching the decision to approve the Merger, the Board of Directors
of Calipso considered a number of factors including, without limitation, the
following:
(i) The historical and recent market prices of the Common Stock and the fact
that the technology being acquired through the Merger along with the
management team associated with KFI present to Calipso a significant business
opportunity.
(ii) The familiarity of the Board of Directors with KFI's business,
prospects, and financial condition.
(iii) The belief of the Board of Directors that a transaction with KFI is
the most advantageous scenario based upon the unique benefits offered by KFI
to Calipso.
(iv) On May 8, 2000 the then stockholders of Calipso unanimously approved the
proposal providing for Calipso to enter into an agreement with KFI.
KFI's Board
The Board of Directors of KFI has determined that the Merger Agreement
and the transactions contemplated thereby are in the best interests of KFI
and, therefore, has unanimously approved the Merger Agreement. In reaching
such a determination, the Board of Directors of KFI and KFI's management have
reviewed information about Calipso made available to them by Calipso's
management and assessed the potential benefits of the Merger. After
considering such information, the Board of Directors of KFI concluded that
the anticipated business advantages of the Merger favored adoption of the
Merger Agreement and the consummation of the Merger. These anticipated
advantages include, but are not limited to, increased access for KFI to
capital and funding resources necessary to launch its technology into
worldwide markets.
THE MERGER
It is anticipated that the Merger will be complete on or about September
12, 2000, subject to the satisfaction of the conditions described below.
Effective Time. The Merger will become effective at the time the
Certificate of Merger is recorded by the Secretary of State of the State of
Delaware (the "Effective Time").
<PAGE>
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions
thereof and is qualified in its entirety by reference to the full text
thereof, a copy of which is attached hereto as Appendix E.
The Merger Agreement provides that at the Effective Time and upon the
terms and subject to the conditions thereof and in accordance with the DGCL,
KFI shall be merged with and into Calipso. Following the Merger, Calipso
shall continue as the Surviving Corporation, shall continue to be governed by
the laws of the jurisdiction of its incorporation or organization and the
separate corporate existence of KFI shall cease to exist. Prior to the
Effective Time, the parties thereto shall mutually agree as to the name of
the Surviving Corporation; however, initially the Surviving Corporation shall
be named KNOWLEDGE FOUNDATIONS, INC., a Delaware corporation. The Merger is
intended to qualify as a tax-free reorganization under Section 368(a)(1)(A)
of the Code.
Subject to the terms and conditions set forth in the Merger Agreement, a
Certificate of Merger, or Merger Certificate shall be duly executed and
acknowledged by each of KFI and Calipso, and thereafter the Merger
Certificate reflecting the Merger shall be delivered to the Secretary of
State of the State of Delaware for filing pursuant to the DGCL on the Closing
Date (as defined therein). The Merger shall become effective at such time as
a properly executed and certified copy of the Merger Certificate is duly
filed by the Secretary of State of the State of Delaware in accordance with
the DGCL or such later time as the parties may agree upon and set forth in
the Merger Certificate.
The closing of the Merger (the "Closing") will take place at a time and
on a date to be specified by the parties, which shall be no later than the
second business day after satisfaction of the latest to occur of the
conditions set forth therein, at the offices of Craig J. Shaber, 2635 Camino
Del Rio, South, Suite 211, San Diego, California, unless another time, date
or place is agreed to in writing by the parties hereto.
The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the properties, rights, privileges, and powers of KFI
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of KFI shall become the debts, liabilities and duties of the Surviving
Corporation.
The directors and officers of KFI immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation from
and after the Effective Time, until their successors shall have been duly
elected or appointed and qualified, or until their earlier death, resignation
or removal in accordance with the Surviving Corporation's Charter and Bylaws.
At the Effective Time, each share of common stock, $.0001 par value per
share of KFI (individually a "KFI Share" and collectively, the "KFI Shares")
issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of KFI, Calipso, or
the holder thereof, be converted into and shall become fully paid and
nonassessable Calipso common shares determined by dividing (i) Thirty-three
Million, Nine Hundred Eighteen Thousand, Four Hundred (33,918,400), by (ii)
the total number of shares of KFI, (Thirty-three Million Six Hundred Eighteen
Thousand Five Hundred) (33,618,500) outstanding immediately prior to the
Effective Time (such quotient, the "Exchange Ratio"). The holder of one or
more shares of KFI common stock shall be entitled to receive in exchange
therefore a number of shares of Calipso Common Stock equal to the product of
(x) (the number of shares of KFI common stock (33,618,500)), times (y) (the
Exchange Ratio). By way of example, 33,918,400 / 33,618,500 = 1.01 (the
Exchange Ratio). The number of shares of KFI common stock held by a
stockholder (1,000) times the Exchange Ratio of 1.01 equals 1,010 shares of
Calipso Shares to be issued.
Prior to the Effective Time, Calipso shall enter into an agreement with,
and shall deposit with, Signature Stock Transfer or such other agent or
agents as may be satisfactory to Calipso and KFI (the "Exchange Agent"), for
<PAGE>
the benefit of the holders of KFI Shares, the Calipso Shares, for exchange
through the Exchange Agent in accordance with the terms of the Agreement.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding KFI
Shares (the "Certificate" or "Certificates") whose shares were converted into
the right to receive Calipso Shares: (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
KFI and Calipso may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing Calipso Shares. Upon surrender of a Certificate to the Exchange
Agent, together with such letter of transmittal, duly executed, and any other
required documents, the holder of such Certificate shall be entitled to
receive in exchange therefore a certificate representing that number of whole
Calipso Shares, which such holder has the right to receive, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of KFI Shares which are not registered in the transfer
records of KFI, a certificate representing the proper number of Calipso
Shares may be issued to a transferee if the Certificate representing such KFI
Shares is presented to the Exchange Agent accompanied by all documents
required by the Exchange Agent or Calipso to evidence and effect such
transfer and by evidence that any applicable stock transfer or other taxes
have been paid. Until surrendered each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon
such surrender the certificate representing Calipso Shares.
No dividends or other distributions declared or made after the Effective
Time with respect to Calipso Shares with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Calipso Shares represented thereby until the holder of record
of such Certificate shall surrender such Certificate.
In the event that any Certificate for KFI Shares or Calipso Shares shall
have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefore, upon the making of an affidavit of that fact by the
holder thereof such Calipso Shares and cash in lieu of fractional Calipso
Shares, if any, as may be required pursuant to this Agreement; provided,
however, that Calipso or the Exchange Agent, may, in its respective
discretion, require the delivery of a suitable bond, opinion or indemnity.
The Agreement specifies that Calipso shall issue 1,012,500 common
restricted shares to Wright and Bleers and 987,500 common restricted shares
to Ocean Way Investments Ltd. for consulting fees earned in the transaction
and for assisting in post merger financing.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of the parties thereto, including representations by the Company
as to the Company's filings with the SEC, the financial statements of the
Company, the absence of certain changes or events concerning the Company's
business, compliance with law and certain contracts, litigation, employee
benefit plans, labor matters, real property leases, trademarks, patents and
copyrights, environmental matters, and taxes.
KNOWLEDGE FOUNDATIONS, INC.
Description
KFI holds the rights to a technological version of "knowledge based
computing" software. KFI's software was developed over past twelve years, by
its Chairman and Chief Scientist, Dr. Richard Ballard and is in its third
generation of development. The first two generations of software have been
licensed into guarded government applications of national importance. These
<PAGE>
operate transparently within any MS-Windows environment and offer
extraordinary capabilities no one had expected or thought possible. They
offer profound storage compressions, speeds impossible in conventional
computing, and the ability to capture virtually any form of knowledge. Users
include the U.S. Air Force Space Systems Division, U. S. Army Strategic
Defense Command, NASA Johnson Space Center, and many others.
KFI's software products could be defined as "knowledge based engineering
tools and applications". Knowledge based computing provides new and very
different capabilities then traditional information based computing systems.
KFI's software allows computer systems to capture, store and use knowledge
(in addition to traditional information) to do many things such as, solving
and managing problems, or providing answers to questions far more complex
than traditional information based systems could provide. It responds to
questions such as how, why and the most important - what if? In essence,
this software incorporates the reasoning or knowledge of one or many humans
as an integral part of the computer's capabilities.
Software manufacturers will be able to license KFI's software to enhance
their own information based applications. Individual users and corporate
enterprises alike will be able to permanently store their intellectual
capital, work products, experience, and learning in a knowledge base. These
knowledge bases will then be able to grow through the introduction of new
knowledge and be passed on from generation to generation.
KFI's goal is to patent and establish its unique technology as an
"industry standard" for all knowledge based computing and plans to market
its technology to the world through licensing agreements.
KFI acquired the rights to its technology through a License and Royalty
Agreement entered into on April 6, 2000 by and between Richard L. Ballard and
Janet J. Pettitt (Ballard), husband and wife, and KFI. The License and
Royalty Agreement provides KFI with exclusive and transferable rights to
Ballard's software. Future inventions and software developments will be the
exclusive property of KFI.
CALIPSO STOCK PRICE
On August 10, 2000, the last full trading day before the first public
announcement of the intention to commence the Merger, the last reported sale
quotation of the Shares on the Over The Counter Bulletin Board ("OTCBB") was
$1.38 per Share.
SECURITIES ACT CONSEQUENCES
The Shares issued pursuant to the terms and conditions of the Merger are
being issued under an exemption pursuant to Section 4(2) under the Securities
Act of 1933, as amended (the "Securities Act"). Accordingly, separate
registration of shares of common stock of Calipso will not be required.
RISK RELATED TO THE MERGER
There has previously been a limited public market for the Calipso common
stock. We cannot predict the extent to which investor interest will lead to
the development of a trading market for our common stock or how liquid that
market might become. The number of shares of our common stock to be issued by
Calipso was determined by negotiations among Calipso and KFI and may not be
indicative of prices that will prevail in the trading market. The trading
price of our common could be subject to wide fluctuations.
The market price of our common stock, like that of the shares of many
other technology companies, may be volatile and fluctuate significantly in
response to various factors, including:
* Change in business or results of operations for KFI;
* Quarterly variations in operating results or groth rates;
* Changes in estimates or recommendations by securities analysts;
* Market conditions related to investor interest in technology stocks;
<PAGE>
* General conditions in the industry;
* Announcements of mergers and acquisitions and other actions by
competitiors;
* Regulatory and judicial actions;
* General economic conditions; and
* Announcements of product developments and other events by our future
collaborative partners, if any.
RISKS RELATING TO INTELLECTUAL PROPERTY
As the result of the Merger with KFI, the business of Calipso will
involve significant intellectual property rights. We may not be able to
obtain patent protection for our discoveries in the future, and we may
infringe patent rights of third parties.
The patent positions of technology companies, including us, are
generally uncertain and involve complex legal, scientific and factual
questions.
Our success depends in significant part on our ability to:
* Obtain patents;
* Protect trade secrets;
* Operate without infringing upon the proprietary rights of others; and
* Prevent others from infringing on our proprietary rights.
We also rely significantly upon unpatented proprietary technology,
information, processes and know-how. We seek to protect this information
through confidentiality agreements with our employees, consultants and other
third-party contractors as well as through other security measures. These
confidentiality agreements may be breached, and we may not have adequate
remedies for any such breach. In addition, our trade secrets may otherwise
become known or be independently developed by competitors.
DESCRIPTION OF CAPITAL STOCK AND VOTING RIGHTS
The following discussion is qualified in its entirety by reference to
the Delaware Charter Documents.
The authorized capital stock of Calipso consists of: Twenty Million
(20,000,000) Shares of Common Stock, $0.001 par value, 9,039,600 common
shares are issued and outstanding as of the date hereof (assuming the
effectiveness of the 36-for-1 split and 1.35-for-1 split of the Company's
Common Stock discussed herein and to become retroactively effective upon
filing with the Secretary of State of the State of Delaware); and no shares
Preferred Stock. On the date that the Merger occurs and prior to filing the
Certificate of Merger, Calipso will file an amendment increasing its
authorized capital stock to 100,000,000 shares of common stock, $0.001 par
value and 20,000,000 shares of preferred stock, $0.001 par value. Each share
of Common Stock currently outstanding has one vote. The offers and sales of
all of the outstanding shares of capital stock of Calipso were at all
relevant times either registered under the Securities Act of 1933, as
amended, and applicable state securities laws or exempt from such
requirements. Pursuant to the Merger Agreement, Calipso will issue Thirty-
Three Million, Nine Hundred Eighteen Thousand, Four Hundred (33,918,400)
shares of Rule 144 restricted common stock to the stockholders of KFI. All
of the outstanding Calipso Shares have been duly authorized and validly
issued, and are fully paid, nonassessable and free of preemptive rights.
<PAGE>
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND CERTAIN BENEFICIAL HOLDERS
Based on currently available information, after the consummation of the
Merger the Company does not believe that there will be any beneficial owners
of more than five percent (5%) of the Common Stock except as set forth below.
<TABLE>
NAME AND ADDRESS SHARES
OF BENEFICIAL HOLDER BENEFICIALLY PERCENT OF CLASS
OWNED
<S> <C> <C>
Richard Ballard 21,377,516 50%
Chairman
Jan Pettitt (1) 4,277,622 10%
Director
Michael Dochterman 4,638,412 11%
President and CEO, Director
Robert A. Dietrich 2,576,884 6%
Vice President and CFO, Director
</TABLE>
(1) Jan Pettitt is the wife of Richard Ballard.
MANAGEMENT
As a result of the Merger, and pursuant to the terms of the Merger
Agreement the directors and officers of KFI immediately prior to the
completion of the Merger shall be the directors and officers of the Surviving
Corporation until their successors shall have been duly elected or appointed
and qualified, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Charter and Bylaws.
The management of KFI after the Effective Time of the Merger will be as
follows:
Dr. Richard Ballard, Ph.D. -- Chairman and Chief Scientist: Dr. Ballard
is the founder and creator of KFI's technology. From August 1995 to March
2000, Dr. Ballard has been the sole proprietor of Knowledge Research and
Knowledge FoundationsT developing and delivering knowledge based software
tools and applications primarily to US Government Agencies and Software
Publishers. From April 2000 to present, Dr. Ballard has been Chairman of the
Board and Chief Scientist of KFI. His background includes hands-on executive
management of numerous start-up companies including Co-Director and Founder
of Apple Foundations for Steve Jobs & Mike Markula and Founder/Chairman of
TALMIS Division, International Data Corporation for Patrick McGovern. He has
received 128 software citations, developed 3 Management Software Workshops
and 21 Educational Software Workshops, been published in 35 publications and
technical reports. As a University of California professor and researcher,
he has developed and taught numerous classes over 15 years. Dr. Ballard will
manage all research and development functions as well as assisting with sales
activities.
Mr. Michael W. Dochterman - President and CEO: From August 1995 to
December 1995, Michael Dochterman has been an independent business consultant
developing business plans, raising capital and providing executive management
for startup clients. From January 1996 to April 1999, Mr. Dochterman served
in various executive management positions launching several new products and
Divisions for Sempra Energy. From April 1999 to April 2000, Mr. Dochterman
developed KFI's business plan and from April 2000 to present, has been
CEO/President and a Board member of KFI. Mr. Dochterman's background includes
hands-on executive management and business consulting experience providing
<PAGE>
operational guidance for numerous start-ups. He has more than fifteen years
experience as President or Vice President of private enterprises and three
years executive management experience in a Fortune 500 company. Mr.
Dochterman will manage all corporate business activities as well as first
year sales and marketing functions.
Mr. Robert A. Dietrich - Executive Vice President and CFO: From August
1995 to March 2000, Robert Dietrich has been President/CEO and Director of
two companies, Semper Resources Corporation and CyberAir Communications, Inc.
From April 2000 to present, Mr. Dietrich has been CFO, Vice President of
Operations, and a Board member of KFI. His background includes hands-on
executive management, investment banking and financial consulting experience.
He has more than fifteen years experience as vice president (finance and
operations) or president of public and private enterprises and thirteen years
with Big 5 and regional CPA firms and technology based investment banking
firms providing financial and operations consulting and merger/acquisition
and financial structuring for clients. Mr. Dietrich is a CPA with a B.B.A.
from Notre Dame and an MBA from the University of Detroit. Mr. Dietrich will
manage all financial and accounting activities as well as operational
management of integration services.
Ms. Janet J. Pettitt - Director of Training Development: From August
1995 to March 2000, Jan Pettitt has been sole proprietor, founder of
Interactive Productions, a proprietorship that provided training for prior
customers of KFI's technology. She has 16 years of hands on experience as a
Master Corporate Software Trainer delivering and training trainers and end
users of published and proprietary software and hardware systems. Ms. Pettitt
has a B.A. from Fontbonne College and years of teaching experience at
Flourissant Valley Community College and Holy Names Academy.
MANAGEMENT CONTRACTS
KFI has employment agreements with three of its directors, Richard
Ballard, Robert Dietrich and Michael Dochterman. Upon the effectiveness of
the Merger with Calipso, these Employment Agreements will transfer to the
Surviving Corporation on the same terms and conditions with the Surviving
Corporation being the employer.
Dochterman Employment Agreement. On April 6, 2000, the Board of Directors
appointed Michael W. Dochterman as CEO, President and director of KFI. Mr.
Dochterman subsequently entered into an Employment Agreement with KFI for a
term commencing May 1, 2000 and expiring March 31, 2004. This agreement
shall automatically be extended for additional one year terms unless either
party gives written notice to terminate the agreement. Under the terms of
the agreement, Mr. Dochterman will receive a base annual salary of Ten
Thousand Dollars ($10,000) per month. Salary will be adjusted by the Board
of Directors each successive January 1st in an amount no less than a ten
percent (10%) increase. The agreement provides for the following additional
compensation:
a. Incentive Compensation. Mr. Dochterman will receive incentive
compensation annually calculated on EBITB (earnings before interest, taxes
and any other executive bonuses) as follows:
<TABLE>
EBITB Marginal % Bonus
Bracket
<S> <C> <C>
$0 - $500,000 3% Up to $15,000
$501,000-$1,500,000 4% $15,000 plus 4% of EBITB over
$501,000
$1,500,001-$2,500,000 5% $55,000 plus 5% of EBITB over
$1,500,001
$2,500,001-$3,500,000 6% $105,000 plus 6% of EBITB over
$2,500,001
Over $3,500,000 7% $165,000 plus 7% of EBITB over
$3,500,000
</TABLE>
<PAGE>
b. Management by Objectives ("MBO") Bonus. Beginning May 1, 2000, and
recommencing each successive calendar year during the term of his employment
agreement, Mr. Dochterman shall receive a MBO Bonus for the incentive,
accomplishment, completion and/or delivery of predefined strategic objectives
that support the company's business. The Board of Directors shall assign a
specific economic MBO bonus value and payment schedule to each objective and
Mr. Dochterman will be paid the appropriate MBO bonus based on performance
and accomplishment of the objectives as determined by the Board of Directors.
c. Stock Purchase Agreement. Mr. Dochterman has purchased 4,597,400 shares
of KFI stock at a purchase price of $.00001 per share for an aggregate
purchase price of $459.74 subject to certain restrictions and an 83b Tax
Election. The purchased shares are subject to a repurchase right which means
KFI has the right to acquire portions of the purchased shares at the original
purchase price if for certain reasons Mr. Dochterman's employment is
terminated. Such repurchase right will lapse in a series of annual and
monthly installments over a three (3) year period. These shares shall be
vested at the rate of:
(i) twenty-five percent (25%) of the shares immediately upon execution of
the agreement.
(ii) twenty-five percent (25%) of the shares upon the first anniversary of
the agreement.
(iii)the balance of the shares in a series of twenty-four (24) equal
monthly installments upon the Mr. Dochterman's completion of each successive
month of service within the twenty-four (24) month period measured from the
date of the first anniversary of this agreement.
The Stock Purchase Agreement provides for the shares to be escrowed by
KFI. The shares shall be released in accordance with the above vesting
schedule. Until such time as the Corporation exercises the Repurchase
Right, Mr. Dochterman shall have all the rights of a shareholder
(including voting, dividend and liquidation rights) with respect to the
Purchased Shares, including the Purchased Shares held in escrow.
In addition to the above compensation, the agreement also provides for an
automobile allowance for Mr. Dochterman in the amount of $750.00 per month .
Mr. Dochterman's Employment Agreement contains a Nondisclosure provision but
does not contain a non-compete provision.
Dietrich Employment Agreement. On April 6, 2000, the Board of Directors
appointed Robert A. Dietrich as CFO, VP-OPS and as a director of KFI. Mr.
Dietrich subsequently entered into an Employment Agreement with KFI for a
term commencing May 1, 2000 and expiring March 31, 2004. The agreement shall
automatically be extended for additional one year terms unless either party
gives written notice to terminate the agreement. Under the terms of the
agreement Mr. Dietrich will receive a base annual salary of Ten Thousand
Dollars ($10,000) per month. Salary will be adjusted by the Board of
Directors each successive January 1st in an amount no less than a ten
percent (10%) increase. The agreement provides for the following additional
compensation:
a. Incentive Compensation. Mr. Dietrich will receive incentive
compensation annually calculated on EBITB as follows:
<PAGE>
<TABLE>
EBITB Marginal Bonus
% Bracket
<S> <C> <C>
$0 - $500,000 3% Up to $15,000
$501,000-$1,500,000 4% $15,000 plus 4% of EBITB over
$501,000
$1,500,001-$2,500,000 5% $55,000 plus 5% of EBITB over
$1,500,001
$2,500,001-$3,500,000 6% $105,000 plus 6% of EBITB over
$2,500,001
Over $3,500,000 7% $165,000 plus 7% of EBITB over
$3,500,000
</TABLE>
b. MBO Bonus. Beginning May 1, 2000 and recommencing each successive
calendar year during the term of the agreement, Mr. Dietrich shall receive a
MBO Bonus for the incentive, accomplishment, completion and/or delivery of
predefined strategic objectives that support the company's business. The
Board of Directors shall assign a specific economic MBO bonus value and
payment schedule to each objective and Mr. Dietrich will be paid the
appropriate MBO bonus based on performance and accomplishment of the
objectives as determined by the Board of Directors.
c. Stock Purchase Agreement. Mr. Dietrich has purchased 2,554,100 shares
of KFI stock at a purchase price of $.00001 per share for an aggregate
purchase price of $255.41 subject to certain restrictions and an 83b Tax
Election under an 83b election. The purchased shares are subject to a
repurchase right which means KFI has the right to acquire portions of the
purchased shares at the original purchase price if for certain reasons Mr.
Dietrich's employment is terminated. Such repurchase right will lapse in a
series of annual and monthly installments over a three (3) year period.
These shares shall be vested at the rate of:
(iv) twenty-five percent (25%) of the shares immediately upon execution of
the agreement.
(v) twenty-five percent (25%) of the shares upon the first anniversary of
the agreement.
(vi) the balance of the shares in a series of twenty-four (24) equal monthly
installments upon the Mr. Dietrich completion of each successive month of
service within the twenty-four (24) month period measured from the date of
the first anniversary of this agreement.
The Stock Purchase Agreement provides for the shares to be escrowed by
KFI. The shares shall be released in accordance with the above vesting
schedule. Until such time as the Corporation exercises the Repurchase
Right, Mr. Dietrich shall have all the rights of a shareholder
(including voting, dividend and liquidation rights) with respect to the
Purchased Shares, including the Purchased Shares held in escrow.
In addition to the above compensation, the agreement also provides for an
automobile allowance for Mr. Dietrich in the amount of $750.00 per month.
Mr. Dietrich's Employment Agreement contains a Nondisclosure provision but
does not contain a non-compete provision.
Ballard Employment Agreement. On April 6, 2000, the Board of Directors
appointed Richard L. Ballard as Chairman, CSO and Director of KFI. Mr.
Ballard subsequently entered into an Employment Agreement with KFI for a term
commencing May 1, 2000 and expiring March 31, 2004. The agreement shall
<PAGE>
automatically be extended for additional one year terms unless either party
gives written notice to terminate the agreement. Under the terms of the
agreement Mr. Ballard will receive a base annual salary of Ten Thousand
Dollars ($10,000) per month. Salary will be adjusted by the Board of
Directors each successive January 1st in an amount no less than a ten
percent (10%) increase. The agreement provides for the following additional
compensation:
a. Incentive Compensation. Mr. Ballard will receive incentive compensation
annually calculated on EBITB as follows:
<TABLE>
EBITB Marginal % Bonus
Bracket
<S> <C> <C>
$0 - $500,000 3% Up to $15,000
$501,000-$1,500,000 4% $15,000 plus 4% of EBITB over
$501,000
$1,500,001-$2,500,000 5% $55,000 plus 5% of EBITB over
$1,500,001
$2,500,001-$3,500,000 6% $105,000 plus 6% of EBITB over
$2,500,001
Over $3,500,000 7% $165,000 plus 7% of EBITB over
$3,500,000
</TABLE>
b. MBO Bonus. Beginning May 1, 2000 and recommencing each successive
calendar year the term of the agreement, Mr. Ballard shall receive a MBO
Bonus for the incentive, accomplishment, completion and/or delivery of
predefined strategic objectives that support the company's business. The
Board of Directors shall assign a specific economic MBO bonus value and
payment schedule to each objective and Mr. Ballard will be paid the
appropriate MBO bonus based on performance and accomplishment of the
objectives as determined by the Board of Directors.
In addition to the above compensation, the agreement also provides for an
automobile allowance for Mr. Ballard in the amount of $750.00 per month
Mr. Ballard's Employment Agreement contains a Nondisclosure provision but
does not contain a non-compete provision.
APPLICABILITY OF CALIFORNIA LAW TO CALIPSO
Section 2115 of the California General Corporation Law ("CGCL") makes
substantial portions of the CGCL applicable, with limited exceptions, to a
foreign corporation with more than half of its outstanding stock held of
record by persons having addresses in California and more than half of its
business conducted in the state (as measured by factors based on the
corporation's levels of property, payroll and sales as determined for
California franchise tax purposes), irrespective of the corporation's state
of incorporation. As a result, although Calipso is incorporated in Delaware,
it may be subject to Section 2115. The statutory provisions of the CGCL to
which Calipso may be subject include, but are not limited to, provisions
governing a director's standard of care in performing the duties of a
director, a stockholder's right to vote cumulatively in any election of
directors, a director's or stockholder's right to inspect corporate records,
indemnification requirements concerning directors, officers and others and
the corporate requirements to effectuate corporate reorganizations (including
mergers and acquisitions). Section 2115 also invokes the application of
Chapter 13 of the CGCL to the Merger with respect to Calipso stockholders who
elect to exercise dissenters' rights.
CALIPSO STOCKHOLDER APPRAISAL AND DISSENTERS' RIGHTS
Holders of Calipso Common Stock who do not approve the Merger may, under
certain circumstances and by following the procedure prescribed by Section
262 of the DGCL, exercise Appraisal Rights and receive cash for their shares
of Calipso Common Stock. Alternatively, although Calipso is a Delaware
<PAGE>
corporation and is therefore subject to the DGCL, Section 2115 of the CGCL
provides that Calipso may be subject to California law with respect to
Dissenters' Rights. Accordingly, pursuant to Chapter 13 of the CGCL,
stockholders of Calipso who do not vote in favor of the Merger and who comply
with the requirements of Chapter 13 will have a right to demand payment for,
and appraisal of the "fair market value" of, their Shares. Although a
dissenting stockholder may choose to proceed under one or both of the states'
statutes, a dissenting stockholder must follow the appropriate procedures
under either the DGCL or the CGCL or suffer the termination or waiver of such
rights. See "Applicability of California Law to Calipso."
DELAWARE APPRAISAL RIGHTS
Holders of record of Calipso Common Stock who do not approve the Merger
by written consent and who otherwise comply with the procedures set forth in
Section 262 of the DGCL, and summarized herein, will be entitled to have
their shares of Calipso Common Stock appraised (the "Appraisal Shares") and
will receive a payment in cash for such shares ("Appraisal Rights"). The
failure of a Calipso stockholder to follow the appropriate procedures set
forth in Section 262 will result in the termination or waiver of the
stockholder's Appraisal Rights. A person having a beneficial interest in
shares of Calipso Common Stock held of record in the name of another person,
such as a broker or nominee, must act promptly to cause the record holder to
follow the steps summarized below properly and in a timely manner to perfect
Appraisal Rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS
ENTIRETY BY THE FULL TEXT OF SECTION 262 WHICH IS REPRINTED IN ITS ENTIRETY
AS APPENDIX F. ALL REFERENCES IN SECTION 262 AND THIS SUMMARY TO A
"STOCKHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF CALIPSO
COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED.
Under the DGCL, holders of shares of Calipso Common Stock who follow the
procedures set forth in Section 262 will be entitled to have their Appraisal
Shares appraised by the Delaware Chancery Court and to receive payment in
cash of the "fair value" of such Appraisal Shares, exclusive of any element
of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, as determined by such court.
Under Section 262, where a proposed merger (like the Merger) is approved
pursuant to a written consent of the stockholders in lieu of a meeting as
provided by Section 228 of the DGCL, each constituent corporation of the
merger, either before the effective time of the merger or within 10 days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to Appraisal Rights of the
approval of the merger and that Appraisal Rights are available for any or all
shares of such class or series of stock of such constituent corporation;
provided, however, that, if the notice is given on or after the effective
time of the merger, such notice shall be given by the surviving corporation
to all such holders of any class or series of stock of a constituent
corporation that are entitled to Appraisal Rights. Such notice also includes
a copy of Section 262, and may, if given on or after the effective time of
the merger, shall, also notify such stockholders of the effective time of the
merger. If such notice did not notify stockholders of the effective time of
the merger, either: (i) each constituent corporation shall send a second
notice before the effective time of the merger notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to Appraisal Rights of the effective time of the merger; or (ii) the
surviving corporation shall send such a second notice to all such holders on
or within 10 days after such effective time; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to Appraisal Rights and who has demanded appraisal of such holder's
shares in accordance with Section 262 of the DGCL.
<PAGE>
This Information Statement constitutes notice to the holders of Calipso
Common Stock of their Appraisal Rights as required by Section 262. Section
262 is attached to this Information Statement as Appendix F. Any Calipso
stockholder who wishes to exercise his, her or its Appraisal Rights, or who
wishes to preserve his, her or its right to do so, should review the
following discussion and Appendix F carefully. Failure to comply timely and
properly with the procedures specified in Section 262 will result in the loss
of Appraisal Rights.
A HOLDER OF APPRAISAL SHARES WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL
RIGHTS MUST: (1) NOT APPROVE THE MERGER BY WRITTEN CONSENT; AND (2) WITHIN 20
DAYS AFTER THE DATE OF MAILING OF A NOTICE FROM CALIPSO OR THE SURVIVING
CORPORATION NOTIFYING THE HOLDER OF APPRAISAL SHARES OF THE EFFECTIVE TIME OF
THE MERGER, DEMAND IN WRITING FROM CALIPSO OR THE SURVIVING CORPORATION, AS
THE CASE MAY BE, APPRAISAL OF HIS, HER OR ITS SHARES. A HOLDER OF APPRAISAL
SHARES WISHING TO EXERCISE SUCH HOLDER'S APPRAISAL RIGHTS MUST BE THE RECORD
HOLDER OF SUCH APPRAISAL SHARES ON THE DATE THE WRITTEN DEMAND FOR APPRAISAL
IS MADE AND MUST CONTINUE TO HOLD SUCH APPRAISAL SHARES OF RECORD UNTIL THE
EFFECTIVE TIME OF THE MERGER. ACCORDINGLY, A HOLDER OF APPRAISAL SHARES WHO
IS THE RECORD HOLDER OF APPRAISAL SHARES ON THE DATE THE WRITTEN DEMAND FOR
APPRAISAL IS MADE, BUT WHO THEREAFTER TRANSFERS SUCH APPRAISAL SHARES PRIOR
TO THE EFFECTIVE TIME OF THE MERGER, WILL LOSE ANY RIGHT TO APPRAISAL IN
RESPECT OF SUCH APPRAISAL SHARES. FAILURE TO APPROVE THE MERGER BY WRITTEN
CONSENT DOES NOT IN ITSELF CONSTITUTE A DEMAND FOR APPRAISAL.
Only a holder of record of Appraisal Shares is entitled to assert
Appraisal Rights for the Appraisal Shares registered in that holder's name.
A demand for appraisal should be executed by or on behalf of the holder of
record, fully and correctly, as such holder's name appears on such holder's
stock certificate. If the Appraisal Shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the Appraisal Shares are
owned of record by more than one person as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners.
An authorized agent, including one or more joint owners, may execute a demand
for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is agent for such owner or owners. A record
holder such as a broker who holds Appraisal Shares as a nominee for several
beneficial owners may exercise Appraisal Rights with respect to the Appraisal
Shares held for one or more beneficial owners while not exercising such
rights with respect to the Appraisal Shares held for other beneficial owners;
in such case, the written demand should set forth the number of Appraisal
Shares as to which appraisal is sought. When no number of Appraisal Shares
is expressly mentioned, the demand will be presumed to cover all Appraisal
Shares held in the name of the record owner. Stockholders who hold their
Appraisal Shares in brokerage accounts or other nominee forms and who wish to
exercise Appraisal Rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal
by such a nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED TO
CALIPSO, INC., 13525 Midland Road, Suite I, Poway, California 92064
ATTENTION: PRESIDENT.
Within 120 days after the effective time of the Merger but not
thereafter, the surviving corporation or any stockholder who has complied
with the statutory requirements summarized above may file a petition in the
Delaware Chancery Court demanding a determination of the fair value of the
Appraisal Shares. Accordingly, it is the obligation of the stockholders to
initiate all necessary action to perfect their Appraisal Rights within the
<PAGE>
time prescribed in Section 262. At any time within 60 days from the
effective time of the Merger, a stockholder may withdraw his, her or its
demand for appraisal, and accept the terms offered under the Merger
Agreement.
Within 120 days after the effective time of the Merger, any stockholder
who has complied with the requirements for exercise of Appraisal Rights will
be entitled, upon written request, to receive from the surviving corporation
a statement setting forth the aggregate number of Appraisal Shares and the
aggregate number of holders of such Appraisal Shares not approving the Merger
by written consent and with respect to which demands for appraisal have been
received and the aggregate number of holders of such shares. The surviving
corporation must mail the statement within 10 days after it has received such
written request.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders
entitled to Appraisal Rights and will appraise the fair value of their
Appraisal Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Stockholders considering whether to seek appraisal should be aware that the
fair value of their Appraisal Shares as determined under Section 262 could be
more than, the same as or less than the value of the consideration they would
receive pursuant to the Merger Agreement if they did not seek appraisal of
their Appraisal Shares. Investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair value under
Section 262. The Delaware Supreme Court has stated that proof of value by
any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court should be considered in
the appraisal proceedings.
The Delaware Chancery Court will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose Appraisal
Shares have been appraised. The costs of the action may be determined by the
Delaware Chancery Court and taxed upon the parties as the Delaware Chancery
Court deems equitable. The Delaware Chancery Court may also order that all
or a portion of the expenses incurred by any stockholder in connection with
an appraisal, including, without limitation, reasonable attorneys' fees and
the fees and expenses of experts utilized in the appraisal proceeding, be
charged pro rata against the value of all the Appraisal Shares entitled to
appraisal.
Any holder of Appraisal Shares who had duly demanded an appraisal in
compliance with Section 262 will not, after the effective time of the Merger,
be entitled to vote the Appraisal Shares subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those Appraisal Shares (except dividends or other distributions payable to
holders of record of Appraisal Shares as of a record date prior to the
effective time of the Merger).
If any stockholder who properly demands appraisal of his Appraisal
Shares under Section 262 fails to perfect, or effectively withdraws or loses,
his, her or its Appraisal Rights, the Appraisal Shares of such stockholder
will be converted into the right to receive the consideration receivable with
respect to such Appraisal Shares in accordance with the Merger Agreement. A
stockholder will fail to perfect, or effectively lose or withdraw his, her or
its right to appraisal if, among other things, no petition for appraisal is
filed within 120 days after the effective time of the Merger, or if the
stockholder delivers to the surviving corporation a written withdrawal of
his, her or its demand for appraisal. Any such attempt to withdraw an
appraisal demand more than 60 days after the effective time of the Merger
will require the written approval of the surviving corporation.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 FOR PERFECTING
APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A
STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION RECEIVABLE WITH
RESPECT TO SUCH APPRAISAL SHARES IN ACCORDANCE WITH THE MERGER AGREEMENT).
IN VIEW OF THE COMPLEXITY OF THE PROVISIONS OF SECTION 262, CALIPSO
<PAGE>
STOCKHOLDERS WHO ARE CONSIDERING OBJECTING TO THE MERGER SHOULD CONSULT THEIR
OWN LEGAL ADVISORS.
CALIFORNIA DISSENTERS' RIGHTS
By virtue of Section 2115 of the CGCL, if holders of Calipso Common
Stock exercise Dissenters' Rights in connection with the Merger under
Sections 1300 to 1312 of the CGCL ("Chapter 13"), any shares of Calipso
Common Stock as to which such Dissenters' Rights are exercised will be
converted into the right to receive such consideration as may be determined
to be due with respect to such shares pursuant to the CGCL. See
"Applicability of California Law to Calipso."
THE FOLLOWING SUMMARY OF THE PROVISIONS OF CHAPTER 13 IS NOT INTENDED TO
BE A COMPLETE STATEMENT OF SUCH PROVISIONS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF CHAPTER 13. A COPY OF WHICH IS ATTACHED
HERETO AS APPENDIX G AND IS INCORPORATED HEREIN BY REFERENCE.
If the Merger is approved pursuant to a written consent of the
stockholders in lieu of a meeting, each holder of Calipso Common Stock who
does not approve the Merger by written consent and who follows the procedures
set forth in Chapter 13 will be entitled to have his, her or its Calipso
Common Stock purchased by Calipso for cash at the "fair market value" of the
shares of Calipso Common Stock. The "fair market value" of shares of Calipso
Common Stock will be determined as of the day before the first announcement
of the terms of the proposed Merger, excluding any appreciation or
depreciation in consequence of the proposed Merger (i.e., valuing the shares
of Calipso Common Stock as if the Merger had not occurred). The shares of
Calipso Common Stock with respect to which holders have perfected their
purchase demand in accordance with Chapter 13 and have not effectively
withdrawn or lost such Dissenters' Rights are referred to in this Information
Statement as the "Dissenting Shares."
Within 10 days after approval of the Merger by the outstanding shares of
Calipso, Calipso must mail a notice of such approval (the "Approval Notice")
to all stockholders who have not approved the Merger by written consent,
together with a statement of the price determined by Calipso to represent the
fair market value of the applicable Dissenting Shares, a brief description of
the procedures to be followed in order for the stockholder to pursue
Dissenters' Rights, and a copy of Sections 1300 to 1304 of the CGCL. The
statement of price by Calipso constitutes an offer by Calipso to purchase all
Dissenting Shares at the stated amount.
A stockholder of Calipso electing to exercise Dissenters' Rights must,
within 30 after the date the Approval Notice is mailed to such stockholder,
mail or deliver a written demand to Calipso stating that such holder is
demanding purchase of his, her or its shares of Calipso Common Stock, stating
the number of shares which Calipso must purchase, what the stockholder claims
to be the fair market value of such shares and enclosing the share
certificates for endorsement by Calipso. A holder who elects to exercise
Dissenters' Rights should mail or deliver his, her or its written demand to
Calipso, Inc., 13525 Midland Road, Suite I, Poway, California, 92064,
Attention: Chief Executive Officer. The statement of fair market value
constitutes an offer by the stockholder to sell the shares at the stated
amount. Any Calipso stockholder who executes and delivers the consent
accompanying this Information Statement approving the Merger will have waived
his, her or its Dissenters' Rights.
If Calipso and the stockholder agree that the shares are Dissenting
Shares and agree upon the price of the shares, Calipso must pay the
stockholder the agreed upon price plus interest thereon at the legal rate
from the date of the agreement on Dissenting Shares within 30 days from the
later of: (i) the date of the agreement on Dissenting Shares; or (ii) the
date all contractual conditions to the Merger are satisfied.
<PAGE>
If Calipso denies that the shares are Dissenting Shares, or if Calipso
and the stockholder fail to agree upon the fair market value of shares of
Calipso Common Stock, then within 6 months after the date the Approval Notice
was mailed to stockholders, any stockholder who has made a valid written
purchase demand and who has not approved the Merger by written consent may
file a complaint in California superior court requesting a determination as
to whether the shares are Dissenting Shares or as to the fair market value of
such holder's shares of Calipso Common Stock, or both.
Any holder of Dissenting Shares who has duly demanded the purchase of
his, her or its shares under Chapter 13 will not after the effective time of
the Merger, be entitled to vote the shares subject to such demand for any
purposes or be entitled to the payment of dividends or other distributions on
such Dissenting Shares (except dividends or other distributions payable to
stockholders of record as of the date prior to the effective time of the
Merger).
If any holder of Calipso Common Stock who demands the purchase of his,
her or its shares under Chapter 13 fails to perfect, or effectively withdraws
or loses his or her right to such purchase, the shares of such holder will be
converted into a right to receive a number of shares of Calipso Common Stock
in accordance with the terms of the Merger Agreement. Dissenting Shares lose
their status as Dissenting Shares if: (i) the Merger is abandoned; (ii) the
shares are transferred prior to their submission for the required
endorsement; (iii) the dissenting stockholder fails to make a timely written
demand for purchase, along with a statement of fair market value; (iv) the
dissenting stockholder approves the Merger by written consent; (v) the
dissenting stockholder and Calipso do not agree upon the status of the shares
as Dissenting Shares or do not agree on the purchase price, but neither
Calipso nor the stockholder files a complaint or intervenes in a pending
action within 6 months after mailing of the Approval Notice; or (vi) with
Calipso's consent, the stockholder delivers to Calipso a written withdrawal
of such stockholder's demand for purchase of his, her or its shares.
FAILURE TO FOLLOW THE STEPS REQUIRED BY CHAPTER 13 FOR PERFECTING
DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS (IN WHICH EVENT A
STOCKHOLDER WILL BE ENTITLED TO RECEIVE THE CONSIDERATION RECEIVABLE WITH
RESPECT TO SUCH DISSENTING SHARES IN ACCORDANCE WITH THE MERGER AGREEMENT).
IN VIEW OF THE COMPLEXITY OF THE PROVISIONS OF CHAPTER 13, Calipso
STOCKHOLDERS WHO ARE CONSIDERING OBJECTING TO THE MERGER SHOULD CONSULT THEIR
OWN LEGAL ADVISORS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the principal federal income tax
consequences of the Merger to the holder of KFI Common Stock. The discussion
is based upon current provisions of the Code, existing and proposed Treasury
Regulations, current administrative rulings of the Internal Revenue Service
("IRS") and judicial decisions, all of which are subject to change, possibly
with retroactive effect. The discussion does not purport to be a complete
analysis of potential tax effects relevant to each particular holder of KFI
Common Stock and does not address the tax consequences that may be relevant
to particular categories of stockholders subject to special treatment under
the code, such as traders or dealers in securities or currencies, banks or
insurance companies. In addition, it does not describe any tax consequences
arising under the laws of any state, local or foreign jurisdiction. No
ruling on the federal income tax consequences of the Merger has been or will
be requested from the IRS or from any other tax authority. In addition, the
discussion is not binding upon any tax authority or any court and no
assurance can be given that a position contrary to those expressed in the
discussion will not be asserted and sustained. Accordingly, each KFI
<PAGE>
stockholder is urged to consult his or her own tax advisor regarding the
federal, state, local and foreign tax implications of the Merger and any tax
reporting obligations caused by the consummation of the Merger.
Assuming the Merger of KFI into Calipso is treated as a reorganization
under Internal Revenue Code Section 368, for federal income tax purposes, (i)
no gain or loss will be recognized by the stockholders of each of Calipso or
KFI upon the conversion of KFI shares into Calipso common stock, and (ii) the
aggregate tax basis of the shares of Calipso common stock received in
exchange for KFI stock pursuant to the Merger will be the same as the
aggregate tax basis of such shares of Calipso and KFI stock, respectively.
ACCOUNTING TREATMENT
The Merger will be treated as a purchase for accounting purposes.
RECOMMENDATION OF THE CALIPSO BOARD
The Board of Directors determined that the terms of the Merger and the
other transactions contemplated by the Merger Agreement were fair to, and in
the best interests of, the Company's stockholders, and recommended that the
Company's stockholders approve and adopt the Merger.
By written consents dated June 8, 1999, April 27, 2000 and August 6,
2000, the Board of Directors of Calipso approved the filing of the
Certificate of Correction, the Charter Amendments and the Merger Agreement.
RECOMMENDATION OF THE KFI BOARD
By unanimous consent dated August 4, 2000, the Board of Directors of KFI
approved the Merger Agreement and the transactions contemplated thereby.
After careful consideration, the Board determined that the Merger Agreement
was fair to, and in the best interests of KFI and its stockholders, and
recommended that the stockholders approve and adopt the Merger.
PRICE RANGE OF SHARES AND DIVIDENDS
Calipso
As of August 4, 2000, there were approximately 85 record holders of
Shares. The Common Stock trades on OTCBB, under the symbol "CPSJ." The
Company's Transfer Agent and Registrar is Signature Stock and Transfer. The
Company has not declared or paid any dividends on the Common Stock and does
not intend to do so prior to the Merger.
The following table sets forth, for each of the periods indicated, the
high and low sales quotations per Share as reported by OTCBB.
<TABLE>
SALE PRICE
HIGH LOW
<S> <C> <C>
May 2000 $3.00 $1.00
June 2000 3.00 2.01
July 2000 2.63 1.38
</TABLE>
On August 10, 2000, the last full trading day before the first public
announcement of the intention to commence the Merger, the last reported sale
quotation of the Shares on the OTCBB was $1.38 per Share.
KFI
As of August 6, 2000, there were 12 stockholders of KFI common stock,
holding an aggregate of 33,618,500 shares. KFI is a privately-held company
and there is no public market for its capital stock. KFI has no declared or
<PAGE>
paid any dividends on its common stock and does not intend to do so prior to
the Merger.
CHANGE OF CONTROL
Upon acceptance by the KFI stockholders of the Shares pursuant to the
Merger Agreement, the stockholders of KFI may be deemed to own beneficially
an aggregate of 33,918,400 shares and majority of the total outstanding
Shares. This includes the cancellation of 4,860,000 shares by the officers
and directors of Calipso concurrent with their resignations pursuant to the
Merger Agreement.
ADDITIONAL AND AVAILABLE INFORMATION
Calipso is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the SEC relating to its
business, financial condition and other matters. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the SEC's regional offices located at
Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information regarding the public reference facilities may be obtained from
the SEC by telephoning 1-800-SEC-0330. Calipso's filings are also available
to the public on the SEC's internet site (http://www.sec.gov). Copies of such
materials may also be obtained by mail from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF CALIPSO OR KFI NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the
Exchange Act with the SEC (File No. 0-28287) are incorporated herein by
reference:
(1) The Company's initial Registration Statement on Form 10SB12G;
(2) The Company's Quarterly Report on Form 10-QSB for the quarterly period
ended December 31, 1999;
(3) The Company's Annual Report on Form 10-KSB for the year ended March 31,
2000.
The Company will provide without charge to each person, including
any beneficial owner of such person, to whom a copy of this Information
Statement has been delivered, on written or oral request, a copy of any and
all of the documents referred to above that have been or may be incorporated
by reference herein other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference herein). Additionally the
Company is providing a copy of Calipso form 10KSB as Appendix H with this
filing. Requests for such copies should be directed to 13525 Midland Road,
Suite I, Poway, California 92064.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Information
Statement shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Information Statement to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
<PAGE>
modified or superseded, to constitute a part of this Information Statement.
OTHER MATTERS
We do not intend to hold a 2000 annual meeting prior to the scheduled
consummation of the Merger. If the Merger is not consummated and we do hold a
2000 annual meeting, we will notify you of such meeting, including the date
by which stockholder proposals must be received at Calipso's executive
offices in order to be considered for inclusion in the proxy materials
relating to such meeting.
We do not intend to bring any other matters before the special meeting,
and are not aware of any other matters that are expected to be brought
properly before the special meeting.
ACCORDINGLY, WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
