SCHEDULE
14A INFORMATION
Proxy
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1934
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/
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/
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/
/ Soliciting Material Pursuant to 240.14a-11(c)
or 240.14a- 12
--------------------------------------------------------------------------------
Avitar,
Inc. (File Number 1-15695)
(Name
of
Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
/X/ No
fee required
/
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computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11
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of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
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pursuant
to Exchange Act Rule 0-11 (set forth the amount on which
the
filing
fee is calculated and state how it was determined):
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fee paid:
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paid previously with preliminary materials.
/
/ Check
box if any part of the fee is offset as provided by Exchange Act
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and identify the filing for which the offsetting fee was paid
previously.
Identify the previous filing by registration statement number, or
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Form
or Schedule and the date of its filing.
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(4)
Date Filed:
AVITAR,
INC.
65
Dan
Road
Canton,
Massachusetts 02021
November 14,
2007
Dear
Stockholder:
You
are cordially invited to attend the Annual Meeting of the Stockholders
of
Avitar, Inc., a
Delaware corporation ("Avitar"), at 65 Dan
Road, Canton, Massachusetts on December 18, 2007 at 10:00
a.m.
At
the meeting you will be asked to consider and vote upon (1) the election of
four Directors to Avitar's Board
of Directors; (2) the approval of an
Amendment of the Certificate of Incorporation to increase our
authorized common stock from 100 million to 800
million; (3) the ratification of appointment of BDO Seidman, LLP as
Avitar's independent registered public accounting firm for the fiscal year
ending September 30, 2007; and (4) any other business that properly
comes before the meeting or any adjournments or postponements
thereof.
The
Board of Directors recommends that shareholders vote FOR Items 1, 2 and
3.
Your
vote is important. We urge you to complete, sign, date and return the
enclosed proxy card promptly in the accompanying prepaid
envelope. You may, of
course, attend the Meeting and vote
in person, even if you have previously returned your proxy
card.
Sincerely
yours,
Peter
P. Phildius,
Chairman
and Chief Executive Officer
Avitar,
Inc.
65
Dan
Road
Canton,
Massachusetts 02021
NOTICE
OF
ANNUAL MEETING OF STOCKHOLDERS
To
be
held on December 18, 2007.
To
the
Stockholders of Avitar, Inc.:
Notice
is hereby given that the Annual Meeting of Stockholders of Avitar, Inc., a
Delaware corporation ("Avitar") will be held at 10:00 a.m., local time, on
December 18, 2007 at 65 Dan Road, Canton, Massachusetts, for the following
purposes:
(1)
To
consider and vote upon the election of the Board of Directors consisting of
four
persons to serve until the next annual meeting of the stockholders;
(2)
To
consider and vote upon a proposal to approve an amendment to Avitar's
Certificate of Incorporation that would increase the number of authorized shares
of our common stock from 100,000,000 to 800,000,000; and
(3)
To
consider and vote upon a proposal to ratify the selection of BDO Seidman, LLP
as
Avitar's independent registered public accounting
firm for the fiscal year ending September 30, 2007.
Only
record holders of Common Stock at the close of business on November 1, 2007
are entitled to notice of and to
vote at the Annual Meeting and any adjournments
or postponements thereof. To ensure that your vote will be counted,
please complete, sign, date
and return the Proxy in
the enclosed prepaid envelope whether or not
you plan to attend the Annual Meeting. You may revoke your
proxy by notifying the Secretary of
the Company in writing at any time before it has been voted at the
Annual Meeting.
By Order of the Board of Directors
Canton,
Massachusetts
Jay C. Leatherman,
November
14,
2007
Secretary, Avitar, Inc.
YOUR
VOTE
IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL
MEETING
Avitar,
Inc.
-----------------------------------
PROXY
STATEMENT
FOR
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE
HELD DECEMBER 18, 2007
------------------------------------
THE
ACCOMPANYING PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF AVITAR, INC.
If
properly signed and returned and not revoked, the proxy will be voted in
accordance with the instructions it contains. The persons named in the
accompanying proxy will vote the proxy for the
Board of Directors' slate of directors and for
the other matters listed on
the proxy, in each case as recommended by the
Board of Directors unless contrary instructions are given. At
any time before it
is voted, each proxy granted may be revoked by
the stockholder by a later dated proxy, by
written revocation addressed to the
Secretary of Avitar, Inc. at
the address below or by voting by ballot at the Annual
Meeting.
The Company's principal executive offices are located
at 65 Dan Road, Canton, Massachusetts 02021. This proxy statement and the
accompanying proxy are being sent to stockholders on or
about November 20, 2007. ANY PROXY MAY BE
REVOKED IN PERSON AT THE ANNUAL MEETING, BY SUBMITTING A PROXY DATED LATER
THAN
THE PROXY TO BE REVOKED OR BY NOTIFYING THE SECRETARY OF THE COMPANY
IN WRITING AT ANY TIME PRIOR TO THE TIME THE PROXY IS VOTED.
VOTING
SECURITIES
The
Board has fixed the close of business on November 1, 2007as the record date
(the
"Record Date") for determination of stockholders entitled to receive notice
of
and to vote at the Annual Meeting or
any adjournment thereof. Only stockholders of
record at the close of business on
the Record Date will be entitled to notice of and to vote
at the Annual Meeting.
On
the Record Date, the
Company had outstanding
77,794,366
shares of Common Stock and 36,297 shares of Preferred Stock, of which
2,000 were shares of
6% Convertible Preferred Stock, 28,608
were shares of Series C Convertible Preferred Stock, and
5,689 were shares of Series B Preferred Stock. Stockholders are entitled to
one vote for each share of Common Stock (including the
shares into which each share
of 6% Convertible Preferred Stock are
convertible) and each share of Series B Preferred Stock on the
business as may properly come before the meeting or any
adjournments thereof. The holders of a majority of the
outstanding voting shares constitute a quorum. Abstentions from
voting and broker non-votes on
a particular Proposal will
be counted for
purposes of determining the presence of
a quorum but will not be counted as affirmative or negative votes on
the Proposals. In the case of Proposal No. 2, which requires a
majority of outstanding shares to amend our Certificate of Incorporation,
abstentions from voting and broker non-votes will have the effect of a negative
vote.
ACTION
TO BE TAKEN UNDER PROXY
All
proxies for stockholders in
the accompanying form that are properly executed and
returned will be voted at the Annual Meeting and
any adjournments thereof in accordance with
any specifications thereon or, if no specifications are
made, will be voted for the election of the four
nominees described herein and for Items 1,
2 and 3.
SOLICITATION
Avitar
will bear the entire cost of the solicitation of
proxies from its
stockholders, including preparation, assembly, printing and
mailing of this Proxy Statement, the proxy card and
any additional information furnished to
stockholders. Copies
of solicitation materials will
be furnished to banks,
brokerage houses, fiduciaries and custodians holding
in their names shares beneficially owned by others to
forward to
such beneficial owners. Original
solicitation of proxies by mail may
be supplemented by telephone, facsimile,
telegram
or personal solicitation by directors, officers or
other regular employees of Avitar. No additional compensation will be
paid to such persons for such services. Avitar may
also employ the services of a professional solicitation company to assist
with
solicitation of stockholders; but as of November 14, 2007 Avitar has not
determined to retain a solicitation company. If such a company were subsequently
retained, Avitar would bear the entire cost.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
Four
(4) directors will be elected to hold office until the next Annual Meeting
of
stockholders and until their successors have been elected and duly
qualified. The persons named on the accompanying proxy will vote all
shares for which they have received proxies for the election of the nominees
named below unless contrary instructions are given. In the event that
any nominee should become unavailable, shares will be voted for a substitute
nominee unless the number of directors constituting a full board is
reduced. Directors are elected by plurality vote.
NOMINEES
The
name, age and position with Avitar of each nominee for director is listed
below, followed by summaries of their background and
principal occupations.
Name
Age Title
Peter
P.
Phildius 77
Chairman of the Board/Chief Executive Officer
Douglas
W.
Scott 61 President
and Chief Operating Officer/Director
Neil
R.
Gordon (1)(2)
59 Director
Charles
R. McCarthy,
Jr. 68 Director
(1)(2)
1.
Member
of Audit Committee.
2.
Member
of Compensation Committee.
PETER
P.
PHILDIUS
Mr.
Phildius has been Chairman of the Board of Directors since October 1990 and
Chief Executive Officer since July 1996. He has been a general partner in
Phildius Kenyon & Scott, a partnership ("PKS"), since that firm's founding
in 1985. Prior to 1985, Mr. Phildius was an independent consultant and Chairman
and co-founder of Nutritional Management, Inc., a company that
operated weight loss clinics (1983 - 1985), President and Chief
Operating Officer of Delmed, Inc., a medical products company (1982 - 1983),
President and Chief Operating Officer of National Medical Care, Inc., a dialysis
and medical products company (1979-1981) and held a variety of senior management
positions with Baxter Laboratories, Inc. ("Baxter"), a hospital
supply company and the predecessor of Baxter Healthcare Corporation.
During the last eight years of his 18 year career at Baxter (1961 - 1979),
Mr. Phildius was Group Vice President and President of the Parenteral
Division, President of the Artificial Organs Division and President of the
Fenwal Division.
DOUGLAS
W. SCOTT
Mr.
Scott has been the
Chief Operating Officer since July
1996, was the Chief Executive Officer from August 1989 until July
1996 and has been a director
since August 1989. Mr. Scott has
been a general partner in PK&S since its
founding in 1985. Prior to 1985, Mr. Scott
was Executive Vice President of Nutritional
Management, Inc. (1983 - 1985); Senior Vice President, Operations of
Delmed, Inc. (1982 -
1983); Vice President, Quality Assurance
of Frito-Lay,
Inc., a consumer products company (1980
- 1982); and held several senior positions at
Baxter from 1970 to 1980. The last two of these senior positions at Baxter
were
General Manager of the Vicra Division and General Manager
of Irish
Operations. Mr. Scott is also a director of Candela Corporation, a
publicly-traded company in the business of
manufacturing and marketing medical lasers. Mr. Scott received an
M.B.A. from the Harvard Business School.
NEIL
R.
GORDON
Mr.
Gordon has served as a director since June 1997. He has been
President of N.R. Gordon
& Company, Inc., a
company that provides a broad range
of financial consulting services, since 1995. From 1981 to 1995, he
was associated with Ekco Group, Inc. and served as its Treasurer from
1987 to 1995. Mr. Gordon has also served as Director of Financing
and Accounting for Empire of Carolina,
Inc. He received a Bachelor of
Science Degree from
the Pennsylvania State
University. Mr. Gordon is also a director of Datameg Corporation, a
publicly-traded company focused on supplying products and related
services that support critical
network performance requirements in the voice, data and
video communications industry.
CHARLES
R. McCARTHY, JR.
Mr. McCarthy was
elected as a director in February 1999. He has
been a counsel in
the Washington D.C. law firm, O'Connor &
Hannan, since 1993.
Previously, Mr. McCarthy was General Counsel to
the National Association of Corporate Directors, served as
a trial attorney with the Securities and Exchange Commission, was
Blue Sky Securities Commissioner for the District of
Columbia and was a
law professor teaching securities law
topics and served as a Board member of and counsel to a number of public
companies over the last 30 years.
NUMBER
OF
DIRECTORS
The Company's Bylaws allow
the Board to fix the number of Board members between 3 and 7. The
number has
been fixed, at present, at 4. The
Board can increase the number to 7 at any time without stockholder
approval. There are no family relationships between any Director or
Executive Officer of Avitar and any other Director or Executive Officer of
Avitar.
TERM
Directors hold
office for a period of one year from the Annual Meeting of
Stockholders at which they
are elected or
until their successors are duly elected and
qualified. Officers are appointed by the Board of Directors and hold office
at
the will of the Board.
BOARD
MEETINGS AND COMMITTEES
The
Board held 2 meetings during the fiscal year ended September 30, 2006
and 1 meeting during the fiscal year ended September 30, 2007. In each of fiscal
year 2007 and 2006, the Directors also executed six (6) unanimous written
consents authorizing financings.
The Board has two standing committees: the Audit Committee and
the Compensation Committee. The Board does not have a standing
nominating committee or any committee performing the function of such a
committee. During fiscal year 2006, each
Board member attended at least 75%
of the aggregate number of meetings of the Board and the
Committee of the Board on which he served.
CONTACTING
OUR BOARD
Our
stockholders and other interested parties who wish to communicate
with our Board or individual Directors may send
written correspondence addressed to them, care of
Secretary, Avitar, Inc., 65 Dan Road, Canton, Massachusetts 02021. All written
correspondence addressed to our Directors will be forwarded promptly by our
Secretary to the Directors to whom it is addressed.
The
Company has no policy on attendance by Directors at the
Annual Meeting
of Shareholders, although the By-Laws provide that
the Annual Meeting of
Directors shall be held as soon
as possible after the Annual Meeting of
Shareholders. In
fact, all Directors attended the
last Annual Meeting of
Shareholders.
NOMINATION
OF DIRECTORS
The
Board of Directors does not have a
separately constituted nominating
committee. The Board believes that it is appropriate under existing
circumstances not to have a separate nominating committee
because the Board is comprised of only four (4) existing members, two (2) of
whom are "independent" as that term is defined in certain
listing standards. All members of the Board of Directors
participate in the consideration of director nominees. The Board of Directors
does not have a formal policy with regard to the consideration of any
director candidates recommended by shareholders.
However,
the Board of Directors
would consider for possible nomination qualified nominees recommended by
shareholders. Shareholders who wish to propose a qualified nominee for
consideration should submit complete information as to the identity and
qualifications of that person to
the Secretary of the Company at 65 Dan Road Canton, MA
02021, sufficiently in advance of an annual
meeting. Absent special circumstances, the Board
of Directors will continue to nominate qualified
incumbent Directors whom the Board of Directors believes
will continue to make important contributions to the Board of
Directors. The Board generally requires that nominees be
persons of sound ethical character, be able to represent
all shareholders fairly, have no material conflicts of
interest, have demonstrated
professional achievement, have meaningful experience and have a general
appreciation of the major business issues facing Avitar. The Board of
Directors does not have a formal process
for identifying and evaluating nominees for
Director.
AUDIT
COMMITTEE
The
Audit Committee of the Avitar Board
of Directors, which consists of
Messrs. Gordon and McCarthy (and which included Mr. Groth
until his death in July 2007), held one (1) telephone meeting concerning fiscal
year 2006. In addition, the
Audit Committee reviewed and approved the financial
statements that were included in each of the quarterly reports on Form
10-QSB during the year ended September 30,
2006. The Board of Directors has
determined that each of the members of the Audit Committee
is independent as
determined in accordance with the
listing standards of
the American Stock Exchange and
Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act. In addition,
the Board of Directors has determined that Neil R. Gordon is an
audit committee financial expert as defined by SEC rules.
The
Audit Committee meets with the independent registered public accounting firm
,
at a minimum annually, to review
the results of the annual audit and
discuss the financial statements; recommends to
the Board the independent registered public accounting
firm to be retained; and receives and considers the registered
public accounting firm's comments as to controls, adequacy
of staff and management performance and procedures in connection with audit
and
financial records. Management has primary responsibility for
financial statements and the
reporting process, including the systems of internal controls, and has
represented to the Audit Committee that Avitar's
2006 consolidated financial statements are in accordance with
generally accepted accounting principles.
AUDIT
COMMITTEE REPORT
In
connection with the fiscal 2006 audit, the Audit Committee has:
- reviewed
and discussed with management Avitar's
audited consolidated
financial statements
included in our annual report on Form 10-KSB for
the
year ended September 30, 2006,
- discussed
with BDO Seidman, LLP the matters required to be
discussed
by
Statement of Auditing Standards No. 61,
- discussed with BDO Seidman, LLP whether various other services
performed
for Avitar during 2006 were compatible with BDO Seidman, LLP
maintaining
its independence, and
- received from and discussed with BDO Seidman, LLP the written
disclosures and
the letter from
BDO Seidman, LLP required by
the
Independence Standards Board Standard
No. 1 and discussed with BDO
Seidman,
LLP its independence.
Based on
the review and the discussions described above, the Audit
Committee recommended to the Board of Directors that the
audited consolidated financial statements be
included in our annual report on Form 10-KSB for the year
ended September 30, 2006 for
filing with
the Securities and Exchange
Commission.
The
Board of Directors has approved a written charter, a copy
of which is attached to the Proxy Statement as Annex A. All members
of the Audit Committee have been determined to be
independent in accordance with the then-applicable
requirements of Section 121(A) of the American Stock Exchange listing
standards.
Fiscal
2006 and 2005 Audit Firm Fee Summary. During fiscal years
2006 and
2005, Avitar retained its principal auditor, BDO Seidman, LLP
to provide services in the following categories and amounts:
|
|
|
2006
|
|
|
2005
|
|
|
Audit
Fees(services in connection with the audit
of
the Company's financial statements, review of the
Company's
quarterly reports of Form 10-QSB and
statutory
or regulatory filings or engagements
|
|
$
|
154,000
|
|
|
$
|
138,445
|
|
|
Audit
Related Fees (assurance and related services)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Tax
Fees (services in connection with the preparation
of
the Company's tax returns)
|
|
$
|
14,700
|
|
|
$
|
14,500
|
|
|
All
Other Fees.
|
|
$
|
-
|
|
|
$
|
-
|
|
The
Audit Committee has considered whether
the provision of non-audit services by the
Company's principal auditor
was compatible with maintaining auditor
independence and has determined such services were not incompatible with
maintaining auditor independence.
THE
AUDIT
COMMITTEE
Neil
R.
Gordon
Charles
R. McCarthy, Jr.
The
Audit Committee Report shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of
1934 (together, the "Acts"), except to the extent Avitar specifically
incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
COMPENSATION
COMMITTEE.
The
Compensation Committee makes recommendations to
the Board concerning
salaries and incentive compensation, awards
stock options to employees and consultants and otherwise
determines compensation levels and performs such other
functions regarding compensation as the Board may
delegate. The Compensation Committee, comprised of Mr.
Gordon, Mr. Groth and Mr. McCarthy, held no meetings in fiscal year
2006.
DIRECTOR
COMPENSATION
During Fiscal
2006 in accordance with a plan approved by the
Company on September 25, 2001, the Company compensated its
non-management directors with a
$5,000
annual retainer, $1,000 for each board meeting attended and $500 for each
committee meeting attended. In addition, a
plan approved by the Company on August 3, 2004 provides for
each non-management director to be granted options
covering 100,000 shares of the Company's common stock upon
initial election to the Board and 75,000 shares of the Company's common stock
for each year in which he/she was selected to serve as a director.
For information on compensation to management directors, see
"Management-Executive Compensation" below.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table
sets forth the number of shares of the Common Stock
beneficially owned as of October 1, 2007 by (i) each person believed
by Avitar to be the beneficial owner of
more than 5% of
the Common Stock; (ii) each
director; (iii) the Chief Executive Officer and its four most highly compensated
executive officers (other than
the Chief Executive Officer) who
earn over $100,000 a year; and (iv)
all directors and executive officers as
a group. Beneficial ownership by the stockholders has been determined
in accordance with the
rules promulgated under Section 13(d) of
the Securities Exchange Act of 1934, as
amended. All shares of the Common Stock are owned both of
record and beneficially, unless otherwise indicated.
|
Name
and Address of Beneficial Owner (1)
|
|
No.
Owned
|
|
|
%
|
|
|
Peter
P. Phildius (2)(3)(8)(9)
|
|
|
99,413
|
|
|
|
*
|
|
|
Douglas
W. Scott (2)(4)(8)(10)
|
|
|
68,173
|
|
|
|
*
|
|
|
Phildius,
Kenyon & Scott("PK&S") (2)(8)
|
|
|
34,652
|
|
|
|
*
|
|
|
Jay
C. Leatherman, Jr.(2)(5)
|
|
|
10,603
|
|
|
|
*
|
|
|
Peter
Cholakis (2)(11)
|
|
|
4,800
|
|
|
|
*
|
|
|
Neil
R.Gordon (2)(6)
|
|
|
6,862
|
|
|
|
*
|
|
|
Charles
R. McCarthy (2)(7)
|
|
|
8,403
|
|
|
|
*
|
|
|
All
directors and executive officers
as
a group (3)(4)(5)(6)(7)(8)(9)(10)
(11)
|
|
|
163,606
|
|
|
|
*
|
|
* Indicates
beneficial ownership of less than one (1%) percent.
(1) Information with respect
to holders of more than five (5%) percent of the
outstanding shares
of the Company's Common Stock was derived from, to the
extent
available, Schedules 13D and the amendments thereto on file with
the
Commission
and the Company's records regarding stock issuances.
(2) The business address
of such persons, for
the purpose hereof, is c/o
Avitar,
Inc., 65 Dan Road, Canton, MA 02021.
(3) Includes
33,362 shares of the Company's Common Stock, options
to
purchase 31,403 shares of the Company's Common Stock. Also includes
the
securities
of the Company beneficially owned by PK&S as described below
in
Note
8.
(4) Includes 14,310 shares of
the Company's Common Stock
and options to
purchase 19,211 shares
of the Company's Common Stock. Also includes
the
securities
of the Company beneficially owned by PK&S as described below
in
Note
8.
(5) Includes
113 shares of the Company's Common Stock, and options to
purchase
10,490
shares of the Company's Common Stock.
(6)
Includes
1,812 shares of the Company's Common Stock and options to purchase
5,050
shares of the Company's Common Stock.
(7) Includes
3,453 shares of the Company's Common Stock and options to purchase
4,950
shares of the Common Stock.
(8) Represents ownership
of 34,652 shares of the Company's Common Stock. PK&S
is
a partnership of which Mr. Phildius and Mr. Scott are general
partners.
(9)
Does
not include 682 shares of the
Common Stock owned by
Mr. Phildius'
wife,
all of which he disclaims beneficial ownership.
(10)
Does
not include 300 shares of
the Common Stock owned by
Mr. Scott's
children,
all of which he disclaims beneficial ownership.
(
11)
Includes options to purchase 4,800 shares of the Company's Common
Stock.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires the officers
and directors, and persons who own more than 10% of a registered class of equity
securities to file reports
of ownership and changes
in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than 10% stockholders are required
by
SEC regulation to furnish Avitar with copies of all Section 16(a) forms they
file.
Based
on its review of the copies of
such forms received by it the
Company believes that, during Fiscal 2006, all
filing requirements applicable to its officers,
directors and greater than ten-percent shareholders were met.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
PK&S,
a 1.8 % beneficial owner of the Company, provided consulting services to the
Company from September 1989 to May 1995. On May
28, 1992, the Company entered into a
written consulting agreement with
PK&S, which reflected the
provisions of a
previous oral agreement approved by
the Company's Board of Directors in October
1990. Pursuant to its arrangement with the
Company, PK&S provided the services of each of Messrs. Phildius
and Scott to the Company.
On
May 19, 1995, the Company's Consulting Agreement ended and was
replaced by the Employment Agreements with
Messrs. Phildius and Scott (See "Employment
Agreements"). As requested by
Messrs. Phildius and Scott and approved by
the Company's Board
of Directors, the salary and benefits provided under
the Employment Agreements will be
paid directly to PK&S. Under the terms of
the current employment agreements with Peter
Phildius and Douglas Scott described above, the Company pays their
salaries and related expenses directly to PK&S.
The
aggregate of salaries, fringe benefits and reimbursement of expenses paid
to
PK&S
by the Company on behalf of
Messrs. Phildius and Scott for fiscal years
2006
and
2005 totaled $408,628 and $414,709 respectively.
MANAGEMENT
The executive officers of
the Company and their respective ages
and positions with the Company, as
of September
30, 2007, along with certain
biographical information (based solely on information supplied by
them), are as follows:
Name
Age Title
Peter
P.
Phildius
77 Chairman of the Board and Chief
Executive
Officer/Director
Douglas
W. Scott
(1) 61 President
and Chief Operating Officer/
Director
Jay
C. Leatherman Jr.
63 Vice President, Chief
Financial Officer and
Secretary
Peter
Cholakis 57 Vice
President of Marketing
PETER
P.
PHILDIUS
Biographical
information of Mr. Phildius is included under "Proposal No. 1,
Election
of Directors -- Nominees" in this Proxy Statement.
DOUGLAS
W. SCOTT
Biographical information
of Mr. Scott is included under "Proposal No. 1,
Election
of Directors -- Nominees" in this Proxy Statement.
JAY
C.
LEATHERMAN, JR.
Mr. Leatherman
has served as the Company's Chief Financial Officer since
October 1992 and its Secretary since July 1994. He has over 27
years experience
in financial management in the
health care, medical products and medical
diagnostic fields. Mr. Leatherman served as Vice President
and Chief Financial Officer of 3030 Park, Inc. and 3030
Park Management Company from 1985 to 1992,
responsible for financial, management information services and business
development functions for this continuing care retirement community and
management company. He served as Director of Finance and
Business Services for
the Visiting Nurses Association of
New Haven, Inc. from 1977 to
1985. In addition, he served in a variety
of accounting and
financial positions with Westinghouse Electric
Corporation from 1969 to 1977. Mr. Leatherman has a B.B.A in accounting from
the
University of Hawaii.
PETER
CHOLAKIS
Mr. Cholakis
has served as the Company's Vice President of Marketing since
February 2004. He has over 20 years
of senior marketing experience and
is
leading Avitar's marketing campaign in penetrating the $1.5 billion
drugs-of-abuse market with its point-of-care oral
fluid drugs-of-abuse test, ORALscreen(R). Before joining
Avitar, Mr. Cholakis worked for VFA, a Boston-based
enterprise software and services firm as vice president of
marketing. Prior to that, he held key marketing and sales positions
in the high technology product and consultative service
markets.
EXECUTIVE
COMPENSATION
Summary Compensation Table. The
following table sets forth compensation earned by or paid to the
Chief Executive Officer, Chief
Operating Officer and
other executive officers for Fiscal 2006
and, to the extent required by
applicable Commission rules, the preceding two fiscal years.
|
|
|
|
Annual
Compensation
|
|
|
Long-Term
|
|
|
Name/Position
|
Year
|
|
Salary(1)
|
|
|
Bonus
|
|
|
Compensation
Options
|
|
|
Peter
P. Phildius
(Chairman
of the Board/
Chief
Executive Officer)
|
2006
|
|
$
|
200,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
$
|
200,000
|
|
|
$
|
0
|
|
|
|
9,072
|
(2)
|
|
|
2004
|
|
$
|
200,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
Douglas
W. Scott
(President/
Chief
Operating Officer)
|
2006
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
|
4,752
|
(2)
|
|
|
2004
|
|
$
|
180,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
Jay
C. Leatherman, Jr.
(Chief
Financial Officer)
|
2006
|
|
$
|
140,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
$
|
140,000
|
|
|
$
|
0
|
|
|
|
3,150
|
(2)
|
|
|
2004
|
|
$
|
140,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
Richard
Anderson(7)
(Vice
President of Research
&
Development)
|
2006
|
|
$
|
140,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
$
|
140,000
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2004(3)
|
|
$
|
-
|
|
|
$
|
0
|
|
|
|
8,000
|
(4)
|
|
Peter
Cholakis
(Vice
President of
Marketing)
|
2006
|
|
$
|
149,995
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
$
|
143,747
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2004(3)
|
|
$
|
-
|
|
|
$
|
0
|
|
|
|
8,000
|
(5)
|
|
David
Greaves (6)
(Vice
President of Sales
|
2006(3)
|
|
$
|
-
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2005
|
|
$
|
184,130
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
2004(3)
|
|
$
|
-
|
|
|
$
|
0
|
|
|
|
8,000
|
(4)
|
(1) Does
not include amounts reimbursed for business-related expenses
incurred
by
the executive officers on behalf of the Company.
(2) Reflects additional stock options granted
to executive officers by the
Company's
Board of Directors in October 2004.
(3) Compensation
was less than $100,000.
(4) Reflects
stock options granted to executive officers by the Company's Board
of
Directors in June 2004.
(5) Reflects
stock options granted to executive officers by the Company's Board
of
Directors in February 2004.
(6) Resigned
in November 2005.
(7) Resigned
in October 2006.
Stock
Option Grants in Last Fiscal Year. No stock options were granted to
executive officers during Fiscal 2006.
Option
Exercises in Last Fiscal Year and Year-Ended Option Values. No stock options
or
stock appreciation rights were exercised by the executive officers in Fiscal
2006.
As
of September 30, 2006, the executive officers held options as
follows, none of which are in the money:
|
|
|
Options
|
|
|
Value
of Options
|
|
|
|
|
Total
Options
|
|
|
Exercisable
|
|
|
Exercisable
|
|
|
Not
Exercisable
|
|
|
Peter
Phildius
|
|
|
47,632
|
|
|
|
27,270
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Douglas
Scott
|
|
|
27,712
|
|
|
|
17,066
|
|
|
|
0
|
|
|
|
0
|
|
|
Jay
Leatherman
|
|
|
16,175
|
|
|
|
8,425
|
|
|
|
0
|
|
|
|
0
|
|
|
Richard
Anderson
|
|
|
8,000
|
|
|
|
3,200
|
|
|
|
0
|
|
|
|
0
|
|
|
Peter
Cholakis
|
|
|
8,000
|
|
|
|
4,800
|
|
|
|
0
|
|
|
|
0
|
|
Employment Agreements. Messrs. Phildius and
Scott are covered by Employment
Agreements (the "Employment Agreements") which commenced on
May 19, 1995.
Pursuant
to the Employment Agreements, if
Messrs. Phildius and/or Scott are
terminated without "Cause" (as such term is defined in the Employment
Agreements) by the Company or if Messrs. Phildius and/or
Scott terminate their employment as a result of a breach by the
Company of its obligations under such
Agreements, he
will be entitled to receive his annual base salary ($200,000 for
Mr. Phildius and $180,000 for
Mr. Scott) for a period of up to
18 months following such termination. In
addition, if there is a "Change of Control" of the Company (as such
term is defined in the Employment Agreements) and, within
two years following such "Change of
Control", either of Messrs. Phildius or Scott is
terminated without cause by the Company or terminates his employment as a result
of a breach by the Company, such executive will be entitled to
certain payments and benefits, including the payment, in a lump sum,
of an amount equal to up to two times the sum of (i)
the executive's annual base salary and (ii) the
executive's most recent annual bonus (if any). In addition, pursuant
to the Employment Agreements, which have a
three-year term (subject to extension),
Messrs. Phildius and Scott are each entitled to annual
bonus payments of up to $150,000 if the Company achieves
certain levels of pre-tax income (as such term
is defined
in such Agreements) or alternative net income objectives established
by the Board of Directors.
REQUIRED
VOTE
Election
of each of the four nominees for director requires, under Avitar's
Bylaws, the affirmative vote of the holders of a majority
of the Avitar Common Stock and other voting shares present in person or by
proxy
at the Avitar Annual Meeting (assuming a quorum exists) and entitled to vote
thereon.
BOARD
RECOMMENDATION
The
Avitar Board of Directors unanimously recommends a vote FOR election of all
of
the four nominees for director.
PROPOSAL
NO. 2
APPROVAL OF
AN AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION THAT WOULD INCREASE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON
STOCK FROM 100,000,000 TO 800,000,000.
General
The
board of directors has unanimously adopted
a resolution approving,
subject to approval by our stockholders, the Proposed Amendment to our
Certificate of Incorporation, that would increase the
number of authorized shares of our common stock from 100,000,000 to
800,000,000. Under
the Proposed Amendment, a copy of which
is attached hereto as Appendix B, the authorized shares of
common stock would be increased to 800 million. Approval of the
Proposed Amendment will authorize the board of directors
to effect the increase of authorized shares of common stock. . We currently
anticipate that if the increase of authorized shares of
common stock is approved by stockholders at the Annual
Meeting, such increase of authorized shares of common stock would be implemented
on the date of the Annual Meeting or as soon as practicable
thereafter, subject to compliance with any applicable
rules.
Purposes
of the Increase of Authorized Shares of Common Stock
Increase
in authorized but unissued shares of common stock. The
principal reason for the increase in the number
of authorized shares of common stock is the availability for issuance of
such
shares for all of our
future purposes, including the shares to
be reserved for issuance upon
the conversion of the $6,126,000 outstanding
convertible notes and exercise of the 113.5 million
warrants issued pursuant to our private placements from
September 2005 to November 2007.
Of the total 700
million increase of the authorized shares of common stock, from 100 million
to
800 million,
617
million
will be reserved for the convertible notes and warrants issued pursuant
to our
private placements from September 2005 to
November
2007.
The Company has agreed in the private
placements from September 2005 to November 2007 to increase sufficient
authorized but unissued shares of common stock as required for the convertible
notes and warrants.
Terms
of Private Placements from September 2005 to November 2007.
From
September 2005 through November 2007, the Company executed notes payable
with AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC,
New
Millennium Capital Partners II, LLC and AJW Master Fund, Ltd. in the total
principal amount of $6,565,000 which are payable at maturities
from September 2008 through November 2010. Interest on
these notes is at 8% per annum and is payable quarterly in cash or the Company’s
common stock at the option of the Company.
The
Company originally issued warrants to purchase 100,000 shares of common
stock at
$12.50 per share for five years in connection with certain of these notes
executed from September 2005 to April 2006. In conjunction with the
notes executed in May 2006, the outstanding warrants were cancelled and
replaced
with warrants to purchase 3,000,000 shares of common stock at $1.25 per
share
for seven years. For the notes executed in July 2006
through November 2007, the Company issued warrants to purchase a total of
110,500,000 shares of common stock at $.01 to $.22 per share for seven
years.
The
collateral pledged by the Company to secure these notes includes all assets
of
the Company.
Through
November 13, 2007, notes totaling $439,257 were converted into 49,899,483
shares
of common stock.
The
Company entered into the September 2005 $3 million private placement of
convertible notes and warrants based upon a Securities Purchase Agreement
with
accredited investors. The securities issued in the September 2005
private placement were $3 million of 8% Secured
Convertible Notes and Warrants to
purchase 6,000,000 shares of the Company's
Common Stock in exchange for gross proceeds of $3
million, of which $1 million was paid in the first closing on
September 23, 2005. A second tranche of $1 million was paid after we
filed a registration statement with respect to the shares
issuable upon conversion of
the Notes and exercise of
the Warrants. On December 2, 2005, the Company applied to
the SEC to withdraw this registration statement. The Company filed
another registration statement with respect to the shares issuable upon
conversion of the Notes and exercise of the Warrants (the "Registration
Statement") which became effective in June 2006 and all of the shares registered
thereunder were issued by mid-August 2007. We received the balance of
$1 million from February through May, 2006 and the additional principal
amount
of $3.565 million in additional private placements with the same or related
Purchasers from July 2006 to November 2007.
All
the Notes issued in the private placements from September
2005 to November 2007 bear interest at
8%, mature three years from the
date of issuance, and are now
convertible into our common stock at
any time, at the
Purchasers' option, at 40% of the average of
the three lowest intraday trading prices for the Common Stock for the
20 trading days ending the day before the conversion
date. The initial conversion rate in 2005 was 65% of market, in May
2007 the conversion rate was reduced to 55% of market for all Notes issued
after
February 2006 and in November 2007 the conversion rates for all the outstanding
Notes were reduced to 40% of market.
The
full principal amount of the Notes, plus a
default interest rate of 15%, is due upon a
default under the terms of
the Notes. We have a right to prepay the Notes under
certain circumstances at a premium ranging from
20% to 35% depending on the timing of such prepayment.
In
addition, we granted the Purchasers a security interest in substantially all
of
our assets. We are further required to file
another Registration Statement with the Securities and
Exchange Commission within 30 days of demand for
registration. If the Registration Statement is not filed on time or
not declared effective within 120 days from the date of demand, we are required
to pay to the Purchasers damages in Common Stock or cash, at the election of
the
Company, in an amount equal to two percent of
the outstanding principal amount of the Notes
per month plus accrued and unpaid interest.
The
Purchasers may exercise the Warrants on a cashless basis if the shares of Common
Stock underlying the Warrants are not then registered pursuant to an
effective registration statement. In the event
the Purchasers exercise the Warrants on a
cashless basis, we will not receive any
proceeds. In addition, the Warrants are subject to
standard anti-dilution provisions.
The
Purchasers have agreed to restrict their ability to convert their Notes or
exercise their Warrants and receive shares of our common stock such
that the number of shares of
common stock held by them
and their affiliates in the
aggregate after such conversion or
exercise does not exceed 4.9% of the then issued and outstanding
shares of Common Stock.
As
a summary and for illustrative purposes only, the following table shows
approximately the present numbers of our common stock and the effect on our
common stock of the proposed increase of authorized shares, based on 87,641,617
shares of common stock issued and outstanding as of the close of business
on
November 14, 2007:
|
|
|
Prior
to Increase of Authorized
|
|
|
After
Increase of Authorized
|
|
|
◊ Authorized
common stock
|
|
|
100,000,000
|
|
|
|
800,000,000
|
|
|
◊ Issued
and outstanding
|
|
|
87,641,617
|
|
|
|
87,641,617
|
|
|
◊ Reserved
for issuance upon exercise of
outstanding
stock options
|
|
|
97,719
|
|
|
|
97,719
|
|
|
◊ Reserved
for future issuance under each of the
Company's
stock plans, warrants, contractual
commitments
or other obligation
|
|
|
127,405,806
|
|
|
|
127,405,806
|
|
|
◊ Reserved
for future issuance upon conversion
of
the Company's issued and outstanding
preferred
stock
|
|
|
11,152,455
|
|
|
|
11,152,455
|
|
|
◊ Reserved
for future issuance upon conversion
of
the Company's issued and
outstanding
convertible notes
Prior
to September 2005
|
|
|
260,000
|
|
|
|
260,000
|
|
|
◊
Number
of
Shares underlying
Notes
in principal amount of $6,126,000
from
September 2005 to November 2007
Private
Placements based on
approximately
$0.0125 per share*
|
|
|
490,080,000
|
|
|
|
490,080,000
|
|
|
◊ Deficiency
in number of authorized shares
|
|
|
(616,637,597
|
)
|
|
|
-
|
|
|
◊
Authorized, unreserved and unissued
|
|
|
-
|
|
|
|
83,460,122
|
|
NOTE
* If the number of shares underlying the outstanding Notes in the
principal amount of $6,126,000 issued in private placements from September
2005
to November 2007 were based upon the closing price on November 9, 2007
of $0.0026,
the total number of shares reserved would
be approximately
5.9
billion,
which is
5.
1
billion more than the total authorized amount, 800,000,000
shares, that the Board of Directors has approved.
[$ 6,126,000 at 40% (0.00104) = 5,890,384,615 shares .] However, the
Board of Directors has unanimously determined at this time to increase
the
number of authorized shares of common stock only to
800,000,000. Further, the Board unanimously decided that the numbers
of authorized shares that may be indicated by some recent market prices
are at
this time excessive and inappropriate for the Company.
After completion of
the increase of authorized (assuming the increase of authorized
became effective at the close of business on November 14, 2007) ,we would
have
approximately 712 million shares of authorized but
unissued shares of common stock, of which an aggregate of
approximately 629 million would be reserved for
issuance pursuant to the Plans and outstanding but
unexercised options and warrants and convertible debt and equity
securities. The authorized and unissued
and unreserved shares, approximately 83 million,
would be available from time to time for corporate purposes including raising
additional capital, acquisitions of companies or assets,
for strategic transactions, including a sale of all or a portion of the
Company,
and sales of stock or securities convertible into common stock. We
currently have no plan, arrangement or agreement to issue
shares of our common stock for
any purpose, except for the issuance of shares of common
stock pursuant to our
stock option and employee stock purchase plans
and outstanding but unexercised options and warrants and outstanding convertible
debt ($6.126 million at present convertible at 60% below market prices) and
equity securities and plans to
raise an additional $4 million in
our previously reported capital raising
plan. If we issue additional shares, the ownership interests of holders of
our common stock may be diluted. The issuance of large numbers of
shares, particularly at below market prices, is likely to result in substantial
dilution to the interests of other stockholders. In addition,
issuances of large numbers of shares may further adversely affect the market
price of our common stock.
Further
Considerations Concerning Convertible Notes. The number of shares
issuable upon conversion of the convertible notes, like the
outstanding shares of preferred stock, is determined by
the market price of our common stock prevailing at the
time of each conversion. The lower the market
price, the greater is the number of shares issuable under
the agreement. Upon issuance of the shares, to the extent that
holders of those shares will attempt to sell the
shares into the market, these sales may
further reduce the market price of
our common stock. This in turn
will increase the number of shares
issuable under
the agreement. This may lead to an escalation
of lower market
prices and
ever greater numbers of shares to
be issued. A larger number of
shares issuable at
a discount to
a continuously declining stock price
will
expose
our stockholders to
greater dilution and a reduction of the value
of
their
investment.
The
convertible notes have the potential to cause significant downward
pressure
on
the
price of our common stock. This
is particularly the case if the shares
issued
upon conversion and placed into the market exceed the market's ability to
absorb the increased number
of shares of stock. Such an
event could place
further downward pressure
on the price of our
common stock. The opportunity
exists
for short sellers and others to contribute to the
future decline of our
stock price. If
there are significant short sales of
our stock, the price
decline that
would result from this activity will
cause the share price to
decline more
so, which, in turn, may cause long holders of
the stock to sell
their
shares thereby contributing to sales of stock in the
market. If there is
an
imbalance on the sell side of the market for the stock, our stock
price will
decline. If
this occurs, the number of shares of
our common stock that is
issuable
upon conversion of the convertible notes
will increase, which will
materially
dilute existing stockholders' equity and voting rights.
As
noted above, the authorized and unissued and unreserved shares would
be available from time to time for
various corporate purposes. In general, no
further shareholder approval will
be required for such future issuances.
However, shareholder approval may
be required for issuances that involve
combinations with, or sales to, other parties. In addition, shareholder approval
may
be required for future issuances if
the Company becomes listed on an exchange or
quoted on a NASDAQ Market.
Potential
Anti-Takeover Effects
If
the Proposed Amendment is approved by our stockholders and
the increase of authorized shares is implemented, the
increased proportion of unissued authorized
shares to issued shares could, under certain circumstances, have an
anti-takeover effect. These authorized but unissued shares could be
used by the Company to oppose a hostile takeover attempt or to delay
or prevent a change of control or changes in
or removal of our board
of directors, including a
transaction that may be favored by a majority of
our stockholders or in which
our stockholders might receive a premium for
their shares over then-current market prices or
benefit in some other manner. For
example, without further stockholder approval, our board
of directors could issue and sell shares thereby
diluting the stock ownership of a
person seeking to effect a change in the
composition of our board of directors or to propose or
complete a tender offer or
business combination involving us
and potentially strategically placing
shares with purchasers who
would oppose such a change in our board or such a
transaction. Although the increased proportion of unissued authorized
shares to issued shares could, under certain circumstances, have an
anti-takeover effect, the increase in authorized is not being proposed in
response to any effort of which we are aware to accumulate the shares of our
common stock or obtain control of us, nor is it part of a plan by
our management to recommend a series of similar amendments to our
board of directors and stockholders.
BOARD
RECOMMENDATION
The
Board of Directors of Avitar unanimously recommends a vote FOR Proposal
No.
2.
PROPOSAL
NO. 3
RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The
Board of Directors of Avitar selected BDO Seidman, LLP as auditors
for the fiscal year ending September 30, 2007, subject to
stockholder approval by ratification. BDO Seidman, LLP has
been the independent registered accounting firm for Avitar
since December 1992. A representative of BDO
Seidman, LLP is expected to be present at the
Annual Meeting, at which time he or she will be afforded
an opportunity to make a statement, and will be available to respond to
questions.
The
Board of Directors of Avitar may, in its discretion, direct appointment of
new independent auditors at any
time during the fiscal year if the Board
believes such change would be
in the best interests of Avitar and its
stockholders. No such change is anticipated.
REQUIRED
VOTE
Approval
of ratification of BDO Seidman, LLP requires the affirmative vote of
the holders of a majority of the
Avitar Common Stock
and Preferred Stock present in person or by proxy at the
Avitar Annual Meeting (assuming a quorum
exists) and entitled to vote thereon.
BOARD
RECOMMENDATION
The
Board of Directors of
Avitar unanimously recommends a vote FOR the
ratification of BDO Seidman, LLP as
registered accounting firm for the fiscal year ending September 30,
2007.
OTHER
BUSINESS
The
proxy confers discretionary authority on the
proxies with respect to any other business, which may
come before the Annual Meeting. The
Board of Directors of Avitar knows of no
other matters to be presented at the Annual
Meeting. The persons named in the proxy will vote the shares for which they
hold
proxies according to their best judgment if any
matters not included in this Proxy Statement properly come before the
meeting.
CODE
OF
ETHICS
Avitar
has adopted a code of ethics that applies to its principal executive officer,
principal financial officer, principal accounting officer or controller and
all
persons performing similar functions, if any. The Company
will provide to any person
without charge, upon request, a copy
of such code of ethics. Requests should be made in writing to:
Corporate Secretary, Avitar, Inc., 65 Dan Road Canton, MA 02021.
INCORPORATION
OF ANNUAL REPORT ON FORM 10-KSB
We
are incorporating by reference the information contained
in the Annual Report on Form 10-KSB for the year ended September 30,
2006, including our most recent audited financial statements and
management's discussion and analysis of financial condition and
results of operations. The Annual Report was filed with the SEC under
the Exchange Act and will be delivered to
our shareholders with this Proxy Statement.
STOCKHOLDER
PROPOSALS
Any
stockholder proposal to be included in the proxy statement and form
of proxy relating to the
2008 Annual Meeting of Avitar Stockholders must
be received by the close of business on June 30, 2008 and must comply in all
other
respects with the rules and regulations of the Securities and Exchange
Commission. Proposals should be addressed to: Corporate Secretary, Avitar,
Inc.,
65 Dan Road, Canton, Massachusetts 02021.
APPENDIX
A
AVITAR,
INC.
AUDIT
COMMITTEE CHARTER
Organization
There shall
be a committee of
the board of directors known as
the audit committee. The audit committee shall be
comprised of directors, the majority of
whom are independent (as defined in
the American Stock Exchange Listing
Standards) of the management of the corporation and are free of any relationship
that, in the opinion of the board
of directors, would interfere with
their exercise of independent judgment as a committee member.
Statement
of Policy
The
audit committee shall
provide assistance to
the corporate directors in fulfilling
their responsibilities to the
shareholders, potential shareholders and investment
community relating to corporate accounting, reporting
practices of the corporation, and the quality and
integrity of the financial reports of the corporation. In so doing,
it is the responsibility of the audit committee to maintain free and
open means of communication between the directors, the
independent auditors and the financial management of the
corporation.
Responsibilities
The
audit
committee believes its policies and procedures should remain flexible, in order
to best react to changing conditions and ensure to
the directors and shareholders that the accounting and
reporting practices of the corporation are in accordance with all
requirements and are of the highest quality.
In
carrying out its responsibilities, the audit committee will:
1. Review
and make a recommendation to the directors regarding the
independent
auditors to be selected to audit the financial statements of the
corporation
and its subsidiaries.
2. Meet with the independent auditors and financial management of the
corporation to
review the scope of the proposed audit for the current year
and
the audit procedures to be utilized, and at
the conclusion thereof
review such audit, including any comment or recommendations of the
independent
auditors.
3. Review with the independent auditors and the corporation's internal
financial
and accounting personnel the adequacy
and effectiveness of the
accounting
and financial controls procedures of the corporation, and
elicit
any
recommendations for the improvement of such internal control
procedures
or
particular areas where new or more detailed controls or
procedures are
desirable. Particular emphasis should
be given to the adequacy of such
internal controls
to expose any payments, transactions or procedures
that
might
be
deemed illegal or otherwise improper.
4. Review
the audited financial statements to be included in the annual
report
to shareholders and
the annual report filed with Securities and Exchange
Commission ("SEC")
on Form 10-KSB with management and
the independent
auditors
to determine that the independent auditors are satisfied with
the
disclosure and
content of the financial statements to be presented to
the
shareholders
and filed with the SEC. Make a recommendation to the board
of
directors regarding
the inclusion of the audited financial statements
in
such annual reports. Any changes in accounting principles should
be
reviewed.
5. Review
the financial information included in the
corporations' Quarterly
Reports
on Form 10-QSB prior to the corporation filing
such reports with
Securities
and Exchange Commission.
6. Provide sufficient opportunity
for the independent auditors to meet with
members
of the audit committee without members of management present. Among
the
items to be discussed in these meetings are
the independent auditors'
evaluation
of the corporation's financial and accounting personnel, and the
cooperation
that the independent auditors received during the course of
the
audit.
7. Review
the matters discussed at each committee meeting
with the board of
directors.
8. Investigate any
matter brought to its attention within the
scope of its
duties, with
the power to retain outside counsel for this purpose if,
in
its
judgment, that is appropriate.
APPENDIX
B
CERTIFICATE
OF AMENDMENT
OF
CERTIFICATE
OF INCORPORATION
Avitar, Inc.,
a corporation organized and existing under and by virtue
of the
General
Corporation Law of the State of Delaware,
DOES
HEREBY CERTIFY:
FIRST: That
by unanimous written consent of the Board
of Directors of Avitar, Inc., resolutions were duly
adopted setting forth proposed an amendment of the Certificate of Incorporation
of said corporation, declaring said amendment to be advisable and
calling a meeting of the stockholders of
said corporation for consideration thereof. The resolutions setting
forth the proposed amendment are as follows:
RESOLVED, that
the Certificate of Incorporation of
this corporation be amended by changing the Article
thereof numbered "FOURTH" so that, as amended, said Article shall be and read
as
follows:
FOURTH: The
total number of shares of stock which
the corporation shall have authority to issue is Eight Hundred Five
Million (805,000,000), of which Eight Hundred
Million (800,000,000) shares shall be Common Stock, par
value $.01 per share, and Five Million (5,000,000) shares shall
be Preferred Stock, par value $.001 per share.
SECOND:
That thereafter, pursuant to resolutions of its Board of Directors, the annual
meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at
which meeting the necessary number
of shares as required by statute were voting in favor of the
amendment.
THIRD: That
said amendment was
duly adopted in accordance with the
provisions of Section 242(c) of
the General Corporation Law of the State of
Delaware.
FOURTH: That
the capital of said corporation shall not be reduced under or
by
reason
of said amendment.
IN
WITNESS WHEREOF, said Avitar, Inc. has caused
this certificate to be signed by Peter
P. Phildius, its Chairman and
Chief Executive Officer, this
_____day
of ____________ , 2007.
By:
--------------------------------
Peter
P. Phildius,
Chairman
& Chief Executive Office
ATTEST:
By: _____________________
Jay
C. Leatherman,
Secretary
VOTE
BY
INTERNET OR TELEPHONE
QUICK
*** EASY *** IMMEDIATE
Voting
by internet or telephone is quick, easy and
immediate.
As a stockholder of Avitar, Inc., you have
the option of voting your shares electronically through the Internet
or on the
telephone, eliminating the need to return the proxy card. Your
electronic vote authorizes the named proxies to vote your shares in the
same
manner as if you marked, signed, dated and returned the proxy
card. Votes submitted electronically over the Internet or by
telephone must be received by 7:00 p.m., Eastern Time, on December 17,
2007.
Vote
Your Proxy on the Internet:
Go
to
www.continentalstock.com
.
Have
your
proxy card available when you access the above website. Follow the
prompts to vote your shares.
Vote
Your Proxy by Phone:
Call
1(866) 894-0537
Use
any
touch-tone telephone to vote your proxy. Have your proxy card
available when you call. Follow the voting instructions to vote your
shares.
PLEASE
DO NOT SEND YOUR PROXY CARD IF YOU ARE
VOTING
ELECTRONICALLY OR BY PHONE
Vote
Your Proxy by mail:
Mark,
sign, and date your proxy card, then detach it, and return it in the
postage-paid envelope provided.
FOLD
AND DETACH HERE AND READ THE REVERSE SIDE
PROXY CARD
AVITAR,
INC.
65
Dan Road, Canton,
Massachusetts 02021
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby
appoints Peter P. Phildius and Douglas W. Scott as Proxies, each with
the power to appoint his substitute and
hereby authorizes them to represent and to vote,
as designated below and on the reverse hereof,
all shares of common stock of
Avitar, Inc. ("Avitar") or shares of Preferred
Stock of Avitar held of record by
the undersigned on November 1, 2007 at the Annual Meeting
of stockholders of Avitar to be held on December 18, 2007 or any
adjournments thereof.
The
undersigned hereby revokes any proxies heretofore given to vote said
shares.
The
undersigned hereby acknowledges receipt of Avitar's Annual Report for 2006
and
of the Notice of Annual Meeting of Stockholders and attached Proxy Statement
dated November 14, 2007.
(Continued,
and to be marked, dated, and signed, on the other side)
This
proxy, when properly executed, will be voted in the manner directed herein
by
the undersigned stockholder. If no direction is made, this proxy will
be voted FOR Items 1, 2 and 3.
[SHAREHOLDER
ADDRESS LABEL]
------------------------
Signature Signature Date ,
2007
Please
sign exactly as your name appears to the left above. When signing as
corporate officer, partner, attorney, administrator,
trustee or guardian, please give your full title as such.
Please
mark boxes on reverse hereof in blue or black ink. Please date, sign
and
return
this Proxy Card promptly using the enclosed envelope.
FOLD
AND DETACH HERE AND READ THE REVERSE SIDE
1.
Election of Directors.
For
all
nominees listed below (except as marked to the contrary listed below) [ _
]
Withhold
Authority to vote for all nominees marked to the contrary below [ _
]
(Instruction: To
withhold authority to vote for any individual nominee strike a line through
the
nominee's name below.)
Peter
P.
Phildius Douglas W.
Scott Neil
R.Gordon Charles
R. McCarthy, Jr.
2..
To
approve the proposed amendment to our Certificate of Incorporation to increase
the authorized shares of our common stock to 800 million.
For Against Abstain
---------------- ---------------- -------------
3.
To
ratify the appointment of BDO Seidman, LLP as registered independent public
accounting firm for Avitar for the fiscal year ending September 30,
2007.
For Against Abstain
---------------- ---------------- -------------
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