UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
RED HOT CONCEPTS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment
of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(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):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
$125.00
[ ] 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:
<PAGE>
RED HOT CONCEPTS, INC.
6701 DEMOCRACY BOULEVARD
SUITE 300
BETHESDA, MARYLAND 20817
(301) 493-4553
NOVEMBER 3, 1997
Dear Shareholder:
We invite you to attend a special meeting of the shareholders (the
"Special Meeting") of Red Hot Concepts, Inc. to be held at the offices of Reed
Smith Shaw & McClay at 1301 K Street, N.W., Suite 1100 - East Tower, Washington,
DC on November 25, 1997 at 10:00 a.m..
The Special Meeting is being held for the purpose of obtaining
Shareholder approval to amend the Company's Certificate of Incorporation to
effectuate a Reverse Stock split of the Company's Common Stock.
The enclosed Notice of Special Meeting and Proxy Statement describe the
formal business to be transacted at the Special Meeting.
YOUR VOTE IS IMPORTANT. On behalf of the Board of Directors, we urge
you to sign, date and return the enclosed proxy as soon as possible, even if you
currently plan to attend the Special Meeting. This will not prevent you from
voting in person, but will assure that your vote is counted if you are unable to
attend the Special Meeting.
If you have any questions, please call the Company's Secretary, H.
Michael Bush, or me at (301) 493-4553.
Thank you for your participation and continuing support.
Sincerely,
Colin Halpern
Chairman of the Board and President
<PAGE>
RED HOT CONCEPTS, INC.
6701 DEMOCRACY BOULEVARD
SUITE 300
BETHESDA, MARYLAND 20817
(301) 493-4553
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NOTICE OF SPECIAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON NOVEMBER 25, 1997
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NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of Red Hot Concepts, Inc. (the "Company") will be held on
November 25, 1997 at 10:00 a.m., at the offices of Reed Smith Shaw & McClay at
1301 K Street, N.W., Suite 1100 - East Tower, Washington, DC for the following
purposes:
(1) To amend the Company's Certificate of Incorporation to effect a one
(1) for three (3) reverse stock split of the Company's Common Stock;
and
(2) To transact other business as may properly come before the Special
Meeting or any adjournments thereof.
Pursuant to the Bylaws, the Board of Directors has fixed the close of
business on October 15, 1997 as the record date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting. Only
holders of Common Stock of record at the close of business on that date will be
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof.
In the event that there are not sufficient votes to approve any one or
more of the foregoing proposals at the time of the Special Meeting, the Special
Meeting may be adjourned in order to permit further solicitation of proxies by
the Company.
You are requested to fill in and sign the enclosed form of proxy which
is solicited by the Board of Directors and mail it in the enclosed envelope. The
proxy will not be used if you attend and choose to vote in person at the Special
Meeting.
By Order of the Board of Directors
H. Michael Bush
Secretary
Bethesda, Maryland
November 3, 1997
- ------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, PLEASE SIGN, DATE, AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
RED HOT CONCEPTS, INC.
6701 DEMOCRACY BOULEVARD
SUITE 300
BETHESDA, MARYLAND 20817
(301) 493-4553
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PROXY STATEMENT
SPECIAL MEETING OF THE SHAREHOLDERS
NOVEMBER 25, 1997
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SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished to shareholders of Red Hot Concepts,
Inc. ("Red Hot" or the "Company") in connection with the solicitation by the
Board of Directors of Red Hot of proxies to be used at the special meeting of
the shareholders (the "Special Meeting"), to be held November 25, 1997 at 10:00
a.m., at the offices of Reed Smith Shaw & McClay ("RSSM"), 1301 K Street, N.W.,
Suite 1100 - East Tower, Washington, DC and at any adjournments thereof. It is
anticipated that this Proxy Statement will be mailed to shareholders on or about
November 3, 1997.
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR PROPOSAL 1 TO APPROVE AN
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A ONE (1) FOR
THREE (3) REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK. Proxies marked as
abstentions and shares held in street name which have been designated by brokers
on proxies as not voted will not be counted as votes cast. Such proxies will be
counted for purposes of determining a quorum at the Special Meeting. Except for
procedural matters incident to the conduct of the Special Meeting, the Company
does not know of any other matters that are to come before the Special Meeting.
If any other matters are properly brought before the Special Meeting, the
persons named in the accompanying proxy will vote the shares represented by such
proxies on such matters as determined by a majority of the Board of Directors.
The presence of a shareholder at the Special Meeting will not
automatically revoke such shareholder's proxy. However, shareholders may revoke
a proxy at any time prior to its exercise by filing with the Secretary of the
Company, H. Michael Bush, a written notice of revocation, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Special
Meeting and voting in person.
The cost of soliciting proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, the Company through its
directors, officers and regular employees, may also solicit proxies personally
or by telephone or telegraph.
The Board of Directors has fixed the close of business on October 15,
1997 as the record date for determination of shareholders entitled to vote at
the Special Meeting. At the close of business on the record date, the Company
had approximately 10,262,347 shares of Common Stock outstanding and entitled to
vote. Each share entitles its owner to one vote on all matters. The presence, in
person or by proxy, of at least a majority of the total number of outstanding
shares of Common Stock is necessary to constitute a quorum at the Special
Meeting.
OWNERSHIP OF EQUITY SECURITIES
The table below sets forth certain information as of October 15, 1997,
the record date, regarding the beneficial ownership, as defined in regulations
of the Securities and Exchange Commission, of Common Stock of (i) each person
who is known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director of the
Company, and (iii) all directors and executive officers as a group. On October
15, 1997, there were 10,262,347 shares of the Company's Common Stock
outstanding. Unless otherwise specified, the named beneficial owner has sole
voting and investment power. The information in the table below was furnished by
the persons listed. "Beneficial Ownership" as used herein has been determined in
accordance with the rules and regulations of the Securities and Exchange
Commission and is not to be construed as a representation that any of such
shares are in fact beneficially owned by any person.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Names and Address of Amount and Nature of Percentage of Class
Beneficial Owner Beneficial Ownership
Woodland Limited Partnership (1) 3,737,500 36%
1301 K Street, N.W.
Washington, DC 20005
Colin Halpern -0- -0-
Melvin F. Lazar 15,000 (2) *
Robert P. Flack 15,000 (2) *
All directors and executive 60,000 (2) *
officers as a group (4 persons)
</TABLE>
- -----------------------------
* Less than 1%
(1) Woodland Group is the General Partner of Woodland Limited Partnership.
Woodland Group is owned one-third by Mr. Jay Halpern, one-third by Ms.
Nancy Gillon and one-third by Mrs. Gail Halpern. Gail Halpern is the wife
of Colin Halpern. Jay Halpern and Nancy Gillon are the children of Gail and
Colin Halpern. By reason of their indirect ownership of 100% of Woodland
Limited Partnership, Mr. Halpern, Ms. Gillon and Mrs. Halpern may be deemed
to have a beneficial interest in the shares owned by Woodland Limited
Partnership. Messrs. Halpern, Ms. Gillon and Mrs. Halpern disclaim
beneficial ownership of such securities.
(2) Represents options to purchase shares of Common Stock exercisable within 60
days of September 15, 1997.
PROPOSAL I
APPROVAL OF AMENDMENT OF CERTIFICATE OF INCORPORATION
TO EFFECT REVERSE SPLIT OF COMMON STOCK
The Board of Directors has approved and is proposing to the
shareholders a reverse stock split through which holders of the Company's Common
Stock would receive one (1) share of new Common Stock in exchange for each three
(3) shares of Common Stock owned.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to effect a one (1) for three (3) reverse stock
split (the "Reverse Stock Split") of the Company's Common Stock.
To effectuate the Reverse Stock Split, the Company is required to amend
its Certificate of Incorporation. Shareholders are being asked to approve the
Amendment to the Company's Certificate of Incorporation (the "Certificate
Amendment"), a copy of which is attached hereto as Exhibit A. If the Certificate
Amendment is approved by the shareholders, each three (3) shares of Common Stock
(the "Old Common Stock") outstanding on the Effective Date (as defined below)
will be converted automatically into one share of new Common Stock (the "New
Common Stock"). To avoid the existence of fractional shares of New Common Stock,
shareholders who would otherwise be entitled to receive fractional shares of New
Common Stock shall receive cash for the value of such fractional shares. See
"Exchange of Stock Certificates" below. The effective date of the Reverse Stock
Split (the "Effective Date") will be the date on which the Amendment is filed
with the Secretary of State of Delaware which is anticipated to be as soon as
practicable following the date of the Special Meeting.
The Board of Directors of the Company believes that the Reverse Stock
Split is in the best interests of both the Company and its shareholders, and has
unanimously approved the Certificate Amendment. The Board of Directors reserves
the right, notwithstanding shareholder approval and without further action by
the shareholders, to decide not to proceed with the Reverse Stock Split, if, at
any time prior to its effectiveness, it determines, in its sole discretion, that
it is no longer in the best interests of the Company and its shareholders.
<PAGE>
Effect of Reverse Stock Split
The principal effect of the Reverse Stock Split will be to reduce the
number of outstanding shares of Common Stock from 10,262,347 shares to
approximately 3,420,782 shares. The proposed Reverse Stock Split would not
affect any shareholder's proportionate equity interest in the Company except as
may result from the provisions for the elimination of fractional shares as
described below. The relative rights and preferences of the New Common Stock
will be identical to the relative rights and preferences of the Old Common Stock
In order that the Company may avoid the expense and inconvenience of
issuing and transferring fractional shares of New Common Stock, shareholders who
would otherwise be entitled to receive a fractional share of New Common Stock
(the "Fractional Shareholders") shall receive payment in cash in lieu of
receiving a fractional share of New Common Stock. See "Exchange of Stock
Certificates."
The following table illustrates the principal effects of the Reverse
Stock Split of the Company's Common Stock on the capitalization of the Company
(without giving effect to any adjustments for fractional shares):
<TABLE>
<CAPTION>
Number of Shares as of
October 15, 1997
Prior to Reverse Stock Split After Reverse Stock Split
<S> <C> <C>
Authorized
Preferred Stock 100,000 100,000
Common Stock 19,900,000 19,900,000
Outstanding
Preferred Stock 100,000 100,000
Common Stock
Outstanding 10,262,347 3,420,782
Issuable upon exercise of Options and 2,240,194 746,731
Warrants 12,502,541 4,167,513
Total
Prior to Reverse Stock Split After Reverse Stock Split
Shareholders' equity as of June 29, 1997 $ 500,066 $ 500,066
Shareholders' equity per share as of June 29, 1997 $ .049 $ .146
Net loss for fiscal year ended December 29, 1996 $ 6,294,829 $ 6,294,829
Net loss per share for fiscal year ended December 29, $ 0.91 $ 2.73
1996
(based on weighted average number of shares
outstanding of 6,929,929 and
2,309,976, respectively)
</TABLE>
<PAGE>
Background and Reasons for the Proposal
The Board of Directors believes that the Reverse Stock Split is
beneficial to the Company and the shareholders. The principal reasons for the
Reverse Stock Split are to aid the Company in remaining eligible for listing on
the NASDAQ SmallCap Market (the "SmallCap Market"), to attempt to enhance
investor interest in the Common Stock and to attempt to help the investment
community realize the underlying value of the Common Stock.
In June, 1997, the Company received a notice from the Nasdaq Stock
Market, Inc. that the Company's Common Stock was not in compliance with the
SmallCap Market minimum bid requirement because the Company's Common Stock had
failed to maintain a closing bid price greater than or equal to $1.00. Nasdaq
SmallCap Market listing criteria requires that for continued listing, all
securities, except warrants and rights, must maintain a minimum bid price of
$1.00. The Nasdaq Stock Market, Inc. gave the Company 90 days to demonstrate
compliance with the $1.00 minimum bid price or adopt a plan to achieve
compliance, otherwise the Company's Common Stock would be delisted.
As of the close of trading on October 15, 1997, the bid price for the
Company's Common Stock was $[1-1/16]. The proposed Reverse Stock Split is
intended to raise the trading price of the Company's stock in order to ensure
that the Company's stock will continue to trade at a price at or above the
Nasdaq Stock Market's minimum bid requirement.
The Board of Directors believes that the decrease in the number of
shares of the Company's Common Stock outstanding as a consequence of the Reverse
Stock Split and the resulting anticipated corresponding increased price level
will result in greater interest in the Company's Common Stock by the financial
community and the investing public than if the Reverse Stock Split were not
effected. The Board of Directors believes that the relatively low share price of
the Common Stock, when compared with the market prices of the common stock of
publicly held companies in the same or comparable industries, impairs the
marketability of the Common Stock and creates a negative impression of the
Company. There can be no assurance, however, that the financial community and/or
public investors will show greater interest in the Company's Common Stock or
that the market price of the Company's Common Stock immediately after
effectiveness of the Reverse Stock Split will increase. Moreover, if the stock
price does increase, there can be no assurance that such increase can be
maintained for any period of time, or such market price will approximate three
(3) times the market price of the stock before the Reverse Stock Split. In fact,
if the market price of the Company's Common Stock after the Reverse Stock Split
is not three (3) times the market price of the stock prior to the Reverse Stock
Split, the value of the Company's Common Stock in the hands of the Shareholders
will have been reduced as a result of the Reverse Stock Split.
In the event that the shareholders fail to approve the Reverse Stock
Split, it is uncertain whether the Company's Common Stock will trade at a price
above $1.00 per share. Since maintaining a minimum bid price of $1.00 per share
is a requirement of the Nasdaq Stock Market for the inclusion of the Company's
Common Stock as a SmallCap Market security, the failure to satisfy this
requirement will cause the Common Stock to be removed from the Nasdaq SmallCap
Market. In such an event, the Company's Common Stock would be delisted from the
SmallCap Market and sales of the Company's Common Stock would not be reported on
the Nasdaq Stock Market. As a result, sales of the Company's Stock would likely
only be reported in the National Daily Quotation Service published by the
National Quotation Bureau, Inc. and certain electronic quotation services and
would not be readily available in newspapers. To the extent that no sales of the
Company's stock occur, no listing would be published by the National Quotation
Bureau, Inc.
<PAGE>
The Company is not aware of any current efforts to accumulate Common
Stock or obtain control of the Company, and the Reverse Stock Split is not
intended to be an anti-takeover device. The Reverse Stock Split is being
proposed with a view toward enhancing marketability of the Company's Common
Stock by moving the price into a range more acceptable to the investment
community.
Execution and Consequences of Reverse Stock Split
Exchange of Stock Certificates
If the proposal to implement the Reverse Stock Split is adopted,
shareholders will be required to exchange their stock certificates for new
certificates representing the shares of New Common Stock. Shareholders of record
on the Effective Date will be furnished the necessary materials and instructions
for the surrender and exchange of share certificates at the appropriate time by
the Company's Transfer Agent (the "Transfer Agent"). Shareholders will not have
to pay a transfer fee or other fee in connection with the exchange of
certificates.
Shareholders should not submit any certificates until requested to do so.
As soon as practicable after the Effective Date, the Transfer Agent
will send a letter of transmittal to each shareholder advising such holder of
the procedure for surrendering stock certificates in exchange for new
certificates representing the ownership of New Common Stock.
Payment for Fractional Shares
No scrip or fractional certificates will be issued in the Reverse Stock
Split. Instead, shareholders who would be entitled to receive fractional shares
because they hold a number of shares not evenly divisible by three will be
entitled to receive a cash payment in lieu thereof at a price equal to the fair
market value of the stock as determined by the Board on the effective date of
the Reverse Stock Split. The ownership of a fractional interest will not give
the holder thereof any voting, dividend or other rights except to receive
payment therefor as described herein.
Shareholders should be aware that, under the escheat laws of the
various jurisdictions where shareholders reside, where the Company is domiciled
and where funds will be deposited, sums due for fractional interests that are
not timely claimed after the effective date of the Reverse Stock Split may be
required to be paid to the designated agent for each such jurisdiction, unless
correspondence has been received by the Company or its transfer agent, as the
case may be, concerning ownership of such funds within the time permitted in
such jurisdictions. Thereafter, shareholders otherwise entitled to receive such
funds will have to seek to obtain them directly from the state to which they are
paid.
Certain Federal Income Tax Consequences
The following description of federal income tax consequences of the
Reverse Stock Split is based on the Internal Revenue Code, the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. This discussion is for general information only and does not address
all the tax consequences that may be relevant to a particular shareholder (such
as non-resident aliens, brokers-dealers or insurance companies). Furthermore, no
foreign, state or local tax consequences are discussed herein. Accordingly,
shareholders are urged to consult their own tax advisors to determine the
specific tax consequences of the Reverse Stock Split to them.
<PAGE>
The exchange of shares of stock for shares of post-split stock will not
result in recognition of gain or loss (except in the case of cash received for
fractional shares as described below). The holding period of the shares of
post-split stock will include the shareholder's holding period for the shares of
stock exchanged therefor, reduced by the tax basis allocable to the receipt of
cash in lieu of fractional shares.
A shareholder who receives cash in lieu of fractional shares will be
treated as if the Company has issued fractional shares to him or her and then
immediately redeemed them for cash. Such shareholder should generally recognize
gain or loss, as the case may be, measured by the difference between the amount
of cash received and the basis of such shareholder's pre-split stock allocable
to such fractional shares, and such fractional shares actually been issued. Such
gain or loss will be capital gain or loss (if such stock was held as a capital
asset), and any such capital gain or loss will generally be long-term capital
gain or loss to the extent such shareholder's holding period for his or her
stock exceeds 12 months.
Vote Required
Approval of the Reverse Stock Split and adoption of the Certificate
Amendment require the affirmative vote of the holders of not less than a
majority of the shares represented and voted at the Special Meeting. Abstentions
and broker non-votes will be counted as votes against adoption of the
Certificate Amendment. Any shareholder entitled to vote may vote part of his or
her shares in favor of the proposed Certificate Amendment and refrain from
voting shares against the proposed Amendment. In such a case, the shareholder
must specify the number of shares which he or she is voting affirmatively or
else it will be conclusively presumed that such shareholder intended to vote all
of his or her shares in favor of the proposed Certificate Amendment. The Board
of Directors unanimously recommends that shareholders vote "FOR" adoption of the
proposal.
Proposals of Shareholders
Any proposal which a shareholder intends to present at the Company's
1998 Annual Meeting of Shareholders must be received by the Company no later
than December 15,1997 in order to be included in the Company's proxy Statement
and form of proxy relating to that meeting.
By order of the Board of Directors
H. Michael Bush
Secretary
Bethesda, Md
November 3, 1997
<PAGE>
RED HOT CONCEPTS, INC.
PROXY
FOR THE HOLDERS OF COMMON SHARES THIS
PROXY IS SOLICITED ON BEHALF OF RED HOT CONCEPTS, INC.
SPECIAL MEETING TO BE HELD ON NOVEMBER 25, 1997 AT 10:00 A.M.
The undersigned shareholder of Red Hot Concepts, Inc. (the "Company") hereby
appoints Colin Halpern and Melvin F. Lazar, as Proxy to vote all shares of the
undersigned at said Special Meeting of Shareholders and at any adjournments
thereof, with like effect and as if the undersigned were personally present and
voting, upon the following matters:
1. TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A ONE (1) FOR
THREE (3) REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK:
AGAINST ( ) FOR ( ) ABSTAIN ( )
2. Such other matters as may properly come before the meeting at the discretion
of proxy holders.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1.
Dated this ____ day of _____________, 1997
------------------------------------------
Signature of Shareholder
------------------------------------------
Signature of Shareholder
------------------------------------------
Please Print Name
------------------------------------------
Please Print Name
Please date and sign exactly as your name or names appear on your stock
certificate. Joint owners should each sign personally. If signing in any
fiduciary or representative capacity, give full title as such and provide
authorization. For shares held by a corporation, please affix its corporate
seal.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
FORM OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
RESOLVED that Article FOUR of this corporation's Certificate of
Incorporation be amended to read in its entirety as follows:
The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 20,000,000
shares of capital stock, with a par value of $.01 per share. The
Board of Directors is hereby granted the authority to fix by
resolution the designations, voting powers, preferences and
relative participation, optional and other special rights of each
class of stock.
Each three (3) shares of Common Stock of the Corporation issued
and outstanding immediately prior to the close of business on ,
1997, that being the time when the amendment of this Article FOUR
of the Certificate of Incorporation shall have become effective,
shall be combined and changed and converted into one fully paid
and nonassessable share of Common Stock, par value $.01 per
share, of the Corporation.
