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SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule 14-
c5(d)(2))
/X/ Definitive Information Statement
AUTOMEDIX SCIENCES, INC.
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), or 14-c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/X/ 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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AUTOMEDIX SCIENCES, INC.
2801 Barranca Road
Irvine, California 92619-7001
INFORMATION STATEMENT
This Information Statement is furnished by the Board of Directors of
Automedix Sciences, Inc., an Illinois corporation (the "Company"), to inform the
shareholders of the Company of the approval of certain corporate actions. This
Information Statement and the accompanying materials will be mailed on or about
October 16, 1996 to holders of record of Common Stock, par value $.01 ("Common
Stock"), and of Class B Common Stock, par value $.01 ("Class B Shares," together
with the Common Stock, the "Shares"), of the Company as of the record date. The
record date for determining shareholders entitled to receive this Information
Statement has been established as the close of business on August 20, 1996. On
that date, the Company had outstanding and entitled to vote 16,505,416 shares of
Common Stock and 2,244,584 Class B Shares. Specifically, this Information
Statement relates to the following corporate actions:
1. Shareholders' approval of a share exchange between the Company and
the sole shareholder of Complete Communications Incorporated.
2. Shareholders' approval of an amendment to the Company's Certificate
of Incorporation effectuating a one for ten reverse stock split of the
issued and outstanding Common Stock.
3. Shareholders' approval of an amendment to the Company's Certificate
of Incorporation increasing the number of shares of Common Stock the Company
is authorized to issue to 40,000,000.
4. Shareholders' approval of an amendment to the Company's Certificate
of Incorporation changing the Company's name to COMC, INC.
5. Shareholders' approval of an amendment to the Company's Certificate
of Incorporation eliminating the Company's Class B Shares.
During August 1996 (i) holders of 12,795,290 Shares (or 68%) consented in
writing without a meeting to the matters set forth herein and (ii) holders of
1,756,530 Class B Shares (or 78%) consented to the matter set forth under
"Elimination of Class B Common Stock." As a result, the corporate actions were
approved by the two-thirds majority required by law and no further votes will be
needed. Unless indicated otherwise, numbers of shares herein do not account for
the reverse stock split.
Shareholders are entitled to dissent from the Share Exchange described under
"Approval of Agreement Between the Company and John J. Ackerman" and they have
the right to obtain payment in cash of $.01 per Share, which the Board of
Directors has determined to be the fair value of the shares. Included in this
Information Statement are instructions with respect to a demand for payment.
Shareholders who fail to return to the Company in a timely manner the notice of
election to dissent lose the right to obtain payment for their Shares. A form of
election to dissent has been included in this mailing. See "Right to Dissent
from the Share Exchange."
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
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SHARE EXCHANGE BETWEEN THE COMPANY AND JOHN J. ACKERMAN
The Company has entered into an Agreement dated June 3, 1996 (the
"Agreement") with John Ackerman ("Ackerman"), the sole shareholder of Complete
Communications Incorporated, a California corporation ("CCI"). Under the
Agreement, the Company will issue to Ackerman 10,000,000 shares of the Company's
Common Stock, par value $.01 ("Common Stock"), in exchange for all issued and
outstanding shares of CCI (the "Share Exchange"). The number of shares of Common
Stock to be issued to Ackerman gives effect to the reverse stock split set forth
under "Amendments to Articles of Incorporation -- Approval of Reverse Stock
Split." The Agreement further provides, among other things, that at the closing
(the "Closing") Ackerman may appoint a new Board of Directors consisting of
Ackerman nominees. Upon completion of the Share Exchange, Ackerman will own
approximately 80% of the Common Stock and the corporate name of Automedix will
be changed to COMC, INC. As a result of the Share Exchange absolute control of
the Company will be transferred to Ackerman.
The Share Exchange has already been approved by the Company's Board of
Directors and by the written consent of the holders of two-thirds of the Common
Stock and Class B Shares without a meeting. Twenty (20) days after the
dissemination of this Information Statement, the necessary corporate action for
the completion of the Share Exchange will be taken. Following the Closing, the
Company will have outstanding approximately 12,500,000 shares of Common Stock
after giving effect to the Reverse Stock split set forth under "Amendments to
Articles of Incorporation -- Approval of Reverse Stock Split."
THE TRANSACTION
Summary
Under the Agreement, the Company will issue to Ackerman an aggregate of
10,000,000 shares of Common Stock. The Agreement also provides that Ackerman is
appointed to appoint a new Board of Directors for the Company. Shareholders
should carefully review additional details of the terms of the Agreement under
the relevant sections in this Information Statement which set forth all material
provisions of the Agreement, as well as the Agreement itself which is annexed
hereto as Attachment A.
The Company believes that it is beneficial to the Company to enter into the
transaction since it affords the Company the opportunity to establish itself in
a new business area after the sale of its assets in 1992.
See "Background of the Transaction."
Issuance of Securities
The Company has agreed to issue to Ackerman 10,000,000 shares of Common
Stock, representing approximately 80% of the total shares of Common Stock to be
outstanding at the Closing, as a result of which he will possess absolute
control over the Company's affairs. The number of shares of Common Stock to be
issued to Ackerman gives effect to the reverse stock split set forth under
"Amendments to Articles of Incorporation -- Approval of Reverse Stock Split."
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BACKGROUND OF THE SHARE EXCHANGE
The Company
The Company was incorporated in December 1978. Initially, its purpose was
the research and development of medical technologies for the treatment of cancer
and other conditions. On March 25, 1987 the Company commenced an initial public
offering of its securities in which it raised $4,500,000. Because the Company
was unable to raise capital to continue the clinical trials with respect to the
medical device for cancer treatment which it had designed, in the spring of
1992, it ceased its operations. As a consequence, the Board of Directors of the
Company began to investigate the possibility of a new business direction and to
search for viable acquisition or merger candidates which would enable the
Company to maximize value to shareholders. In 1992, the Company ceased making
the required public filings under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
In April 1996, after a lengthy search, the Company was introduced to
Ackerman, the sole shareholder of CCI, by an unaffiliated third party. The
Company's Board of Directors determined that CCI was a young company involved in
a promising business which had growth potential if afforded access to the
capital markets. Therefore, the Board of Directors of the Company resolved that
a business combination with CCI had the potential to provide increased liquidity
to the Company's shareholders and to maximize shareholders value. The Company
will at the Closing issue to the unaffiliated introducing party or his designee
625,000 shares of Common Stock as a finder's fee, after giving effect to the
reverse stock split set forth under "Amendments to Articles of Incorporation --
Approval of Reverse Stock Split."
The Company commenced negotiations with Ackerman in May 1996. On June 3,
1996, the parties reached agreement with respect to the issuance to Ackerman of
10,000,000 shares of Common Stock in exchange for all of the issued and
outstanding shares of CCI. The number of shares to be issued to Ackerman was
arbitrarily determined between the parties to be 80% of the total number of
shares outstanding.
The Company's current address is 2801 Barranca Road, Irvine, California
92619-7001. Its telephone number at that address is 714-559-5300. It is
anticipated that upon consummation of the Share Exchange, the Company will move
its offices to CCI's headquarters at the address set forth under "Description of
CCI."
Description of CCI
CCI, a California corporation, provides voice and data services to major
companies that are undergoing changes in their telecommunication and data
communication infrastructures. It assists its clients by being a full-service
provider in the area of computer networks and telephone systems. Specifically,
it provides, among other things, services in the following areas:
Telecommunications Solutions - CCI sells and provides support and
consulting services with respect to telecommunications systems. It designs
network solutions for remote access and video and desktop conferencing and
provides installation and service of both digital and analog telephone
systems. CCI is an authorized dealer for major telecommunications companies
including AT&T.
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LAN/WAN Solutions - CCI designs, implements and maintains LAN and WAN
networks, including installation and configuration of computer hardware and
software. It also offers hardware and software solutions for mainframe and
PC platforms.
Premise Wiring Services - CCI offers complete wiring services, including
voice data, fiber and video system application design, installation and
management services. Its technical personnel participates in continuous
certification programs offered by companies such as AT&T and Pacific Bell.
Help Desk Solutions - CCI offers continuous 24-hour-a-day telephone
support to its clients in the areas of computer networks and
telecommunications. In addition, it provides outsourcing services in the
area of telemarketing.
Internet Business Solutions - CCI provides services in connection with
the design, implementation and maintenance of web pages on the internet. It
attempts to improve the inter-active capabilities of a particular design and
provides, through third parties, credit card clearing services that it
believes are reliable and secure.
Its recent major clients include Bank of America and Cedar Sinai Medical
Center. Other entities it has served include The Walt Disney Company, Warner
Bros., Mattell, Inc., The Campbell Soups Company, Warner Brothers Company and
Wells Fargo.
The Board of Directors of the Company believes that CCI has positioned
itself to take advantage of the opportunities created by a number of
circumstances. First, in order to remain competitive, an increasing number of
companies are introducing computers into their business. Second, prior
generations of computer equipment are becoming obsolete and must be upgraded or
replaced. Third, deregulation of the telecommunication industry is creating the
need for new systems that will enable the integration of the computer,
broadcasting, multi-media and cable industries. The Board of Directors of the
Company believes that CCI offers a low-cost alternative to similar services
offered by larger and more established telecommunications companies. In
addition, by focusing on reducing the time it takes to respond to clients'
needs, it has been able to develop a strong client base. Nevertheless, the
Company's Board of Directors is aware that the computer and telecommunications
is a highly competitive business. There can be no assurance that the Company
will be able to effectively compete with entities many of which are older, more
established in this area and possess greater financial and other resources than
the Company.
CCI's revenues are generated by the sale of equipment and by services
provided in almost equal proportions. For the fiscal year ended December 31,
1995, CCI generated total revenues of approximately $3 million. Its gross
profits for the same period aggregated approximately $1.3 million with pre-tax
net profits totalling approximately $312,000.
CCI employs approximately 60 persons of whom five are executive personnel,
five are involved in marketing and 50 are involved in operations.
CCI was incorporated in California in 1987. CCI leases approximately 3,500
square feet of space in an office building located at 400 N. Glenoaks Boulevard,
Burbank, California. In addition, it leases approximately 1,000 square feet at a
warehouse nearby. Its telephone number is 818-556-3333.
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RECONSTITUTION OF THE BOARD
Under the terms of the Agreement, Ackerman is entitled to appoint a new
Board of Directors of the Company. Three of the Company's current four
directors, Marvin Loeb, Richard Horowitz and Donald Baker, will remain on the
Board. Bruce Barron will resign as a director. At the Closing, Ackerman will
fill the vacancy to be created by the resignation of Mr. Barron.
RIGHT TO DISSENT FROM THE SHARE EXCHANGE
Pursuant to Sections 11.65 and 11.70 of the Illinois Business Corporation
Act of 1983 (the "Business Corporation Act"), holders of Common Stock and of
Class B Shares have the right to dissent from the Share Exchange and obtain
payment of the fair value of their Shares. A shareholder who elects to dissent
from the Share Exchange and obtain payment for his Shares (a "Dissenter"), must
complete a form of election to dissent (a copy of which has been included in
this mailing) and return it to the Company at its address before November 17,
1996. If an originally executed copy of the election form is not received by
that date, the Dissenter will lose his right to dissent and obtain payment for
his Shares. In order to be entitled to receive payment, a Dissenter must return
to the Company any stock certificates or other evidence of Share ownership to
the satisfaction of the Company. The Board of Directors of the Company has
determined the fair market value of the Common Stock and of the Class B Shares
to be $.01 per share.
Upon consummation of the Share Exchange, the Company will pay to the
Dissenter the fair value plus accrued interest. If the Dissenter disagrees with
the Company's determination of fair value, he must so notify the Company in
writing before November 17, 1996. If within 60 days from the mailing date of
this document the Company and the Dissenter have not agreed upon the estimated
fair value, the Company must either pay to the Dissenter the difference in value
demanded by the Dissenter or file with the circuit court of competent
jurisdiction a petition for a determination of the fair value.
The foregoing summary does not purport to be a complete statement of the
provisions of Sections 11.65 and 11.70 of the Business Corporation Act and is
qualified in its entirety by reference to the relevant portions of such
Sections copies of which are attached hereto as Attachment B.
A Dissenter who receives payment for his Shares upon exercise of his right
of dissent will, subject to the provisions of Section 302(b) of the Internal
Revenue Code, recognize gain or loss for Federal income tax purposes, measured
by the difference between the cost basis for his Shares and the amount of
payment received.
SHAREHOLDERS ARE URGED TO CAREFULLY REVIEW THE ENCLOSED LETTER AND, IF THEY
ELECT TO CONSENT FROM THE SHARE EXCHANGE, TO EXECUTE AND RETURN TO THE COMPANY
THE FORM OF ELECTION TO DISSENT ATTACHED THERETO. IF SAID FORM IS NOT RECEIVED
BY THE COMPANY ON NOVEMBER 17, 1996, A DISSENTER LOSES HIS RIGHT TO DISSENT.
GOVERNMENTAL AND REGULATORY APPROVALS
No approval by any governmental or regulatory authority is required to be
obtained to consummate the Share Exchange.
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FEDERAL TAX CONSEQUENCES
The Share Exchange has been structured as a tax free organization under
Section 368 of the Internal Revenue Code and will therefore not result in any
tax consequences for the Company's shareholders.
NO DEFAULTS OR DIVIDENDS IN ARREARS
The Company is not in default in principal or interest in respect of any of
its securities. It is not in arrears in the payment of any dividends.
VOTE REQUIRED
The affirmative vote of two thirds of the Shares entitled to vote is
required for approval of the Share Exchange. Such majority was obtained by
written consent without a meeting, and no further vote will therefore be
required.
AMENDMENTS TO ARTICLES OF INCORPORATION
The Board of Directors of the Company and the holders of two thirds of the
shares entitled to vote thereon have adopted a proposal declaring advisable
amendments to the Articles of Incorporation of the Company to (i) effect a one
for ten reverse stock split of the Company's currently issued and outstanding
Common Stock (the "Reverse Stock Split"), (ii) increase the number of shares of
Common Stock the Company is authorized to issue to 40,000,000, (iii) change the
Company's name to COMC, INC., and (iv) eliminate the Class B Common Stock
(collectively, the "Amendments"). The Company is currently authorized to issue
20,000,000 shares of Common Stock, $.01 par value. As of the date hereof, there
are issued and outstanding 16,505,416 shares of Common Stock and 2,244,584 Class
B Shares. The numbers of issued and outstanding shares include 5,250,000 shares
of Common Stock and 1,000,000 Class B Shares, respectively, recently issued to
Marvin Loeb, the Company's present Chairman and President. See "Certain
Relationships and Related Transactions." The Amendments will become effective
upon the filing of a certificate of amendment to the Company's certificate of
incorporation with the Illinois Secretary of State. It is anticipated that the
filing will take place on or around November 7, 1996.
REVERSE STOCK SPLIT
The Board of Directors of the Company and more than two-thirds of the Common
Stock and the Class B Shares entitled to vote thereon have approved a one for
ten reverse stock split. Adoption of the Reverse Stock Split (assuming the
conversion and elimination of the Class B Shares described below) will reduce
the presently issued and outstanding shares of Common Stock from 18,750,000 to
approximately 1,875,000 (as a result of rounding, the actual number may be
slightly higher). The Company believes that the decrease in the number of shares
of Common Stock outstanding as a consequence of the proposed Reverse Stock Split
should increase the per share price of the Common Stock, which may encourage
greater interest in the Common Stock and possibly promote greater liquidity for
the Company's shareholders. However, the increase in the per share price of the
Common Stock as a consequence of the proposed Reverse Stock Split may be
proportionately less than the decrease in the number of shares
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outstanding. In addition, any increased liquidity due to any increased per share
price could be partially or entirely off-set by the reduced number of shares
outstanding after the proposed Reverse Stock Split. Nevertheless, the proposed
Reverse Stock Split could result in a per share price that adequately
compensates for the adverse impact of the market factors noted above. There can,
however, be no assurance that the favorable effects described above will occur,
or that any increase in per share price of the Common Stock resulting from the
proposed Reverse Stock Split will be maintained for any period of time.
No fractional shares will be issued. All fractional interests resulting from
the Reverse Stock Split will be increased to the next higher whole number of
shares. The Company believes that the approximate total number of beneficial
holders of the Common Stock of the Company is in excess of 3,000. After the
Reverse Stock Split the Company estimates that it will continue to have
approximately the same number of shareholders.
The number of issued shares after the Reverse Stock Split is
approximate. Except for changes resulting from the Reverse Stock Split, the
rights and privileges of holders of shares of Common Stock will remain the same,
both before and after the proposed Reverse Stock Split.
There can be no assurance that the market price of the Common Stock
after the proposed Reverse Stock Split will be proportionately greater than the
market price before the proposed Reverse Stock Split, or that such price will
either exceed or remain in excess of the current market price.
Federal Income Tax Consequences
The following information is based on discussions with counsel. No
opinion of counsel has been obtained. Shareholders are advised to consult with
their own tax advisors for more detailed information relating to their
individual tax circumstances.
1. The proposed Reverse Stock Split will be a reorganization described
in section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the
"Code").
2. The Company will recognize no gain or loss as a result of the
proposed Reverse Stock Split.
3. Shareholders will recognize no gain or loss to the extent that
currently outstanding shares of Common Stock are exchanged for new shares of
Common Stock pursuant to the proposed Reverse Stock Split.
4. The tax basis of the new Common Stock received in exchange for
Common Stock pursuant to the proposed Reverse Stock Split will be the same as
the shareholders' basis in the stock exchanged. Therefore, the new shares of
Common Stock in the hands of a shareholder will have an aggregate basis for
computing gain or loss equal to the aggregate basis of shares of Common Stock
held by that shareholder immediately prior to the proposed Reverse Stock Split.
5. Shareholders whose fractional interests will be rounded up to the
next whole number of shares will recognize gain equal to the difference between
the fractional amount of shares owned by them and the whole number of shares
they receive pursuant to the proposed Reverse Stock Split. Assuming
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that such shareholders have held their Common Stock as a capital asset and have
held such stock for more than one year, the gain recognized upon the receipt of
the whole shares in lieu of fractional shares will be capital gain.
INCREASE IN THE NUMBER OF AUTHORIZED SHARES
The Company is currently authorized to issue 20,000,000 shares of
Common Stock of which as of the date hereof a total of 16,505,416 were
outstanding, including 5,250,000 shares of Common Stock recently issued to
Marvin Loeb, the Company's present Chairman and President. See "Certain
Relationships and Related Transactions." An increase in the authorized shares of
Common Stock to 40,000,0000 will enable the Company to issue to Ackerman the
10,000,000 shares in connection with the Share Exchange. See "Share Exchange
between the Company and John J. Ackerman." In addition, sufficient shares will
be readily available for use in any acquisition or financing or upon the
exercise of options, if granted.
Shares that are presently authorized but not issued and outstanding are
issuable at any time and from time to time, by action of the Board of Directors
without further authorization from the Company's shareholders, except as
otherwise required by applicable law or rules and regulations to which the
Company may be subject, to such persons and for such consideration as the Board
of Directors determines. This will permit the Company to consider financings,
acquisitions or other transactions which may require the issuance of shares of
Common Stock. The Company is not currently considering any financing
transactions which would involve the issuance of Common Stock and, other than in
connection with the Share Exchange, the Company has no commitments which would
require the issuance of any shares of Common Stock.
Current holders of Common Stock of the Company have no preemptive
rights to acquire or subscribe to any of the shares of Common Stock which are
authorized but not issued and outstanding. Voting rights afforded to shares of
Common Stock upon their issuance would have a dilutive effect on the voting
power of the outstanding Common Stock of the Company. Issuance of any of such
additional shares of Common Stock could also have a dilutive effect on
stockholders' equity in the Company.
CHANGE OF NAME
The Company's current name, "Automedix Sciences, Inc.," was conceived
because the Company was organized for the purpose of developing medical devices.
See "Share Exchange between the Company and John J. Ackerman-Background of the
Share Exchange-The Company." As a result of the Share Exchange, the Company will
be controlled by Ackerman and be engaged in CCI's business. To more accurately
reflect its new direction, the Board of Directors and a two-thirds majority of
the Shares entitled to vote thereon have determined that the Company should
change its name to "COMC, INC."
ELIMINATION OF CLASS B COMMON STOCK
The Company is currently authorized to issue 2,250,000 shares of Class
B Common Stock, par value $.01 ("Class B Shares"). As of the date hereof,
2,244,584 Class B Shares are issued and outstanding. Under the Company's
certificate of incorporation, the holders of the Class B Shares are entitled to
elect a majority of the Board of Directors of the Company. Each Class B Share is
convertible at the option of the holder thereof into one share of Common Stock.
Except as to voting rights with
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respect to the election of the Company's Board of Directors, the Class B Shares
are identical to the Common Stock.
In order to stimulate shareholders participation in the Company's
affairs, the Company's Board of Directors, the holders of two-thirds of the
shares of Common Stock entitled to vote thereon as well as the holders of two-
thirds of the issued and outstanding Class B Shares, have resolved to eliminate
the Class B Shares. The Board of Directors of the Company believes that
elimination of the super voting rights associated with the Class B Shares will
increase the liquidity of the Company's Common Stock since it will terminate the
exercise of control over the Company's affairs by a relatively small group of
individuals, thereby making the Common Stock more attractive.
Immediately prior to the elimination of the Class B Shares, each
outstanding Class B Share will automatically be converted into the right to
receive one share of Common Stock without further action by the holder thereof.
Shares of Common Stock issued upon the conversion of the Class B Shares will be
subject to the Reverse Stock Split. See "Reverse Stock Split."
VOTE REQUIRED
Under Illinois law any material amendments to the Company's certificate
of incorporation require a two-thirds majority of the shares entitled to vote
thereon. Such two-thirds majority was obtained by written consent without a
meeting with respect to all Amendments and no further votes will therefore be
required. The Board of Directors does not intend to solicit any proxies or
consents from any other shareholders in connection with this action.
SHAREHOLDERS ARE URGED TO READ THE AMENDMENTS, THE TEXT OF WHICH IS
ATTACHED AS ATTACHMENT C TO THIS INFORMATION STATEMENT.
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DESCRIPTION OF BUSINESS
The Company was incorporated in December 1978. Initially, its purpose
was the research and development of medical technologies. On March 25, 1987 the
Company commenced an initial public offering of its securities in which it
raised $4,500,000. Because the Company was unable to raise capital to continue
the clinical trials with respect to the medical devices for cancer treatment
which it had designed, in the spring of 1992, it ceased its operations. As a
consequence, the Board of Directors of the Company began to investigate the
possibility of a new business direction and to search for viable acquisition or
merger candidates which would enable the Company to maximize value to
shareholders. In June 1996 the Company reached agreement with Ackerman with
respect to the Share Exchange set forth under "Share Exchange between the
Company and John J. Ackerman."
DESCRIPTION OF PROPERTY
The Company's headquarters are located at the address of Marvin P.
Loeb, the Company's Chairman and President at 2801 Barranca Parkway, Irvine,
California. The arrangement with Mr. Loeb is on a rent free basis. It is
anticipated that upon consummation of the Share Exchange, the Company will move
its offices to CCI's headquarters.
LEGAL PROCEEDINGS
There are no legal proceedings pending, or, to the knowledge of the
Company, threatened.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
There has been no trading market for the Company's securities since it
ceased operations in March 1992.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Initially, the Company's purpose was the research and development of
medical technologies for the treatment of cancer and other conditions. Because
the Company was unable to raise capital to continue the clinical trials with
respect to the medical device for cancer treatment which it had designed, in the
spring of 1992, it ceased its operations. As a consequence, the Board of
Directors of the Company began to investigate the possibility of a new business
direction and to search for viable acquisition or merger candidates which would
enable the Company to maximize value to shareholders. In June 1996 the Company
reached agreement with Ackerman with respect to the Share Exchange.
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Results of Operations
There have been no transactions for the fiscal years ended September
30, 1995 and 1994, and the nine months ended June 30, 1996.
Liquidity and Capital Resources
The Company had no cash or cash equivalents on September 30, 1995 and
1994. In addition, its working capital position on each of these dates was zero.
In June 1996, the Company agreed with Ackerman on the terms of the
Share Exchange set forth under "Share Exchange between the Company and John J.
Ackerman." Under the Agreement, in exchange for all issued and outstanding
voting securities of CCI, Ackerman will be issued an aggregate of 10,000,000
shares of Common Stock (as adjusted for the Reverse Stock Split), representing
approximately 80% of the Company's voting securities outstanding at the Closing.
The transaction is structured as a tax-free reorganization under the Internal
Revenue Code. At June 30, 1996, CCI had working capital of $657,599, and
stockholders equity of $568,885. For the six months ended June 30, 1996, CCI had
sales of approximately $1,604,000 and a pre-tax profit of approximately $95,000.
MANAGEMENT
The following sets forth the name and age, present position(s) with the
Company, principal business occupations and committee service for the last five
years of each person who is presently a director or executive officer of the
Company, as well as the nominee who fill the vacancy on the Company's Board on
November 7, 1996.
Name Age Position
---- --- --------
Marvin Loeb 69 Chairman, President
Richard F. Horowitz 55 Director
Bruce Barron 41 Director
Donald Baker 67 Director
MARVIN P. LOEB has been the Chairman and the President of the Company
since 1979 and 1980, respectively. Since 1990, he has been Chairman of
Trimedyne, Inc., a publicly held corporation involved in the manufacture of
medical lasers ("Trimedyne"). He has also been a director of Pharmos, Inc.
(formerly Pharmatec, Inc.), a publicly-held company which is developing drugs
and drug delivery systems since December 1982 and Chairman from that date until
October 1992. Mr. Loeb was a Director of Gynex Pharmaceuticals, Inc. (now
Biotechnology General Corporation), a publicly-held company developing
reproductive products, from April 1986 until August 1993, and was its Chairman
from April 1986 to August 1992. From April 1986 to June 1994, he was Chairman
and a Director of Xtramedics, Inc. (now Athena Medical Corporation), a publicly
held company which is engaged in the development
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of a feminine hygiene product. Mr. Loeb was Chairman and a director from 1988 to
June 1993 of Contracap, Inc., a publicly held company, which was developing a
pharmaceutical product and is now inactive. Mr. Loeb was Chairman from 1983 to
April 1986 and Vice Chairman from April 1987 to April 1992 of Petrogen, Inc., a
privately held company which was developing genetically engineered bacteria for
oil and toxic waste cleanup and is now inactive. Since May 1986, he has been
Chairman and director of Cardiomedics, Inc., a privately held company which is
developing circulatory assist devices. Since November 1988, he has been Chairman
of Ultramedics, Inc., a privately held company whose principal interest is its
investment in Cardiomedics, Inc. and which was formerly engaged in manufacturing
ultraviolet devices for medical use. Mr. Loeb has been President of Master
Health Services, Inc., a family held medical consulting firm, since 1973, and
Marvin P. Loeb and Company, a family held licensing firm, since 1983. Mr. Loeb
is Mr. Barron's father-in-law. Mr. Loeb holds an honorary Doctor of Science
Degree from Pacific State University and a Bachelor of Science Degree from the
University of Illinois.
RICHARD F. HOROWITZ has been a director of the Company since 1993. He
has been a director of Trimedyne since 1983. He was a director of Gynex from
August 1988 to August 1992 and has been a Director of Ultramedics, Inc. since
November 1988 and of Cardiomedics Inc. since 1992. Mr. Horowitz has been a
practicing attorney in New York City for the past 32 years. He has been a member
of the firm of Heller, Horowitz and Feit, P.C. (formerly Heller, Horowitz &
Feit) since January 1979. Heller, Horowitz & Feit, P.C. has been securities
counsel to the Company and to other entities with which Mr. Loeb is associated.
Mr. Horowitz is a graduate of Columbia College and Columbia Law School. He is a
member of the Association of the Bar of the City of New York and the New York
State Bar Association.
BRUCE N. BARRON has been a director of the Company since 1984. He has
been a Director of Trimedyne. Since April 1995 he has been President and CEO of
Molecular Geriatrics Corporation, a privately owned company developing
pharmaceuticals to treat and a diagnostic to detect, Alzheimer's Disease, having
been Chief Financial Officer since September 1993 and a director since June
1994. He was Chief Financial Officer and a director of Gynex, Inc. ("GYNEX"), a
biotechnology company, from 1985 to August 1993 and Secretary from November 1985
to July 1985. He was Vice President-Finance and a director of Contracap, Inc.
from April 1988 to June 1993, a director of Petrogen, Inc. from July 1990 to
April 1992; President and Chief Executive Officer of Pharmos, Inc., a
biotechnology company, from July 1990 to October 1992, a director of Pharmos,
Inc., from August 1988 to October 1992, and from July 1985 to July 1986 (Vice
President-Finance from July 1985 to July 1987); a director of VPG, Inc. a joint
venture owned by Pharmos and Innovet, Inc. from August 1986 to June 1989; a
director of Xtramedics, Inc. from September 1988 to June 1994, Vice Chairman and
Chief Executive Officer from September 1989 to February 1994 and Vice
President-Finance from September 1988 to September 1989; Secretary/Treasurer and
a director of Ultramedics, Inc. since November 1988; Treasurer, Chief Financial
Officer and a director of Direct Therapeutics, Inc. (a privately owned company
developing therapeutics for the treatment of cancer) since June 1991; a director
of Applied Starch Technologies (a privately owned company developing starch
based products) since January 1992; a director of Cardiomedics, Inc. since May
1986 and a director of Toll Coating Services, a privately owned company
providing specialty coating to various industries since January 1995. He has
served without compensation from time to time since 1978 as a director,
Secretary and/or Treasurer of Master Health Services, Inc., and other privately
owned companies some of which Marvin P. Loeb, his father-in-law, has an
interest. Members of Mr. Barron's family, but not Mr. Barron, are beneficiaries
of a trust established by Mr. Loeb. Mr. Barron holds a B.S. degree in Accounting
from the University of Illinois and is a Certified Public Accountant.
12
<PAGE> 14
DONALD BAKER has been a director of the Company since 1993. Mr. Baker
recently retired after 39 years as a partner of the law firm of Baker &
McKenzie. Mr. Baker recently retired as Secretary, General Counsel and a
Director of Air South, Inc., an airline operating in the Southeast. He holds a
J.D.S. degree from the University of Chicago Law School. He is a director of the
Mid-America Committee on International Business and Government Cooperation,
Chicago, and Cardiomedics, Inc., Santa Ana, California. He is a member of the
Illinois, Chicago and American Bar Associations.
ELECTION OF ACKERMAN
At the Closing, Mr. Ackerman will fill the vacancy to be created by the
currently contemplated resignation of Bruce Barron. Shareholders are not voting
on the initial election of Mr. Ackerman. Ackerman, who is 38 years old, has been
the President and Chief Executive Officer of CCI since its inception in 1987
and, at the Closing, will assume the same positions at the Company. From 1984
until 1987 he was a sound technician with Sunglo Electric where for a period of
three years he supervised a technical staff of 25 people. Prior thereto he
worked as a cameraman and, prior thereto, as an import/export broker.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company during the three fiscal years ended September 30, 1995 to its President
and Chief Executive Officer. No employee of the Company received compensation in
excess of $100,000 per year during these periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Restricted
Year Salary Bonus Stock Awards
---- ------ ----- ------------
<S> <C> <C> <C> <C>
Marvin P. Loeb 1995 -0- -0- -0-
1994 -0- -0- -0-
1993 -0- -0- $42,000
</TABLE>
In July 1996 the Company issued to Martin Loeb, the Company's Chairman
and President, 5,250,000 shares of Common Stock and 1,000,000 Class B Shares
valued in the aggregate at $62,500 for past services from August 1, 1993 to July
31, 1996. See "Certain Relationships and Related Transactions."
13
<PAGE> 15
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The table below sets forth, as of September 30, 1996, information
regarding the beneficial ownership of the Company's Common Stock based upon the
most recent information available to the Company for (i) each person known by
the Company to own beneficially more than five (5%) percent of the Company's
outstanding Common Stock, (ii) each of the Company's officers and directors and
(iii) all officers and directors of the Company as a group. Unless otherwise
indicated in the footnotes, the address for all parties is c/o Automedix
Sciences, Inc., 2801 Barranca Road, Irvine, California 92619- 7001.
<TABLE>
<CAPTION>
Name and Address Number of Percent of
of Owner Title of Class Shares(1) Class(2)
- ---------------- -------------- --------- ----------
<S> <C> <C> <C>
Marvin P. Loeb Common Stock 9,621,500 51.3%
Class B Common 1,561,270(3) 69.6%
Richard F. Horowitz Common Stock 200,000 2.0%
292 Madison Avenue Class B Common 173,000(4)
New York, NY 10017
Bruce Barron Common Stock 1,022,260 5.4%
Class B Common 14,000(5) *
Donald Baker Common Stock 200,000 1%
All Officers and Directors Common Stock 11,216,760 68.2%
as a Group (4 persons) Class B Common 1,748,270 77.9%
(3)(4)(5)
</TABLE>
- -------------------
* Less than one percent.
(1) Unless otherwise indicated, all shares are owned beneficially and of record.
(2) The "Percent per Class" column sets forth, with respect to the Common Stock,
the percentage of the Common Stock and the Class B Shares on a combined basis
since the two classes have identical voting rights with respect to the matters
set forth in this Information Statement.
(3) Includes 371,270 Class B shares owned by The Marvin P. Loeb Irrevocable
Living Trust, of which Mr. Loeb is the sole trustee, and 190,000 Class B Shares
held by Mr. Loeb as nominee for his children. Mr. Loeb disclaims beneficial
ownership in such shares.
(4) Consists of 173,000 Class B shares beneficially owned by the law firm of
Heller, Horowitz & Feit, P.C, of which Mr. Horowitz is a principal.
(5) Consists of shares beneficially owned by members of Mr. Barron's immediate
family. Mr. Barron disclaims beneficial ownership of such shares.
14
<PAGE> 16
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. To the Company's
knowledge, based on information furnished to the Company and written
representations that no other reports were required, during the last fiscal year
all applicable Section 16(a) filing requirements were met.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 28, 1996, the Company's Board of Directors, after all efforts
to sell or license the Company's patents, patent applications and medical
devices had proven fruitless, transferred these assets to Marvin Loeb, the
Company's Chairman and President in consideration for amounts advanced by him
for the Company's benefit since 1992. In addition, on July 31, 1996, the Board
of Directors of the Company issued to Mr. Loeb, an aggregate of 5,250,000 shares
of Common Stock and 1,000,000 Class B Shares, valued at $62,500, for services
performed in the period from August 1, 1993 until July 31, 1996, including
reviews of and negotiations respecting the potential acquisition of new
businesses.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
In connection with the Share Exchange, Ackerman, will be issued an
aggregate of 10,000,000 shares of Common Stock representing approximately 80% of
the total shares of Common Stock to be outstanding at the Closing, as a result
of which he will possess absolute control over the Company's affairs. The number
of shares of Common Stock to be issued to Ackerman gives effect to the Reverse
Stock Split. In connection with the Share Exchange, at the Closing Ackerman is
entitled to appoint a new Board of Directors. See "Share Exchange Between the
Company and John J. Ackerman."
Dated: Irvine, California
October 15, 1996
By Order of the Board of Directors
Marvin P. Loeb, Chairman
15
<PAGE> 17
INDEX TO FINANCIAL STATEMENTS
AUTOMEDIX SCIENCES, INC.
<TABLE>
<CAPTION>
- ----------------
<S> <C>
Accountants' Compilation Report F-3
Balance Sheets at September 30, 1994 and 1995 F-4
Statements of Operations for the Years Ended September 30, 1993, 1994
and 1995 and the Period from Inception to September 30, ,1995 F-5
Statements of Stockholders' Equity for the Years Ended September 30, 1993,
1994 and 1995 F-6
Statements of Cash Flows for the Years Ended September 30, 1993, 1994
and 1995 F-7
Notes to Financial Statements F-8
- ----------------------
Balance Sheets at June 30, 1996 and September 30, 1995 F-11
Statements of Operations for the three and nine months ended June 1996
and 1995 and the Period from Inception to June 30, 1996 F-12
Statements of Cash Flows for the nine months ended June 30, 1996 and 1995
and the Period from Inception to June 30, 1996 F-13
Notes to Financial Statements F-14
COMPLETE COMMUNICATIONS INCORPORATED
Independent Auditors' Report F-15
Balance Sheet as of December 31, 1995 and June 30, 1996 (Unaudited) F-16
Statements of Income for the Years Ended December 31, 1994 and 1995
and the Six Months Ended June 30, 1995 and 1996 (unaudited) F-17
Statements of Stockholders' Equity for the Years Ended September 30,
1994 and 1995 and the Six Months Ended June 30, 1996 F-18
Statements of Cash Flows for the Years Ended September 30, 1994
and 1995 and the Six Months Ended June 30, 1995 and 1996 (Unaudited) F-19
Notes to Financial Statements F-20
</TABLE>
F-1
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C>
Pro Forma Condensed Consolidated Financial Statements F-27
Pro Forma Consolidated Balance Sheet F-28
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1995 F-29
Pro Forma Consolidated Statement of Operations
for the Year Ended December 31, 1995 F-30
</TABLE>
F-2
<PAGE> 19
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash $ 0 $ 0
Certificates of deposit 0 0
Other current assets 0 0
----------- -----------
Total current assets 0 0
----------- -----------
Property, and equipment, net of accumulated
depreciation of $0 and $0 respectively 0 0
Other assets 0 0
----------- -----------
Total assets $ 0 $ 0
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 0 $ 0
----------- -----------
Total current liabilities 0 0
----------- -----------
Stockholders' equity:
Common stock $.01 par value, authorized, 20,000,000 shares
issued and outstanding 11,255,416 for each year 112,555 112,555
Class B Common stock, $.01 par value, authorized
2,250,000 shares issued and outstanding
1,244,584 shares for each year 12,445 12,445
Capital in excess of par value 5,799,059 5,799,059
Accumulated deficit during the development stage (5,924,059) (5,924,059)
----------- -----------
0 0
Total stockholders' equity 0 0
----------- -----------
Total liabilities & stockholders' equity $ 0 $ 0
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 20
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period From
Inception to
Years Ended September 30, September 30,
-------------------------
1995 1994 1993 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Interest $ 0 $ 0 $ 0 $ 783,037
Other 0 0 0 110,097
----------- ----------- ---------- ----------
0 0 0 893,134
----------- ----------- ---------- ----------
Cost and expenses:
Research and development $ 0 $ 0 $ 0 2,998,312
Salaries and wages 0 0 0 1,592,185
Legal and professional fees 0 0 0 505,659
Rent 0 0 0 161,902
Depreciation and amortization 0 0 0 227,287
Other general and administration
expenses 0 0 58,610 1,331,848
----------- ----------- ---------- ----------
0 0 58,610 6,817,193
----------- ----------- ---------- ----------
Net loss $ 0 $ 0 $ 58,610 $(5,924,059)
----------- ----------- ---------- ----------
Net loss per share $ .00 $ .00 $ (.01) $ (0.67)
----------- ----------- ---------- ----------
Weighted average common shares
outstanding 12,500,000 12,500,000 7,106,583 8,940,600
----------- ----------- ---------- ----------
</TABLE>
F-5
<PAGE> 21
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
<TABLE>
<CAPTION>
Class A Accumulated
Total Class B Redeemable Capital in During the Total Stock-
Common Stock Common Stock Common Stock Excess of Development Treasury Holders'
Shares Amount Shares Amount Warrants Par Value Stage Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
At September 30, 1992 5,394,416 53,945 1,244,584 12,445 0 5,799,173 (5,865,449) (114) 0
Common Stock issued for
compensation expense 5,861,000 58,610 0 0 0 0 0 0 58,610
Retired Treasury
Stock 0 0 0 0 0 (114) 114 0
Net Loss 0 0 0 0 0 0 (58,610) 0 (58,610)
---------- -------- --------- ------- ---- ---------- ----------- --- --------
At September 30, 1993 11,255,416 $112,555 1,244,584 $12,445 $ 0 $5,799,059 $(5,924,059) 0 $ 0
========== ======== ========= ======= ==== ========== =========== === ========
</TABLE>
Note:
At September 30, 1994 and 1995, same balances as September 30, 1993. There were
no transactions during the fiscal year ended September 30, 1994 and 1995.
F-6
<PAGE> 22
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Period From
YEARS ENDED SEPTEMBER 30, Inception to
---------------------------- September 30,
1995 1994 1993 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ 0 $ 0 $(58,610) $(5,924,059)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 0 0 0 243,209
Loss on sale of property and
equipment 0 0 0 8,317
Compensation expense related to
issuance of stock 0 0 58,610 275,674
Other current assets 6,967
Other assets 45,560
Accounts payable 0 0 0 0
---- --- -------- -----------
Net cash used by operating
activities 0 0 0 (5,344,332)
---- --- -------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of certificates of deposits
and marketable securities 0 0 0 (3,599,636)
Redemption of certificates of deposits
and sale of marketable securities 0 0 0 3,599,636
Patents, licenses and organizational
costs 0 0 0 (32,827)
Disposals (purchase) of property and
equipment, net 0 0 0 (230,967)
---- --- -------- -----------
Net cash provided (used) investing
activities 0 0 0 (263,794)
---- --- -------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of ownership interests
prior to acquisition by Trimedyne 0 0 0 552,659
Proceeds from sale of common stock and
exercise of stock options 0 0 0 5,095,840
Capitalized lease obligations 0 0 0 79,263
Payments on capital lease obligations 0 0 0 (79,263)
Purchase of long-term deposit and other
assets 0 0 0 (40,259)
Repurchase of 113,880 shares of Class B
common stock 0 0 0 (114)
---- --- -------- -----------
Net cash (used) provided by financing
activities 0 0 0 5,608,126
---- --- -------- -----------
Net decrease in cash 0 0 0 0
Cash, beginning of period 0 0 0 0
---- --- -------- -----------
Cash, end of period $ 0 0 0 0
---- --- -------- -----------
</TABLE>
F-7
<PAGE> 23
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
NOTE 1 - THE COMPANY:
Automedix Sciences, Inc. (the Company) was incorporated in the State of
Illinois on December 29, 1978 under the name of Biomedics, Inc. The
Company changed its name to Trimedyne Biomedical, Inc. on August 17,
1984 after its acquisition by Trimedyne, Inc. (Trimedyne) in September
1980, and to Automedix Sciences on March 31, 1986. On March 25, 1987,
upon the completion of an initial public offer in of its stock (Note
5), the Company merged with Automedix, Inc. in a transaction accounted
for as a pooling of interests (Note 4). Also upon completion of the
public offering, Trimedyne distributed substantial all of its holdings
in the Company to Trimedyne's shareholders.
The Company and its predecessors' companies have been engaged only in
the organization and administration of research and development
activities conducted primarily through consulting arrangements and
under grants and contracts with university research institutions,
manufacturers and others. Under the terms of these arrangements grants
are paid directly by the Company to the beneficiary organizations. The
Company is entitled to the benefits of any technology developed, either
royalty-free or in return for royalties on future sales of products
developed and sold (Note 8).
In November 1990, the Company completed an in vivo study to further
determine CC CCCC the anticancer potential of its enzymes. In July
1991, the U.S. Government sponsored and completed an in vivo study to
determine the potential use of the CC CCCC Company's enzymes for
treating an immune disease. Continuance of the trial and further FDA
trial expansions are contingent upon raising additional capital.
In January 1991, all Company sponsored research programs, including the
Company's clinical trials, Company sponsored laboratory studies and
manufacturing of the Company's enzymes and BTD devices was suspended,
due to lack of available capital to support such activities.
Continuance of these activities is contingent upon raising additional
capital.
In the nine months ended June 30, 1992, the Company ceased operations,
liquidated all assets and liabilities, terminated all its employees and
vacated its offices. At September 30, 1992 only the Chairman and some
of the Board Directors remain to see if they can reenergize the Company
through acquisitions or strategic partnerships. There was no activity
during the fiscal year September 30, 1995.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Net Loss Per Share
Net loss per share is computed on the basis of weighted average shares
outstanding for each period presented, adjusted to give effect to stock
dividends. Common stock equivalents (options and warrants) have been
excluded from the calculation for all periods presented because they
were determined to be anti-dilutive.
Research and Development Costs
Research and development costs are expensed as incurred.
F-8
<PAGE> 24
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D):
Property and Equipment
Furniture, fixtures and equipment are recorded at cost and depreciated
on a straight-line basis over their estimated useful lives of five
years.
Statement of Cash Flows
Cash - for purposes of reporting cash flows, cash includes cash on
hand, amounts due from banks and short-term investments.
NOTE 3 - TRANSACTIONS WITH TRIMEDYNE, INC.:
For the period subsequent to its acquisition by Trimedyne, Inc.
(Trimedyne) on September 30, 1980 (Note 1) and prior to the completion
of its initial public offering on March 25, 1987 (Note 6),
substantially all of the Company's expenses were incurred by Trimedyne
on the Company's behalf or allocated to the Company by Trimedyne. As a
part of a negotiated settlement in fiscal year 1988, Trimedyne forgave
$102,871 due it for costs incurred by Trimedyne on behalf of the
Company at September 30, 1987.
NOTE 4 - COMMON STOCK:
At September 30, 1995, the Common Stock was worthless. There was no
market for the Company's common stock.
Shares of Common Stock and Class B Common Stock carry identical rights,
except that holders of Class B Common Stock are entitled to elect a
majority of the Company's Board of Directors; shares of Class B Common
Stock cannot be sold until after June 30, 1993; and the Class B Common
Stock is convertible on a share-for-share basis at any time into common
stock.
NOTE 5 - STOCK OPTIONS AND WARRANTS:
The Company currently has available for future grants no shares under
its Incentive Stock Option Plan. Non Incentive Qualified Options Price
Stock Stock Range Options Options
<TABLE>
<CAPTION>
Non
Incentive Qualified
Options Price Stock Stock
Range Options Options
------------- --------- ---------
<S> <C> <C> <C>
Outstanding at September
30, 1993, 1994 and 1995..... $0.05 NONE NONE
---- ----
</TABLE>
During the fiscal year ended September 30, 1992, both options had
expired as a result of all employees terminated during the second and
third quarter of 1992.
The Company issued a total of 3,450,000 Class A Warrants in connection
with its initial public offering. As of September 30, 1992, all Class A
Warrants had expired.
F-9
<PAGE> 25
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
NOTE 6 - INCOME TAXES:
As of September 30, 1995, the Company has net operating loss
carryforwards available of approximately $4,636,000 and $4,641,000 for
financial reporting and federal income tax purposes, respectively. The
difference in net operating losses for financial reporting and federal
income tax purposes is caused by timing differences in the recognition
of various expenses which, in certain instances, have been capitalized
for tax purposes. If not applied against future taxable income, the
loss carryforwards will expire from 2003 to 2009. The amount of loss
carryforwards that can be utilized against income in any given year is
subject to an annual limitation triggered by the change in the
Company's ownership during 1987. No tax benefit relating to the losses
has been recorded, as its realization cannot be assured.
NOTE 7 - COMMITMENTS:
Beginning July 1, 1992, the Company's facilities were relocated to the
Board Chairman's Business location. As of September 30, 1995, there
were no company commitments for rent, or any contingent liabilities.
F-10
<PAGE> 26
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 0 $ 0
Other current assets 0 0
----------- -----------
Total current assets 0 0
Property, and equipment, net of accumulated
depreciation of $0 0 0
Other assets 0 0
----------- -----------
Total assets $ 0 $ 0
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 0 $ 0
----------- -----------
Total current liabilities 0 0
----------- -----------
Stockholders' equity:
Common stock $.01 par value, authorized, 20,000,000 shares
issued and outstanding 11,255,416 for each year 112,555 112,555
Class B Common stock, $.01 par value, authorized
2,250,000 shares issued and outstanding 1,244,584
for each year 12,445 12,445
Capital in excess of par value 5,799,059 5,799,059
Accumulated deficit during the development stage (5,924,059) (5,924,059)
----------- -----------
0 0
Total stockholders' equity 0 0
----------- -----------
Total liabilities & stockholders' equity $ 0 $ 0
=========== ===========
</TABLE>
See accompanying notes to financial statements
F-11
<PAGE> 27
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period From
Three Months Nine Months Inception to
Ended June 30, Ended June 30, June 30,
1996 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income:
Interest $ 0 $ 0 $ 0 $ 0 $ 783,037
Other 0 0 0 0 110,097
----------- ----------- ----------- ----------- -----------
0 0 0 0 893,134
----------- ----------- ----------- ----------- -----------
Cost and expenses:
Research and development $ 0 $ 0 $ 0 $ 0 2,998,312
Salaries and wages 0 0 0 0 1,592,185
Legal and professional fees 0 0 0 0 505,659
Rent 0 0 0 0 161,902
Depreciation and amortization 0 0 0 0 227,287
Other general and administration
expenses 0 0 0 0 1,331,848
----------- ----------- ----------- ----------- -----------
0 0 0 0 6,817,193
----------- ----------- ----------- ----------- -----------
Net loss $ 0 0 0 0 $(5,924,059)
----------- ----------- ----------- ----------- -----------
Net loss per share $ .00 .00 .00 .00 $ (0.67)
----------- ----------- ----------- ----------- -----------
Weighted average common shares
outstanding 12,500,000 12,500,000 12,500,000 12,500,000 8,940,600
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
F-12
<PAGE> 28
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Period From
Inception to
June 30,
1996 1995 1996
---- ---- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $0 $0 $(5,924,059)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 0 0 243,209
Loss on sale of property and
equipment 0 0 8,317
Compensation expense related to
issuance of stock 0 0 275,674
Other current assets 0 0 6,967
Other assets 0 0 45,560
Accounts payable 0 0 0
-- -- -----------
Net cash used by operating
activities 0 0 (5,344,332)
-- -- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of certificates of deposits
and marketable securities 0 0 (3,599,636)
Redemption of certificates of deposits
and sale of marketable securities 0 0 3,599,636
Patents, licenses and organizational
costs 0 0 (32,827)
Disposals (purchase) of property and
equipment, net 0 0 (230,967)
-- -- -----------
Net cash provided (used) by
investing activities 0 0 (263,794)
-- -- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of ownership interests
prior to acquisition by Trimedyne 0 0 552,659
Proceeds from sale of common stock and
exercise of stock options 0 0 5,095,840
Capitalized lease obligations 0 0 79,263
Payments on capital lease obligations 0 0 (79,263)
Purchase of long-term deposit and other
assets 0 0 (40,259)
Repurchase of 113,880 shares of Class B
common stock 0 0 (114)
-- -- -----------
Net cash provided by financing
activities 0 0 5,608,126
-- -- -----------
Net decrease in cash 0 0 0
Cash, beginning of period 0 0 0
-- -- -----------
Cash, end of period $0 $0 $ 0
== == ===========
</TABLE>
See accompanying notes to financial statements
F-13
<PAGE> 29
AUTOMEDIX SCIENCES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
NOTE 1 - Basis of Financial Statements:
The financial statement for the three months and nine months ended June
30, 1996 and 1995 and the period from inception to June 30, 1996 have been
prepared by Automedix Sciences, Inc. and are unaudited. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary for a fair statement of the results of the interim
periods presented have been made. It is suggested, however, that the
interim financial statements be read in conjunction with financial
statements and notes there to in the Company's Form 10-K, for the fiscal
year ended September 30, 1995.
F-14
<PAGE> 30
INDEPENDENT AUDITORS' REPORT
Board of Directors
Complete Communications Incorporated
Formerly Complete Cable, Inc.
(A California Corporation)
Burbank, California
We have audited the accompanying balance sheets of Complete Communications
Incorporated, formerly Complete Cable, Inc. (A California Corporation) as
of December 31, 1994 and 1995 and the related statements of income and
changes in stockholder's equity and cash flows for the years ended
December 31, 1994 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted the audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Complete
Communications Incorporated formerly Complete Cable, Inc. (A California
Corporation) as of December 31, 1994 and 1995 and the results of
operations and its cash flows for the year ended December 31, 1994 and
1995 in conformity with generally accepted accounting principles.
Culver City, California
July 23, 1996
F-15
<PAGE> 31
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND JUNE 30, 1996
ASSETS
<TABLE>
December 31, June 30,
1995 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 3) $ 172,350 $ 210,747
Available for sale securities (market value) 2,156 2,000
Accounts receivable - trade 775,068 772,687
Inventory 0 113,433
Loan receivable - employees 5,374 12,893
Prepaid expenses (Note 4) 28,963 11,618
Income tax receivable 1,715 964
---------- ----------
Total current assets 985,626 1,124,342
---------- ----------
Property and equipment, at cost, less
accumulated depreciation of $52,317, and $65,443 (Note 5) 122,940 137,016
---------- ----------
Other assets:
Security deposit (Note 6) 17,825 28,825
---------- ----------
Total assets $1,126,391 $1,290,183
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 171,779 $ 177,342
Accrued liabilities (Note 7) 131,009 65,878
Contracts payable (Note 8) 16,633 2,781
Payroll taxes payable 8,962 5,602
Sales tax payable 9,260 100,000
Loan payable - bank (Note 9) 250,000 112,888
Deferred income tax (Note 10) 4,352 2,252
---------- ----------
Total current liabilities 591,995 466,743
---------- ----------
Long-term debt:
Long-term debt less current maturities 0 191,667
Loans payable - shareholder 0 62,888
---------- ----------
0 254,555
---------- ----------
Commitments (Note 14)
Shareholder's equity:
Common stock, no par value, 100,000 shares,
authorized 100 shares issued and outstanding 1,000 1,000
Retained earnings 525,777 567,068
Unrealized gain on securities 7,619 817
---------- ----------
Total shareholder's equity 534,396 568,885
---------- ----------
Total liabilities and shareholder's equity $1,126,391 $1,290,183
========== ==========
</TABLE>
See accountants' report and notes to financial statements
F-16
<PAGE> 32
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Years Ended Six Months
December 31, Ended June 30,
1994 1995 1995 1996
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $2,071,846 $3,081,440 $1,689,680 $1,604,340
Cost of sales 1,169,590 1,757,783 658,863 1,039,843
---------- ---------- ---------- ----------
Gross profit 902,256 1,323,657 1,030,817 564,497
Operating expenses 449,644 803,749 350,035 469,643
---------- ---------- ---------- ----------
Operating income 452,612 519,908 680,782 94,854
Other non-recurring
expenses (Notes 11) 0 207,500 50,000 0
---------- ---------- ---------- ----------
Income before income taxes 452,612 312,408 630,782 94,854
Provision for income taxes 7,569 5,000 9,800 1,700
---------- ---------- ---------- ----------
Net income $ 445,043 $ 307,408 $ 620,982 $ 93,154
========== ========== ========== ==========
Pro forma: (Note 12)
Historical income before
income taxes $ 452,612 $ 312,408 $ 630,782 $ 94,854
Pro forma income taxes 191,400 132,600 261,500 33,100
---------- ---------- ---------- ----------
Pro forma net income $ 261,212 $ 179,808 $ 369,282 $ 61,754
========== ========== ========== ==========
Pro forma net income per common
and common equivalent share $ 2,612.12 $ 1,798.08 $ 3,692.82 $ 617.54
========== ========== ========== ==========
Shares used in computation 100 100 100 100
========== ========== ========== ==========
</TABLE>
See accountants' report and notes to financial statements
F-17
<PAGE> 33
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Unrealized
Common Stock Retained Gain on
Shares Amount Distribution Earnings Securities Total
-------- --------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 100 $ 1,000 $ 0 $ 310,362 $ 0 $311,362
Net income 445,043 445,043
Distribution (162,734) (162,734)
Unrealized gain on securities 72 72
-------- --------- --------- ---------- -------- --------
Balances, December 31, 1994 100 1,000 (162,734) 755,405 593,743
Net income 307,408 307,408
Distribution (374,302) (374,302)
Unrealized gain on securities 7,547 7,547
-------- --------- --------- ---------- -------- --------
Balances, December 31, 1995 100 1,000 (537,036) 1,062,813 7,619 534,396
Net income 93,154 93,154
Distribution (51,863) (51,863)
Decrease in unrealized gain
on securities (6,802) (6,802)
-------- --------- --------- ---------- -------- --------
Balance, June 30, 1996 100 $ 1,000 $(588,899) $1,155,967 $ 817 $568,885
======== ========= ========= ========== ======== ========
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE> 34
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
<TABLE>
<CAPTION>
Years Ended Six Months
December 31, Ended June 30,
1994 1995 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 445,043 $ 307,408 $ 622,599 $ 93,154
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 10,504 30,553 11,500 13,126
Gain on securities (777) (2,106) (72) (6,802)
Loss from abandonment of property and
equipment 18,543 0
(Increase) decrease in:
Accounts receivable (244,467) (274,027) (32,163) 2,381
Other receivable (2,204) 789 (3,006) (7,519)
Marketable securities (1,928) 9,497 0 156
Inventory 0 0 0 (113,433)
Loan receivable- officer 15,777 0 (26,732) 0
Prepaid expenses (450) (28,513) (10,560) 17,345
Deposits (10,000) (7,825) 0 (11,000)
Income tax receivable 0 (1,715) 0 751
Increase (decrease) in:
Account payable and accrued expenses 140,817 161,971 (30,720) (59,568)
Payroll and sales tax (6,482) 12,181 (6,041) (12,620)
Income taxes payable 7,222 (2,870) (7,222) (2,100)
--------- --------- --------- ---------
Net cash provided (used) by
operating activities 371,598 205,343 517,583 (86,129)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (19,229) (134,688) (126,564) (27,202)
Proceeds from sale of property and
equipment 10,160 0 0 0
--------- --------- --------- ---------
Net cash used in investing activities (9,069) (134,688) (126,564) (27,202)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to shareholders (162,734) (374,302) (240,380) (51,863)
Proceeds from (payments on) short-term
borrowings-bank 0 250,000 0 (150,000)
Proceeds from (payments on) short-term
borrowings-contract payable 0 16,633 0 (13,852)
Proceeds from long-term borrowings-bank 0 0 0 241,667
Proceeds from long-term borrowings-
stockholder 0 0 0 125,776
--------- --------- --------- ---------
Net cash provided (used) by
financing activities (162,734) (107,669) (240,380) 151,728
--------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 199,795 (37,014) 150,639 38,397
Cash and cash equivalents, beginning
of year 9,569 209,364 209,364 172,350
--------- --------- --------- ---------
Cash and cash equivalents, end of
year $ 209,364 $ 172,350 $ 360,003 $ 210,747
========= ========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for interest $ 144 $ 2,911 $ 0 $ 16,211
========= ========= ========= =========
Cash paid during the year for income
taxes $ 5,252 $ 5,437 $ 5,252 $ 3,049
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE> 35
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(1) Nature of business:
Complete Communications Incorporated, formerly Complete Cable, Inc.
(A California Corporation) provides telecommunication services to
major companies in Southern California that are undergoing changes
in their telecommunication and data communication infrastructures.
In February 1996, the Company changed its name to Complete
Communications Incorporated.
(2) Summary of significant accounting policies:
(A) Use of estimates:
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect
the reported amounts of assets and liabilities, and the
reported revenues and expenses.
(B) Accounts receivable:
Accounts receivable are stated without allowance for
doubtful accounts. Bad debts are written-off using the
direct write-off method when management deems them to be
uncollectible.
(C) Property, equipment and depreciation:
Property and equipment are stated at cost. Depreciation is
provided using the double-declining method over the
estimated lives. Repair and maintenance expenditures, not
calculated to extend the original asset lives are charged to
income as incurred.
(D) Cash equivalents:
For the purposes of cash flows, the Company considers all
highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
(E) Subchapter S Corporation:
The Company with the consent of its shareholders, has
elected under the Internal Revenue Code and California
Taxation Code to be treated as a subchapter S corporation
effective August 5, 1992. In lieu of federal and most sate
corporate income taxes, the shareholders of a subchapter S
corporation are taxed on their proportional share of the
Company's taxable income. The Company has adopted December
31, as its fiscal year end.
(F) Income taxes:
The Company reports its income for financial purposes on the
accrual method while reporting income taxes on a cash basis
for the year ended December 31, 1995. Commencing January 1,
1996, the Company is required to file its tax returns on the
accrual method.
(G) Concentration of credit risk:
The Company maintains cash balance with the bank, which
frequently exceeds federally insured limits. The Company
also invests money in mutual funds which depends totally on
the performance of the funds.
See accompanying accountants' report
F-20
<PAGE> 36
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(2) Summary of significant accounting policies (cont'd):
(H) Unaudited information as of June 30, 1995 and 1996:
The accompanying unaudited financial statements as of June
30, 1995 and 1996 reflect all adjustments which are in the
opinion of management necessary for a fair presentation of
the financial statements of such interim periods. Such
adjustments consist only of normal recurring items.
Interim results are not necessarily indicative of results
for a full year.
(3) Cash and cash equivalents:
The balance consists of:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
-------- --------
(Unaudited)
<S> <C> <C>
Cash in banks $ 35,217 $210,130
Mutual fund 137,133 617
-------- --------
$172,350 $210,747
======== ========
</TABLE>
(4) Prepaid expenses:
Prepaid expenses consists of prepaid rent and prepaid insurance for
the year ended December 31, 1995 and the six months ended June 30,
1996:
(5) Property and equipment:
<TABLE>
<CAPTION>
December 31, June 30,
Property and equipment consist of: 1995 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Machinery & equipment $ 0 $ 3,783
Furniture & fixtures 42,529 42,529
Transportation equipment 15,000 46,920
Leasehold improvements 8,639 8,639
Office equipment 109,089 100,588
--------- ---------
175,257 202,459
Less accumulated depreciation (52,317) (65,443)
--------- ---------
$ 122,940 $ 137,016
========= =========
</TABLE>
Depreciation for Complete Communications Incorporated, formerly
Complete Cable, Inc. (A California Corporation) for the year ended
December 31, 1995 was $30,553 and for the six months ended June 30,
1996 was $13,126.
See accompanying accountants' report
F-21
<PAGE> 37
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(6) Security deposits:
The Company has put up a time certificate of deposit of $10,000 for
sales tax bond purposes, renewable every ninety days. Security
deposits consist of:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Sales tax bond $ 10,000 $ 10,000
Rent 6,750 6,750
Utilities 1,075 12,075
------- -------
$ 17,825 $ 28,825
======= =======
</TABLE>
(7) Accrued liabilities:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Insurance-workers comp. $ 28,479 $ 0
Other expenses 2,030 22,878
Consulting expenses 57,500 0
Distribution 43,000 43,000
------- -------
$ 131,009 $ 65,878
======= =======
</TABLE>
(8) Contracts payable:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Insurance financing, payable in
monthly installments of $1,390
including interest at 12% $ 12,512 $ 2,781
Insurance financing, payable in
monthly installments of $1,374
including interest at 8% 4,121 0
------- -------
$ 16,633 $ 2,781
======= =======
</TABLE>
(9) Loan payable - bank:
The Company has entered into a loan agreement with a bank for a
revolving line of credit of $250,000. The loan bears interest at
1.5% over prime (10%), is collateralized by the assets of the
Company and the personal guarantees of its shareholder. In April
1996, the line of credit was reduced to $100,000, and bears
interest at 2.5% over prime, with a due date of April 10, 1997.
See accompanying accountants' report
F-22
<PAGE> 38
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(10) Income taxes:
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standard No. 109, "Accounting for Income
Taxes," retroactively for all periods presented, for the purpose of
accounting for state income taxes.
The deferred taxes reflect the temporary timing difference of
reporting income on the cash basis for taxes and the accrual method
for financial reporting.
Liabilities:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Current payable $ (1,715) $ (964)
Deferred 4,352 2,252
------- -------
$ 2,637 $ 1,288
======= =======
</TABLE>
The provision for state income taxes consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Current payable $ 2,300 $ 3,800
Deferred 2,700 (2,100)
------- -------
$ 5,000 $ 1,700
======= =======
</TABLE>
The pro forma provision for income taxes for the years ended
December 31, consist of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Current:
Federal $ 37,600 $ 73,400
State 14,300 23,700
------- -------
51,900 97,100
------- -------
Deferred:
Federal 63,900 (50,700)
State 16,800 (13,300)
------- -------
80,700 (64,000)
------- -------
Total pro forma $ 132,600 $ 33,100
======= =======
</TABLE>
See accompanying accountants' report
F-23
<PAGE> 39
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(10) Income taxes (cont'd):
The pro forma provision for income taxes for the fiscal year ended
December 31, 1995 and for the six months ended June 30, 1996,
differs from the amount computed by applying the federal statutory
income tax rate to income before taxes as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Total computed at federal statutory rate 35.0% 35.0%
State income taxes, net of federal effect 6.0% 6.0%
Other 1.0% 1.0%
Surtax benefits 0 (7.0)%
------- -------
Effective pro forma income tax rate 42.0% 35.0%
======= =======
</TABLE>
The components of the pro forma deferred tax liabilities were as
follows:
Deferred tax liabilities:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
---- ----
(Unaudited)
<S> <C> <C>
Accruals recognized in different
periods for tax purposes $ 173,780 $(143,195)
======= =======
</TABLE>
(11) Long-term debt:
<TABLE>
<CAPTION>
June 30,
1996
----
(Unaudited)
<S> <C>
Note payable to bank, secured by all
property and assets, guaranteed by
the shareholder. Monthly principle
payments of $4,167 plus interest at
2.5% above the bank's reference rate.
The note matures April 15, 2001 $ 241,667
Less current maturities 50,000
-------
$ 191,667
=======
</TABLE>
Maturities of long-term debt for years ending December 31, are as
follows:
<TABLE>
<S> <C>
1996 $ 25,000
1997 50,000
1998 50,000
1999 50,000
2000 50,000
2001 and thereafter 16,667
-------
$ 241,667
=======
</TABLE>
See accompanying accountants' report
F-24
<PAGE> 40
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(12) Loan payable - shareholder:
<TABLE>
<CAPTION>
June 30,
1996
----
(Unaudited)
<S> <C>
Payable to shareholder within two
years with interest at 0.0% $ 125,776
Less current maturities 62,888
-------
$ 62,888
=======
</TABLE>
(13) Other non-recurring expenses:
In 1995, the Company incurred $207,500 in consulting fees in the
search, negotiation and acquisition of publicly held shell
companies. The purpose was to raise equity capital to develop new
product lines.
(14) Pro forma income statement information:
Income taxes:
The Company has not been subject to federal and most state
income taxes since its election to be as an S corporation. Upon
the closing of the proposed exchange of common stock with a
publicly held entity, the Company will terminate its status as
an S corporation and will become subject to federal and state
income taxes. The pro forma information presented on the
statements of income reflect a provision for such income taxes
at an effective rate of 42% for year ended December 31, 1995 and
35% for the six months ended June 30, 1996.
Pro forma net income per share:
Pro forma net income per share is based on the weighted average
number of shares of common stock and common stock equivalents
(stock options) outstanding during the period.
(15) Significant customers:
Sales to two customers were approximately $2,686,000 and $899,336
for the year ended December 31, 1995 and for the six months ended
June 30, 1996, respectively, representing 87% and 56% of the total
sales. Balance in accounts receivable from the two customers were
approximately $96,800 and $428,154 for the year ended December 31,
1995 and for the six months ended June 30, 1996, respectively,
representing 13% and 15% of the total accounts receivable.
(16) Commitments:
The shareholder on behalf of the Company has entered into a lease
for a single story office building in Burbank, California. The term
is for five years starting April 1, 1995, with an option for an
additional five years or a right of first refusal to purchase the
building.
See accompanying accountants' report
F-25
<PAGE> 41
COMPLETE COMMUNICATIONS INCORPORATED
FORMERLY COMPLETE CABLE, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996
(INFORMATION AT JUNE 30, 1996 AND FOR THE SIX
MONTHS ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
(16) Commitments (cont'd):
The following is the annual lease payment for the next five years
ending December 31:
<TABLE>
<CAPTION>
December 31, June 30,
Period 1995 1996
------ ---- ----
(Unaudited)
<S> <C> <C>
1996 $ 40,500 $ 20,250
1997 42,019 42,019
1998 44,119 44,119
1999 46,326 46,326
2000 11,721 11,721
------- -------
$ 184,685 $ 164,435
======= =======
</TABLE>
The Company in September 1993 adopted a simplified employee pension
plan. The eligibility requirements are that the employee reach the
age of 21 and perform service during one out of five preceding
years. The contribution limitation is based upon a maximum annual
compensation of $150,000 at a rate not to exceed 15%.
The Company has decided not to make any contribution to the plan
for the year ended December 31, 1995 and for the six months ended
June 30, 1996.
See accompanying accountants' report
F-26
<PAGE> 42
COMPLETE COMMUNICATIONS INCORPORATED
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited, pro forma, condensed, consolidated Balance Sheet
of Complete Communication Incorporated ("COMC") has been prepared to
present the consolidated financial position of Automedix Sciences, Inc.
("Automedix"), a publicly held entity and Complete Communications,
Incorporated ("CCI") as though the exchange of Automedix's stock for
100% of the equity securities of CCI had taken place on June 30, 1996.
Upon completion of the transaction, the sole shareholder of CCI will own
80% of the outstanding common stock of Automedix, and the corporate name
of Automedix will be changed to Complete Communications Incorporated.
The purpose of the pro forma adjustments is to reflect the change in
capitalization of Automedix to the capitalization of COMC, with
appropriate changes to earnings per share of Automedix to reflect the
acquisition of CCI.
The following unaudited, pro forma, condensed consolidated Statements of
Operations of COMC for the twelve month period ended December 31, 1995,
and the six months ended June 30, 1996 have been prepared for each of
these periods as if the exchange of common stock of Automedix for CCI had
taken place on June 30, 1996.
These unaudited pro forma condensed financial statements should be read in
conjunction with the selected financial data and notes included elsewhere
herein.
The following unaudited pro forma, condensed financial statements are not
necessarily indicative of the results of consolidated operations that
would have occurred had the acquisition been effective on January 1, 1995
or the future results of the consolidated companies. All material
non-recurring charges are fully disclosed in the pro forma financial
statements.
F-27
<PAGE> 43
COMPLETE COMMUNICATIONS INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
Complete
Communications, Automedix Pro Forma Pro Forma
Incorporated Science, Inc. Adjustment Total
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Current assets $1,124,342 $ 0 $ 0 $ 1,124,342
Property and equipment 137,016 0 0 137,016
Other assets 28,825 0 0 28,825
----------- ----------- ----------- ----------
$ 1,290,183 $ 0 $ 0 $1,290,183
=========== =========== =========== ==========
Liabilities:
Current liabilities $ 466,743 $ 0 $ 0 $ 466,743
Long-term liabilities 254,555 0 0 254,555
----------- ----------- ----------- ----------
721,298 0 0 721,298
----------- ----------- ----------- ----------
Stockholders' equity:
Common stock $.01 par value
authorized 40,000,000
shares, issued and out-
standing 1,250,000 shares
before offering and
12,500,000 pro forma
shares after exchange 1,000 125,000 (1) (1,000) 125,000
Capital in excess of par
value 0 5,799,059 (1) (5,799,059) 0
Retained earnings 567,068 (5,924,059)(1) 5,800,059 443,068
Unrealized gain on
securities 817 0 0 817
----------- ----------- ----------- ----------
Total stockholders' equity 568,885 0 0 568,885
----------- ----------- ----------- ----------
$ 1,290,183 $ 0 $ 0 $1,290,183
=========== =========== =========== ==========
</TABLE>
(1) Reflects the issuance of 10,000,000 shares of common stock of COMC to
the sole shareholder of CCI, 1,875,000 shares to the former
shareholders of Automedix Science, Inc., and 625,000 shares to the
designee of a finder. After these issuances, COMC will have 12,500,000
shares of Common Stock outstanding, of which the former sole
shareholder of CCI will own 80%. COMC also recently increased the
number of its authorized shares of Common stock from 20,000,000 to
40,000,000.
F-28
<PAGE> 44
COMPLETE COMMUNICATIONS, INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Complete
Communications, Automedix Pro Forma Pro Forma
Incorporated Science, Inc. Adjustment Total
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $3,081,440 $ 0 $ 0 $ 3,081,440
Cost of sales 1,757,783 0 0 1,757,783
---------- ------------ ---------- -----------
Gross profit 1,323,657 0 0 1,323,657
Operating expenses 803,749 0 0 803,749
---------- ------------ ---------- -----------
Operating income 519,908 0 0 519,908
Other income (expense) (1) 207,500 0 0 207,500
---------- ------------ ---------- -----------
Income before income
taxes 312,408 0 0 312,408
State income taxes 5,000 0 0 5,000
---------- ------------ ---------- -----------
Net income $ 307,408 $ 0 $ 0 $ 307,408
========== ============ ============ ===========
Historical income before
income taxes $ 312,408 $ 0 $ 0 $ 312,408
Pro forma income taxes 132,600 0 0 132,600
---------- ------------ ---------- -----------
Pro forma net income $ 179,808 $ 0 $ 0 $ 179,808
========== ============ ============ ===========
Net income per common and 0.15
common equivalent share (2) $ 1,798 $ 0 $ (1,798) $ 0.15
========== ============ ============ ===========
Shares used in
computation (3) 100 12,500,000 100 12,500,000
========== ============ ============ ===========
</TABLE>
(1) Other expenses of $207,500 represents transactions with consultants to
find an appropriate publicly-held shell company to do a reverse
acquisition. The purpose of becoming a publicly-held entity is to enable
CCI to obtain additional equity financing to expand its services in the
telecommunication industry and to enable the sole shareholder of CCI to
own a substantial interest in a publicly-held entity.
The transaction for the exchange of stock is a tax free exchange,
however, none of the remaining tax carry forward losses can be used by
COMC in the future.
(2) Based on converting an S corporation's earnings to what would be earned
after tax by a C corporation, assuming income tax provisions of 42%.
(3) After the 1 for 10 reverse split and the issuance of new shares, the
total number of shares of common stock of COMC outstanding is
12,500,000.
F-29
<PAGE> 45
COMPLETE COMMUNICATIONS, INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION> Complete
Communications, Automedix Pro Forma Pro Forma
Incorporated Science, Inc. Adjustment Total
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $1,604,340 $ 0 $ 0 $ 1,604,340
Cost of sales 1,039,843 0 0 1,039,843
---------- ------------ ------- -----------
Gross profit 564,497 0 0 564,497
Operating expenses 469,643 0 0 469,643
---------- ------------ ------- -----------
Operating income 94,854 0 0 94,854
State income taxes 1,700 0 0 1,700
---------- ------------ ------- -----------
Net income $ 93,154 $ 0 $ 0 $ 93,154
========== ============ ======= ===========
Historical income before
income taxes $ 94,854 $ 0 $ 0 $ 94,854
Pro forma income taxes 33,100 0 0 33,100
---------- ------------ ------- -----------
Pro forma net income $ 61,754 $ 0 $ 0 $ 61,754
========== ============ ======= ===========
Net income per common 0.05
and common equivalent
share (1) $ 617 $ 0 $(617) $ 0.05
========== ============ ======= ===========
Shares used in
computation (2) 100 12,500,000 (100) 12,500,000
========== ============ ======= ===========
</TABLE>
(1) Based on converting an S corporation's earnings to what would be earned
after tax by a C corporation, assuming a 35% income tax provision.
(2) After the 1 to 10 reverse split and the issuance of new shares, COMC
will have 12,500,000 shares of Common Stock outstanding.
F-30
<PAGE> 46
ATTACHMENTS
A - Share Exchange Agreement
B- Sections 11.65 and 11.70 of the Illinois Business Corporation Act
C- Form of Articles of Amendment to the Certificate of Incorporation
<PAGE> 47
ATTACHMENT A
AUTOMEDIX SCIENCES, INC.
2801 Barranca Road, P.O. Box 57001, Irvine, CA 92619-7001
Telephone (714) 559-5300 Fax (714) 559-1481
May 24, 1996
John J. Ackerman, President
Complete Communications, Inc.
400 N. Glenoaks Blvd.
Burbank, CA 91502
Dear John:
Automedix Sciences, Inc., an Illinois corporation
("Automedix"), hereby offers to exchange an aggregate of 10,000,000 shares of
its Common Stock ($.01 par value) (the "Exchange Shares") in consideration for
100% of the outstanding equity securities of Complete Communications, Inc., a
California corporation ("CCI") (the "Exchange"). The Exchange Shares, when
issued on the Closing Date of the Exchange, will represent eighty percent (80%)
of the outstanding equity securities of Automedix. On the closing date, neither
Automedix nor CCI, will have any outstanding options or warrants to acquire
equity securities of Automedix or CCI, respectively, or any securities
convertible into equity securities of Automedix or CCI respectively. We also
agree to issue on the Closing Date of the Exchange an additional 625,000 shares
to the designee of Alex Varonos for his services in connection with this
transaction.
We hereby warrant that on the Closing Date of the Exchange,
Automedix will have (a) an authorized capital of 40,000,000 shares of Common
Stock ($.01 par value), (b) no equity securities or debt securities outstanding
other than 1,875,000 shares of Common Stock ($.01 par value), of which 1,250,000
shares are owned by the shareholders of Automedix and 625,000 shares are owned
by Marvin P. Loeb as nominee for certain of his family members or trusts for
their benefit, (c) no cash, securities or other assets, (d) no liabilities of
any kind, (e) a certificate of good standing from the State of Illinois and (f)
approximately 3,000 shareholders. We further warrant that the Board of Directors
of Automedix has approved of and authorized me to enter into this Agreement.
<PAGE> 48
We acknowledge receipt of the Business Plan of CCI dated March
7, 1996. You acknowledge receipt of copies of Automedix's Form 10-K for the Year
ended September 30, 1991 and 10Q for the Quarter ended March 31, 1992.
We understand that, upon the issuance of the Exchange Shares,
you shall have the right to (a) elect a new Board of Directors of Automedix of
your choice, (b) change the name of Automedix to any name you wish and (c) issue
such additional shares of Common Stock of Automedix as you deem appropriate,
keeping in mind the duties and obligations of officers and directors of
publicly-held companies to obtain for their shareholders a fair value for any
securities issued by their companies.
You warrant that on the Exchange Date, CCI's financial
condition and operations shall be substantially as described in the Business
Plan of CCI dated March 7, 1996, and that no substantial changes have occurred
in the financial condition or operations of CCI other than in the ordinary
course of CCI's business.
You further warrant that (a) you own one hundred percent
(100%) of the outstanding equity securities of CCI, (b) you are the President
and sole Director of CCI, (c) you are the Secretary of CCI, and (d) the Board of
Directors of CCI has approved of and authorized you to enter into this
Agreement. You also warrant that none of the present officers or directors of
CCI and none of the persons you propose to install as officers or directors of
Automedix have, to your knowledge, ever been convicted of a crime or fraud or
have been subject to an injunction or order by any local, state or federal
regulatory agency.
You agree to prepare and submit such filings and audited
financial statements with the SEC and NASD as may be required by law or
necessary for the trading of shares of Automedix to resume. After the Exchange
Date, you shall have the right to list such shares of Automedix as you wish on
the NASDAQ System or such other exchange as you deem appropriate. You agree to
reinstate American Stock Transfer and Trust Company as Automedix's transfer
agent and registrar. You agree to promptly send a notice to the shareholders of
Automedix advising them of this transaction and your business plans for
Automedix, along with financial statements of CCI.
Upon consummation of the Exchange contemplated hereby, we
shall deliver to CCI, freight collect, all of the books, records and files of
Automedix, other than those you instruct us in writing to destroy.
This Letter Agreement constitutes the only agreement or
understanding, written or oral, between us. You and we agree that any change or
modifications of this Agreement shall become effective only if in writing and
signed by the parties hereto or
2
<PAGE> 49
their duly authorized representatives. You and we agree that we mutually
participated in the preparation of this Letter of Agreement.
If you are in agreement with the terms and conditions
contained herein, please so signify by signing and returning one copy of this
letter to me, which will then constitute an Agreement between us.
Very truly yours,
AUTOMEDIX SCIENCES, INC.
/s/ Marvin P. Loeb, Sc.D.
------------------------------
Marvin P. Loeb, Sc.D.
Chairman and President
AGREED AND ACCEPTED
COMPLETE COMMUNICATIONS, INC.
/s/ John Ackerman Date: June 3, 1996
----------------------------------
John Ackerman
President
3
<PAGE> 50
ATTACHMENT B
ILLINOIS RIGHT TO DISSENT
SECTION 11.65. RIGHT TO DISSENT.
(a) A shareholder of a corporation is entitled to dissent from, and
obtain payment for his or her shares in the event of any of the following
corporate actions:
(1) consummation of a plan of merger or consolidation or a
plan of share exchange to which the corporation is a party of;
(i) shareholder authorization is required for the
merger or consolidation or the share exchange by Section 11.20 or the articles
of incorporation; or
(ii) the corporation is a subsidiary that is merged
with its parent or another subsidiary under Section 11.30;
(2) consummation of sale, lease or exchange of all, or
substantially all, of the property and assets of the corporation other than in
the usual and regular course of business;
(3) an amendment of the articles of incorporation that
materially and adversely affects rights in respect of a dissenter's shares
because it:
(i) alters or abolishes a preferential right of such
shares;
(ii) alters of abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the redemption
or repurchase, of such shares; or
(4) any other corporate action taken pursuant to a shareholder
vote if the articles of incorporation, by-laws, or a resolution of the board of
directors provide that shareholders are entitled to dissent and obtain payment
for their shares in accordance with the procedures set forth in Section 11.70 or
as may be otherwise provided in the articles, by-laws or resolution.
(b) A shareholder entitled to dissent and obtain payment for his or her
shares under this Section may not challenge the corporate action creating his or
her entitlement unless the action is fraudulent with respect to the shareholder
or the corporation or constitutes a breach of a fiduciary duty owed to the
shareholder.
(c) A record owner of shares may assert dissenter's rights as to fewer
than all the shares recorded in such person's name only if such person dissents
with respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the record owner asserts dissenter's rights. The rights of a partial dissenter
are determined as if the shares as to which dissent is made and other shares
were recorded in the names of different shareholders. A beneficial owner of
shares who is not the record owner may assert dissenters' rights as to shares
held on such person's behalf only in the beneficial owner submits to the
corporation the record
1
<PAGE> 51
owner's written consent to the dissent before or at the same time the beneficial
owner asserts dissenters' rights. Amended by P.A. 85-1269, eff. Jan. 1, 1989.
SECTION 11.70. PROCEDURE TO DISSENT.
(a) If the corporate action giving rise to the right to dissent is to
be approved at meeting of shareholders, the notice of meeting shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to the meeting, the corporation furnishes to the shareholders material
information with respect to the transaction that will objectively enable a
shareholder to vote on the transaction and to determine whether or not to
exercise dissenters' rights , a shareholder may assert dissenters' rights only
if he or she delivers to the corporation before the vote is taken a written
demand for payment for his or her shares is the proposed action is consummated,
and the shareholder does not vote in favor of the proposed action.
(b) If the corporate action giving rise to the right to dissent is not
to be approved at a meeting of shareholders, the notice to shareholders
describing the action taken under Section 11.30 or Section 7.10 shall inform the
shareholders of their right to dissent and the procedure to dissent. If, prior
to or concurrently with the notice, the corporation furnishes to the
shareholders material information with respect to the transaction that will
objectively enable a shareholder to determine whether or not to exercise
dissenters' rights, a shareholder may assert dissenters' rights only if he or
she delivers to the corporation within 30 days from the date of mailing the
notice a written demand for payment for his or her shares.
(c) Within 10 days after the date on which the corporate action giving
rise to the right to dissent is effective or 30 days after the shareholder
delivers to the corporation the written demand for payment, whichever is later,
the corporation shall sen each shareholder who has delivered a written demand
for payment a statement setting forth the opinion of the corporation as to the
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery
of the statement, together with the statement of income for that year and the
latest available interim financial statements, and either a commitment to pay
for the shares of dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the
dissenting shareholder to sell his or her shares within 10 days after delivery
of the corporation's statement to the shareholder. The corporation may instruct
the shareholder to sell only if there is public market for the shares at which
the shares may be readily sold. If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this
Section the shareholder shall be deemed to have sold his or her shares at the
average closing price of the shares, if listed on a national exchange, or the
average of the bid and asked price with respect to the shares quoted by a
principal market maker, if not listed on a national exchange, during that 10 day
period.
(d) A shareholder who makes written demand for payment under this
Section retains all other rights of a shareholder until those rights are
canceled or modified by the consummation of the proposed corporate action. Upon
consummation of that action, the corporation shall pay to each dissenter who
transmits to the corporation the certificate of other evidence of ownership of
the shares the amount the corporation estimates to be the fail value of the
shares, plus accrued interest, accompanied by a written explanation of how the
interest was calculated.
2
<PAGE> 52
(e) If the shareholder does not agree with the opinion of the
corporation as to the estimated fair value of the shares or the amount of
interest due, the shareholder, within 30 days from the delivery of the
corporation's statement of value, shall notify the corporation in writing of the
shareholder's estimated fair value and amount of interest due and demand payment
for the difference between the shareholder's estimate of fair value and interest
due and amount of the payment by the corporation or the proceeds of sale by the
shareholder, whichever is applicable because of the procedure for which the
corporation opted pursuant to subsection (c).
(f) If, within 60 days from delivery to the corporation of the
shareholder notification of estimate of fair value of the shares and interest
due, the corporation and the dissenting shareholder have not agreed in writing
upon the fair value of the shares and interest due, the corporation shall either
pay the difference in value demanded by the shareholder, with interest, or file
a petition in the circuit court of the county in which either the registered
office or the principal office of the corporation is located, requesting the
court to determine the fair value of the shares and interest due. The
corporation shall make all dissenters, whether or not residents of this state,
whose demands remain unsettled parties to the proceeding as an action against
their shares and all parties shall be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Failure of the corporation to commence an action pursuant to
this Section shall not limit or affect the right of the dissenting shareholders
to otherwise commence an action as permitted by law.
(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision of the question of fair value. The appraisers have the power described
in the order appointing them, or in any amendment to it.
(h) Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds that the fair value or
his or her shares, plus interest, exceeds the amount paid by the corporation of
the proceeds of sale by the shareholder, whichever amount is applicable.
(i) The court, in a proceeding commenced under subsection (f), shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraiser, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the
respective parties. If the fair value of the shares as determined by the court
materially exceeds the amount which the corporation estimated to be the fair
value of the shares or if not estimate was made in accordance with subsection
(c), then all or any part of the costs may be assessed against he corporation.
If the amount which any dissenter estimated to be the fair value of the shares
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter. The court
may also assess the fees and expenses of counsel and experts for the respective
parties, in amounts the court finds equitable, as follows:
(1) Against the corporation and in favor of any or all
dissenters if the court finds that the corporation did not substantially comply
with the requirements of subsection (a), (b), (c), (d) or (f).
(2) Against either the corporation or a dissenter and in favor
of any other party if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this Section .
3
<PAGE> 53
If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated and the fees for
those services should not be assessed against the corporation, the court may
award to the counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who are benefitted. Except as otherwise provided in this
Section ,the practice, procedure, judgment and costs shall be governed by the
Code of Civil Procedure.
(j) As used in this Section ;
(1) "Fair value," with respect to a dissenter's shares, means
the value of the shares immediately before the consummation of the corporate
action to which the dissenter objects excluding any appreciation or depreciation
in anticipation of the corporate action, unless exclusion would be inequitable.
(2) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans, or, if none, at a rate that is
fair and equitable under all the circumstances.
4
<PAGE> 54
ATTACHMENT C
Form BCA-10.30 ARTICLES OF AMENDMENT File #
(Rev.Jan 1995)
- --------------------------------------------------------------------------------
George H. Ryan SUBMIT IN DUPLICATE
Secretary of State
Department of
Business Services
Springfield, IL 62756
Tel. (217) 782-1832
- -------------------------
This space for use by
Secretary of State
Date
- ------------------------------------
Remit payment in Franchise Tax $
check or money order, Filing Fee* $
payable to "Secretary Penalty $
of State."
Approved:
*The filing fee for
articles of amendment
- - $25.00
1. CORPORATE NAME:
----------------------------------------------------
(Note 1)
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was
adopted on ______________, 19__ in the manner indicated below.
("X" one box only)
/ / By a majority of the incorporators, provided no directors were
named in the articles of incorporation and no directors have been
elected;
(Note 2)
/ / By a majority of the board of directors, in accordance with
Section 10.10, the corporation having issued no shares as of the
time of adoption of this amendment;
(Note 3)
/ / By a majority of the board of directors, in accordance with
Section 10.15, shares having been issued but shareholder action
not being required for the adoption of the amendment;
(Note 4)
/ / By the shareholders, in accordance with Section 10.20, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. At a meeting of shareholders, not
less than the minimum number of votes required by statute and by
the articles of incorporation were voted in favor of the
amendment;
(Notes 4&5)
/ / By the shareholders, in accordance with Sections 10.20 and
7.10, a resolution of the board of directors having been duly
adopted and submitted to the shareholders. A consent in
writing has been by all the shareholders entitled to vote on
this amendment.
(Note 5)
3. TEXT OF AMENDMENT:
a. When amendment effects a name change, insert the new corporate
name below. Use Page 2 for all other amendments.
Article I: The name of the corporation is:
- ------------------------------------------------------------------------------
(NEW NAME)
All changes other than name, include on page 2
(over)
<PAGE> 55
Text of Amendment
RESOLVED, that the corporation wishes to change its name and to that
end, ARTICLE I shall be amended to read as follows:
ARTICLE I
The name of the corporation is COMC, INC.
RESOLVED, that prior to the filing of this amendment, there were
authorized for issuance 20,000,000 shares of Common Stock, par value $0.01, and
2,250,000 shares of Class B Common Stock, par value $0.01 of which 18,750,000
shares of Common Stock and 2,244,584 shares of Class B Common Stock were issued
and outstanding; that the corporation wishes to (i) eliminate in its entirety
the Class B Common Stock, (ii) effectuate a one for ten reverse stock split with
respect to the issued and outstanding shares of Common Stock and (iii) increase
the number of shares of Common Stock it is authorized to issue; and that to that
end, ARTICLE V shall be amended to read as follows:
ARTICLE V
The aggregate number of shares which the corporation shall be
authorized to issue shall be FORTY MILLION (40,000,000) shares of
Common Stock, par value $0.01. At 5:00 p.m. on the date of the filing
of these Articles of Amendment to its Articles of Incorporation each
outstanding and issued share of Class B Common Stock shall without
further action by the holder thereof or the corporation be
automatically converted into one share of Common Stock. In addition,
all issued and outstanding shares of Common Stock, including the shares
of Class B Common Stock converted into shares of Common Stock in
accordance with the previous sentence, shall without further action by
the holders thereof or the corporation be combined at the rate of 0.10
(one tenth) for one. No fractional shares shall be issued. All
fractional shares shall be increased to the next higher whole number of
shares.
b. (If amendment affects the corporate purpose, the amended
purpose is required to be set forth in its entirety. If there
is not sufficient space to do so, add one or more sheets of
this size.)
4.
or a reduction of the number of authorized shares of any class below
the number of issued shares of that class, provided for or effected by
this amendment, is as follows:
(If not applicable, insert "No change")
5. (a) The manner, if not set forth in Article 3b, in which said amendment
effects a change in the amount of paid-in capital (Paid-in capital
replaces the terms Stated Capital and Paid-in Surplus and is equal to
the total of these accounts) is as follows:
(If not applicable, insert "No change")
<PAGE> 56
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (If not
applicable, insert "No change")
Before Amendment After Amendment
Paid-in Capital $ $
----------------- ---------------
(COMPLETE EITHER 6 OR 7 BELOW. ALL SIGNATURES MUST BE IN BLACK INK.)
6. The undersigned corporation has caused this statement to be signed by
its duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true.
Dated , 19
---------------------- -- -----------------------------------
(Exact Name of Corporation at date of execution
attested by by
---------------------- ---------------------------------
(signature of Secretary or (Signature of President or
Assistant Secretary Vice President
---------------------------------- -------------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
7. If amendment is authorized pursuant to Section 10.10 by the
incorporators must sign below, and type or print name and title.
OR
If amendment is authorized by the directors pursuant to Section 10.10
and there are no officers, then a majority of the directors or such
directors as may be designated by the board, must sign below, and type
or print name and title.
The undersigned affirms, under the penalties of perjury, that the facts
stated herein are true.
Dated __________________________, 19____
