DIGICORP,
INC.
4143
Glencoe Avenue
Marina
Del Rey, California 90292
INFORMATION
STATEMENT
CONSENT
OF STOCKHOLDERS IN LIEU OF SPECIAL MEETING
The
purpose of this Information Statement is to notify you that the holders of
shares representing a majority of the voting securities of Digicorp, Inc.,
a
Delaware corporation (the “Company”), as of September 10, 2008 (the “Record
Date”), have given their written consent to resolutions adopted by the Board of
Directors (i) to amend the Company’s
Certificate of Incorporation (the “Certificate of Incorporation”) to increase
the number of authorized shares of Common Stock, par value $.001 per share,
of
the Company (the “Common Stock”) from 60,000,000 to 500,000,000 and increase the
number of authorized shares of Preferred Stock, par value $.001 per share,
of
the Company (the “Preferred Stock”) from 1,000,000 to 2,000,000 (the
“Capitalization Amendment”), and (ii) to
amend
the Certificate of Incorporation so as to change the name of the company
from
“Digicorp, Inc.” to “China Youth Media, Inc.” (the “Corporate Name
Change”).
This
Information Statement is first being mailed to stockholders of the Company
on or
about September __, 2008. The Capitalization Amendment and the Corporate
Name
Change will not become effective until at least twenty (20) days after the
initial mailing of this Information Statement.
Delaware
corporation law permits holders of a majority of the voting power to take
stockholder action by written consent. Accordingly, the Company will not
hold a
meeting of its stockholders to consider or vote upon the Capitalization
Amendment and the Corporate Name Change as described in this Information
Statement.
The
principal
executive office of the Company is located at 4143 Glencoe Avenue, Marina
Del
Rey, California 90292. The telephone number of the principal executive office
of
the Company is (310) 728-1450.
WE
ARE NOT ASKING YOU FOR A PROXY
AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
The
date
of this Information Statement is September __, 2008
GENERAL
INFORMATION
Section
228 of the General Corporation Law of the State of Delaware states that,
unless
otherwise provided in the certificate of incorporation, any action that may
be
taken at any annual or special meeting of stockholders, may be taken without
a
meeting, without prior notice and without a vote, if consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled
to
vote thereon were present and voted, and those consents are delivered to
the
corporation by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. The
Company’s Certificate of Incorporation contains no provision or language in any
way limiting the right of stockholders of the Company to take action by written
consent.
On
September 10, 2008 (the “Record Date”), holders
of shares representing a majority of the voting securities of the Company
have
given their written consent to resolutions adopted by the Board of Directors
(i)
to amend the Company’s
Certificate of Incorporation (the “Certificate of Incorporation”) to increase
the number of authorized shares of Common Stock, par value $.001 per share,
of
the Company (the “Common Stock”) from 60,000,000 to 500,000,000 and increase the
number of authorized shares of Preferred Stock, par value $.001 per share,
of
the Company (the “Preferred Stock”) from 1,000,000 to 2,000,000 (the
“Capitalization Amendment”), and (ii) to
amend
the Certificate of Incorporation so as to change the name of the company
from
“Digicorp, Inc.” to “China Youth Media, Inc.” (the “Corporate Name
Change”).
Such
written consents were given by Rebel Holdings, LLC, Jay Rifkin and Dennis
Pelino
who hold in the aggregate 31,527,664 shares of Common Stock (59.9% of the
outstanding Common Stock). Under
Delaware corporation law, and as described above, the consent of the holders
of
a majority of the voting power is effective as stockholders’ approval. We will
file a Certificate of Amendment to the Certificate of Incorporation of the
Company in order to effect the Capitalization Amendment and the Corporate
Name
Change, provided, however, that in accordance with the requirements of the
Securities Exchange Act of 1934 and Regulation 14C promulgated thereunder,
the
Capitalization Amendment and the Corporate Name Change will not be filed
with
the Secretary of State of Delaware or become effective until at least twenty
(20) calendar days after the mailing of this Information Statement. On the
Record Date, the Company had outstanding 52,628,439 shares of Common Stock,
which are the only outstanding voting securities of the Company. Each share
of
common stock is entitled to one vote.
VOTING
SECURITIES AND PRINCIPAL STOCKHOLDERS
The
following table sets forth certain information, as of the Record Date, with
respect to the beneficial ownership of the outstanding Common Stock by (i)
any
holder of more than five (5%) percent; (ii) each of the named executive officers
and directors; and (iii) our directors and named executive officers as a
group.
Except as otherwise indicated, each of the stockholders listed below has
sole
voting and investment power over the shares beneficially owned.
|
Name
of Beneficial Owner (1)
|
|
Common
Stock Beneficially Owned (2)
|
|
Percentage
of Common Stock (2)
|
|
Jay
Rifkin
|
|
26,077,664
|
(3)
|
|
46.0%
|
|
William
B. Horne
|
|
600,000
|
(4)
|
|
1.1%
|
|
Alice
M. Campbell
|
|
500,000
|
(5)
|
|
1.0%
|
|
Alan
Morelli
|
|
850,000
|
(6)
|
|
1.6%
|
|
David
M. Kaye
|
|
600,000
|
(7)
|
|
1.1%
|
|
Dennis
Pelino
|
|
10,000,000
|
(8)
|
|
19.0%
|
|
Bodnar
Capital Management, LLC
|
|
2,570,176
|
(9)
|
|
5.0%
|
|
All
named executive officers and directors as a group (5
persons)
|
|
28,627,664
|
|
|
48.4%
|
__________________
|
(1)
|
Except
as otherwise indicated, the address of each beneficial owner is
c/o
Digicorp, Inc., 4143 Glencoe Avenue, Marina Del Rey, CA 90292.
|
|
(2)
|
Applicable
percentage ownership is based on 52,628,439 shares of common stock
outstanding as of the Record Date, together with securities exercisable
or
convertible into shares of common stock within 60 days of the Record
Date
for each stockholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities.
Shares of
common stock that a person has the right to acquire beneficial
ownership
of upon the exercise or conversion of options, convertible stock,
warrants
or other securities that are currently exercisable or convertible
or that
will become exercisable or convertible within 60 days of the Record
Date
are deemed to be beneficially owned by the person holding such
securities
for the purpose of computing the percentage of ownership of such
person,
but are not treated as outstanding for the purpose of computing
the
percentage ownership of any other
person.
|
|
(3)
|
Includes:
(a) 19,086,372 shares held by Rebel Holdings, LLC (“Rebel Holdings”) of
which Mr. Rifkin is the sole managing member; (b) 2,441,292 shares
which
are directly held by Mr. Rifkin; (c) 4,400,000 shares issuable
upon
exercise of stock options with an exercise price of $0.85 per share,
which
stock options vest annually over a period of three years from December
30,
2006; and (d) and 150,000 shares issuable upon exercise of stock
options
with an exercise price of $0.20 per share, which stock options
vest
annually over a period of three years from November 8, 2007. Mr.
Rifkin's
reported beneficial ownership does not include certain shares of
common
stock issued and issuable for which certain shareholders have granted
Mr.
Rifkin an irrevocable proxy to vote for certain directors. Also,
does not
include shares which Mr. Rifkin may acquire upon conversion of
the
Consolidated Note. See “Amendment to the Certificate of Incorporation to
Increase the Company’s Authorized Shares of Common Stock and Preferred
Stock”.
|
|
(4)
|
Includes
(a) 50,000 shares owned by Mr. Horne; (b) 400,000 shares issuable
upon
exercise of stock options with an exercise price of $0.25 per share
and an
expiration date 18 months from the date Mr. Horne's services terminate;
and (c) 150,000 shares issuable upon exercise of stock options
with an
exercise price of $0.20 per share which stock options vest annually
over a
period of four years from November 8, 2007. Mr. Horne has granted
Mr.
Rifkin an irrevocable proxy to vote the shares of common stock
issuable
upon exercise of such stock options for certain directors.
|
|
(5)
|
Represents
(a) 350,000 shares issuable upon exercise of stock options with
an
exercise price of $0.25 per share and an expiration date 18 months
from
the date Ms. Campbell's services terminate; and (b) 150,000 shares
issuable upon exercise of stock options with an exercise price
of $0.20
per share which stock options vest annually over a period of four
years
from November 8, 2007. Ms. Campbell has granted Mr. Rifkin an irrevocable
proxy to vote the shares of common stock issuable upon exercise
of such
stock options for certain
directors.
|
|
(6)
|
Includes:
(a) options to purchase 350,000 shares of common stock with an
exercise
price of $1.50 per share, which stock options vest annually over
a period
of three years from March 26, 2006; (b) 250,000 shares issuable
upon
exercise of warrants with an exercise price of $0.145 per share
and an
expiration date of September 15, 2010, and (c) options to purchase
250,000
shares of common stock with an exercise price of $0.14 per share,
which
stock options vest annually over a period of four years from August
8,
2008.
|
|
(7)
|
Includes
(a) options to purchase 350,000 shares of common stock with an
exercise
price of $1.50 per share, which stock options vest annually over
a period
of three years from March 26, 2006; and (b) options to purchase
250,000
shares issuable upon exercise of stock options with an exercise
price of
$0.20 per share which stock options vest annually over a period
of four
years from November 8, 2007.
|
|
(8)
|
The
address for Mr. Pelino is 400 Alton Road, Suite 3107, Miami Beach,
FL
33129.
|
| (9) |
The
address for Bodnar Capital Management, LLC is 680 Old Academy
Road,
Fairfield, CT 06824.
|
AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
TO
INCREASE THE COMPANY’S AUTHORIZED SHARES
OF
COMMON STOCK AND PREFERRED STOCK
The
Board
of Directors of the Company has adopted a resolution to amend the Company’s
Certificate of Incorporation (the “Certificate of Incorporation”) to increase
the number of authorized shares of Common Stock, par value $.001 per share,
of
the Company (the “Common Stock”) from 60,000,000 to 500,000,000 and increase the
number of authorized shares of Preferred Stock, par value $.001 per share,
of
the Company (the “Preferred Stock”) from 1,000,000 to 2,000,000 (the
“Capitalization Amendment”). As stated above, the holders
of shares representing a majority of the voting securities of the Company
have
given their written consent to the Capitalization Amendment.
The
Certificate of Incorporation presently authorizes the Company to issue
60,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock.
As of
the date hereof, there are 51,128,439 shares of Common Stock and 102,220
shares
of Series A Convertible Preferred Stock outstanding as described below.
On
May
23, 2008, the Company filed a Certificate of Designation with the State of
Delaware authorizing its Series A Convertible Preferred Stock consisting
of
500,000 shares, each of $.001 par value. The Series A Convertible Preferred
Stock shall be convertible into shares of Common Stock at a rate of one thousand
(1,000) shares of Common Stock for every one share of Series A Convertible
Preferred Stock at the option of the holder at any time subsequent to the
filing
of an amendment to the Company’s Certificate of Incorporation with the Secretary
of State of the State of Delaware whereby the authorized Common Stock is
increased to a minimum of 200,000,000 shares. In addition, the Series A
Convertible Preferred Stock (i) has no voting rights prior to conversion
except
as otherwise provided under Delaware law, (ii) has no mandatory or optional
redemption rights, (iii) has no preemptive rights, and (iv) shall pay cash
dividends only in the event cash dividends have been declared on the Company’s
Common Stock.
On
June
2, 2008, and in connection with the Company’s recently
announced plans to shift its business to aggregation and distribution of
international content for Internet consumption in China, the Company
entered into a Content License Agreement with New China Media, LLC
(“NCM”), YGP,
LLC (“YGP”) and
TWK
Holdings, LLC (“TWK”) (New China Media, YGP and TWK collectively referred to as
“Content Providers”) providing for (i) the assignment by Content Providers and
the assumption by the Company of certain rights of Content Providers for
the
territory of the People’s Republic of China (“PRC”) to use, transmit and
publicly display via the internet certain content; and (ii) the purchase
by YGP,
NCM and TWK of 16,200 shares, 3,000 shares and 12,000 shares of Series A
Convertible Preferred Stock of the Company. Dennis Pelino is the sole Managing
Member of NCM and YGP.
Effective
on June 10, 2008, and in furtherance of the Company’s shift in business strategy
as mentioned above, the Company’s subsidiary, Youth Media (Hong Kong) Limited,
entered into a Cooperation Agreement (the “Cooperation Agreement”) with China
Youth Net Technology (Beijing) Co., Ltd. (“CYN”), China Youth Interactive
Cultural Media (Beijing) Co., Ltd. and China Youth Net Advertising Co. Ltd.
pursuant to which the parties have agreed to cooperate with each other to
develop, build and operate a fully managed video and audio distribution network
based on, including but not limited to, the China Education and Research
Network, the broadband network infrastructure built in schools, universities
and
other education institutions. In conjunction with Cooperation Agreement,
the
Company issued an aggregate of 71,020 shares of its Series A Convertible
Preferred Stock to three designees of CYN.
As
a
result of the foregoing transactions, there are currently 102,220 shares
of
Series A Convertible Preferred Stock outstanding, which upon effectiveness
of
the Capitalization Amendment will be convertible at the option of the holders
thereof into 102,220,000 shares of Common Stock of the Company.
On
September 10, 2008, the Company, on the one hand, and Jay Rifkin, the Company’s
President and Chief Executive Officer, and Rebel Holdings, LLC (“Rebel
Holdings”), of which Mr. Rifkin is the sole managing member, on the other hand,
agreed to consolidate various outstanding loans made to the Company by Jay
Rifkin and Rebel Holdings, and other amounts incurred by or due to Mr. Rifkin,
in each case through June 30, 2008, into one promissory note payable to Rebel
Holdings in the principal amount of $2,078,047 which shall be due and payable
in
two years with interest at the prime rate (the “Consolidated Note”). The
Consolidated Note provides that the principal thereof shall at the option
of
Rebel Holdings be convertible at a conversion price equal to the lesser of,
or
more favorable to Mr. Rifkin, of the following (i) $0.03 per share of Common
Stock provided a notice of conversion is submitted no later than 45 days
following the date of the Consolidated Note (which, at $0.03 per share, shall
be
convertible into 69,268,233 shares of Common Stock), or (ii) the then current
offering terms for any bona fide pending offering of the Company, provided
a
notice of conversion pursuant to this subparagraph (ii) is submitted no later
than 30 days following the completion of the offering, and contains such
other
terms and conditions as set forth therein.
In
addition to the foregoing, there are an additional 10,072,500 shares of Common
Stock which may be issued upon exercise of currently outstanding options
and
other rights to acquire shares of the Company’s Common Stock.
The
Company is also presently engaged in a private placement offering of up to
$600,000 in convertible promissory notes of the Company which proceeds are
intended to be used for working capital purposes. The convertible promissory
notes shall be convertible at the option of the holder into shares of Common
Stock at a conversion rate of $0.09 per share. Investors in the offering
will
also receive 350,000 warrants for each $100,000 in convertible promissory
notes
purchased. Such warrants will be exercisable at a price of $0.09 per share
subject to the effectiveness of the Capitalization Amendment. Following the
Capitalization Amendment, further authorization for the issuance of the
securities by a vote of security holders will not be solicited prior to such
issuance.
The
Capitalization Amendment has been approved in order for the Company to have
a
sufficient number of authorized shares of Common Stock available to issue
in
connection with the conversion of the Series A Convertible Preferred Stock,
the
conversion of the Consolidated Note and to allow currently outstanding options
and other rights to be exercised as described above. In addition, the Board
of
Directors believes it is in the Company’s best interest to increase the number
of authorized but unissued shares of Common Stock and Preferred Stock in
order
to have additional authorized shares available for issuance to meet business
needs as they arise, including meeting future financing needs of the Company,
raising additional capital and such other corporate purposes. The Board of
Directors strongly believes that opportunities may arise which will require
prompt action and in which any delay incurred in seeking stockholder approval
for issuance of additional shares could be detrimental to the Company and
its
stockholders. In the Board’s opinion, the proposed amendment to the Company’s
Certificate of Incorporation will give the Company the flexibility to take
advantage of such opportunities and to operate more effectively. Authorization
of such additional shares would permit the issuance at various times of shares
which could be specifically adapted to a wide variety of circumstances. As
to
each series of Preferred Stock, the Board of Directors has the power to fix
the
dividend rights, dividend or interest rates, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), redemption
prices and liquidation preferences, and any other powers, designations,
preferences and relative participating, optional or other rights of the series,
as well as any qualifications, limitations or restrictions on any of the
rights
of the series, and the number of shares constituting the series and the
designation thereof, all without further approval of the stockholders, except
as
may be required by application of applicable law or stock exchange
rules.
Other
than the issuances described herein, there are no present negotiations,
agreements, or firm intentions regarding the use of any of the additional
shares
of Common Stock or Preferred Stock proposed to be authorized. No stockholder
of
the Company presently has, or would have, any preemptive rights relating
to the
future issuance of any shares of Common Stock or Preferred Stock.
Shares
of
Common Stock or Preferred Stock would be issued only as, if, and when the
Board
of Directors believed the issuance to be in the best interests of the Company
and its stockholders. It is possible, however, that the issuance of shares
of
Preferred Stock with dividend and liquidation preferences could diminish
the
amounts which would otherwise be available to the holders of Common Stock
for
these purposes. To the extent that any series of Preferred Stock is made
convertible into shares of Common Stock of the Company, or that Common Stock
or
Preferred Stock is issued for cash or assets, a dilution of the equity and
the
present voting interest of the outstanding shares of Common Stock could
result.
It
is not
possible to state the actual effect of the authorization of the Preferred
Stock
upon the rights of the Company’s Common stockholders until the Board of
Directors has specified the rights of a series of the Preferred Stock. However,
the rights of any such series, if and when issued, might preclude or make
difficult a merger or takeover, making the Company a less attractive potential
takeover candidate. Although the Board would make such a determination based
on
its judgment as to the best interest of stockholders, the Board could so
act to
discourage an acquisition attempt or other transaction viewed favorably by
the
holders of a majority of the outstanding voting stock of the Company. Thus,
the
authorization of the Preferred Stock might be deemed to have an anti-takeover
effect. On balance, however, the Board believes that the advantages of
increasing its flexibility to act in the face of a proposed transaction outweigh
any resulting disadvantages to the Company’s stockholders. The Capitalization
Amendment is not part of a plan by management to adopt a series of amendments
which may have an anti-takeover effect nor does management presently intend
to
propose any anti-takeover measures in any future solicitation of proxies.
Management does not believe that any provisions of the Company’s present
Certificate of Incorporation or By-laws are likely to have an anti-takeover
effect.
No
director, executive officer, associate of any director or executive officer,
has
any substantial interest, direct or indirect, in the Capitalization Amendment
except that the effectiveness of the Capitalization Amendment will permit
(i)
Jay Rifkin to convert the Consolidated Note into shares of Common Stock;
and
(ii) the Company’s officers and directors, including Mr. Rifkin, to exercise
their currently outstanding options and other rights to acquire shares of
the
Company’s Common Stock. See
“Voting Securities and Principal Stockholders”.
The
text
of the amendment which we will file to the Certificate of Incorporation is
as
follows:
That
Article Fourth of the Certificate of Incorporation be and it hereby is amended
to read in its entirety as follows:
“FOURTH:
The Corporation is authorized to issue two classes of stock. One class of
stock
shall be Common Stock, par value $0.001 per share. The second class of stock
shall be Preferred Stock, par value $0.001 per share. The Preferred Stock,
or
any series thereof, shall have such designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof as shall be expressed in the resolution or resolutions
providing for the issue of such stock adopted by the Board of Directors and
may
be made dependent upon facts ascertainable outside such resolution or
resolutions of the Board of Directors, provided that the matter in which
such
facts shall operate upon such designations, preferences, rights and
qualifications; limitations or restrictions of such class or series of stock
is
clearly and expressly set forth in the resolution or resolutions providing
for
the issuance of such stock by the Board of Directors.
The
total
number of shares of stock of each class which the Corporation shall have
authority to issue and the par value of each share of each class of stock
are as
follows:
| Class |
|
Par
Value
|
|
Authorized
Shares
|
|
| |
|
|
|
|
|
| Common |
|
$ |
0.001 |
|
|
500,000,000 |
|
| Preferred |
|
$ |
0.001 |
|
|
2,000,000 |
|
| |
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
502,000,000” |
|
AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
TO
CHANGE THE NAME OF THE COMPANY
The
Board
of Directors of the Company has adopted a resolution to change the name of
the
corporation from “Digicorp, Inc.” to “China Youth Media, Inc.” (the “Corporate
Name Change”).
As
stated above, the holders
of shares representing a majority of the voting securities of the Company
have
given their written consent to the Corporate Name Change.
The
Corporate Name Change has been approved because the new name better represents
the Company’s shift in business focus to the
aggregation and distribution of international content for Internet consumption
in China, including the transactions contemplated by the Cooperation Agreement
(as described above) pursuant to which the Company and the other parties
thereto
have agreed to cooperate with each other to develop, build and operate a
fully
managed video and audio distribution network based on, including but not
limited
to, the China Education and Research Network, the broadband network
infrastructure built in schools, universities and other education institutions
in the PRC. With the name “Digicorp, Inc.”, there is no clear relationship to
the Company’s business activities. The name “China Youth Media, Inc.” should
allow the Company to develop a clearer and more recognizable identity in
the
marketplace.
The
text
of the amendment which we will file to the Certificate of Incorporation is
as
follows:
That
Article First of the Certificate of Incorporation be and it hereby is amended
to
read in its entirety as follows:
“FIRST:
The name of the Corporation (hereinafter called the “Corporation”) is China
Youth Media, Inc.”
Certificates
for the Company’s common stock that recite the name “Digicorp, Inc.” will
continue to represent shares in the Company after the Corporate Name Change
has
become effective. If, however, a stockholder wishes to acquire a certificate
reciting the name “China Youth Media, Inc.” after the effectiveness of the
Corporate Name Change, the stockholder may do so by surrendering its certificate
to the Company’s transfer agent with a request for a replacement certificate and
the appropriate stock transfer fee.
The
Company’s transfer agent is: Transfer Online, Inc., 317 SW Alder Street,
2nd
floor,
Portland, Oregon 97204, Telephone (503) 227-2950, Fax (503)
227-6874.
NO
DISSENTERS’ RIGHTS
Under
Delaware law, stockholders are not entitled to dissenters’ rights with respect
to the transactions described in this Information Statement.
ADDITIONAL
INFORMATION
The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934 and files
annual, quarterly and current reports, proxy statements and other information
with the Securities and Exchange Commission (the “SEC”). Such
reports, proxy statements and other information may be inspected at the public
reference room of the SEC at 100 F Street, N.E., Washington D.C. 20549. Copies
of such material can be obtained from the facility at prescribed rates. Please
call the SEC toll free at 1-800-SEC-0330 for information about its public
reference room. Because the Company files documents electronically with the
SEC,
you may also obtain this information by visiting the SEC’s Internet website at
http://www.sec.gov.
| |
By Order of the Board of
Directors, |
| |
|
| |
|
| |
Jay Rifkin, |
| |
President and Chief Executive
Officer |
Dated:
September
__, 2008