Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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
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Sonex Research, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Stattement, if other than the Registrant)
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[X] No fee required.
[ ] Fee computed per Exchange Act Rules 14a-6(i)(1) and 0-11.
SONEX RESEARCH, INC.
23 Hudson Street
Annapolis, MD 21401
Tel: 410-266-5556; Fax: 410-266-5653
E-mail: sonex@erols.com
Website: www.sonexresearch.com
August 2003
Dear Fellow Shareholders:
I am pleased to report that the period from August 2002 through the
present has seen substantial growth at Sonex. During the second half of 2002 the
Company secured new engine development projects from branches of the U.S.
government and Department of Defense (DoD) and/or their prime contractors,
resulting in record revenues for 2002 and 2003 to date. We increased our
full-time staff from three to seven, added two part-time employees, and
continued to have access to high-caliber technical consultants. Significant
upgrades have been made to our engineering and design capabilities which will
lead to greater efficiencies in fabricating and analyzing Sonex development
components.
This year the Company has expanded its marketing and commercialization
capabilities by hiring specialized consultants to provide business advisory
services in areas such as strategic alliances, federal marketing, and government
procurement assistance. We also have made an effort this year to increase the
industry exposure worldwide of the Sonex Combustion System (SCS) technologies
with technical publications and presentations for the international engine
community.
Along with the boost in revenues from the new contracts has come an
increase in expenditures through higher personnel costs for the expansion of our
technical staff and improvements to our test facility and computer capabilities
to meet the demands of the projects, as well as the new spending on marketing
and commercialization services. The Company has been able to meet its cash needs
through revenue receipts and, among other measures, the continued voluntary
deferral of salaries by Company officers, flexible payment arrangements with
consultants, and the securing of short-term loans from shareholders.
I firmly believe that the strides made in the past twelve months are
laying the foundation for successful commercialization of the SCS technologies.
We continue to pursue new opportunities for revenue as we perform development
work on the current engine projects, and we look for positive results from our
expanded marketing efforts.
The accompanying Annual Report on Form 10-KSB for the year ended
December 31, 2002 provides a comprehensive explanation of the Company's business
initiatives and finances. The information presented is current as of March 2003
when the Form 10-KSB was filed with the SEC, and is supplemented by the "Report
for the Second Quarter of 2003" enclosed with the proxy materials.
I extend my gratitude to my fellow shareholders for their continued
support, particularly to those who have lent their time, energy, and financial
resources to Sonex, and to our employees and consultants for their continued
hard work. The Company will hold its Annual Meeting here in Annapolis on
Tuesday, September16, 2003, and I look forward to seeing many of you at that
time.
Sincerely,
Andrew A. Pouring, D.Eng.
Chief Executive Officer
SONEX RESEARCH, INC.
23 Hudson Street
Annapolis, Maryland 21401
2003 ANNUAL MEETING OF SHAREHOLDERS
NOTICE OF MEETING AND PROXY STATEMENT
To the Shareholders of Sonex Research, Inc.:
The 2003 Annual Meeting of Shareholders of Sonex Research, Inc. (the
"Corporation") will be held on Tuesday, September 16, 2003 at 10:00 a.m. local
time in the Dorsey Room in the Hampton Inn & Suites, located in the ARINC
Corporate Park, 124 Womack Drive, Annapolis, Maryland. Holders of record of the
Common Stock and Preferred Stock of the Corporation at the close of business on
July 28, 2003 will be entitled to notice of, and to vote, as and if applicable,
at the Annual Meeting and any adjournment thereof.
Shareholders will act upon the following matters and such other matters as may
properly come before the Annual Meeting or any adjournment thereof:
PREFERRED STOCK PROPOSAL: To elect one individual to serve as a Class II
Preferred Stock director until the Annual Meeting of Shareholders in
2006 and until his successor is duly elected and qualified.
If you own shares of Common Stock that are registered in your name (i.e.,
represented by actual stock certificates), you are receiving a Proxy directly
from the Corporation. Holders of shares of Common Stock that are held of record
in an account with a financial institution such as a brokerage or bank (i.e.,
held in "street name") are receiving a proxy voting instructions form from a
proxy processing firm. The Board of Directors of the Corporation has not
presented any proposal for vote by the Common Stock holders and currently knows
of no proposal which may be brought before the Annual Meeting. Holders of Common
Stock are nevertheless asked to execute the Proxy or voting instructions form
received to enable the Proxies to vote your shares with respect to any proposal
which may lawfully and properly be brought before the Annual Meeting or any
adjournment thereof.
Whether or not you plan to attend the Annual Meeting, please complete, date,
sign and promptly return the enclosed Proxy or voting instructions form in the
accompanying envelope to assure that your shares are represented at the Annual
Meeting. Proxies returned by holders of Preferred Stock with no voting direction
indicated will be voted "FOR" the Preferred Stock Proposal.
You may attend the Annual Meeting and vote, as and if applicable, in person
shares registered in your name either by submitting a completed Proxy or by
completing a ballot at the Annual Meeting. If you have returned a Proxy to the
Corporation but later decide to attend in person, you may revoke your Proxy at
the Annual Meeting and cast your vote, as and if applicable, in person by
ballot. If you own shares of Common Stock in street name and you wish to vote in
person if any proposal later is lawfully and properly brought before the Annual
Meeting, you must mark the appropriate box on the proxy voting instructions form
and return it to the proxy processing firm, which will then send you a Legal
Proxy to allow you to vote the shares by ballot at the Annual Meeting.
By Order of the Board of Directors
George E. Ponticas
Secretary
August 28, 2003
PROXY SOLICITATION
This Notice of Meeting and Proxy Statement is furnished to shareholders of Sonex
Research, Inc. (the "Corporation") in connection with the solicitation of
Proxies on behalf of the Board of Directors of the Corporation for use at the
Annual Meeting of Shareholders of the Corporation to be held on September 16,
2003 for the purposes set forth on the cover page of this Notice of Meeting and
Proxy Statement. The Board of Directors has fixed July 28, 2003 as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Annual Meeting. The cost of preparing, assembling and mailing of proxy
materials will be borne by the Corporation.
The Corporation will supply proxy materials as requested to brokerage houses and
other custodians, nominees and fiduciaries for transmission to the beneficial
owners of the Corporation's securities. The Corporation will reimburse such
brokerage houses and other custodians for their expenses. The approximate
mailing date of this Notice of Meeting and Proxy Statement is August 28, 2003.
CLASSES OF SECURITIES
The Corporation has two classes of voting securities: its $.01 par value common
stock (the "Common Stock") and its $.01 par value convertible preferred stock
(the "Preferred Stock"). Each share of Preferred Stock is convertible at any
time at the option of the holder into Common Stock at the rate of $.35 per share
of Common Stock. The Preferred Stock has priority in liquidation over the Common
Stock, but it carries no stated dividend. Additionally, the holders of Preferred
Stock, voting as a separate class, have the right to elect that number of
directors of the Corporation which represents a majority of the total number of
directors. The only other matters with respect to which holders of Preferred
Stock are entitled to vote concern a consolidation, merger, share exchange or
transfer of assets. Each share of Preferred Stock outstanding will be entitled
to one vote on the Preferred Stock Proposal.
The Corporation is presently authorized to issue up to 48,000,000 shares of
Common Stock and 2,000,000 shares of Preferred Stock. At the close of business
on July 28, 2003, there were 21,592,669 shares of Common Stock issued and
outstanding held by approximately 900 registered holders, with shares for
approximately 1,700 additional beneficial owners being held in street name by
brokers, dealers, banks, and other entities, and 1,540,001 shares of Preferred
Stock issued and outstanding held by seven registered holders.
VOTING
A quorum is required in order for the Corporation to conduct business at the
Annual Meeting. The presence, in person or by Proxy, of the majority in number
of the outstanding shares of Common Stock and Preferred Stock as of the record
date constitutes a quorum. If a quorum of the holders of Preferred Stock is
attained at the Annual Meeting, directors will be elected by a plurality of the
shares present and entitled to vote. Unless otherwise directed by the
shareholder, the shares of Preferred Stock represented by executed Proxies
returned to the Corporation will be voted "FOR" the election of directors.
If any other matters are lawfully and properly brought before the Annual Meeting
and a quorum of the holders of the Preferred Stock and/or Common Stock is
attained, the shares of Preferred Stock and/or Common Stock represented by
executed Proxies returned to the Corporation will be voted in the discretion of
the Proxy holders.
A Proxy may be revoked at any time before it is voted by giving written notice
of revocation, or by delivery of a later dated Proxy, to the Corporation's
Secretary prior to the Annual Meeting. A Proxy may also be revoked if the
shareholder is present at the Annual Meeting and gives written notice to the
Corporation's Secretary of his revocation at such time.
BOARD OF DIRECTORS
The Corporation's Board of Directors is divided into two categories: (1) "Common
Stock" directors elected by the holders of Common Stock; and (2) "Preferred
Stock" directors elected by the holders of Preferred Stock. Pursuant to the
Corporation's Charter, the holders of the Preferred Stock, voting as a separate
class, have the right to elect that number of directors of the Corporation which
represents a majority of the total number of directors. These two categories of
directors are further divided into three classes as nearly equal in number as
possible, with the term of one of the three classes of directors expiring at
each annual meeting of shareholders. The members of each class of directors are
to hold office for terms of three years until their successors have been elected
and qualified. The terms of Class I, Class II and Class III directors are
scheduled to expire at the annual meetings of shareholders to be held in 2005,
2003, and 2004, respectively.
The Corporation's By-laws state that the Board of Directors shall consist of not
fewer than three directors, with the total number of directors to be set by the
Board by resolution. In July 1997 the total number of directors was fixed at
five, and, from December 2001 until early in 2003 the Board consisted of three
Preferred Stock directors and two Common Stock directors. On March 24, 2003, Mr.
John H. Drewanz, a Class II Common Stock director since October 2001 and
Chairman of the Corporation's Board of Directors since October 2002, resigned
from the Board. Mr. Drewanz informed other directors that he had made all the
contributions he could as a director and believes the Company is in capable
hands with its current management and other members of the Board. The Board of
Directors subsequently decided against filling the vacancy or naming a new
Chairman. In July 2003 the Board of Directors acted to fix the number of
directors at four. Currently, the Board of Directors consists of three Preferred
Stock directors and one Common Stock director.
Due to the small total number of directors, the Board does not have separate
Nominating, Compensation or Audit Committees; however, the functions of these
committees have been performed by the Board as a whole. The Company does not
have an Audit Committee charter. The Board believes its outside directors
possess the necessary independence and skills to perform all the functions
normally assigned to separate Nominating, Compensation or Audit Committees.
While it is the function of the Board to recommend potential nominees for Board
positions, it is also the policy of the Board to consider nominees recommended
by security holders. Such recommendations should be addressed to the Chairman of
the Board, at the address of the Corporation, and should include the name and
address of the security holder submitting the nomination and a detailed listing
of the business experience and particular qualifications of the nominee. The
Board will review the nomination at its next meeting following receipt of the
nomination and respond accordingly to the security holder who submitted the
nomination.
Based on their education and business experience, Board members Mr. Lawrence H.
Hyde and Mr. Charles C. McGettigan, both of whom have experience overseeing or
assessing the performance of companies or public accountants with respect to the
preparation, auditing or evaluation of financial statements, have been
designated as audit committee "financial experts" with respect to Audit
Committee functions that are performed by the Board as a whole. In general, an
audit committee "financial expert" means an individual who possesses (i) an
understanding of generally accepted accounting principles and financial
statements; (ii) the ability to assess the general application of such
principles in connection with the accounting for estimates, accruals and
reserves; (iii) experience preparing, auditing, analyzing or evaluating
financial statements containing the breadth and level of complexity of
accounting issues that are generally comparable to such issues encountered by
the small business issuer's financial statements; (iv) an understanding of
internal controls and procedures for financial reporting; and (v) an
understanding of audit committee functions.
In performing the duties typically assigned to an audit committee, the entire
Board has (1) reviewed and discussed the 2002 audited financial statements of
the Corporation with management; (2) discussed with the independent accountants
of the Corporation the independent accountants' judgments about the quality, not
just the acceptability, of the Corporation's accounting principles, including
the clarity and completeness of the financial statements and related note
disclosures; (3) received written assurance from the independent accountants
with respect to independence; and (4) recommended that the 2002 audited
financial statements be included in the December 31, 2002 Annual Report on Form
10-KSB for filing with the Securities and Exchange Commission (SEC).
PRINCIPAL SECURITY SHAREHOLDERS
The following table sets forth as of July 28, 2003 information relating to
beneficial ownership of Common Stock by directors and executive officers of the
Corporation, individually and as a group, and any other persons known by the
Corporation to be the beneficial owner of more than five percent of the
currently issued and outstanding Common Stock. A reporting person is considered
the "beneficial owner" of a security if that person has or shares the power to
vote or to direct the voting of such security, or the power to dispose or to
direct the disposition of such security. Under this definition, more than one
person may be a beneficial owner of securities as to which he has no record
ownership interest, and the same shares may be beneficially owned by more than
one reporting person.
Beneficial ownership includes securities which the reporting person currently
owns or has the right to acquire or the obligation to dispose within sixty days,
such as through the exercise of options, warrants, puts and calls, or through
the conversion of Preferred Stock. The percentage of beneficial ownership for a
reporting person is based on the number of outstanding shares of Common Stock of
the Corporation plus the number of shares which the reporting person has the
right to acquire within sixty days, but does not include shares which any other
reporting person has the right to acquire. Unless otherwise noted, all shares
are beneficially owned and sole voting and investment power is held by the
persons named.
Total Beneficial Ownership
--------------------------
Common Rights to Total shares
shares acquire beneficially Percent
Name and address (1) owned shares (4) owned of class
-------------------- --------- --------- --------- --------
Lawrence H. Hyde 644,986 1,814,286 2,459,272 11.1
Charles C. McGettigan 1,351,618 1,814,285 3,165,903 (3) 13.5
George E. Ponticas 326,262 528,928 855,190 3.9
Andrew A. Pouring 853,239 480,244 1,333,483 6.0
Myron A. Wick, III 1,351,618 1,814,285 3,165,903 (3) 13.5
All directors & officers
as a group (5 persons) 3,176,105 4,987,743 8,163,848 30.7
Herbert J. Mitschele, Jr.
Far Hills, NJ 1,081,655 65,000 1,146,655 5.3
Proactive, et.al. (2)
San Francisco, CA 2,574,064 2,928,570 5,502,634 22.4
-----------------------------
(1) The business address for each director and named executive officer is 23
Hudson Street, Annapolis, Maryland, 21401.
(2) Includes shares beneficially owned directly and indirectly by Proactive
Partners, L.P. and several affiliated entities and individuals
("Proactive et.al."), as reported in a Form 13D filing with the Securities
and Exchange Commission.
(3) Includes 2,815,903 shares beneficially owned by Proactive et.al.,
which shares could be deemed to be beneficially owned by both Mr.
McGettigan and Mr. Wick by virtue of their executive and ownership
positions in Proactive et.al. Both individuals exercise shared voting
and investment power with respect to such shares.
(4) See detail provided in the following table.
Rights to Acquire Shares
------------------------
Total
Exercisable Preferred rights to
Exercisable (put)/ Exercisable stock acquire
Name options call (2) warrants converted shares
-------------------- ---------- ---------- --------- --------- ----------
Lawrence H. Hyde 600,000 1,214,286 1,814,286
Charles C. McGettigan (1) 350,000 (607,143) 2,071,428 1,814,285
George E. Ponticas 447,500 80,000 1,428 528,928
Andrew A. Pouring 386,316 92,500 1,428 480,244
Myron A. Wick, III (1) 350,000 (607,143) 2,071,428 1,814,285
All directors & officers
as a group (5 persons) 2,133,816 607,143 172,500 2,074,284 4,987,743
Herbert J. Mitschele, Jr. 25,000 40,000 65,000
Proactive , et.al. (2)
San Francisco, CA (1,214,286) 4,142,856 2,928,570
---------------------------
(1) Includes 1,526,785 shares beneficially owned by Proactive, et.al.,
which shares could be deemed to be beneficially owned by both Mr.
McGettigan and Mr. Wick by virtue of their executive and ownership
positions in Proactive, et.al. Both individuals exercise shared voting
and investment power with respect to such shares.
(2) Represents the currently exercisable portions of ten-year options granted
in December 1997 and December 1999 by Proactive, et.al. to Mr. Hyde to
purchase 714,286 shares and 500,000 shares, respectively, of common stock
presently owned by Proactive, et.al., at an exercise price of $.35 and
$.50 per share, respectively. The December 1997 and December 1999 options
become exercisable at the rate of 20% and 25% respectively, per year
beginning with the date of grant. Because these agreements relate to
shares which are already outstanding, the exercise of such rights will
not result in an increase in the total number of the Company's
outstanding shares for purposes of computing the percentage of
beneficial ownership of each reporting person. Mr. McGettigan and Mr.
Wick each has indirect beneficial ownership in 50% of the shares subject
to these agreements.
STOCK OPTION PLAN
The Corporation maintains a non-qualified stock option plan adopted in 1987 (the
"Plan") which has made available for issuance a total of 7.5 million shares of
Common Stock. The Corporation does not have any other stock option or other
similar equity compensatory plans. Shareholder approval was not required for the
adoption of the Plan, nor is it required for any amendments to the Plan. All
directors, full-time employees and consultants to the Corporation are eligible
for participation. Option awards are determined at the discretion of the Board
of Directors. Upon a change in control of the Corporation, all outstanding
options granted to employees, officers and directors become vested with respect
to those options which have not already vested. Options outstanding expire at
various dates through June 2013. A copy of the Plan has been filed with the SEC
and is incorporated by reference to the Corporation's Registration Statement No.
33-34520 on Form S-8.
Pertinent information as of July 28, 2003 regarding shares of Common Stock
issuable pursuant to options granted or available for future grant under the
Plan is as follows:
Number
of shares
Issuable upon exercise of outstanding options 4,179,973
Weighted average exercise price per share $0.40
Available for future issuance 1,452,859
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid by the Corporation to its
chief executive officer and any other executive officer who earned annual
compensation during the most recently completed year in excess of $100,000
(together referred to as the "Named Executives").
Summary Compensation Table
Annual compensation
---------------------------------------
Salary Long-term
---------------------- Accrued compensation
Name and Position Year Current Deferred bonus # of options
----------------- ---- -------- -------- -------- ------------
Dr. Andrew A. Pouring 2002 $ 87,500 (1) $ 37,500 $ 0 0 (3)
CEO & Chief Scientist 2001 87,500 (1) 37,500 10,000 35,000
2000 87,500 37,500 10,000 35,000
Mr. George E. Ponticas 2002 $ 86,400 (2) $ 9,600 $ 25,000 200,000
CFO & Secretary 2001 86,400 (2) 9,600 25,000 100,000
2000 86,400 9,600 10,000 30,000
(1) Includes $79,933 for 2002 and $33,656 for 2001 which has not been paid as
of December 31, 2002.
(2) Includes $53,171 for 2002 and $33,232 for 2001 which has not been paid as
of December 31, 2002.
(3) In November 2002 Dr. Pouring was granted an option to purchase 100,000
shares of Common Stock effective as of January 1, 2003.
In order to help conserve the Corporation 's limited cash resources, however,
the Named Executives for several years have voluntarily deferred receipt of
payment of significant portions of their authorized annual salaries upon request
by the Board of Directors. By written agreement with the Corporation, these
individuals and other current and former employees consented to the deferral of
payment of amounts so accumulated until the Corporation has received licensing
revenue of at least $2 million or at such earlier date as the Board of Directors
determines that the Corporation 's cash flow is sufficient to allow such
payment. For many years through 1998, Dr. Pouring had been deferring 40% of his
annual salary. In January 1999, the percentage deferral was reduced to 30%. Mr.
Ponticas has been deferring 10% of his annual salary for the last several years.
The conditions that would require repayment of deferred amounts have yet to
occur. As of December 31, 2002, a total of $448,923 and $125,326 in deferred
salary is owed to Dr. Pouring and Mr. Ponticas, respectively, that is payable
under the conditions described above. The authorized full annual salaries for
Dr. Pouring and Mr. Ponticas for each of the past three years were $125,000 and
$96,000, respectively. Effective January 1, 2003, the authorized full annual
salary for Mr. Ponticas was increased to $120,000 while the percentage deferral
was increased to 25%.
During much of 2001 and through the third quarter of 2002, the Corporation
operated under severe cash flow difficulties. At times during 2001 and 2002 the
Corporation's officers voluntarily and at their own discretion deferred receipt
of payment of significant portions of their current wages to reduce the
Corporation 's monthly cash requirements, although some of these amounts were
repaid by the end of the year. With the generation of cash flow from revenues
during the fourth quarter of 2002, some of these amounts were repaid by the end
of the year. Since December 2002, Mr. Ponticas has been receiving his current
wages, while Dr. Pouring continues to defer a significant portion of his current
wages. Such wages payable to the Corporation's officers totaled $199,992 as of
December 31, 2002 and are payable upon demand.
In December of each of the last three years, the Corporation awarded bonuses
totaling $37,500 in 2002, $57,500 in 2001, and $30,000 in 2000, to its officers
and employees, including the amounts reported above for the Named Executives.
The bonus awards in each year were made with the stipulation that payment of
such bonuses would be deferred until the Board of Directors determines that the
Corporation's cash resources are sufficient to enable such payments. In a
private financing in March 2002, Dr. Pouring and Mr. Ponticas accepted Common
Stock in payment of accrued bonuses of $9,000 each. As of December 31, 2002,
$22,500 and $50,000 in accrued bonuses remained payable to Dr. Pouring and Mr.
Ponticas, respectively.
The bonus awards and option grants in 2001 and 2002 to the Named Executives
continued to increase to reflect the fact since 2001 these individuals have made
extraordinary sacrifices, both financially in the amount of wages that have gone
unpaid, and personally, to enable the Corporation to remain in operation given
its poor financial condition, and to provide incentive for the Named Executives
to remain in the employment of the Corporation under such arduous continuing
conditions.
In order to avoid long-term financial commitments, the Corporation does not have
employment agreements with any of its personnel. The salaries of executive
officers are set by the Board of Directors on an annual basis. With the
exception of the granting of stock options, the Corporation does not pay its
Named Executives any bonuses or any type of long-term compensation in the form
of restricted stock awards, stock appreciation rights (SARs) or other form of
long-term incentive plan payments.
Option Grants In Last Fiscal Year
Individual Grants
-------------------------------------------------------------------
Number of % of total
securities options
underlying granted to
options employees in Exercise Market Expiration
Name granted fiscal year price price date
---- ------- ----------- ----- ----- -------------
Pouring 0 (1) 0% n/a n/a n/a
Ponticas 200,000 41% $.25 $.20 Nov. 17, 2012
(1) In November 2002 Dr. Pouring was granted a ten-year option to purchase
100,000 shares of Common Stock effective as of January 1, 2003. These
options are exercisable at $.25 per share.
Aggregated Option/SAR Exercises In Last Fiscal Year
And Fiscal Year-end Option/SAR Values
Number of securities Value of unexercised
underlying unexercised in-the-money
options/SARs at options/SARs at
December 31, 2002 December 31, 2002
# of shares
acquired on Value Exercisable/ Exercisable/
Name exercise realized unexercisable unexercisable
-------- ----------- -------- ---------------------- -------------------
Pouring:
@ $.25 0 $0 126,250 / 8,750 $0/$0
@ $.50 0 $0 210,066 / 0 $0/$0
@ $.75 0 $0 25,000 / 0 $0/$0
Ponticas:
@ $.25 0 $0 222,500 / 65,000 $0/$0
@ $.50 0 $0 205,000 / 0 $0/$0
@ $.75 0 $0 20,000 / 0 $0/$0
The exercise price of all options held by the Named Executives was higher than
the December 31, 2002 market price of $.20 of the Corporation's publicly traded
Common Stock.
COMPENSATION OF DIRECTORS
Directors of the Corporation do not receive fees for their services, but are
eligible to receive stock option grants and are reimbursed for expenses related
to their activities as directors. It has been the Corporation's policy to grant
outside directors stock options every three years that have a term of ten years
and vest over a number of years. When an individual ceases to be a director of
the Corporation, he loses the rights to any shares under these options which
have not vested as of that date.
INDEPENDENT ACCOUNTANTS
In September 2003 the Corporation's independent accountants since 1997, C. L.
Stewart & Company, informed the Board of Directors that the firm was
discontinuing its audit practice and would not serve as independent accountants
of the Corporation for the year ended December 31, 2002. The Corporation had no
disagreements with C. L. Stewart & Company on any matter of accounting
principles or practices or financial statement disclosure.
The Corporation's Board of Directors engaged Hausser + Taylor LLP as new
independent accountants as of December 17, 2002. The Corporation has had no
disagreements with Hausser + Taylor LLP on any matter of accounting principles
or practices or financial statement disclosure. It is expected that a
representative of Hausser + Taylor LLP will be present at the Annual Meeting and
will have an opportunity to make a statement, should they desire to do so, and
will be available to answer appropriate questions.
ANNUAL REPORT ON FORM 10-KSB
A copy of the Corporation's 2002 Annual Report on Form 10-KSB containing
financial statements of the Corporation has been mailed to all shareholders with
this Notice of Meeting and Proxy Statement.
COMMON STOCK DIRECTOR
Year first
elected to Year term
Name Age Class the Board expires
---------------------- --- ----- --------- -------
Andrew A. Pouring 71 III 1980 2004
Dr. Andrew A. Pouring has been a full-time employee, director, and Chief
Scientist of the Company since 1980, serving as President from April 1980
through November 1991, and as Chief Executive Officer since May 1985. In
November 1991 he was elected a Vice Chairman of the Board of Directors. He has
co-authored all of the Company's patented inventions. Prior to forming Sonex,
Dr. Pouring served as a Professor of Aerospace Engineering at the U.S. Naval
Academy, including four years as the Chairman of the Academy's Department of
Aerospace Engineering. Dr. Pouring is a member of various professional and
scientific societies, including the American Society of Mechanical Engineers and
the Society of Automotive Engineers. Dr. Pouring received his Bachelors and
Masters degrees in mechanical engineering from Rensselaer Polytechnic Institute.
He received his Doctor of Engineering degree from Yale University, where he also
was a post doctoral research fellow and lecturer.
PREFERRED STOCK DIRECTORS
Year first
elected to Year term
Name Age Class the Board expires
---------------------- --- ----- --------- -------
Lawrence H. Hyde (nominee) 79 II 1986 2003
Charles C. McGettigan 58 I 1992 2005
Myron A. ("Mike") Wick, III 59 I 1991 2005
Mr. Lawrence H. Hyde has been a director of the Company since September 1986,
serving as Chairman of the Board from June 1987 to June 1993 and as President
from October 1997 through September 2001. Mr. Hyde is a private investor with
interests in a number of publicly and privately held companies. He spent the
majority of his business career as an executive in the automotive industry,
serving in various engineering, marketing, international, and chief executive
capacities for AM General Company, American Motors Corporation and Ford Motor
Co. Currently, Mr. Hyde serves as a trustee of the American University in Cairo,
where he is also chairman of the Karnak Equity Fund. Mr. Hyde is a graduate of
Harvard College and Harvard Business School.
Mr. Charles C. McGettigan has been a director of the Company since February
1992. He was a founding partner in 1991 and is a general partner of Proactive
Investment Managers, L.P., which is the general partner of Proactive Partners,
L.P. In 1988 Mr. McGettigan co-founded McGettigan, Wick & Co., Inc., an
investment banking firm, following a career as an executive with major
investment banking firms, including Hambrecht & Quist, Inc. and Dillon, Read &
Co. Inc. He currently serves on the Boards of Directors of Cuisine Solutions,
Inc., Modtech, Inc., PMR Corporation, Tanknology - NDE Corporation, and Onsite
Energy, Inc., of which he is the Chairman. Mr. McGettigan is a graduate of
Georgetown University, and received his MBA in Finance from The Wharton School
of the University of Pennsylvania.
Mr. Myron A. ("Mike") Wick, III, has been a director of the Company since
November 1991 and was elected Chairman of the Board of Directors in June 1993.
He was a founding partner in 1991 and is a general partner of Proactive
Investment Managers, L.P., which is the general partner of Proactive Partners,
L.P. In 1988 Mr. Wick co-founded McGettigan, Wick & Co., Inc., an investment
banking firm. From 1985 to 1988 Mr. Wick was Chief Operating Officer of
California Biotechnology, Inc. in Mountain View, California. He currently serves
on the Boards of Directors of Modtech, Inc., StoryFirst Communications, Inc.,
and Tanknology - NDE Corporation. Mr. Wick received a B.A. degree from Yale
University and an MBA from the Harvard Business School.
OTHER EXECUTIVE OFFICER
Mr. George E. Ponticas, age 44, has been Vice President of Finance, Chief
Financial Officer, Secretary and Treasurer of the Corporation since September
1991. From May 1987 through August 1991, he served as the Corporation's
Controller and Assistant Secretary. Prior to joining the Corporation, Mr.
Ponticas was a member of the auditing staff of Price Waterhouse in Baltimore,
Maryland, attaining the position of audit manager. Mr. Ponticas is a Certified
Public Accountant, and is a member of the American Institute of Certified Public
Accountants and the Maryland Association of Certified Public Accountants. He
received his B.S. in Accounting from Loyola College in Maryland.
PREFERRED STOCK PROPOSAL - ELECTION OF PREFERRED STOCK DIRECTOR
At its meeting on June 17, 2003, the Board of Directors nominated incumbent
director Mr. Lawrence H. Hyde for election at the 2003 Annual Meeting of
Shareholders as a Class II Preferred Stock director. The persons named in the
enclosed Proxy have the intention of voting for the election of the nominee
unless the shareholder specifies otherwise. Although the Board of Directors does
not contemplate that the nominee will be unable to serve, if such a situation
arises prior to the Annual Meeting the persons named in the Proxy will vote in
accordance with their best judgment.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who beneficially own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
beneficial ownership and reports of changes in beneficial ownership with the
SEC, and to provide copies of all such reports to the Company. Based solely on
its review of the copies of such reports received by it, or written
representations from reporting persons that no reports were required for those
persons, the Company believes that all of its officers, directors, and greater
than 10% shareholders complied with all such filing requirements related to
beneficial ownership of Common Stock during 2002 except as indicated below.
In August 2002 the Company was informed that certain members of the Proactive,
et.al. Form 13D filing group of affiliated entities and individuals, beneficial
owners of more than 10% of the Company's Common Stock, had failed to report to
the Company, and failed to file Form 4s, covering the following sales of the
Company's Common Stock in 2000 and 2001:
Number
Period of Transactions of shares
June 2000 - September 2000 78,000
December 2000 6,000
November 2001 11,000
In late July 2002 and August 2002 pursuant to a Form 144 filing with the SEC
dated July 23, 2002, Proactive, et.al. sold an additional 63,000 shares of the
Company's Common Stock for which Form 4s were not timely filed. Two of the
Company's directors, Mr. McGettigan and Mr. Wick, held beneficial ownership of
the shares sold in July 2002 by virtue of their executive and ownership
positions in Proactive, et.al. Form 4s covering these sales were not timely
filed by Mr. McGettigan and Mr. Wick.
Based solely on its review of the copies of such reports received by it, the
Company believes that Form 4s were eventually filed by Proactive, et.al., Mr.
McGettigan and Mr. Wick to report all of the above-described transactions.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Annual Meeting other than those specifically set forth in this Notice of Meeting
and Proxy Statement. If any such matters should arise, it is intended that the
persons named in and acting under the enclosed form of Proxy or their
substitutes will vote thereon in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be included in the Corporation's proxy
statement and form of proxy for presentation at the next annual shareholder
meeting must comply with certain rules and regulations with respect to the
number and length of proposals, eligibility of persons entitled to have such
proposals included, and other aspects. Interested persons should refer to the
Securities Exchange Act of 1934 and other applicable laws and regulations.
Proposals intended to be included in the Corporation's proxy statement and form
of proxy for presentation at the 2004 Annual Meeting of Shareholders must be
received at the Corporation's principal executive offices in Annapolis, Maryland
at least 120 days before the anniversary date of mailing of the 2003 proxy
materials. Based on the date of mailing of the 2003 proxy materials, the date
for receipt of proposals intended to be included in the Corporation's proxy
statement and form of proxy for presentation at the 2004 Annual Meeting of
Shareholders is April 30, 2004.
APPENDIX A - FORM OF PROXY
PROXY Sonex Research, Inc. - Common Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ANDREW A. POURING and GEORGE E.
PONTICAS, or each of them, as Proxies, each with the power to appoint his
substitute, to represent and vote all shares of Common Stock of and on behalf of
the undersigned upon or in connection with the transaction of all business at
the Annual Meeting of Holders of Common Stock of Sonex Research, Inc. ("Sonex")
to be held September 16, 2003, and any adjournments thereof, with all powers the
undersigned would possess if personally present and voting at such meeting.
While the Board of Directors of Sonex has not presented any proposal for vote
and currently knows of no proposal which may be brought before the Annual
Meeting, this proxy is given to enable the Proxies to vote all shares of the
undersigned with respect to any proposal which may lawfully and properly be
brought before the meeting.
Dated _______________ , 2003
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Signature
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Signature (if held jointly)
PLEASE SIGN EXACTLY AS NAME(S) APPEAR(S) HEREON. If shares are held in the
names of two or more persons, all must sign. When signing in a representative or
fiduciary capacity, give full title as such. If signer is a corporation, sign
corporate name by fully authorized officer.