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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
MEDCARE TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MEDCARE TECHNOLOGIES, INC.
Suite 1210--1515 West 22nd Street
Oak Brook, IL 60523
Telephone: 630-472-5300
October , 2000
Dear Stockholders:
You are cordially invited to attend a special meeting (the "Special
Meeting") of stockholders of Medcare Technologies, Inc. (the "Company"). The
Special Meeting will be held at , local time, on [November , 2000]
at [The Drake Oak Brook Hotel, 2301 S. York Road, Oak Brook, Illinois 60523.]
Enclosed are the official notice of this meeting, a proxy statement and a form
of proxy.
As described in the enclosed proxy statement, at the Special Meeting you
will be asked to consider and vote upon a proposal to approve and adopt an
amendment to the Company's Certificate of Incorporation (the "Certificate of
Amendment") to effect a reverse stock split of the issued and outstanding
shares of common stock of the Company (the "Reverse Stock Split"). If the
Reverse Stock Split is approved, every five (5) shares of issued and
outstanding common stock will be exchanged for one (1) new share of common
stock.
You are urged to read the accompanying proxy statement, which provides you
with a description of the terms of the Reverse Stock Split, including the
reasons why the Reverse Stock Split is being recommended and the results of
its implementation.
The Board of Directors has determined that the Reverse Stock Split is in
the best interests of Medcare Technologies and its stockholders and has
unanimously approved the Certificate of Amendment and the resulting Reverse
Stock Split. The board unanimously recommends that you vote "FOR" the proposal
to approve and adopt the Certificate of Amendment and the Reverse Stock Split.
Please note that attendance at the Special Meeting will be limited to
stockholders of record at the close of business on [October , 2000], and to
guests of the Company. If your shares are registered in your name and you plan
to attend the Special Meeting, please bring the enclosed ballot with you to
the meeting. If your shares are held by a broker, bank or other nominee and
you plan to attend the meeting, please contact the person responsible for your
account regarding your intention to attend the meeting so that they will know
how you intend to vote your shares at that time. Stockholders who do not
expect to attend the Special Meeting in person may submit their ballot to the
Management of the Company at Suite 1210, 1515 West 22nd Street, Oak Brook,
Illinois 60523.
By Order of the Board of Directors,
Jeffrey S. Aronin
President & Chief Executive Officer
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS OF MEDCARE TECHNOLOGIES, INC.
TO BE HELD [NOVEMBER , 2000]
To the Stockholders of Medcare Technologies, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of Medcare Technologies, Inc., a Delaware corporation, (the
"Company"), will be held at [The Drake Oak Brook Hotel, 2301 S. York Road, Oak
Brook, Illinois 60523] on the day of [November], 2000, at (local
time) for the following purposes:
1. To approve and adopt an amendment to the Company's Certificate of
Incorporation to effect a one for five reverse stock split with respect
to all shares of the Company's issued and outstanding common stock; and
2. To transact any and all other business that may properly come before the
Special Meeting or any adjournment(s) thereof.
Pursuant to the Company's Bylaws (the "Bylaws"), the record date (the
"Record Date") for the determination of stockholders entitled to notice of and
to vote at such meeting or any adjournment(s) there of shall be the close of
business on October , 2000. Only holders of record of the Company's Common
Stock at the close of business on the Record Date are entitled to notice of
and to vote at the Special Meeting. Shares can be voted at the Special Meeting
only if the holder is present or represented by proxy. A list of stockholders
entitled to vote at the Special Meeting will be available for examination at
the offices of the Company for ten (10) days prior to the Special Meeting.
You are cordially invited to attend the Special Meeting; whether or not you
expect to attend the meeting in person, however, you are urged to mark, sign,
date, and mail the enclosed form of proxy promptly so that your shares of
stock may be represented and voted in accordance with your wishes and in order
that the presence of a quorum may be assured at the meeting. Your proxy will
be returned to you if you should be present at the Special Meeting and should
request its return in the manner provided for revocation of proxies on the
initial page of the enclosed proxy statement.
By Order of the Board of Directors
Jeffrey S. Aronin
President & Chief Executive Officer
Oak Brook, Illinois
Dated: October , 2000
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MEDCARE TECHNOLOGIES, INC.
1515 West 22nd Street
Suite 1210
Oak Brook, Illinois 60523
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD [NOVEMBER , 2000]
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of Directors on behalf of
Medcare Technologies, Inc., a Delaware corporation (the "Company"), to be
voted at the Special Meeting of Stockholders of the Company (the "Special
Meeting") to be held on [November ,] 2000 a the time and place and for the
purposes set forth in the accompanying Notice of Special Meeting of
Stockholders (the "Notice") and at any adjournment(s) thereof. When proxies in
the accompanying form are properly executed and received, the shares
represented thereby will be voted at the Special Meeting in accordance with
the directions noted thereon; if no direction is indicated, such shares will
be voted "FOR" the adoption of the amendment to the Company's Certificate of
Incorporation (the "Certificate of Amendment") to effect the one for five
reverse stock split (the "Reverse Stock Split") with respect to all shares of
the Company's issued and outstanding common stock, $.001 par value per share
(the "Common Stock"), and in their discretion with respect to any other
matters that may properly come before the stockholders at the Special Meeting.
The executive officers of the Company are located at, and the mailing
address of the Company is, 1515 West 22nd Street, Suite 1210, Oak Brook,
Illinois 60523.
Management does not anticipate that any matters will be presented at the
Special Meeting other than matters set forth in the Notice.
This proxy statement (the "Proxy Statement") and accompanying proxy are
being mailed on or about [October , 2000.]
Any stockholder of the Company giving a proxy has the right to revoke their
proxy at any time prior to the voting thereof by voting in person at the
Special Meeting, by delivering a duly executed proxy bearing a later date or
by giving written notice of revocation to the Company addressed to Jeffrey S.
Aronin, President, 1515 West 22nd Street, Suite 1210, Oak Brook, Illinois
60523; no such written notice shall be effective, however, until such notice
of revocation has been received by the Company at or prior to the Special
Meeting.
In addition to the solicitation of proxies by use of the mail, officers and
regular employees of the Company may solicit the return of proxies, either by
mail, telephone, telegraph or through personal contact. Such officers and
employees will not be additionally compensated but will be reimbursed for out-
of-pocket expenses. Brokerage houses and other custodians, nominees, and
fiduciaries will, in connection with shares of Common Stock registered in
their names, be requested to forward solicitation material to the beneficial
owners of such shares of Common Stock.
The cost of preparing, printing, assembling, and mailing the Notice, this
Proxy Statement, and the enclosed form of proxy, as well as the cost of
forwarding solicitation materials to the beneficial owners of shares of Common
Stock and other costs of solicitation, are to be borne by the Company.
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QUORUM AND VOTING
The record date for the determination of stockholders entitled to notice of
and to vote at the Special Meeting was the close of business on [October
,], 2000 (the "Record Date"). On the Record Date, there were
shares of Common Stock issued and outstanding.
Each share of Common Stock is entitled to one vote on all matters to be
acted upon at the Special Meeting, and neither the Company's Certificate of
Incorporation (the "Certificate of Incorporation") nor its Bylaws allow for
cumulative voting rights. The presence, in person or by proxy, of the holders
of a majority of the issued and outstanding Common Stock entitled to vote at
the meeting is necessary to constitute a quorum to transact business. If a
quorum is not present or represented at the Special Meeting, the stockholders
entitled to vote thereat, present in person or by proxy, may adjourn the
Special Meeting from time to time without notice or other announcement until a
quorum is present or represented. Assuming the presence of a quorum, the
affirmative vote of a majority of all outstanding shares of Common Stock
entitled to vote at the Special Meeting will be required for the adoption of
the Certificate of Amendment to effect the Reverse Stock Split. Any other
matters properly brought before the Special Meeting will require the approval
of a majority of shares present in person or represented by proxy at the
Special Meeting and entitled to vote on such matters. Abstentions and broker
non-votes will each be counted towards the presence of a quorum, but will be
counted as votes represented at the Special Meeting and, accordingly, will
have the effect of a vote "against" all matters to be acted upon at the
Special Meeting. Holders of our preferred stock, $0.25 par value per share
(the "Preferred Stock"), are not entitled to vote on matters to be acted upon
at the Special Meeting.
Proxies in the accompanying form which are properly executed and returned
to the Company will be voted at the Special Meeting in accordance with the
instructions contained in such proxies and, at the discretion of the proxy
holders, on such other matters as may properly come before the meeting. Where
no such instructions are given, the shares will be voted for the adoption of
the Certificate of Amendment to effect the Reverse Stock Split.
SUMMARY
MedCare Technologies, Inc. (the "Company") is a healthcare technology
service company that focuses on under-served high growth markets. The Company
is the parent company of MedCare Technologies Corporation and RxSheets.com,
Inc. and was originally incorporated in the State of Utah in 1986 and changed
its domicile to Delaware in 1996 through a migratory merger.
In 1995, the Company acquired the MedCare Program ("Program"), a propriety
product of the Company, that is made up of equipment, software and services
developed to provide non-pharmaceutical, non-invasive treatment to individuals
suffering from urinary incontinence and other pelvic disorders. In 1996, the
Company began to offer the Program to doctors and in 1998 the Program was
launched nationally. The Company did not generate any revenues until 1997.
During 1998, the Company's sole business was the offering of the MedCare
Program.
In October 1999, MedCare launched a new, business-to-business web site,
RxSheets.com (www.rxsheets.com), which is directed exclusively at the
physician and pharmaceutical marketplace. In addition, the Company changed the
name of its wholly-owned subsidiary from Medcareonline.com to RxSheets.com.
RxSheets.com offers a wide array of compelling and focused information and
services that will enable physicians to more efficiently and effectively
manage the sampling of pharmaceutical drugs. As of June 30, 2000, the Company
had not generated any revenues from RxSheets.com.
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. This summary is not intended to be complete and is
qualified in all respects by reference to the detailed information appearing
elsewhere in this Proxy Statement and the exhibit hereto.
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The Special Meeting
Date, Time and Place of the Special Meeting
The Special Meeting of Medcare Technologies, Inc., is scheduled to be held
on [November , 2000], at (local time) at [The Drake Oak Brook Hotel,
2301 S. York Road, Oak Brook, Illinois 60523.]
Purpose of the Special Meeting
At the Special Meeting, stockholders will act upon the matters outlined in
the accompanying notice of meeting, including a proposal to approve and adopt
the Certificate of Amendment to effect the Reverse Stock Split. If the
stockholders approve and adopt the proposal, the Certificate of Amendment will
be filed with the Secretary of State of Delaware to effectuate the Reverse
Stock Split.
Record Date
Only holders of record of shares of Common Stock at the close of business
on [October , 2000] are entitled to receive notice of and to vote at the
Special Meeting.
Vote Required
Assuming the presence of a quorum, the affirmative vote of a majority of
all outstanding shares of Common Stock entitled to vote at the Special Meeting
will be required for the adoption of the Certificate of Amendment to effect
the Reverse Stock Split. Any other matters properly brought before the Special
Meeting will require the approval of a majority of shares present in person or
represented by proxy at the Special Meeting and entitled to vote on such
matters.
Effect of the Reverse Stock Split
If the Reverse Stock Split is effected, each stockholder will receive one
(1) new post-split share of Common Stock, par value $.001 per share (each, a
"New Share", and collectively, the "New Shares") for each five (5) old pre-
split shares of Common Stock, par value $.001 per share (the "Old Shares")
owned by such stockholder, and cash in lieu of any fractional shares that
would otherwise be issuable.
For further information, see the discussion on page under the heading
"Potential Effects of the Reverse Stock Split."
Federal Income Tax Consequences of the Reverse Stock Split
Each stockholder is urged to consult with such stockholder's own tax
advisor with respect to the consequences of the Reverse Stock Split.
Stockholders who receive cash upon redemption of their fractional share
interests in the New Shares as a result of the Reverse Stock Split will
generally recognize gain or loss based on their adjusted basis in the
fractional share interests redeemed. Otherwise, no gain or loss should be
recognized by a stockholder upon such stockholder's exchange of Old Shares for
New Shares pursuant to the Reverse Stock Split. The tax basis of the New
Shares received in the Reverse Stock Split will be the same as the
stockholder's aggregate tax basis in the Old Shares exchanged therefor, less
the tax basis allocated to fractional share interests. The stockholder's
holding period for the New Shares will include the period during which the
stockholder held the Old Shares surrendered in the Reverse Stock Split.
For further information, see the discussion on page under the heading
"Federal Income Tax Consequences of the Reverse Stock Split."
Recommendation of the Board
The Board of Directors of the Company unanimously recommends that the
Company's stockholders vote "FOR" the proposal to approve and adopt the
Certificate of Amendment to the Company's Certificate of Incorporation to
effect the Reverse Stock Split ("Proposal 1").
RECENT EVENTS
As of September 29, 2000, Medcare entered into a definitive agreement with
Wireless MD, a Delaware corporation, to sell Wireless MD all of the capital
stock of RxSheets.com for cash of $1.5 million and promissory notes and
convertible promissory notes aggregating to $5.0 million in face amount.
Consummation of the transaction is subject to a number of conditions,
including Wireless MD completing its due diligence review of RxSheets.com.
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PROPOSAL NO. 1:
APPROVAL OF THE REVERSE STOCK SPLIT
General
The Board of Directors of the Company believes it would be in the best
interests of the Company and its stockholders to effect a one for five reverse
stock split of the issued and outstanding shares of Common Stock (the "Reverse
Stock Split"). In this regard, on September , 2000, the Board of Directors
of the Company adopted resolutions approving, and authorizing the submission
to the stockholders for their approval and adoption, a proposal to amend the
Company's Certificate of Incorporation to effect the Reverse Stock Split. The
Reverse Stock Split, if approved by the Company's stockholders, will become
effective upon the filing with the Secretary of State of the State of Delaware
(the "Effective Time") of an amendment (the "Certificate of Amendment") to the
Company's Certificate of Incorporation, substantially as set forth in Exhibit
A to this Proxy Statement. It is expected that such filing will take place on
or shortly after the date of the Special Meeting.
If the Reverse Stock Split is effected, the shares of Common Stock held by
stockholders of record as of the Effective Time will be converted at the
Effective Time into the right to receive a number of post-split shares of
common stock, par value $.001 per share ("New Shares") equal to the number of
pre-split shares of common stock, par value $.001 per share ("Old Shares")
divided by five. Cash in lieu of fractional shares will be paid to the
stockholders in an amount equal to the product obtained by multiplying (a) the
"market price," which will be determined by calculating the average closing
price per share of the Common Stock on the Nasdaq SmallCap Market for the
twenty (20) business days prior to the date before Medcare files the
Certificate of Amendment effectuating the Reverse Stock Split, by (b) the
number of Old Shares held by such holder that would otherwise have been
exchanged for such fractional share interest. Conversion rates for the number
of shares issuable upon exercise of Medcare's outstanding Series B Convertible
Preferred Stock, warrants and options and the exercise price per share will be
adjusted accordingly.
There are presently 100,000,000 shares of Common Stock authorized by the
Company's Certificate of Incorporation, as amended. The number of authorized
shares of Common Stock will not be reduced by the Reverse Stock Split.
Additionally, proportionate voting rights and other rights and privileges of
the holders of Common Stock will not be altered by the Reverse Stock Split
(other than as a result of the payment of cash in lieu of fractional shares,
as described above). Additionally, the Reverse Stock Split will not affect the
par value of the Common Stock or the Preferred Stock.
As of the Record Date, there were shares of Common Stock
issued and outstanding and shares of Common Stock reserved for
issuance upon the conversion or exercise of Series B Convertible Preferred
Stock, outstanding warrants and options. Following the effectiveness of the
Reverse Stock Split, the number of shares of Common Stock issued and
outstanding will be approximately and the number of shares of
Common Stock reserved for issuance in connection with outstanding warrants and
options will be approximately .
The purpose of the Reverse Stock Split is not to reduce the number of
record holders who before the Reverse Stock Split numbered . The Company
currently has approximately beneficial stockholders and after the Reverse
Stock Split will have approximately record holders and approximately
beneficial stockholders.
Reasons for the Reverse Stock Split
Our Common Stock is currently listed on the Nasdaq SmallCap Market. Under
the current rules for listing on that market, we must maintain at least
$2,000,000 in net tangible assets, a market capitalization of $35 million or
have net income of $500,000. In addition, we must maintain at least $1,000,000
in market value of public float and a minimum bid price of $1.00 per share of
Common Stock.
The Nasdaq SmallCap Market may delist our Common Stock if the bid price for
the Common Stock is less than $1.00 for a period of thirty (30) consecutive
business days; provided that once Nasdaq has notified the Company of such
deficiency, the Company will have ninety (90) days to achieve compliance,
which is defined as the Company's common stock trading above such $1.00
minimum for a period of ten (10) consecutive
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business days during such 90 day period. If a delisting were to occur, the
Common Stock would trade in the over-the-counter market on an electronic
bulletin board established for securities that do not meet the listing
requirements or in what are commonly referred to as the "pink sheets." Such
alternatives are generally considered to be less efficient markets for trading
in the Company's Common Stock. Additionally, if delisting from Nasdaq were to
occur, the Company's outstanding Preferred Stock would be subject to
redemption.
On June 29, 2000, we received a letter from Nasdaq advising us that our
common stock had not met Nasdaq's minimum bid price closing requirement for
thirty consecutive trading days and that, if we were unable to demonstrate
compliance with this requirement during the ninety (90) calendar days ending
September 27, 2000, our common stock would be delisted at the close of
business on September 29, 2000. While we did not achieve compliance with the
minimum bid requirement by September 27, 2000, and as of August 31, 2000, our
tangible net assets were less than $2.0 million, we applied to Nasdaq for a
hearing and the delisting of the Common Stock will be stayed during the period
prior to our hearing, which is scheduled for October 26, 2000. At the hearing,
the Company hopes to demonstrate that the implementation of the Reverse Stock
Split and the Wireless MD sale will achieve compliance with the minimum bid
requirement and the tangible net assets requirement as follows:
If effected, the Reverse Stock Split will reduce the number of shares of
Common Stock issued and outstanding. The Board expects that this reduction
will result in an increase in the bid price of the Common Stock to a level
above the current bid price and to at least $1.00 per share. However, since
there are numerous factors and contingencies that could affect the bid price
of the Common Stock, there can be no assurance that an increase in the bid
price will occur, or if it occurs, that the bid price will be at least $1.00
per share for a sustained period.
The net proceeds of the Wireless MD sale should result in net tangible
assets in excess of the $2.0 million requirement.
In addition, the Board of Directors believes that the Reverse Stock Split
should enhance the acceptability of the Common Stock by the financial
community and investing public. The reduction in the number of issued and
outstanding shares of Common Stock caused by the Reverse Stock Split is
anticipated initially to increase proportionately the per share market value
of the Common Stock. The Board also believes that the Reverse Stock Split may
result in a broader market for the Common Stock than that which currently
exists.
The Board of Directors believes that some of the practices and policies of
brokerage firms tend to discourage individual brokers within those firms from
dealing with lower priced stocks. Some of those practices and policies pertain
to the payment of broker's commissions and to time consuming procedures that
function to make the handling of lower priced stocks economically unattractive
to brokers. In addition, the structure of trading commissions also tends to
have an adverse impact upon holders of lower priced stock because the
brokerage commissions on the sale of lower priced stocks generally represent a
higher percentage of the sales price than the commissions on relatively higher
priced stocks. The Reverse Stock Split could result in a price level for the
Common Stock that will reduce, to some extent, the effect of these policies
and practices of brokerage firms and diminish the adverse impact of trading
commissions on the market for the Common Stock.
The expected increase in price level may encourage interest and trading in
the Common Stock and possibly promote greater liquidity for the Company's
stockholders, although such potential liquidity could be adversely affected by
the reduced number of shares of Common Stock outstanding after the Effective
Date of the Reverse Stock Split.
The Board of Directors offers no assurance that the market value of the
Common Stock will rise in proportion to the reduction in the number of
outstanding shares resulting from the Reverse Stock Split. Accordingly, there
can be no assurance that the foregoing objectives will be achieved or that the
market price of the Common Stock resulting upon implementation of the Reverse
Stock Split will be maintained for any period of time.
Potential Effects of the Reverse Stock Split
If the Reverse Stock Split is effected, the shares of Common Stock held by
stockholders of record as of the Effective Time will be converted at the
Effective Time into the right to receive a number of New Shares equal to the
number of Old Shares divided by five. Cash in lieu of fractional shares will
be paid to the stockholders in an
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amount equal to the product obtained by multiplying (a) the "market price,"
which will be determined by calculating the average closing price per share of
the Common Stock on the Nasdaq SmallCap Market for the twenty (20) business
days prior to the date before Medcare files the Certificate of Amendment
effectuating the Reverse Stock Split, by (b) the number of Old Shares held by
such holder that would otherwise have been exchanged for such fractional share
interest.
On the Effective Date, the interest of each stockholder of record who owns
fewer than five (5) shares of Common Stock will thereby be terminated, and he
will have no right to vote as a stockholder or share in the assets or any
future earnings of the Company. Shares of Common Stock no longer outstanding
as a result of the fractional share settlement procedure will be returned to
authorized but unissued shares of the Company.
If approved, the Reverse Stock Split will result in some stockholders
owning odd lots of less than 100 shares of Common Stock. Brokerage commissions
and other costs of transactions in odd lots are generally somewhat higher,
particularly on a per share basis, than the costs of transactions in round
lots of even multiples of 100 shares.
Increase of Shares of Common Stock Available for Future Issuances
As a result of the Reverse Stock Split, there will be a reduction in the
number of shares of Common Stock issued and outstanding and an associated
increase in the number of authorized shares which would be unissued and
available for future issuances after the Reverse Stock Split (the "Increased
Available Shares"). The Increased Available Shares could be used for any
proper corporate purpose approved by the Board of Directors of the Company,
including, among others, future financing transactions. However, at present
the Company does not have any plans, nor are there any proposals to use the
additional shares for future financing transactions or for any other purpose.
In addition, the Company does not have any plans, nor are there any proposals
for any business combination that would use the additional shares.
Because the Reverse Stock Split will create the Increased Available Shares,
the Reverse Stock Split may be construed as having an anti-takeover effect.
Although neither the Board of Directors nor the management of the Company
views the Reverse Stock Split as an anti-takeover measure, the Company could
use the Increased Available Shares to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company by, for example, making such
shares available to a friendly purchaser in a private placement or reserving
such shares for use in connection with a stock option plan or stockholders'
rights agreement. Further, the Reverse Stock Split is not part of a plan by
management or the Board of Directors to adopt amendments to such instruments
having an anti-takeover effect, nor does management or the Board of Directors
plan to propose other anti-takeover measures in future proxy soliciations. The
Company's Certificate of Incorporation and By-Laws do not presently contain
other provisions having an anti-takeover effect, other than the protections
afforded by Section 203 of the Delaware General Corporation Law (the "DGCL"),
which will not be limited by the Reverse Stock Split. The Company does not
have any agreements that contain anti-takeover provisions.
Additionally, stockholders should note that certain disadvantages may
result from the creation of the Increased Available Shares. In the event the
Reverse Stock Split is approved by the stockholders and effected by the Board,
the number of outstanding shares of Common Stock would be decreased as a
result of the Reverse Stock Split, but the number of authorized shares of
Common Stock would not be so decreased. The Company would then have the
authority to issue a greater number of shares of Common Stock following the
Reverse Stock Split without the need to obtain stockholder approval to
authorize additional shares. Any such additional shares may have the effect of
significantly reducing the interest of the existing stockholders of the
Company with respect to earnings per share, voting, liquidation value and book
and market value per share.
Exchange of Stock Certificates and Treatment of Fractional Shares
Shortly after the Effective Date, the Company will send a letter of
transmittal to each holder of record of Old Shares outstanding on the
Effective Date. The letter of transmittal will contain instructions for the
surrender of certificate(s) representing such Old Shares to LaSalle Bank, NA,
which will be appointed as exchange agent (the "Exchange Agent") to act for
the stockholders in effecting the exchange of their certificates. Upon proper
completion and execution of the letter of transmittal and return thereof to
the Exchange Agent, together with the
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certificate(s) representing Old Shares, a stockholder will be entitled to
receive a certificate representing the number of New Shares into which his Old
Shares have been reclassified and changed as a result of the Reverse Stock
Split. Stockholders holding a number of Old Shares not evenly divisible by
five, and stockholders holding less than five Old Shares, upon surrender of
their old certificates, will receive cash in lieu of fractional shares.
Stockholders should not send their stock certificates until they receive a
transmittal letter. No certificates representing New Shares will be issued to
a stockholder until he has surrendered his outstanding certificate(s) together
with the properly completed and executed letter of transmittal to the Exchange
Agent.
After giving effect to the settlement of fractional shares of Common Stock,
there will be no material differences between the rights of the Old Shares
outstanding prior to the Reverse Stock Split and the New Shares outstanding
after the Reverse Stock Split is effected.
We will not issue fractional certificates for New Shares in connection with
the reverse split. Stockholders who otherwise would be entitled to receive
fractional shares because they hold a number of Old Shares not evenly
divisible by five, will, upon surrender to the exchange agent of such
certificates representing such fractional shares, receive cash at a the market
price. The market price will be determined by calculating the average closing
price per share of the Common Stock on the Nasdaq SmallCap Market for the
twenty (20) business days prior to the date before Medcare files the
Certificate of Amendment effectuating the Reverse Stock Split.
No Dissenter's Rights
Under the DGCL, stockholders of the Company are not entitled to dissent
from the Reverse Stock Split. We will not independently provide our
stockholders with any such dissenter's rights.
Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of certain material anticipated federal income
tax consequences of the Reverse Stock Split to stockholders of the Company.
It should be noted that this summary is based upon the federal income tax
laws currently in effect and as currently interpreted. This summary does not
take into account possible changes in such laws or interpretations, including
any amendments to applicable statutes, regulations and proposed regulations,
or changes in judicial or administrative rulings, some of which may have
retroactive effect. The summary is provided for general information only, and
does not purport to address all aspects of the range of possible federal
income tax consequences of the Reverse Stock Split and is not intended as tax
advice to any person. In particular, and without limiting the foregoing, this
summary does not account for or consider the federal income tax consequences
to stockholders of the Company in light of their individual investment
circumstances or to holders subject to special treatment under the federal
income tax laws (for example, life insurance companies, regulated investment
companies, and foreign taxpayers). This summary does not discuss any
consequences of the Reverse Stock Split under any state, local or foreign tax
laws.
No ruling from the Internal Revenue Service or opinion of counsel will be
obtained regarding the federal income tax consequences to the stockholders of
the Company in connection with the Reverse Stock Split. Accordingly, each
stockholder is encouraged to consult his tax adviser regarding the specific
tax consequences of the proposed reverse stock split to such stockholder,
including the application and effect of federal, state, local and foreign
taxes, and any other tax laws.
The Board of Directors believes that the Reverse Stock Split would be a
tax-free recapitalization to the Company and its stockholders. If the Reverse
Stock Split qualifies as a recapitalization described in Section 368(a)(1)(E)
of the Internal Revenue Code of 1986, as amended (the "Code"), (i) no gain or
loss will be recognized by a stockholder of Common Stock who exchanges its Old
Shares for New Shares, except that a holder of Common Stock who receives cash
proceeds from the sale of fractional shares of Common Stock will recognize a
gain or loss equal to the difference, if any, between such proceeds and the
basis of its Common
7
<PAGE>
Stock allocated to its fractional share interests, and such gain or loss, if
any, will constitute capital gain or loss if its fractional share interests
are held as capital assets at the time of their sale, (ii) the tax basis for
the New Shares received in the Reverse Stock Split will be the same as the tax
basis in the Old Shares exchanged therefore, less the tax basis allocated to
fractional share interests and (iii) the holding period for New Shares will
include the period during which the stockholder held the Old Shares
surrendered in the Reverse Stock Split, provided that such Common Stock was
held as a capital asset immediately prior to the Effective Date.
Recommendation of the Board of Directors
The Board of Directors has considered this Proposal and believes that the
adoption of the Certificate of Amendment and the resulting Reverse Stock Split
is in the best interests of its stockholders and the Company.
The Board of Directors unanimously recommends a vote FOR Proposal 1.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of September 29, 2000, the beneficial
ownership of the Company's Common Stock by each nominee, director and
executive officer of the Company, each person known by the Company to
beneficially own more than 5% of the Company's Common Stock outstanding as of
such date and the executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares
Person or Group of Common Stock Percent
--------------- ---------------- -------
<S> <C> <C>
Harmel S. Rayat................................. 2,000,000 16.0%
216-1628 West First Avenue
Vancouver, B.C. V6J 1G1 Canada
Jeffrey S. Aronin (1)........................... 518,033 4.2%
1515 West 22nd Street
Oak Brook, Illinois 60523
Gregory Wujek (1)............................... 145,390 1.2%
1515 West 22nd Street
Oak Brook, Illinois 60523
Alan P. Jagiello (1)............................ 54,890 0.4%
1515 West 22nd Street
Oak Brook, Illinois 60523
Dr. Michael M. Blue (1)......................... 127,473 1.0%
500 E. Robinson St., Suite 700
Norman, Oklahoma 73071
George Nagy (1)................................. 3,473 0.03%
1200 Diehl Road
Naperville, IL 60566
Directors and Executive Officers as a group (5
persons)....................................... 849,259 6.8%
</TABLE>
--------
(1) Includes 514,583, 143,890, 52,640, 123,473 and 3,473 shares for Messrs. J.
Aronin, G. Wujek, A. Jagiello, Dr. Blue and G. Nagy, respectively, which
may be acquired pursuant to options granted and exercisable within 60 days
of September 29, 2000, under the Company's stock option plans.
Voting Intentions of Certain Beneficial Owners and Management
The Company's directors and officers have advised the Company that they
will vote the 11,200 shares of Common Stock owned or controlled by them "FOR"
each of the Proposals in this Proxy Statement. These shares represented .1% of
the outstanding Common Stock of the Company as of September 29, 2000.
8
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
MEDCARE TECHNOLOGIES, INC.
----------------
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
----------------
Medcare Technologies, Inc., a corporation duly organized and validly
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The name of the Corporation is Medcare Technologies, Inc.
2. The Certificate of Incorporation of the Corporation is hereby amended
by changing Article IV thereof so that, as amended, such Article shall read
in its entirety as follows:
"FOURTH: (a) The Corporation shall have the authority to issue
100,000,000 shares of common stock, par value $.001 per share, and
1,000,000 shares of preferred stock, par value $.001 per share.
(b) Simultaneously with the effective date of the filing of this
amendment to the Corporation's Certificate of Incorporation (the
"Effective Date"), each share of common stock, par value $.001 ("Common
Stock"), of the Corporation issued and outstanding or held as treasury
shares immediately prior to the Effective Date (the "Old Shares") shall
automatically be reclassified and continued (the "Reverse Stock
Split"), without any action on the part of the holder thereof, as one-
fifth of one share of Common Stock. The Corporation shall not issue
fractional shares in connection with the Reverse Stock Split. Holders
of Old Shares who would otherwise be entitled to receive a fraction of
a share on account of the Reverse Stock Split shall receive, upon
surrender of the stock certificates formerly representing the Old
Shares, in lieu of such fractional share, an amount in cash equal to
the product of (i) the closing sale price per share of the Common Stock
as reported by the Nasdaq SmallCap Market on the last trading day
preceding the Effective Date by (ii) the number of Old Shares held by
such holder that would otherwise have been exchanged for such
fractional share interests."
3. The Amendment of the Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 242 of the General Corporation
Law of the State of Delaware. On October , 2000, the Board of Directors
of the Corporation duly adopted resolutions setting forth the Amendment,
declaring its advisability and calling for submission of the Amendment to
the stockholders of the Corporation for vote at a special meeting. The
stockholders approved the Amendment at the special meeting of stockholders
held on November , 2000.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its Chief Executive Officer and President this day of October,
2000.
MEDCARE TECHNOLOGIES, INC.
By: _________________________________
Jeffrey S. Aronin
Chief Executive Officer and
President
A-1
<PAGE>
PROXY PROXY
MEDCARE TECHNOLOGIES, INC.
1515 West 22nd Street,
Suite 1210
Oak Brook, Illinois 60523
Proxy for Special Meeting of Stockholders
November , 2000
This proxy is solicited on behalf of the Board of Directors of Medcare
Technologies, Inc.
The undersigned, a stockholder of Medcare Technologies, Inc. (the "Company")
hereby constitutes and appoints each of Mr. Jeffrey S. Aronin and Mr. Alan P.
Jagiello the attorney, agent and proxy of the undersigned, with full power of
substitution, for and in the name, place and stead of the undersigned, to vote
and act with respect to all shares of the common stock of the Company par value
$0.001 per share standing in the name of the undersigned or in respect of which
the undersigned is entitled to vote, with all powers the undersigned would
possess if personally present at such meeting upon the following matters, and
otherwise in his discretion:
(Comments/Change of Address)
---------------------------------------
---------------------------------------
---------------------------------------
(If you have written in the above
space, please mark the corresponding
box on the reverse side)
/\ FOLD AND DETACH HERE /\
<PAGE>
MEDCARE TECHNOLOGIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. To approve and adopt an amendment to the Company's Certificate of Incorpora-
tion to effect a one for five reverse stock split with respect to all shares
of the Company's issued and outstanding common stock.
For Against Abstain
[_] [_] [_]
2. To transact any and all such other business that may properly come before
the meeting or any adjournment(s) thereof.
Comments/ [_]
Change
of
Address
If no direction is indicated, this proxy will be voted in the discretion of the
proxy holder. Please date, sign, and print your name on this proxy exactly as
your name appears on your stock certificate and return immediately to the ad-
dress printed above in the enclosed self-addressed stamped envelope.
Dated:
-------------------------------------------------------------
Signature:
----------------------------------------------------------
No. of Shares:
------------------------------------------------------
Print Name:
---------------------------------------------------------
/\ FOLD AND DETACH HERE /\
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
