IGENE BIOTECHNOLOGY, INC.
Notice of Annual Meeting of Stockholders
To be held September 16, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of IGENE Biotechnology, Inc. (the "Company") will be
held at the offices of Kimelman & Baird, LLC, 100 Park Avenue,
21st floor, New York, New York 10017 at 10:00 a.m. local time on
September 16, 1999 for the following purposes:
1. To elect seven (7) Directors.
2. To approve the appointment of Berenson & Company as
independent auditors of the Company for the fiscal year
ending December 31, 1999.
3. To transact such other business as may properly come
before the meeting, or any adjournment thereof.
Stockholders of record at the close of business on July 23,
1999, shall be entitled to notice of, and to vote at, the
meeting.
By order of the Board of Directors
/s/Stephen F. Hiu
________________________________________
Stephen F. Hiu
President and Treasurer
Dated: Columbia, Maryland
August 12, 1999
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE
ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE
THAT YOUR SHARES ARE REPRESENTED AT THE MEETING.
-Cover Page-
IGENE BIOTECHNOLOGY, INC.
9110 Red Branch Road
Columbia, Maryland 21045
PROXY STATEMENT
The accompanying Proxy is solicited by the Board of
Directors of IGENE Biotechnology, Inc., a Maryland Corporation
(the "Company"), for use at the Annual Meeting of Stockholders
(the "Meeting") to be held on September 16, 1999, or any
adjournment thereof, at which stockholders of record at the close
of business on July 23, 1999 (the "Record Date") shall be
entitled to vote. The cost of solicitation of proxies will be
borne by the Company. The Company may use the services of its
Directors, officers, employees and others to solicit proxies,
personally or by telephone; arrangements may also be made with
brokerage houses and other custodians, nominees, fiduciaries and
stockholders of record to forward solicitation material to the
beneficial owners of stock held of record by such persons. The
Company may reimburse such solicitors for reasonable out-of-
pocket expenses incurred by them in soliciting, but no
compensation will be paid for their services.
Each proxy executed and returned by a stockholder may be
revoked at any time before it is voted by timely submission of
written notice of revocation or by submission of a duly executed
proxy bearing a later date (in either case directed to the
Secretary of the Company) or, if a stockholder is present at the
Meeting, he or she may elect to revoke his proxy and vote his or
her shares personally.
There is being mailed herewith to each stockholder of record
the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998. The date of this Proxy Statement is
August 12, the approximate date on which this Proxy Statement and
form of Proxy were first sent or given to stockholders.
On the Record Date, the Company had outstanding and entitled
to vote with respect to all matters to be acted upon a the
meeting 31,094,174 shares of Common Stock. Each holder of Common
Stock is entitled to one vote for each share of stock held by
such holder.
-Page 1-
On the Record Date, the Company also had outstanding and
entitled to vote with respect to all matters to be acted upon at
the meeting 29,592 shares of 8% Cumulative Preferred Stock
("Series A Preferred Stock"). Each holder of Series A Preferred
Stock is entitled to two votes for each share of Preferred Stock
held by such holder. Holders of record of outstanding Common
Stock and Series A Preferred Stock will be entitled to vote
together as a single class at the Meeting.
Pursuant to the terms of the Company's Series A Preferred
Stock, as a consequence of the non-payment of dividends on such
Stock for more than the past four consecutive dividend payment
dates, the holders of Series A Preferred Stock, if they so elect,
may vote as a separate class with respect to the election of two
additional directors, in accordance with the procedures set forth
in the Charter and by-laws of the Company. To date, the holders
of the Series A Preferred Stock have not exercised such right.
In the event they exercise their right, the Board would be
expanded to nine directors.
The presence of holders representing a majority of all the
votes entitled to be cast at the meeting will constitute a quorum
at the meeting. In accordance with Maryland law, abstentions,
but not broker non-votes, are counted for purposes of determining
the presence or absence of a quorum for the transaction of
business. Each item on the agenda must receive the affirmative
vote of a majority of the voting power voted at the meeting in
order to pass. Abstentions and broker non-votes are not counted
in determining the votes cast with respect to any of the matters
submitted to a vote of stockholders.
Incorporation of Certain Documents by Reference
The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1998, and Quarterly Report on Form 10-QSB
for the six months ended June 30, 1999, copies of which accompany
this Proxy Statement, are incorporated herein by reference.
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the securities Exchange Act of 1934
(the "Exchange Act") subsequent to the date of this Proxy
Statement and prior to the meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents. Any
statement contained in a document incorporated or deemed to be
-Page 2-
incorporated by reference herein shall be deemed to be modified
or superseded for the purposes of this proxy Statement to the
extent that a statement contained herein or in any other
subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement.
The Company will provide, without charge, to each person to
whom a copy of this Proxy Statement is delivered, upon the
written or oral request of such person and by first class mail or
other equally prompt means within one business day of receipt of
such request, a copy of any or all of the documents incorporated
herein by reference (other than exhibits, unless such exhibits
are specifically incorporated herein by reference). Requests
should be directed to: Investor Relations, IGENE Biotechnology,
Inc., 9110 Red Branch Road, Columbia, Maryland 21045.
The Company is subject to the informational requirements of
the Exchange Act and, in accordance therewith, files reports,
proxy or information statements and other information with the
commission. Such reports, proxy or information statements,
exhibits and other information filed by the Company with the
Commission can be inspected and copies at the pubic reference
facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Regional Offices of the Commission at 7 World Trade Center (13th
Floor), New York, New York 10048 and Northwestern Atrium Center,
500 Madison Street, Suit 1400, Chicago, Illinois 60661-2511.
Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its
public reference facilities in New York, New York and Chicago,
Illinois, at prescribed rates. The Commission maintains an
Internet web site that contains reports, proxy and information
statements and other information regarding issuers who file
electronically with the commission.
Financial Information
Financial information for the Company for the fiscal year
ended December 31, 1998, is included in the Company's Annual
Report on Form 10-KSB, a copy of which accompanies this proxy
Statement.
-Page 3-
It is expected that the following business will be
considered at the meeting and action taken thereon:
1. ELECTION OF DIRECTORS
Pursuant to the By-Laws of the Company, the number of
Directors of the Company has been set at seven members. It is
proposed to elect seven Directors at this Meeting to hold office
for a one-year term until the 2000 Annual Meeting of Stockholders
and until their successors are duly elected and qualify. It is
intended that the accompanying form of Proxy will be voted for
the nominees set forth below, each of whom is presently a
Director of the Company. If some unexpected occurrence should
make necessary, in the Board of Directors' judgment, the
substitution of some other person or persons for any of the
nominees, shares will be voted for such other persons as the
Board of Directors may select. The Board of Directors is not
aware that any nominee may be unable or unwilling to serve as a
Director. The following table sets forth certain information
with respect to the nominees.
<TABLE>
NOMINEES FOR ELECTION
<CAPTION>
Name Age Position with IGENE
____________________ ___ ____________________________________
<S> <C> <C>
Michael G. Kimelman 60 Chairman of the Board of Directors
Thomas L. Kempner 72 Vice Chairman of the Board of
Directors
Stephen F. Hiu 43 Director, President, Secretary,
Acting Treasurer, and Director
of Research and Development
Patrick F. Monahan 48 Director, and Director of
Manufacturing
Joseph C. Abeles 84 Director
John A. Cenerazzo 75 Director
Sidney R. Knafel 68 Director
</TABLE>
MICHAEL G. KIMELMAN was elected a Director of the Company in
February 1991 and Chairman of the Board of Directors in March
1991. He is the Managing Partner of Kimelman & Baird, LLC. He
is a founder of Blue Chip Farms, a standard bred horse-breeding
farm, and has been an officer of the same since its inception in
1968. Mr. Kimelman is currently a Director of the Harness Horse
Breeders of New York State and serves on the Board of the
Hambletonian Society.
-Page 4-
THOMAS L. KEMPNER is Vice Chairman of the Board of Directors and
has been a Director of the Company since its inception in October
1981. He is and has been Chairman and Chief Executive Officer of
Loeb Partners Corporation, investment bankers, New York, and its
predecessors since February 1978. He is currently a Director of
Alcide Corporation, CCC Information Services Group, Inc., Energy
Research Corp., Intermagnetics General Corp., Northwest Airlines,
Inc., and Roper Starch Worldwide, Inc.
STEPHEN F. HIU was appointed President and Treasurer in March
1991, and elected a Director in August 1990. He has been
Director of Research and Development since January 1989 and,
prior thereto, was Senior Scientist since December 1985, when he
joined the Company. He was a post-doctoral Research Associate at
the Virginia Polytechnic Institute and State University,
Blacksburg, Virginia, from January 1984 until December 1985. Dr.
Hiu holds a Ph.D. degree in microbiology from Oregon State
University and a B.S. degree in biological sciences from the
University of California, Irvine.
PATRICK F. MONAHAN was appointed Director of Manufacturing and
elected a Director of the Company in April 1991 and was elected
as Secretary in September 1998. He has managed the Company's
fermentation pilot plant since 1982, and its manufacturing
operation since its inception in 1998. Prior thereto, he was a
technical specialist in the fermentation pilot plant of W.R.
Grace and Co. from 1975 to 1982. He received an Associate in
Arts degree in biology from Allegheny Community College and a
B.S. degree in biology with a minor in Chemistry from Frostburg
State College, Frostburg, Maryland.
JOSEPH C. ABELES, private investor, was elected Director of the
Company on February 28, 1991. Mr. Abeles serves as Director of
Intermagnetics General Corporation, Bluegreen Corporation, and
Ultralife Batteries, Inc.
JOHN A. CENERAZZO was Chairman of the Board from November 1989 to
April 1991. He served as President of the Company from August
1988 through September 1989 and has been a Director since
September 1987. He also serves as a Director of U.S. Axle
Corporation.
-Page 5-
SIDNEY R. KNAFEL, a Director of the Company since 1982, has been
Managing Partner of SRK Management Company, a private investment
concern, New York, since 1981, Chairman of Insight
Communications, Inc. since 1985, and of BioReliance Corporation
since 1982. Mr. Knafel is also currently a Director of Cellular
Communications International, Inc., CoreComm Incorporated,
General American Investors Company, Inc., and NTL Incorporated.
Committees of the Board of Directors
The Company has two standing committees of the Board of
Directors. Set forth below is a description of the functions of
those committees and the members of the Board of Directors who
serve on such committees.
Audit Committee
The responsibilities of the Audit Committee include
recommending to the Board of Directors the independent certified
public accountants to conduct the annual audit of the books and
accounts of the Company, reviewing the proposed scope of the
audit and approving the audit fees to be paid. The Audit
Committee also reviews, with the independent certified public
accountants and with the Company's management, the adequacy and
effectiveness of the internal auditing, accounting and financial
controls of the Company. There were no meetings of the Audit
Committee in 1998. The functions of the Committee were performed
by the Board during 1998.
Compensation Committee
The Compensation Committee approves the salaries of all
officers and certain other employees of the Company. It also
supervises the administration of all benefit plans and other
matters affecting executive compensation, subject to further
approval of the Board of Directors. The members of the
Compensation Committee during 1998 were Messrs. Thomas L. Kempner
and Sidney R. Knafel. There were no meetings of the Compensation
Committee in 1998.
-Page 6-
Board Compensation
During 1998, Directors were not compensated for their Board
or Committee activities. The Board of Directors held 2 meetings
in 1998. Each Director of the Company attended in excess of 75%
of the total number of meetings of the Board of Directors
including committee meetings for which each respective director
was a member.
Executive Compensation
The following table sets forth information with respect to
the compensation of the named executive officers for each of the
last three completed fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Securities
Name and Underlying All Other
Principal Position Year Salary Options/SARS(#) Compensation
_____________________ ____ _______ _______________ _____________
<S> <C> <C> <C> <C>
Ramin Abrishamian/CEO 1998 $83,700 1,500,000 ---
Ramin Abrishamian/CEO 1997 $50,000 --- $59,591*
Dexter Gaston/CEO 1996 $48,494 1,418,502 ---
* Mr. Abrishamian was paid as a consultant in this amount prior
to being appointed CEO.
</TABLE>
Other than the 1986 and 1997 stock option plans and the
Simple Retirement Plan described below, the Company has no profit
sharing or incentive compensation plans.
Simple Retirement Plan
Effective February 1, 1997 the Company adopted a Simple
Retirement Plan under Internal Revenue Code Section 408(p). The
plan is a defined contribution plan, which covers all of the
Company's employees who receive at least $5,000 of compensation
for the preceding year. The plan permits elective employee
contributions. The Company makes a nonelective contribution of
2% of each eligible employee's compensation for each year. The
Company's contributions to the plan for 1998 were $6,979, which
is expensed in the 1998 statement of operations.
-Page 7-
Stock Option Plan
The 1997 Stock Option Plan (the "Plan"), which was approved
by the stockholders on November 17, 1997, and which succeeds the
1986 Stock Option Plan, provides for the issuance of options to
acquire up to 20,000,000 shares of Common Stock of the Company.
The Plan is administered by a committee of the Board of
Directors.
The purpose of the Plan is to advance the interests of the
Company by encouraging and enabling the acquisition of a larger
personal proprietary interest in the Company by directors, key
employees, consultants and independent contractors who are
employed by, or perform services for, the Company and its
subsidiaries and upon whose judgment and keen interest the
Company is largely dependent for the successful conduct of its
operations. It is also expected that the opportunity to acquire
such a proprietary interest will enable the Company and its
subsidiaries to attract and retain desirable personnel, directors
and other service providers.
Options are exercisable at such rates and times as may be
fixed by the committee. Options become exercisable in full upon
(i) the holder's retirement on or after his 65th birthday, (ii)
the disability or death of the holder, (iii) or under special
circumstances as determined by the Committee. Options generally
terminate on the tenth business day following cessation of
service as an employee, director, consultant or independent
contractor.
Options may be exercised by payment in full of the option
price in cash or check, or by delivery of previously-owned shares
of common stock having a total fair market value on the date of
exercise equal to the option price, or by such other methods as
permitted by the Committee.
The Plan contains anti-dilution provisions in the event of
certain corporate transactions.
-Page 8-
The Board of Directors may at any time withdraw from, or
amend the Plan and any options not heretofore granted.
Stockholder approval is required to (i) increase the number of
shares issuable under the plan, (ii) increase the number of
options which may be granted to any individual during a year,
(iii) or change the class of persons to whom options may be
granted. No options shall be granted under the Plan after
September 19, 2007.
Options to acquire 7,080,584 shares of common stock have
been granted under the 1986 and 1997 Stock Option Plans and
6,490,750 options are outstanding under the Plans as of July 31,
1999.
The following table sets forth information with respect to
stock options granted in 1998 to the executive officers.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Percent
Number of of Total
Securities Options/SARs
Underlying Granted To Exercise or
Option/SARS Employees In Base Price Expiration
Name Granted(#) Fiscal Year ($/Share) Date
__________________ ___________ ____________ ___________ __________
<S> <C> <C> <C> <C>
Stephen F. Hiu 2,000,000 41.2 .10 4/16/08
Patrick F. Monahan 1,050,000 21.6 .10 4/16/08
Ramin Abrishamian 1,500,000 30.9 .10 4/20/00
</TABLE>
The following table sets forth information as to all
incentive and non-statutory stock options that have been granted
to the executive officers of the Company. No options were
exercised by officers in 1998. The following table provides
information regarding the number of shares covered by both
exercisable and unexercisable stock options for executive
officers as of December 31, 1998 and the values of "in-the-money"
options as of that date. An option is "in-the-money" if the per
share fair market value of the underlying stock exceeds the
option exercise price per share.
-Page 9-
<TABLE>
Aggregate Fiscal Year End Option Values
<CAPTION>
Number of Dollar Value of
Number of Unexercised Options In-The-Money Options
Shares At End of At End of
Acquired Dollar Fiscal Year Fiscal Year(1)
on Value
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
__________________ _________ _________ _________________________ _________________________
<S> <C> <C> <C> <C>
Stephen F. Hiu ------ ------ 2,955,000/None $76,892/None
Patrick F. Monahan ------ ------ 1,682,500/None $48,206/None
Ramin Abrishamian ------ ------ 1,500,000/None $15,000/None
(1) The value of unexercised in-the-money options at December
31, 1998 is based on the difference between $.11 per share
and the per share option exercise price, multiplied by the
number of shares of common stock underlying such option.
</TABLE>
-Page 10-
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of July 31,
1999, with respect to beneficial ownership of shares of the
Company's outstanding Common Stock by (i) each person known to
the Company to own more than five percent of its Common Stock,
(ii) each Director, and (iii) all Directors and executive
officers as a group.
<TABLE>
<CAPTION>
Number of
Name and Address Shares Percent*
___________________________________ ______________ __________
Directors and Officers:
______________________
<S> <C> <C>
Joseph C. Abeles 15,012,789(1) 31.17%
c/o Abel Associates
220 E. 42nd Street
New York, NY 10017
John A. Cenerazzo 1,912,456(2) 1.14%
Stokesay Castle Lane
Reading, PA 19606
Stephen F. Hiu 3,030,500(3) 7.92%
c/o IGENE Biotechnology, Inc.
9110 Red Branch Road
Columbia, MD 21045
Thomas L. Kempner 54,241,169(4) 66.07%
c/o Loeb Partners Corporation
61 Broadway
New York, NY 10006
Michael G. Kimelman 8,718,950(5) 20.60%
c/o Kimelman & Baird, LLC
100 Park Avenue
New York, NY 10017
Sidney R. Knafel 51,368,264(6) 64.55%
c/o SRK Management
126 East 56th Street
New York, NY 10022
Patrick F. Monahan 1,756,900(7) 4.75%
c/o IGENE Biotechnology, Inc.
9110 Red Branch Road
Columbia, MD 21045
-Page 11-
Number of
Name and Address Shares Percent*
___________________________________ _______________ ___________
Directors and Officers (continued):
__________________________________
All Directors and Officers 136,041,028(8) 89.06%
As a Group (7 persons)
Others:
______
Thomas R. Grossman 3,192,150(9) 8.70%
Fraydun Manocherian 7,500,000(10) 17.54%
Richard Stebbins 2,023,880(11) 5.59%
</TABLE>
__________________________
* Under the rules of the Securities and Exchange Commission,
the calculation of the percent assumes for each person that
only such person's warrants, options or convertible notes
are exercised or converted and that no other person
exercises or converts outstanding warrants, options or
convertible notes. Accordingly, these percentages are not
on a fully-diluted basis.
(1) Includes 2,109,404 shares, 2,250 shares issuable upon
conversion of 1,125 shares of Series A Preferred Stock,
$311,663 in long-term notes convertible into 3,782,083
shares and warrants to purchase 9,100,177 shares. Also
includes 4,140 shares and warrants to purchase 2,235 shares
held by his wife and 12,500 shares issuable upon conversion
of 6,250 shares of Series A Preferred Stock held by his
wife.
(2) Includes 283,458 shares, warrants to purchase 1,103,513
shares, 32,750 shares subject to options currently
exercisable and $40,622 in long-term notes convertible into
492,321 shares. Also includes 414 shares held by his wife.
(3) Includes 25,500 shares held by Dr. Hiu, 2,955,000 shares
subject to options currently exercisable, and warrants to
purchase 50,000 shares.
(4) Includes 386,972 shares and warrants to purchase 536,916
shares held by Mr. Kempner; 2,594,000 shares, $140,873 in
long-term notes convertible into 1,616,065 shares and
warrants to purchase 18,555,092 shares held by a trust under
which Mr. Kempner is one of two trustees and the sole
beneficiary; 1,482,987 shares, $79,200 in long-term notes
convertible into 1,147,670 shares and warrants to purchase
4,622,848 shares held by a trust under which Mr. Kempner is
one of two trustees and a one-third beneficiary; 182,526
shares and warrants to purchase 98,564 shares held by Mr.
-Page 12-
Kempner's wife; 203,880 shares and warrants to purchase
110,095 shares held by trusts under which Mr. Kempner is one
of two trustees and his brothers are beneficiaries; and
2,554,000 shares, $140,872 in long-term notes convertible
into 1,616,065 shares and warrants to purchase 18,533,492
shares held by a trust under which Mr. Kempner is one of two
trustees and one of his brothers is the beneficiary.
(5) Includes 521,104 shares, warrants to purchase 5,325,672
shares and $63,070 in long-term notes convertible into
804,568 shares held by Mr. Kimelman. Also includes 833,256
shares and warrants to purchase 750,894 shares held by
Kimelman & Baird, LLC, in which Mr. Kimelman has a 50%
interest, and 180,000 shares held by M. Kimelman & Co., in
which Mr. Kimelman has a 60% interest. Also includes
127,000 shares and warrants to purchase 176,460 shares held
by his wife, in which Mr. Kimelman disclaims any beneficial
interest.
(6) Includes 4,018,769 shares, warrants to purchase 26,253,158
shares, and $306,200 in long-term notes convertible into
3,715,706 shares owned by Mr. Knafel. Also includes
3,025,947 shares and warrants to purchase 14,354,683 shares
held in trusts for the benefit of Mr. Knafel's adult
children, as to which Mr. Knafel disclaims any beneficial
interest.
(7) Includes 24,400 shares held by Mr. Monahan, 1,682,500 shares
subject to options currently exercisable and warrants to
purchase 50,000 shares.
(8) Includes 18,557,757 shares, 4,670,250 shares which are
subject to options currently exercisable or exercisable
within 60 days, unexpired warrants to purchase 99,623,793
shares, 14,750 shares subject to the conversion of 7,375
shares of redeemable preferred stock, and $1,082,500 in long-
term notes convertible into 13,174,478 shares.
(9) Includes 1,753,400 shares and warrants to purchase 1,438,750
shares.
(10) Includes warrants to purchase 7,500,000 shares.
(11) Includes 1,096,000 shares and warrants to purchase 927,880
shares.
-Page 13-
Compensation Committee Interlocks and Insider Participation
Thomas L. Kempner and Sidney R. Knafel are members of the
Compensation Committee. None of the executive officers of the
Company has served on the Board of Directors or compensation
committee of any other entity that has had any of such entity's
officers serve either on the Company's Board of Directors or
Compensation Committee.
Certain Relationships and Transactions
Since inception, the Company has been unable to pay its
operating expenses without outside assistance. Financing from
outside sources, including institutional lenders and customers,
has not been available to the Company. Due to the difficulty or
impossibility in obtaining adequate outside financing, the time
delay and expense which would be occasioned in attempting to
secure such financing and the Company's immediate need for
operating capital, various Directors of the Company have made
periodic loans and capital contributions to the Company in order
to ensure the Company's continued viability.
On December 14, 1995 the shareholders of the Company
approved cancellation of promissory notes and warrants issued to
certain directors of the Company between August 25, 1993 and
March 7, 1995 and the conversion of these notes to 4,290,400
common stock of the Company at $.125 per share and warrants to
purchase 4,290,400 shares of common stock of the Company at $.125
per share, which was the fair market value of the common stock as
quoted on April 3, 1995. Such warrants originally expired on
April 3, 1998, were extended on April 6, 1998, and now have an
expiration date of April 3, 2008.
Beginning November 16, 1995 and continuing through May 8,
1997, the Company issued promissory notes to certain directors
for aggregate consideration of $1,082,500. These notes specify
that at any time prior to repayment the holder has the right to
convert the notes to common stock of the Company at prices
ranging from $0.05 per share to $0.135 per share, based on the
market price of common shares at the issue date. In connection
with such issuance, the holders also received warrants for an
equivalent number of shares at the equivalent price per share.
The warrants expire ten years from the issue of the notes. These
notes are due on March 31, 2003. The notes bear interest at the
prime rate.
-Page 14-
The notes are detailed, by issue date, and by conversion and
warrant price, as follows:
<TABLE>
<CAPTION>
Conversion/
Note Warrant
Issue Date Amount Price/Share
__________________________ __________ ___________
<S> <C> <C>
November 16, 1995 $ 40,000 $ 0.050
December 22, 1995 60,000 0.050
__________
Total issued in 1995 100,000
__________
February 14, 1996 70,000 0.100
March 11, 1996 70,000 0.090
April 23, 1996 36,000 0.060
May 9, 1996 71,000 0.060
June 7, 1996 70,000 0.050
July 24, 1996 90,000 0.115
September 24, 1996 70,000 0.125
November 15, 1996 70,000 0.090
December 11, 1996 70,000 0.090
__________
Total issued in 1996 617,000
__________
January 14, 1997 70,000 0.070
February 24, 1997 100,000 0.110
March 31, 1997 75,000 0.100
April 3, 1997 24,500 0.100
May 8, 1997 80,000 0.135
May 8, 1997 16,000 0.135
__________
Total issued in 1997 365,500
__________
TOTAL $1,082,500
__________
</TABLE>
Beginning June 5, 1997 and continuing through December 5, 1997,
the Company issued promissory notes to certain directors and
another investor for aggregate consideration of $1,875,000.
These notes specify that at any time prior to repayment the
holder had the right to convert the notes to common stock of the
Company at $.10 per share. In connection with such issuance, the
holders also received warrants for an equivalent number of shares
at $0.10 per share. The warrants expire ten years from the issue
of the notes. These notes bear interest at 8%. These notes were
due on March 31, 1998. The Company repaid these notes with
proceeds from the Rights Offering, as described below.
-Page 15-
The Company distributed, to holders of record on February 13,
1998, transferable rights to subscribe for and purchase 0.54 of a
Unit for each share of common share or equivalent owned by such
holder. Each Unit entitled the holder to receive $0.10 principal
amount of 8% Notes due March 31, 2003 and warrants to purchase
one share of common stock at an exercise price of $0.10 per
share. Common shares or equivalents include: Common Stock,
Preferred Stock, unexpired warrants, options exercisable, and
convertible notes outstanding. The Company raised $5,000,000
through this Rights Offering, which was fully subscribed. In
consideration of certain investors agreeing to subscribe to Units
such that the Company received at least $2,000,000, the Company
issued additional warrants to these investors to purchase
20,000,000 shares of Common Stock, exercisable at $0.10 per share
and expiring ten years after issue.
The Company's stockholders purchased a total of 50,000,000
Units, including additional Units available to fully subscribing
shareholders as a result of unexercised rights of other
shareholders, under the terms of the Rights Offering. The Rights
Offering period expired March 31, 1998 was not extended. The
Company's gross proceeds from the Rights Offering were
$5,000,000, of which $1,875,000 was used to repay outstanding
promissory notes due on March 31, 1998; and $475,000 was used to
repay demand promissory notes issued from January 1, 1998 through
March 31, 1998 as described below. The Company incurred transfer
agent and legal fees of $211,712 in relation to the Rights
Offering, resulting in net proceeds after fees and debt repayment
of $2,438,288. The Company recorded $5,000,000 in principal of
new notes issued to holders of subscribed units, which are
payable five years from date of issue and bear interest at 8%.
In connection with the Rights Offering, the holders of subscriber
Units also received warrants to purchase 50,000,000 shares of
common stock expiring ten years from date of issue and
exercisable at $.10 per share.
On January 13, and February 2 and 24, and March 10 and 20,
1998 the Company issued non-convertible demand promissory notes
to certain directors for an aggregate consideration of $950,000.
These loans bear interest at the prime rate. The notes were
repaid during the six months ended June 30, 1998.
On April 6, 1998, the Company issued 9,500,000 warrants to
purchase common stock, at $0.10 per share, to certain directors
who were the lenders of $950,000 in demand notes issued in 1998.
The Company also issued 4,000,000 warrants to purchased common
stock at $0.10 per share, expiring 5 years from issue, to Mr.
Michael Kimelman, the chairman of the board of directors.
-Page 16-
The Company agreed, on February 20, 1998, to issue 2,000,000
shares of common stock to its legal counsel, in payment of
retainers for on-going litigation. The stock was issued in May
and June of 1998 at $.0675 per share, or $135,000.
In May of 1998 the Company also issued 190,000 shares of
common stock to its patent counsel in payment of outstanding
fees, pursuant to an agreement dated August 27, 1997. The stock
was issued in May of 1998 at $0.142 per share, the market price
as of the date of the agreement, for an aggregate amount of
$27,000.
Effective April 16, 1998, the Company issued 3,350,000
employee stock options to its employees at $0.10 per of share of
common stock, expiring on the sooner of ten years from date of
issue or ten days following cessation of employment.
Effective May 1, 1998, the Company issued 1,500,000 stock
options to its CEO, Ramin Abrishamian, expiring two years from
the date of issue. Effective May 1, 1998, Mr. Abrishamian
resigned his position as CEO of the Company. Mr. Abrishamian
declined to stand for re-election as a director at the 1998
annual meeting.
During the quarter ended March 31, 1999, the Company issued
866,667 shares of common stock to its legal counsel, in payment
of fees and retainers for on-going litigation. The stock was
issued at current market prices per share, which averaged $.0574.
On January 25, 1999 the Company issued to certain directors
and other accredited investors 4,166,667 shares of common stock
at $.06 per share, which was the market price on that date.
These investors also committed to purchase an additional
8,333,333 shares of common stock at $.06 per share by July 31,
1999. The total funding to be received in this transaction is
$750,000, and a total of 12,500,000 shares will be issued at $.06
per share. In return for this commitment, these investors also
received warrants to purchase 12,500,000 shares of common stock
at $.06 per share, expiring in 10 years.
Section 16(a) Beneficial ownership Reporting Compliance
The Company believes that during 1998 all of its officers,
directors and holders of more than 5% of its Common Stock
complied with all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, except as follows: In 1997
directors of the Company made various loans to the Company. The
loans are evidenced by demand promissory notes convertible into
Common Stock. The directors also received warrants to purchase
shares of Common Stock in 1997 and 1998 in conjunction with
the 1997 notes and a 1998 rights offering. None of the
foregoing securities were reported on Forms 4 or Forms 5
-Page 17-
filed with the Securities and Exchange Commission. In making
this disclosure, the Company has relied solely on written
representations of its directors, officers and more than 5%
holders and on copies of reports that have been filed with the
Securities and Exchange Commission.
2. APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Berenson
& Company as independent auditors of the Company for the fiscal
year ending December 31, 1999. A representative of Berenson &
Company is not expected to be present at the meeting.
The Board of Directors of the Company recommends a vote FOR
approval of the appointment of Berenson & Company as the
Company's auditors.
3. OTHER MATTERS
Stockholder Proposals
Proposals of stockholders intended to be presented at the
Company's 2000 Annual Meeting of Stockholders must be received by
the Company on or prior to June 10, 2000, to be eligible for
inclusion in the Company's Proxy Statement and form of Proxy to
be used in connection with such meeting.
Other Business
At the date of this Proxy Statement, the only business which
the Board of Directors intends to present or knows that others
will present at the Meeting is that hereinabove set forth. If
any other matter or matters are properly brought before the
meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the Proxy
on such matters in accordance with their judgment.
/s/ Stephen F. Hiu
______________________________
Stephen F. Hiu
President and Treasurer
Dated: August 12, 1999
-Page 18-
