ELECTROSCOPE, INC.
4828 Sterling Drive
Boulder, CO 80301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 11, 1999
To Our Shareholders:
The Annual Meeting of Shareholders of Electroscope, Inc., a Colorado
corporation (the "Company"), will be held at 10:00 A.M., Mountain Standard Time,
on August 11, 1999, in the offices of Chrisman, Bynum & Johnson, P.C., 1900
Fifteenth Street, Boulder, Colorado, for the following purposes, all of which
are more completely set forth in the accompanying Proxy Statement.
1. To elect three (3) Directors;
2. To ratify the appointment of Arthur Andersen LLP as
the Independent Public Accountants for the Company;
3. To transact such other business as may properly come
before the meeting, or any adjournment thereof.
All shareholders are cordially invited to attend the meeting, although
only shareholders of record at the close of business on June 25, 1999, will be
entitled to notice of, and to vote at, the meeting or any and all adjournments
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David W. Newton
-------------------
David W. Newton, Acting CEO
July 1, 1999
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING. YOUR PROMPT RETURN OF THE PROXY WILL HELP TO ASSURE A
QUORUM AT THE MEETING AND AVOID ADDITIONAL COMPANY EXPENSE FOR FURTHER
SOLICITATION. YOUR PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
ELECTROSCOPE, INC.
4828 Sterling Drive
Boulder, CO 80301
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held August 11, 1999
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Electroscope, Inc., a Colorado
corporation (the "Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at 10:00 A.M. Mountain Standard Time, on August 11, 1999,
in the offices of Chrisman, Bynum & Johnson, 1900 Fifteenth Street, Boulder, CO
80302 and at any and all adjournments of such meeting.
If the enclosed Proxy Card is properly executed and returned in time to
be voted at the meeting, the shares of Common Stock represented will be voted in
accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted for each of the nominees for director
indicated herein. It is anticipated that this Proxy Statement and the
accompanying Proxy Card and Proxy Notice will be mailed to the Company's
shareholders on or about July 8, 1999.
Shareholders who execute proxies for the Annual Meeting may revoke
their proxies at any time prior to their exercise by delivering written notice
of revocation to the Company, by delivering a duly executed Proxy Card bearing a
later date, or by attending the meeting and voting in person.
The costs of the meeting, including the costs of preparing and mailing
the Proxy Statement, Proxy Notice and Proxy Card, will be borne by the Company.
The Company may, in addition, use the services of its directors, officers and
employees to solicit proxies, personally or by telephone, but at no additional
salary or compensation. The Company will also request banks, brokers, and others
who hold shares of Common Stock of the Company in nominee names to distribute
annual reports and proxy soliciting materials to beneficial owners, and will
reimburse such banks and brokers for reasonable out-of-pocket expenses which
they may incur in so doing.
<PAGE>
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting
is June 25, 1999. At the close of business on that day, there were 5,383,507
shares of no par value Common Stock (the "Common Stock") of the Company
outstanding and entitled to vote at the meeting.
QUORUM AND VOTING
The presence in person or by proxy of the holders of a majority of the
total issued and outstanding shares of Common Stock of the Company which are
entitled to be voted at the Annual Meeting is necessary in order to constitute a
quorum for the meeting. If a quorum is present, directors will be elected by a
plurality of the votes present in person or by proxy. The aggregate number of
votes cast by all shareholders present in person or by proxy will be used to
determine whether a proposal will carry. Thus, in the case of the election of
directors, an abstention from voting has no effect on the item on which the
shareholder abstained from voting. In addition, broker "non-votes" will be
counted for purposes of attaining a quorum.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in
the proxy, will be voted (i) FOR the election of each of the three nominees
named herein for the office of director, (ii) FOR approval of the appointment of
Arthur Andersen LLP as the Company's independent public accountants and (iii) at
the discretion of the proxy holders, on any other matter that may properly come
before the meeting or any adjournment thereof.
Where shareholders have appropriately specified how their proxies are
to be voted, they will be voted accordingly. If any other matter of business is
brought before the meeting, the proxy holders may vote the proxies at their
discretion. The directors do not know of any such other matter of business.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 14, 1999, the number of
shares of the Company's Common Stock owned by any person who is known by the
Company to be the beneficial owner of more than 5% of the Company's voting
securities, by all individual Directors, by all Named Executive Officers and by
all Officers and Directors as a group:
<TABLE>
<CAPTION>
Shares
Beneficially
Beneficial Owner(2) Owned(1) Percent of Class
- ------------------- -------- ----------------
<S> <C> <C>
Vern Kornelsen(6) 1,968,443 36.6%
David W. Newton(4) 306,944 5.7%
Roger C. Odell(3) 144,119 2.7%
All executive officers and directors 2,472,911 45.5%
as a group (5 Persons)(5)
Other Shareholders holding
5% or more:
CMED Partners LLLP(7) 1,830,222 34.0%
<FN>
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of June 14, 1999, or within 60 days
of such date, are treated as outstanding when determining the percent of
the class owned by such individual and when determining the percent owned
by the group. Unless otherwise indicated, each person named or included in
the group has sole voting and investment power with respect to the shares
of Common Stock set forth opposite the shareholder's name.
(2) The address of each director and officer of the Company is 4828 Sterling
Drive, Boulder, CO 80301.
(3) Includes 2,200 shares issuable pursuant to currently exercisable options
and 32,853 shares owned by Mr. Odell's children, for which he disclaims
beneficial ownership.
(4) Includes 2,000 shares issuable pursuant to currently exercisable options.
(5) Includes 56,200 shares issuable pursuant to currently exercisable options.
(6) Includes 100,005 shares owned directly, 38,216 shares owned by Enrox, Inc.,
of which Mr. Kornelsen is the Secretary and a Director and 1,830,222 shares
owned by CMED Partners LLLP, of which Mr. Kornelsen is the General Partner.
(7) The address of CMED Partners LLLP is 4605 Denice Drive, Englewood, Co
80111.
</FN>
</TABLE>
3
<PAGE>
ELECTION OF DIRECTORS
(Proxy Item #1)
The Company's Board of Directors has nominated the three persons listed
below for election as directors for the ensuing year, each to hold office until
the 2000 Annual Meeting of Shareholders and until their successors are duly
elected and qualified, or until their death, resignation or removal. Each of the
nominees is a member of the present Board of Directors of the Company. A
shareholder using the enclosed proxy form can vote for all or any of the
nominees of the Board of Directors or such shareholder may withhold his or her
vote from all or any of such nominees. If the proxy card is properly executed
but not marked, it will be voted for all of the nominees. Each of the nominees
has agreed to serve as a director if elected; however, should any nominee become
unable or unwilling to accept nomination or election, the persons named in the
proxy will exercise their voting power in favor of such other person or persons
as the Board of Directors of the Company may recommend.
There are no family relationships among these nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE FOR THE BOARD
OF DIRECTORS.
The following table sets forth the directors of the Company, their ages
as of March 31, 1999, all positions and offices held with the Company and the
period from which served:
Name Age Position
---- --- --------
Vern Kornelsen (1,2) 66 Director
David W. Newton 52 Acting Chief Executive Officer, Vice
President, Research and Development and
Director
Roger C. Odell 48 Vice President, Sales & Marketing
and Director
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
All directors hold office until the next annual meeting of shareholders
or until their successors have been duly elected and qualified. Executive
officers of the Company are appointed by, and serve at the discretion of, the
Board of Directors and are elected annually. The Board of Directors has an Audit
Committee and a Compensation Committee. There is no family relationship between
any director of the Company and any other director or officer of the Company.
Vern D. Kornelsen, a co-founder of the Company, served on the Board of Directors
of the Company and as the Chief Financial Officer from 1991 through February of
1997. He was re-elected to the Board in April 1998. Mr. Kornelsen is the General
Partner of CMED Partners
4
<PAGE>
LLLP, a major shareholder of the Company, and is the Secretary of Enrox, Inc., a
Colorado corporation that is a minor shareholder of the Company. For the past
five years Mr. Kornelsen has been a CPA in the state of Colorado. Mr. Kornelsen
holds a bachelor's degree in business from the University of Kansas.
David W. Newton, a co-founder of the Company, has been Vice President and a
Director of the Company since its inception in 1991. From 1989 until 1991, Mr.
Newton was President of Newton Associates, Inc., a contract engineering firm.
From 1985 to 1989, Mr. Newton was President of Tienet, Inc., a developer of
integrated computer systems. Mr. Newton has an additional 14 years of experience
as an electrical engineer designing electrosurgical generators and related
accessories. Mr. Newton holds nine patents in the field of medical electronic
equipment and holds a bachelor's degree in electrical engineering from the
University of Colorado.
Roger C. Odell, a co-founder of the Company has been a Director of the Company
since its inception in 1991. From 1976 until 1991, Mr. Odell was employed at
Valleylab in a variety of increasingly responsible engineering capacities,
primarily involving electrosurgical products. Mr. Odell holds an associate of
applied science degree in electrical engineering from Alfred State University.
During the fiscal year ended March 31, 1999, there were ten meetings of
the Board of Directors. All directors nominated for re-election to the Board
attended all of the meetings of the Board and committees of the Board on which
they were members during fiscal year 1999. There was one meeting of the Audit
Committee and one meeting of the Compensation Committee, both attended by all
Directors who were members of the committees at the time of the meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers and holders of more than
10% of the Company's Common Stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. Based solely upon a review of Forms 3 and 4 and
amendments thereto furnished to the Company during the fiscal year ended March
31, 1999 and Forms 5 and amendments thereto furnished to the Company with
respect to the fiscal year ended March 31, 1999, to the best of the Company's
knowledge, the Company's directors, officers and holders of more than 10% of its
Common Stock complied with all Section 16(a) filing requirements.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation
The following table sets forth certain information regarding
compensation earned or awarded the President and Chief Executive Officer of the
Company (the "Named Executive Officer") during the Company's last three fiscal
years ended March 31, 1997, 1998 and 1999. No executive officer of the Company
received total salary and bonus compensation in excess of $100,000 for the
fiscal year ended March 31, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
----------
Annual Compensation Compensation
------------------- ------------
Awards
------
Other Annual Securities Underlying
Name and Principal Position Year Salary ($) Bonus($) (2) Compensation ($) Options/# of Shares(3)
- --------------------------- ---- ---------- ------------ ---------------- ----------------------
<S> <C> <C> <C> <C> <C>
David W. Newton 1999 80,000
Acting CEO 1998 80,000 N/A N/A
1997 74,299 N/A N/A 2,000 (1)
<FN>
(1) Number of shares of Common Stock subject to options granted during the year
indicated.
</FN>
</TABLE>
Compensation of Directors
Outside Directors are reimbursed for their out-of-pocket expenses for
attending Board meetings.
Stock Options
On February 14, 1991, the Board of Directors and the shareholders of
the Company adopted a stock option plan (the "Plan") providing for grants of
stock options, stock appreciation rights and/or supplemental bonuses to
employees and directors of the Company who are also employees. The Plan permits
the granting of incentive stock options meeting the requirements of Section 422A
of the Internal Revenue Code of 1986, as amended, and also nonqualified stock
options which do not meet the requirements of Section 422A. As amended by the
Board of Directors and approved by the shareholders, the Company has reserved
1,150,000 shares of its Common Stock for issuance upon exercise of options
granted under the Plan. The Compensation Committee of the Board of Directors
administers the Plan.
On August 15, 1997 the shareholders of the Company approved the
adoption of the 1997 Stock Option Plan (the "1997 Plan") providing for grants of
stock options and/or supplemental bonuses to employees and directors of the
Company. The Plan permits the
6
<PAGE>
granting of incentive stock options meeting the requirements of Section 422A of
the Internal Revenue Code of 1986, as amended, and also nonqualified stock
options which do not meet the requirements of Section 422A. As approved by the
shareholders, the Company has reserved 800,000 shares of its Common Stock for
issuance upon exercise of options granted under the Plan. The Compensation
Committee of the Board of Directors administers the Plan.
As of June 14, 1999, options to purchase an aggregate of 482,762 shares
of Common Stock (net of options canceled) had been granted pursuant to the Plan
and 180,562 options had been exercised. As of June 14, 1999, options to purchase
an aggregate of 106,000 shares of Common Stock (net of options canceled) had
been granted pursuant to the 1997 Plan and no options had been exercised. As of
June 14, 1999, the market value of all shares of Common Stock subject to
outstanding options was $167,362 (based upon the closing bid price as reported
on the Over the Counter Bulletin Board on such date).
Options Granted
The following table sets forth certain information regarding the number
and value of exercisable and unexercisable options to purchase shares of Common
Stock held as of the end of the Company's 1999 fiscal year by the Named
Executive Officer:
<TABLE>
<CAPTION>
AGGREGATED 1999
FISCAL YEAR END OPTION VALUES
Shares Number of Shares Value of Unexercised
Acquired Value Underlying Unexercised in-the-Money Options
on Exercise Realized Options at March 31, 1999 at March 31, 1999
Name (#) ($) (#) ($)
---- ----- --- --------------- ------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David W. Newton 2,200 0 N/A N/A
</TABLE>
Note-The exercise price of the options exceeds their fair market value.
APPROVAL OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proxy Item # 2)
The Board of Directors has appointed the firm of Arthur Andersen LLP to
act as independent accountants for the Company for the fiscal year ending March
31, 2000. This appointment will be submitted to the Company's shareholders for
ratification. This firm has audited the financial statements of the company for
the fiscal year ended March 31, 1999 and for prior years, and has advised the
Company that neither the firm nor any of its partners has any direct or indirect
material financial interests in the Company, nor have they had any connections
during the past three years with the Company, in any capacity other than that of
independent accountants and auditors. Arthur Andersen LLP will have
representatives at the 1999 Annual Meeting who will have an opportunity to make
a statement and will be available to respond to appropriate questions.
7
<PAGE>
In the event the shareholders do not ratify the appointment of Arthur
Andersen LLP, the Board of Directors will consider the selection of other
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ARTHUR
ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
OTHER MATTERS
-------------
Management of the Company knows of no other matters that may come
before the meeting. However, if any additional matters are properly presented at
the meeting, it is intended that the persons named in the enclosed Proxy, or
their substitutes, will vote such Proxy in accordance with their judgment on
such matters.
Shareholder proposals intended for presentation at the Company's 2000
Annual Meeting of Shareholders must be received by the Company at its principal
offices in Boulder, Colorado, not later than March 10, 2000.
ANNUAL REPORT TO SHAREHOLDERS
-----------------------------
The Annual Report of the Company for the fiscal year ended March 31,
1999, including audited Financial Statements for the year then ended, as filed
with the Securities and Exchange Commission on Form 10-KSB is being mailed to
Shareholders on July 8, 1999 with these proxy materials.
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED IF YOU DO NOT PLAN TO
ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY. IN THE
EVENT YOU ARE ABLE TO ATTEND, WE WILL, IF YOU REQUEST, CANCEL THE PROXY.
SIGNATURE
---------
By Order of the Board of Directors
/s/ David W. Newton
- -------------------
Acting Chief Executive Officer
Boulder, Colorado
July 2, 1999
<PAGE>
PROXY ELECTROSCOPE, INC. PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD AUGUST 11, 1999
The undersigned hereby constitutes, appoints and authorizes David W. Newton and
Karl D. Hawkins and each of them, the true and lawful attorneys and Proxies of
the undersigned with full power of substitution and appointment, for and in the
name, place and stead of the undersigned, to act for and vote as designated
below, all of the undersigned's shares of the no par value common stock of
Electroscope, Inc., a Colorado corporation, at the Annual Meeting of
Shareholders to be held in the offices of Chrisman, Bynum & Johnson, 1900
Fifteenth Street, Boulder, Colorado at 10:00 A.M., Mountain Standard Time, on
August 11, 1999, and at any and all adjournments thereof, for the following
purposes:
1. To elect three (3) Directors:
|_| For all nominees listed below (except as marked to the contrary):
|_| Withhold authority to vote for the nominees listed below:
Vern D. Kornelsen David W. Newton Roger C. Odell
(INSTRUCTION: To withhold authority to vote for any individual nominee, draw a
line through or otherwise strike out his name. If authority to vote for the
election of any nominee is not withheld, the execution of this Proxy shall be
deemed to grant such authority.)
2. To ratify the appointment of Arthur Andersen LLP as Independent Pubic
Accountants for the Company.
FOR |_| AGAINST |_| ABSTAIN |_|
3. To transact such other business as may properly come before the meeting, or
any adjournment thereof.
FOR |_| AGAINST |_| ABSTAIN |_|
<PAGE>
The undersigned hereby revokes any Proxies as to said shares heretofore given by
the undersigned, and ratifies and confirms all that said attorneys and Proxies
may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL PROPOSALS. THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO
MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE
ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement furnished herewith.
DATED: _____________________________, 1999.
---------------------------------------------
Signature(s) of Shareholder(s)
---------------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) shown hereon.
Executors, administrators, trustees, guardians and attorneys
should indicate their capacity when signing. Attorneys
should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ELECTROSCOPE,
INC. PLEASE SIGN AND RETURN THIS PROXY TO AMERICAN SECURITIES TRANSFER AND
TRUST, INCORPORATED, 12039 WEST ALAMEDA PARKWAY, SUITE Z-2, LAKEWOOD, CO 80228.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND
THE MEETING.
