<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
INFORMATION STATEMENT
PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------
INTERFILM, INC.
(Name of Subject Company)
INTERFILM, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
45866R108
(CUSIP Number of Class of Securities)
---------------
WILLIAM FRANZBLAU
110 GREENE STREET, SUITE 601
NEW YORK, NEW YORK 10012
(212) 334-5900
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With copies to:
DAVID L. FICKSMAN, ESQ.
LOEB & LOEB LLP
1000 WILSHIRE BOULEVARD, SUITE 1800
LOS ANGELES, CALIFORNIA 90017
(213) 688-3698
================================================================================
<PAGE>
INTERFILM, INC.
INFORMATION PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14F-1 THEREUNDER
1. General
-------
This information is being furnished in connection with the expected
appointment to the Board of Directors of Interfilm, Inc., a Delaware corporation
("Interfilm" or the "Company"), of persons representing a majority of the
members of the Board of Directors of the Company, other than at a meeting of the
Company's stockholders, pursuant to the terms of that certain Agreement and Plan
of Reorganization, dated as of April 12, 1996 (the "Reorganization Agreement")
by and among the Company, RhoMed Incorporated ("RhoMed") and Interfilm
Acquisition Corp. ("InSub"). No action is required by the stockholders of the
Company in connection with the appointment of such directors. However, Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires the filing with the Securities and Exchange Commission (the "SEC") and
the mailing to stockholders of the information set forth herein at least ten
(10) days prior to a change in a majority of the directors.
2. The Merger
----------
Pursuant to the Reorganization Agreement, InSub will merge with and
into RhoMed (the "Merger") and the RhoMed Preferred Stock outstanding
immediately prior to the effective date of the Merger (the "Effective Time")
will be converted into the Series A Convertible Preferred Stock of Interfilm
(the "Interfilm Series A Preferred"), and the RhoMed Common Stock outstanding
immediately prior to the Effective Time will be converted into the Series B
Convertible Preferred Stock of Interfilm (the "Interfilm Series B Preferred").
Additionally, all warrants and options to purchase the Common Stock of RhoMed
outstanding immediately prior to the Effective Time (the "RhoMed Derivative
Securities"), including without limitation, any rights underlying RhoMed's
qualified or non-qualified stock option plans, will be automatically converted
into rights upon exercise to receive Interfilm capital stock in the same manner
in which the shares of RhoMed Common Stock are to be converted at the Effective
Time. Holders of each class of Interfilm Preferred Stock will be entitled to
vote on matters submitted to a vote of stockholders of Interfilm as if the
applicable shares of Preferred Stock were converted into shares of Common Stock.
<PAGE>
Each share of the Interfilm Series A Preferred Stock will
automatically convert into shares of Interfilm Common Stock and each share of
the Interfilm Series B Preferred Stock will automatically convert into shares of
Interfilm Common Stock upon the filing of an amendment to Interfilm's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock. The holders of at least 51% of the total outstanding shares of
Interfilm Common Stock immediately prior to the Effective Time have agreed to
vote to, among other things, increase the number of authorized shares of
Interfilm Common Stock. After all conversions and exercises, each share of
RhoMed Preferred Stock will convert into 4.6695604349 shares of Interfilm Common
Stock, and each share of RhoMed Common Stock will convert into 1.84332593 shares
of Interfilm Common Stock.
Immediately after the Merger, the present stockholders of Interfilm
will retain an aggregate of approximately 8% of the outstanding capital stock of
Interfilm (on a fully diluted basis) before giving effect to the Private
Placement (See, Item 4 below) and certain shares which may be issuable pursuant
to stock options of RhoMed to be assumed by Interfilm but after giving effect to
the (a) shares of the Interfilm Series A Preferred and Interfilm Series B
Preferred issuable pursuant to the Merger, and (b) shares of the capital stock
of Interfilm issuable pursuant to the exercise or conversion of the RhoMed
Derivative Securities.
As a result of the Merger, RhoMed will become a wholly owned
subsidiary of Interfilm. The Merger will not affect any of the rights of the
existing security holders of Interfilm except as set forth in Item 5 below.
No vote of the stockholders of Interfilm is required with respect to
the Merger. A majority of the shares of each of RhoMed Preferred Stock and
RhoMed Common Stock voting at a meeting called for that purpose is required to
approve the Merger.
The Interfilm Common Stock is publicly traded. There are currently no
shares of any Interfilm Preferred Stock outstanding. The RhoMed Common Stock is
held by approximately 225 holders, and the shares of RhoMed Preferred Stock are
held by approximately 12 holders. None of the RhoMed capital stock is publicly
traded.
3. RhoMed Incorporated.
-------------------
RhoMed, incorporated in New Mexico on January 28, 1986, is a
development stage biopharmaceutical company which has developed a platform
technology for the design and
2
<PAGE>
synthesis of novel peptides that it believes may represent a proprietary pathway
to drug design and development.
This platform technology, MIDAS (Metal Ion-induced Distinctive Array
of Structures), is designed to allow for the design and development of receptor-
specific metallopeptide mimics of native peptides, as well as other types of
molecules, such as steroids and hormones. RhoMed believes that the MIDAS
technology could enable the design of novel peptide analogs or mimics for a
broad range of diagnostic and therapeutic applications.
The following unaudited pro forma consolidated balance sheet of the
Company as of February 29, 1996 gives effect to the proposed Merger as if it had
occurred on that date. The following unaudited pro forma consolidated statement
of operations of the Company for the six months ended February 29, 1996 gives
effect to the proposed Merger as if it had occurred on September 1, 1995.
The proposed Merger will be accounted as a recapitalization of
Interfilm with RhoMed being deemed the acquirer for accounting purposes (reverse
acquisition). The unaudited pro forma consolidated financial information does
not purport to represent what the Company's financial position would actually
have been had the Merger in fact occurred on the dates indicated above, or to
project the Company's financial position for any future date or period.
3
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of February 29, 1996
<TABLE>
<CAPTION>
Adjustments
Increase (Adjusted
RhoMed Interfilm (Decrease) Pro Forma)
------ --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 16,204 $ 162,000 $(162,000)(1) $ 16,204
Net property, plant,
and equipment 119,404 -- -- 119,404
Other non-current assets 315,519 -- -- 315,519
----------- --------- --------- -----------
LIABILITIES AND
SHAREHOLDER'S DEFICIT
Current liabilities $ 2,634,584 $ 999,000 $(599,000)(1)(2) $ 3,034,584
Long-term debt 1,981,488 -- -- 1,981,488
Shareholder's deficit (4,164,945) (837,000) 437,000 (1)(2) (4,564,945)
----------- --------- --------- -----------
$ 451,127 $ 162,000 $(162,000) $ 451,127
=========== ========= ========= ===========
</TABLE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following adjustments were made:
Note (1) Immediately after the Effective Time, certain Interfilm assets and
liabilities, except for $50,000 of current liabilities, will be
transferred to a limited partnership for the benefit of the
stockholders of Interfilm as of a record date immediately prior to the
closing date (See, Item 5 below).
Note (2) Transaction fees and finders fees amounted to approximately $350,000.
4
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the six months ended February 29, 1996
<TABLE>
<CAPTION>
Adjustments
Increase (Adjusted
RhoMed Interfilm (Decrease) Pro Forma)
------ --------- ----------- ----------
<S> <C> <C> <C> <C>
Total revenues $ 9,516 $ -- $ -- $ 9,516
Expenses:
Research and development 411,133 -- -- 411,133
Net write down of game business -- (683,000) 683,000 (1) --
General and administrative expenses 684,887 690,000 (690,000)(1) 684,887
----------- --------- --------- -----------
Total expenses 1,096,021 7,000 (7,000) 1,096,021
----------- --------- --------- -----------
Other income (expenses)
Other income 58 18,000 (18,000)(1) 58
Interest (expense) (260,940) -- -- (260,940)
Placement agent commissions and fees (138,959) -- -- (138,959)
----------- --------- --------- -----------
Total other (expense)(Net) (399,842) 18,000 (18,000) (399,842)
----------- --------- --------- -----------
Discontinued operations -- (603,000) 603,000 (1) --
Net loss $(1,486,352) $(592,000) $ 592,000 $(1,486,352)
=========== ========= ========= ===========
Loss per common stock -- -- -- --
</TABLE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENT.
The following adjustment was made:
Note (1) Immediately after the Effective Time, certain Interfilm assets and
liabilities, except for $50,000 of current liabilities, will be
transferred to a limited partnership for the benefit of the
stockholders of Interfilm as of a record date immediately prior to the
closing date (See, Item 5 below).
4. Private Placement
-----------------
RhoMed is currently undertaking a private placement of RhoMed Common
Stock (the "Financing") for a maximum of $10,750,000. Certain stockholders of
Interfilm and third parties have committed to purchase an aggregate of $750,000
of RhoMed Common Stock in the Financing. Such purchase is a condition precedent
to the closing of the Merger. Additionally, RhoMed will issue warrants to
purchase shares of RhoMed Common Stock (the "Financing Warrants") to certain
parties in connection with
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<PAGE>
their participation in the Financing. The shares of RhoMed Common Stock issued
in the Financing will be converted at the Effective Time into shares of the
Interfilm Series B Preferred and the Financing Warrants will be treated
identically to the other RhoMed Derivative Securities.
5. Transfer of Certain Assets to Limited Partnership
-------------------------------------------------
On the date of the Merger, immediately after the Effective Time,
certain of the assets of Interfilm (collectively, the "Interfilm Assets") will
be transferred to a limited partnership (the "Partnership") for the benefit of
the stockholders of Interfilm as of a record date immediately prior to the
Effective Time (the "Old Interfilm Stockholders"). The Interfilm Assets consist
principally of funds which may be recoverable from a lawsuit filed against Sony
Corporation of America ("Sony") and certain intellectual property rights of
Interfilm. The Interfilm Assets will be available to secure the indemnification
obligations of Interfilm pursuant to the Reorganization Agreement, including
taxes (including interest and penalties), if any, imposed on Interfilm arising
from the transfer of the Interfilm Assets.
The interest of the Old Interfilm Stockholders in the Partnership will
be held either directly or through a liquidation trust (the "Trust"). The
general partner of the Partnership is expected to be Fab Five, Inc., a New
Jersey corporation, wholly owned by William Franzblau, Interfilm's current
Executive Vice President. The sole trustee of the Trust will be Mr. Franzblau.
The Company's estimate of the fair market value of the beneficial
interest in the Trust (as to those stockholders who are beneficiaries of the
Trust) and of the Partnership interest in the Partnership (as to those
stockholders who are partners in the Partnership), will be reported to the
relevant stockholders and to the Internal Revenue Service ("IRS"). That amount
should be reported as dividend income under applicable tax law. Thus,
stockholders may have taxable income in the year the Trust and Partnership are
established without receipt of cash at that time. The IRS may assert that the
actual fair market value of the beneficial interest in the Trust or of the
partnership interest in the Partnership exceeds the Company's valuation. The
IRS may make such assertion in a later year, prior to the expiration of the
applicable statute of limitations. If the IRS were successful in such an
assertion, additional tax, interest, and penalties could be assessed against
such stockholders.
The Partnership intends to report for federal income tax purposes that
it is taxable as a partnership as opposed to a corporation. Each year, all the
taxable income of the Partnership, if any, will be allocated among the partners
of the Partnership, one of which will be the Trust, and reported to them
6
<PAGE>
and to the IRS. Thus, partners may have taxable income in a given year without
receipt of cash at that time.
The trustee of the Trust intends to treat the Trust as a grantor trust
for federal income tax purposes. Each year, all the taxable income of the
Trust, if any, will be allocated among the holders of beneficial interests and
reported to them and to the IRS. Thus, holders of beneficial interests may have
taxable income in a given year without receipt of cash at that time. The IRS
may assert that the Trust is an association taxable as a corporation. If the
IRS were successful in such an assertion, the Trust itself could be subject to
corporate tax, as well as interest and penalties. Under that argument, the
Trust's recovery of monies from a lawsuit in excess of tax basis, collection of
royalties, and any other taxable income would be subject to "double taxation,"
which means that the Trust would be subject to corporate tax upon collection of
such amounts and then the shareholders could be subject to a second tax on Trust
distributions to them which would be characterized as dividends.
Counsel has not expressed an opinion as to the tax status of the
Partnership or of the Trust.
6. Fairness Hearing.
----------------
Approval of the issuance of the Interfilm securities pursuant to the
Merger by the Commissioner of the California Department of Corporations is a
condition precedent to the closing of the Merger. Interfilm has filed an
Application for Qualification with the Commissioner requesting a hearing on the
fairness of the offer and sale of the securities pursuant to Section 25142 of
the California Corporation Code. The hearing is currently scheduled for June
12, 1996, at 10:00 a.m. (Pacific Time) at Hearing Room(s) A, B and C, 5th floor,
3700 Wilshire Boulevard, Los Angeles, California 90010. If the Commission finds
the terms and conditions of the offer and sale to be fair to the shareholders of
RhoMed, subject to the approval of the Merger by the shareholders of RhoMed,
Interfilm will issue, to those security holders of RhoMed who have not perfected
their dissenters' rights of appraisal, shares of Interfilm Preferred Stock in
accordance with the terms of the Reorganization Agreement. Interfilm intends to
issue these shares of its Preferred Stock without registration under the
Securities Act of 1933, as amended (the "Act"), based upon the exemption set
forth in Section 3(a)(10) of the Act. Such issuance is proposed to be made
without the assistance of any broker-dealers or similar agents.
7
<PAGE>
7. Certain Information Concerning the Board of Directors.
-----------------------------------------------------
Pursuant to the terms of the Reorganization Agreement, the Company
will deliver resignations of each of its directors and officers.
Set forth below are the name, age, business address, present principal
occupation and five year employment history of each of the persons expected to
be appointed to the Board of Directors of the Company pursuant to the
Reorganization Agreement.
Principal Occupation
and 5 year Employment
Name and Address Age History
- ---------------- --- ---------------------
Edward J. Quilty 45 See text below
RhoMed Incorporated
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
Buck A. Rhodes 60 See text below
RhoMed Incorporated
4261 Ballon Park Road NE
Albuquerque, New Mexico 87109
Michael S. Weiss 30 See text below
The Castle Group Ltd.
375 Park Avenue, Suite 1501
New York, New York 10152
Carl Spana 33 See text below
RhoMed Incorporated
214 Carnegie Center, Suite 100
Princeton, New Jersey 08540
MR. EDWARD J. QUILTY has been Chairman, Chief Executive Officer and a
Director of RhoMed since November 1995. From July 1994 through November 1995,
Mr. Quilty was President, Chief Executive Officer and a Director of MedChem
Products, Inc., a publicly traded medical device company, which in September
1995 was merged into C.R. Bard, Inc. From March 1992 through July 1994, Mr.
Quilty served as President and Chief Executive Officer of Life Medical Sciences,
Inc., a publicly traded medical device company. From January 1987 through
October 1991, Mr. Quilty served as Executive Vice President of McGaw Inc., a
pharmaceutical company. Mr. Quilty is also Chairman of the Board and a Director
of Derma Sciences, Inc., a publicly traded medical device company. Mr. Quilty
received his M.B.A. from Ohio University, and a B.S. from Southwest Missouri
State University.
8
<PAGE>
BUCK A. RHODES, PH.D., has been a director of RhoMed since its
inception in January 1986, and served as President until November 1995. Dr.
Rhodes is currently a consultant to RhoMed. Since founding RhoMed, Dr. Rhodes
has been responsible for discovering, evaluating and developing
radiopharmaceutical drugs. Prior to founding RhoMed, he was Senior Vice
President for Scientific Affairs at Summa Medical Corporation. Dr. Rhodes has
held professorships at The Johns Hopkins Medical Institutions, the University of
Kansas Medical Center, and the University of New Mexico in the areas of
Diagnostic Radiology, Radiation Health and Pharmacy Practice. Dr. Rhodes
received his Ph.D. in Radiological Sciences from The Johns Hopkins University
and a B.S. from New Mexico State University.
MICHAEL S. WEISS, has been a Director of RhoMed since July 1995.
Since November 1993, Mr. Weiss has been Associate General Counsel and then
General Counsel of The Castle Group, LLC, and a Vice President and Senior
Managing Director of Paramount Capital, Incorporated. From 1991-1993, Mr. Weiss
was an attorney with Cravath, Swaine & Moore. Mr. Weiss serves on the Board of
Directors of Xytronyx, Inc. and as Secretary of Atlantic Pharmaceuticals, Inc.,
both publicly traded biotechnology companies. Mr. Weiss received his J.D. from
Columbia University School of Law and a B.S. in Finance from The State
University of New York at Albany.
CARL SPANA, PH.D., has been a director of RhoMed since July 1995.
Since June 1996, he has been Executive Vice President and Chief Scientific
Officer of The Castle Group, LLC. Since joining The Castle Group, LLC, in June
1993, Dr. Spana has been responsible for discovering, evaluating, and
commercializing new biotechnologies. Through his work at The Castle Group, LLC,
Dr. Spana has been a co-founder of several private biotechnology firms. Prior
to working at The Castle Group, LLC, Dr. Spana was a Research Associate at
Bristol-Myers Squibb where he was involved in scientific research in the field
of immunology. Dr. Spana is a Director and Interim President of Avax
Technologies, Inc., and a Director of Gemini Technologies, Inc., both privately
held biotechnology companies. Dr. Spana received his Ph.D. in Molecular Biology
from The Johns Hopkins University and a B.S. in Biochemistry from Rutgers
University.
None of the foregoing persons currently is a director of, or holds any
position with, the Company. Except as set forth herein, to best knowledge of
the Company, none of the above-listed persons beneficially owns any equity
securities or rights to acquire any equity securities of the Company or has been
involved in any transaction with the Company or any of its directors, executive
officers or affiliates which are required to be disclosed pursuant to the rules
and regulations of the Securities and Exchange Commission.
9
<PAGE>
The following table provides information as of May 15, 1996, with
respect to each of the Company's present directors and executive officers.
Served as
Officer
or Director
of the
Name Age Position Company Since
- ---- --- -------- -------------
William Franzblau 42 Executive Vice 1993
President, and Chief
Operating Officer
& Director
Brian Cooper 31 Vice President of 1993
Finance
Bob Bejan 36 Director 1993
Myron Hyman 56 Director 1994
Lawrence Kuppin 47 Director 1986
Robert Rehme 60 Director 1986
Officers of the Company are elected annually by the Board of
Directors.
The Board of Directors of the Company held seven meetings during the
fiscal year ended December 31, 1995, and all action taken by the Board of
Directors was done by telephone conference.
The Board of Directors has an Audit Committee which provides the
opportunity for direct contact between the Company's independent accountants and
the Board. The Audit Committee meets at least once a year, and as often
thereafter as necessary, to review the effectiveness of the auditors during the
annual audit, to review the adequacy of financial statement disclosures, to
discuss the Company's internal control policies and procedures and to consider
and recommend the selection of the Company's independent accountants. During
1995, the Audit Committee met once. The members of the Audit Committee are
Messrs. Franzblau and Hyman.
The Board of Directors also has a Compensation Committee which
provides recommendations to the Board regarding compensation programs of the
Company. The current member of the Compensation Committee is Mr. Hyman. During
1995, the
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Compensation Committee met once. The Board of Directors does not have
a Nominating Committee.
8. Certain Information Concerning the Company.
------------------------------------------
The authorized capital stock of the Company consists of 10,000,000
shares of common stock, $.01 par value per share, of which 4,327,500 shares are
issued and outstanding (without giving effect to the Reorganization Agreement
and 2,000,000 shares of the Preferred Stock, $.01 par value per share, none of
which are outstanding).
The Board of Directors is comprised of only one class. At each annual
meeting of stockholders, the entire class of directors is elected to serve for a
one year term. The term of office of the directors will expire at the next
Annual Stockholders' Meeting. The Board of Directors is expected to be
comprised of four members immediately after the Closing.
9. Compensation of Officers and Directors.
--------------------------------------
The Company currently has two officers, William Franzblau serving as
Executive Vice President and Chief Operating Officer, and Brian Cooper, serving
as Chief Financial Officer. Since October 1995, at the request of the Board of
Directors, these officers, including David Goret serving as General Counsel who
subsequently resigned in February 1996, were performing services for the Company
while foregoing any compensation. Prior to curtailing its operations, the
Company had entered into employment contracts with all of its executives that
were to provide annual compensation totaling $660,000 in 1995 and $380,000 in
1996. Due to the lack of financial resources of the Company, certain officers
have agreed to allow the amounts due under such agreements to accrue until there
is a settlement or judgment from its litigation claims against Sony while other
officers have rescinded their agreements.
On August 9, 1995, Bob Bejan, the Company's President and Chief
Executive Officer, resigned. William Franzblau, the Company's then Executive
Vice President and Chief Operating Officer, assumed the duties of the office
previously held by Mr. Bejan. Mr. Bejan was paid $86,000 in 1995. Mr.
Franzblau was paid $105,000 for the year ended December 31, 1995. Other than
Mr. Franzblau, no officer of the Company received $100,000 or more in
compensation for 1995. In 1995, no stock options were granted to or exercised
by any officer of the Company.
10. Certain Information Concerning Security Ownership of Certain
-------------------------------------------------------------
Beneficial Owners and Management.
- --------------------------------
The following table sets forth certain information, as of May 15,
1996, with respect to the beneficial ownership of the
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<PAGE>
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
present director; (iii) each executive officer referred to in Item 7 and (iv)
all present directors and present executive officers of the Company as a group.
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 May 15, 1996 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 constitutes an
admission of beneficial ownership of those shares.
No. of Shares
Beneficially Percent
Name of Shareholder Owned of Class
- ------------------- ------------- --------
Lawrence L. Kuppin(2) 670,311 14.5%
c/o Fifth Avenue Entertainment
9615 Brighton way
Beverly Hills, CA 90210
Bob Bejan(3) 452,612 9.8%
c/o Interfilm, Inc.
110 Green Street
New York, NY 10012
William Franzblau(3) 452,612 9.8%
c/o Interfilm, Inc.
110 Green Street
New York, NY 10012
Irving Fuller(4) 282,580 6.1%
c/o Fullvest Corp.
8727 West 3rd Street
Los Angeles, CA 90048
Robert G. Rehme 213,437 4.6%
c/o Nuefeld Rehme Productions
5555 Melrose Avenue
Dressing Room Bldg. 112
Los Angeles, CA 90038
Brian T. Cooper(5) 98,153 2.1%
c/o Interfilm, Inc.
110 Green Street
New York, NY 10012
12
<PAGE>
Myron A. Hyman -- --
Hyman, Levy & Fruendlich, L.L.P.
501 Madison Avenue, 19th Fl.
New York, NY 10022
All present Executive Officers &
Directors as a Group (6 persons) 1,887,125
(1) For purposes of calculating percentage ownership, the total number of
outstanding shares includes 308,611 shares of Common Stock issuable upon
exercise of warrants held by certain exhibitors of Interfilm products.
This table assumes no exercise of any convertible option on outstanding
convertible notes, option, or stock purchase warrants, except as to the
person set forth. 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) Includes 670,311 shares of Common Stock owned by Vivaldi Ltd. Mr. Kuppin
is the general partner of Vivaldi Ltd.
(3) Includes 57,000 shares of Common Stock for which the holder thereof was
granted the option to purchase pursuant to the Company's 1993 Equity
Incentive Plan.
(4) Includes 282,580 shares of Common Stock owned by the Fuller Family Trust of
which Irving Fuller and Bonnie Fuller, Mr. Fuller's wife, are trustees.
(5) Includes 14,250 shares of Common Stock for which the holder thereof was
granted the option to purchase pursuant to the Company's 1993 Equity
Incentive Plan.
11. Certain Relationships and Related Transactions.
----------------------------------------------
In connection with the restructuring of certain notes dated August 19,
1993 to two of the Company's stockholders, Irving Fuller (a 5% stockholder) and
Paul Selwyn, in the original aggregate amount of $330,000, Messrs. Fuller and
Selwyn will receive the aggregate amount of $264,000 if the Limited Partnership
receives payment of
13
<PAGE>
not less than $3 million as a result of a settlement or judgment of the Sony
----
Litigation (see Item 5) and/or from the sale or licensing of products. In the
event that the Limited Partnership receives payment of less than $3 million, the
amount due will be reduced by a factor which is equal to 1 minus a fraction, the
numerator of which is the actual payment received and the denominator of which
is $3 million.
During the year, the Company retained both Marshall, O'Toole,
Gerstein, Murray & Borun, of which Allen H. Gerstein, a director of the Company,
is a partner, and Hyman, Levy & Fruendlich, L.L.P., of which Myron A. Hyman, a
director of the Company, is a partner, to provide legal services on behalf of
the Company.
12. Compliance with Section 16(a) of the Exchange Act.
-------------------------------------------------
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and certain written
representations, no persons who were either a director, officer, beneficial
owner of more than 10% of the Company's common stock, failed to file on a timely
basis reports required by Section 16(a) of the Exchange Act during the most
recent fiscal year.
14
