SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934, as amended
Check the appropriate box:
[X] Preliminary Information Statement
Confidential, For Use of the Commission Only
(as Permitted by Rule 14c-5(d)(2))
Definitive Information Statement
Endorex Corp.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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 transactions 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:
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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PRELIMINARY COPIES
ENDOREX CORP.
900 North Shore Drive
Lake Bluff, IL 60044
INFORMATION STATEMENT
(Dated May 6, 1997)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY. THE ACTIONS, DEFINED BELOW, HAVE ALREADY BEEN
APPROVED BY WRITTEN CONSENT OF HOLDERS OF A MAJORITY OF THE COMPANY'S
OUTSTANDING COMMON STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT
NECESSARY.
This Information Statement is first being furnished on or about May 16,
1997 to stockholders of record as of the close of business on April 8, 1997
(the "Record Date") of the Common Stock, $.001 per value per share (the "Common
Stock") of Endorex Corp., a Delaware corporation (the "Company"), in connection
with amending the Company's Certificate of Incorporation, as amended (the
"Certificate of Incorporation") with respect to effecting a 1-for-15 reverse
stock split (the "Reverse Stock Split").
The Board of Directors has approved, and 3 stockholders representing
11,490,499 shares (approximately 70.41%) of the 16,318,870 shares outstanding
of the Common Stock as of the Record Date have consented in writing, to the
Reverse Stock Split. Such approval and consent are sufficient under Section 228
of the Delaware General Corporation Law and the Company's By-Laws to approve the
Reverse Stock Split. Accordingly, the Reverse Stock Split will not be submitted
to the other stockholders of the Company for a vote and this Information
Statement is being furnished to stockholders solely to provide them with certain
information concerning the Reverse Stock Split in accordance with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the regulations promulgated thereunder, including Regulation 14C.
REVERSE STOCK SPLIT
The Certificate of Incorporation will be amended to effect a 1:15 reverse
stock split of the issued and outstanding shares of the Company's Common Stock.
GENERAL
As set forth above, the Board of Directors authorized the Reverse Stock
Split, and stockholders holding the requisite percentage of the outstanding
shares have consented thereto. An amendment to the Certificate of
Incorporation, in the form attached to this Information Statement as Exhibit A,
will be filed with the Secretary of State of the State of Delaware
(the "Effective Date"). The Board of Directors may abandon the Reverse Stock
Split without further action by the stockholders if it determines that it is in
the best interests of the Company not to effect the Reverse Stock Split. The
Effective Date shall be on or after June 5, 1997. On the Effective Date, the
Reverse Stock Split will be deemed effective, and each certificate representing
shares of Common Stock outstanding immediately prior to the Reverse Stock Split
(the "Old Shares") will be deemed automatically, without any action on the
part of the stockholders, to represent 1/15 of the number of shares of Common
Stock outstanding after the Reverse Stock Split (the "New Shares"), rounded up
to the nearest whole number to eliminate fractional New Shares.
The Company is presently authorized to issue up to 50,100,000 shares of
stock, of which 50,000,000 shares are Common Stock, $.001 Par Value, and 100,000
shares are Series A Junior Participating Preferred Stock, $.05 Par Value. The
Reverse Stock Split will be effected on the basis of one share of New Shares
for each fifteen shares of outstanding Old Shares, and would authorize a
reduction in the stated capital of the Company. The authorized number of shares
of Common Stock, however, will not change.
PRINCIPAL EFFECTS OF REVERSE STOCK SPLIT
The principal effects of the Reverse Stock Split will be:
1. Based upon the 16,318,870 shares of Old Shares outstanding as of April 8,
1997, the Reverse Stock Split will decrease the outstanding shares of
Common Stock by approximately 93.3%, and thereafter approximately
1,088,469 shares of New Shares will be outstanding. The Reverse Stock
Split will not affect any stockholder's proportionate equity interest in
the Company, subject to the provisions for the elimination of fractional
shares as described below.
2. The Company is authorized under the Certificate of Incorporation to issue
up to 50,000,000 shares of Common Stock. The Company is not proposing to
reduce the amount of its authorized Common Stock. The New Shares issued
and outstanding will represent approximately 2.18% of the Company's
authorized Common Stock, whereas the Old Shares currently issued and
outstanding represent approximately 32.64% of the authorized Common
Stock. After giving effect to the Reverse Stock Split, approximately
48,911,531 shares of Common Stock will be available for future issuance
by the Board of Directors without further action by the stockholders.
3. As of April 8, 1997, there were outstanding options to purchase an
aggregate of 1,432,409 shares of Old Shares under the Company's Incentive
Stock Option Plan, 1994 Non-Employee Stock Option Plan and 1995 Omnibus
Incentive Plan (collectively, the "Stock Option Plans"), options to
purchase an aggregate of 262,000 shares of Old Shares not issued pursuant
to the Stock Option Plans, and 615,630 shares issuable upon exercise of
the Company's Common Stock Purchase Warrants and publicly traded Class C
Warrants. All of the outstanding options and warrants include provisions
for adjustments in the number of shares covered thereby, and the exercise
price thereof, in the event of a reverse stock split. After the Reverse
Stock Split is effected, there will be reserved for issuance upon
exercise of all outstanding options and warrants a total of approximately
151,000 shares of New Shares. Each of the outstanding options and
warrants would therefore evidence the right to purchase 6.67% of the
shares of Common Stock previously covered thereby, and the exercise
price per share would be fifteen times the previous exercise price.
PURPOSES OF THE PROPOSED REVERSE STOCK SPLIT
The Reverse Stock Split is to be effected for several reasons. The Reverse
Stock Split should enhance the acceptability of the Common Stock by the
financial community and investing public. The reduction in the number of issued
and outstanding shares of Common Stock caused by the Reverse Stock Split is
expected to increase the market price of the Common Stock. The Board of
Directors also believes that the proposed Reverse Stock Split will result in a
broader market for the Common Stock than that which currently exists. A variety
of brokerage house policies and practices tend to discourage individual brokers
within those firms from dealing with lower priced stocks. Some of those
policies and practices pertain to the payment of broker's commissions and to
time consuming procedures that function to make the handling of lower priced
stock economically unattractive to brokers. In addition, the structure of
trading commissions also tends to have an adverse impact upon holders of lower
priced stock because the brokerage commission on a sale of lower priced stock
generally represents a higher percentage of the sales price than the commission
on a relatively higher priced issue. The Reverse Stock Split may result in a
price level for the Common Stock that will reduce, to some extent, the effect
of the above-referenced policies and practices of brokerage firms and diminish
the adverse impact of trading commissions on the market for the Common Stock.
The expected increased price level may also encourage interest and trading in
the Common Stock and possibly promote greater liquidity for the Company's
stockholders.
Currently, the Company's shares of Common Stock are traded on the NASDAQ
OTC Bulletin Board. The Board of Directors believes that the Reverse Stock
Split may be of assistance in any future effort by the Company, if any, to meet
the initial listing application requirements maintained by The NASDAQ SmallCap
Market.
However, there can be no assurance that any or all of these effects will
occur; including, without limitation, that the market price per New Share of
Common Stock after the Reverse Stock Split will be fifteen times the market
price per Old Share of Common Stock before the Reverse Stock Split, or that
such price will either exceed or remain in excess of the current market price.
Further, there is no assurance that the market for the Common Stock will be
improved. Stockholders should note that the Board of Directors cannot predict
what effect the Reverse Stock Split will have on the market price of the Common
Stock.
IMPLEMENTATION OF REVERSE STOCK SPLIT
The Reverse Stock Split will be effected by filing the amendment to the
Certificate of Incorporation with the Delaware Secretary of State and will
become effective on the Effective Date. Without any further action on the part
of the Company or the stockholders, after the Effective Date, each certificate
representing Old Shares will be deemed to represent 1/15 of the number of New
Shares (exclusive of any fractional interest).
As soon as practicable after the Effective Date, the Company will send a
letter of transmittal to each holder of record of Old Shares of Common Stock
outstanding on the Effective Date. The letter of transmittal will contain
instructions for the surrender of certificate(s) representing such Old Shares
to American Stock Transfer & Trust Company, the Company's exchange agent (the
"Exchange Agent"). Upon proper completion and execution of the letter of
transmittal and return thereof to the Exchange Agent, together with the
certificate(s) representing Old Shares, a stockholder will be entitled to
receive a certificate representing the number of New Shares of Common Stock into
which such stockholder's Old Shares have been reclassified and changed as a
result of the Reverse Stock Split, rounded up to the nearest whole number to
eliminate any fractional share interest.
Stockholders should not submit any certificates until requested to do so.
No new certificate will be issued to a stockholder until such stockholder has
surrendered such stockholder's outstanding certificate(s) together with the
properly completed and executed letter of transmittal to the Exchange Agent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the Reverse Stock Split. This summary does not purport to be complete and
does not address the tax consequences to holders that are subject to special tax
rules, such as banks, insurance companies, regulated investment companies,
personal holding companies, foreign entities, nonresident alien individuals and
other non-U.S. persons, broker-dealers and tax-exempt entities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations and proposed regulations, court decisions and current administrative
rulings and pronouncements of the Internal Revenue Service ("IRS"), all of which
are subject to change, possibly with retroactive effect, and assumes that the
New Shares will be held as a "capital asset" (generally, property held for
investment) as defined in the Code. Holders of Old Shares are advised to
consult their own tax advisers regarding the federal income tax consequences of
the Reverse Stock Split in light of their personal circumstances and the
consequences under state, local and foreign tax laws.
1. The reverse split will qualify as a recapitalization described in
Section 368(a) (1) (e) of the Code.
2. No gain or loss will be recognized by the Company in connection with
the Reverse Stock Split.
3. No gain or loss will be recognized by a stockholder who exchanges all
of such stockholder's Old Shares solely for New Shares.
4. The aggregate basis of the shares of New Shares to be received in the
Reverse Stock Split will be the same as the aggregate basis of the Old
Shares surrendered in exchange therefor.
5. The holding period of the New Shares to be received in the Reverse
Stock Split will include the holding period of the Old Shares
surrendered in exchange therefor.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION
ONLY. ACCORDINGLY, EACH HOLDER OF COMMON STOCK OF THE COMPANY IS
URGED TO CONSULT WITH ITS OWN TAX ADVISER WITH RESPECT TO THE TAX
CONSEQUENCES OF THE REVERSE STOCK SPLIT, INCLUDING THE APPLICATION AND
EFFECT OF THE LAWS OF ANY STATE, MUNICIPAL, FOREIGN OR OTHER TAXING
JURISDICTION.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
PERSONS ENTITLED TO NOTICE
The record date for the determination of the stockholders entitled to
notice of and to consent to the Reverse Stock Split has been fixed as of the
close of business on April 8, 1997. As of the Record Date, there were
outstanding 16,318,870 shares of Common Stock, each of which is entitled to one
vote.
Since the Reverse Stock Split has been duly approved by stockholders
holding a majority of the outstanding Common Stock, approval or consent of the
remaining stockholders is not required and is not being solicited hereby or by
any other means.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of the Record Date,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock; (ii) each director as of the Record Date;
(iii) each named executive officer as of the Record Date; and (iv) all directors
and executive officers of the Company as a group as of the Record Date. The
number of shares beneficially owned by each person is determined under the rules
of the Securities and Exchange Commission, and the information is not
necessarily indicative of beneficial ownership for any other purpose. Under
such rules, beneficial ownership includes any shares as to which the individual
has sole or shared voting power or investment power and also any shares which
the individual has the right to acquire within 60 days of the Record Date
through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting power (or shares such
power with his or her spouse) with respect to the shares set forth in the
following table. The inclusion herein of any shares deemed beneficially owned
does not constitute an admission of beneficial ownership ofthose shares.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner No. of Shares Percent of
Beneficially Owned (1) Class
<S> <C> <C>
The Aries Trust (2) 6,988,500 42.8%
MeesPierson (Cayman) Limited
P.O. Box 2003, British American Centre
Phase 3, Dr. Roy's Drive
George Town, Grand Cayman
Aries Domestic Fund, L.P. (2) 2,358,500 14.5%
c/o Paramount Capital Asset
Management, Inc.
787 Seventh Avenue
New York, NY 10019
Gerald J. Vosika, M.D.(3) 2,318,499 14.1%
c/o Endorex Corp.
3233-15th Street South
Fargo, ND 58104
Michael S. Rosen, MBA (4)(5) 175,000 1.1%
Steve H. Kanzer, Esq. (2)(6) 200,000 1.2%
c/o Paramount Capital Investments, LLC
787 Seventh Avenue
New York, NY 10019
Carl Gilbert, Ph.D.(7) 39,000 *
4655 Oakleigh Manor Drive
Powder Springs, GA 30073
Leonard Jacob, M.D., Ph.D.,MBA 0 *
405 Caranel Circle
Penn Valley, PA 19072
Kenneth Tempero, M.D., Ph.D., M.B.A. 0 *
1290 French Creek Drive
Wayzata, MN 55391
Robert N. Brey, Ph.D.(4)(8) 18,750 *
All Executive Officers and Directors
as a Group (8 persons) (9) 2,754,374 16.3%
</TABLE>
* Represents less than 1% of outstanding Common Stock or voting power.
(1) Shares of the Company's Common Stock which any person set forth in this
table has a right to acquire, pursuant to the exercise of options or
warrants, are deemed to be outstanding for the purpose of computing the
percentage ownership of such person, but are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
(2) Lindsay A. Rosenwald, M.D. is the President and sole stockholder of
Paramount Capital Asset Management, Inc., the Investment Manager and
General Partner of the Aries Trust and Aries Domestic Fund, L.P.
(the "Aries Funds"), respectively. Dr. Rosenwald disclaims beneficial
ownership of the shares owned by the Aries Funds except to the extent of
his pecuniary interest therein, if any.
(3) Includes 175,000 shares issuable upon exercise of options held by Dr.
Vosika that are exercisable within the 60-day period following the Record
Date.
(4) The address of Mr. Rosen and Dr. Brey is c/o Endorex Corp., 900 North Shore
Drive, Lake Bluff, IL 60044.
(5) Consists of 175,000 shares issuable upon exercise of options held by Mr.
Rosen that are exercisable within the 60-day period following the Record
Date.
(6) Consists of 200,000 shares issuable upon exercise of options held by Mr.
Kanzer that are exercisable within the 60-day period following the Record
Date. Mr. Kanzer is an employee of Paramount Capital Investments, LLC,
of which Dr. Rosenwald is the President and sole stockholder.
(7) Includes 8,000 shares issuable upon exercise of options held by Dr. Gilbert
that are exercisable within the 60-day period following the Record Date.
(8) Consists of 18,750 shares issuable upon exercise of options held by Dr.
Brey that are exercisable within the 60-day period following the Record
Date.
(9) Includes 579,875 shares issuable upon exercise of options that are
exercisable within the 60-day period following the Record Date.
By Order of the Board of Directors
MICHAEL S. ROSEN
SECRETARY
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ENDOREX CORP.
Pursuant to Sections 228 and 242
of the General Corporation
Law of the State of Delaware
**************************
Endorex Corp., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (the "Corporation")
DOES HEREBY CERTIFY:
FIRST: That Article FOURTH, of the Certificate of Incorporation of the
Corporation be amended by replacing the first paragraph thereof
with the following paragraph:
Each one (1) share of the Corporation's Common Stock, par value
$.001 per share, issued and outstanding immediately prior to 6:00 P.M.
on June __, 1997 shall be converted and reclassified automatically
effective as of June __, 1997 at 6:00 P.M., Delaware time, into
one-fifteenth (1/15) share of the Corporation's Common Stock, par
value $.001 per share, so that each share of the Corporation's Common
Stock issued and outstanding is hereby converted and reclassified.
No fractional interests resulting from such conversion shall be issued
but, in lieu thereof, the Corporation will round the number of shares
of the Corporation's Common Stock issuable to each holder up to the
nearest whole share of Common Stock.
SECOND: That the foregoing amendment was approved by the holders of the
requisite number of shares of said Corporation in accordance with
Section 228 of the General Corporation Law of the State of Delaware
and has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed
by Michael S. Rosen, President and Chief Executive Officer, and its Secretary,
this __ day of June, 1997.
By:_____________________
Michael S. Rosen
President and Chief Executive Officer
ATTEST:
_____________________
Michael S. Rosen
Secretary
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