UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by
the Registrant
x
Filed by
a party other than the Registrant
o
Check the
appropriate box:
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o
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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SUSPECT DETECTION SYSTEMS
INC.
(Name of
Registrant as Specified in Its Charter)
N/A
(Name of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
No fee
required.
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
O-11.
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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
O-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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SUSPECT
DETECTION SYSTEMS, INC.
4 Nafcha
Street, Jerusalem, Israel 95508
November
12, 2009
Dear
Shareholders:
We
cordially
invite you to attend our Special Meeting of Shareholders. The meeting
will be held on Thursday, December 3, 2009, at 10:00 a.m. local time, at
the offices of David Lubin & Associates, PLLC, 5 North Village Avenue, 2nd
Floor, Rockville Center, NY 11570.
With
this letter we are including the notice for our meeting, the proxy statement,
and the proxy card. At the meeting, we will vote on the following
matters:
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1.
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To
authorize the amendment of our Certificate of Incorporation for the
purpose of increasing the authorized capital of the Company from one
hundred million (100,000,000) shares of common stock, $.0001 par value per
share to two hundred fifty million (250,000,000) shares of common stock,
$.0001 par value per share.
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2.
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To
transact such other business as may properly be brought before a special
meeting of the shareholders of our company or any adjournment
thereof.
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Your vote
is important to us, and I look forward to seeing you at the
meeting. If you do not plan to attend the meeting in person, please
complete, sign and return the attached proxy card so that your shares can be
voted at the meeting in accordance with your instructions. Thank you for your
interest in Suspect Detection Systems, Inc.
Sincerely,
/s/ Asher
Zwebner
Asher
Zwebner
Interim
Chief Executive Officer,
Chief
Financial Officer and Director
SUSPECT
DETECTION SYSTEMS, INC.
4 Nafcha
Street, Jerusalem, Israel 95508
NOTICE
OF SPECIAL MEETING OF SHAREHOLDERS
A
special
meeting the (“
Meeting
”) of the
shareholders of Suspect Detection Systems, Inc. (the “
Company
”) will be
held on Thursday, December 3, 2009, at 10:00 a.m., at the offices of David Lubin
& Associates, PLLC, 5 North Village Avenue, Rockville Center, 2nd Floor, NY
11570, for the following purposes:
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1.
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To
authorize the amendment of our Certificate of Incorporation for the
purpose of increasing the authorized capital of the Company from one
hundred million (100,000,000) shares of common stock, $.0001 par value per
share to two hundred fifty million (250,000,000) shares of common stock,
$.0001 par value per share.
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2.
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To
transact such other business as may properly be brought before a special
meeting of the shareholders of the Company or any adjournment
thereof.
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You may
vote at the meeting if you were a shareholder at the close of business on April
23, 2009, (the “Record Date”). Only shareholders of record at the
Record Date are entitled to notice of and to vote at the Meeting or any
adjournments thereof.
Your
attention is called to the Proxy Statement on the following
pages. Please review it carefully. We hope you will attend
the Meeting. If you do not plan to attend, please sign, date and mail
the enclosed proxy card in the enclosed envelope, which requires no postage if
mailed in the United States, so that your shares can be voted at the Meeting in
accordance with your instructions. For more instructions, please see
the Questions and Answers beginning on page 1 of this Proxy Statement and
the instructions on the attached proxy card.
By Order
of the Board of Directors,
November
12, 2009
/
s/ Asher
Zwebner
Asher
Zwebner
Interim
Chief Executive Officer,
Chief
Financial Officer and Director
SHAREHOLDERS
WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED WHICH
REQUIRES NO POSTAGE.
QUESTIONS
AND ANSWERS ABOUT THIS
PROXY
MATERIAL AND THE SPECIAL MEETING
These
questions do not, and are not intended to, address all the questions that may be
important to you. You should carefully read the entire Proxy Statement, as well
as the documents incorporated by reference in this Proxy Statement.
Why
am I receiving this proxy material?
This
Proxy
Statement and the accompanying proxy card are being mailed to holders of shares
of common stock, $0.0001 par value (the “
Common Stock
”), of
Suspect Detection Systems, Inc., a Delaware corporation (the “
Company
”),
commencing on or about November 13, 2009, in connection with the solicitation of
proxies by the Board of Directors of the Company (the “
Board
”) for use at
the special meeting of the shareholders of the Company (the “
Meeting
”) to be held
at the offices of David Lubin & Associates, PLLC, 5 North Village Avenue,
2nd Floor, Rockville Center, NY 11570, on Thursday, December 3, 2009at 10:00
a.m. You are invited to attend the Meeting and are requested to vote
on the proposal described in this Proxy Statement.
What
information is contained in these materials?
The
information included in this Proxy Statement relates to the proposal to be voted
on at the Meeting, the voting process, the security ownership of certain
beneficial owners and management, and certain other required
information.
On
what matters am I voting?
Our Board
seeks shareholder approval for the proposal to amend our Certificate of
Incorporation for the purpose of increasing the authorized capital of the
Company from one hundred million (100,000,000) shares of common stock to two
hundred fifty million (250,000,000) shares of common stock. Such approval is
sought so that we will have available additional authorized but unissued shares
of common stock to provide for our future needs, including the satisfaction of
our obligations to issue shares upon the exercise of warrants already issued and
to be issued. The approval of this proposal will not affect total stockholder
equity but will increase the authorized capitalization of the Company. For full
and further details, please see our description under Proposal no. 1
below.
The
shareholders will also transact any other business that properly comes before
the Meeting.
What
is our Board’s voting recommendation?
The Board
has approved the increase in the authorized capital of the Company from one
hundred million (100,000,000) shares of common stock to two hundred fifty
million (250,000,000) shares of common stock and recommends that stockholders of
the Company vote FOR approval of increase in the authorized capital of the
Company. In the event that this proposal is approved, the Board will
file an amendment to the Company’s Certificate of Incorporation in Delaware
similar to the attached Appendix A to increase the authorized capital of the
Company.
Who
can vote at the Meeting?
An
aggregate of 65,809,668 votes (the “
Voting Shares
”) may
be cast by shareholders at the Meeting, consisting of the issued and outstanding
shares of Common Stock held by shareholders of record at the close of business
on the Record Date. Holders of shares of Common Stock are entitled at
the Meeting to one vote for each share of Common Stock held on the Record
Date.
How
do I vote?
You may
vote your shares either by proxy or in person at the Meeting (please also see
the detailed instructions on your proxy card). Each such share is
entitled to one vote on each matter submitted to a vote at the
Meeting. To vote by proxy, please complete, sign and mail the
enclosed proxy card in the envelope provided, which requires no postage for
mailing in the United States. If a proxy specifies how it is to be
voted, it will be so voted. If you return a signed proxy card but do
not provide voting instructions, your shares will be voted FOR approval of
Proposal No. 1 and in accordance with the recommendation of our Board or, in the
absence of such a recommendation, in accordance with the judgment of the proxy
holder, with respect to any other matter that is properly brought before the
Meeting for action by shareholders. Proxies in the form enclosed are
being solicited by our Board for use at the Meeting.
May I
revoke my proxy?
As a
holder of record of our shares, you may revoke your proxy and change your vote
at any time prior to the Meeting by giving written notice of your revocation to
our Interim Chief Executive Officer, Asher Zwebner, by signing another proxy
card with a later date and submitting this later dated proxy to Mr. Zwebner
before or at the Meeting, or by voting in person at the Meeting. Please note
that your attendance at the Meeting will not constitute a revocation of your
proxy unless you actually vote at the Meeting. Giving a proxy will
not affect your right to change your vote if you attend the Meeting and want to
vote in person. We will pass out written ballots to any holder of record of our
shares who wants to vote at the Meeting.
Any
written notice of revocation or subsequent proxy should be sent to Suspect
Detection Systems, Inc., Attention: Asher Zwebner, Interim Chief Executive
Officer, c/o David Lubin & Associates, PLLC, 5 North Village Avenue, 2
nd
Floor, NY 11570, or hand delivered to Mr. Lubin at or before the voting at the
Meeting.
What
does it mean if I receive more than one proxy card?
If your
shares are registered differently or are held in more than one account, you will
receive more than one proxy card. Please sign and return all proxy cards to
ensure that all of your shares are voted.
Will
my shares be voted if I do not sign and return my proxy card?
If you
are the record holder of your shares and do not return your proxy card, your
shares will not be voted unless you attend the Meeting in person and vote your
shares.
What
is a quorum and what constitutes a quorum?
A
“quorum” is the number of shares that must be present, in person or by proxy, in
order for business to be conducted at the Meeting. The required quorum for the
Meeting is the presence in person or by proxy of the holders of a majority of
the Voting Shares issued and outstanding as of the Record Date. Since
there was an aggregate of 65,809,668 Voting Shares issued and outstanding as of
the Record Date, a quorum will be present for the Meeting if an aggregate of at
least 32,904,835 Voting Shares is present in person or by proxy at the
Meeting.
How
many votes are required to approve the proposals?
The
approval of the proposal herein requires the affirmative vote by the holders of
a majority of Voting Shares that are present in person or by proxy at the
Meeting, so long as a quorum is established at the Meeting. For
example, if all 65,809,668 Voting Shares are present in person or by proxy at
the Meeting, then each proposal must be approved by the affirmative vote of the
holders of 32,904,835 Voting Shares.
Who
is paying for this proxy’s solicitation process?
The
enclosed proxy is solicited on behalf of our Board, and we are paying for the
entire cost of the proxy solicitation process. Copies of the proxy material will
be given to banks, brokerage houses and other institutions that hold shares that
are beneficially owned by others. Upon request, we will reimburse these banks,
brokerage houses and other institutions for their reasonable out-of-pocket
expenses in forwarding these proxy materials to the shareholders who are the
beneficial owners. Original solicitation of proxies by mail may be supplemented
by telephone, telegram, or personal solicitation by our directors, officers, or
other employees.
How
can I find out the results of the voting at the Special Meeting?
We will
announce preliminary voting results at the Meeting and publish final results in
a Current Report on Form 8-K which will be filed with the SEC within four
business days after the Meeting.
How
can shareholders communicate with our Board of Directors?
Company
shareholders who want to communicate with our Board may write to Asher Zwebner,
c/o David Lubin & Associates, PLLC, 5 North Village Avenue, 2
nd
Floor, NY 11570, fax number (516) 887-8250, email address
david@dlubinassociates.com.
Your
letter should indicate that you are a Company shareholder. Depending on the
subject matter, Mr. Zwebner will: (i) forward the communication to the
appropriate officer of the Company; (ii) attempt to handle the inquiry
directly, for example when the request is for information about the Company or
is a stock-related matter; or (iii) not forward the communication if it is
primarily commercial in nature or if it relates to an improper or irrelevant
topic. At each Board meeting, a member of management will present a summary of
all communications received since the last meeting that were not forwarded to
the director to whom they were addressed, and shall make those communications
available to our Board upon request.
PROPOSALS
TO BE VOTED UPON
PROPOSAL
NO. 1
INCREASE
IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board
of Directors believes that it is advisable and in our best interest to increase
the number of authorized shares of common stock in order to have available
additional authorized but unissued shares of common stock in an amount adequate
to provide for our future needs. The availability of additional authorized but
unissued shares will be achieved by effectuating an increase in the number of
authorized shares of common stock from 100,000,000 to 250,000,000 shares. This
step is necessary, in the judgment of the Board of Directors, in order to
satisfy our obligations to investors in recent private placements, our
obligations to acquire the remainder of the shares of Suspect Detection Systems
Ltd., establish a stock option plan and raise additional capital.
Under our
current Articles of Incorporation, as amended, we have the authority to issue
100,000,000 shares of common stock. As of the Record Date, 65,809,668 shares of
common stock were issued and outstanding. As of the Record Date, the Company
expects to issue an additional 102,349,817 shares of common stock upon the
issuance of the following shares and the conversion and exercise of the
following options and warrants:
The
Company has 12,810,004 warrants issued and outstanding, 3,086,667 of which are
exercisable for the same number of shares of common stock at an exercise price
of $0.25 per share and 9,723,337 of which are exercisable for the same number of
common stock at an exercise price of $0.375 per share. In November 2007, the
Company began a capital formation activity through a private placement offering,
exempt from registration under the Securities Act of 1933, to raise up to
$2,500,000 through the issuance of 16,666,666 units. The purchase
price of each unit is $0.15. Each unit contains one share of common
stock, one Class A Warrant giving the holder the right to purchase one share of
common stock for $0.25, which is exercisable for one year from the date of
issuance and one Class B Warrant, giving the holder the right to purchase one
share of common stock for $0.375, which is exercisable for three years from the
date of issuance. As of the closed of the offering on November 15,
2008, the Company issued 9,523,002 shares of common stock and 12,810,004
warrants to 27 non US persons. Of the 12,810,004 warrants issued, 3,086,667 are
Class A Warrants, which are exercisable for the same number of shares of common
stock at an exercise price of $0.25 per share, for a period of 12 months and
9,723,337 are Class B Warrants, which are exercisable for the same number of
common stock at an exercise price of $0.375 per share, for a period of 36
months. As of the date hereof, our common stock is quoted under the symbol
“SDSS.OB” on the Over-the-Counter Bulletin Board. As of the date hereof, the
reported bid and asked price is $0.135 and $0.15 per share, and the average of
the bid and asked price is $0.1425 per share, a price which below the exercise
price Class A Warrants and the Class B Warrants on the date that the
warrants.
The
Company has recently began an additional capital formation activity through a
private placement offering, exempt from registration under the Securities Act of
1933, to raise up to $1,500,000 through the issuance of 10,000,000
units. The purchase price of each unit is $0.15. Each unit
contains one share of common stock, one Class A Warrant giving the holder the
right to purchase one share of common stock for $0.25, which is exercisable for
one year from the date of issuance and one Class B Warrant, giving the holder
the right to purchase one share of common stock for $0.375, which is exercisable
for three years from the date of issuance. Therefore, the Company expects
to issue 10,000,000 shares of common stock and 10,000,000 Class A warrants and
10,000,000 Class B warrants. As of the date hereof, the Company has sold an
aggregate of 1,713,334 units and has issued 1,713,334 shares of common stock
1,713,334 Class A Warrants and 1,713,334 Class B Warrants. As of the date
hereof, the reported bid and ask price is $0.135 and $0.15 per share, and the
average of the bid and asked price is $0.1425 per share, a price which is below
the exercise price of the Class A Warrants and the Class B
Warrants.
The
Company is committed to issue an aggregate of 29,089,922 options to the
remaining shareholders and convertible securities of Suspect Detection Systems,
Ltd. in order that SDSS Israel become a wholly owned subsidiary, as compared to
the 51% which we currently own. As disclosed in Current Report on
Form 8-K filed with the Commission on December 22, 2008, the Company entered
into an Investment Agreement with SDS, Ltd. (the “Investment Agreement”),
pursuant to which the Company agreed that it will enter into a second agreement
which will granted shareholders of SDS, Ltd. put options of purchase up to
22,140,948 shares of the Company in exchange for 1,170,295 shares of SDS
Ltd. The Company also granted holders of SDS options the right to
purchase up to 6,948,974 shares of the Company’s common stock. In accordance
with the terms of the Investment Agreement, the Company has an obligation to
issue an aggregate of 29,089,922 options as an incentive for SDS, Ltd. to become
a wholly owned subsidiary of the Company. Each option entitles the holder
thereof to purchase 1 share of the Company’s common stock at the conversion
price of $0.001 for a ten (10) year term. As of the date hereof, the reported
bid and asked price is $0.135 and $0.15 per share, respectively, and the average
of the bid and asked price is $0.1425 per share, a price which is above the
conversion price of the options on the date that the options were
issued.
The
Company issued 3,199,891 shares of common stock and 2,250,000 warrants to one of
the current investors in Suspect Detection Systems, Ltd.; and intends to issue
25,000,000 stock options to our employees and consultants upon the approval of
our shareholders of this proposal. In accordance with the terms and provisions
of the Investment Agreement, the Company entered into an Exchange Agreement with
NG-The Northern Group LP (the “Investor”), pursuant to which, the Investor was
issued 3,199,891 shares of the Company’s common stock in exchange for 170,295
ordinary shares of SDS, Ltd. (the “SDS Shares”). In addition, the
Company issued 2,250,000 warrants to purchase the same number of shares of
common stock of the Company. Each warrant grants the Investor the
right to purchase one (1) share of common stock of the Company for a period of
three (3) years, commencing on July 8, 2009 and terminating on July 8,
2011. Each warrant gives the Investor the right to purchase one (1)
share of common stock at an exercise price of $0.15 per share. As of
the date hereof, the reported bid price and asked price was $0.135 and $0.15 per
share, respectively, and the average of the bid and asked price is $0.1425 per
share, a price which is below the exercise price of the warrants on the date
that the warrants were issued.
Upon the
approval of our shareholders of this proposal, the Company intends to issue
25,000,000 stock options to the management and staff of SDS, Ltd. who have
dedicated a significant amount of their time to the growth and development of
the SDS Ltd. In accordance with the proposed option agreement, each option
entitles the holder thereof to purchase 1 share of the Company’s common stock at
the conversion price of $0.15 per share for a period of three years from the
date of the option agreement. As of the date hereof, the reported bid and asked
price is $0.135 and $0.15 per share, respectively and the average of the bid and
asked price is $0.1425 per share, a price which is below the conversion price of
the options.
Under our current Certificate of Incorporation, as amended, we
have the authority to issue 100,000,000 shares of common stock. As of the Record
Date, 65,809,668 shares of common stock were issued and outstanding. As of the
Record Date, the Company expects to issue an additional 102,349,817 shares of
common stock upon the conversion of the following options and warrants, for a
total of 168,159,486 shares of common stock issue and
outstanding:
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12,810,004
warrants issued and outstanding, 3,086,667 of which are exercisable for
the same number of shares of common stock at an exercise price of $0.25
per share and 9,723,337 of which are exercisable for the same number of
common stock at an exercise price of $0.375 per
share;
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10,000,000
shares of common stock and 20,000,000 warrants, 10,000,000 of which are
exercisable for the same number of shares of common stock at an exercise
price of $0.25 per share and 10,000,000 of which are exercisable for the
same number of common stock at an exercise price of $0.375 per
share;
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29,089,922
options to the remaining shareholders and convertible securities of
Suspect Detection Systems, Ltd. in order that SDSS Israel become a wholly
owned subsidiary, as compared to the 51% which we currently
own;
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3,199,891
shares of common stock and 2,250,000 warrants to one of the current
investors in Suspect Detection Systems, Ltd.;
and
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25,000,000
stock options to our employees and consultants upon the approval of our
shareholders of this proposal.
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The
Company has determined that the increase in the Company’s common stock from
100,000,000 to 250,000,000 shares will be sufficient to provide the Company with
the flexibility to issue common stock without further action by the Company's
stockholders (unless required by law or regulation) to meet its current
obligations and for such other corporate purposes as the Board may deem
advisable. These purposes may include, among other things, the sale of shares to
obtain additional capital funds, the use of additional shares for various equity
compensation and other employee benefit plans of the Company or of acquired
companies, the acquisition of other companies, and other bona fide
purposes.
The text
of the proposed amendment which contains the increase in the authorized common
stock is attached hereto as Appendix A.
After
taking into consideration our current outstanding equity obligations, together
with, if approved by our shareholders, our stock issuance obligations as
described above, as well as to assure that we have additional shares available
for issuance, if needed, our board of directors have determined that it is in
the best interest of our shareholders to increase the number of authorized
shares of our common stock to 250,000,000. The additional common stock to be
authorized will become part of the existing class of common stock and will have
the same par value, the same voting rights, the same rights to dividends and
distributions and will be identical in all other respects to the shares of our
common stock now authorized. The Amendment will not affect the terms of the
outstanding common stock or the rights of the holders of the common stock,
except for some disadvantages incidental to increasing the number of shares of
common stock outstanding, such as dilution of the earnings per share, which
could have a depressive effect upon the market value of the Company’s common
stock and an adverse effect on the voting rights of current holders of common
stock as their percentage ownership of the Company will be reduced (
See Effects of Issuing Additional
Common Stock
).
The Board
believes that the issuance of additional shares to raise capital to operate our
business and to compensate employees for their services outweighs these
disadvantages associated with the increase in the authorized shares of Common
Stock. The Company needs the capital which will be generated from the
issuance of additional common stock in order to facilitate its growth and
development and its ability to compete successfully in the market for skilled
employees. If we fail to facilitate growth and development, we may not be able
to generate revenues or achieve profitability, and our stockholders may lose
their entire investment in us. Furthermore, technological innovation is
important to our success and depends, to a significant degree, on the work of
technically skilled employees. Competition for the services of these types of
employees is intense. We may not be able to attract and retain these employees
if we cannot adequately compensate them for their services to the Company. If we
are unable to attract and maintain technically skilled employees, our
competitive position could be materially and adversely affected.
The
Effects of Issuing Additional Common Stock
As of the
Record Date, 65,809,668 shares of our common stock were issued and outstanding.
As of the date hereof, the reported bid and asked price of our common stock is
$0.135 and $0.15 per share, respectively and the average of the bid and asked
price of our common stock is $0.1425 per share, a price which is below the
conversion price of our outstanding warrants and options. If all our warrants
and options were exercised or converted, we would have 168,159,485 shares of
common stock issued and outstanding. Accordingly, a common stockholder has a
significant risk of having its interest in our Company being significantly
diluted.
Dilution
“Dilution,"
as the term is used herein, is a reduction in the value of a shareholders’
investment measured by the difference between the purchase price and the net
tangible book value of the common shares after the purchase takes
place. "Net book value" represents the amount of total assets less
the amount of total liabilities divided by the number of shares of our common
stock outstanding. This dilution arises mainly from the arbitrary
decision as to the offering price per share and the lower book value of the
shares of our currently outstanding.
As of
June 30, 2009, the Company had net tangible book value of $123,685, or $0.002
per share of common stock outstanding (based on total outstanding shares of
65,809,668 as of the record date). Net tangible book value equals the
tangible net worth of the Company (total tangible assets less total liabilities)
divided by the number of shares of common stock outstanding (65,809,668
shares). After giving effect to the conversion by the Company of all
outstanding and planned issuances of warrants, units, options, and investor
shares, at an average issuance price of $0.164 per share of common stock, the
pro forma net tangible book value of the Company and amount per share of common
stock would be $16,864,178 and $0.110, respectively. The following
table shows the immediate increase in pro forma net tangible book value to
current stockholders and the immediate dilution of new investors based on the
levels of 100%, 50%, and 25% of proceeds from the conversion by the Company of
all outstanding and planned issuances of warrants, units, options, and investor
shares:
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Situation
1
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Situation
2
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Situation
3
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102,349,817
(100%)
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51,174,908
(50%)
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25,587,454
(25%)
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Net
Tangible Book Value Per Share Prior to the Conversion
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$
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0.002
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$
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0.002
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$
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0.002
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Increase
in Net Tangible Book Value Per Share Attributable to the
Conversion
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$
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0.098
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$
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0.071
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$
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0.045
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Net
Tangible Book Value Per Share After the Conversion
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$
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0.100
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$
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0.073
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$
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0.047
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|
|
|
|
|
|
|
|
|
|
|
|
Dilution
to Stockholders
|
|
$
|
0.063
|
|
|
$
|
0.091
|
|
|
$
|
0.116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Tangible Book Value before Conversion
|
|
$
|
123,685
|
|
|
$
|
123,685
|
|
|
$
|
123,685
|
|
|
Consideration
received upon conversion
|
|
|
16,740,493
|
|
|
|
8,370,246
|
|
|
|
4,185,123
|
|
|
Net
Tangible Book Value after Conversion
|
|
$
|
16,864,178
|
|
|
$
|
8,493,931
|
|
|
$
|
4,308,808
|
|
|
|
|
Shares
|
|
|
Percent
|
|
|
Total
Consideration
|
|
|
Percent
|
|
|
Average
Price Per
Common
Share
|
|
|
Situation 1 (100%)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing
Shareholders
|
|
|
65,809,668
|
|
|
|
39
|
%
|
|
$
|
1,822,572
|
|
|
|
10
|
%
|
|
$
|
0.028
|
|
|
New
Investors
|
|
|
102,349,817
|
|
|
|
61
|
%
|
|
|
16,740,493
|
|
|
|
90
|
%
|
|
|
0.164
|
|
|
Total
|
|
|
168,159,485
|
|
|
|
100
|
%
|
|
$
|
18,563,065
|
|
|
|
100
|
%
|
|
$
|
0.110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Situation 2 (50%)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing
Shareholders
|
|
|
65,809,668
|
|
|
|
56
|
%
|
|
$
|
1,822,572
|
|
|
|
18
|
%
|
|
$
|
0.028
|
|
|
New
Investors
|
|
|
51,174,908
|
|
|
|
44
|
%
|
|
|
8,370,246
|
|
|
|
82
|
%
|
|
|
0.164
|
|
|
Total
|
|
|
116,984,576
|
|
|
|
100
|
%
|
|
$
|
10,192,818
|
|
|
|
100
|
%
|
|
$
|
0.0871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Situation 3 (25%)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Existing
Shareholders
|
|
|
65,809,668
|
|
|
|
72
|
%
|
|
$
|
1,822,572
|
|
|
|
30
|
%
|
|
$
|
0.028
|
|
|
New
Investors
|
|
|
25,587,454
|
|
|
|
28
|
%
|
|
|
4,185,123
|
|
|
|
70
|
%
|
|
|
0.164
|
|
|
Total
|
|
|
91,397,122
|
|
|
|
100
|
%
|
|
$
|
6,007,695
|
|
|
|
100
|
%
|
|
$
|
0.066
|
|
In
addition to the risk of dilution of earnings per share, our stockholders also
risk dilution of equity interest. For example, as reported in our Annual Report
for the year ended December 31, 2008, Yosef Nachum Benstein is the holder of
4,900,000 shares of our common stock, which represents 7.45% of the issued and
outstanding shares of common stock as of the Record Date. Should the
Company issue the additional 102,349,817 shares to fulfill all of its
obligations described above, the Company will have 168,159,485 shares issued and
outstanding. At such time, Yosef Nachum Benstein ownership interest of 4,900,000
shares will represent only 2.9% of our issued and outstanding shares on a fully
diluted basis. As a result of the decrease in ownership interest, Mr.
Benstein’s ability to influence matters submitted to our stockholders for
approval, including election of our board of directors, removal of any of our
directors, amendment of our Certificate of Incorporation or bylaws, or corporate
transactions, will significantly decrease.
In
addition, the future prospect of sales of significant amounts of shares held by
our stockholders could affect the market price of our common stock if the
marketplace does not orderly adjust to the increase in shares in the market and
the value of our shareholders’ investment in the Company may decrease. A
significant ownership held by one party may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which in
turn could reduce our stock price or prevent our stockholders from realizing a
premium over our stock price.
We
currently do not have any plans, proposals or arrangements to issue any
additional shares of common stock, other than the shares issuable:
|
|
-
|
upon
exercise of currently outstanding warrants;
|
|
|
-
|
upon
issuance of additional shares of common stock and warrants to raise
additional capital as described above;
|
|
|
-
|
pursuant
to the commitments to third parties to acquire SDS, Ltd. as described
above; and
|
|
|
-
|
under
the proposed stock option plan.
|
OUR
RECOMMENDATION TO SHAREHOLDERS
REGARDING
PROPOSAL NO. 1
The Board
has approved the change in the Certificate of Incorporation of Company for the
purpose of increasing the authorized capital from 100,000,000 shares of common
stock, par value $.0001 per share to 250,000,000 shares of common stock, par
value $.0001 per share and authorized and recommends that shareholders of the
Company vote FOR approval of the increase in the number of authorized shares of
common stock.
REGARDING
PROPOSAL NO. 2
Our Board
knows of no business that will be presented for consideration at the Meeting
other than the items referred to above. If any other matter is properly brought
before the Meeting for action by shareholders, proxies in the enclosed form
returned to the Company will be voted in accordance with the recommendation of
our Board or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table lists, as November 12, 2009, the number of shares of common
stock beneficially owned by (i) each person, entity or group (as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934) known to the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock; (ii) each officer and director of the Company; and (iii) all officers and
directors as a group. Information relating to beneficial ownership of Common
Stock by our principal stockholders and management is based upon information
furnished by each person using “beneficial ownership” concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed
to be a beneficial owner of a security if that person directly or indirectly has
or shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to dispose or direct
the disposition of the security. The person is also deemed to be a beneficial
owner of any security of which that person has a right to acquire beneficial
ownership within 60 days. Under the Securities and Exchange Commission rules,
more than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of securities as
to which he or she may not have any pecuniary interest. Except as noted below,
each person has sole voting and investment power.
The
percentages below are calculated based on 71,522,893 shares issued and
outstanding on November 12, 2009. Unless indicated otherwise, all
addresses below are c/o Suspect Detection Systems, Inc., 4 Nafcha Street,
Jerusalem, Israel 95508.
|
Name
of Beneficial Owner
|
|
Amount
of Beneficial Ownership
|
|
Percentage
of Class
|
|
|
|
|
|
|
|
Yosef
Nachum Bernstein
|
|
|
4,900,000
|
|
6.85%
|
|
Julius
Klein
|
|
|
50,000
|
|
Less
than 1%
|
|
Asher
Zwebner
|
|
|
120,000
|
|
Less
than 1%
|
|
|
|
|
|
|
|
|
All
directors and executive officers as a group (2 persons)
|
|
|
170,000
|
|
Less
than 1%
|
SHAREHOLDER PROPOSALS
Shareholders
of our Company may submit proposals to be considered for shareholder action at
the Meeting if they do so in accordance with applicable regulations of the SEC
and the laws of the State of Delaware. In order to be considered for inclusion
in the Proxy Statement for the meeting, our Interim Chief Executive Officer must
receive proposals no later than November 27, 2009. Shareholder proposals should
be addressed to Suspect Detection Systems, Inc., c/o David Lubin &
Associates, PLLC, 5 North Village Avenue, 2
nd
Floor, Rockville Center, NY
11570.
OTHER
MATTERS
As of the
date of this proxy statement, the Company knows of no business that will be
presented for consideration at the meeting other than the item referred to
above. If any other matter is properly brought before the Meeting for action by
shareholders, proxies in the enclosed form returned to the Company will be voted
in accordance with the recommendation of our Board or, in the absence of such a
recommendation, in accordance with the judgment of the proxy
holder.
Suspect
Detection Systems, Inc.
4 Nafcha
Street
Jerusalem,
Israel 95508
By Order
of the Board of Directors,
/s/ Asher
Zwebner
Asher
Zwebner
Interim
Chief Executive Officer
Chief
Financial Officer and Director
November
12, 2009
SUSPECT
DETECTION SYSTEMS, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR A
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
THURSDAY,
DECEMBER 3, 2009
The
undersigned,
a shareholder of Suspect Detection Systems, Inc. (the "Company"), does hereby
appoint Asher Zwebner as the attorney and proxy of the undersigned, with power
of substitution, for and on behalf of the undersigned, and to attend the Special
Meeting of Shareholders of the Company to be held on Thursday, December 3, 2009,
at 10:00 a.m., at the offices of David Lubin & Associates, PLLC, 5 North
Village Avenue, 2nd Floor, NY 11570 (the "Meeting"), to represent the
undersigned at the Meeting, and there to vote all the shares of common stock of
the Company which the undersigned is entitled to vote at the Meeting, in any
manner and with the same effect as if the undersigned were personally present at
the Meeting, and the undersigned hereby authorizes and instructs the above named
proxy to vote as specified below.
The
shares represented by this Proxy will be voted only if this Proxy is properly
executed and timely returned. In that event, such shares will be voted in the
manner directed herein. If no direction is made on how you desire your shares to
be voted, the Proxy holder will have complete discretion in voting the shares on
any matter voted on at the Meeting.
THE BOARD
OF DIRECTORS RECOMMENDS VOTING "FOR" THE FOLLOWING:
The
shares represented by this Proxy shall be voted in the following
manner:
1. Approval
of the proposal to amend the Certificate of Incorporation for the purpose of
increasing the authorized capital of the Company from 100,000,000 shares of
common stock to 250,000,000 shares of common stock, $.0001 par value per
share.
|
FOR
|
AGAINST
|
WITHOLD
|
|
o
|
o
|
o
|
2. In
the discretion of the persons acting as proxies, on such other matters as may
properly come before the Meeting or any adjournment(s) or postponement(s)
thereof.
The
undersigned does hereby revoke any Proxy previously given with respect to the
shares represented by this Proxy.
NOTE:
As to shares held in joint names, each joint owner should sign. If the signer is
a corporation, please sign in corporate name by a duly authorized officer. If a
partnership, please sign in partnership name by a duly authorized person. If
signing as attorney, executor, administrator, trustee, guardian, or in other
representative capacity, please give full title as such.
PLEASE
MARK, SIGN AND DATE THIS PROXY CARD AND PROPERLY RETURN IT USING THE ENCLOSED
ENVELOPE.
|
Number
of Shares Owned on ________
|
|
________________________________
|
|
|
|
|
|
Dated:
________________, 2009
|
Signature:
|
________________________________
|
|
|
Name:
|
________________________________
|
|
|
Address:
|
________________________________
|
|
Dated:
________________, 2009
|
Signature:
|
________________________________
|
|
|
Name:
|
________________________________
|
|
|
Address:
|
________________________________
|
Appendix
A
CERTIFICATE
OF AMENDMENT
TO
THE
CERTIFICATE OF INCORPORATION
OF
SUSPECT
DETECTION SYSTEMS, INC.
The
undersigned, for purposes of amending the Certificate of Incorporation (the “
Certificate
”) of
Suspect Detection Systems, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST
: The name of the
corporation is Suspect Detection Systems, Inc. (the “
Corporation
”), and the date
of its incorporation was October 5, 2006.
SECOND:
That at a
meeting of the Board of Directors of the Corporation, resolutions were duly
adopted setting forth a proposed amendment to the Certificate to increase the
number of authorized shares of the Corporation, declaring said amendment to be
advisable and calling a special meeting of the stockholders of the Corporation
for consideration thereof. The resolution setting forth the proposed amendment
is as follows:
RESOLVED
, that the
Certificate of Incorporation of the Corporation be amended by changing Article
FOURTH, so that, as amended said Article shall be read as follows: “The total
number of shares of stock which the Corporation shall have authority to issue is
250,000,000 shares of common stock, $.0001 par value per share (the "Common
Stock").
THIRD
: That the foregoing
amendment was duly adopted by the Board of Directors and by the stockholders of
the Corporation in accordance with the applicable provisions of Section 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS
WHEREOF
, the undersigned, being a duly authorized officer of the
Corporation, does hereby execute this Amendment to the Certificate this ___ day
of _______, 2009.
By:
______________________
Name:
Asher Zwebner
Title:
Interim Chief Executive Officer,
Chief
Financial Officer and Director
Suspect Detection Systems (CE) (USOTC:SDSS)
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