SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[x] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or 14a-12
[ ] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(20) )
LIFEPOINT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LIFEPOINT, INC.
- --------------------------------------------------------------------------------
(Name of Person (s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statements number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
LIFEPOINT, INC.
10400 Trademark Street
Rancho Cucamonga, CA 91730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of LIFEPOINT, INC.
The Annual Meeting of Stockholders of LifePoint, Inc. (the "Company")
will be held at the _____________ located at __________________, Ontario,
California 91764, on Friday, August 20, 1999, at 10:00 a.m., Pacific Daylight
Time (the "Annual Meeting"), for the following purposes:
1. To elect four directors for a one-year term until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualify.
2. To ratify the appointment of Ernst & Young LLP as independent public
accountants of the Company for the fiscal year ending March 31, 2000.
3. To approve a reverse stock split of the Company's Common Stock, $.001
par value, in an amount which the Board of Directors, after
consultation, deems appropriate, to be not less than one-for-two and
not more than one-for-five, and the timing of its effectiveness to be
at such time as the Board determines to file an Amendment to the
Company's Restated Certificate of Incorporation effectuating such
reverse stock split, but not later than June 30, 2000.
4. To approve an increase in the authorized number of shares of the Common
Stock by up to 10,000,000 shares, but only if the reverse stock split
in an amount not less than one-for-three nor more than one-for-five is
authorized and implemented.
5. To transact such other business as may come before the Annual Meeting or any
adjournment thereof.
Only stockholders of record at the close of business on Monday, July 12, 1999,
are entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors
Robert W. Berend
Secretary
July 23, 1999
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
EXCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. THE PROXY MAY BE REVOKED
IN WRITING PRIOR TO THE MEETING OR, IF YOU ATTEND THE MEETING, YOU MAY REVOKE
THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
================================================================================
LIFEPOINT, INC.
Notice of Annual Meeting of Stockholders and Proxy Statement
July 23, 1999
Table of Contents
================================================================================
Page
Notice of the Annual Meeting Stockholders ..........N/A
Proxy Statement:
Voting Securities.....................................1
Proposal One: Election of Directors...................2
Management............................................6
Executive Compensation................................8
Security Ownership of Certain Beneficial
Holders and Management............................13
Proposal Two: Appointment of Independent
Auditors..........................................16
Proposal Three: Authority to Board to
Implement a Reverse Stock Split...................17
Proposal Four: Authority to Board to
Increase Authorized shares........................21
Financial Statements.................................24
Other Matters Coming Before Meeting..................25
Miscellaneous........................................25
================================================================================
================================================================================
<PAGE>
LIFEPOINT, INC.
10400 Trademark Street
Rancho Cucamonga, CA 91730
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
August 20, 1999
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of LifePoint, Inc. (the "Company") of proxies to be
voted at the Company's Annual Meeting of Stockholders (the "Meeting") to be held
on Friday, August 20, 1999, or at any adjournment thereof. The purposes for
which the Meeting is to be held are set forth in the preceding Notice of Annual
Meeting. This Proxy Statement and the enclosed form of proxy are first being
mailed on or about Friday, July 23, 1999, to holders of record of the Company's
Common Stock, par value $.001 per share (the "Common Stock"), and the Company's
Series A 10% Cumulative Convertible Preferred Stock, $.001 par value (the
"Series A Preferred Stock"), as of the close of business on Monday, July 12,
1999 (the "Record Date"), which has been fixed as the record date for the
determination of the stockholders entitled to notice of, and to vote at, the
Meeting.
VOTING SECURITIES
On the Record Date, 14,944,328 shares of the Common Stock and 444,875
shares of the Series A Preferred Stock, which are the only classes entitled to
vote at the Meeting, were issued, outstanding and entitled to vote. Each
stockholder of record is entitled to cast, in person or by proxy, one vote for
each share of the Common Stock, and one vote for each share of the Series A
Preferred Stock held by such stockholder, as of the close business on the Record
Date. The holders of the Common Stock and the Series A Preferred Stock will vote
together as a single class on all matters to be submitted to vote at the
Meeting, thereby resulting in 15,389,203 shares being eligible to vote on each
proposal at the Meeting. A plurality of the votes cast at the Meeting shall be
necessary to elect the four directors. The affirmative vote of the holders of a
majority of the shares represented and entitled to vote at the Meeting shall be
necessary (1) to approve the selection of the independent auditors, (2) to
approve a reverse stock split of the Common Stock in an amount which the Board
of Directors of the Company deems appropriate, to be not less than one-for-two
and not more than one-for-five, and the timing of its effectiveness to be at
such time as the Board determines to file an Amendment to the Company's Restated
Certificate of Incorporation effectuating such reverse stock split, but not
later than June 30, 2000, and (3) to approve, if the reverse stock split in an
amount not less than one-for-three nor more than one-for-five is authorized and
then implemented, an increase in the number of authorized shares of the Common
Stock by up to 10,000,000 shares.
A majority of the shares entitled to vote, present in person or
represented by proxy, constitutes a quorum at the Meeting. Abstensions and
broker non-votes are treated for the purpose of determining a quorum at the
Meeting and are not treated as a vote for or against a proposal.
1
<PAGE>
Proxies will be voted as indicated in this Proxy Statement and the
enclosed proxy. Shares presented by properly executed proxies, if received in
time, will be voted in accordance with any specifications made therein. A proxy
may be revoked by delivering a written notice of revocation to the Company
(Attention: Robert W. Berend, Secretary) at its principal executive office or in
person at the Meeting, or by a subsequently dated proxy, at any time prior to
the voting thereof. The principal executive office of the Company is located at
the address in the heading to this Proxy Statement.
Rule 452 of the New York Stock Exchange, Inc. permits a member firm to
vote for the directors and/or for the proposal to ratify the selection of
independent auditors if the member firm holds the shares of the Common Stock for
a beneficial owner and receives no instructions to the contrary by the tenth day
before the Meeting. However, under the Rule the beneficial owner must give
specific instructions to the member firm for it to vote the stockholder's shares
on the proposals to approve a reverse stock split of the Common Stock and to
approve an increase in the authorized number of shares of the Common Stock. The
Company, accordingly, urges each beneficial owner to instruct the member firm
which holds of record the stockholder's shares of the Common Stock to vote in
favor of the four proposals submitted to the stockholders for a vote.
A stockholder shall have no right to receive payment for his, her or
its shares as a result of stockholder approval of any proposal in the Notice of
Annual Meeting.
Each of the persons who has served as a director or as an executive
officer of the Company since April 1, 1998 (i.e., the beginning of the last
fiscal year of the Company), has no substantial interest, direct or indirect, by
security holdings or otherwise, in any of the proposals submitted to a vote at
the Meeting (as described in the fourth preceding paragraph), other than the
election of directors, except that he or she could be the recipient of some of
the additional shares should the increased number of authorized shares of the
Common Stock be authorized, then implemented and thereafter used for a stock
incentive or benefit plan as described in the section "General" under the
caption "Proposal Four: Authority to Board to Increase Authorized Shares."
PROPOSAL ONE: ELECTION OF DIRECTORS
Nominees for Election as Directors
Four directors will be elected at the Meeting, each to serve for a
one-year term until the next Annual Meeting of Stockholders and until his or her
successor is duly elected and qualifies. The Board intends to seek additional
directors after this Meeting and, if appropriate candidates are determined after
screening by the Company's new Nominating Committee, to increase the number of
authorized directors and to elect such candidate or candidates as permitted by
the By-Laws of the Company.
Proxies received in response to this solicitation, unless specified
otherwise, will be voted in favor of the four nominees named below, all of whom
are currently serving as directors of the Company. If a nominee should not be
available for election as contemplated, the management proxy holders will vote
for such lesser number of directors as are available to serve or will vote for a
substitute designated by the current Board of Directors. In no event will
proxies be voted for more than four nominees.
2
<PAGE>
The following table sets forth certain information, as of the Record
Date, concerning the nominees for election as directors of the Company. The
information has been furnished to the Company by the individual named. For
information as to the shares of the Common Stock held by each nominee, see the
table under the caption "Security Ownership of Certain Beneficial Holders and
Management" elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year First
Elected
Name of Nominee Age Director Position and Offices with the Company
Linda H. Masterson 48 1996 President, Chief Executive Officer and a Director
Peter S. Gold 74 1997 Director
Jonathan J. Pallin 49 1997 Director
Paul Sandler 59 1997 Director
</TABLE>
Family Relationships of Nominees and Executive Officers
Jonathan J. Pallin and Paul Sandler are brother-in-laws. There are no
other family relationships among the nominees for election as directors and the
executive officers of the Company.
Business History of Nominees
Linda H. Masterson has had substantial experience in marketing, sales
and business development in the medical diagnostics, healthcare and
biotechnology fields. She was elected a director of Substance Abuse
Technologies, Inc. ("SAT"), the then parent of the Company, on September 26,
1995. Effective May 13, 1996, she became the President and Chief Operating
Officer of SAT. On May 31, 1996, she was elected a director of the Company and,
on July 31, 1996, the President and Chief Operating Officer of the Company.
Effective November 19, 1996, she relinquished her duties as Chief Operating
Officer of SAT in order to devote more time to supervising the development
program of the Company and the operations of the Alcohol Products and BioTox
Divisions of SAT. On May 23, 1997, she resigned as the President of SAT in order
to become the Chief Executive Officer of the Company (formally designated as
such on May 26, 1997). On November 4, 1997, she resigned as a director of SAT,
thereby terminating her last position with the former parent of the Company.
Until May 13, 1996 when she became an employee of SAT, she was employed as the
Executive Vice President of Cholestech, Inc., a start-up diagnostic company, for
which she developed and restructured that company's business strategy. In
November 1993, Ms. Masterson founded Masterson & Associates, a company of which
she was the President and owner until she joined Cholestech, Inc. in May 1994,
which was engaged in the business of providing advice to start-up companies,
including the preparation of technology and market assessments and the
preparation of strategic and five-year business plans for biotech, medical
device, pharmaceutical and software applications companies. From April 1992 to
November 1993, Ms. Masterson was employed as the Vice President of Marketing and
Sales of BioStar, Inc., a start-up biotech company focused on the
commercialization of a new detection technology applicable to both immunoassay
and hybridization based systems. From 1989 to 1992, she was employed as Senior
Vice President of Marketing, Sales and Business Development by Gen-Probe, Inc.,
a specialized genetic probe biotechnology company focused on infectious
diseases, cancer and therapeutics. Prior to 1989, Ms. Masterson was employed for
12 years in various domestic and international marketing and sales positions at
Johnson & Johnson, Inc., Baxter International Inc. and Warner-Lambert Company.
Ms. Masterson has a BS in Medical Technology from the University of Rhode Island
and an MS in Microbiology/Biochemistry from the University of Maryland and
attended the Executive Advanced Management Program at the Wharton School of
Business at the University of Pennsylvania.
3
<PAGE>
Peter S. Gold was elected as a director of the Company on December 5,
1997. He retired in 1990 as Chairman and Chief Executive Officer of Price
Pfister, Inc., the largest manufacturer of faucets in the world. Mr. Gold did a
leveraged buyout and purchased such company in 1983; he subsequently took the
company public in 1987; and sold the company in 1988. Price Pfister is now owned
by Black & Decker Corp. Mr. Gold is a Director Emeritus of The Home Depot, Inc.
and has major investments in commercial real estate in various parts of the
United States. Mr. Gold is Chairman of the Board of Trustees of Pitzer College
(Claremont College), Claremont, CA, and a member of the Board of Trustees of the
City of Hope. Mr. Gold received a Doctor of Humane Letters from Pitzer College,
Claremont, CA, and received a law degree at Southwestern University, Los
Angeles, CA.
Jonathan J. Pallin was elected Chairman of the Board and a director of
the Company on October 31, 1997. He resigned as the Chairman of the Board on
January 8, 1999. However, he continued to serve the Company as a financial
consultant until March 31, 1999. He has over 22 years' experience in the
financial markets as an institutional fixed income broker and a financial
consultant and in an investment banking advisory role. Mr. Pallin served as
Senior Vice President, Retail Brokerage for PaineWebber Incorporated from
January 1991 to July 1993, as a Senior Vice President, Investments, Retail
Brokerage for Baraban Securities Incorporated from July 1993 to May 1996 and as
a Vice President, Retail Brokerage for Sutro & Co. Incorporated from May 1996 to
October 1997. Mr. Pallin has an MBA from Arizona State University with a major
emphasis on Accounting, and a BS from Long Island University (Southampton) in
Business and Psychology.
Paul Sandler was elected as a director of the Company on December 5,
1997. He is a Board Certified pediatric nephrologist at the Arizona Kidney
Disease & Hypertension Center in Phoenix. Additionally, Dr. Sandler is the
Medical Director at Walter Boswell Memorial Hospital, the Phoenix Artificial
Kidney Center, the South Phoenix Dialysis Center, the South Mountain Dialysis
Services and Phoenix Memorial Hospital PPG. Dr. Sandler was a fellow at Albert
Einstein College of Medicine in New York City and received his post-graduate
training at Kings County Hospital, New York City. Dr. Sandler received his MD at
the State University of New York and his BA from Emory University.
4
<PAGE>
Committees and Board Meetings
Because the Company was a majority-owned subsidiary of SAT until
October 29, 1997 and, as a result, all major decisions were made by the parent
company, there were no standing audit, compensation or nominating committees
prior thereto. On December 5, 1997, the Board established standing audit and
compensation committees and designated the then independent directors to serve
on such two committees. On February 26, 1999, the Board established a standing
nominating committee with the members described in the third succeeding
paragraph.
Messrs. Gold and Sandler serve on the Audit Committee, with Mr. Gold
serving as Chairperson. The Audit Committee recommends annually to the
stockholders the independent auditors to be retained by the Company, reviews the
scope and procedures to be followed in the conduct of audits by the independent
auditors and, when employed, the internal auditors of the Company and reviews
various reports and recommendations with respect to internal controls and any
significant changes in accounting.
Messrs. Gold and Sandler also serve on the Compensation Committee, with
Dr. Sandler serving as Chairperson. The Compensation Committee approves the
remuneration of key officers of the Company and, if incorporated or acquired,
its subsidiaries, reviews and recommends to the Board of Directors changes in
the Company's stock benefit and executive, managerial or employee compensatory
and benefit plans or programs and administers stock option, restricted stock or
similar plans of the Company.
Messrs. Gold and Pallin and Ms. Masterson serve on the Nominating
Committee, with Mr. Gold serving as Chairperson. The Nominating Committee will
recommend to the Board, among, other matters, nominees for election or
re-election as directors of the Corporation, including screening any nomination
received from a stockholder, director or officer of the Corporation, criteria
relating to tenure and retention, changes in directors' compensation,
appointments to committees and procedures as to management succession.
If a stockholder has a recommendation as to a nominee for election as a
director, such stockholder should make his, her or its recommendation in writing
addressed to Peter S. Gold, as the Chairperson of the Nominating Committee, at
the Company's address shown in the heading to this Proxy Statement, giving the
business history and other relevant biographical information as to the proposed
nominee and the reasons for suggesting such person as a director of the Company.
The Nominating Committee will then promptly review the recommendation and advise
the stockholder of its conclusion and, if a rejection, the reasons therefor.
During the fiscal year ended March 31, 1999 ("fiscal 1999"), there were
13 meetings of the Board. Each of the incumbent directors participated in all
meetings of the Board. The Audit Committee held one meeting and the Compensation
Committee held two meetings during fiscal 1999. The Audit Committee intends to
meet on the date of this Meeting with representatives of Ernst & Young LLP, the
independent auditors for the Company, to review the auditors' comments derived
as a result of their audit of the Company's financial statements for fiscal
1999. Because the Nominating Committee was first authorized on February 26,
1999, it held no meetings in fiscal 1999.
5
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table contains certain information relating to the
directors and executive officers of the Company as of the Record Date:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Position
Linda H. Masterson 48 President, Chief Executive Officer and a Director
Thomas J. Foley 59 Senior Vice President, Research and Development
Michele A. Clark 46 Controller and Chief Accounting Officer
Peter S. Gold 74 Director
Jonathan J. Pallin 49 Director
Paul Sandler 59 Director
</TABLE>
Each director is elected to serve until the next Annual Meeting of
Stockholders or until his or her successor is elected and shall have qualified.
All directors named in the table were initially elected to fill a vacancy and
re-elected by the stockholders at the last Annual Meeting on August 13, 1998.
The 1998 Annual Meeting was the first Annual Meeting held since September 24,
1994 and after the purchase on October 29, 1997 by Meadow Lane Partners, LLC
("Meadow Lane"), of which Jonathan J. Pallin, now a director, and Herman Sandler
were the sole members, of all shares of the Common Stock owned by SAT. With the
resignations on October 31, 1997 of two directors who also served as directors
of SAT (one also being its Chairman of the Board and Chief Executive Officer)
and the resignation on November 4, 1997 by Linda H. Masterson, the President,
Chief Executive Officer and a director of the Company, as a director of SAT, all
relationships between the Company and its former parent (i.e., SAT) were
terminated. All directors named in the table are the Board's nominees for
re-election as directors at the Meeting. See the section "Nominees for Election
as Directors" under the caption "Proposal One: Election of Directors." Each
officer of the Company is elected by the Board of Directors to serve at the
discretion of the Board.
Business History
For information as to the business histories of Messrs. Gold, Pallin
and Sandler and Ms. Masterson, see the section "Business History of
Nominees" under the caption "Proposal One: Election of Directors."
Thomas J. Foley has over 25 years' experience in the medical diagnostic
industry. He was elected to his officership in the Company effective March 9,
1998. From November 1997 to March 1998, he was a consultant to various
companies. From November 1994 to November 1997, he served as the Executive Vice
President of Business and Product Development at HiChem/Elan Diagnostics
("HiChem"), where he managed research and development, regulatory affairs
(including FDA submissions), strategic and business planning, technology
assessment for acquisitions, and manufacturing operations. Prior to joining
HiChem in November 1994, Dr. Foley was Vice President of Research and
Development at Hycor Biomedical, Inc. ("Hycor"), where he was responsible for
research and development of all products, including drugs of abuse products,
over an eight-year period from May 1986 to November 1994. Prior to Hycor, Dr.
Foley was Vice President of Research and Development at Gilford Instruments from
1983 to 1986 and Worthington Diagnostics from 1981 to 1983. Prior to Worthington
Diagnostics, Dr. Foley worked at Beckman Instruments, Inc. ("Beckman") and was
the reagents product development manager for the Astra, one of Beckman's most
successful product lines. Dr. Foley has a Ph.D. in Biochemistry from Trinity
College, Dublin.
6
<PAGE>
Michele A. Clark became an employee of the Company on April 12, 1999
and was elected as its Controller and appointed as its Chief Accounting Officer
on April 16, 1999. Ms. Clark has 25 years of accounting and finance experience
in manufacturing and high tech companies. Ms. Clark was most recently the
Controller at Auto-Graphics, Inc. ("Auto-Graphics"), a software development
company, where she managed all accounting, finance, human resource and
administrative functions within the company. Additionally, she was responsible
for all filings with the Securities and Exchange Commission (the "Commission")
and shareholder relations. Prior to Auto-Graphics, Ms. Clark was Controller at
Typecraft, Inc. ("Typecraft"), a commercial lithographer, where she was
responsible for all accounting, finance and human resource functions. Prior to
Typecraft, Ms. Clark served as accounting manager for three retail companies
with multiple locations. Ms. Clark graduated Cum Laude with a B.S. in Accounting
from University of La Verne.
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 furnished to the Company
under Rule 16a-3(e) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to fiscal 1999, the Company is not
aware of any director or officer of the Company who failed to file on a timely
basis, as disclosed in such forms, reports required by Section 16(a) of the
Exchange Act during fiscal 1999 except that each of Linda H. Masterson (the
President, Chief Executive Officer and a director), Thomas J. Foley (Senior Vice
President, Research and Development) and William B. Benken (formerly a Vice
President) filed one report three days late, each reporting one transaction
(i.e., the grant of an Option under the Stock Option Plan).
As of March 31, 1998, i.e., the end of fiscal 1998, Jonathan J. Pallin
and Herman S. Sandler, and the General Conference Corporation of Seventh-day
Adventists (the "Seventh-day Adventists") were the only beneficial owners of 10%
or more of the Common Stock known to the Company. Both Mr. Pallin and the
Seventh-day Adventists have advised the Company that they made timely filings
with respect to their transactions in fiscal 1999 and Mr.
Sandler has advised that he had no transactions in fiscal 1999.
Certain Transactions
See the section "Employment and Severance Agreements" under the caption
"Executive Compensation" for information relating to the Company's severance
agreement with Linda H. Masterson, the President, the Chief Executive Officer
and a director of the Company.
7
<PAGE>
On April 28, 1998, the Board authorized the following compensation
arrangement for Jonathan J. Pallin, then the Chairman of the Board and a
director of the Company, for his services on a daily basis as the Chairman of
the Board of the Company: (1) a fee of $10,000 per month for a one-year period
commencing April 1, 1998 and (2) a bonus of $75,000 if the Company obtains cash
financing of $5,000,000 to $6,900,000; (b) $100,000 if the Company obtains cash
financing of $7,000,000 to $9,900,000; and (c) $125,000 if the Company obtains
cash financing of over $10,000,000, subject to certain limitations.
On January 8, 1999, the Board accepted the resignation of Mr. Pallin as
the Chairman of the Board, canceled the foregoing bonus compensation arrangement
and authorized his engagement as a financial consultant to the Company on the
following terms:
(1) he would continue to receive $10,000 per month through March 31,
1999 on the basis he would continue to serve the Company on a daily basis as a
financial consultant and
(2) he would receive a finder's fee of 10% of the gross proceeds from
any purchaser whom or which he secured for a Company financing.
He received $420,451 as his finder's fee for the Company's third private
placement closed on January 21, 1999 relating to the sale of 600,000 shares of
the Series A Preferred Stock.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid or accrued by the Company during fiscal 1999 and the fiscal
years ended March 31, 1998 ("fiscal 1998") and 1997 ("fiscal 1997") to the sole
person who served as the Chief Executive Officer during fiscal 1999 and to each
other executive officer whose total annual salary and bonus exceeded $100,000
during any such year.
<TABLE>
Annual Compensation Long Term Compensation
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation
Linda H. Masterson 1999 184,038(2) 50,000
Chief Executive Officer 1998 125,249(2) 700,000
and President (1) 1997 0(3)
Thomas J. Foley 1999 135,769 220,000
Sr. Vice President, Research
and Development
Stephen J. Kline 1999 --
Vice President, Research 1998 20,131(5) 150,000(6)
and Development 1997 125,000 50,000(6)
- ------------------------
(1) Ms. Masterson was elected President of the Company effective August 1, 1996
and designated as its Chief Executive Officer on May 26, 1997.
(2) The amount shown in the table for 1998 does not reflect $33,654 paid by SAT
to Ms. Masterson for the period April 1 to June 1, 1997 nor $19,038.47 in
deferred salary which was paid in October 1998 after the Company obtained
long-term financing. Effective August 11, 1997, the Company directly paid all
compensation for Ms.
Masterson.
(3) Ms. Masterson became an employee of SAT on May 13, 1996 and all compensation
paid to her for fiscal 1997 was paid by SAT. To the extent any such services
were on behalf of the Company, this was reflected in SAT's management fee to the
Company.
(4) Dr. Kline resigned on September 12, 1997.
(5) The amount shown in the table does not reflect $50,000 paid by SAT to Dr. Kline during fiscal 1998.
(6) These options were canceled upon his resignation. See note (4) to this table.
</TABLE>
8
<PAGE>
Option/SAR Grants in Last Fiscal Year
On August 14, 1997, the Board of Directors adopted, subject to
stockholder approval, the LifePoint, Inc. 1997 Stock Option Plan (the "Stock
Option Plan") providing for the granting of stock options (the "Options") to
purchase up to 1,000,000 shares of the Common Stock to employees (including
officers) and persons who also serve as directors and consultants of the
Company. On June 5, 1998, the Board increased the number of shares subject to
the Stock Option Plan to 2,000,000, again subject to stockholder approval.
Stockholder approval was given on August 13, 1998. The Options may either be
incentive stock options as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") to be granted to employees or nonqualified
stock options to be granted to employees, directors or consultants.
9
<PAGE>
As of March 31, 1999, Options to purchase an aggregate of 794,167
shares of the Common Stock granted to employees (including two officers, one of
whom is also a director) were outstanding. As of such date, Options to purchase
an aggregate of 44,947 shares of the Common Stock had been exercised by
employees and Options to purchase an aggregate of 130,278 shares of the Common
Stock were then exercisable. Options granted to date under the Stock Option Plan
have generally become exercisable as to one-quarter of the shares subject
thereto on the first anniversary date of the date of grant and as to 1/36th of
the remaining shares on such calendar day each month thereafter for a period of
36 months. Certain Options will become exercisable upon the achievement of
certain goals. The exercise price per share for incentive stock options under
the Code may not be less than 100% of the fair market value per share of the
Common Stock on the date of grant. For nonqualified stock options, the exercise
price per share may not be less than 85% of such fair market value. No Option
may have a term in excess of ten years. Of the Options outstanding as of March
31, 1999, all were incentive stock options except for Options to purchase an
aggregate of 120,000 shares and all had an exercise price of $.50 per share. The
Options had expiration dates ranging from August 13, 2002 to June 30, 2008.
The Company has not granted any Options to consultants. For information
as to two Options granted subsequent to March 31, 1999 to two directors, see the
section "Compensation of Directors" under this caption "Executive Compensation."
The Company has never granted any stock appreciation rights.
The following table contains information concerning the grant of
Options to the named executive officers whose compensation for fiscal 1999
exceeded $100,000 as reported in the Summary Compensation Table under this
caption "Executive Compensation."
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Number of Percentage of
Securities Total Options Potential Realizable Value at
Underlying Granted to Assumed Annual Rates of Stock
Options Employees in Exercise or Price Appreciation for Option
Granted Fiscal Base Price Expiration Term (3)
-------------------------------
Name (#) 1999 (1) ($/Sh) (2) Date 5% ($) 10% ($)
- ------------------------ --------------- ---------------- ------------- ------------- -------------- ---------------
Linda H. Masterson 50,000 37.0% $0.50 6/29/08 $40,722 $64,844
Thomas J. Foley 20,000 14.8% $0.50 6/29/08 $16,289 $25,937
- -------------------
(1) Based upon Options to purchase 135,000 shares of Common Stock granted in fiscal 1999.
(2) The exercise price is equal 100% of the fair market value of the Common
Stock at the date of grant, as determined by the Board of Directors at the
time of grant.
(3) The potential realizable value is calculated based upon the term of the
Option at the time of grant (ten years). Stock price appreciation of five
percent and ten percent is assumed pursuant to rules promulgated by the
Commission and does not represent the Company's prediction of the stock
price performance.
</TABLE>
10
<PAGE>
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/
SAR Values
Options to purchase an aggregate of 44,947 shares of the Common Stock
were exercised by employees terminating their employment during fiscal 1999.
As indicated in the preceding section, the Company has never granted
any stock appreciation rights.
The following table shows the fiscal year-end option values for the
named executive officers whose compensation for fiscal 1999 exceeded $100,000 as
reported in the Summary Compensation Table under this caption "Executive
Compensation".
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Securities Underlying Value of Unexercised
Unexercised Options At Fiscal In-The-Money Options At
Year-End (#) Exercisable/ Fiscal Year End
Unexercisable ($) Exercisable/
Name Unexercisable
------------------------ ----------------------------------- -------------------------------
Linda H. Masterson 466,667/283,333 $772,917/$469,270 (1)
Thomas J. Foley 25,000/195,000 $41,406/$322,969(1)
(1) The market value of the options on March 31, 1999 is based on the average of
the high bid and low asked prices of $1.65625 per share on that date .
</TABLE>
Other Compensation
The Company currently has no pension plan in effect and has in effect
no restricted stock plan, no stock appreciation rights nor any other long-term
incentive plan under which grants or allocations may be made in the fiscal 1999
or thereafter.
Compensation of Directors
On April 16, 1999, the Board of Directors approved a compensation plan
for outside directors. In consideration of the services to be performed as a
director of the Corporation, each director:
11
<PAGE>
(a) who is not an employee of the Corporation, or any subsidiary of the
Corporation (if hereafter created), or
(b) who is not a consultant to the Corporation, or any subsidiary of the
Corporation, and is paid a fee on a monthly basis
shall receive as compensation a grant of an Option pursuant to the Stock Option
Plan. Each grant shall be for the right to purchase 15,000 shares of the Common
Stock on an annual basis. Except for incumbent directors, the initial grant
shall be on the day of his or her first election as a director of the
Corporation, whether by the Board or the stockholders, and thereafter on the
anniversary day of such first election. The exercise price of each Option shall
be the Fair Market Value as determined pursuant to the Stock Option Plan on the
respective date of the grant, or if not a business day, on the preceding day on
which the Common Stock was traded. Each Option will expire ten years from its
date of grant and will become exercisable as to one quarter of the shares of the
Common Stock on the first anniversary of the date of grant and 1/36th of the
remaining shares of the Common Stock on the same date each month thereafter for
a period of 36 months.
On April 16, 1999, pursuant to the foregoing authorization, each of
Peter S. Gold and Paul Sandler, each a non-employee director, was granted an
Option expiring April 15, 2009 under the Stock Option Plan to purchase 15,000
shares of the Common Stock at $1.81 per share. The Option becomes exercisable as
provided in the preceding paragraph. April 16th of each year, commencing 2000,
will be the date of grant of an Option for each of Messrs. Gold and Sandler
assuming he is still a director of the Company on such date of grant.
See section "Certain Transactions" under the caption "Management" for
information as to a compensation arrangement with Jonathan J. Pallin for his
former services as Chairman of the Board and subsequently as a financial
consultant to the Company.
Employment and Severance Agreements
There are no employment agreements currently in effect in the Company.
Pursuant to a Severance Agreement dated as of October 27, 1997 (the
"Masterson Severance Agreement") between the Company and Linda H. Masterson, the
Company has agreed to pay Ms. Masterson for her services as the Chief Executive
Officer and the President of the Company a base salary of $165,000; provided,
however, such amount was to be $120,000 from October 27, 1997 to the date at
least $5,000,000 in long term financing was obtained, at which time or upon her
termination the difference was to be paid to her. As a result of the
consummation of the Company's third private placement on January 21, 1999 this
limitation terminated and, effective January 29, 1999, she is being paid at the
authorized rate. $43,269 of the deferred salary was paid to her in October 1998.
The Masterson Severance Agreement also provided for the grant of:
12
<PAGE>
(1) a stock option under the Stock Option Plan to purchase
150,000 shares of the Common Stock at $.50 per share, the option to become
immediately exercisable as to all shares subject thereto in the event she is
terminated without cause, the Company is acquired or sold without the Board's
approval, the corporate headquarters are moved outside the State of California,
the positions of Chief Executive Officer or President are eliminated or her
duties are substantially changed;
(2) stock options to purchase 150,000 shares of the Common
Stock, an option to purchase 75,000 shares to be granted upon completion of the
working pilot plant project and an option to purchase 75,000 shares to be
granted upon product release into the first targeted market; and
(3) Common Stock purchase warrants to purchase 400,000 shares
of the Common Stock at $.50 per share, a warrant to purchase 200,000 shares
which was granted upon the purchase on October 19, 1997 of SAT's shares of the
Common Stock by Meadow Lane (see section "Directors and Officers" under the
caption "Management") and a warrant to purchase 200,000 shares to be granted at
the completion of a long term financing of at least $5,000,000.
The stock options have all been granted as Options under the Stock Option Plan.
Also as a result of the private placement consummated on January 21, 1999 as
described in the preceding paragraph, the second warrant has now become
exercisable.
In the event that Ms. Masterson is terminated without cause (as defined
in the Masterson Severance Agreement), she will be paid severance pay in a lump
sum amount equal to her annual base salary that would have been paid to her had
she not been terminated during the period between the date of termination and
October 27, 2001.
The Company had a Severance Agreement dated as of October 24, 1997 (the
"Benken Severance Agreement") with William B. Benken, the then Vice President,
Operations of the Company. Because Mr. Benken was terminated for cause on
October 7, 1998, the Benken Severance Agreement did not become operative.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain
information with respect to (1) any person known to the Company who beneficially
owned more than 5% of the Common Stock, (2) each director of the Company, (3)
the Chief Executive Officer of the Company; and (5) all directors and executive
officers as a group. Each beneficial owner who is a natural person has advised
the Company that he or she has sole voting and investment power as to the shares
of the Common Stock, except that until a Common Stock purchase warrant or an
Option is exercised, there is no voting right. See the section "Effect on
Stockholders" under the caption "Proposal Three: Authority to Implement a
Reverse Stock Split" for information as to the voting rights of the holders of
shares of the Series A Preferred Stock.
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Percentage of
Name and Address of Common Stock Common Stock
of Beneficial Owner Beneficially Owned Beneficially Owned (1)
General Conference Corporation 5,735,000(2) 29.5%
of Seventh-day Adventists
12501 Old Columbia Pike
Silver Spring, MD 20804-6600
Jonathan J. Pallin (3) 4,307,595(4) 28.3%
131 East Holly Street
Pasadena, CA 91103
Herman Sandler 1,200,000(5) 7.8%
2 World Trade Center, 104th Floor
New York, NY 10048
Melvin Simon(6)
c/o Melvin Simon & Associates, Inc. 500,000(7) 3.3 %
115 W. Washington Street
Indianapolis, IN 46204
Herbert Simon (6)
c/o Melvin Simon & Associates, Inc. 500,000(7) 3.3%
115 W. Washington Street
Indianapolis, IN 46204
Peter S. Gold (8) 900,000(9) 5.9%
16027 Ventura Blvd., Suite 601
Encino, CA 91436
Linda H. Masterson (10) 489,584(11) 3.2%
10400 Trademark Street
Rancho Cucamonga, CA 91730
Paul Sandler (8) 200,000(12) 1.3%
333 West Hatcher Road
Phoenix, AZ 85021
All directors and executive 5,938,428(13) 37.2%
officers as a group (six persons)
</TABLE>
14
<PAGE>
(1) The percentages computed in this column of the table are based upon
14,944,328 shares of the Common Stock which were outstanding on the Record
Date. Effect is given, pursuant to Rule 13d-3(l)(i) under the Exchange Act,
to shares issuable upon the exercise of the Common Stock purchase warrants
and the Options currently exercisable or exercisable within 60 days of the
Record Date and, where applicable, to the conversion of the Series A
Preferred Stock, all of which shares were currently convertible as of such
date.
(2) The shares reported in the table include 4,500,000 shares issuable upon the
conversion of 225,000 shares of the Series A Preferred Stock.
(3) A director of the Company since October 31, 1997 and the Chairman of the
Board from that date until January 8, 1999.
(4) The shares reported in the table reflect (a) 4,007,306 shares of the
5,575,306 shares acquired by Meadow Lane from SAT on October 29, 1997 and
(b) 300,289 shares of the 666,289 shares issuable upon the exercise of a
Common Stock purchase warrant expiring January 7, 2003 (the "Meadow Lane
Warrant") exercisable at $.50 per share. The shares reported in the table
do not reflect 100,000 shares issuable upon the exercise at $.0448 per
share of a Common Stock purchase warrant expiring October 28, 1999 granted
by Mr. Pallin to an unaffiliated person in October 1997.
(5) The shares reported in the table reflect (a) 1,250,000 shares of the
5,575,306 shares acquired by Meadow Lane from SAT; (b) 150,000 shares of
the 666,289 shares issuable upon the exercise of the Meadow Lane Warrant;
and (c) 300,000 shares issuable upon the exercise of a Common Stock
purchase warrant expiring November 4, 2002 exercisable at $.50 per share.
(6) The shares reported in the table for each of these two stockholders were
acquired by Melvin Simon & Associates, Inc. from the Company in two private
placements and subsequently distributed to the stockholders in March 1999.
Because the two stockholders may be deemed to be a "group" pursuant to Rule
13d-5(b)(1) under the Exchange Act, the Company reported their ownership in
the table, even though they disclaim beneficial ownership in each other's
shares.
(7) The shares reported in the table include 250,000 shares issuable upon the
conversion of 12,500 shares of the Series A Preferred Stock.
(8) A director of the Company since December 5, 1997.
(9) The shares reported in the table include an aggregate of 200,000 shares
issuable upon the exercise of two Common Stock purchase warrants expiring
November 4, 2002, one for 100,000 shares exercisable at $.50 per share and
the other exercisable at $1.00 per share. The shares reported in the table
do not include 15,000 shares issuable upon the exercise at $1.81 per share
of an Option expiring April 15, 2009 which is not exercisable at the Record
Date or within 60 days thereafter.
(10) A director of the Company since May 31, 1996; effective August 1, 1996, its
President; and, effective May 23, 1997, its Chief Executive Officer. (11)
The shares reported in this table reflect (a) an aggregate of 400,000
shares issuable upon the exercise at $.50 per share of two Common Stock
purchase warrants expiring October 26, 2002 at $.50 per share, (b) 75,000
shares issuable upon the partial exercises at $.50 per share of an Option
expiring August 13, 2007 and (c) 14,584 shares issuable upon the partial
exercises at $.50 per share of an Option expiring June 29, 2008. The shares
reported in the table do not include (x) an aggregate of 110,416 shares
subject to the foregoing Options as to which the Options were not
exercisable at the Record Date or within 60 days thereafter and (y) 150,000
shares subject to another Option expiring August 13, 2007 which was not
exercisable at the Record Date or within 60 days thereafter.
(12) The shares reported in the table do not include 15,000 shares issuable upon
the exercise at $1.81 per share of an Option expiring April 15, 2009 which
is not exercisable at the Record Date or within 60 days thereafter.
(13) The shares reported in the table include (a) those issuable upon the
exercise of the Common Stock purchase warrants and the Options described in
Notes (4), (9) and (11) to the table and (b) an aggregate of 41,249 shares
issuable upon the partial exercises at $.50 per share of two Options
granted to an executive officer, one Option expiring March 19, 2008 and the
other expiring June 29, 2008. The shares reported in the table do not
include (x) an aggregate of 78,751 shares subject to the foregoing Options
which were not exercisable at the Record Date or within 60 days thereafter,
(y) 100,000 shares subject to another Option expiring March 19, 2008
granted to the same executive officer which was not exercisable on the
Record Date or within 60 days thereafter and (z) 50,000 shares subject to
an Option expiring April 25, 2009 granted to another executive officer
which was not exercisable on the Record Date or within 60 days thereafter.
15
<PAGE>
PROPOSAL TWO: APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee has re-appointed Ernst & Young LLP as the Company's
independent public accountants for the fiscal year ending March 31, 2000. Ernst
& Young served as independent auditors for the Company for the first time for
the fiscal year ended March 31, 1996.
The Board is seeking stockholder approval of the Audit Committee's
selection of Ernst & Young LLP. The General Corporation Law of the State of
Delaware (the "GCL") does not require the approval of the selection of
independent auditors by the Company's stockholders; however, in view of the
importance of the financial statements to stockholders, the Board of Directors
deems it desirable that the Company's stockholders pass upon the selection of
auditors. In the event that stockholders disapprove of the selection, the Board
of Directors will consider the selection of other auditors.
A representative of Ernst & Young LLP will be present at the Meeting.
The Company has been informed that the representative does not intend to make
any statement to the stockholders at the Meeting, but will be available to
respond to appropriate questions from stockholders.
16
<PAGE>
PROPOSAL THREE: AUTHORITY TO BOARD TO IMPLEMENT
A REVERSE STOCK SPLIT
General
The Board of Directors has long recognized and disclosed that the
obtaining of additional financing is a prerequisite for the Company, after
development of the prototype of its saliva based drugs of abuse and alcohol
testing product, to complete first the development and then to initiate
manufacturing and marketing of such product. Management currently estimates that
it will require an additional $7,000,000 for such purpose and that the prototype
will be available in the first quarter of 2000. Various investment banking firms
which have been contacted by management as potential sources of such financing
have advised the Company that, unless, as a result of implementing a reverse
stock split of the Common Stock, there should be a higher market price for the
Common Stock, they do not believe that they can consummate a financing for the
Company. In addition, a higher market price for the Common Stock would enable
the Company to effect the financing in a manner less dilutive to the current
stockholders.
Based on its analysis of the entry criteria for listing the Common
Stock on the American Stock Exchange, Inc. (the "AMEX") or for having the Common
Stock traded on the SmallCap Market of The Nasdaq Stock Market ("Nasdaq"), the
Board has concluded that a major stumbling block to any such listing on the AMEX
or trading on the Nasdaq SmallCap Market is that the current bid price of the
Common Stock is less than $3.00 per share, i.e., the AMEX entry criteria, and
$4.00 per share, i.e., the Nasdaq entry criteria. The investment bankers which
the Company has contacted have also advised the Company that a listing of the
Common Stock on the AMEX or trading of such security on the Nasdaq SmallCap
Market would also facilitate the Company's ability to obtain financing on a more
favorable basis, as well as being beneficial in other ways to existing
stockholders.
However, no assurance can be given that, after a reverse stock split is
effected, the market price of the Common Stock will increase proportionately
with the proposed decrease in the outstanding number of shares of the Common
Stock (i.e., that, if, for example, the Company was to effect a one-for-four
reverse stock split of the Common Stock, the new market price would remain at
four times the prior market price and would not drop to the price level prior to
the contemplated split, which is often what develops with respect to a reverse
stock split in other public companies). Nor can there be any assurance as to
precisely what effect the proposed reverse stock would have on the market price
of the Common Stock. In addition, there can be no assurance that, at the time
that the Company makes its application to the AMEX or Nasdaq, the Company will
meet the other requirements for listing on the AMEX or trading on Nasdaq, even
though management believes that the Company currently meets all such criteria
except those based on the market price of the Common Stock. Finally, even if the
market price of the Common Stock retains the level of the reverse stock split
and the Common Stock is listed on the AMEX or traded on the Nasdaq SmallCap
Market, there can be no assurance that the Company will obtain financing on more
favorable terms, if at all.
17
<PAGE>
The Board also recognizes that the timing for effecting a reverse stock
split is a key element in determining whether the desired goal of a higher
market price for the Common Stock is likely to be achieved. The Board is
cognizant of the fact that general market conditions not related to the Company
or its securities and market and other conditions relating to the Company
specifically can affect the result, especially because the Company is still a
development stage company with certain risks or uncertainties as to its future.
The Board has concluded that market and other conditions do not warrant
implementing a reverse stock split at the current time; however, the directors
would prefer to avoid the time delay and the expense of calling a Special
Meeting of Stockholders at a later date when they deem the time appropriate for
taking such action. Accordingly, instead of asking the stockholders to authorize
a reverse stock split in a specified amount and for the Company to implement the
change at the current time, the Board is seeking stockholder approval of a
proposal to authorize a reverse stock split in an amount which the Board deems
appropriate, to be not less than one-for-two nor more than one-for-five, and the
timing of its effectiveness to be at such time as the Board determines, but not
later than June 30, 2000. In making their determination, the directors intend to
consult with the investment bankers which have expressed some interest in
seeking financing for the Company. If the reverse stock split is not effected by
June 30, 2000, then the Board believes that the desirability of implementing a
reverse stock split should be the subject of consideration at the Annual Meeting
of Stockholders in 2000, if at all.
The reverse stock split, if authorized by the stockholders at the
Meeting and if subsequently implemented by the Board, will be effected by the
filing of an Amendment to Article Fourth of the Company's Restated Certificate
of Incorporation relating to capitalization. If, for example, a one-for-five
reverse stock split was to be effected, the authorized shares of the Common
Stock will be changed from 50,000,000 shares with a par value of $.001 per share
to 10,000,000 shares with a par value of $.005 per share. The 14,944,328 shares
outstanding on the Record Date in such example would become 2,988,865 shares,
with any fractional shares being paid for in cash. See the section "Stock
Certificates" under this caption "Proposal Three: Authority to Board to
Implement a Reverse Stock Split."
Increase in Authorized Shares
As of the Record Date, the Company had reserved for issuance 14,098,183
shares of the Common Stock consisting of (1) an aggregate of 8,897,500 shares
upon the conversion of the outstanding 444,875 outstanding shares of the Series
A Preferred Stock; (2) an aggregate of 489,294 shares as dividends on such
shares of the Series A Preferred Stock; (3) an aggregate of 1,955,053 shares
upon the exercise of the Options outstanding on the Record Date or to be granted
under the Stock Option Plan; and (4) an aggregate of 2,756,334 shares upon the
exercise of outstanding Common Stock purchase warrants. If all 14,098,183
reserved shares were to be issued, as to which there can be no assurance, the
then outstanding shares would become 29,042,511, leaving 20,957,489 authorized
shares to be issued for other corporate purposes. Even though the reverse stock
split would proportionately reduce the number of these shares, the Board
recommends, for the reasons set forth under "Proposal Four: Authority to Board
to Increase Authorized Shares," that the authorized number of shares of the
Common Stock should be increased by up to 10,000,000 shares if a reverse stock
split in an amount not less than one-for-three nor more than one-for-five is
effected. This change would bring the to be authorized shares to an amount
between 26,666,666 at the maximum and 20,000,000 at the minimum depending on
which reverse stock split was implemented.
18
<PAGE>
Reasons for Reverse Stock Split
As indicated above in the section "General" under this caption
"Proposal Three: Authority to Board to Implement a Reverse Stock Split," the
Board of Directors believes that an increased market price for the Common Stock
resulting from a successful reverse stock split can facilitate financing and
also could result in a listing of the Common Stock on the AMEX or trading on the
Nasdaq SmallCap Market, as to none of which results there can be any assurance.
Additionally, because the Common Stock is not on the AMEX or Nasdaq and
because its bid price has been below $5.00 per share, the Common Stock has
become subject to Rule 15g-9 promulgated under the Exchange Act. This Rule
imposes additional sales practices requirements on a broker-dealer which sells
Rule 15g-9 securities to persons other than the broker-dealer's established
customers and institutional accredited investors (as such term is defined in
Rule 501 (a) under the Securities Act of 1933, as amended (the "Securities
Act")). For transactions covered under Rule 15g-9, the broker-dealer must make a
suitability determination of the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. In addition, broker-dealers,
particularly if they are market makers in the Common Stock, have to comply with
the disclosure requirements of Rule 15g-2, 15g-3, 15g-4, 15g-5 and 15g-6 under
the Exchange Act unless the transaction is exempt under Rule 15g-1.
Consequently, Rule 15g-9 and these other Rules may adversely affect the ability
of broker-dealers to sell or to make markets in the Common Stock and,
accordingly, make it more difficult for stockholders to sell their shares
whenever they desire to take such action. If the Common Stock were listed on the
AMEX or traded on the Nasdaq SmallCap Market, these "penny stock" rules would
not be applicable.
A listing of the Common Stock on the AMEX would exempt that security
from compliance with the "blue sky" laws of all 50 states and the District of
Columbia and, accordingly, would reduce the Company's expenses in any future
public or private offering under the Securities Act.
In addition to the possibility of avoiding continuing application to
the Common Stock of the Rules under the Exchange Act referred to in the second
preceding paragraph, the Board believes that the reverse stock split may result
in certain other benefits to stockholders, such as creating the ability for them
to execute purchase or sale orders with certain brokerage firms which restrict
or discourage execution or orders for low-priced stocks, the ability for them to
purchase shares of the Common Stock on margin (assuming approval by the Federal
Reserve Board) with those firms which do not allow margin purchases on very
low-priced stocks and the ability for them to have purchases or sales executed
at a lower commission rate per dollar of investment. However, as indicated in
the section "General" under this caption "Proposal Three: Authority to Board to
Implement a Reverse Stock Split," there can be no assurance as to what effect
the proposed reverse stock split will have on the market price of the Common
Stock. Accordingly, there can be no assurance that any or all of the objectives
set forth in this and the preceding two paragraphs would be achieved.
19
<PAGE>
Effect on Stockholders
Holders of the Common Stock have no preemptive, subscription or
conversion rights and are entitled to dividends on a pro rata basis when and if
declared by the Board of Directors. However, because of the continuing losses in
the Company, its cash requirements to fund first its development program and
later manufacturing and marketing of the drugs of abuse and alcohol testing
product and the provisions of the Series A Preferred Stock, the likelihood of
dividends being paid on the Common Stock in the foreseeable future is extremely
remote. The reverse stock split, if implemented, will not affect the dividend
rights of a holder of the Series A Preferred Stock who has a preference in any
event with respect to dividends.
Each holder of the Common Stock has one vote per share on all matters
submitted to stockholders for a vote. Each holder of the Series A Preferred
Stock has one vote per share and votes with the holders of the Common Stock as a
single class on all such matters (except with respect to those matters which
might adversely affect the rights of the holders of the Series A Preferred Stock
or as to which such holders have been granted the right to consent as to certain
actions by the Company, in which events the holders of the Series A Preferred
Stock vote as a separate class). Accordingly, a reverse stock split will reduce
the proportional voting power of the Common Stock as compared with that of the
Series A Preferred Stock on most matters submitted to a vote of the
stockholders. However, the Board does not believe that this change is material
because additional shares of the Common Stock will be issued, either because of
a new financing or the current reserve for issuances of shares, and the number
of shares of the Series A Preferred is expected to decrease as conversions are
made (as of the Record Date, the outstanding shares had been reduced through
conversions from 600,000 to 444,875, a decrease of 155,125 shares). See the
section "Increase in Authorized Shares" under this caption "Proposal Three:
Authority to Board to Implement a Reverse Stock Split" for information as to the
shares of the Common Stock reserved for future issuances.
Upon liquidation of the Company, each holder of the Common Stock is
entitled to share ratably any assets available for distribution after payment of
all debts and distribution in respect of the then outstanding shares of the
Company's Preferred Stock, $.001 par value (of which only Series A Preferred
Stock is currently outstanding). The reverse stock split, if implemented, will
not affect the liquidation rights of the holders of the Series A Preferred Stock
or the Common Stock.
Accordingly, except for the increase in the par value of a share of the
Common Stock and the concurrent decrease in the number of shares held by each
holder of the Common Stock as a result of the reverse stock split, if
implemented, the Board is of the opinion that the proposed Amendment to the
Certificate of Incorporation would create no material differences between the
shares of the Common Stock prior to the Amendment and the shares of the Common
Stock after the Amendment. In addition, the Board is of the opinion that, except
for the temporary increase in voting percentage as described in the second
preceding paragraph, there would be no material differences between the shares
of the Series A Preferred Stock prior to the Amendment and the shares of the
Series A Preferred Stock after the Amendment.
20
<PAGE>
Stock Certificates
If the proposed Amendment to the Certificate of Incorporation of the
Company effecting the proposed reverse stock split is adopted by the
stockholders at the Meeting and thereafter the Amendment is filed in the State
of Delaware as required by the GCL to become effective, each stockholder must
turn in his, her or its stock certificate to U.S. Stock Transfer Corporation,
the transfer agent for the Common Stock, for exchange for a new stock
certificate evidencing the post-reverse-stock-split Common Stock. The Company
will give notice to each stockholder, and will make a form available for such
purpose, at the appropriate time. If, upon making the exchange for the new
certificates evidencing the Common Stock, a fractional share would otherwise be
issued, no fractional share will be issued and the stockholder making the
exchange will receive instead a cash payment for the fractional share based on
the average of the closing bid and asked prices of the Common Stock on the date
that the Amendment becomes effective.
Recommendation
FOR THE REASONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO AUTHORIZE A REVERSE STOCK SPLIT OF THE
COMMON STOCK IN AN AMOUNT AND AT A TIME TO BE DETERMINED BY THE DIRECTORS.
PROPOSAL FOUR: AUTHORITY TO BOARD TO INCREASE
AUTHORIZED SHARES
General
As indicated in the section "Increase in Authorized Shares" under the
caption "Proposal Three: Authority to Board to Implement a Reverse Stock Split,"
the Board is also seeking stockholder approval to increase the number of
authorized shares of the Common Stock by up to 10,000,000 shares, but only if
the proposed reverse stock split an amount not less than one-for-three nor more
than one-for-five is implemented. If Proposal Three is not approved by the
stockholders or, even if it is, if the reverse stock split is not implemented,
the Board will not implement Proposal Four even if approved by the stockholders.
The Board is seeking approval of Proposal Four because of its concern that the
Company may not have sufficient shares, after meeting the requirements for which
shares are currently reserved, to effect a financing or to consummate the other
uses of the Common Stock as described in the succeeding four paragraphs if the
reverse stock split is effected. (See the aforementioned section for information
as to the shares of the Common Stock currently reserved for issuance.)
Primarily, the Board believes that additional shares should be
authorized because it is uncertain how many shares will be required on any
additional financing, both those shares sold to investors and those used as
underwriter's or placement agent's fees or as finder's fees. See the section
"General" under the caption "Proposal Three: Authority to Board to Implement a
Reverse Stock Split" for information as to one such required financing. In
addition, as the Company grows, additional funding could become desirable to
fund such expansion.
21
<PAGE>
The Company has also been seeking a strategic partner, particularly for
marketing assistance. Shares of the Common Stock may be required as a finder's
fee for securing such a strategic partner, as indicated by the Company's
recently terminated agreement with Burrill & Company ("Burrill") for Burrill to
seek such a partner for the Company. In addition, the strategic partner or
partners could also desire a stock interest in the Company as part of the
partnering arrangement or arrangements.
In addition, the Board deems it advisable for the Company to be in a
position to grant stock options additional to those authorized under the Stock
Option Plan, to grant stock awards and to have a stock purchase plan as an
incentive for attracting and retaining in the future qualified and competent
employees by providing them with the ability to acquire a proprietary interest
in the Company through ownership of the Common Stock. The Company has in the
past used shares of the Common Stock as compensation for consultants performing
various services and could require such usage in the future. As of the Record
Date, the only such benefit plan was the Stock Option Plan pursuant to which
Options as to an additional 973,553 shares of the Common Stock could be issued
(assuming all of the Options outstanding as of the Record Date to purchase an
aggregate of 981,500 shares were exercised and did not terminate).
Although the Board has no specific company as to which its stock or
assets would be acquired under consideration, the Board believes that, should an
appropriate acquisition opportunity present itself in the future, the Company
should have the flexibility to use shares of the Common Stock instead of, or in
addition to, cash to effect such an acquisition.
There are no proposals for use of the additional shares of the Common
Stock which have been approved or which are currently under consideration by the
Board of Directors. In describing the possible uses in the four preceding
paragraphs of the additional shares of the Common Stock to be authorized, the
Board recognizes that additional stockholder approval may be required before
certain of these uses can be implemented, even if the shares are made available
by the proposed Amendment to the Company's Restated Certificate of
Incorporation. In addition, there can be assurance that the Company will use
shares of the Common Stock in any of the ways described in the preceding four
paragraphs except under the Stock Option Plan and with respect to Common Stock
purchase warrants outstanding on the Record Date.
The Board is seeking authority to authorize an indefinite number of
shares, but not to exceed 10,000,000, because the availability of shares will be
exacerbated the greater the split that is effected. The following table
illustrates such result, based on 50,000,000 shares currently being authorized
and an aggregate of 29,042,511 shares either outstanding or reserved for
issuance as of the Record Date.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Authorized Outstanding and Reserved Available for
Size of Split After Split After Split Use After Split
One-for-Two 25,000,000 14,521,255 10,478,745
One-for-Three 16,666,666 9,680,837 6,985,829
One-for-Four 12,500,000 7,260,627 5,239,373
One-for-Five 10,000,000 5,808,502 4,191,498
</TABLE>
22
<PAGE>
Accordingly, if the 10,000,000 shares are added, the Company would be
able to issue (1) 16,985,829 additional shares if the reverse stock split was
one-for-three; (2) 15,239,373 additional shares if the reverse stock split was
one-for-four; and (3) 14,191,498 shares if the reverse stock split was
one-for-five, assuming in each case that all 14,098,183 shares reserved as of
the Record Date were used as currently intended.
Effect on Stockholders
See the section "Effect on Stockholders" under the caption "Proposal
Three: Authority to Board to Implement a Reserve Stock Split" for information as
to the current rights of a holder of the Common Stock.
Authorization of the additional shares of the Common Stock will have no
effect on the rights of the existing holders of the Common Stock and their
rights will continue, as described in the section "Effect on Stockholders" under
the caption "Proposal Three: Authority to Implement a Reverse Stock Split,"
unless and until such shares are issued, in which event the only effect would be
a dilution of the voting rights of such holders as a result of the increased
number of outstanding shares of the Common Stock. However, this result would
occur even if Proposal Four was not adopted by the stockholders at the Meeting
or, even if adopted, was not implemented because of the currently existing
reserve for issuances of shares of the Common Stock. See the section "Increase
in Authorized Shares" under the caption "Proposal Three: Authority to Board to
Implement a Reverse Stock Split" for data relating to the reserve.
Although the issuance of additional shares of the Common Stock would
theoretically increase the amount necessary to pay dividends, the Board does not
anticipate, because of the current financial requirements of the Company, its
financial condition and the terms of the outstanding shares of the Series A
Preferred Stock, that dividends on the Common Stock will be paid in the
foreseeable future.
The only impact which the additional shares, if authorized and then
issued, would have on the holders of the Series A Preferred Stock would be to
reduce their percentage of shares being voted as a single class with the Common
Stock on matters submitted to a stockholder vote. However, the Board does not
believe this result to be material because dilution of such voting power would
occur if all shares reserved as of the Record Date for purposes other than
conversion of the Series A Preferred Stock (i.e., an aggregate of 4,711,387
shares) were issued, together with the unissued and not reserved shares (i.e.,
an aggregate of 20,957,489 shares).
The Board recognizes that, when a public company has a substantial
number of authorized and unreserved shares, this condition could create concern
among existing stockholders that their stock interests could be substantially
diluted when such additional shares are issued. Sometimes such concerns may have
a depressive effect on the market price for the Common Stock. The Board believes
that, as a result of the reduction to be effected in the number of authorized
shares by the reverse stock split, when and if implemented, the addition of
10,000,000 authorized shares should not have such an adverse effect, especially
in view of certain of the intended use of such shares such as to effect a
financing to bring the Company's first product to market and to secure a
strategic partner. See the preceding section "General" under this caption
"Proposal Four: Authority to Increase Authorized Shares" for information as to
the possible uses of the additional shares, all of which the Board believes will
be beneficial to the Company and its stockholders.
23
<PAGE>
In voting on this Proposal Four, stockholders should be aware that the
Board may use the additional shares to enter into a transaction which other
stockholders do not believe would be in their interests, as, for example, in an
attempt to defeat an acquisition proposal by a party whom the Board opposes but
these stockholders favor. The Board, in proposing this Amendment to the Restated
Certificate of Incorporation to increase the authorized number of shares has no
such current intention.
The number of the additional shares which may be issued and the extent
of dilution of voting rights cannot be predicted because the Board does not know
for what number of shares, if any, whether part or all of the outstanding
Options or Common Stock purchase warrants will be exercised or whether part or
all of the outstanding shares of the Series A Preferred Stock will be converted.
In addition, the Board does not know the number of shares, whether of the Common
Stock or securities convertible or exercisable into shares of the Common Stock,
that may be issued in the future for the purposes described in the section
"General" under this caption "Proposal Four: Authority to Board to Increase
Authorized Shares."
Recommendation
FOR THE REASONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO AUTHORIZE THE BOARD TO INCREASE THE
AUTHORIZED SHARES OF THE COMMON STOCK IF THE REVERSE STOCK SPLIT IS IMPLEMENTED.
FINANCIAL STATEMENTS
The following financial statements and management's discussion and
analysis, all of which appear in the 1999 Annual Report to Stockholders which
accompanies this Proxy Statement, are incorporated herein by the reference.
<TABLE>
<CAPTION>
<S> <C> <C>
Page
in 1999
Annual
Report
Item
1. Report of Independent Auditors................................................. F-1
2. Balance Sheets at March 31, 1999 and 1998.................................. F-2
3. Statements of Operations for the Years Ended March 31, 1999 and for
the Period from October 8, 1992 (inception) to March 31, 1999............ F-3
4. Statements of Stockholders' (Deficit) Equity for the Years
Ended March 31, 1999 and for the Period from October 8, 1992
(inception) to March 31,
1999................................................................. F-4
5. Statements of Cash Flows for the Years Ended March 31, 1999
and for the Period from October 8, 1992 (inception) to
March 31, 1999.................................................................... F-5
6. Notes to Financial Statements.................................................... F-6
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................................... 21
24
</TABLE>
<PAGE>
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this Proxy Statement, the Board of Directors does
not know of any matters to be presented to the Meeting other than the four
proposals set forth in the attached Notice of Annual Meeting. If any other
matters properly come before the Meeting, it is intended that the holder of the
management proxies will vote thereon in their discretion.
MISCELLANEOUS
The solicitation of proxies on the enclosed form of proxy is made by
and on behalf of the Board of Directors of the Company and the cost of this
solicitation is being paid by the Company. In addition to the use of the mails,
proxies may be solicited personally, or by telephone or telegraph, by the
officers or directors of the Company.
Stockholders' proposals for inclusion in the Company's proxy statement
for the Annual Meeting of Stockholders in 2000 must be received no later than
March 30, 2000. If a stockholder intends to submit a proposal for consideration
at the Annual Meeting in 2000 by means other than the inclusion of the proposal
in the Company's proxy statement for such Meeting, the stockholder must notify
the Company on or before June 13, 2000 of such intention or risk management
exercising discretionary voting authority with respect to the management proxies
to defeat such proposal when and if presented at the Meeting.
25
<PAGE>
A copy of the Annual Meeting Report to Stockholders is being mailed to
all stockholders as of the Record Date with this Proxy Statement. A copy of the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1999,
including financial statements (there are no schedules), may be obtained by
written or oral request to Linda H. Masterson, President and Chief Executive
Officer of the Company, at the following address: 10400 Trademark Street, Rancho
Cucamonga, CA 91730 or telephone number: (909) 466-8047, extension 223. A
reasonable fee for duplicating and mailing will be charged if a copy of any
exhibit is requested.
By Order of the Board of Directors
/s/ Robert W. Berend
Robert W. Berend
Secretary
July 22, 1999
26
<PAGE>
1400 Trademark Street
Rancho, Cucamonga, CA 91730
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Linda H. Masterson and Robert W. Berend
as Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the Common
Stock and/or Series A Preferred Stock of LifePoint, Inc. (the "Company") held of
record by the undersigned on July 12, 1999 at the Annual Meeting of Stockholders
to be held on August 20, 1999 or at any adjournment thereof.
1. Election of Jonathan J. Pallin, Linda H. Masterson, Peter S. Gold and
Paul Sandler as Directors of the Company.
[ ] FOR all nominees listed above.
FOR all nominees listed above EXCEPT: ______________________________
(INSTRUCTION: To withhold authority to vote on any individual nominee(s),
write his/her name(s) in the space above.)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed above.
2. Proposal to Ratify the Appointment of Ernst & Young
LLP as Independent Auditors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to Authorize a Reserve Stock Split.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to Authorize an Increase in Authorized Shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as may come before the Annual Meeting or any
adjournment thereof.
This proxy, when executed, will be voted in the manner directed by the
undersigned shareholder(s). If no direction is made, this proxy will be voted
FOR Proposals 1, 2, 3 and 4.
PLEASE MARK, SIGN, DATE, AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
I (we) shall attend the Annual Meeting in person _____ Yes _____ No
Please sign exactly as your name appears to the left. When shares are
held by joint tenants, please both sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by the
President or other authorized officer. If a partnership, please sign
in full partnership name by a duly authorized person.
------------------------------------
Signature
------------------------------------
Signature, if held jointly
Date: _________________________, 1999
