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
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RIM SEMICONDUCTOR COMPANY
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Tuesday, February 21, 2006
Dear Fellow Rim Semiconductor Shareholders,
On Friday we filed with the Securities and Exchange Commission our preliminary
Proxy Statement for the 2006 Annual Meeting of Shareholders. I would like to
take a moment of your time to tell you about the proposals that you will be
voting on.
We will hold our Annual Shareholders' meeting on April 11, 2006 at the Hotel
Vintage Plaza in Portland, unless we receive SEC comments about our proxy
materials that require us to change our meeting date. Watch our website in the
coming weeks for travel information for those who are coming in from out of town
to attend the meeting.
At the Shareholders' Meeting, you and your fellow shareholders will be asked to:
o approve an amendment to Article IV of our Articles of Incorporation to
increase our authorized common stock from 500 million shares to 900
million shares;
o elect four directors to serve until the 2007 Annual Meeting of
Shareholders and their successors are elected and qualified;
o approve an amendment to Section B(2) of Article IV of our Articles of
Incorporation relating to our preferred stock;
o approve an amendment to Article IV of our Articles of Incorporation to
delete Paragraph (C) of Article IV (regarding the reverse stock split
effected by the Corporation in 2000);
o amend our Articles of Incorporation to cancel the designations of our
Series A through G preferred stock;
o ratify the appointment of Marcum & Kliegman, LLP as our independent
public accountants; and
o transact any other business that properly comes before the meeting.
Let's take these proposals one at a time and consider how they help us all reach
our goal of becoming a dynamic, profitable fabless semiconductor company.
The most important proposal is to increase our authorized common stock from 500
million to 900 million shares. Let me share more about the increase of
authorized shares with you.
Let's start with some definition of terms first. "authorized shares" are the
maximum number of shares of stock that we can issue. This number is specified in
our Articles of Incorporation, and has changed several times in the past with
shareholder approval. Generally a much greater number of shares are authorized
than required, to give a company's board flexibility to issue more stock as
needed. Until an authorized share is issued, it is not counted in the number of
shares outstanding, does not have a vote, does not decrease our earnings or loss
per share, or have any other effect on the value of the shares that you already
own. An authorized but unissued share turns into an issued share when we sell it
or give it to an investor, an employee, a consultant, another company, etc., or
when an option, warrant or convertible security is converted into common stock.
We need to make sure that we do not run out of authorized common stock. If we
ever run out, we will not be able to raise additional money to fund the company,
grant options to employees, or other important corporate functions. If we were
to acquire another company, we would probably want the flexibility to issue
common stock in payment of a purchase price. Our Articles of Incorporation make
sure that the Board of Directors cannot authorize common stock on its own. You
must agree (by voting your shares) to create more.
About 70% of the currently authorized shares are already issued or could be
issued under various circumstances. As of January 24, 2006, which is the last
time we reported our count of common shares, we had issued roughly 266 million
shares. But we have approximately 80 million shares of common stock reserved for
issuance under outstanding options, warrants and convertible securities.
o OPTIONS OR WARRANTS: We are obligated to issue shares to the holders
of options or warrants. Some of these shares may never actually be
issued. For example, some of our outstanding options may not vest, and
some of our outstanding options and warrants have exercise prices well
in excess of our current market price per share, making their exercise
unlikely. Nevertheless, we intend to keep reserved for future issuance
a sufficient number of shares of our authorized common stock to honor
our commitment to issue common stock in the event these options or
warrants are exercised.
o CONVERTIBLE SECURITIES: We are obligated to issue shares to the
holders of convertible debentures and notes who elect to convert their
debt into our common stock. We are required to hold shares in reserve
to cover possible conversions while the debt is outstanding, even
though we may never be required to issue all of the shares we've
reserved.
If we add these potential share issuances to our actual outstanding shares, we
arrive at 346 million shares. This is about 70% of the 500 million shares of
common stock that are currently authorized.
We will need to raise and spend more money if we are to realize our business
plan. We will also need to raise funds to repay existing debt. In January, we
borrowed $750,000 from an investment fund. An amount equal to 108% of the
principal amount of the loan is due and payable on the earlier of May 25, 2006
or the date we effect a financing transaction or series of transactions
resulting in gross proceeds to us of at least $2,000,000. We will require
additional funds to repay the bridge loan upon maturity, and to continue to meet
our other liquidity needs.
At today's stock price, we believe that our current number of authorized shares,
500 million, would be adequate for covering the options and warrants and for our
financing needs. But we want to make sure that if we have to raise money at a
lower stock price, or that when we are presented with opportunities to grow the
company, or to merge or acquire another company, that we have the ability to do
so.
In short, while we're not out of authorized shares, we believe that it is in the
shareholders' best interest to increase the authorized share count at this time
to give us the flexibility to grow our business.
The second proposal reelects the existing Board of Directors for another year.
Our board has served us well, and I am proud to recommend them to you for your
vote. You should know that during this fiscal year we plan to add one or more
members to the board. Adding a seat does not require shareholder approval. But
next year, you will have an opportunity to vote on the election of the entire
board of directors.
The third, fourth and fifth proposals each concern amendments to our Articles of
Incorporation. The third and fourth items address our preferred stock. Although
preferred shares of Rim Semi are authorized, none are outstanding. These
proposals eliminate the designations of eight series of preferred stock that we
do not intend to issue and modify the authority of the Board of Directors with
regard to them. The fifth item on the ballot eliminates a paragraph from our
Articles that no longer has any effect. Full details on these proposals are
available in our Proxy Statement.
The sixth proposal ratifies the appointment of Marcum & Kliegman, LLP as our
independent auditors for the current fiscal year.
It is important that you carefully consider these proposals and send in your
vote. If you do not vote, then your shares vote "no" on the proposal to
authorize additional shares and the other amendments to our Articles. If the
proposal to increase the authorized common stock fails to win enough votes, then
we may not be able to secure enough financing to realize our business plans. The
Board has unanimously approved these proposals, and is voting "yes" to them with
all of their shares.
Please feel free to contact me at 503-257-6700 with your comments or for further
clarification. To make sure that we are well within the SEC guidelines for
proxy-related communications, we will not be replying in writing to any
questions until after the shareholder meeting. We would, as always, be pleased
to return your phone calls and speak in person.
Sincerely,
/s/ Brad Ketch
Brad Ketch
President and CEO
IMPORTANT LEGAL INFORMATION
Investors and security holders are urged to read the proxy statement regarding
the proposals to be considered at the annual meeting when it becomes available
because it will contain important information. The proxy statement will be filed
with the U.S. Securities and Exchange Commission by Rim Semiconductor Company
and security holders may obtain a free copy of the proxy statement when it
becomes available, and other documents filed with the SEC by Rim Semiconductor
Company, at the SEC's web site at WWW.SEC.GOV. The proxy statement, and other
related documents filed with the SEC by Rim Semiconductor Company, may also be
obtained for free by directing a request to Rim Semiconductor Company at 305 NE
102nd Avenue, Suite 105, Portland, Oregon 97220. Investors may obtain a detailed
list of names, affiliations and interests of participants in the solicitation of
proxies of Rim Semiconductor Company stockholders to approve the proposals to be
considered at the annual meeting at the following address: 305 NE 102nd Avenue,
Suite 105, Portland, Oregon 97220.