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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission only (as permitted
by Rule 14a-6(e)(2))
[X] 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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October 6, 2004
Dear Stockholders:
I am pleased to invite you to Dial Thru International Corporation's Annual
Meeting of Stockholders. The meeting will be held at 10:00 a.m., Los Angeles
time, on Tuesday, November 9, 2004 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) amend our Certificate of Incorporation (3) ratify the
appointment of KBA Group LLP as our independent auditors for the current
fiscal year, and (4) transact such other business as may properly come
before the meeting or any adjournment thereof. 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.
We hope that you can join us on November 9, 2004 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 and return it to us
prior to the meeting. We value our stockholders and look forward to your
participation.
Yours truly,
/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 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 2004
To the Stockholders of Dial Thru International Corporation:
NOTICE IS HEREBY given that the 2004 Annual Meeting of Stockholders of Dial
Thru International Corporation will be held at Dial Thru's principal
executive offices, 17383 Sunset Boulevard, Suite 350, Los Angeles, CA 90272
on Tuesday, November 9, 2004 at 10:00 a.m., Los Angeles time, for the
following purposes:
1. To elect five directors to serve until the 2005 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified;
2. To consider and act upon a proposal to amend our Certificate of
Incorporation;
3. To consider and act upon a proposal to ratify the selection of KBA
Group LLP to serve as independent auditors for our current fiscal
year; and
4. 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 October 7, 2004 as
the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof.
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,
October 6, 2004
/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
-------------------------
PROXY STATEMENT
-------------------------
2004 ANNUAL MEETING OF STOCKHOLDERS
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
November 9, 2004. This Proxy Statement, the accompanying proxy and our
annual report to stockholders for the year ended October 31, 2003 will first
be sent to our stockholders on or about October 13, 2004.
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; AND
* FOR THE RATIFICATION OF THE APPOINTMENT OF KBA GROUP LLP TO SERVE AS
OUR INDEPENDENT AUDITORS FOR THE 2004 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 October 7, 2004 will
be entitled to notice of and to vote at the Annual Meeting. On October
4, 2004 we had issued and outstanding 23,022,129 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. With respect to the approval of
the Amendment to the Certificate of Incorporation, the affirmative vote of
the majority of shares outstanding is required. 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 2003 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 39 Executive Vice President, Chief Financial Officer,
Secretary and Director
Lawrence Vierra 59 Executive Vice President and Director
Robert M. Fidler 66 Director
David Hess 43 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.
LAWRENCE VIERRA has served as our Executive Vice President and a director
since January 2000. 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
The Board of Directors held one meeting during the fiscal year ended October
31, 2003. 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. Nick DeMare served on the Audit Committee
through September 19, 2004. 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 two meetings during the fiscal year ended October 31, 2003.
Compensation Committee
The Compensation Committee is comprised of two non-employee directors,
Robert M. Fidler and Lawrence Vierra. Nick DeMare served on the
Compensation Committee through September 19, 2004. 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, 2003.
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
Each of our directors who is not one of our executive officers receives
a fee of $1,500 for each Board meeting attended. Directors are
not compensated for attending committee meetings. Our directors also
participate in our Company's equity incentive plan and 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.
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
On September 9, 2004, 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 forty-four million one hundred sixty-nine thousand one hundred
(44,169,100) shares to eighty-four million one hundred sixty-nine thousand
one hundred (84,169,100). 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 ninety-four million
one hundred sixty-nine thousand one hundred (94,169,100) shares
consisting of (A) eighty-four million one hundred sixty-nine thousand
one hundred (84,169,100) 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 44,169,100 shares of Common
Stock. As of October 4, 2004, 23,022,129 shares of Common Stock were
issued and outstanding, 7,269,891 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 42,048,879
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 fair value at October 4, 2004.
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.
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 in 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.
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. 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.
PROPOSAL THREE: 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, 2004. 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.
Changes in Certifying Accountants
On August 2, 2002, we received a letter from the SEC notifying us that our
independent auditors, Arthur Andersen LLP, in connection with the winding-
down of its business, had notified the SEC that it would be unable to
perform future audit services for us effective immediately. We did not
receive a copy of this notification directly from Arthur Andersen LLP.
The audit report of Arthur Andersen LLP on our consolidated financial
statements as of and for the year ended October 31, 2001, the fiscal year
audited by Arthur Andersen LLP, did not contain any adverse opinion or
disclaimer of opinion, nor was it qualified or modified as to uncertainty,
audit scope or accounting principles, other than a modification as to the
uncertainty of our ability to continue as a going concern. In connection
with the audit for the most recent fiscal year and through August 7, 2002,
there were no disagreements with Arthur Andersen LLP on any matter of
accounting principle or practice, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Arthur Andersen LLP would have caused them to make reference
to them in their report on the financial statements for those periods.
During the fiscal year ended October 31, 2001 and through August 7, 2002,
there were no reportable events (as defined in Item 304(a)(1)(v) of
Regulation S-K.
On August 23, 2002, we reengaged King Griffin & Adamson P.C. as our
independent public accountants. Our Audit Committee participated in and
approved the decision to reengage King Griffin & Adamson P.C. During the
fiscal year ended October 31, 2001 and through August 23, 2002, we did not
consult with King Griffin & Adamson P.C. regarding the following:
* the application of accounting principles to a specified
transaction, either completed or proposed;
* the type of audit opinion that might be rendered on our
financial statements, and in no case was a written report provided
to us nor was oral advice provided that we concluded was an
important factor in reaching a decision as to an accounting,
auditing or financial reporting issue; or
* any matter that was either the subject of a disagreement, as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K and
the related instructions to Item 304 of Regulation S-K, or a
reportable event, as that term is defined in Item 304(a)(1)(v) of
Regulation S-K.
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 most recent fiscal year 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 $94,626 and $114,166 for the
fiscal years ended October 31, 2003 and 2002, respectively. Arthur Andersen
LLP, our former independent public accountants, billed us an aggregate
$8,900 as audit fees during the fiscal year ended October 31, 2002.
Audit-Related Fees
There were no audit-related fees billed by KBA Group LLP during the fiscal
years ended October 31, 2003 and 2002.
Tax Fees
The aggregate fees billed by KBA Group LLP for professional services
rendered for tax compliance, tax advice and tax planning were $28,985 and
$14,557 for the fiscal years ended October 31, 2003 and 2002, respectively.
The services comprising the fees reported as "Tax Fees" included tax return
preparation, review of registration statements, consultation regarding
various tax issues and support provided to management in connection with
income and other tax audits. Arthur Andersen LLP, our former independent
public accountants, billed us an aggregate $7,000 as tax fees during the
fiscal year ended October 31, 2002.
All Other Fees
There were no fees billed by KBA Group LLP for products and services other
than those described above for the fiscal years ended October 31, 2003 and
2002.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
The Audit Committee's policy will be 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, 2004 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 2004.
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, 2003, 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 October 4, 2004,
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 (2)
------------------------------------ ------------ ---------
Dodge Jones Foundation 1,000,000 4.34%
400 Pine Street, Suite 900
Abilene, TX 79601
John Jenkins 26,425,121 (3) 63.76%
17383 Sunset Boulevard, Suite 350
Los Angeles, CA 90272
Lawrence Vierra 1,399,608 (4) 5.79%
8760 Castle Hill Avenue
Las Vegas, NV 89129
Robert M. Fidler 14,000 (5) *
987 Laguna Road
Pasadena, CA 91105
David Hess 0 *
545 Alder Avenue
Westfield, NJ 07090
Allen Sciarillo 1,594,608 (6) 6.54%
17383 Sunset Boulevard, Suite 350
Los Angeles, CA 90272
Global Capital Funding Group L.P. 15,743,232 (7) 41.38%
106 Colony Park Drive
Cumming, GA 30040
GCA Strategic Investment Fund Limited 10,813,538 (8) 31.96%
106 Colony Park Drive
Cumming, GA 30040
All Executive Officers and Directors 29,453,616 67.01%
as a group (6 persons)
* Reflects less than one percent.
(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 October 4, 2004
are deemed outstanding. Such shares, however, are not deemed
outstanding for purposes of computing the ownership of any other
person.
(2) Based upon 23,022,129 shares of Common Stock outstanding as of
October 4, 2004.
(3) Includes (i) 700,000 shares of Common Stock which may be
acquired through the exercise of options, (ii) 2,148,390 shares of
Common Stock which may be acquired through the exercise of
warrants, and (iii) 15,576,731 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
October 4, 2004); all of which are exercisable or convertible
within 60 days of October 4, 2004.
(4) Includes (i) 400,000 shares of Common Stock which may be
acquired through the exercise of warrants and (ii) 744,608 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 October 4, 2004); all of which are
exercisable or convertible within 60 days of October 4, 2004.
(5) Includes 10,000 shares of Common Stock which may be acquired
through the exercise of option and warrants which are exercisable
within 60 days of October 4, 2004.
(6) Includes (i) 500,000 shares of Common Stock which may be
acquired through the exercise of options, (ii) 100,000 shares of
Common Stock which may be acquired through the exercise of
warrants, and (iii) 744,608 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
October 4, 2004); all of which are exercisable or convertible
within 60 days of October 4, 2004.
(7) Includes (i) 600,000 shares of Common Stock which may be
acquired through the exercise of warrants and (ii) 14,419,394
shares of Common Stock which may be acquired through the
conversion of a convertible note (shares from conversion
calculated using 80% of the average of the three lowest closing
bid share prices from September 7, 2004 through October 4, 2004)
if the related convertible note remains outstanding at its
maturity date of November 8, 2004; all of which are exercisable or
convertible within 60 days of October 4, 2004.
(8) Includes (i) 250,000 shares of Common Stock which may be
acquired through the exercise of warrants and (ii) 10,563,538
shares of Common Stock which may be acquired through the
conversion of convertible notes (shares from conversion calculated
using 85% of the average of the three lowest closing bid share
prices from September 7, 2004 through October 4, 2004); all of
which are exercisable or convertible within 60 days of October 4,
2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 2001, we executed 10% convertible notes with three of our
executive officers and directors, who each 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 $1,745,957 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, and are now
currently due on demand. 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, 2003, 2002, and 2001 for services in all capacities
to each of our chief executive officer and our other executive officers
whose total annual salary and bonus exceeded $100,000 during fiscal 2003.
We refer to these individuals collectively as our Named Executive Officers.
Summary Compensation Table
Securities
Underlying
Name and Principal Options/ All other
Position Year Salary ($) Bonus ($) Warrants (#) Compensation
------------------- ---- ---------- --------- ------------ ------------
John Jenkins 2003 150,000 -0- -0- -0-
Chairman, CEO 2002 151,042 -0- -0- -0-
and President 2001 108,833 -0- 700,000 -0-
Allen Sciarillo 2003 125,000 1,106 -0- -0-
Executive Vice 2002 141,667 -0- -0- -0-
President and Chief 2001 -0- -0- 500,000 -0-
Financial Officer
Aggregated Option Exercise in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information with respect to the number of
options held at the 2003 fiscal year end and the aggregate value of in-the-
money options held at the 2003 fiscal year end by each of the Named
Executive Officers.
Number of securities Value of unexercised
underlying unexercised in-the-money options
Value options at Fiscal at Fiscal
Shares acquired realized Year End (#) Year End ($) (2)
Name on exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
--------------- --------------- -------- -------------------------- --------------------------
John Jenkins -0- -0- 466,666 233,334 -0- -0-
Allen Sciarillo -0- -0- 333,333 166,667 -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 2003
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 2003, which was $0.17 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 Ethics and Business Conduct applicable to all of
our directors and employees, including our principal executive officer,
principal financial officer, principal accounting officer, controller and
other employees performing similar functions. We have filed this Code of
Ethics and Business Conduct with our Form 10-K, filed with the SEC on or
about January 29, 2004. A copy of this Code of Ethics and Business Conduct
is available 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.
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 2003. The compensation of
our executive officers during the 2003 fiscal year did not change from the
previous fiscal year and was continued under compensation arrangements
already in place.
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.
Mr. Jenkins, the Company's President and Chief Operating Officer through
September 2001, was promoted to the position of CEO in October 2001. Mr.
Jenkins' base pay for fiscal 2001, 2002 and 2003 was established at an
amount considered below market in comparison to executive compensation
levels for companies of similar size and maturity. The Compensation
Committee established, and Mr. Jenkins accepted, below market compensation
at the beginning of fiscal 2001, based on a variety of factors, including
the performance of the Company, the ability of the Company to obtain funding
to support its operational cash flow requirements, and a desire to save the
Company the expense of compensation at market levels. The Compensation
Committee set Mr. Jenkins' salary at $100,000 per annum for fiscal 2001 and
$150,000 for fiscal years 2002 and 2003.
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 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, 2003:
(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 2003 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,
2003. 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, 1998
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 1999 2000 2001 2002 2003
--------------------------------------------------------------------------
Dial Thru International
Corporation $280 $490 $224 $38 $54
Nasdaq Stock Market (US) $188 $234 $97 $75 $101
Nasdaq Telecom Index $186 $157 $53 $27 $27
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for us to consider for
inclusion in our 2005 proxy materials and for presentation at our 2005
Annual Meeting of Stockholders, you 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 March 1, 2005,
unless the 2005 Annual Meeting will be held on a date that is more than 30
days before or after November 9, 2005, the anniversary of the date of the
2004 Annual Meeting, in which case we must receive your proposal within a
reasonable time before we mail the proxy materials for our 2005 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,
2003, 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 29,
2004. 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 NOVEMBER 9, 2004
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 November 9, 2004 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 amend the Company's Certificate of Incorporation to increase the
amount of authorized common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
___________________________________________________________________________
3. To ratify the selection of KBA Group LLP to serve as independent public
accountants for Dial Thru International Corporation for the 2004 fiscal
year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, to vote upon such other business as may properly come
before the meeting or any adjournments thereof.
(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 Shareholder
__________________________________
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.