UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission only (as permitted
by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-12
DIAL THRU INTERNATIONAL CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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DIAL THRU INTERNATIONAL CORPORATION
17383 Sunset Boulevard, Suite 350
Los Angeles, California 90272
(310) 566-1700
Dear Stockholders:
I am pleased to invite you to Dial Thru International Corporation's 2005
Annual Meeting of Stockholders. The meeting will be held at 10:00 a.m.,
Los Angeles time, on Tuesday, October 25, 2005 at our principal executive
offices, 17383 Sunset Boulevard, Suite 350, Los Angeles, CA 90272.
At the meeting you will be asked to (1) elect five directors to our Board of
Directors, (2) approve an amendment to our certificate of incorporation to
increase the amount of our authorized stock, (3) approve an amendment to
our certificate of incorporation to change our company name, (4) approve
an amendment to the Dial Thru International 2002 Equity Incentive Plan to
increase the number of shares of our common stock authorized for issuance
under the plan, (5) ratify the appointment of KBA Group LLP as our
independent auditors for the 2005 fiscal year, and (6) transact such other
business as may properly come before the meeting or any adjournment thereof.
The accompanying Notice of 2005 Annual Meeting of Stockholders and proxy
statement describe the matters to be presented at the Annual Meeting. These
proxy solicitation materials will first be mailed on or about September 26,
2005 to all stockholders entitled to vote at the Annual Meeting. You will
also have the opportunity to hear what has happened in our business during
the past year and to ask questions of our executive officers who will be in
attendance at the Annual Meeting. You will find other detailed information
about us and our operations, including our audited financial statements, in
the enclosed Annual Report.
Our Board of Directors unanimously recommends that stockholders vote in
favor of the election of the nominated directors, the amendments to our
certificate of incorporation to increase our authorized stock and change
the name of our company, the amendment to the Dial Thru International 2002
Equity Incentive Plan, and the ratification of our auditors.
We hope that you can join us on October 25, 2005 and vote in person. Whether
or not you can attend, please read the enclosed Proxy Statement. Please
note that your vote is very important to us. A minimum number of shares
must be represented at the meeting, in person or by proxy, to obtain the
requisite quorum and proceed with the Annual Meeting. Therefore, we urge
you to attend the Annual Meeting in person, but if you are not able to
attend, we request that you complete the attached proxy card and return it
to us prior to the meeting. We value our stockholders and look forward to
your participation.
Los Angeles, California Yours truly,
August 22, 2005
/s/ John Jenkins
----------------
John Jenkins,
Chairman and Chief Executive Officer
DIAL THRU INTERNATIONAL CORPORATION
17383 SUNSET BOULEVARD, SUITE 350
LOS ANGELES, CALIFORNIA 90272
NOTICE OF 2005 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 25, 2005
To the Stockholders of Dial Thru International Corporation:
NOTICE IS HEREBY given that the 2005 Annual Meeting of Stockholders of Dial
Thru International Corporation, a Delaware corporation, will be held at Dial
Thru's principal executive offices, 17383 Sunset Boulevard, Suite 350, Los
Angeles, CA 90272 on Tuesday, October 25, 2005 at 10:00 a.m., Los Angeles
time, for the following purposes:
1. To elect five directors to serve until the 2006 Annual Meeting
of Stockholders or until their successors are duly elected and
qualified;
2. To consider and act upon a proposal to amend our Certificate of
Incorporation to increase the amount of authorized common stock
from 84,169,100 shares to 175,000,000 shares;
3. To consider and act upon a proposal to amend our Certificate of
Incorporation to change the name of the Company;
4. To approve an amendment to the Dial Thru International Corporation
2002 Equity Incentive Plan to increase the number of shares of the
Company's common stock authorized for issuance thereunder from
2,000,000 to 4,000,000;
5. To consider and act upon a proposal to ratify the selection of KBA
Group LLP to serve as independent auditors for the current fiscal
year ending October 31, 2005; and
6. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Our Board of Directors has fixed the close of business on September 23, 2005
as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting or any adjournments thereof. Only
those stockholders of record as of the close of business on that date are
entitled to notice of and to vote at the Annual Meeting.
A list of our stockholders entitled to notice of and to vote at the Annual
Meeting will be available for examination by any stockholder of our Company,
for any purpose germane to the meeting, at the Annual Meeting and during
ordinary business hours at our principal offices at the address set forth
above for a period of ten days prior to the meeting.
Los Angeles, California By Order of the Board of Directors,
August 22, 2005
/s/ Allen Sciarillo
-------------------
Allen Sciarillo,
Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE
ANNUAL MEETING IN PERSON, BUT IF YOU DO NOT PLAN TO ATTEND, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
IF YOU DO SUBSEQUENTLY ATTEND THE ANNUAL MEETING, YOU MAY, IF YOU PREFER,
REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
DIAL THRU INTERNATIONAL CORPORATION
17383 SUNSET BOULEVARD, SUITE 350
LOS ANGELES, CALIFORNIA 90272
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PROXY STATEMENT
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FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 25, 2005
General Information
The Board of Directors of Dial Thru International Corporation is soliciting
your proxy for use at the Annual Meeting of Stockholders to be held on
October 25, 2005. This Proxy Statement, the accompanying proxy card and our
annual report to stockholders for the year ended October 31, 2004 will first
be sent to our stockholders on or about September 26, 2005.
Voting and Revocation of Proxies
All properly completed proxies received prior to the Annual Meeting and not
revoked will be voted in accordance with your instructions. IF NO SUCH
INSTRUCTIONS ARE MADE, THEN PROXIES WILL BE VOTED AS FOLLOWS:
* FOR THE ELECTION OF THE FIVE NOMINEES FOR DIRECTOR;
* FOR AMENDING THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE
THE AMOUNT OF AUTHORIZED COMMON STOCK FROM 84,169,100 SHARES TO
175,000,000 SHARES;
* FOR AMENDING OUR CERTIFICATE OF INCORPORATION TO CHANGE OUR COMPANY
NAME TO RAPID LINK, INCORPORATED;
* FOR THE APPROVAL TO AMEND OUR 2002 EQUITY INCENTIVE PLAN TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
THEREUNDER FROM 2,000,000 TO 4,000,000; AND
* FOR THE RATIFICATION OF THE APPOINTMENT OF KBA GROUP LLP TO SERVE AS
OUR INDEPENDENT AUDITORS FOR THE 2005 FISCAL YEAR.
If any other matters come before the Annual Meeting, the persons named as
proxies will vote upon such matters according to their best judgment.
We encourage the personal attendance of our stockholders at the Annual
Meeting. The execution of the accompanying proxy will not affect a
stockholder's right to attend the Annual Meeting and to vote in person.
Proxies may be revoked if you:
* Deliver a signed, written revocation letter, dated any time before
the proxy is voted, to Mr. Allen Sciarillo, Secretary, Dial Thru
International Corporation, at our principal executive offices, 17383
Sunset Boulevard, Suite 350, Los Angeles, California 90272; or
* Sign and deliver a proxy, dated later than any previously delivered
proxy to the above address; or
* Attend the meeting and vote in person. Attending the Annual Meeting
alone will not revoke your proxy. A revocation letter or a later-dated
proxy will not be effective until received by us at or prior to the
Annual Meeting.
Securities Entitled to be Voted at the Annual Meeting
Only stockholders of record at the close of business on September 23, 2005
will be entitled to notice of and to vote at the Annual Meeting. On August
10, 2005 we had issued and outstanding 23,472,922 shares of our common
stock, $.001 par value per share. Each share of Common Stock is entitled to
one vote on each matter presented to the stockholders.
How Proxies are Solicited
In addition to the solicitation of proxies by use of the mail, we may also
use certain officers, directors and regular employees who may solicit the
return of proxies by personal interview, mail, telephone, facsimile and/or
through the Internet. These persons will not be additionally compensated,
but will be reimbursed for out-of-pocket expenses. We will also request
brokerage houses and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares. We will
reimburse such persons and the transfer agent for their reasonable out-of-
pocket expenses in forwarding such materials. We will bear all costs of the
solicitation.
Quorum and Voting Requirements
The presence, in person or by proxy, of the holders of a majority of the
issued and outstanding shares of Common Stock is necessary to constitute a
quorum at the Annual Meeting.
Abstentions and broker non-votes are counted for the purposes of determining
the presence or absence of a quorum for the transaction of business.
Abstentions are counted in the tabulations of votes cast on proposals
presented to the stockholders, while broker non-votes are not counted as
among the shares entitled to vote with respect to such matters, and thus
have the effect of reducing the number of affirmative votes required to
approve a proposal and the number of negative votes or abstentions required
to block such approval. A broker non-vote is a proxy submitted by a broker
that does not indicate a vote for some or all of the proposals because the
broker does not have discretionary voting authority and has not received
instructions from its client as to how to vote on a particular proposal.
Assuming the presence of a quorum, the affirmative vote of a plurality of
the shares of Common Stock represented in person or by proxy at the Annual
Meeting, is required to elect our directors. Stockholders may not cumulate
their votes in the election of directors. The proposals to amend our
Certificate of Incorporation require the affirmative vote of a majority of
the shares outstanding and entitled to vote. All other matters submitted
for a vote at the Annual Meeting will be decided by the affirmative vote of
a majority of the shares present in person or represented by proxy at the
Annual Meeting, except as otherwise provided by law or in our Certificate of
Incorporation or Bylaws.
PROPOSAL ONE: ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting, to serve until our
next annual meeting of stockholders and until their respective successors
are elected and qualified, or until their earlier resignation or removal.
All of the nominees listed below currently serve as our directors and were
elected to our Board of Directors at our 2004 Annual Meeting of
Stockholders. Unless authority to vote for one or more nominees is withheld,
the enclosed proxy will be voted FOR the election of all of the nominees
listed below. Although the Board of Directors does not contemplate that any
of the nominees will be unable to serve, if such a situation arises prior to
the Annual Meeting the persons named in the enclosed proxy will vote for the
election of such other person(s) as may be nominated by the Board of
Directors.
The following table sets forth certain information regarding each nominee
for election as a director and our executive officers.
Name Age Position with the Company
----------------- --- --------------------------------
John Jenkins 43 Chairman, Chief Executive
Officer, President and Director
Allen Sciarillo 40 Executive Vice President, Chief
Financial Officer, Secretary and
Director
Lawrence Vierra 59 Director
Robert M. Fidler 67 Director
David Hess 44 Director
JOHN JENKINS has served as our Chairman of the Board and Chief Executive
Officer since October 2001, and has served as our President and a director
since December 1999. Mr. Jenkins has also served as the President of DTI
Com, Inc., one of our subsidiaries, since November 1999. In May 1997, Mr.
Jenkins founded Dial Thru International Corporation (subsequently dissolved
in November 2000), and served as its President and Chief Executive Officer
until joining us in November 1999. Prior to 1997, Mr. Jenkins served as the
President and Chief Financial Officer for Golden Line Technology, a French
telecommunications company. Prior to entering the telecommunications
industry, Mr. Jenkins owned and operated several software, technology and
real estate companies. Mr. Jenkins holds degrees in physics and
business/economics.
ALLEN SCIARILLO has been our Chief Financial Officer, Executive Vice
President and Secretary since July 2001 and was elected as a director in
May 2002. From January to March 2001, Mr. Sciarillo was the Chief Financial
Officer of Star Telecommunications, Inc., a global facilities-based
telecommunications carrier. Prior to that time, Mr. Sciarillo served as
Chief Financial Officer of InterPacket Networks, a provider of Internet
connectivity to Internet service providers worldwide, from July 1999 until
its acquisition by American Tower Corporation in December 2000. From
October 1997 to June 1999, he served as Chief Financial Officer of RSL
Com USA, a division of RSL Com Ltd., a global facilities-based
telecommunications carrier. Prior to joining RSL, Mr. Sciarillo was Vice
President and Controller of Hospitality Worldwide Services, Inc. from July
1996 to October 1997. Mr. Sciarillo began his career at Deloitte & Touche
and is a Certified Public Accountant. Mr. Sciarillo received a B.S. in
Accounting from California State University, Northridge.
LAWRENCE VIERRA has served as one of our directors since January 2000, and
from that time through October 2004, served as our Executive Vice President.
Currently, Mr. Vierra is a professor at the University of Las Vegas. From
1995 through 1999, Mr. Vierra served as the Executive Vice President of RSL
Com USA, Inc., an international telecommunications company, where he was
primarily responsible for international sales. Mr. Vierra has also served
on the board of directors and executive committees of various
telecommunications companies and he has extensive knowledge and experience
in the international sales and marketing of telecommunications products
and services. Mr. Vierra holds degrees in marketing and business
administration.
ROBERT M. FIDLER has served as one of our directors since November 1994.
Mr. Fidler joined Atlantic Richfield Company (ARCO) in 1960, was a member of
ARCO's executive management team from 1976 to 1994 and was ARCO's manager of
New Marketing Programs from 1985 until his retirement in 1994.
DAVID HESS was elected to our Board of Directors in May 2002. Mr. Hess is
currently the Managing Partner of RKP Steering Group, a company he co-
founded in August 2003. From November 2001 until December 2002, Mr. Hess
served as the Chief Executive Officer and President, North America of Telia
International Carrier, Inc. Prior to joining Telia, Mr. Hess was part of a
turnaround team hired by the board of directors of Rapid Link Incorporated.
He served as the Chief Executive Officer and as a director of Rapid Link
Incorporated from August 2000 until September 2001. On March 13, 2001,
Rapid Link Incorporated filed for Chapter 11 bankruptcy protection. Before
joining Rapid Link, Mr. Hess served as Chief Executive Officer of Long
Distance International from January 1999 until its acquisition by World
Access in February 2000. Mr. Hess also served as President and Chief
Operating Officer of TotalTel USA from May 1995 until January 1999. Mr.
Hess received a BA in Communications with a Minor in Marketing from Bowling
Green State University.
Meetings of the Board of Directors
Our Board of Directors held two meetings during the fiscal year ended
October 31, 2004. The Board of Directors has two standing committees:
an Audit Committee and a Compensation Committee. There is no standing
nominating committee. Each of the directors attended the meeting of the
Board of Directors and all meetings of any committee on which such director
served.
Committees of the Board of Directors
Audit Committee
The Audit Committee is comprised of two non-employee directors, Robert M.
Fidler and Lawrence Vierra. The Audit Committee makes recommendations to
the Board of Directors or management concerning the engagement of our
independent public accountants and matters relating to our financial
statements, our accounting principles and our system of internal accounting
controls. The Audit Committee also reports its recommendations to the Board
of Directors as to the approval of our financial statements. The Audit
Committee held four meetings during the fiscal year ended October 31, 2004.
The Audit Committee acts pursuant to a written charter adopted by our Board
of Directors. All members of the Audit Committee are non-employee directors
and are "independent" pursuant to Section 3(a)(58) of the Securities
Exchange Act of 1934.
Compensation Committee
The Compensation Committee is comprised of two non-employee directors,
Robert M. Fidler and Lawrence Vierra. The Compensation Committee is
responsible for considering and making recommendations to the Board of
Directors regarding executive compensation and is also responsible for
administration of our stock option and executive incentive compensation
plans. The Compensation Committee held no meetings during the fiscal year
ended October 31, 2004.
Nominating Committee
We do not have a standing nominating committee. Due to our company's size
and the resulting efficiency of a Board of Directors that is also limited in
size, as well as a lack of turnover in our Board of Directors, our Board of
Directors has determined that it is not necessary or appropriate at this
time to establish a separate Nominating Committee. Potential candidates
are discussed by the entire Board of Directors, and director nominees are
selected by a majority of the independent directors meeting in executive
session. All of the nominees recommended for election to the Board of
Directors at the Annual Meeting are directors standing for re-election.
Compensation of Directors
Directors are not compensated for attending Board and committee meetings,
though our directors participate in our equity incentive plan. Directors
are annually awarded non-qualified stock options for an aggregate of 5,000
shares of our Common Stock for services rendered to our Company as a
director. For the 2004 fiscal year, our directors were granted options to
purchase shares of our Common Stock at an exercise price of $0.12 per share,
in the following amounts:
Name Number of Option Shares Granted
--------------------- -------------------------------
Lawrence Vierra 5,000
Robert M. Fidler 25,000
David Hess 15,000
Vote Required
Directors are elected by a plurality of the votes of the shares present at
the Annual Meeting in person or represented by proxy and entitled to vote on
the election of directors.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE NOMINEES.
PROPOSAL TWO: AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On August 22, 2005, subject to stockholder approval, the Board of
Directors authorized an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock from eighty-four million one hundred sixty-nine thousand one hundred
(84,169,100) shares to one hundred seventy-five million (175,000,000). If
approved by the stockholders, the first paragraph of the Sixth Article of
the Company's Certificate of Incorporation would be amended to provide as
follows:
"The aggregate number of shares of all classes of stock which
the corporation shall have authority to issue is one hundred
eighty-five million (185,000,000) shares consisting of (A) one
hundred seventy-five million (175,000,000) shares of common stock,
par value $0.001 per share (the "Common Stock"), and (B) ten
million (10,000,000) shares of preferred stock, par value $0.0001
per share (the "Preferred Stock")."
The Company is currently authorized to issue 84,169,100 shares of Common
Stock. As of August 10, 2005, 23,472,922 shares of Common Stock were issued
and outstanding, 8,458,391 shares were reserved for issuance upon exercise
of outstanding stock options, warrants and for options that may be granted
in the future under the 2002 Equity Incentive Plan, and approximately
33,210,300 shares were required to be reserved for convertible notes. As
the conversion of these notes into shares is based upon the fair value of
the shares at the date of conversion, the necessary reserve was calculated
using the closing bid price for our Common Stock on the OTC Bulletin Board
at August 10, 2005.
Reasons for Proposed Amendment
The Board of Directors believes that it is advisable and in the best
interest of the Company and its stockholders to have available authorized
but unissued shares of common stock in an amount adequate to provide for the
current and future financing needs of the Company. The additional shares
will be available for issuance from time to time by the Company at the
discretion of the Board of Directors, normally without further stockholder
action (except as may be required for a particular transaction by applicable
law or requirements of regulatory agencies), for any proper corporate
purpose including, among other things, future acquisitions of property or
securities of other corporations, stock dividends, stock splits, convertible
debt financing and equity financings. Other than for current reserve needs,
the Company has no present plans, understandings or agreements for the
issuance or use of the proposed additional shares of common stock, however,
the Board of Directors believes that if an increase in the authorized number
of shares of common stock were to be postponed until a specific need arose,
the delay and expense incident to obtaining the approval of the Company's
stockholders at that time could significantly impair the Company's ability
to meet financing requirements or other objectives.
Effects of Proposed Amendment
The terms of the additional shares of common stock will be identical to
those of the currently outstanding shares of common stock. However, because
holders of common stock have no preemptive rights to purchase or subscribe
for any unissued stock of the Company, the issuance of additional shares of
common stock will reduce the current stockholders' percentage ownership
interest in the total outstanding shares of common stock. This amendment
will not alter the current number of issued shares. The relative rights and
limitations of the shares of common stock would remain unchanged under this
proposal.
One of the effects of the proposed amendment might be to enable the Board to
render it more difficult to, or discourage an attempt to, obtain control of
the Company by means of a merger, tender offer, proxy contest or otherwise,
and thereby protect the continuity of present management. The Board would,
unless prohibited by applicable law, have additional shares of common stock
available to effect transactions (such as private placements) in which the
number of the Company's outstanding shares would be increased and would
thereby dilute the interest of any party attempting to gain control of the
Company. However, the amendment may encourage persons seeking to acquire
the Company to negotiate directly with the Board enabling the Board to
consider the proposed transaction in a manner that best serves the
stockholders' interests.
Vote Required
The affirmative vote of stockholders having a majority of the outstanding
Common Stock entitled to vote at the Annual Meeting is required to approve
the amendment of the Certificate of Incorporation of the Company to increase
the authorized number of shares of Common Stock from 84,169,100 to
175,000,000. If Proposal Two is approved by the stockholders, it will
become effective on the date the amendment is filed with the Delaware
Secretary of State.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDMENT
OF THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF THE COMPANY'S COMMON STOCK.
PROPOSAL THREE: PROPOSAL TO CHANGE THE NAME OF THE COMPANY
General
The Board of Directors of the Company has unanimously adopted and
recommended adoption by the stockholders of a proposed amendment to Article
One of the Certificate of Incorporation of the Company that would change the
name of "Dial Thru International, Corporation" to "Rapid Link,
Incorporated."
The Board of Directors believes that the name "Rapid Link, Incorporated"
better reflects the Company's business strategies and opportunities, and
will receive better market recognition and acceptance than its current name,
especially as the Company continues to roll out Voice over Internet Protocol
related services. In addition, the Board of Directors also believes that
the name, which was the name of the Company we acquired in October 2001,
is a recognized brand name with members of the United States Military, a
significant source of retail revenue for the Company since the acquisition.
If the change of name is approved by the Company's stockholders, the
Board intends to formally change the name of the Company at the earliest
appropriate time consistent with an orderly transition to the new name.
If the proposed name change is approved, it will not be necessary for
stockholders to exchange outstanding stock certificates. The Company's
common stock is traded on the OTC Bulletin Board and if the Proposal is
approved, the symbol under which the Company's common stock is traded will
remain "DTIX."
Vote Required
The affirmative vote of stockholders having a majority of the outstanding
Common Stock entitled to vote at the Annual Meeting is required to approve
the amendment of the Certificate of Incorporation of the Company to change
the name of the Company to Rapid Link, Incorporated. If Proposal Three is
approved by the stockholders, it will become effective on the date the
amendment is filed with the Delaware Secretary of State.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY TO
RAPID LINK, INCORPORATED.
PROPOSAL FOUR: PROPOSAL TO AMEND THE DIAL THRU INTERNATIONAL 2002 EQUITY
INCENTIVE PLAN
At the Annual Meeting, we will ask our stockholders to approve an amendment
to the Dial Thru International Corporation 2002 Equity Incentive Plan (the
"2002 Plan"). On August 22, 2005, our Board authorized an amendment to
increase the number of shares which may be purchased under the 2002 Plan
from 2,000,000 to 4,000,000 shares. The amendment will become effective
when it is approved by the Company's stockholders.
The 2002 Plan was originally adopted by our Board on March 28, 2002 and our
stockholders approved it at the 2002 Annual Meeting held on May 6, 2002. As
of August 10, 2005, there were approximately 1,647,000 shares remaining and
available for issuance under the 2002 Plan.
General
The Board of Directors believes that it is advisable and in the best
interest of the Company to increase the number of shares of Common Stock
available for the exercise of Options or Stock Purchase Rights in order
to replace options as they expire that were previously granted under the
Company's Dial Thru International Corporation Amended and Restated Stock
Option Plan (the "Predecessor Plan"). The Company no longer issues
options under the Predecessor Plan, in addition, the Board believes that
a sufficient number of options should be available to ensure that the
Company is able to attract and retain key employees required to support the
Company's new product initiatives which are central to the Company's future
success.
Principal Features of the 2002 Plan
Shares Subject to the 2002 Plan. Subject to adjustments to reflect
certain corporate events that are described below, the maximum aggregate
number of shares of common stock available for issuance under the 2002 Plan
is currently 2,000,000, and is proposed to be increased to 4,000,000. If
any previously granted option expires or otherwise terminates, in whole or
in part, without having been exercised in full, the stock not issued under
such option will revert to and again become available for issuance under the
2002 Plan. We will issue the shares of common stock to be issued under the
2002 Plan directly from our authorized but unissued shares of common stock.
The number of shares issuable pursuant to the 2002 Plan, and the exercise
price of such options, is subject to proportional adjustment to reflect
stock splits, stock dividends, mergers, consolidations, and similar events.
Eligibility for Participation. Generally, all employees, directors,
and other persons providing bona fide services to us are eligible to receive
grants of options under the 2002 Plan. Approximately 25 persons are
currently eligible to receive stock option grants under the 2002 Plan.
Administration of the 2002 Plan. The 2002 Plan is administered by the
Board. Under the terms of the 2002 Plan, the Board determines the persons
who are to receive stock option grants, the number of shares subject to each
such grant, and the terms and conditions of such grants. The Board has the
authority to interpret the 2002 Plan and to adopt rules and procedures
relating to the administration of the 2002 Plan.
Options. Options granted under the 2002 Plan may be either incentive
stock options, or ISOs, or nonqualified stock options, or NQSOs.
The Board of Directors determines the terms and conditions of each option
at the time of grant and includes them in a written agreement between the
individual and the Company. The terms of each option will set forth:
* the per share exercise price of the option;
* the termination date of the option, which will not be later than
ten years after the date of grant; and
* the effect on the option of the termination of the participant's
employment or service (in the case of a non-employee director or
independent contractor).
Each option will also contain other terms and conditions that we may
establish. Options are not transferable during the individual's lifetime.
To the extent an option is intended to qualify as an ISO, the option is
required to have terms and conditions consistent with the requirements for
that treatment under the Internal Revenue Code. ISOs are subject to the
following special restrictions under the Internal Revenue Code:
* ISOs may only be granted to our employees;
* the exercise price for an ISO must be at least equal to 100%, or
110% in the case of stockholders holding more than 10% of the
total combined voting power of all classes of our stock, of the
fair market value of our common stock, determined on the date of
grant; and
* the aggregate fair market value of the shares of common stock
issuable upon exercise of all ISOs granted to a participant,
determined at the time each ISO is granted, that become
exercisable for the first time during a calendar year cannot
exceed $100,000.
Modification of options. We have the authority to modify any
outstanding option as we consider appropriate, including the authority to
accelerate the right to exercise any option, and extend or renew any option.
However, we may not modify any option in a manner adverse to the participant
holding that option without that participant's consent.
Adjustments. In connection with certain types of corporate events like
stock splits, stock dividends, recapitalizations, reorganizations, mergers,
consolidations and spin-offs, we may make appropriate and equitable
adjustments to:
* the aggregate number and kind of shares for which we can grant
options under the 2002 Plan;
* the number and kind of shares covered by outstanding options; and
* the per share exercise price of outstanding options.
Tax matters. We are obligated to withhold from the compensation of the
participants amounts necessary to satisfy the tax withholding obligations
arising from the 2002 Plan. If we intend any option to qualify as qualified
performance-based compensation, as defined in the regulations promulgated
under Section 162(m) of the Internal Revenue Code, we intend to grant the
option in a manner and subject to terms and conditions required for the
option to so qualify.
Compliance with securities laws. We are not obligated to issue any
common stock under the 2002 Plan if we determine that the issuance would
violate applicable state or federal securities laws.
Termination or amendment of the 2002 Plan. Our Board may terminate the
2002 Plan at any time. Termination of the 2002 Plan will not affect the
rights of any participant with respect to any option outstanding as of the
time of the termination.
Federal income tax consequences of the 2002 Plan
The following general discussion of the principal federal income tax
consequences of participation in the 2002 Plan is based on the statutes and
regulations existing as of the date of this proxy statement. In addition,
participation in the 2002 Plan may have state and local tax consequences.
Incentive stock options. A participant will not recognize taxable
income upon the grant or the exercise of an ISO, and we are not entitled to
an income tax deduction as the result of the grant or exercise of an ISO.
Any gain or loss resulting from the subsequent sale of shares of common
stock purchased upon exercise of an ISO will be long-term capital gain or
loss if the sale is made after the later of:
* two years from the date of grant of the ISO; or
* one year from the date of exercise of the ISO.
If a participant sells common stock acquired upon the exercise of an ISO
prior to the expiration of both of these periods, the sale will be a
disqualifying disposition under the federal tax laws. The participant
will generally recognize ordinary income in the year of the disqualifying
disposition in an amount equal to the difference between the exercise price
of the ISO and the fair market value of the shares of our common stock on
the date of exercise of the ISO. However, the amount of ordinary income
recognized by the participant generally will not exceed the difference
between the amount realized on the sale and the exercise price. We will
be entitled to an income tax deduction equal to the amount taxable to the
participant. Any additional gain recognized by the participant upon the
disqualifying disposition will be taxable as long-term capital gain if the
shares of common stock have been held for more than one year before the
disqualifying disposition or short-term capital gain if the shares of common
stock have been held for less than one year before the disqualifying
disposition.
The amount by which the fair market value, determined on the date of
exercise, of the shares of common stock purchased upon exercise of an
ISO exceeds the exercise price will constitute an adjustment to the
participant's income for purposes of the alternative minimum tax in the
year that the ISO is exercised.
Nonqualified stock options. As with an ISO, a participant will not
recognize taxable income on the grant of an NQSO, and we are not entitled
to an income tax deduction as the result of the grant of an NQSO. Unlike
an ISO, however, upon the exercise of an NQSO, the participant generally
will recognize ordinary income, and we will be entitled to an income tax
deduction, in the amount by which the fair market value of the shares of
common stock purchased upon exercise, determined as of the date of exercise,
exceeds the exercise price. This income is part of the participant's wages
for which we are required to withhold federal and state income as well as
employment taxes.
Upon the sale of shares of common stock acquired upon the exercise of an
NQSO, the participant will recognize capital gain or loss in an amount equal
to the difference between the proceeds received upon the sale and the fair
market value of the shares on the date of exercise. If the participant has
held the shares for more than one year at the time of the sale, the capital
gain or loss will be long-term, otherwise the capital gain will be short-
term.
Acceleration of stock options upon a change in control. The 2002
Plan permits acceleration of exercisability upon a change in control. The
acceleration of exercisability may be a parachute payment for federal income
tax purposes. If the present value of all of a participant's parachute
payments equals or exceeds three times the participant's average
compensation for the past five years, the participant will owe a 20% excise
tax on the amount of the parachute payment that is in excess of the greater
of:
* the average compensation of the participant for the past five
years (or period of employment, if less); or
* an amount which the participant establishes as reasonable
compensation.
In addition, we will not be allowed to deduct any such excess parachute
payments.
Capital gains and ordinary income tax. Long term capital gains are
currently taxed at a maximum federal rate of 20%. However, long term capital
gains with respect to stock with a holding period of more than five years
may qualify to be taxed at a maximum federal rate of 18% if the stock was
acquired no earlier than January 1, 2001. Short term capital gains and
ordinary income are taxed at marginal federal rates of up to 38.6%.
Applicability of ERISA
The 2002 Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 and it is not a tax-qualified
retirement plan under Section 401(a) of the Internal Revenue Code.
Required Vote of Shareholders
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote is required to
approve amendment of the 2002 Plan.
Recommendation of our Board of Directors
OUR BOARD BELIEVES THAT APPROVAL OF THE AMENDMENT TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE UNDER THE 2002 PLAN IS IN THE
BEST INTERESTS OF OUR STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF THIS PROPOSAL.
PROPOSAL FIVE: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our Audit Committee has appointed the firm KBA Group LLP as our independent
auditors for the fiscal year ending October 31, 2005. That appointment has
also been confirmed and ratified by our Board of Directors and the Board of
Directors recommends that the stockholders ratify the appointment of KBA
Group LLP as our Company's independent auditors. Although our Bylaws do not
require the ratification of the selection of KBA Group LLP by stockholders,
as a matter of good corporate practice, our Board is submitting the
selection of KBA Group LLP for stockholder approval. However, even if the
stockholders ratify the selection, our Board of Directors, in its
discretion, may still direct the appointment of other independent auditors
at any time during the year if our Board believes that such change would be
in the best interests of our Company and our stockholders.
On March 6, 2003, King Griffin & Adamson P.C. resigned to allow its
successor entity KBA Group LLP to be engaged as our independent public
accountants.
The report issued by King Griffin & Adamson P.C. on our financial statements
for the fiscal year ended October 31, 2002 did not contain an adverse
opinion nor a disclaimer of opinion, and was not qualified or modified as to
audit scope or accounting principles. The report issued by King Griffin &
Adamson P.C. on our financial statements for the fiscal year ended October
31, 2002 was modified to include an explanatory paragraph describing
conditions that raised substantial doubt about our ability to continue as a
going concern.
In connection with its audit for the fiscal year ended October 31, 2002
and through March 5, 2003, there were no disagreements with King Griffin &
Adamson P.C. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements,
if not resolved to the satisfaction of King Griffin & Adamson P.C., would
have caused King Griffin & Adamson P.C. to make reference thereto in their
report on the financial statements for such year or such interim periods.
In its letter dated March 10, 2003 to the SEC, King Griffin & Adamson P.C.
stated that it agreed with the statements in the preceding three paragraphs.
This letter was filed as Exhibit 16 to our Current Report on Form 8-K, filed
with the SEC on March 10, 2003.
Our Audit Committee approved the engagement of KBA Group LLP and we engaged
KBA Group LLP as our new independent public accountants as of March 6, 2003.
As KBA Group LLP is a successor entity to King Griffin & Adamson P.C., the
section addressing consultation of the newly engaged independent public
accountants is not applicable.
Audit and Non Audit Fees
Audit Fees
The aggregate fees billed by KBA Group LLP for professional services
rendered for the audit of the Company's annual financial statements and
review of the interim financial statements included in the Company's Forms
10-Q, including services related thereto, were $96,223 and $94,626 for the
fiscal years ended October 31, 2004 and 2003, respectively.
Audit-Related Fees
There were no audit-related fees billed by KBA Group LLP during the fiscal
years ended October 31, 2004 and 2003.
Tax Fees
The aggregate fees billed by KBA Group LLP for professional services
rendered for tax compliance, tax advice and tax planning were $12,000 and
$28,985 for the fiscal years ended October 31, 2004 and 2003, respectively.
The services comprising the fees reported as "Tax Fees" included tax return
preparation, consultation regarding various tax issues and support provided
to management in connection with income and other tax audits.
All Other Fees
The aggregate fees billed by KBA Group LLP for professional services
rendered for the review of registration statements were $0 and $6,195
for the fiscal years ended October 31, 2004 and 2003, respectively.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
The Audit Committee's policy is to pre-approve all audit and allowable non-
audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other
services. The Audit Committee may delegate the authority to grant pre-
approval of auditing or allowable non-audit services to one or more members
of the Audit Committee. Each pre-approval decision pursuant to this
delegation will be presented to the full Audit Committee at its next
scheduled meeting for ratification.
Vote Required
The ratification of the appointment of KBA Group LLP as our independent
auditors for the fiscal year ending October 31, 2005 requires the
affirmative vote of the holders of a majority of the shares of our Common
Stock present at the Annual Meeting in person or by proxy and entitled to
vote.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
SELECTION OF KBA GROUP LLP AS OUR INDEPENDENT AUDITORS FOR THE 2005 FISCAL
YEAR.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers and persons who own more than 10% of
our Common Stock to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of our Common Stock
and other equity securities. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish us with copies of
all Section 16(a) reports that they file. To our knowledge, based solely on
the review of the copies of such reports filed during the fiscal year ended
October 31, 2004, all Section 16(a) filing requirements applicable to our
officers, directors and greater than 10% beneficial owners were met.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information as of August 10, 2005,
concerning the beneficial ownership of our Common Stock by (i) each
stockholder known by us to own beneficially five percent or more of our
outstanding Common Stock, (ii) each of our current directors, (iii) each
Named Executive Officer, and (iv) all of our executive officers and
directors as a group. Except as otherwise indicated below, each of the
entities or persons named in the table has sole voting and investment power
with respect to all shares of our Common Stock beneficially owned by them.
Effect has been given to shares reserved for issuance under outstanding
stock options and warrants where indicated.
Number of Percent of
Name and address of Beneficial Owner Shares (1) Class
------------------------------------ ------------ ----------
John Jenkins 23,556,936 (2) 60.36%
17383 Sunset Boulevard,
Suite 350
Los Angeles, CA 90272
Lawrence Vierra 989,939 (3) 4.09%
8760 Castle Hill Avenue
Las Vegas, NV 89129
Robert M. Fidler 24,000 (4) *
987 Laguna Road
Pasadena, CA 91105
David Hess 10,000 (5) *
545 Alder Avenue
Westfield, NJ 07090
Allen Sciarillo 1,532,439 (6) 6.19%
17383 Sunset Boulevard,
Suite 350
Los Angeles, CA 90272
All Executive Officers and 26,116,314 63.58%
Directors as a group (5 persons)
* Reflects less than one percent.
** We have disclosed in previous reports that Global Capital Funding
Group, L.P. ("Global") and GCA Strategic Investment Fund Limited
("GCA") beneficially owned more then 5% of our issued and
outstanding Common Stock due to the fact that the notes and
convertible debentures they hold are convertible within 60 days into
a number of shares of our Common Stock that would exceed 5% of our
shares outstanding. However, both Global and GCA have represented
to us that due to conversion caps set forth in their respective
agreements with our Company, they are forbidden from holding, at
any given time, more than 4.9% of our issued and outstanding Common
Stock. Consequently, we are not required to include them in our
beneficial ownership table.
(1) Beneficial ownership is determined in accordance with the rules
of the SEC. In computing the number of shares beneficially owned
by a person and the percentage ownership of that person, shares
of our Common Stock subject to options or warrants held by that
person that are exercisable within 60 days of August 10, 2005 are
deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the ownership of any other
person.
(2) Includes (i) 750,000 shares of Common Stock which may be
acquired through the exercise of options, (ii) 2,728,391 shares
of Common Stock which may be acquired through the exercise of
warrants, and (iii) 12,078,545 shares of Common Stock which may be
acquired through the conversion of a convertible note (shares from
conversion calculated using the closing bid share price at August
10, 2005 of $0.17); all of which are exercisable or convertible
within 60 days of August 10, 2005.
(3) Includes (i) 2,500 shares of Common Stock which may be acquired
through the exercise of options, (ii) 130,000 shares of Common
Stock which may be acquired through the exercise of warrants and
(iii) 602,439 shares of Common Stock which may be acquired through
the conversion of a convertible note (shares from conversion
calculated using the closing bid share price at August 10, 2005 of
$0.17); all of which are exercisable or convertible within 60 days
of August 10, 2005.
(4) Includes 20,000 shares of Common Stock which may be acquired
through the exercise of options which are exercisable within 60
days of August 10, 2005.
(5) Includes 10,000 shares of Common Stock which may be acquired
through the exercise of options which are exercisable within 60
days of August 10, 2005.
(6) Includes (i) 550,000 shares of Common Stock which may be
acquired through the exercise of options, (ii) 130,000 shares
of Common Stock which may be acquired through the exercise of
warrants, and (iii) 602,439 shares of Common Stock which may be
acquired through the conversion of a convertible note (shares from
conversion calculated using the closing bid share price at August
10, 2005 of $0.17); all of which are exercisable or convertible
within 60 days of August 10, 2005.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about shares of our common stock
that may be issued under our equity compensation plans, as of August 10,
2005:
---------------------------------------------------------------------------
Number of
securities
remaining available
Number of for future issuance
securities to be under equity
issued upon Weighted-average compensation plans
exercise of exercise price of (excluding
outstanding outstanding securities
options, warrants options, warrants reflected in column
Plan Category and rights (a) and rights (b) (a)) (c)
------------- -------------- -------------- -------------------
Equity
compensation
plans approved by 1,573,000 (1) $0.36 1,647,000
securityholders
---------------------------------------------------------------------------
Equity
compensation
plans not -0- n/a -0-
approved by
securityholders
---------------------------------------------------------------------------
Total: 1,573,000 $0.36 1,647,000
---------------------------------------------------------------------------
(1) Amount includes outstanding options granted pursuant to the 2002 Dial
Thru International Corporation Equity Incentive Plan and the Amended and
Restated 1990 Dial Thru International Corporation Stock Option Plan.
We adopted the 2002 Equity Incentive Plan ("Incentive Plan"), at our annual
shareholder meeting in May 2002. The Incentive Plan authorizes our Board of
Directors to grant up to 2,000,000 options to purchase our common shares.
The maximum number of shares of common stock which may be issuable under the
Incentive Plan to any individual plan participant is 500,000 shares. All
options granted under the Incentive Plan have vesting periods up to a
maximum of five years. The exercise price of an option granted under the
Incentive Plan shall not be less than 85% of the fair value of the common
stock on the date such option is granted.
The 1990 Stock Option Plan ("1990 Stock Option Plan"), as amended,
authorizes our Board of Directors to grant up to 2,300,000 options to
purchase common shares of the Company. No options will be granted to any
individual director or employee which will, when exercised, exceed 5% of the
issued and outstanding shares of the Company. The term of any option granted
under the 1990 Stock Option Plan is fixed by the Board of Directors at the
time the options are granted, provided that the exercise period may not be
longer than 10 years from the date of grant. All options granted under the
1990 Stock Option Plan have up to 10 year terms and have vesting periods
that range from 0 to 3 years from the grant date. The exercise price of any
options granted under the 1990 Stock Option Plan is the fair market value at
the date of grant. Subsequent to the adoption of the Incentive Plan, no
further options will be granted under the 1990 Stock Option Plan
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 2001, we executed 10% convertible notes with three of our
executive officers and directors, who provided financing to our Company
in the aggregate principal amount of $1,945,958. The Notes were issued as
follows: (i) a Note in the principal amount of $1,745,958 to John Jenkins,
our Chief Executive Officer; (ii) a Note in the principal amount of $100,000
to Allen Sciarillo, our Executive Vice President and Chief Financial
Officer; and (iii) a Note in the principal amount of $100,000 to Larry
Vierra, our Director. With an original maturity date of October 24, 2003,
these Notes were amended to mature on February 24, 2004. On July 21, 2005,
the Notes were amended once again to extend the maturity date to February
20, 2008. In connection with the extension, we issued to the holders of the
Notes warrants to acquire an aggregate of 640,000 shares of Common Stock at
an exercise price of $0.16, which warrants expire on July 21, 2010.
Each Note is secured by certain of our assets. Each Note was originally
convertible at six-month intervals only, but was subsequently amended in
November 2002 to provide for conversion into shares of our Common Stock at
the option of the holder at any time. The conversion price is equal to the
closing bid price of our Common Stock on the last trading day immediately
preceding the conversion. We also issued to the holders of the Notes
warrants to acquire an aggregate of 1,945,958 shares of Common Stock at
an exercise price of $0.75 per share, which warrants expire on October 24,
2006.
In January and July 2002, the Notes issued to Mr. Jenkins were amended to
include additional advances in the aggregate principal amount of $402,433.
We also issued to Mr. Jenkins warrants to acquire an additional 102,433 and
300,000 shares of Common Stock, respectively, at an exercise price of $0.75
per share, which warrants expire on January 28, 2007 and July 8, 2007,
respectively.
On September 20, 2004, the holders of the Notes converted a total of
$877,500 of principal into 6,750,000 shares of Common Stock.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of non-employee directors Messrs. Fidler
and Vierra. Neither of the members of the Compensation Committee is
currently an officer or employee of our Company. None of our executive
officers serves as a member of the board of directors or compensation
committee of any other entity that has one or more executive officers
serving as a member of our Board of Directors or Compensation Committee.
No member of our Board of Directors is an executive officer of a company
in which one of our executive officers serves as a member of the board of
directors or compensation committee of that company.
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid during the fiscal
years ended October 31, 2004, 2003, and 2002, respectively, to each of our
chief executive officer and our other executive officers whose total annual
salary and bonus exceeded $100,000 during the fiscal year ended October 31,
2004. We refer to these individuals collectively as our Named Executive
Officers.
Summary Compensation Table
Securities
Underlying
Name and Principal Options/ All other
Position Year Salary ($) Bonus ($) Warrants (#) Compensation
------------------- ---- ---------- --------- ------------ ------------
John Jenkins 2004 150,000 -0- 100,000 -0-
Chairman, CEO 2003 150,000 -0- -0- -0-
and President 2002 151,042 -0- -0- -0-
Allen Sciarillo 2004 130,000 -0- 100,000 -0-
Executive Vice 2003 125,000 1,106 -0- -0-
President and Chief 2002 141,667 -0- -0- -0-
Financial Officer
Aggregated Option Exercise in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information with respect to the number of
options held at the 2004 fiscal year end and the aggregate value of in-the-
money options held at the 2004 fiscal year end by each of the Named
Executive Officers.
Number of securities Value of unexercised
Shares underlying unexercised in-the-money options at
acquired Value options at Fiscal Fiscal Year
on realized Year End (#) End ($) (2)
exercise ($) ------------------------- -------------------------
Name (#) (1) Exercisable Unexercisable Exercisable Unexercisable
--------------- -------- -------- ----------- ------------- ----------- -------------
John Jenkins -0- -0- 750,000 50,000 -0- -0-
Allen Sciarillo -0- -0- 550,000 50,000 -0- -0-
(1) The value realized upon the exercise of stock options represents the
difference between the exercise price of the stock option and the fair
market value of our Common Stock as of the last trading date of our 2004
fiscal year, multiplied by the number of options exercised on the date of
exercise.
(2) The value of "in-the-money" options represents the positive spread
between the exercise price of the option and the fair market value of the
underlying shares based on the closing stock price of our Common Stock on
the last trading day of fiscal year ended October 31, 2004, which was $0.10
per share. "In-the-money" options include only those options where the fair
market value of the stock is higher than the exercise price of the option on
the date specified. The actual value, if any, an executive realizes on the
exercise of options will depend on the fair market value of our Common Stock
at the time of exercise.
Employment Agreements
We do not currently have employment agreements with any of our officers or
employees.
Code of Ethics and Business Conduct
We have adopted a code of business conduct and ethics for employees,
executive officers and directors that is designed to ensure that all of our
directors, executive officers and employees meet the highest standards of
ethical conduct. The code requires that our directors, executive officers
and employees avoid conflicts of interest, comply with all laws and other
legal requirements, conduct business in an honest and ethical manner and
otherwise act with integrity and in our best interest. Under the terms of
the code, directors, executive officers and employees are required to report
any conduct that they believe in good faith to be an actual or apparent
violation of the code.
As a mechanism to encourage compliance with the code, we have established
procedures to receive, retain and treat complaints received regarding
accounting, internal accounting controls or auditing matters. These
procedures ensure that individuals may submit concerns regarding
questionable accounting or auditing matters in a confidential and anonymous
manner. The code also prohibits us from retaliating against any director,
executive officer or employee who reports actual or apparent violations of
the code.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for implementing, overseeing and
administering the Company's overall compensation policy. The basic
objectives of that policy are to (a) provide compensation levels that are
fair and competitive with peer companies, (b) align pay with performance,
and (c) where appropriate, provide incentives which link executive and
stockholder interests and long-term corporate objectives through the use of
equity-based incentives. Overall, the compensation program is designed to
attract, retain and motivate high quality and experienced employees at all
levels. The principal elements of executive officer compensation are base
pay, bonus and stock options, together with health benefits. The various
aspects of the compensation program, as applied to the Company's Named
Executive Officers, are outlined below.
Executive officer compensation is, in large part, determined by the
individual officer's ability to achieve his or her performance objectives.
Each of the Company's Named Executive Officers participates in the
development of an annual business strategy from which individual objectives
are established and performance goals are measured periodically. Initially,
the objectives are proposed by the particular officer involved. Those
objectives are then determined by the Chief Executive Officer or, in the
case of Mr. Jenkins's objectives, by the Board of Directors.
The Compensation Committee did not meet in fiscal 2004.
Base Pay
Initially, base pay was established at levels that were considered to be
sufficient to attract experienced personnel but which would not exhaust
available resources. As the Company grows, the compensation focus continues
to emphasize other areas of compensation. Executive officers understand that
their principal opportunities for substantial compensation lie not in
enhanced base salary, but rather through appreciation in the value of
previously granted stock options. Thus, base pay has not represented the
most critical element of executive officer compensation.
Bonus
The Compensation Committee has determined that a cash incentive plan will be
implemented when the Company is able to achieve positive operating results.
Stock Options
The Compensation Committee believes that a stock option plan provides
capital accumulation opportunities to participants in a manner that fosters
the alignment of the participants' interests and risks with the interests
and risks of public stockholders. The Compensation Committee further
believes that stock options can function to assure the continuing retention
and loyalty of employees. Options that have been granted to the Named
Executive Officers typically carry two or three-year vesting schedules.
If these officers leave the Company's employ before their options are fully
vested, they will lose a portion of the benefits that they might otherwise
receive if they remain in the Company's employ for the entire vesting
period. Stock option grants have been based upon amounts deemed necessary
to attract qualified employees and amounts deemed necessary to retain such
employees and to equitably reward high performance employees for their
contributions to our development. For most of the Company's executive
officers, stock options generally constitute the most substantial portion
of the Company's compensation program.
The Compensation Committee believes that an appropriate compensation program
can help in fostering competitive operations if the program reflects a
suitable balance between providing appropriate awards to key employees while
at the same time effectively controlling compensation costs, principally by
establishing cash compensation at competitive levels and emphasizing
supplemental compensation that correlates the performance of individuals,
the Company and its common stock.
This report has been furnished by the Compensation Committee of the Board of
Directors.
Robert M. Fidler
Lawrence Vierra
AUDIT COMMITTEE MATTERS
Independence of Audit Committee Members
Our Common Stock is quoted on the OTC Bulletin Board and is governed by the
standards applicable thereto. All members of the Audit Committee of the
Board of Directors have been determined to be "independent directors"
pursuant to the definition contained in Rule 4200(a)(15) of the National
Association of Securities Dealers' Marketplace rules.
AUDIT COMMITTEE REPORT
In connection with the preparation and filing of our Annual Report on Form
10-K for the year ended October 31, 2004:
(1) the Audit Committee reviewed and discussed the audited financial
statements with our management;
(2) the Audit Committee discussed with our independent auditors the
matters required to be discussed by Statement of Auditing Standards No.
61; and
(3) based on the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial
statements be included in the 2004 Annual Report on Form 10-K filed
with the SEC.
By: The Audit Committee of the Board of Directors
Robert Fidler
Lawrence Vierra
Stock Performance Graph
The following graph compares the percentage change in the cumulative total
shareholder return on our Common Stock with the cumulative total return of
the Nasdaq Stock Market (U.S.) Composite Index and the Nasdaq Stock Market
Telecommunications Index (IXTC-O) for the five-year period ended October 31,
2004. For purposes of the graph, it is assumed that the value of the
investment in our Common Stock and each index was $100 on October 31, 1999
and that all dividends were reinvested.
The comparison in the graph below is based solely on historical data and is
not intended to forecast the possible future performance of our Common
Stock.
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURN AMONG DIAL THRU INTERNATIONAL CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) AND THE NASDAQ TELECOM INDEX
[ PERFORMANCE GRAPH APPEARS HERE ]
TELECOMMUNICATIONS INDEX
October October October October October
31, 31, 31, 31, 31,
CUMULATIVE TOTAL RETURN 2000 2001 2002 2003 2004
--------------------------------------------------------------------------
Dial Thru International
Corporation $175 $80 $14 $19 $11
Nasdaq 100 $124 $52 $38 $54 $56
Nasdaq Telecom $84 $29 $14 $24 $25
STOCKHOLDER PROPOSALS
Deadline for Receipt of Stockholder Proposals
Any stockholder who wishes to submit a proposal for us to consider for
inclusion in our 2006 annual meeting proxy materials and for presentation
at our 2006 Annual Meeting of Stockholders must send such proposal to our
Company Secretary at the address indicated on the first page of this proxy
statement, so that the Secretary receives it no later than May 11, 2006,
unless the 2006 Annual Meeting will be held on a date that is more than 30
days before or after October 25, 2006, the anniversary of the date of the
2005 Annual Meeting, in which case we must receive your proposal within a
reasonable time before we mail the proxy materials for our 2006 Annual
Meeting.
Advance Notice Requirements
Our Bylaws require that stockholder proposals and director nominations by
stockholders be made in compliance with certain advance notice requirements.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must deliver a written notice to our Secretary
no later than 90 days prior to the date of the scheduled meeting; however,
if less than 100 days' notice or prior public disclosure of the date of the
scheduled meeting is given, notice by the stockholder must be given no later
than the close of business on the tenth day following our public disclosure
or mailing of a notice setting forth the date of the annual meeting. A
stockholder's notice to the Secretary with regard to an annual meeting shall
be in the form required by our Bylaws.
The chairman of the meeting may refuse to bring any business before the
meeting that is not properly brought before the meeting in accordance with
our Bylaws. Copies of our Bylaws are available upon written request to our
Secretary. The advance notice requirements for our annual meetings do
not supersede the requirements or conditions established by the SEC for
stockholder proposals to be included in our proxy materials for a meeting
of stockholders.
OTHER MATTERS
Our Board of Directors is not aware of any other matters that are to be
presented for action at the Annual Meeting. However, if any other matters
properly come before the Annual Meeting or any adjournment(s) thereof, it
is intended that the enclosed proxy will be voted in accordance with the
judgment of the persons voting the proxy.
Annual Report and Financial Information
Our Annual Report to stockholders covering our fiscal year ended October 31,
2004, including our audited financial statements, is enclosed herewith. The
Annual Report does not form any part of the materials for the solicitation
of proxies.
Form 10-K
We filed an annual report on Form 10-K with the SEC on or about January 31,
2005. You may obtain a copy of that report, without charge, by writing to
Investor Relations at Dial Thru International Corporation, 17383 Sunset
Boulevard, Suite 350, Los Angeles, California 90272, or you can access
copies of all our SEC filings on the SEC website at http://www.sec.gov.
By Order of the Board of Directors
/s/ Allen Sciarillo
-------------------
Allen Sciarillo,
Secretary
[PROXY CARD]
DIAL THRU INTERNATIONAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 25, 2005
The undersigned hereby constitutes and appoints John Jenkins and Allen
Sciarillo, or either of them, as the true and lawful attorneys and proxies
of the undersigned, with full power of substitution, to represent the
undersigned and to vote all of the shares of Common Stock of Dial Thru
International Corporation, that the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Dial Thru International Corporation to be
held on October 25, 2005 and at any and all adjournments thereof.
1. Election of [ ] FOR ALL nominees [ ] WITHOLD
Directors: named below AUTHORITY to
(except as vote for all
marked to the nominees
contrary) named below
John Jenkins, Allen Sciarillo, Larry Vierra, Robert M. Fidler, David Hess
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the line below.)
----------------------------------------------------------------------------
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the amount of authorized common stock from 84,169,100
shares to 175,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
____________________________________________________________________________
3. To approve an amendment amend to the Company's Certificate of
Incorporation to change the name of the Company to Rapid Link, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
____________________________________________________________________________
4. To approve an amendment to the Dial Thru International Corporation 2002
Equity Incentive Plan to increase the number of shares of the Company's
common stock authorized for issuance thereunder from 2,000,000 to
4,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
____________________________________________________________________________
5. To ratify the selection of KBA Group LLP to serve as independent public
accountants for Dial Thru International Corporation for the 2005 fiscal
year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
____________________________________________________________________________
In accordance with the discretion of the proxy holders, to act upon all
matters incident to the conduct of the meeting and upon such other business
as may properly come before the meeting or any adjournments thereof.
[ ] FOR [ ] WITHHOLD
The board of directors recommends a vote FOR the directors listed above and
a vote FOR each of the listed proposals.
(Continued and to be signed on Reverse Side)
(Continued from Other Side)
THE RIGHT TO REVOKE THIS PROXY AT ANY TIME BEFORE IT IS VOTED IS RESERVED.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED OR WITHHELD IN ACCORDANCE
WITH THE SPECIFICATIONS MADE IN THIS PROXY. IF NO SPECIFIC DIRECTIONS ARE
GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR EACH
OTHER PROPOSAL SET FORTH HEREIN AND IN THE DISCRETION OF THE PROXY HOLDERS
ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
All proxies to vote at the Meeting or any adjournment thereof previously
given by the undersigned are hereby revoked.
[INSERT MAILING Dated: _______________________________
LABEL]
______________________________________
Signature of Stockholder
______________________________________
Signature (if jointly
owned) Please sign exactly as the name
appears on the certificate or certificates
representing shares to be voted by the
proxy. When signing as executor,
administrator, attorney trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
person. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.