SCHEDULE
14C INFORMATION
(RULE
14c-101)
INFORMATION
REQUIRED IN INFORMATION STATEMENT
SCHEDULE
14C INFORMATION
INFORMATION
STATEMENT PURSUANT TO SECTION 14(C)
OF
THE SECURITIES EXCHANGE ACT OF 1934
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o
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Preliminary
Information Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
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x
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Definitive
Information Statement
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PROTOCALL
TECHNOLOGIES INCORPORATED
(Name
of
Registrant As Specified In Charter)
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o
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Fee
computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was
determined):
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4)
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Proposed
maximum aggregate value of
transaction:
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o
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Fee
paid previously with preliminary
materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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PROTOCALL
TECHNOLOGIES INCORPORATED
47
Mall Drive
Commack,
NY 11725
INFORMATION
STATEMENT AND NOTICE OF ACTION TAKEN WITHOUT A MEETING OF
STOCKHOLDERS
We
are not asking for a proxy and
you
are requested not to send us a proxy
INTRODUCTION
This
Information Statement and Notice of Action Taken Without a Meeting of
Stockholders is being furnished by us to our stockholders of record as of
February 12, 2008, to inform them of the February 8, 2008 approval by written
consent of stockholders owning a majority, as of the record date, of our
outstanding shares of common stock and series A convertible preferred stock,
the
only classes of our voting securities outstanding as of the record date, of
an
amendment to our articles of incorporation to increase the aggregate number
of
authorized shares of our common stock from 200 million to 550 million shares.
We
are
contractually obligated to increase our authorized shares pursuant to a previous
financing. The previous financing was first reported in our current report
on
Form 8-K filed with the U.S. Securities and Exchange Commission (or SEC) on
August 10, 2006, and amended in our current report on Form 8-K filed with the
SEC on June 6, 2007. As a result of the change in our stock price since the
date
of the financing transaction and the built-in conversion price and exercise
price adjustment features of the callable secured convertible notes and the
warrants issued by us in that financing transaction, we no longer have the
necessary authorized, unissued shares of common stock available for the maximum
number of shares of common stock potentially issuable upon conversion of the
notes and exercise of the warrants at this time, as well as for our employee
stock option plan and other uses for our common stock. As a consequence, we
must
increase the aggregate number of authorized shares of our common stock from
200
million to 550 million shares to allow us to reserve adequate shares for
conversion of the notes and exercise of the warrants, and to provide additional
shares for issuance as needed. We anticipate reserving 319,107,539 of the
newly-authorized shares of common stock for potential issuance pursuant to
conversion or exercise of the callable secured convertible notes and warrants.
Other than these shares, we have no present plans, proposals or arrangements
to
issue any of the shares being authorized.
This
information statement is dated May 1, 2008, and is first being sent or given
to
our stockholders as of the record date on or about May 5, 2008.
VOTING
RIGHTS AND OUTSTANDING SHARES
The
amendment to our articles of incorporation was approved by written stockholder
consent on February 8, 2008, by our stockholders owning a majority of the
outstanding shares of our common stock. As of the date of the stockholder
consent, our only outstanding voting securities were our shares of common stock
and series A convertible preferred stock. As of the date of the stockholder
consent, there were 126,133,894 shares outstanding of our common stock, plus
3,000,000 shares if converted from 30 shares of our series A convertible
preferred stock outstanding. With respect to the action approved by the
stockholder consent, each share of our common stock entitled its holder to
one
vote. Holders of series A convertible preferred stock are entitled to one vote
on an as-if converted basis. The stockholder consent was signed by holders
of
64,602,731 shares (or 50.03%) of the 129,133,894 shares that were entitled
to be voted on these matters.
As
a
result of requirements under applicable federal securities and state law, the
stockholder consent will not be effective, and therefore the amendment to our
articles of incorporation cannot occur, until at least 20 calendar days after
this information statement is sent or given to our stockholders of record as
of
the record date.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the number of shares of our
common stock beneficially owned as of February 20, 2008, by (i) each person
known to us to be the beneficial owner of more than 5% of our common stock;
(ii)
each director; (iii) each executive officer; and (iv) all of our directors
and
executive officers as a group. Unless otherwise indicated in the footnotes
following the table, the persons as to whom the information is given had sole
voting and investment power over the shares of common stock shown as
beneficially owned by them. Unless otherwise indicated, the address of each
person shown is c/o Protocall Technologies Incorporated, 47 Mall Drive, Commack,
New York 11725-5717.
Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Shares of our
common stock which may be acquired upon exercise of stock options or warrants
which are currently exercisable or which become exercisable within 60 days
after
the date indicated in the table are deemed beneficially owned by the optionees.
Subject to any applicable community property laws, the persons or entities
named
in the table below have sole voting and investment power with respect to all
shares indicated as beneficially owned by them.
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Name
of Beneficial Owner
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Number
of Shares
Beneficially
Owned
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Percentage
of Shares
Beneficially
Owned
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Bruce
Newman
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5,218,965
(1
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)
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3.90
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%
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Peter
Greenfield
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11,874,732
(3
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)
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8.91
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%
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Brenda
Newman
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4,501,393
(2
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)
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3.39
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%
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Syd
Dufton
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1,966,011
(6
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)
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1.50
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%
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CIMOS,
Inc.
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12,110,982
(4
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)
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9.14
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%
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Joachim
R. Anzer
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51,841,471
(5
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)
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35.12
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%
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Monarch
Capital Fund
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12,298,133
(7
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)
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9.32
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%
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Directors
and executive officers as a group (four persons)
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23,561,101
(8
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)
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16.64
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%
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(1)
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Includes
605,494 shares of common stock issuable upon exercise of stock options
granted under the Protocall 2000 Stock Incentive Plan which are currently
exercisable and 3,930,871 shares of common stock issuable upon exercise
of
stock options granted under the Protocall 2004 Stock Incentive Plan
which
are currently exercisable.
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(2)
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Includes
591,012 shares of common stock issuable upon exercise of stock options
granted under the Protocall 2000 Stock Incentive Plan which are currently
exercisable and 3,227,781 shares of common stock issuable upon exercise
of
stock options granted under the Protocall 2004 Stock Incentive Plan
which
are currently exercisable.
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(3)
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Includes
4,130,871 shares of common stock issuable upon the exercise of stock
options granted and currently exercisable under the Protocall 2004
Stock
Incentive Plan.
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(4)
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Includes
3,385,452 shares of common stock issuable upon the exercise of
currently-exercisable warrants. Based on a Schedule 13G filed on
February
27, 2006, and other information known to us.
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(5)
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Includes
18,468,336 shares of common stock issuable upon the exercise of
currently-exercisable warrants that expire between June 2008 and
October
2010.
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(6)
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Includes
1,966,011 shares of common stock issuable upon the exercise of stock
options granted and currently exercisable under the Protocall 2004
Stock
Incentive Plan.
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(7)
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Includes
2,884,615 shares of common stock issuable upon the exercise of
currently-exercisable warrants that expire November 2013. Based on
a
Schedule 13G filed on January 3, 2008, and other information known
to
us.
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(8)
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Includes
1,196,506 shares of common stock issuable upon exercise of stock
options
granted and currently exercisable under the Protocall 2000 Stock
Incentive
Plan. Also includes 13,255,534 shares of common stock issuable upon
exercise of stock options granted under the Protocall 2004 Stock
Incentive
Plan.
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AMENDMENT
TO CERTIFICATE OF INCORPORATION
Our
board
of directors and stockholders owning a majority of the outstanding shares of
our
common stock have approved an amendment to our articles of incorporation to
increase the aggregate number of authorized shares of our common stock from
200
million to 550 million shares. Our articles of incorporation presently authorize
the issuance of 200 million shares of common stock. Our board of directors
recently authorized the issuance of 5,000 shares of preferred stock.
Text
of Amendment
The
amendment would result in the text of Article III of our Articles of
Incorporation reading as follows:
Number
of Shares
.
The
aggregate number of shares of capital stock which the Corporation shall have
authority to issue is five hundred fifty million (550,000,000) shares of common
stock, $.001 par value. The Board may, in its discretion, issue up to 5,000
shares of preferred stock, $0.001 par value, with such terms and conditions
as it may decide, without shareholder approval.
General
Effect of the Proposed Amendment and Reasons for Approval
Our
board
of directors unanimously recommended that we approve the amendment for the
following reasons:
Availability
.
Of our
200 million authorized shares of common stock, 126,133,894 shares were
outstanding as of the record date. As of the record date, after taking into
account shares of common stock reserved for issuance under compensation plans,
outstanding warrants and shares underlying convertible notes, we determined
we
have an insufficient number of shares available for issuance. As a result of
the
change in our stock price since the date of a previous financing transaction
first reported in our current report on Form 8-K filed with the SEC on August
10, 2006, and the built-in conversion price and exercise price adjustment
features of the callable secured convertible notes and the warrants issued
by us
in that financing transaction, we no longer have the necessary authorized,
unissued shares of common stock available for the maximum number of shares
of
common stock potentially issuable upon conversion of the notes and exercise
of
the warrants at this time, as well as for our employee stock option plan and
other uses for our common stock. The following table sets forth
as
of
February 20, 2008, and following the proposed amendment,
(a)
the
number of shares of our common stock issued and outstanding; (b) the number
of
shares of our common stock authorized and reserved for issuance, identifying
each purpose for which shares are being reserved; and (c) the number of shares
of our common stock authorized and unreserved (showing the current
deficit):
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February
20, 2008
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After
Amendment
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(a)
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Issued
and
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Outstanding
Common Stock
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126,133,894
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126,133,894
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(b)
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Authorized
Common Stock
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200,000,000
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550,000,000
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(c)
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Reserved
Common Stock:
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·
for exercise of employee and director
stock options
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17,907,901
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17,907,901
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·
for
exercise of other
warrants
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40,849,783
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40,849,783
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·
for
conversion/exercise of
callable convertible notes and related warrants
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331,055,961
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331,055,961
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·
for
conversion of series A
preferred stock
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3,000,000
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3,000,000
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Total
Reserved
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392,813,645
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392,813,645
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(d)
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Authorized
and Unreserved Common Stock (deficit)
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(319,107,539)
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31,052,461
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As
a
consequence, we must increase the aggregate number of authorized shares of
our
common stock from 200 million to 550 million shares to allow us to reserve
adequate shares for conversion of the callable convertible notes and
exercise of the related warrants, as well as for our employee stock option
plan and the other uses described above. We will reserve the
newly-authorized shares of common stock for potential issuance pursuant to
conversion or exercise of the notes and warrants, as well as for our employee
stock option plan and the other uses described above. Other than with respect
to
these shares, we have no present plans, proposals or arrangements to issue
any
of the shares being authorized.
Adoption
of the amendment would enable our board of directors from time to time to issue
additional shares of our common stock authorized by the amendment for such
purposes and such consideration as our board of directors may approve without
further approval of our stockholders, except as may be required by law or the
rules of any national securities exchange on which our shares of common stock
are at the time listed. As is true for shares presently authorized, common
stock
authorized by the amendment may, when issued, have a dilutive effect on the
equity and voting power of existing holders of common stock.
The
effective increase in the number of authorized, unissued shares of our common
stock may be construed as having an anti-takeover effect by permitting the
issuance of shares to purchasers who might oppose a hostile takeover bid or
oppose any efforts to amend or repeal certain provisions of our articles of
incorporation or by-laws. Such a use of these additional authorized shares
could
render more difficult, or discourage, an attempt to acquire control of our
company through a transaction opposed by our board of directors. Our management
could use the additional shares to resist or frustrate a third-party transaction
providing an above-market premium that is favored by a majority of the
stockholders. In addition, certain provisions of the Nevada General Corporation
Law, as embodied in our articles of incorporation, could have the effect of
making it more difficult or more expensive for a third party to acquire, or
of
discouraging a third party from attempting to acquire, control of our company.
We do not currently have any plans or proposals to adopt other provisions or
enter into other arrangements that may have material anti-takeover consequences.
There
are
no preemptive rights with respect to our common stock. The additional authorized
shares of common stock would have the identical powers, preferences and rights
as the shares now authorized. Under Nevada law, stockholders will not have
any
dissenters’ or appraisal rights in connection with the amendment. The amendment
will become effective upon the filing, promptly after the expiration of the
20-day period commencing on the mailing of this information statement, of the
certificate of amendment required by the Nevada General Corporation Law.
Description
of Financing Transactions - Callable Convertible Notes and Related
Warrants
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August
2006 Securities Purchase Agreement
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From
August 2006 through February 2008, we entered into several callable
convertible note financing transactions with substantially similar
terms
and parties, as described below. As of March 31, 2008, we have
issued
callable convertible notes in the outstanding principal amount
of
$2,967,182 and warrants to purchase 58,281,730 shares of common
stock. In
August 2006, we entered into a securities purchase agreement with
several
institutional investors, under which we sold 6% callable convertible
notes
due August 8, 2009, in the principal amount of $700,000. We also
granted
the investors seven-year warrants to purchase a total of 15,000,000
shares
of common stock at an exercise price of $.10 per share, subject
to
adjustment for dilutive share issuances. In September 2006, we
entered
into an amendment to the securities purchase agreement with several
institutional investors, under which we sold additional 6% callable
convertible notes due September 29, 2009, in the principal amounts
of
$600,000 and $217,750. The holder of the $217,750 note was issued
seven-year warrants to purchase a total of 2,512,500 shares of
common
stock at an exercise price of $.10 per share, subject to adjustment
for
dilutive share issuances. In November 2006, we entered into a joinder
to
the securities purchase agreement with additional institutional
investors,
under which we sold additional 6% callable convertible notes due
November
7, 2009, in the principal amount of $500,000. The investors were
also
issued seven-year warrants to purchase a total of 5,769,230 shares
of
common stock at an exercise price of $.10 per share, subject to
adjustment
for dilutive share issuances. In May 2007, pursuant to an advance
agreement, we amended the securities purchase agreement and the
institutional investors funded an additional $500,000 in 6% callable
convertible notes and, in July 2007, we issued 6% callable convertible
notes in the amount of $200,000 on the same terms as the other
notes under
the securities purchase agreement. All of the funds under the securities
purchase agreement were used to support our working capital
requirements.
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August
2007 Securities Purchase Agreement
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In
August 2007, we entered into a securities purchase agreement with
several
institutional investors, under which we sold 8% callable convertible
notes
due August 21, 2010, in the principal amount of $400,000. We also
granted
the investors seven-year warrants to purchase a total of 20,000,000
shares
of our common stock at an exercise price of $.02 per share, subject
to
adjustment for dilutive share issuances.
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|
December
2007 Securities Purchase Agreement
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|
In
December 2007, we entered into a securities purchase agreement
with
several institutional investors, under which we sold 8% callable
convertible notes due December 24, 2010, in the principal amount
of
$200,000. We also granted the investors warrants to purchase a
total of
15,000,000 shares of common stock at an exercise price of $.03
per share,
subject to adjustment for dilutive share issuances.
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|
January
2008 Securities Purchase Agreement
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In
January 2008, we entered into a securities purchase agreement with
the
investors, under which unpaid accrued interest on previously-issued
convertible notes were rolled into new 2% callable convertible
notes due
January 31, 2011, in the principal amount of
$123,135.27.
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February
2008 Securities Purchase Agreement
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|
In
February 2008, we entered into a securities purchase agreement
with an
investor, under which we sold 8% callable convertible notes due
February
19, 2011, in the principal amount of $150,000. We also granted
the
investors seven-year warrants to purchase a total of 540,000 shares
of
common stock at an exercise price of $.10 per share, subject to
adjustment
for dilutive share issuances.
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Common
Features of Callable Convertible Notes
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|
The
callable convertible notes issued pursuant to the securities purchase
agreements are convertible into shares of our common stock at a
so-called
variable conversion price, subject to adjustment if we issue any
additional shares of common stock at a price per share less than
the
applicable conversion rate then in effect, without any floor price.
The
variable conversion price is the applicable percentage (50%), multiplied
by the average of the lowest three trading prices for our common
stock
during the previous 20 trading days. Conversions, including warrant
exercises, are limited monthly to the greater of $80,000 or the
10-day
average daily volume, and in total are limited to the holder’s beneficial
ownership of 4.99% of our outstanding shares (except for the February
2008
notes, for which conversions, including warrant exercises, are
limited to
the holder’s beneficial ownership of 9.99% of our outstanding shares). We
have a call option to prepay (or redeem) the notes assuming our
common
stock is trading at or below $.20 per share. We are required to
pay in
cash for prepayments at 140% for prepayments. We have a partial
call
option if the volume-weighted average price of our common stock
for the
previous five trading days is below $.1198. For a partial call
option, we
are required to prepay a portion of the outstanding principal amount
of
the notes equal to 101% of the principal, divided by 36, plus one
month’s
interest.
|
The
table
below illustrates the number of shares that would be issued by us upon full
conversion of the callable convertible notes using two examples of our recent
trading price.
Dilution
Table for Conversion/Exercise of Callable Convertible Notes and Related
Warrants
|
|
If
Trading Price is $.055 per Share
|
If
Trading Price is $.022 per Share
|
|
Principal
Amount of Callable Convertible Notes
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$2,967,182
|
$2,967,182
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|
Note
Holder’s Conversion Price - 50% discount to average of three lowest
intraday trading prices during preceding 20 days
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$.027667
|
$.010878
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|
Shares
underlying Callable Convertible Notes divided by Conversion
Price
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107,246,250
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272,774,231
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|
Warrants
issued in connection with Callable Convertible Notes
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58,281,730
|
58,281,730
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|
Shares
underlying Callable Convertible Notes and Related Warrants
|
165,527,980
|
331,055,961
|
|
Total
Outstanding Shares of Protocall
|
126,133,894
|
126,133,894
|
|
Potential
Percentage Dilutive Impact
|
57%
|
72%
|
Description
of Employee and Director Stock Options
In
March
2000, we adopted a stock plan for the issuance of up to 3,000,000 shares
of
common stock to employees, directors and consultants. In 2004, we adopted
the
2004 Stock Option Plan, under which a total of 1,000,000 shares of common
stock
were reserved for issuance. In August 2006, our shareholders voted to increase
those stock options to cover 19,000,000 shares. As of December 31, 2007,
options
to purchase 17,907,901 shares of common stock were outstanding pursuant to
the
2004 Plan, with exercise prices ranging between $.10 and $1.35 per share.
Non-employee director options vest monthly or quarterly over a one-year period
and are exercisable over either five or ten-year periods. Most employee options
vest annually or quarterly over a three-year period, and are exercisable
over
either five or ten-year periods.
Description
of Other Warrants
As
of
February 20, 2008, we had outstanding warrants (exclusive of warrants issued
in
connection with our callable convertible notes described above) to purchase
40,849,783 shares of our common stock. The warrants have exercise prices
ranging
from $.083 to $4.00 per share, with exercise terms ranging from three to
seven
years. These warrants were issued for various purposes, including equity
financing and strategic alliances.
Description
of Series A Convertible Preferred Stock
Currently,
500 shares of our preferred stock have been designated as Series A Convertible
Preferred Stock. As of December 31, 2007, there were 30 shares of series
A
preferred outstanding, convertible into 3,000,000 shares of common stock,
issued
to investors. Each share of Series A Preferred will automatically convert
into
100,000 shares of our common stock, without any further payment on the earlier
of the date on which total dividends paid per share of Series A Preferred
equal
$50,000, or December 31, 2010. At the end of any calendar quarter beginning
on
March 31, 2008, and continuing until September 30, 2010, each holder of series
A
preferred will have a one-time option to convert all unpaid dividends
attributable to all shares of series A preferred owned into our common stock.
The conversion price will be the closing market price on the last trading
day of
that quarter; provided, in no event will the conversion price be less than
$.10
per share.
REASONS
WE USED STOCKHOLDER CONSENT AS OPPOSED TO SOLICITATION OF STOCKHOLDER APPROVAL
VIA PROXY STATEMENT AND SPECIAL MEETING
The
increase in our authorized shares of common stock requires an amendment to
our
articles of incorporation, which cannot proceed until stockholder approval
is
obtained and effective. Stockholder approval could have been obtained by us
in
one of two ways: (i) by the dissemination of a proxy statement and subsequent
majority vote in favor of the actions at a stockholders meeting called for
such
purpose, or (ii) by a written consent of the holders of a majority of our
voting securities. However, the latter method, while it represents the requisite
stockholder approval, is not deemed effective until 20 days after this
information statement has been sent to all of our stockholders giving them
notice of and informing them of the actions approved by such
consent.
Given
that we have already secured the affirmative consent of the holders of a
majority of our voting securities to the amendment to our articles of
incorporation, we determined that it would be a more efficient use of limited
corporate resources to forego the dissemination of a proxy statement and
subsequent majority vote in favor of the actions at a stockholders’ meeting
called for such a purpose, and rather proceed through the written consent of
the
holders of a majority of our voting securities. Spending the additional company
time, money and other resources required by the proxy and meeting approach
would
have been potentially wasteful and, consequently, detrimental to completing
the
amendment in a manner that is timely and efficient for us and our
stockholders.
INTEREST
OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None
of
our directors or officers or their associates have any interest, direct or
indirect, by security holdings or otherwise, in any of the matters to be
approved by the stockholders as described in this information
statement.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and special reports, proxy statements and other information
with the SEC. You may read and copy any reports, statements or other information
we file at the SEC’s public reference room in Washington, D.C. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our filings with the SEC are also available to the public from
commercial document retrieval services and at the website maintained by
the SEC at “http://www.sec.gov.”
You
should rely only on the information contained or incorporated by reference
in
this information statement. We have not authorized anyone to provide you with
information that is different from what is contained in this information
statement. This information statement is dated March 19, 2008. You should not
assume that the information contained in this information statement is accurate
as of any date other than that date, and the mailing of this information
statement to stockholders shall not create any implication to the
contrary.
Dated:
May 1, 2008
|
|
By
Order of the Board of Directors,
Bruce
Newman
Chief
Executive Officer
|
Protocall Technologies (PK) (USOTC:PCLI)
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