<PAGE> 1
SCHEDULE 14 C
(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.
(AMENDMENT NO. )
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
BIODYNAMICS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
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:
Common Stock, par value $.01 per share
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
[ ] 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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<PAGE> 2
BIODYNAMICS INTERNATIONAL, INC.
1719 ROUTE 10, SUIT 314
PARSIPPANY, NEW JERSEY 07054
October 14, 1997
Dear Shareholder:
On behalf of the Board of Directors, we cordially invite you to attend
a Special meeting of the Shareholders of Biodynamics International, Inc. (the
"Company"), which will be held at the offices of the Company, located at 1719
Route 10, Suite 314, Parsippany, New Jersey 07054, on November 10, 1997, at
9:30 a.m., local time.
At the Special Meeting, shareholders will be asked to act upon (i) a
proposal to amend the Company's Articles of Incorporation to change the name of
the Company from Biodynamics International, Inc. to Genix Medical, Inc., and
(ii) a proposal to reduce the number of outstanding shares of the Company's
Common Stock through a one-for-ten reverse split of the shares, and if the
proposal to reverse split the outstanding shares of Common Stock is approved,
to consider and vote upon (iii) a proposal to amend the Company's 1996
Incentive and Non-Statutory Stock Option Plan to increase the shares of Common
Stock covered by such plan from 200,000 to 2,000,000 shares, (iv) a proposal to
grant a Special Stock Option to purchase 300,000 shares of Common Stock to the
President and Chief Executive Officer, and (v) a proposal to amend the
Company's 1996 Management Compensation Plan to increase the shares of Common
Stock subject thereto from 50,000 to 500,000 shares. Shareholders will also be
asked to transact such other business as may properly come before the meeting
or any adjournment thereof. On the following pages you will find the Notice of
the Special Meeting of Shareholders and the Information Statement giving
information concerning the matters to be acted upon at the meeting. Due to the
importance of the information contained in the Information Statement, you are
urged to retain it for future reference.
Your vote is important and the Company's management team would greatly
appreciate your attendance at the Special Meeting. However, we are not asking
you for a proxy, and you are requested not to send us a proxy.
We sincerely hope you will be able to attend the Special Meeting and
we look forward to seeing you at the Special Meeting of Shareholders.
Very truly yours,
CHARLES C. DRAGONE
Chairman of the Board
<PAGE> 3
BIODYNAMICS INTERNATIONAL, INC.
1719 ROUTE 10, SUITE 314
PARSIPPANY, NEW JERSEY 07054
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 10, 1997
---------------
TO THE SHAREHOLDERS OF BIODYNAMICS INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of
Biodynamics International, Inc., a Florida corporation (the "Company"), will be
held at the offices of the Company, located at 1719 Route 10, Suite 314,
Parsippany, New Jersey 07054, on November 10, 1997 at 9:30 a.m., local time, to
act on the following matters:
1. A proposal to amend the Company's Articles of Incorporation
to change the name of the Company from Biodynamics
International, Inc. to Genix Medical, Inc.;
2. A proposal to reduce the number of outstanding shares of the
Company's Common Stock through a one-for-ten reverse split of
such outstanding shares; and if applicable, to consider and
vote upon:
3. A proposal to amend the Company's 1996 Incentive and
Non-Statutory Stock Option Plan to increase the shares of
Common Stock covered by such plan from 200,000 shares to
2,000,000 shares;
4. A proposal to grant a Special Stock Option to purchase
300,000 shares of Common Stock to the President and Chief
Executive Officer;
5. A proposal to amend the Company's 1996 Management
Compensation Plan to increase the shares of Common Stock
subject thereto from 50,000 to 500,000 shares; and
6. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only Shareholders of record at 5:00 p.m., Eastern Daylight Time, on
October 10, 1997, are entitled to receive notice of, and to vote at, the
Special Meeting.
By Order of the Board of Directors
Charles C. Dragone,
Chairman of the Board
Parsippany, New Jersey
October 14, 1997
<PAGE> 4
BIODYNAMICS INTERNATIONAL, INC.
1719 ROUTE 10, SUITE 314
PARSIPPANY, NEW JERSEY 07054
---------------------------------------
INFORMATION STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 10, 1997
---------------------------------------
GENERAL INFORMATION
This Information Statement is being furnished to the holders
("Shareholders") of the common shares, par value $.01 per share ("Common
Stock"), of Biodynamics International, Inc., a Florida corporation (the
"Company"), in connection with the Special Meeting of Shareholders to be held
on November 10, 1997, at 9:30 a.m. (the "Special Meeting"), and at any
adjournment thereof. The Special Meeting will be held at the offices of the
Company, located at 1719 Route 10, Suite 314, Parsippany, New Jersey 07054.
This Information Statement is first being sent to Shareholders, together with
the Notice of Special Meeting, on or about October 14, 1997.
At the Special Meeting, Shareholders will be asked to consider and
vote on the following proposals to (i) amend the Company's Articles of
Incorporation to change the name of the Company from Biodynamics International,
Inc. to Genix Medical, Inc. and (ii) reduce the outstanding shares of the
Company's Common Stock through a one-for-ten reverse split and, if the proposal
to reverse split the outstanding shares of Common Stock is approved, to (iii)
amend the Company's 1996 Incentive and Non-Statutory Stock Option Plan to
increase the number of shares of Common Stock covered by such plan from 200,000
shares to 2,000,000 shares, and (iv) grant a Special Stock Option to purchase
300,000 shares of Common Stock to the President and Chief Executive Officer of
the Company, and (v) amend the Company's 1996 Management Compensation Plan to
increase the shares of Common Stock subject thereto from 50,000 to 500,000
shares. The shareholders will also be asked to transact such other business as
may properly come before the meeting or any adjournment thereof.
The Board of Directors has fixed 5:00 p.m., Eastern Daylight Time, on
October 10, 1997, as the record date (the "Record Date") for the determination
of the Shareholders of record entitled to receive notice of, and to vote at,
the Special Meeting or any adjournment thereof. On October 10, 1997, there were
26,875,090 issued and outstanding shares of Common Stock of the Company,
constituting the only class of stock outstanding. The presence of a majority of
the outstanding Shares of Common Stock as of the Record Date will constitute a
quorum at the Special Meeting. Each share of Common Stock outstanding on the
Record Date entitles the record holder thereof to cast one vote with respect to
each matter to be voted upon.
Pursuant to an agreement and plan of recapitalization among the
Company and certain institutional investors, as described in greater detail
elsewhere in this Information Statement, management and such institutional
investors, who own approximately 60% of the outstanding shares of Common Stock
of the Company, have indicated their intent to vote in favor of the proposals.
The votes represented by these Shareholders are sufficient to approve the
proposals coming before the Special Meeting. THEREFORE, WE ARE NOT ASKING YOU
FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. Shareholders are
invited to attend the Special Meeting and can vote in person at that time.
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 10, 1997 by
(i) each person known to the Company to own beneficially more than 5% of its
Common Stock, (ii) each director and executive officer of the Company, and
(iii) all directors and executive officers as a group. Except as otherwise
indicated, the persons named in the table have sole voting and investment power
with respect to all of the Common Stock owned by them.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNER(1) OF CLASS(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Renaissance Capital Partners III, Ltd..................................... 5,475,600 20.37%
8080 N. Central Expressway
Suite 210-LB 59
Dallas, TX 75206
Renaissance Capital Group, Inc.(3)........................................ 5,475,600 20.37%
8080 N. Central Expressway
Suite 210-LB 59
Dallas, TX 75206
Charterhouse Second Venture Fund
Management Limited.................................................... 4,022,250 14.96%
123 Buckingham Palace Rd.
London, England
SE1W9SL
Kleinwort Benson European Mezzanine Fund, L.P............................. 3,220,350 11.98%
Westbourne
The Grange
St. Peter Port
Guernsey, CI
GY1 3BG
Froley, Revy Investment Co., Inc.......................................... 2,939,850 10.94%
10900 Wilshire Boulevard, Suite 1050
Los Angeles, CA 90024-6594
Alta Berkeley Associates.................................................. 2,610,000 9.71%
9 Saville Row
London, England
W1X1AF
Nat West Ventures (Investments) Ltd....................................... 216,150 *
Fenchurch Exchange
8 Fenchurch Place
London, England
EC3M4TE
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C> <C>
Charles Dragone........................................................... 323,500 1.20%
Karl H. Meister........................................................... 668,750 2.49%
Russell Cleveland......................................................... 5,485,600(3) 20.41%
Dr. Harold Helderman...................................................... 10,000 *
Elroy G. Roelke........................................................... 2,500 *
Peter J. Finnerty......................................................... 200,000 *
All directors and officers as a group (6 persons)......................... 6,690,350 24.88%
</TABLE>
- ----------------
* Less than 1%
(1) In accordance with Rule 13d-3 promulgated pursuant to the Securities
Exchange Act of 1934, a person is deemed to be the beneficial owner of
the security for purposes of the rule if he or she has or shares voting
power or dispositive power with respect to such security or has the
right to acquire such ownership within sixty days. As used herein,
"voting power" is the power to vote or direct the voting of shares, and
"dispositive power" is the power to dispose or direct the disposition of
shares, irrespective of any economic interest therein.
(2) In calculating the percentage ownership for a given individual or group,
the number of shares of Common Stock outstanding includes unissued
shares subject to options, warrants, rights or conversion privileges
exercisable within sixty days held by such individual or group, but are
not deemed outstanding by any other person or group.
(3) Includes 5,475,600 shares of Common Stock owned by Renaissance, a
limited partnership of which Renaissance Capital Group, Inc. is the
Managing General Partner. Mr. Cleveland is the President and 66.6%
majority shareholder of Renaissance Capital Group, Inc.
ITEM - I
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors on September 22, 1997 unanimously adopted a
resolution proposing that the Company amend its Articles of Incorporation to
change its corporate name from Biodynamics International, Inc. to Genix
Medical, Inc. (the "Amendment"). The Board believes that this change of name of
the Company better reflects the nature of the business of the Company.
Article I of the Articles of Incorporation will be amended to read as
follows:
"ARTICLE I - Corporate Name
The name of this corporation is Genix Medical, Inc."
VOTE REQUIRED
In order to approve and adopt the proposal to amend the Company's
Articles of Incorporation to change the name of the Company at the Special
Meeting, the votes cast in favor of adopting the Amendment must exceed the
votes cast opposing such action, provided a quorum is present.
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<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S ARTICLES OF INCORPORATION TO CHANGE THE NAME OF THE COMPANY TO
GENIX MEDICAL, INC.
ITEM - II
PROPOSAL TO EFFECT A ONE-FOR-TEN REVERSE SPLIT OF
THE OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK
The Board of Directors has proposed a resolution that would effect a
reverse split of certain shares of the Company's Common Stock on the basis of
one share of Common Stock for each ten shares of such Common Stock ( the
"Reverse Stock Split"). The Board's proposed Reverse Stock Split would have the
effect of reducing the number of outstanding shares of Common Stock, but it
would not reduce the total number of authorized shares of Common Stock from
30,000,000 shares. As of October 10, 1997, 26,875,090 shares of Common Stock
were issued and outstanding, 2,492,000 shares are reserved for issuance upon
exercise of options granted under the Company's stock option plans and
18,484,200 shares are subject to issuance upon the exercise of outstanding
warrants.
BACKGROUND
The Company experienced a net loss of $3,175,000 for the nine months
ended June 30, 1997, or $0.38 per share compared to a net loss for the same
period a year ago of $1,995,000 or $0.25 per share. The June 30, 1997 results
were impacted by a ban on the use of human dura mater tissue, and a recall of
such products ordered by the Japanese Ministry of Health in April 1997. The
Company had negative working capital of $249,000 as of June 30, 1997, and total
negative stockholders equity of $716,000, as of the same date.
In the past the Company has relied upon its available lines of credit
and upon institutional investors to fund its operational cash flow, when
needed. Based upon current operations, it was projected that the working
capital of the Company would have been exhausted by the end of August 1997. In
response to the projected working capital shortage, the Company sought the
cooperation of its institutional investors to provide the required capital and
to convert existing debt into equity. On August 29, 1997, the Company reached
such an agreement (the "Recapitalization Agreement") with Renaissance Capital
Partners II, Ltd. ("Renaissance"), NatWest Ventures (Investments) Ltd.
("NatWest"), Kleinwort Benson European Mezzanine Fund L.P. ("Kleinwort"),
(NatWest and Kleinwort collectively referred to as the "Mezzanine Lenders"),
Froley, Revy Investment Co., Inc. ("Froley"), and Charterhouse Second Venture
Fund Management Limited ("Advent"), (Renaissance, NatWest, Kleinwort, Froley
and Advent collectively are referred to as the "Institutional Investors").
Pursuant to the Recapitalization Agreement, the Institutional
Investors agreed to convert their shares of the Company's Series C Preferred
Stock (the "Series C Shares") into Common Shares, and to amend the terms of the
Series C Shares to (i) delete the anti-dilution provision of such shares, and
(ii) to permit the Company's Board of Directors to mandatorily convert all of
the Series C Shares into shares of Common Stock (the "Amendments"). At a
Special Meeting of the shareholders of Series C Shares, the proposed Amendments
were approved by the Institutional Investors. On September 22, 1997,
$15,711,570 million of outstanding Series C Shares were converted into (i)
18,484,200 shares of Common Stock, and (ii) three-year warrants to purchase, in
the aggregate, 18,484,200 additional shares of Common Stock for $4,621,050 (the
"Warrants"), ((i) and (ii) collectively are referred to as the "Series C
Conversion").
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<PAGE> 8
In June 1997, Renaissance loaned the Company $1,000,000 to be used for
working capital. As part of the Recapitalization Agreement, Renaissance agreed
to and has extended the maturity date on such short-term loan, and on September
15, 1997, Renaissance provided the Company with an additional $1,000,000 loan
(collectively, the "Bridge Loans"). Renaissance has further agreed to exchange
the Bridge Loans for a five-year convertible debenture (the "Debenture"), which
will be convertible into 44,132,309 shares of Common Stock plus warrants which
will be exercisable at $2,015,991 into 8,063,963 shares (the
"Debenture/Warrant"). In the Series C Conversion, Renaissance received
5,475,600 shares of Common Stock, and Warrants to purchase approximately
5,475,600 additional shares of Common Stock for $1,368,900. On a fully diluted
basis, giving effect to the exercise of Warrants and conversion of the
Debenture to be issued, Renaissance will have beneficial ownership of 51% of
the Company's outstanding shares of Common Stock.
The Company's Mezzanine Lenders have provided in the past a total of
approximately $4,100,000 in the form of loans and accrued interest to the
Company's German subsidiary. Pursuant to the Recapitalization Agreement, and in
addition to their agreement to participate in the Series C Conversion, the
Mezzanine Lenders agreed to exchange such loans and accrued interest into
26,263,010 shares of Common Stock. Separately, in the Series C Conversion, the
Mezzanine Lenders as Institutional Investors received 3,436,500 shares of
Common Stock, and Warrants to purchase 3,436,500 additional shares of Common
Stock for $859,125 in exchange for their Series C Stock. On a fully diluted
basis, the Mezzanine Lenders will have beneficial ownership of 26.76% of the
Company's outstanding shares of Common Stock.
Advent and Froley, together with Alta Berkeley Associates, the sole
other shareholder of Series C Shares ("Alta Berkeley"), collectively received
9,572,100 shares of Common Stock in the Series C Conversion, plus Warrants to
purchase 9,572,100 additional shares of Common Stock for $2,393,000. On a full
diluted basis, Alta Berkeley, Advent and Froley collectively will have
beneficial ownership of 15.47% of the Company's outstanding shares of Common
Stock.
This background information about the Recapitalization Agreement is
supplemented by the Company's Pro Forma Balance Sheet attached hereto as
Appendix A, which sets forth the Company's June 30, 1997 Balance sheet, as
adjusted to reflect (i) a July 1, 1997 litigation settlement and conversion of
Senior B Long-term debt to Series C Preferred Stock, (ii) the Series C
Conversion to Common Stock, (iii) the Bridge Loans, (iv) the exchange of the
Mezzanine Lenders' loans for Common Stock, and (v) the exchange of
Renaissance's Bridge Loans for the Debenture.
REASONS FOR THE PROPOSED REVERSE STOCK SPLIT
Giving full effect to the Recapitalization Agreement, assuming the
exercise of all Warrants and the conversion of the Debenture, the number of
outstanding shares of the Company's Common Stock would rise to 123,818,572
shares. The principal purpose of the proposed Reverse Stock Split is to prevent
such a significant increase in the number of outstanding shares, by reducing
the number of shares presently (i) outstanding, (ii) subject to issuance
pursuant to the Recapitalization Agreement, and (iii) reserved for issuance
pursuant to the Company's option and incentive plans ((i), (ii), and (iii)
collectively referred to as the "Shares Subject to the Reverse Stock Split").
The Company's Articles of Incorporation authorize the issuance of
only 30,000,000 shares of Common Stock. The Board of Directors proposed the
Reverse Stock Split, rather than an increase in the number of authorized shares
of Common Stock, because it believes that 123,818,572 outstanding shares of the
Company's Common Stock would be disproportionately large relative to the
Company's present market
5
<PAGE> 9
capitalization. Moreover, when such a large number of shares is outstanding,
earnings per share is only affected by a significant change in net earnings. If
a smaller number of shares is outstanding, management would be more likely to
see its sales efforts and savings reflected in any future earnings per share of
the Company.
In addition, the Board of Directors believes that the present level of
per share market prices of the Common Stock impairs the acceptability of the
stock by the investment community. During the past six months, the market price
for the Company's Common Stock has ranged from $0.063 to $0.938 per share, and
as of October 10, 1997, such market price was $ ____ per share. There can be no
assurance that the price of a stock after a reverse split will actually
increase in an amount proportionate to the decrease in the number of
outstanding shares, however, the proposed Reverse Stock Split is intended to
facilitate a future price level for the Common Stock that will increase
investor interest and reduce the resistance of brokerage firms to recommend the
Common Stock in the future. Although the Company anticipates that the reverse
stock split will not adversely affect the Company's stock price, there can be
no assurance that the market price of the Company's Common Stock after the
proposed Reverse Stock Split will be higher than the market price before the
proposed Reverse Stock Split, or that the price following the Reverse Stock
Split will either exceed or remain in excess of the current market price.
The Board set the ratio for combining the stock at one-for-ten,
because that ratio would allow the Company to effectuate the Recapitalization
Agreement, ensure the availability of a sufficient number of Common Shares to
satisfy the Company's current obligations to issue stock, and have enough
authorized and unissued shares available for future stock issuances, without
having to increase the number of Common Shares currently authorized in the
Articles.
PRINCIPAL EFFECTS
If the Reverse Stock Split is approved, the total number of Shares
Subject to the Reverse Stock Split would be converted automatically into an
amount of whole shares equal to such number divided by ten. All fractional
shares will be treated in the manner set forth below. In addition, the number
of authorized shares of Common Stock and the par value of the Common Stock will
not change under the Board's proposed Reverse Stock Split.
Based upon 26,875,090 shares of Common Stock outstanding on October
10, 1997, the proposed one-for-ten Reverse Stock Split would decrease the
outstanding shares of Common Stock to approximately 2,687,509 shares, which
will be held by approximately 425 shareholders of record. The proposed Reverse
Stock Split would not affect the proportionate equity interest in the Company
or proportionate voting power of any holder of Common Stock. The rights and
privileges of the holders of Common Shares would not be affected substantially
by adoption of the proposed Reverse Stock Split, however the effect of the
Recapitalization Agreement will be to reduce the percentage ownership of the
Company's public Shareholders from approximately 31.22% to 6.78% on a fully
diluted basis. The Board believes that the Recapitalization Agreement and
resultant dilution of the public Shareholders' equity interest in the Company
is necessary to avert a filing by the Company for bankruptcy.
As of October 10, 1997, there were outstanding options to purchase an
aggregate 2,492,000 shares of Common Stock under the Company's incentive and
non-statutory stock option plans (the "Option Plans"). On that date, 908,000
shares of Common Stock remained available for grant under the Option Plans. The
Option Plans provides for automatic adjustment of the number and per share
price of the Common Stock
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<PAGE> 10
subject to outstanding options and available for future grant in the event of a
change in capitalization, such as the proposed Reverse Stock Split. If the
proposed one-for-ten Reverse Stock Split is approved, there would be reserved
for issuance upon the exercise of all outstanding options a total of 249,200
shares of Common Stock. Each of the outstanding options would thereafter
evidence the right to purchase 10% of the shares of Common Stock previously
covered thereby, and the exercise price per share would be ten times the
present exercise prices which range from $0.4375 per share to $1.10 per share.
The number of shares available for issuance under the Option Plan would
decrease to approximately 90,800 shares of Common Stock.
Currently there are 18,484,200 shares of Common Stock subject to
issuance upon the exercise of outstanding Warrants. The Board of Directors have
proposed, and the majority of the holders of the Warrants have agreed, that the
Warrants will be subject to the Reverse Stock Split. If the proposed Reverse
Stock Split is approved, the Warrants will be convertible, in the aggregate,
into 1,848,420 shares of Common Stock. The Warrants are presently exercisable
at $.25 per share. Upon approval of the Reverse Stock Split, the exercise price
of the Warrants would be increased to $2.50 per share.
The Company is also obligated to issue an aggregate of 44,132,309
shares of Common Stock upon the issuance of the Debenture to Renaissance. The
Board of Directors have proposed, and Renaissance has agreed, that the
Debenture will be subject to the Reverse Stock Split. If the proposed Reverse
Stock Split is approved, the Debenture will be convertible into 4,413,231
shares of Common Stock. Similarly, Renaissance's Debenture/Warrant, upon
issuance, will be exercisable for 8,063,963 shares of Common Stock will be
reduced to 806,397 shares of Common Stock into which it may be converted if the
Reverse Stock Split is approved.
The following table illustrates the principal effects of the proposed
Reverse Stock Split as discussed in the preceding paragraphs:
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Of Common Stock Of Common Stock
Prior to Reverse Split After Reverse Split
---------------------- -------------------
<S> <C> <C>
Authorized........................................................ 30,000,000 30,000,000
Outstanding....................................................... 26,875,090 2,687,509
Reserved for future issuance upon exercise of options
under Option Plan............................................ 2,000,000 2,000,000
Reserved for issuance in connection with future grants
under management compensation plan........................... 500,000 500,000
Subject to issuance upon exercise of all outstanding
Warrants..................................................... 18,484,200 1,848,420
Subject to issuance upon conversion of Renaissance's
Debenture and Debenture/Warrant.............................. 52,196,272 5,219,628
Available for future issuance by action of the Board of
Directors (after giving effect to the above
reservations)................................................ - 17,744,443
</TABLE>
FRACTIONAL SHARES AND EXCHANGE OF STOCK CERTIFICATES
As soon as possible after the Effective Date, holders of Common Stock
will be notified and requested to surrender their present Common Stock
certificates for new certificates representing the number of whole shares of
Common Stock after the Reverse Split. Until so surrendered, each current
certificate representing
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<PAGE> 11
shares of Common Stock will be deemed for all corporate purposes after the
Effective Date to evidence ownership of Common Stock in the appropriately
reduced whole number of shares. American Transfer & Trust Company will be
appointed exchange agent (the "Exchange Agent"), to act for Shareholders in
effecting the exchange of their certificates. Shareholders should not forward
their certificates to the Exchange Agent until a letter of instruction is
received, and should surrender their certificates only with such letter.
No scrip or fractional shares certificates for Common Stock will be
issued in connection with the proposed Reverse Stock Split, but in lieu
thereof, the Board of Directors has authorized the Company's officers to round
up all fractional shares to the nearest whole share.
EFFECTIVE DATE
Upon approval of the proposed Reverse Stock Split by the Shareholders
at the Special Meeting and the filing of an amendment to the Articles of
Incorporation, the Reverse Stock Split will become effective as of 5:00 p.m.,
E.S.T. on the date of such approval and filing (the "Effective Date"). Without
any further action on the part of the Company or the Shareholders, the Common
Shares held by Shareholders of record will be converted at 5:00 p.m., E.S.T. on
the Effective Date into the right to receive a number of whole Common Shares as
described above.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material anticipated
federal income tax consequences of the proposed Reverse Stock Split of the
Company's Common Stock. This discussion is based on the Federal income tax laws
as now in effect and as currently interpreted; it does not take into account
possible changes in such tax laws or interpretations, including amendments to
applicable statutes, regulations and proposed regulations or changes in
judicial or administrative rulings, some of which may have retroactive effect.
This discussion does not purport to address all aspects of the possible federal
income tax consequences of the proposed Reverse Stock Split and is not intended
as tax advice to any person. In particular, and without limiting the foregoing,
this discussion does not consider the federal income tax consequences to
Shareholders of the Company in light of their individual investment
circumstances or to tax laws (for example, life insurance companies, financial
institutions, tax-exempt organizations, regulated investment companies and
foreign taxpayers). The summary does not address any consequence of the Reverse
Stock Split under any state, local or foreign tax laws.
No ruling will be obtained from the Internal Revenue Service regarding
the Federal income tax consequences to the Shareholders of the Company as a
result of the Reverse Stock Split. ACCORDINGLY, EACH SHAREHOLDER IS ENCOURAGED
TO CONSULT HIS OR HER TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF
THE PROPOSED TRANSACTION TO SUCH SHAREHOLDER, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
Upon approval of the Company's Shareholders, the proposed Reverse
Stock Split will qualify as a tax-free recapitalization for the Company and the
Shareholders.
Shares of Common Stock in the hands of a Shareholder after the Reverse
Stock Split will have an aggregate basis for computing gain or loss equal to
the aggregate basis of the shares of Common Stock held by that Shareholder
immediately prior to the proposed Reverse Stock Split, increased by any gain
recognized
8
<PAGE> 12
from the rounding of fractional shares to the nearest next whole share. A
Shareholder's holding period for the Common Shares after the Reverse Stock
Split will not change.
DISSENTERS' RIGHTS
Dissenting Shareholders have no appraisal rights under Florida law or
under the Company's Articles or By-laws in connection with the proposed Reverse
Stock Split.
VOTE REQUIRED
The Board of Directors believes that the Recapitalization and the
attendant Reverse Stock Split are in the best interests of the Company and the
Shareholders. In order to approve and adopt this proposal at the Special
Meeting, the votes cast in favor of the proposal must exceed the votes cast
opposing this proposal, provided a quorum is present.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO EFFECT
A ONE-FOR-TEN REVERSE SPLIT OF THE COMPANY'S COMMON STOCK
ITEM - III
AMENDMENT TO THE COMPANY'S 1996 INCENTIVE AND
NON-STATUTORY STOCK OPTION PLAN
The Company maintains a 1992 ("1992 Option Plan") and 1996 Incentive
and Non-Statutory Stock Option Plan ("1996 Option Plan") under which incentive
and non-qualified options may be granted to employees, directors and certain
key affiliates. Under the Option Plans, options may be granted at not less than
the fair market value on the date of grant. Options may be subject to a vesting
schedule and expire ten years after grant.
Under the 1992 Option Plan, 1,400,000 shares are reserved for issuance
of which 882,000 are reserved for options granted. The 1996 Option Plan
reserves 2,000,000 shares of the Company's Common Stock for issuance
thereunder, of which 1,610,000 shares are reserved for issuance pursuant to
outstanding options. The Company has in the past utilized and wishes in the
future to utilize the Option Plan to attract, maintain and develop management
by encouraging ownership of the Company's Common Stock by key employees,
directors and others. In the event the Reverse Stock Split proposed above is
approved by the Shareholders, the number of shares subject to the Option Plan
will be reduced from 1,400,000 shares to 140,000 shares and 2,000,000 shares to
200,000 shares of which 249,200 shares would be reserved for issuance pursuant
to outstanding options.
On September 22, 1997, the Board of Directors approved and hereby
recommends to the Shareholders that in the event that the Reverse Stock Split
is approved at the Special Meeting, the Shareholders approve a proposal to
amend the Company's 1996 Option Plan to increase the number of shares of Common
Stock subject to the Option Plan from 200,000 shares to 2,000,000 shares. The
proposed amendment will cause Section 3.1 of the Option Plan to be replaced
with the following revised Section 3.1:
3.1 Shares Subject to Plan. The stock subject to the options granted
under the Plan shall be shares of the Company's authorized but
unissued common stock, par value $.01 per
9
<PAGE> 13
share ("Common Stock"). The total number of shares that may be issued
pursuant to options granted under the Plan shall not exceed 2,000,000
shares of Common Stock.
Except for such amendment, if approved, the 1996 Option Plan will
remain unchanged. The following is a summary of the provisions of the 1996
Option Plan. This summary is qualified in its entirety by reference to the
Option Plan, a copy of which may be obtained from the Company.
SUMMARY DESCRIPTION OF THE 1996 OPTION PLAN
The 1996 Option Plan authorizes the granting to employees of the
Company and its affiliates of both incentive stock options, as defined under
Section 422 of the Internal Revenue Code of 1986 ( "ISO"), and non-qualified
stock options to purchase Common Stock ("NQO"). All employees of the Company
and its affiliates are eligible to participate in the 1996 Option Plan. The
1996 Option Plan also authorizes the granting of non-qualified stock options to
non-employee directors and consultants of the Company of non-qualified stock
options to purchase Common Stock. Pursuant to the 1996 Option Plan, an option
to purchase 10,000 shares of Common Stock shall be granted automatically to
each outside director who is newly elected to the Company's Board. In addition,
an option to purchase 2,500 shares of Common Stock shall be granted
automatically, on the date of each annual meeting of shareholders of the
Company, to each outside director who has served in that capacity for the past
six months and continues to serve following such meeting. Any outside director
may decline to accept any option granted to him under the 1996 Option Plan.
The Board of Directors or the Compensation and Stock Option Committee
is responsible for the administration of the 1996 Option Plan and determines
the employee to be granted options, the period during which each option will be
exercisable, the number of shares and exercise price of the Common Stock
covered by each option, and whether line dropped an option will be a
non-qualified or an incentive stock option. The Stock Option Committee has no
authority to administer or interpret the provisions of the 1996 Option Plan
relating to the grant of options to outside directors. The current members of
the Compensation and Stock Option committee are Russell Cleveland and Dr.
Harold Helderman.
No option granted pursuant to the 1996 Option Plan is transferable
otherwise than by will or the laws of descent and distribution. The term of
each option granted to an employee under the 1996 Option Plan is determined by
the Board of Directors or the Compensation and Stock Option Committee, but in
no event may such term exceed 10 years from the date of grant. The exercise
price for the purchase of shares subject to such an option cannot be less than
100% of the fair market value of the Common Stock on the date the option is
granted. Furthermore, the exercise price for any incentive stock option granted
to an employee who owns stock possessing more than 10% of the total combined
voting power for all classes of stock of the Company or an affiliate must be at
least 110% of the fair market value of the Common Stock at the date of the
grant. Upon exercise of an option by an employee, the purchase price must be
paid in full in cash. Shares of Common Stock underlying options that have
expired or terminated without being exercised in full, are again available for
grant under the Option Plan. The aggregate fair market value (determined at the
time an option is granted) of the Common Stock with respect to which ISOs are
exercisable for the first time by any person during any calendar year under the
Plan shall not exceed $100,000. In addition, the aggregate number of shares of
Common Stock for which any employee may be granted options during any one
calendar year may not exceed 75,000.
Each option granted to an outside director under the 1996 Option Plan
shall be exercisable in whole or in part during the four-year period commencing
on the date of grant of such option. Any option granted to an outside director
shall remain effective during its entire term regardless of whether such
director continues
10
<PAGE> 14
to serve as a director. The purchase price per share of Common Stock under each
option granted to a director will be the fair market value of such share on the
date of grant.
The vesting period for options granted under the 1996 Option Plan is
set forth in an option agreement entered into with the optionee. ISOs granted
to an optionee terminate 90 days after retirement. In the event of death or
disability, all vested options expire 180 days from the date of death or
termination of employment due to disability.
In the event that the Company effects a split of the outstanding
shares of Common Stock or a dividend payable in Common Stock, or the
outstanding Common Stock is combined into a smaller number of shares, the
maximum number of shares subject to outstanding options and the purchase price
per share of such options will be increased or decreased proportionately so
that the aggregate purchase price for all the shares then subject to such
options will remain the same as immediately prior to such split, dividend or
combination. In the event of a reclassification of Common Stock not covered by
the foregoing, or in the event of a liquidation or reorganization (including
merger, consolidation or sale of assets) of the Company, the Board of Directors
of the Company will make such adjustments, if any, as it deems appropriate in
the number, purchase price and kind of shares covered by the unexercised
portions of options theretofore granted under the 1996 Option Plan, to the
extent permitted by applicable law.
Upon the occurrence of a "change in control" of the Company, the
maturity of all options then outstanding under the 1996 Option Plan will be
accelerated automatically, so that all such options will become exercisable in
full with respect to all shares that have not been previously exercised or
become exercisable. A "change in control" includes certain mergers,
consolidation, reorganization, sales of assets, or a dissolution of the
Company.
Unless sooner terminated, the 1996 Option Plan will expire on February
27, 2006. The Board of Directors of the Company may alter, amend or terminate
the 1996 Option Plan, except that it may not, without the approval of the
shareholders of the Company, make any alteration or amendment which would
operate to (i) abolish the Stock Option Committee, change the qualification of
its members or withdraw the administration of the 1996 Option Plan from the
supervision of the Committee, (ii) increase the total number of shares of
Common Stock for which options may be granted under the 1996 Option Plan,
(other than proportionate adjustments described above), (iii) extend the term
of the 1996 Option Plan or the maximum exercise period provide under the 1996
Option Plan, (iv) decrease the minimum purchase price provided under the 1996
Option Plan, (v) materially increase the benefits accruing to participants
under the 1996 Option Plan, or (vi) materially modify the requirements as to
eligibility for participation in the 1996 Option Plan. No amendment of
termination of the 1996 Option Plan may adversely affect the rights of an
optionee without the consent of such optionee.
STOCK OPTIONS
Since January 1, 1996, the Company granted options to purchase
1,387,000 shares of Common Stock to four officers, 1,195,000 shares of Common
Stock to 18 employees of the Company, and 117,500 shares to its directors. The
exercise prices of the options ranged from $0.375 to $1.125 per share of Common
Stock. Subsequent to the grants, options to purchase 150,000 shares held by
officers, 300,000 shares held by employees, and 2,500 shares held by a
director, were canceled due to termination of employment or resignation as a
director. Neither the number nor value of future option awards to particular
participants or groups of participants is presently determinable.
11
<PAGE> 15
On October 10, 1997, the per share market value of the Common Stock
was $____.
FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION PLAN
The holder of an ISO does not realize taxable income upon the grant or
upon the exercise of the option (although the option spread is an item of tax
preference income potentially subject to the alternative minimum tax). If the
stock acquired upon exercise of the option is sold or otherwise disposed of
within two years from the option grant date or within one year from the
exercise date then, in general, gain realized on the sale is treated as
ordinary income to the extent of the option spread at the exercise date, and
the Company receives a corresponding deduction. Any remaining gain is treated
as capital gain. If the stock is held for at least two years from the grant
date and one year from the exercise date, then gain or loss realized upon the
sale will be capital gain or loss and the Company will not be entitled to a
deduction. A special basis adjustment applies to reduce the gain for
alternative minimum tax purposes.
An optionee does not realize taxable income upon the grant of an NQO
if the exercise price is equal to the fair market value. If the exercise price
is less than the fair market value, the optionee will realize income equal to
the difference between the exercise of the NQO in an amount equal to the
difference between the exercise price and the market value on the date of
exercise. The Company is entitled to a deduction at the same time and in a
corresponding amount.
In general, if an optionee delivers previously-owned shares in payment
of the exercise price of an option, no gain or loss will be recognized on the
exchange of the previously-owned shares for an equivalent number of newly
issued shares. However, if the previously-owned shares delivered in payment of
the exercise price were acquired pursuant to the exercise of an ISO and if the
requisite option holding periods are not satisfied (see above), then the
optionee will realize ordinary income on the delivery of the previously-owned
shares as in the case of any other "early" disposition of option-acquired
shares.
VOTE REQUIRED
The Board of Directors believes that the proposal to increase the
number of shares of Common Stock subject to the 1996 Incentive and
Non-Statutory Stock Option Plan, after approval of the proposed Reverse Stock
Split, is in the best interests of the Company and the Shareholders. In order
to approve and adopt this proposal at the Special Meeting, the votes cast in
favor of the amendment must exceed the votes cast opposing the adoption of this
proposal, provided a quorum is present.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND
THE 1996 INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN.
ITEM - IV
APPROVAL AND AUTHORIZATION TO GRANT SPECIAL STOCK OPTIONS
TO THE COMPANY'S PRESIDENT AND CHIEF EXECUTIVE OFFICER
In February 1996, the Board of Directors approved the terms of an
offer of employment with Karl H. Meister as President and Chief Executive
Officer. Included in those terms is the February 28, 1996 grant of Special
Stock Options which shall entitle Mr. Meister to purchase 750,000 shares of
Common Stock of the Company at eighty five cents ($.85) per share. As a result
of the actions being taken at this meeting the number
12
<PAGE> 16
of options previously granted to Mr. Meister will be reduced to 75,000 options
exercisable at $8.50 per share. In view of the anticipated share price, it is
being proposed to cancel this option and grant to Mr. Meister a new option to
purchase 300,000 shares to be exercisable at the fair market value determined
at the close of business on the date of the consummation of the transactions
referred to above.
VOTE REQUIRED
The Board of Directors believes that the proposal to cancel the
existing option to Mr. Meister and issue a new option to purchase 300,000
shares of Common Stock, after approval of the proposed Reverse Stock Split, is
in the best interests of the Company and the Shareholders. In order to approve
this proposal at the Special Meeting, the votes cast in favor of the proposal
must exceed the votes cast opposing such action, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL TO GRANT
SPECIAL STOCK OPTIONS TO THE PRESIDENT AND CHIEF EXECUTIVE OFFICER.
ITEM - V
AMENDMENT TO THE COMPANY'S 1996 MANAGEMENT COMPENSATION PLAN
The Company maintains a 1996 Management Compensation Plan (the
"Compensation Plan") under which shares of Common Stock may be issued to
management employees. The Compensation Plan currently reserves 500,000 shares
of the Company's Common Stock for issuance thereunder. Currently, no shares
have been issued under the Compensation Plan. The purpose of the Compensation
Plan is to reward management employees for superior results obtained by the
Company and by such employees individually. The Company wishes in the future to
utilize the Compensation Plan to attract and retain superior executive talent
and to obtain a commitment to the long-term success of the Company.
In the event the Reverse Stock Split is approved, the number of shares
subject to the Compensation Plan will be automatically reduced to 50,000 shares
of Common Stock. On September 22, 1997, the Board of Directors approved and
hereby recommends to the Shareholders, in the event the proposed Reverse Stock
Split is approved, that the Shareholders approve a proposal to amend the
Company's Compensation Plan to increase the number of shares of Common Stock
subject to the Compensation Plan from 50,000 shares to 500,000 shares. The
proposed amendment will cause the first sentence of the section of the
Compensation Plan entitled "Shares Subject to this Plan" to be replaced with
the following revised first sentence:
"Shares Subject to this Plan:
.........The total number of shares of Common stock of the Company
that may be issued pursuant to this Plan shall not exceed
a maximum of 500,000 in the aggregate."
Except for such amendment, if approved, the Compensation Plan will
remain unchanged. The following is a summary of the provisions of the
Compensation Plan. This summary is qualified in its entirety by reference to
the Compensation Plan, a copy of which may be obtained from the Company.
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<PAGE> 17
SUMMARY DESCRIPTION OF THE COMPENSATION PLAN
The Compensation Plan authorizes the granting to management employees
of the Company and its subsidiaries of incentive compensation in the form of
bonuses payable 50% in cash and 50% in Common Stock of the Company. Management
employees of the Company or one or more of its subsidiaries who are selected to
participate in the Compensation Plan by the Compensation and Stock Option
Committee of the Board of Directors of the Company are eligible to receive
bonuses pursuant to the Compensation Plan.
The Compensation and Stock Option Committee is responsible for the
administration of the Compensation Plan. The current members of the
Compensation and Stock Option Committee are Russell Cleveland and Dr. Harold
Helderman.
The Compensation and Stock Option Committee shall have full authority
to interpret the Compensation Plan, to establish rules and regulations relating
to the operation of the Compensation Plan, to determine the management
employees eligible to receive bonuses thereunder, to set bonus criteria, to
determine whether and to what extent the bonus criteria or other results have
been met, and to make all other determinations and take all other actions as
the Compensation and Stock Option Committee deems necessary, advisable or
appropriate for the proper administration of the Compensation Plan. The
criteria for incentive compensation under the Compensation Plan consists of two
parts - corporate results and individual results. Corporate results means
exceeding budgeted sales and profits and meeting certain annual bonus criteria.
Individual results are measured by whether an employee achieves certain goals
set for his or her position. The amount of potential bonus for an employee
consists of a target bonus multiplied by a performance component. The target
bonus is determined as a percentage of salary and ranges from 20% to 35%
depending on the individual's position. The performance component is a
percentage rate measuring results achieved in comparison to the Company's
annual operating budget. The performance component can be adjusted upward or
downward based on individual performance, upon approval by the Compensation and
Stock Option Committee.
As soon as practicable after the close of the Company's fiscal year,
the Compensation and Stock Option Committee shall determine the bonus amounts
payable, if any, to participants with respect to such fiscal year in accordance
with the Compensation Plan. As soon as practicable after the amount of such
participant's bonus for a fiscal year has been determined and certified, 50% of
the bonus will be paid in cash and 50% in Common Stock, based on the fair
market value of the stock on the date of certification of payment of the bonus
by the Compensation and Stock Option Committee.
No participant will have the right to receive payment of any bonus
unless the participant is an employee of the Company or one of its subsidiaries
through the date of certification of such bonus; provided, however, that the
Compensation and Stock Option Committee may, in its sole discretion, pay all or
part of a bonus to any participant whose employment with the Company or its
subsidiaries is terminated prior to such certification for any reason. In
addition, the Compensation and Stock Option Committee may, in its sole
discretion, increase or decrease any bonus payable to any participant to
reflect the individual performance and contribution of, and other factors
relating to, such participant.
In the event the Company effects a split of the outstanding shares of
Common Stock or a dividend payable in Common Stock, or in the event the
outstanding Common Stock of the Company is combined into a smaller number of
shares, the maximum number of shares that may be issued under the Compensation
Plan will be decreased or increased proportionately.
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<PAGE> 18
The Compensation Plan shall terminate on February 27, 2001, provided,
however, that any bonus payment determined and certified pursuant to the
Compensation Plan, but not yet paid as of the date of such termination shall be
paid as soon as practicable, but in no event later than thirty days after the
date of such termination. The Board of Directors of the Company may alter or
amend the Compensation Plan but may not, without the approval of the
shareholders of the Company, make any alteration or amendment thereof which
operates (i) increase the total number of shares of Common Stock of the Company
which may be issued under the Compensation Pan (other than as described in the
preceding paragraph), (ii) extend the term thereof, (iii) materially increase
the benefits accruing to participants thereunder, or (iv) materially modify the
requirements as to eligibility for participation in the Compensation Plan.
FEDERAL INCOME TAX CONSEQUENCES OF THE COMPENSATION PLAN
Upon the grant of a cash bonus, a participant will recognize ordinary
income and the Company will be entitled to a corresponding deduction (subject
to the new deduction limitations described below) equal to the amount of the
cash bonus. Except as described below in the case of an "insider" subject to
Section 16(b) of the Exchange Act, upon the grant of a stock bonus, a
participant will recognize ordinary income and the Company will be entitled to
a corresponding deduction (subject to the new deduction limitations described
below) equal to the fair market value of the Common Stock of the Company at the
time. In the absence of an election pursuant to Section 83(b) of the Code, an
"insider" subject to Section 16(b) of the Exchange Act who receives a stock
bonus will recognize income on the six months after the date of grant in an
amount equal to the fair market value of the Common Stock of the Company. A
participant subject to Section 16(b) of the Exchange Act can avoid such
deferral by making an election, pursuant to Section 83(b) of the Code, no later
than thirty days after the date of grant.
Section 162(m) of the Code, which became effective in 1994, limits the
deduction which the Company may take for otherwise deductible compensation
payable to certain executive officers of the Company to the extent that
compensation paid to such officers for such year exceeds $1 million, unless
such compensation is performance-based, is approved by the Company's
shareholders and meets certain other criteria. The Company may be limited by
Section 162(m) of the code in the amount of deductions it would otherwise be
entitled to take (as described in the foregoing summary) with respect to
bonuses awarded under the Compensation Plan.
VOTE REQUIRED
The Board of Directors believes that the proposal to increase the
number of shares of Common Stock subject to the 1996 Management Compensation
Plan is in the best interests of the Company and the Shareholders. In order to
approve and adopt this proposal at the Special Meeting, the votes cast in favor
of the amendment must exceed the votes cast opposing the adoption of this
proposal, provided a quorum is present.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND
THE 1996 MANAGEMENT COMPENSATION PLAN.
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<PAGE> 19
OTHER MATTERS
At the time of the preparation of this Information Statement, the
Board of Directors of the Company has no knowledge of any other matters to be
presented at the meeting other than those specifically set forth in the Notice
of Annual Meeting and described herein.
By Order of the Board of Directors
Charles C. Dragone
Chairman of the Board
October 14, 1997
Parsippany, New Jersey
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<PAGE> 20
APPENDIX A
BIODYNAMICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Pro forma
(unaudited) --------------------------------
6/30/97 (Note 1) (Note 2) (Note 3)
----------- -------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 495 $ 495 $ 1,495 $ 1,495
Accounts receivable 1,450 1,450 1,450 1,450
Inventories 3,698 3,698 3,698 3,698
Other current assets 428 428 428 428
-------- -------- -------- --------
6,071 6,071 7,071 7,071
Property, plan and equipment, net 3,135 3,135 3,135 3,135
Intangible and other assets, net 2,880 2,880 2,880 2,880
-------- -------- -------- --------
TOTAL ASSETS $ 12,086 $ 12,086 $ 13,086 $ 13,086
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 592 $ 592 $ 592 $ 592
Accrued interest 707 212 212 8
Other accrued expenses 1,872 1,706 1,706 1,706
Credit facility 771 771 771 771
Current portion of long-term debt 2,378 1,093 2,093 (93)
-------- -------- -------- --------
6,320 4,374 5,374 3,170
LONG-TERM DEBT 6,482 5,460 5,460 3,460
SHAREHOLDERS' EQUITY
Preferred Stock, par value $.01 per share,
issued and outstanding Series C: 110,603; 123,228;
-0- and -0- respectively 1 1 -- --
Common Stock, par value $.01 per share,
issued and outstanding: 8,390,890; 8,390,890
26,875,090 and 5,313,810 shares respectively 84 84 269 53
Additional contributed capital 21,300 22,888 22,704 27,124
Foreign currency translation adjustment (148) (148) (148) (148)
Accumulated deficit (21,953) (20,573) (20,573) (20,573)
-------- -------- -------- --------
(716) 2,252 2,252 6,456
======== ======== ======== ========
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,086 $ 12,086 $ 13,086 $ 13,086
======== ======== ======== ========
</TABLE>
- --------------------
Notes to Pro Forma Balance Sheets
(1) Incorporates the July 1, 1997 litigation settlement and conversion of
Senior B Long-term debt to Series C Preferred Stock.
(2) Reflects the September 16, 1997 conversion of Series C Preferred Stock
to restated Common Shares and the September 15, 1997 $1 million
short-term bridge loan.
(3) Incorporates the exchange of long-term mezzanine debt for restated
Common Shares and the exchange of both short-term bridge loans to a
long-term Convertible Debenture.
