prer14c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14C
(RULE 14C-101)
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO
SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
Check the appropriate box:
þ Preliminary
Information Statement.
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2)).
o Definitive
Information Statement.
AVERION INTERNATIONAL CORP.
(Name of Registrant As Specified In
Its Charter)
Payment of Filing Fee (Check the Appropriate Box):
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No fee required
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Fee computed on table below per Exchange Act
Rules 14c-5(g)
and 0-11
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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.
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Amount previously paid:
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Form, schedule or registration statement No.:
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Averion International Corp.
225 Turnpike Road
Southborough, Massachusetts 01772
INFORMATION
STATEMENT
NOTICE OF
ACTION TAKEN BY
WRITTEN CONSENT OF MAJORITY STOCKHOLDERS
WE ARE
NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THIS TRANSACTION, PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
IMPORTANT
NOTICE REGARDING INTERNET AVAILABILITY OF INFORMATION
STATEMENT.
AS
PERMITTED BY RULES PROMULGATED BY THE SEC, WE HAVE ELECTED
TO PROVIDE ACCESS TO THIS INFORMATION STATEMENT BOTH BY SENDING
YOU A COPY OF THIS INFORMATION STATEMENT AND BY NOTIFYING YOU OF
THE AVAILABILITY OF THIS INFORMATION STATEMENT ON THE INTERNET.
A COPY OF THIS INFORMATION STATEMENT IS AVAILABLE TO YOU FREE OF
CHARGE AT: HTTP://WWW.AVERIONINTL.COM/ UNDER THE HEADING
CORPORATE GOVERNANCE.
THE
PROPOSAL ACTED UPON BY WRITTEN CONSENT OF A MAJORITY OF THE
STOCKHOLDERS OF THE COMPANY WAS FOR THE APPROVAL OF AN AMENDMENT
TO OUR CERTIFICATE OF INCORPORATION, AS AMENDED TO DATE, TO
EFFECT THE REVERSE/FORWARD STOCK SPLIT, CONSISTING OF THE
REVERSE SPLIT IN A RATIO OF TWENTY THOUSAND FIVE HUNDRED
(20,500) SHARES TO ONE (1) SHARE, FOLLOWED IMMEDIATELY
THEREAFTER BY THE FORWARD SPLIT, PURSUANT TO WHICH EACH SHARE OF
COMMON STOCK OUTSTANDING UPON CONSUMMATION OF THE REVERSE SPLIT
WILL BE CONVERTED AT A RATIO OF ONE (1) SHARE TO TWENTY
THOUSAND FIVE HUNDRED (20,500) SHARES OF OUR COMMON
STOCK.
THESE
CORPORATE ACTIONS WILL BE EFFECTED APPROXIMATELY 20 CALENDAR
DAYS AFTER THE DATE OF THE INITIAL MAILING OF THIS INFORMATION
STATEMENT, OR ON OR
ABOUT ,
2009. WE ARE NOT
SOLICITING YOUR PROXY OR CONSENT, BUT ARE FURNISHING THIS
INFORMATION STATEMENT TO YOU PURSUANT TO
RULE 14C-2
PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
i
General
Averion International Corp. (the Company,
we, our or
us) is providing this Information Statement
(the Information Statement) to you to inform
you that stockholders holding a majority in interest of our
voting stock have adopted resolutions by written consent that:
Approve an amendment to our Certificate of Incorporation, as
amended to date (the Certificate of
Amendment), to effect a reverse stock split in a ratio
of twenty thousand five hundred (20,500) shares to one
(1) share (the Reverse Split), followed
immediately thereafter by a forward stock split, pursuant to
which each share of common stock outstanding upon consummation
of the Reverse Split will be converted at a ratio of one
(1) share to twenty thousand five hundred (20,500) shares
of our common stock (the Forward Split, together
with the Reverse Split, is referred to in this Information
Statement as the Reverse/Forward Stock Split).
Stockholders owning fewer than twenty thousand five hundred
(20,500) shares of common stock immediately prior to the
effective time of the Reverse Split, whose shares of common
stock would be converted into less than one (1) share in
the Reverse Split, will instead be converted solely into the
right to receive a cash payment of One Cent ($0.01) per share
owned by such stockholders immediately prior to the Reverse
Split. If a stockholder holds twenty thousand five hundred
(20,500) or more shares of common stock immediately prior to the
effective time of the Reverse Split, any fractional shares in
such account resulting from the Reverse Split will not be cashed
out and the total number of shares held by such stockholder will
not change as a result of the Reverse/Forward Stock Split.
The intended effect of the Reverse/Forward Stock Split is to
reduce the number of holders of our common stock to fewer than
three hundred (300) so that we will be eligible to
terminate the public registration of our common stock under the
Securities Exchange Act of 1934, as amended (the
Exchange Act). Provided that the
Reverse/Forward Stock Split has the intended effect, we will
file to deregister our common stock with the Securities and
Exchange Commission (the SEC) and to
terminate the quotation of our common stock on the
Over-the-Counter
Bulletin Board (the OTCBB). At such
time, we will no longer be required to file periodic reports
with the SEC.
The Forward Split, which will occur immediately following the
Reverse Split, is intended to benefit the Company by:
(i) restoring continuing stockholders to their original
position prior to the Reverse Split; (ii) eliminating the
need to replace stock certificates or cash out fractional shares
held by continuing stockholders; and (iii) avoiding the
need to adjust the exercise price of any awards previously
granted under the Companys stock option plans.
We expect the Certificate of Amendment to be filed with the
Secretary of State of the State of Delaware approximately twenty
(20) calendar days after the date this Information
Statement is first mailed to our stockholders and will become
effective as of the date set forth therein (the
Effective Date). As a result of the
Reverse/Forward Stock Split, as described in more detail in this
Information Statement, stockholders who own fewer than twenty
thousand five hundred (20,500) shares of our common stock will
have their shares cashed out based upon a price of One Cent
($0.01) per pre-Reverse Split share.
We have established the close of business on August 27,
2009 as the record date (Record Date) related
to the foregoing. Therefore, we are mailing this Information
Statement to our stockholders of record as of the close of
business on the Record Date. We intend to mail this Information
Statement to our security holders no later
than ,
2009.
As soon as practicable after the Effective Date, we will send
all stockholders with stock certificates representing the right
to receive cash payments a letter of transmittal to be used to
transmit common stock certificates to American Stock
Transfer & Trust Co. (the Exchange
Agent). Upon proper completion and execution of the
letter of transmittal, and the return of the letter of
transmittal and accompanying stock certificate(s) to the
Exchange Agent, each stockholder entitled to receive payment
will receive a check for such stockholders shares.
Stockholders should allow for approximately five
(5) business days after mailing for the Exchange Agent to
receive the letter of transmittal and accompanying stock
certificate. The Exchange Agent will send a check for such
stockholders stock within approximately ten
(10) business days of receiving
ii
such letter of transmittal and accompanying stock certificate.
In the event we are unable to locate certain stockholders or if
a stockholder fails properly to complete, execute and return the
letter of transmittal and accompanying stock certificate to the
Exchange Agent, any funds payable to such holders pursuant to
the Reverse/Forward Stock Split will be held in escrow until a
proper claim is made, subject to applicable abandoned property
laws.
This Information Statement is being mailed to you for
information purposes only. No action is requested or required on
your part.
Stockholders
Entitled to Vote
Our Board of Directors (the Board) declared
August 27, 2009, the official Record Date with respect to
the foregoing action. Holders of shares of our common stock at
the close of business on the Record Date were entitled to vote
on the actions set forth above. On the Record Date, we had
approximately 639,257,754 shares of common stock issued and
outstanding. Each stockholder was entitled to one (1) vote
for each share of common stock held by such stockholder.
Results
of the Vote
As of the Record Date, holders of a majority of our common stock
had executed a written consent in favor of the actions described
above. The foregoing action was approved by
453,299,776 shares, or approximately 71% of all shares
entitled to vote thereon. This consent satisfies the stockholder
approval requirement for the proposed actions.
Information
Statement
No action is required by you. As set forth above, we have
obtained the required stockholder approval. The accompanying
Information Statement is furnished only to inform you of the
corporate action described above before it takes effect in
accordance with
Rule 14c-2
promulgated under the Exchange Act. Pursuant to
Rule 14c-2,
the foregoing actions will not take effect until a date that is
at least twenty (20) calendar days after the date on which
this Information Statement has been mailed to you. No other
stockholder approval is required.
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TABLE OF
CONTENTS
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2
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2
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9
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43
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47
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48
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57
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57
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57
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58
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58
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58
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A-1
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B-1
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C-1
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iv
FORWARD-LOOKING
STATEMENTS
This Information Statement contains forward-looking statements.
The words believe, expect,
anticipate, estimate,
project, intend, plan and
similar expressions identify forward-looking statements, which
speak only as of the date of this Information Statement. The
Information Statement also contains projections under
Special Factors-Fairness of the Reverse/Forward Stock
Split to Stockholders. These projections are not a
guarantee of performance. They involve risks, uncertainties and
assumptions. We cannot assure you that the projections will be
realized or that the Companys future financial results
will not materially vary from the projections. We do not intend
to update or revise the projections. These projections are also
forward-looking statements. These projections and other
forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified.
Future events and actual results could differ materially from
those made in, contemplated by, or underlying the
forward-looking statements. Some of these risks and
uncertainties include, but are not limited to, those discussed
in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and our other
documents filed with the SEC. For these reasons, you should not
place undue reliance on any forward-looking statements included
in this Information Statement. The Company does not assume any
obligation to update or correct forward-looking statement to
reflect subsequent events or actual results. The safe harbor
provisions of the Private Securities Litigations Reform Act of
1995 are not available to statements made in this Information
Statement. In addition, the safe harbor provisions of the
Private Securities Litigations Reform Act of 1995 referenced in
our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008 and our
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009, which are incorporated
by reference into this Information Statement, do not apply to
any forward-looking statements that we make in this Information
Statement in connection with the Reverse/Forward Stock Split.
1
ACTION
NO. 1:
REVERSE/FORWARD
STOCK SPLIT
The following is a summary of the material terms of the proposed
Reverse/Forward Stock Split and the other transactions
contemplated in connection with the Reverse/Forward Stock Split.
The remaining information in this Information Statement contains
a more detailed description of the terms of the proposed
Reverse/Forward Stock Split and related transactions. We
encourage you to read carefully the entire Information Statement.
SUMMARY
OF TERMS OF REVERSE/FORWARD STOCK SPLIT
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Our Board, including all of our independent, non-employee
directors, has authorized, and our stockholders have approved, a
twenty thousand five hundred (20,500) to one (1) Reverse
Split of our common stock, followed immediately thereafter by a
one (1) to twenty thousand five hundred (20,500) Forward
Split of our common stock. See also the information under the
caption Special Factors Structure of the
Reverse/Forward Stock Split on pages
23-24,
Special Factors Fairness of the
Reverse/Forward Stock Split to Stockholders on pages
24-36 in
this Information Statement and Special Factors
Independent Valuation Report by Third Party Valuation
Consultant on pages
27-33 in
this Information Statement.
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Our Board also formed a special committee comprised of the
following independent directors: Alastair McEwan, Robert Tucker
and James Powers (the Special Committee). The
purpose of the Special Committee was to review and, if
determined to be fair, recommend to our full Board a
Reverse/Forward Stock Split ratio and a price per share to be
paid for the shares of our common stock held by stockholders
holding less than twenty thousand five hundred (20,500) shares
that are to be cashed out as a result of the Reverse/Forward
Stock Split.
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The Special Committee recommended to the Board and the Board
authorized a twenty thousand five hundred (20,500) to one
(1) Reverse/Forward Stock Split of our common stock, par
value $0.001 per share, and a price per share of One Cent
($0.01) to be paid for the shares of our common stock held by
stockholders holding less than twenty thousand five hundred
(20,500) shares that are to be cashed out as a result of the
Reverse/Forward Stock Split. Our Board also relied on a third
party independent valuation report from Marshall &
Stevens, Inc.,
and/or its
affiliates (the Valuation Consultant) in
determining the fairness of One Cent ($0.01) per share as a cash
payment per pre-Reverse/Forward Stock Split share; provided,
however, that neither our Board nor our Special Committee
obtained an independent fairness opinion for the Reverse/Forward
Stock Split, nor did the Valuation Consultant render an opinion
as to the fairness of the Reverse/Forward Stock Split. See also
the information under the captions Special
Factors Reasons for and Purposes of the
Reverse/Forward Stock Split on pages 8-10, Special
Factors Fairness of the Reverse/Forward Stock Split
to Stockholders on pages
24-36 in
this Information Statement and Special Factors
Independent Valuation Report by Third Party Valuation
Consultant on pages
27-33 in
this Information Statement.
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Our Board, including all independent, non-employee directors,
determined that the Reverse/Forward Stock Split is fair to and
in the best interests of all of our nonaffiliated stockholders,
including those stockholders holding less than twenty thousand
five hundred (20,500) shares that are to be cashed out as a
result of the Reverse/Forward Stock Split and those who will
retain an equity interest in our Company subsequent to the
Reverse/Forward Stock Split. See also the information under the
caption Special Factors Fairness of the
Reverse/Forward Stock Split to Stockholders on pages
24-36 and
Special Factors Procedural Fairness on
pages 33-35
in this Information Statement.
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Each of ComVest, Philip T. Lavin, Ph.D., James H. McGuire,
Cecilio Rodriguez and Michael Falk, who have each been deemed a
filing person for purposes of
Schedule 13E-3,
have adopted the analysis and conclusions of the Special
Committee and our Board, including the adoption of the analysis
and conclusions of our management, regarding the material
factors upon which it was determined that the Reverse/Forward
Stock Split is procedurally and substantively fair to our
unaffiliated stockholders, both to stockholders who will retain
an equity interest in the Company and those who will not be
continuing stockholders of the Company. See also the information
under the caption Special Factors Fairness
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Determination by ComVest, Philip T. Lavin, Ph.D., James H.
McGuire, Cecilio Rodriguez and Michael Falk on pages
35-36 in
this Information Statement.
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The Certificate of Amendment requires the approval of the
holders of a majority of our outstanding voting securities. The
stockholders that voted to approve the Certificate of Amendment
and Reverse/Forward Stock Split were ComVest Investment Partners
II LLC (ComVest), Philip T. Lavin Ph.D. and
Dr. Gene Resnick. All of the members of our Board and the
following executive officers: Philip T. Lavin Ph.D. our Vice
Chairman and Founder and Dr. Gene Resnick our Chief Medical
Officer and Founder, have voted, or caused to be voted, all
shares which they directly or indirectly control in favor of the
Reverse/Forward Stock Split. Philip T. Lavin, Ph.D. our
Executive Chairman, has voting control over
114,918,159 shares of voting stock, representing
approximately 17.98% of the outstanding shares of voting stock.
Michael Falk, a director, has voting control over
323,829,235 shares of voting stock, representing
approximately 50.60% of the outstanding shares of voting stock,
the majority of which are held by ComVest Investment Partners II
LLC. Although Mr. Falk has voting control over the shares,
he disclaims beneficial ownership of these shares. The shares of
stock beneficially held by our directors and executive officers
represent 71.58% of our total outstanding voting securities. See
also the information under the caption Special
Factors Description of the Reverse/Forward Stock
Split on pages
37-38 in
this Information Statement.
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When the Reverse/Forward Stock Split becomes effective, if you
hold at least twenty thousand five hundred (20,500) shares of
common stock, the number of shares of common stock that you hold
will not change, and you will not be entitled to receive any
cash payments. You will not need to take any action, including
exchanging or returning any existing stock certificates, which
will continue to evidence ownership of the same number of shares
as set forth currently on the face of the certificates. See also
the information under the caption Special
Factors Description of the Reverse/Forward Stock
Split on pages
37-38 in
this Information Statement.
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We presently have approximately eight hundred fifty
(850) stockholders of record of our common stock, of which
approximately seven hundred twenty five (725) stockholders
each own fewer than twenty thousand five hundred (20,500)
shares. In the aggregate, the shares held by these small holders
comprise less than 1% of our outstanding capital stock. When the
Reverse/Forward Stock Split is effected, we believe that
approximately one hundred twenty five (125) stockholders
will remain as holders of our common stock, beneficially owning
100% of the outstanding common stock. Common stockholders, who
now beneficially own approximately 99% of the outstanding common
stock, will beneficially own 100% of the outstanding common
stock after the Reverse/Forward Stock Split. See also the
information under the captions Special Factors
Reasons for and Purposes of the Reverse/Forward Stock
Split on pages 8-10 and Special Factors
Conduct of the Companys Business After the Reverse/Forward
Stock Split on
pages 39-40
in this Information Statement.
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The Reverse/Forward Stock Split will not affect the outstanding
stock options, whether exercisable or unexercisable, granted
under our option plans and holders of options will, following
the Reverse/Forward Stock Split, continue to hold options for
the same number of shares of common stock at the same exercise
prices and other option terms. See also the information under
the caption Special Factors Effect of the
Reverse/Forward Stock Split on Option Holders on
page 17 in this Information Statement.
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The Reverse/Forward Stock Split will not affect the outstanding
warrants to purchase our common stock and holders of warrants
will, following the Reverse/Forward Stock Split, continue to
hold warrants to purchase the same number of shares of common
stock at the same exercise prices and other warrant terms. See
also the information under the caption Special
Factors Effect of the Reverse/Forward Stock Split on
Warrant Holders on page 17 in this Information
Statement.
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The Reverse/Forward Stock Split is not expected to affect our
current business plan or operations, except for the anticipated
cost and management time savings associated with the termination
of our obligations as a public reporting company. See also the
information under the captions Special Factors
Effects of the Reverse/Forward Stock Split on pages
14-16,
Special Factors Financial Effect and
Accounting Consequences of the Reverse/Forward Stock Split
on pages
17-19 and
Special Factors Conduct of the Companys
Business After the Reverse/Forward Stock Split on
pages 39-40
in this Information Statement.
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When the Reverse/Forward Stock Split becomes effective, we will
be able to terminate registration of our securities under
Section 12(g) of the Exchange Act, suspend our duty to file
periodic reports pursuant to Section 15(d) of the Exchange
Act, and terminate the quotation of shares of our common stock
on the OTCBB. Once we terminate registration of our common stock
under Section 12(g) of the Exchange Act, suspend our duty
to file periodic reports pursuant to Section 15(d) of the
Exchange Act and terminate the quotation of our common stock, we
will no longer be obligated to file periodic reports with the
SEC or furnish reports to our stockholders. See also the
information under the captions Special Factors
Reasons for and Purposes of the Reverse/Forward Stock
Split on pages 8-10, Special Factors
Fairness of the Reverse/Forward Stock Split to
Stockholders, on pages
24-36 and
Special Factors Termination of Exchange Act
Registration on page 36 in this Information Statement.
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A stockholder who receives cash in the Reverse/Forward Stock
Split (i.e., a stockholder who owns fewer than twenty thousand
five hundred (20,500) shares of common stock immediately prior
to the Reverse Split), will be treated as having had its shares
redeemed by the Company, which will be a taxable transaction for
federal income tax purposes. The tax treatment of a redemption
of stock is governed by Section 302 of the Internal Revenue
Code of 1986, as amended (the Code) and,
depending on a stockholders situation, will be taxed as
either: (i) a sale or exchange of the redeemed shares, in
which case the stockholder will recognize gain or loss equal to
the difference between the cash payment and the
stockholders tax basis for the redeemed shares; or
(ii) a cash distribution which is treated: (a) first,
as a taxable dividend to the extent of the Companys
accumulated earnings, (b) then, as a tax-free return of
capital to the extent of the stockholders tax basis in the
redeemed shares, and (c) finally, as gain from the sale or
exchange of the redeemed shares. For those stockholders who
retain our common stock immediately after the completion of the
Reverse/Forward Stock Split, you will not recognize any gain or
loss with respect to such shares for federal income tax
purposes. See also the information under the caption
Special Factors Material Federal Income Tax
Consequences of the Reverse/Forward Stock Split on pages
19-23 in
this Information Statement. You are urged to consult with your
own tax advisor regarding the tax consequences of the
Reverse/Forward Stock Split in light of your own particular
circumstances.
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You are not entitled to appraisal rights under either our
governance documents or the Delaware General Corporation Law in
connection with the Reverse/Forward Stock Split. See also the
information under the caption Special Factors
Description of the Reverse/Forward Stock Split on pages
37-38 in
this Information Statement.
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Although the Reverse/Forward Stock Split has been approved by
the requisite number of stockholders, our Board reserves the
right, in its discretion, to abandon the Reverse/Forward Stock
Split prior to the proposed Effective Date if it determines that
abandoning the Reverse/Forward Stock Split is in our best
interests and those of our stockholders. Our Board believes that
it is prudent to recognize that, between the date of this
Information Statement and the date that the Reverse/Forward
Stock Split will become effective, factual circumstances could
possibly change such that it might not be appropriate or
desirable to effect the Reverse/Forward Stock Split at that time
or on the terms currently proposed, such as if we receive an
offer from a third party to acquire the Company that represents
a superior offer to our stockholders, if we experience a
material change in our business or if litigation is initiated
affecting our ability to proceed with the Reverse/Forward Stock
Split. In the event our Board decides to abandon the
Reverse/Forward Stock Split, we will file a Current Report on
Form 8-K and issue a press release announcing the Boards
decision. See also the information under the captions
Special Factors Financing of the
Reverse/Forward Stock Split, on page 39 Special
Factors Structure of the Reverse/Forward Stock
Split on pages 23-24 and Special
Factors Reservation of Rights on page 36
in this Information Statement.
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We have the financial resources to complete the Reverse/Forward
Stock Split, the costs of which we anticipate to be
approximately $27,000 (for the cash payment to be paid for the
shares of our common stock held by stockholders holding less
than twenty thousand five hundred (20,500) shares that are to be
cashed out as a result of the Reverse/Forward Stock Split), plus
$135,000 (for legal fees, accounting fees and certain other fees
incurred in connection with the Reverse/Forward Stock Split).
However, if on the date immediately preceding the Effective
Date, we believe that the cash required to pay for the
Reverse/Forward Stock Split exceeds our reasonable estimate of
the amount of cash necessary to consummate the
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Reverse/Forward Stock Split, our Board reserves the right not to
effect the Reverse/Forward Stock Split. If our Board decides to
withdraw or modify the Reverse/Forward Stock Split, our Board
will notify the stockholders of such decision promptly in
accordance with applicable rules and regulations. See also the
information under the captions Special Factors
Financing of the Reverse/Forward Stock Split on
page 39 and Special Factors Reservation
of Rights on page 36 in this Information Statement.
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ComVest is the controlling stockholder of the Company. In
addition, each of Mr. Falk and Mr. Rodriguez, two of
our board members, are affiliates of ComVest. The material facts
as to each such directors interest are known to or have
been fully disclosed to each of the other members of the
Companys Board. For more detailed information concerning
any conflict of interest of our Board or any filing person with
respect to the Reverse/Forward Stock Split or concerning our
relationship with any of our stockholders, please see also
information under the caption Security Ownership of
Certain Beneficial Owners and Management on pages
46-49,
Certain Relationships and Related Transactions on
pages 45-54,
Special Factors-Effects of the Reverse/Forward Stock
Split on pages
15-17 and
Special Factors-Potential Disadvantages of the
Reverse/Forward Stock Split to Stockholders; Accretion in
Ownership and Control of Certain Stockholders on pages
17-18 in
this Information Statement.
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In addition, the Reverse/Forward Stock Split will have a nominal
effect on the percentage of beneficial ownership of each of our
officers, directors and major stockholders, including ComVest,
Philip T. Lavin, Ph.D., Cecilio Rodriguez and Michael Falk.
For more detailed information concerning the names of our major
stockholders who will remain after the Reverse/Forward Stock
Split, current relationships between those stockholders and the
Company or our affiliates and the number and percentage of
post-split outstanding shares that each such stockholder will
hold after the Reverse/Forward Stock Split, please see also
information under the caption Security Ownership of
Certain Beneficial Owners and Management on pages
46-49,
Certain Relationships and Related Transactions on
pages 45-54,
Special Factors-Effects of the Reverse/Forward Stock
Split on pages
15-17 and
Special Factors-Potential Disadvantages of the
Reverse/Forward Stock Split to Stockholders; Accretion in
Ownership and Control of Certain Stockholders on pages
17-18 in
this Information Statement.
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5
QUESTIONS
AND ANSWERS ABOUT THE REVERSE/FORWARD STOCK SPLIT
The following questions and answers briefly address certain
questions about the Reverse/Forward Stock Split that are not
addressed in the Summary of Terms of Reverse/Forward Stock
Split. They may not include all the information that is
important to you and we urge you to read carefully this entire
Information Statement.
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Q: |
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What are some of the advantages of the Reverse/Forward Stock
Split? |
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A: |
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Our Board believes that the Reverse/Forward Stock Split will
have, among others, the following advantages: |
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because the number of our stockholders will be less
than three hundred (300), we will terminate the registration of
our common stock under Section 12(g) of the Exchange Act,
suspend our duty to file periodic reports pursuant to
Section 15(d) of the Exchange Act and terminate the
quotation of our common stock on the OTCBB, which will eliminate
the significant tangible and intangible costs of being a public
company. Because we would no longer have to incur external
auditor fees, consulting and legal fees related to being a
public company, including expenses related to compliance,
planning, documentation and testing, in preparation for the
internal controls audit imposed by Section 404 of the
Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley
Act), we estimate annual tangible costs savings of
approximately $805,000 (excluding costs to be incurred to comply
with the internal control audit requirements of Section 404
of the Sarbanes-Oxley Act) or $1,210,000 (including costs that
we will ultimately be required to incur in order to comply with
the internal control audit requirements of Section 404 of
the Sarbanes-Oxley Act), in each case before taxes. We may incur
annual audit fees as a private company although the costs of
such services have yet to be determined;
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we will be able to provide greater liquidity for the
relatively large number of stockholders holding fewer than
twenty thousand five hundred (20,500) shares where liquidity has
been limited in the public market;
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we will be able to eliminate the obligation to
publicly disclose sensitive, competitive business information;
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we will be able to achieve the overhead reduction
associated with the Reverse/Forward Stock Split without
negatively affecting our business operations;
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our management will be able to better focus on our
businesss long-term goals and objectives; and
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the Forward Split will allow us to: (i) restore
continuing stockholders to their original position prior to the
Reverse Split; (ii) eliminate the need to replace stock
certificates or cash out fractional shares held by continuing
stockholders; and (iii) avoid the need to adjust the
exercise price of any awards previously granted under the
Companys stock option plans.
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See also the information under the captions Special
Factors Reasons for and Purposes of the
Reverse/Forward Stock Split on pages 8-10, Special
Factors Fairness of the Reverse/Forward Stock Split
to Stockholders on pages
24-36 and
Special Factors Procedural Fairness on
pages 33-35
in this Information Statement. |
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Q: |
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What are some of the disadvantages of the Reverse/Forward
Stock Split? |
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A: |
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Our Board believes that the Reverse/Forward Stock Split will
have, among others, the following disadvantages: |
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stockholders owning less than twenty thousand five
hundred (20,500) shares of common stock will not have an
opportunity to liquidate their shares at a time and for a price
of their choosing; instead, they will be cashed out and will no
longer be a stockholder and will not have the opportunity to
participate in or benefit from any future potential appreciation
in our value;
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the public market for shares of our common stock,
where liquidity has been limited, could be greatly diminished;
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stockholders remaining following the Reverse/Forward
Stock Split will no longer have readily available to them all of
the information regarding our operations and results that is
currently available in our filings with the SEC;
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6
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the elimination of our common stocks trading
market may result in us having less flexibility in attracting
and retaining executives and employees since equity-based
incentives (such as stock options) tend not to be as valuable in
a private company;
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the termination of our Exchange Act registration
will make many of the provisions of the Exchange Act, such as
certain short-swing profit provisions of Section 16, the
proxy solicitation rules under Section 14 and the stock
ownership reporting requirements under Section 13, no
longer applicable to us;
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The Sarbanes-Oxley Act which imposes many additional
rules and regulations on public companies that were designed to
protect investors will no longer be applicable to us;
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we will be less likely to be able to use our shares
to acquire other companies; and
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it will be more difficult for us to access the
public equity markets.
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See also the information under the captions Special
Factors Reasons for and Purposes of the
Reverse/Forward
Stock Split on pages 8-10, Special
Factors Effects of the Reverse/Forward Stock
Split on pages
14-16,
Special Factors Potential Disadvantages of the
Reverse/Forward Stock Split to Stockholders; Accretion in
Ownership and Control of Certain Stockholders on
page 16 and Special Factors Fairness
of the Reverse/Forward Stock Split to Stockholders on
pages 24-36
in this Information Statement. |
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Q: |
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What are some of the reasons for terminating the registration
of our common stock under the Exchange Act? |
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A: |
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Our Board believes that we currently derive no material benefit
from our public company status. In addition to the related
direct financial burden from being a public company, the thin
trading market in our common stock has not provided the desired
level of liquidity to our stockholders nor provided a meaningful
incentive for our key employees. See also the information under
the caption Special Factors Reasons for and
Purposes of the Reverse/Forward Stock Split on pages 8-10
in this Information Statement. |
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Q: |
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What are some of the factors that our Board considered in
approving the Reverse/Forward Stock Split? |
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A: |
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Our Board considered several factors in approving the
Reverse/Forward Stock Split. Significantly, our Board considered
the relative advantages and disadvantages discussed above and
under the captions Special Factors Reasons for
and Purposes of the Reverse/Forward Stock Split on pages
8-10, Special Factors Strategic Alternatives
Considered on page 10, Special
Factors Background and Timing of the Reverse/Forward
Stock Split on pages
11-14 and
Special Factors Effects of the Reverse/Forward
Stock Split on pages
14-16 in
this Information Statement. Our Board also considered other
factors, including: |
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the financial presentations and analyses of
management regarding the Reverse/Forward Stock Split;
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the financial presentations and analyses of
management and the Special Committee regarding the
Reverse/Forward Stock Split and determination of the fair price
per pre-Reverse Split share;
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the Boards discussions and conclusions about
the fairness of the price of One Cent ($0.01) per pre-Reverse
Split share to be paid following the Reverse/Forward Stock Split
to unaffiliated stockholders owning fewer than twenty thousand
five hundred (20,500) shares;
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the recommendation of the Special Committee to the
Board regarding the fairness of the Reverse/Forward Stock Split
to our stockholders;
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the independent valuation report presented by the
Valuation Consultant to the Special Committee;
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the projected tangible and intangible cost savings
to us by terminating our public company status; and
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the benefit of the elimination of our obligations to
publicly disclose sensitive, competitive business information.
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See also the information under the captions Special
Factors Potential Disadvantages of the
Reverse/Forward Stock Split to Stockholders; Accretion in
Ownership and Control of Certain Stockholders on |
7
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page 16, Special Factors Fairness of the
Reverse/Forward Stock Split to Stockholders on pages
24-36 in
this Information Statement and Special
Factors Independent Valuation Report by Third Party
Valuation Consultant on pages
27-33 in
this Information Statement. |
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Q: |
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How was the cash payment price of One Cent ($0.01) per
pre-Reverse Split share determined? |
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A: |
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Our Board determined the cash payment price of $0.01 per share
based on the recommendation of the Special Committee. In
determining the cash payment price of One Cent ($0.01) per
pre-Reverse Split share, our Board relied on: (i) the
financial presentation and analyses of management and the
Special Committee regarding the price per pre-Reverse Split
share, including, without limitation, managements
historical market price analysis and current market price
analysis; and (ii) the independent valuation report
presented by the Valuation Consultant. See also the information
under the caption Special Factors Fairness on
the Reverse Stock Split to Stockholder on pages
24-35 in
this Information Statement. |
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Q: |
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What will the procedure and timing be to receive cash
payments? |
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A: |
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When the Reverse/Forward Stock Split becomes effective, if you
hold fewer than twenty thousand five hundred (20,500) shares of
common stock, you will receive a cash payment of One Cent
($0.01) per pre-Reverse Split share. We are instructing our
Exchange Agent not to cash out a stockholder owning at least
twenty thousand five hundred (20,500) shares in the aggregate
even if such holder holds such shares in multiple accounts each
with less than twenty thousand five hundred (20,500). However,
if you are such a stockholder, in order to ensure that you are
not cashed out, please take action, or instruct your broker to
take action, prior to the Effective Date, to consolidate your
positions into one account. As soon as practicable after the
Effective Date, you will be notified by the Exchange Agent in a
letter of transmittal and asked to surrender your stock
certificates to the Exchange Agent. You should allow for
approximately five (5) business days after mailing for the
Exchange Agent to receive the stock certificates surrendered.
Upon receipt of a properly completed letter of transmittal and
your stock certificates by the Exchange Agent, you will receive
your cash payment within approximately ten (10) business
days. You will not receive any interest on the cash payments
after the Effective Date. See also the information under the
caption Special Factors Description of the
Reverse/Forward Stock Split on pages
37-38 and
Special Factors Exchange of Certificates for Cash
Payment or Shares on pages
38-39 in
this Information Statement. |
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Q: |
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At what prices has the Companys stock traded
recently? |
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A: |
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Our common stock is traded on the OTCBB under the symbol
AVER.OB. Prior to September 22, 2006, our
common stock was quoted under the symbol ITER.OB.
Prior to 2003, there was no trading market in our common stock.
We have set forth below our high and low sales price information
for the periods indicated, as reported by OTCBB. These
quotations reflect inter-dealer prices, without retail
mark-up,
mark-down or commission and may not necessarily represent actual
transactions: |
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High
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Low
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2009
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Quarter ended September 30, 2009
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$
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0.01
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$
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0.0052
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Quarter ended June 30, 2009
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$
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0.02
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$
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0.005
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Quarter ended March 31, 2009
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$
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0.08
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$
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0.02
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2008
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Quarter ended December 31, 2008
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$
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0.05
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$
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0.01
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Quarter ended September 30, 2008
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$
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0.09
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$
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0.02
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Quarter ended June 30, 2008
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$
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0.14
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$
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0.06
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Quarter ended March 31, 2008
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$
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0.13
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$
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0.05
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2007
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Quarter ended December 31, 2007
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$
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0.18
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$
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0.07
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Quarter ended September 30, 2007
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$
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0.18
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$
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0.11
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Quarter ended June 30, 2007
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$
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0.25
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$
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0.09
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Quarter ended March 31, 2007
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$
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0.21
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$
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0.12
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8
We have never paid any dividends on our common stock. We intend
to retain our future earnings, if any, and do not anticipate
paying cash dividends on our common stock in the foreseeable
future. Restrictive debt covenants in our senior secured notes
issued in October 2007, November 2007 and June 2008 preclude us
from declaring dividends or other distributions on our common
stock.
On September 3, 2009, the last trading day prior to the
initial announcement of the Reverse/Forward Stock Split, our
common stocks closing price per share was $0.0086.
On ,
2009, the last practicable trading day prior to the date of this
Information Statement, our common stocks closing bid as
quoted on the OTCBB was $ .
See also the information under the caption Special
Factors Fairness of the Reverse/Forward Stock Split
to Stockholders on pages
24-36 in
this Information Statement.
SPECIAL
FACTORS
Reasons
for and Purposes of the Reverse/Forward Stock Split
The primary purpose of the Reverse/Forward Stock Split is to
reduce the number of holders of record of our common stock to
fewer than three hundred (300), so that we can terminate the
registration of our common stock under Section 12(g) of the
Exchange Act and suspend our duty to file periodic reports
pursuant to Section 15(d) of the Exchange Act. The
Reverse/Forward Stock Split is expected to ultimately result in
the elimination of the expenses related to our disclosure and
reporting requirements under the Exchange Act and the
Sarbanes-Oxley Act, and is likely to decrease the administrative
expense we incur in servicing a large number of record
stockholders who own relatively small numbers of shares. The
Reverse/Forward Stock Split is thus expected to enable our
management and employees to devote more time and effort to our
operations.
Our Board believes that the advantages of remaining public were
primarily perceived to be: (i) increased liquidity to
existing stockholders, (ii) increased access to equity
markets for us to finance our growth, and (iii) the ability
to use our capital stock more easily as consideration in
acquisition transactions; however, we, and our stockholders,
have been generally unable to realize any of these perceived
benefits due to our historically low stock price, our small
public float and the resulting illiquidity of our stock as well
as an absence of any sustained interest from public
institutional investors or securities research analysts.
Further, as we have grown with the acquisitions of Averion Inc.
and more recently Hesperion AG, a corporation organized under
the laws of Switzerland (Hesperion), which
has historically prepared its financial statements in accordance
with International Financial Reporting Standards (IFRS) as
opposed to generally accepted accounting principles in the
United States (GAAP), our accounting function has become
increasingly complex, adding significantly to the accounting
costs and financial burden of being a public company.
In addition, the obligation to file a report of our management
as to the effectiveness of our internal controls, which is
mandated by Section 404 of the Sarbanes-Oxley Act, has
become applicable to us, and the obligation to file an
attestation report of our independent registered public
accounting firm on managements assessment of the
Companys internal control over financial reporting will
become applicable to us beginning in our fiscal year ending
December 31, 2009. These obligations also will add
significantly to the costs and financial burden of being a
public company.
Our auditor estimates that adding the Section 404
attestation procedures to the annual audit process would cause
our annual audit costs to increase approximately $105,000 per
year. We also expect to incur an additional expense of
approximately $175,000 annually in consulting fees and legal
fees due to issues related to compliance with Section 404.
We would also incur additional expenses annually of
approximately $125,000 to retain additional personnel to handle
the increased obligations resulting from compliance with
Section 404. We also estimate that we will have to incur a
one-time expense of approximately $175,000 for documentation and
implementation of internal systems relating to preparation for
compliance with Section 404, an additional one-time expense
of approximately $350,000 for auditor expenses, and an
additional one-time expense of approximately $150,000 for
consulting and legal fees. We avoid these one-time expenses,
which we estimate
9
to be approximately $675,000, by ceasing to be a public
reporting company and going private now. Further, since we have
a limited number of executive personnel, the indirect costs
associated with such compliance can also be significant relative
to our overall expenses. Although there will be no direct
monetary savings with respect to these indirect costs when the
Reverse/Forward Stock Split is effected and we cease filing
periodic reports with the SEC, the time currently devoted by
management to our public company reporting obligations could be
devoted to other purposes, such as operational concerns to
further our business objectives and the interests of our
stockholders.
Additionally, the Sarbanes-Oxley Act makes it difficult for us
to attract and retain independent directors without increasing
director compensation and obtaining additional directors and
officers liability insurance.
Direct costs associated with compliance with the SECs
public reporting requirements include, but are not limited to,
auditing fees, consulting fees, legal fees, financial printer
fees and miscellaneous clerical and other administrative
expenses, such as word processing, conversion to EDGAR,
telephone and fax charges associated with the preparation and
filing of periodic reports, proxy materials and other reports
and statements with the SEC. To comply with the various public
company obligations and requirements, we incur an estimated
$805,000 annually (this amount will likely increase to
$1,210,000 once we are required to comply with the auditor
attestation of managements assessment of our internal
controls obligation mandated by Section 404 of the
Sarbanes-Oxley Act) before taxes in related expenses as follows:
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Audit and Accounting
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$
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350,000
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$
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350,000
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Legal Fees
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100,000
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100,000
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Stockholder Expenses
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150,000
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150,000
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D&O Insurance
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80,000
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80,000
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Internal Control Compliance*
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125,000
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530,000
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Total
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$
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805,000
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$
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1,210,000
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* |
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Consists of costs associated with compliance with the
Sarbanes-Oxley Act related to establishing and maintaining
adequate internal controls and procedures for financial
reporting, procedures to enable management to attest as to the
effectiveness of these internal controls and our internal review
and audit of our financial statements |
The estimates set forth above are only estimates. The actual
savings that we may realize may be higher or lower than the
estimates set forth above. In light of our current size,
opportunities and resources, our Board does not believe that
such costs are justified. Therefore, our Board believes that it
is in our best interests and those of our stockholders to
eliminate the administrative, financial and additional
accounting burdens associated with being a public company by
consummating the Reverse/Forward Stock Split at this time rather
than continue to subject us to these burdens.
In certain respects, being a public company has also resulted in
us being at a competitive disadvantage with respect to our
privately-held competitors. In our Boards view, many of
our competitors have a cost advantage in that they do not have
the operating expenses associated with being a public company.
Furthermore, our competitors, as well as the companies with whom
we transact business, can use publicly disclosed information
that we file under the Exchange Act to our detriment. Publicly
available information about us can be readily analyzed by
privately-held competitors and other companies rendering us at a
competitive disadvantage in the marketplace. Conversely, we do
not have access to similar information with respect to
non-public rivals nor can we protect information about our
business if we are mandated by federal securities laws to
release such information on an annual or quarterly basis.
See also information under the caption Special
Factors Strategic Alternatives Considered on
page 10 in this Information Statement for an additional
description of the reasons why our Board approved the
Reverse/Forward Stock Split instead of another alternative
transaction structure.
The Reverse/Forward Stock Split will terminate the equity
interests of approximately seven hundred twenty five
(725) record holders of our common stock who each own fewer
than twenty thousand five hundred (20,500) shares of our common
stock. As a result, the Reverse/Forward Stock Split would
provide small stockholders a
10
beneficial mechanism to liquidate their equity interest at a
fair price for their shares without having to pay brokerage
commissions, particularly in light of the limited liquidity
available to holders of our common stock.
We intend for the Reverse/Forward Stock Split to treat
stockholders holding common stock in street name through a
nominee (such as a bank or broker) in the same manner as record
holders. Nominees will be instructed to effect the
Reverse/Forward Stock Split for their beneficial holders.
However, nominees may have different procedures, and
stockholders holding shares in street name should contact their
nominees directly.
We presently have approximately eight hundred fifty
(850) stockholders of record of our common stock, of which
approximately seven hundred twenty five (725) each own
fewer than twenty thousand five hundred (20,500) shares. In the
aggregate, the shares held by these small holders comprise less
than 1% of our outstanding capital stock. The administrative
burden and cost to us of maintaining records in respect of these
numerous small accounts and the associated cost of printing and
mailing information to them is, in our Boards view,
excessive given our size. These expenditures result in no
material benefit to us. The Reverse/Forward Stock Split will
enable us to eliminate much of this cost.
When the Reverse/Forward Stock Split is consummated,
stockholders owning fewer than twenty thousand five hundred
(20,500) shares of our common stock will no longer have any
equity interest and will not participate in any future earnings
or any increases in the value of our assets or operations. The
stockholders that will continue to have an equity interest in
the Company after the Reverse/Forward Stock Split will own a
security, the liquidity of which will be restricted. The share
price offered by us to holders holding fewer than twenty
thousand five hundred (20,500) shares of our common stock was
recommended to our Board by the Special Committee and was not
determined at arms length. See also information under the
caption Special Factors Fairness of the
Reverse/Forward Stock Split to Stockholders on pages
24-36 in
this Information Statement.
The Reverse/Forward Stock Split will: (i) cause us to cash
out shares held by any stockholder holding fewer than twenty
thousand five hundred (20,500) pre-Reverse Split shares,
(ii) not cash out any shares held by any stockholder
holding at least twenty thousand five hundred (20,500)
pre-Reverse Split shares of common stock and (iii) change
the percentage of common stock held by the remaining
stockholders to 100%. However, the Board reserves the right, in
its discretion, to abandon the Reverse/Forward Stock Split prior
to the proposed Effective Date if it determines that abandoning
the Reverse/Forward Stock Split is in the best interests of the
Company. If stockholders take actions to: (i) reduce their
holdings to under twenty thousand five hundred (20,500) shares;
or (ii) increase their holdings to at least twenty thousand
five hundred (20,500) shares prior to the proposed Effective
Date, the Company may be forced to make further changes to the
Reverse/Forward Stock Split ratio or to abandon the
Reverse/Forward Stock Split entirely.
Strategic
Alternatives Considered
In making the determination to proceed with the Reverse/Forward
Stock Split, our Board considered two (2) other strategic
alternatives. As discussed below, however, these other
alternatives were ultimately rejected because our Board believed
that the Reverse/Forward Stock Split would be the most cost
effective approach in which to achieve the purposes described
above and the alternative that would result in the best outcome
for our stockholders. These alternatives were:
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Merger. Our Board discussed the
possibility of entering into a merger or other strategic
business combination with a third party. We engaged Edgemont
Advisors (Edgemont) as a financial advisor
for this purpose. After a significant marketing effort, Edgemont
identified only a single potential third party. After
preliminary discussions with this third party and without
receiving a formal offer, our Board concluded that the terms of
the proposed transaction were not in the best interests of the
Company, our stockholders or our debt holders.
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Maintaining the status quo. Our Board
also considered taking no action to reduce the number of our
stockholders. However, due to the significant and increasing
costs of being a public reporting company, and other
considerations described herein, our Board believed that
maintaining the status quo would be detrimental to all
stockholders. We would continue to incur the expenses of being a
public company without realizing the benefits of public company
status.
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11
Background
and Timing of the Reverse/Forward Stock Split
In the days leading up to our regularly scheduled Board meeting
held on February 27, 2008, ComVest, a holder of a majority
of our common stock, indicated that it desired that the Company
become private and requested that the Board explore the various
alternatives of doing so.
At a regularly scheduled meeting of our Board held on
February 27, 2008, the Board discussed the concerns of
ComVest regarding the anticipated costs and expenses of
maintaining our public company status in light of the recent
Hesperion acquisition and the increased disclosure obligations
that were becoming applicable to us under Section 404 of
the Sarbanes-Oxley Act. The Board generally concurred that a
going private transaction might be a desirable strategic
alternative if it resulted in material cost savings and was fair
to all of the Companys stockholders. The Board then
authorized management to consult with the Companys outside
counsel, Foley & Lardner LLP, as to various going
private alternatives and the mechanics and timing of such a
transaction.
Beginning in February, 2008, management and representatives of
the Board consulted with Foley & Lardner LLP, to
identify the possible going private transaction alternatives, as
well as the legal and regulatory process required to complete
such a transaction.
At a special meeting of the Board held on March 12, 2008,
management and a representative of Foley & Lardner LLP
advised the Board with respect to such alternatives as well as
the legal and regulatory process required to complete such a
transaction. The Board then explored the advantages and
disadvantages of each of the following strategic alternatives:
(i) a Reverse Split to reduce the number of stockholders to
less than 300; and (ii) maintaining the status quo. The
Board ultimately decided to pursue a possible going private
transaction because our stockholders have been unable to take
advantage of the perceived benefits of being a public reporting
Company and because it concluded that we would benefit from
future cost savings expected to be realized from the termination
of our public company status.
In addition, at the special meeting of the Board held on
March 12, 2008, in view of possible conflicts of interest
involved with effecting the Reverse Split, our Board unanimously
decided that it would be advisable to form a Special Committee
comprised solely of non-employee, independent directors to
analyze the appropriate Reverse Split ratio as well as the price
per share to be paid for the shares of our common stock held by
stockholders that are to be cashed out as a result of the
Reverse Split and to make a recommendation to the full Board as
to the appropriate Reverse Split ratio and the price per share
to be paid for the shares of our common stock held by
stockholders that are to be cashed out as a result of the
Reverse/Forward Stock Split. At this meeting, the Special
Committee was formed consisting of three (3) independent
directors: Alastair McEwan, Robert Tucker, and James Powers.
None of the directors serving on the Special Committee is
employed by or affiliated with us, Philip T. Lavin, Ph.D.,
James H. McGuire or Michael Falk.
At the special meeting of the Board held on March 12, 2008,
the members of the Special Committee advised management to
prepare a financial analysis of the costs and expenses related
to our public company reporting responsibilities and the costs
of the Reverse Split and related repurchase of shares of our
common stock held by stockholders that are to be cashed out as a
result of the Reverse Split, assuming a variety of Reverse Split
ratios and to perform an analysis supporting a per share price
to be paid for the repurchase of such shares of our common stock
held by stockholders that are to be cashed out as a result of
the Reverse Split.
From March 12, 2008 to March 24, 2008, our management
prepared an analysis of the estimated costs and benefits of
proceeding with a going private transaction assuming the
following potential Reverse Split ratios: 7,500 to 1, 10,000 to
1, 12,500 to 1 and 20,500 to 1. In addition, our management
performed a financial analysis to enable it to present to our
Special Committee a fair price per share to be paid for shares
of our common stock held by stockholders that are to be cashed
out as a result of the Reverse Split.
The Special Committee held a meeting on March 24, 2008, at
which a representative of Foley & Lardner LLP was
present and available to address the questions and concerns of
the Board. Members of management made a presentation related to
the costs and benefits of the Reverse Split assuming a variety
of Reverse Split ratios as well as a variety of valuation
analyses to enable the Special Committee to determine a fair
price for the shares of our common stock held by stockholders
that are to be cashed out as a result of the Reverse Split.
12
The Special Committee asked questions of management related to
the assumptions underlying the various valuation analyses. In
addition, the Special Committee discussed the desire to effect
the Reverse Split at a ratio to ensure that following the
transaction and taking into account anticipated future option
and warrant exercises, stock certificates that will ultimately
be held of record by current beneficial holders, as well as
stock sales and transfers, the Company could be reasonably
assured that the number of record holders would not increase to
300 which would once again subject the Company to the reporting
requirements of the Exchange Act. The Special Committee then
instructed management to obtain all the information necessary to
form that analysis and to report back to the Special Committee
once it had done so.
The Special Committee held a meeting on April 8, 2008, at
which a representative of Foley & Lardner LLP was
present and available to address the questions and concerns of
the Board. At this meeting, management revised its presentation
related to an appropriate Reverse Split ratio. In addition, at
this meeting, the Special Committee also considered the
Reverse/Forward Stock Split structure. The Special Committee
asked questions and discussed the advantages and disadvantages
of the Reverse/Forward Stock Split structure as compared to the
Reverse Split only and ultimately concluded to recommend the
Reverse/Forward Stock Split to the Board. The Special Committee
determined that it was in the best interests of the Company to
effect the Forward Split, at the same ratio as the Reverse
Split, immediately following the Reverse Split, for the purposes
of: (i) restoring continuing stockholders to their original
position prior to the Reverse Split; (ii) eliminating the
need to replace stock certificates or cash out fractional shares
held by continuing stockholders; and (iii) avoiding the
need to adjust the exercise price of any awards previously
granted under the Companys stock option plans. The Special
Committee then instructed management to obtain additional
information related to the holdings of the objecting beneficial
owners of the Companys common stock in order to propose a
final Reverse/Forward Stock Split ratio. At this meeting, the
Special Committee did not discuss any other alternatives other
than the Reverse Split and the Reverse/Forward Stock Split.
At a special meeting of the Board held on May 28, 2008, the
Board determined that it was in the best interests of the
Company and its stockholders to suspend discussion of the
Reverse/Forward Stock Split and to take no further action
towards completing the Reverse/Forward Stock Split at such time
in order to explore a strategy of seeking a potential business
combination with a third party and to allow the business time to
improve in order to enable the Company and its stockholders to
realize the perceived benefits of being a public reporting
Company.
On October 31, 2008, the Board engaged Edgemont as the
Companys financial advisor to explore a possible merger
with or sale of the Company to a third party.
For the remainder of 2008 and during the first and second
quarters of 2009, management and the Board, with the assistance
of Edgemont, discussed the possibility of entering into a merger
with or a sale of the Company to a third party. After a
significant marketing effort, Edgemont identified only a single
potential third party. After preliminary discussions with this
third party and without receiving a formal offer, our Board
concluded that the terms of the proposed transaction were not in
the best interests of the Company, our stockholders or our debt
holders.
Because we did not enter into a business combination transaction
with a third party and because we and our stockholders continued
to be unable to take advantage of the perceived benefits of
being a public reporting Company, in June 2009, ComVest again
requested that the Board and the Company analyze a going private
transaction as a desirable strategic alternative if it would
result in material cost savings and was fair to all of the
Companys stockholders and debt holders. At a regularly
scheduled meeting of our Board held on June 29, 2009, the
Board reconvened the Special Committee to revisit analyzing an
appropriate Reverse/Forward Stock Split ratio as well as the
price to be paid for shares of our common stock held by
stockholders that are to be cashed out as a result of the
Reverse/Forward Stock Split and to make a recommendation to the
full Board as to the appropriate Reverse/Forward Stock Split
ratio and price to be paid for shares of our common stock held
by stockholders that are to be cashed out as a result of the
Reverse/Forward Stock Split.
On July 14, 2009, the Board terminated Edgemonts
engagement as the Companys financial advisor.
At a Special Committee meeting held on July 31, 2009, the
Special Committee reconvened to analyze and discuss a going
private transaction. A representative from Foley &
Larder LLP was present and available
13
during the meeting to address the questions and concerns of the
Special Committee. After discussion, the Special Committee
instructed management to prepare materials to reconfirm that its
prior analyses related to the Reverse/Forward Stock Split ratio
were still accurate and to re-perform various valuation analyses
to assist the Special Committee in determining a price per share
to be paid for the shares to be cashed out as a result of the
Reverse/Forward Stock Split. At the meeting, the Special
Committee also ratified managements engagement of the
Valuation Consultant to conduct an independent valuation of the
Companys common stock to assist the Special Committee in
determining the fairness of the price to be paid for shares of
our common stock held by stockholders that are to be cashed out
as a result of the Reverse/Forward Stock Split.
From July 31, 2009 through August 24, 2009, management
conducted the relevant analyses and assisted the Valuation
Consultant in its due diligence investigation of the
Companys assets and operations to prepare a third party
independent valuation report of the Company.
At a Special Committee meeting held on August 24, 2009, the
Valuation Consultant delivered its independent valuation report
and an analysis of the valuation methods used in preparing the
valuation report. The representatives of the Valuation
Consultant informed the Special Committee that, based upon the
assumptions and methodologies relied upon in preparing its
valuation report, it had concluded that the Companys
common stock currently had no value. After the Valuation
Consultants presentation, management made a financial
presentation to the Special Committee regarding an appropriate
Reverse/Forward Stock Split ratio as well as the price to be
paid for shares of our common stock held by stockholders that
are to be cashed out as a result of the Reverse/Forward Stock
Split. After a full discussion and based on the Valuation
Consultant and managements financial reports, the Special
Committee adopted managements financial analyses as its
own and determined to recommend to the full Board a
Reverse/Forward Stock Split ratio of 20,500-to-1, which was the
result of calculations intended to determine how many
stockholders needed to be cashed out to reduce the number of our
stockholders to less than three hundred (300), and a price per
pre-Reverse Split share of One Cent ($0.01) to be paid for each
share of our common stock held by stockholders holding less than
twenty thousand five hundred (20,500) shares that are to be
cashed out as a result of the Reverse/Forward Stock Split. In
doing so, each of the Special Committee members reviewed the
information set forth below under Special
Factors Fairness of the Reverse/Forward Stock
Split on pages
24-36 in
this Information Statement. The per share price of One Cent
($0.01) was selected by the Special Committee because it was
within the range of recent historical stock prices of our common
stock and was not materially in excess of the value attributed
to our common stock by the Valuation Consultant.
At a duly convened meeting of our Board on August 27, 2009,
the Special Committee presented its findings and the Valuation
Consultants valuation report to the Board and recommended
to the Board that it approve the Reverse/Forward Stock Split
ratio of 20,500 to 1 and the pre-Reverse Split price per share
of One Cent ($0.01) to be paid for shares of our common stock
held by stockholders holding less than twenty thousand five
hundred (20,500) shares that are to be cashed out as a result of
the Reverse/Forward Stock Split. All directors were present at
the meeting. Each of Mr. Falk and Mr. Rodriguez is an
affiliate of ComVest, and the material facts as to each such
directors interest are known to or have been fully
disclosed to each of the other members of the Companys
Board. In addition, a representative from Foley &
Larder LLP was present and available during the meeting to
address the questions and concerns of the Board.
Our Board reviewed the Special Committees findings and
recommendations, as well as managements pricing analysis
and study of the Reverse/Forward Stock Split. Our Board then
asked the Special Committee and management questions and
received answers regarding the Reverse/Forward Stock Split, the
Reverse/Forward Stock Split ratio and the per pre-Reverse Split
share price to be paid for shares of our common stock held by
stockholders holding less than twenty thousand five hundred
(20,500) shares that are to be cashed out as a result of the
Reverse/Forward Stock Split. After consideration and discussion,
the Board adopted the financial analyses of management as its
own and adopted the Special Committees recommendation
regarding the Reverse/Forward Stock Split ratio and the price to
be paid for shares of our common stock held by stockholders
holding less than twenty thousand five hundred (20,500) shares
that are to be cashed out as a result of the Reverse/Forward
Stock Split.
14
At this meeting, our Board also determined that the purpose of
the Reverse/Forward Stock Split was to reduce the number of our
stockholders to below 300, thereby permitting us to proceed with
the termination of our public reporting obligations and to
continue future operations as a private company and thereby
relieving us of the substantial costs, administrative burdens
and certain competitive disadvantages associated with our
operating as a public reporting company. In addition, the Board
concluded that the advantages of the Reverse/Forward Stock Split
to our unaffiliated stockholders (both those being cashed out
and those remaining as stockholders after the Reverse/Forward
Stock Split) outweighed the disadvantages, and that the
Reverse/Forward Stock Split was substantively and procedurally
fair and in the best interests of both us and our unaffiliated
stockholders. The Board also determined that it would be in the
Companys best interests to effect the Forward Split, at
the same ratio as the Reverse Split immediately following the
Reverse Split, for the purposes of: (i) restoring
continuing stockholders to their original position prior to the
Reverse Split; (ii) eliminating the need to replace stock
certificates or cash out fractional shares held by continuing
stockholders; and (iii) avoiding the need to adjust the
exercise price of any awards previously granted under the
Companys stock option plans or warrants previously issued
by us.
The Board then approved the Reverse/Forward Stock Split and the
filing of the Certificate of Amendment with the Secretary of
State of the State of Delaware, subject to the filing of any and
all necessary documentation with the SEC, including this
preliminary Information Statement and related
Schedule 13E-3.
Effects
of the Reverse/Forward Stock Split
The Reverse/Forward Stock Split will reduce the number of record
stockholders of our common stock from approximately eight
hundred fifty (850) to approximately one hundred twenty
five (125).
Termination of the registration of our common stock
Section 12(g) of the Exchange Act and suspension of our
duty to file periodic reports pursuant to Section 15(d) of
the Exchange Act would substantially reduce the information
required to be furnished by us to our stockholders and to the
SEC. Additionally, certain provisions of the Exchange Act would
no longer apply, such as the short-swing profit recovery
provisions of Section 16(b).
For a total expenditure by us of approximately $135,000 in
transaction costs (including legal, accounting and other fees
and costs) and approximately $27,000 in purchase costs for
shares of our common stock held by stockholders holding less
than twenty thousand five hundred (20,500) shares that are to be
cashed out as a result of the Reverse/Forward Stock Split, we
will realize an estimated minimum of $805,000 (this number will
likely increase to $1,210,000 once we are obligated to comply
with the requirement to file our outside auditors attestation as
to managements report as to the effectiveness of our
internal controls mandated by Section 404 of the
Sarbanes-Oxley Act) in cost savings on an annual basis by
terminating our public company status. We intend to apply for
termination of the registration of our common stock under
Section 12(g) of the Exchange Act and suspension of our
duty to file periodic reports pursuant to Section 15(d) of
the Exchange Act as soon as practicable following completion of
the Reverse/Forward Stock Split. However, our Board reserves the
right, in its discretion, to abandon the Reverse/Forward Stock
Split prior to the proposed Effective Date if it determines that
abandoning the Reverse/Forward Stock Split is in our best
interests and those of our stockholders.
The effect of the Reverse/Forward Stock Split on each
stockholder will depend on the number of shares that such
stockholder owns, as summarized in the table below. See also
information under the caption Special Factors
Structure of the Reverse/Forward Stock Split on pages
23-24 in
this Information Statement for additional information with
respect to the effect of the Reverse/Forward Stock Split on each
stockholder.
Decrease in book value. Because the Company is
paying non-remaining stockholders more than the current book
value per share, the book value per share for remaining
stockholders will decrease after the Reverse/Forward Stock
Split. The total cost to the Company, including expenses, of
effecting the Reverse/Forward Stock Split is expected to be
approximately $162,000. Our net book value was approximately
$4.0 million, or $0.0063 per share at June 30, 2009.
As a result of the Reverse/Forward Stock Split, the book value
per share of common stock will be decreased by 4.5% to $0.0066
per share on a pro forma basis.
15
As a result of the Reverse/Forward Stock Split, the interest in
our net book value and net earnings (or losses) by affiliated
parties will be increased by approximately 0.6%. This includes
the benefit of our future earnings or increases to our value.
Affiliated parties will bear a higher risk of our future losses
or decreases to our value. The effect of the Reverse/Forward
Stock Split will be to increase the ownership interest of
affiliated parties from approximately 71.6% (after giving effect
to the exercise of all of the affiliates outstanding
options and warrants) to 71.9%.
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Stockholders Before Completion of
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Net Effect After Completion of the
|
the Reverse/Forward Stock Split
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Reverse/Forward Stock Spilt
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Registered stockholders holding twenty thousand five hundred
(20,500) or more shares of common stock.
|
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The percentage of beneficial ownership of each of the remaining
stockholders of the Company will be slightly increased. Based on
an assumed cash-out of approximately 2,700,000 shares, the
aggregate percentage ownership of all stockholders remaining
after the Reverse/Forward Stock Split will increase by less than
1%.
|
Registered stockholders holding fewer than twenty thousand five
hundred (20,500) shares of common stock.
|
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Each share will be converted into the right to receive cash at a
price of One Cent ($0.01) per pre-Reverse Split share.
|
Stockholders holding common stock in street name through a
nominee (such as a bank or broker).
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We intend for the Reverse/Forward Stock Split to treat
stockholders holding common stock in street name through a
nominee (such as a bank or broker) in the same manner as
stockholders whose shares are registered on the books of the
Company in their own names. Nominees will be instructed to
effect the Reverse/Forward Stock Split for their beneficial
holders. However, nominees may have different procedures and
stockholders holding shares in street name are urged to contact
their nominees. A stockholder holding fewer than twenty thousand
five hundred (20,500) shares of common stock in street name who
wants to receive cash in the Reverse/Forward Stock Split should
instruct his, her or its nominee to transfer such
stockholders shares into a record account in such
stockholders name prior to the Effective Date to ensure
that such stockholder will be considered a holder of record
prior to the Effective Date of the Reverse/Forward Stock Split.
A stockholder holding fewer than twenty thousand five hundred
(20,500) shares of Common Stock in street name through a nominee
who does not transfer such stockholders shares into a
record account prior to the Effective Date may not have his, her
or its shares cashed out as a result of the Reverse/Forward
Stock Split. For instance, a stockholders shares may not
be cashed out if such stockholders nominee is a record
holder of an aggregate of twenty thousand five hundred (20,500)
or more shares of common stock, holds shares for multiple
stockholders in street name and does not provide such beneficial
ownership positions to the Exchange Agent prior to the Effective
Date.
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All of our affiliated stockholders and a number of our
unaffiliated stockholders will remain stockholders after the
Reverse/Forward Stock Split by virtue of the size of their
holdings. Nevertheless, we believe that the Reverse/Forward
Stock Split is substantively and procedurally fair to our
unaffiliated stockholders who are entitled to receive a cash
payment of One Cent ($0.01) per pre-Reverse Split share. Each
member of our
16
Board, including all independent directors, approved the
Reverse/Forward Stock Split based on the recommendation of our
Special Committee as to the Reverse/Forward Stock Split ratio
and the price to be paid for shares of our common stock held by
stockholders holding less than twenty thousand five hundred
(20,500) shares that are to be cashed out as a result of the
Reverse/Forward Stock Split. In addition, in making this
determination, we considered other factors such as the
substantive features and procedural safeguards of the
Reverse/Forward Stock Split, the fact that all unaffiliated
stockholders will have the option to remain stockholders (by
purchasing additional shares prior to the Effective Date), the
fairness of the price offered to all stockholders based on
current and historical stock prices, our net book value and the
Valuation Consultants valuation report.
Potential
Disadvantages of the Reverse/Forward Stock Split to
Stockholders; Accretion in Ownership and Control of Certain
Stockholders
Stockholders owning fewer than twenty thousand five hundred
(20,500) shares of our common stock immediately prior to the
effective time of the Reverse/Forward Stock Split will, after
the Reverse/Forward Stock Split takes place, no longer have any
equity interest in us and therefore will not participate in our
future potential earnings or growth. It is estimated that all
but approximately one hundred twenty five
(125) stockholders of record of our common stock will be
fully cashed out in the Reverse/Forward Stock Split. It will not
be possible for cashed out stockholders to re-acquire an equity
interest in us unless they purchase an interest from the
remaining stockholders.
The Reverse/Forward Stock Split will require stockholders who
own less than twenty thousand five hundred (20,500) shares of
our common stock to involuntarily surrender their shares for
cash. These stockholders will not have the ability to continue
to hold their shares. The ownership interest of certain
stockholders will be terminated as a result of the
Reverse/Forward Stock Split, but our Board concluded that the
completion of the Reverse/Forward Stock Split will be an overall
benefit to these stockholders because of the liquidity provided
by the transaction at a fair price to such stockholders.
The Reverse/Forward Stock Split will have a nominal effect on
the percentage of beneficial ownership of each of our officers,
directors and major stockholders, including Philip T.
Lavin, Ph.D., ComVest and Michael Falk. See also
information under the caption Security Ownership of
Certain Beneficial Owners and Management on pages
45-46 in
this Information Statement.
Potential disadvantages to our stockholders who will remain as
stockholders after the Reverse/Forward Stock Split include
decreased access to information and decreased liquidity as a
result of the termination of the quotation of our common stock
on the OTCBB. Upon consummation of the Reverse/Forward Stock
Split, stockholders may no longer have the alternative of
selling their shares of our common stock in the public market,
and there may be no effective trading market for our common
stock. Any stockholder desiring to sell his or her shares may
have a difficult time finding a buyer. This illiquidity may
reduce the price a buyer is willing to pay for shares of our
common stock. We anticipate that the public market for shares of
our common stock will be substantially reduced or eliminated
altogether. Following the Reverse/Forward Stock Split, our
common stock will no longer be quoted on the OTCBB, which is a
quotation service that displays real time quotes, last sales
price and volume information for over-the-counter securities.
For this reason, stockholders will experience a loss of
liquidity after the Reverse/Forward Stock Split and may be
required to hold their shares of common stock for an indefinite
period of time. We do not have any present plans to sell our
assets or enter into any other transaction that would provide
liquidity for our shares. However, we may explore from time to
time various methods to provide liquidity to stockholders.
When the Reverse/Forward Stock Split is effected, we intend to
terminate the registration of our common stock under
Section 12(g) of the Exchange Act and suspend our duty to
file periodic reports pursuant to Section 15(d) of the
Exchange Act. As a result of the termination and suspension, we
will no longer be subject to the periodic reporting requirements
or the proxy rules of the Exchange Act. Upon terminating our
public reporting, we will no longer file, among other things,
annual or quarterly reports with the SEC. We will no longer be
subject to the provisions of the Sarbanes-Oxley Act or the
liability provisions of the Exchange Act. In addition, our
officers will no longer be required to certify the accuracy of
our financial statements. Updated information regarding our
business, results of operations and financial condition, like
the information that is
17
currently available to the general public and our investors,
will not be available once we terminate our public reporting.
Effect of
the Reverse/Forward Stock Split on Option Holders
Regardless of whether an outstanding stock option provides a
right to purchase less than, equal to or greater than twenty
thousand five hundred (20,500) shares, the number of shares
underlying each such outstanding stock option, granted under our
2005 Equity Incentive Plan (the Plan), will
not change as a result of the Reverse/Forward Stock Split. Our
Compensation Committee, as administrator of the Plan, has
determined that no adjustment to the outstanding stock options
is necessary or appropriate in connection with the
Reverse/Forward Stock Split. Because of the symmetry of the one
(1) to twenty thousand five hundred (20,500) Reverse Split
and the twenty thousand five hundred (20,500) to one
(1) Forward Split, our Board has determined, based on
recommendation from the Compensation Committee, that the
Reverse/Forward Stock Split will not cause dilution or
enlargement of the benefits intended by the Company to be made
available under the Plan or with respect to any outstanding
stock options.
Effect of
the Reverse/Forward Stock Split on Warrant Holders
Regardless of whether an outstanding warrant provides a right to
purchase less than, equal to or greater than twenty thousand
five hundred (20,500) shares, the number of shares underlying
each such outstanding warrant, will not change as a result of
the Reverse/Forward Stock Split. The Board has determined that
no adjustment to the outstanding warrants is necessary or
appropriate in connection with the Reverse/Forward Stock Split.
Because of the symmetry of the one (1) to twenty thousand
five hundred (20,500) Reverse Split and the twenty thousand five
hundred (20,500) to one (1) Forward Split, our Board has
determined that the Reverse/Forward Stock Split will not cause
dilution or enlargement of the benefits intended by the Company
with respect to any outstanding warrants.
Financial
Effect and Accounting Consequences of the Reverse/Forward Stock
Split
Completion of the Reverse/Forward Stock Split will require
approximately $162,000, which includes $135,000 for legal,
accounting and other fees and costs related to the transaction
and approximately $27,000 in purchase costs for shares of
our common stock held by stockholders holding less than twenty
thousand five hundred (20,500) shares that are to be cashed out
as a result of the Reverse/Forward Stock Split. The payments to
holders of fewer than twenty thousand five hundred (20,500)
shares of our common stock will be paid out of our working
capital. See also the information under the caption
Special Factors Financing of the
Reverse/Forward Stock Split on page 39 in this
Information Statement.
Based upon analysis of the share ownership distribution among
our stockholders, our Board chose to limit the scope of the
Reverse/Forward Stock Split to twenty thousand five hundred
(20,500) to one (1) because this was an efficient way to
reduce the number of our record holders to below three hundred
(300) requiring us to pay to stockholders being cashed
pursuant to the Reverse/Forward Stock Split, an aggregate of,
approximately, $27,000.
18
The impact of the Reverse/Forward Stock Split on: (i) the
weighted average shares outstanding; (ii) the earnings per
share (iii) the shares of common stock issued and
outstanding; and (iv) the net book value per share for
the years ended December 31, 2007 and December 31,
2008 and for the three and six months ended June 30, 2008
and June 30, 2009 are set forth in the tables below (In
millions, except per share amounts).
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Year Ending December 31,
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2008
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2007
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As
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As
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As
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As
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Reported
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Adjustments(1)
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Adjusted
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Reported
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Adjustments(1)
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Adjusted
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Income Statement Data:
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Net sales
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$
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66.3
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$
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$
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66.3
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$
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34.8
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$
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$
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34.8
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Loss from Operations
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31.8
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31.8
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2.2
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2.2
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Net loss
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37.4
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37.4
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5.3
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5.3
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Net Loss Available to Common Shareholders
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37.4
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37.4
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5.3
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5.3
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Basic & Diluted weighted average shares outstanding
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630.4
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2.7
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627.7
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519.4
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2.7
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516.7
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Basic & Diluted net loss per share
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$
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0.06
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$
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0.00
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$
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0.06
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$
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0.01
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$
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0.00
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$
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0.01
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As of December 31,
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2008
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2007
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As
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As
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As
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As
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Reported
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Adjustments(1)
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Adjusted
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Reported
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Adjustments(1)
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Adjusted
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Balance Sheet Data
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|
|
Total Stockholders Equity (Deficit)
|
|
$
|
(0.8
|
)
|
|
$
|
0.0
|
|
|
$
|
(0.8
|
)
|
|
$
|
34.9
|
|
|
$
|
0.0
|
|
|
$
|
34.9
|
|
Common Shares issued and outstanding
|
|
|
634.97
|
|
|
|
2.70
|
|
|
|
632.27
|
|
|
|
625.6
|
|
|
|
2.7
|
|
|
|
622.9
|
|
Book Value per share (Deficit)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.06
|
|
|
$
|
0.00
|
|
|
$
|
0.06
|
|
Ratio of Earnings to Fixed Charges(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the impact of the Reverse/Forward Stock Split. |
|
|
|
(2) |
|
The ratio of earnings to fixed charges are not meaningful since
earnings available for fixed charges is negative. The shortfall
in the earnings available for fixed charges to achieve a ratio
of earnings to fixed charges of 1.00 amounted to approximately
$38.7 million and $3.6 million for the periods ended
December 31, 2008 and 2007, respectively. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three(3) Months Ending June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
As
|
|
|
|
|
|
As
|
|
|
As
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments(1)
|
|
|
Adjusted
|
|
|
Reported
|
|
|
Adjustments(1)
|
|
|
Adjusted
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
15.9
|
|
|
$
|
|
|
|
$
|
159
|
|
|
$
|
18.7
|
|
|
$
|
|
|
|
$
|
18.7
|
|
Income (Loss) from Operations
|
|
|
1.2
|
|
|
|
|
|
|
|
1.2
|
|
|
|
1.0
|
|
|
|
|
|
|
|
1.0
|
|
Net Income (loss)
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
(0.6
|
)
|
Net Income (Loss) Available to Common Shareholders
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
(0.6
|
)
|
Basic & Diluted weighted average shares outstanding
|
|
|
639.26
|
|
|
|
2.70
|
|
|
|
636.56
|
|
|
|
625.80
|
|
|
|
2.70
|
|
|
|
623.10
|
|
Basic & Diluted net income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
|
|
(1) |
|
Reflects the impact of the Reverse/Forward Stock Split. |
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six(6) Months Ending June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
As
|
|
|
|
|
|
As
|
|
|
As
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments(1)
|
|
|
Adjusted
|
|
|
Reported
|
|
|
Adjustments(1)
|
|
|
Adjusted
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
31.6
|
|
|
$
|
|
|
|
$
|
31.6
|
|
|
$
|
34.4
|
|
|
$
|
|
|
|
$
|
34.4
|
|
Income from Operations
|
|
|
1.9
|
|
|
|
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
(2.1
|
)
|
|
|
(3.3
|
)
|
|
|
|
|
|
|
(3.3
|
)
|
Net Loss Available to Common Shareholders
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
(2.1
|
)
|
|
|
(3.3
|
)
|
|
|
|
|
|
|
(3.3
|
)
|
Basic & Diluted weighted average shares outstanding
|
|
|
639.23
|
|
|
|
2.70
|
|
|
|
636.53
|
|
|
|
625.72
|
|
|
|
2.70
|
|
|
|
623.02
|
|
Basic & Diluted net loss per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
As
|
|
|
|
|
|
As
|
|
|
As
|
|
|
|
|
|
As
|
|
|
|
Reported
|
|
|
Adjustments(1)
|
|
|
Adjusted
|
|
|
Reported
|
|
|
Adjustments(1)
|
|
|
Adjusted
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders Equity (Deficit)
|
|
$
|
(2.5
|
)
|
|
$
|
0.0
|
|
|
$
|
(2.5
|
)
|
|
$
|
32.5
|
|
|
$
|
0.0
|
|
|
$
|
32.5
|
|
Common Shares issued and outstanding
|
|
|
639.26
|
|
|
|
2.70
|
|
|
|
636.56
|
|
|
|
635.02
|
|
|
|
2.70
|
|
|
|
632.32
|
|
Book Value per share (Deficit)
|
|
$
|
0
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.05
|
|
|
$
|
0.00
|
|
|
$
|
0.05
|
|
Ratio of Earnings to Fixed Charges(2)
|
|
|
0.49
|
|
|
|
0.00
|
|
|
|
0.49
|
|
|
|
0.13
|
|
|
|
0.00
|
|
|
|
0.13
|
|
|
|
|
(1) |
|
Reflects the impact of the Reverse/Forward Stock Split. |
|
|
|
(2) |
|
The shortfall in the earnings available for fixed charges to
achieve a ratio of earnings to fixed charges of 1.00 amounted to
approximately $1.9 million and $3.3 million for the 6 month
periods ended June 30, 2009 and 2008, respectively. |
Material
Federal Income Tax Consequences of the Reverse/Forward Stock
Split
The following is a summary of the material United States federal
income tax consequences of the Reverse/Forward Stock Split, but
does not purport to be a complete analysis of all the potential
tax considerations relating thereto. This summary is based upon
the provisions of the Code, Treasury regulations promulgated
thereunder, administrative rulings and judicial decisions, all
as of the date hereof. These authorities may be changed,
possibly retroactively, so as to result in United States federal
income tax consequences different from those set forth below. We
have not sought any ruling from the Internal Revenue Service
(the IRS) with respect to the statements made
and the conclusions reached in the following summary, and there
can be no assurance that the IRS will agree with such statements
and conclusions.
This summary also does not address the tax considerations
arising under the laws of any foreign, state or local
jurisdiction. In addition, this discussion does not address tax
considerations applicable to a stockholders particular
circumstances or to stockholders that may be subject to special
tax rules, including, without limitation:
|
|
|
|
|
banks, insurance companies or other financial institutions;
|
|
|
|
persons subject to the alternative minimum tax;
|
|
|
|
tax-exempt organizations;
|
|
|
|
dealers in securities or currencies;
|
20
|
|
|
|
|
traders in securities that elect to use a mark-to-market method
of accounting for their securities holdings;
|
|
|
|
persons that own, or are deemed to own, more than five percent
(5%) of our Company (except to the extent specifically set forth
below);
|
|
|
|
certain former citizens or long-term residents of the United
States;
|
|
|
|
persons who hold our common stock as a position in a hedging
transaction, straddle, conversion
transaction or other risk reduction transaction; or
|
|
|
|
persons deemed to sell our common stock under the constructive
sale provisions of the Code.
|
In addition, if a partnership holds our common stock, the tax
treatment of a partner generally will depend on the status of
the partner and upon the activities of the partnership.
Accordingly, partnerships which hold our common stock and
partners in such partnerships should consult their tax advisors
with respect to the United States federal income and other tax
consequences of the Reverse/Forward Stock Split.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR
PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE
REVERSE/FORWARD STOCK SPLIT OR THE PURCHASE, OWNERSHIP AND
DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE UNITED STATES
FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY
STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY
APPLICABLE TAX TREATY.
Averion
International Corp.
We will not recognize taxable income, gain or loss in connection
with the Reverse/Forward Stock Split. At December 31, 2008,
we have federal and state net operating loss (NOL) carry
forwards of approximately $13.5 million, which may be
available to reduce future income tax liabilities, and which
expire at various dates through 2028. Under Section 382 of
the Code, the utilization of net operating loss carry forwards
is limited under the change in stock ownership rules of the
Code. As a result of the proposed ownership changes, the
surviving company and the remaining stockholders will be
beneficiaries of these net operating loss carry-forwards. Future
ownership changes could limit the utilization of any net
operating loss carry forwards and the ability to benefit from
them is predicated on our ability to produce net income prior to
the expiration of these benefits. Due to the uncertainty of
future income estimates, it is likely that these net operating
loss carry forwards will not be fully utilized.
Stockholders
The federal income tax consequences of the Reverse/Forward Stock
Split for our stockholders will differ depending on the number
of shares of pre-Reverse Split common stock owned and, in some
cases, constructively owned by such stockholders. As set forth
in more detail below, stockholders who own at least twenty
thousand five hundred (20,500) shares of pre-Reverse Split
common stock will retain their shares and will not recognize any
gain, loss or dividend income as a result of the Reverse/Forward
Stock Split. Stockholders who own fewer than twenty thousand
five hundred (20,500) shares of pre-Reverse Split common stock
will receive cash, the treatment of which will depend on whether
the constructive ownership rules described below are applicable.
If such constructive ownership rules do not apply, a stockholder
who owns fewer than twenty thousand five hundred (20,500) shares
of pre-Reverse Split common stock generally will recognize gain
or loss upon the sale or exchange of the pre-Reverse Split
common stock. If such constructive ownership rules apply, the
stockholder may be required to treat any cash received as a
dividend distribution rather than as gain or loss from a sale or
exchange, as more fully described below. The differences in tax
consequences to the stockholders do not depend on whether a
stockholder is an affiliate of the Company, has voted to approve
the Reverse/Forward Stock Split or is an unaffiliated
stockholder. With respect to the Company, as described above,
the Company will not recognize any income, gain or loss in
connection with the Reverse/Forward Stock Split. Neither the
differences in tax consequences between stockholders who hold
21
at least twenty thousand five hundred (20,500) shares of
pre-Reverse Split common stock and stockholders who own fewer
than twenty thousand five hundred (20,500) shares of pre-Reverse
Split common stock nor the differences in tax consequences
between the stockholders and the Company were reasons for the
Company to undertake the Reverse/Forward Stock Split in this
form at this time.
Stockholders
Who Receive Shares of Post-Reverse/Forward Stock Split Common
Stock
A stockholder who retains shares of post-Reverse/Forward Stock
Split common stock in the transaction (i.e., a stockholder who
owns at least twenty thousand five hundred (20,500) shares of
pre-Reverse Split common stock) will not recognize gain or loss
or dividend income as a result of the Reverse/Forward Stock
Split, and the tax basis (as adjusted for the Reverse/Forward
Stock Split) and holding period of such stockholder in shares of
pre-Reverse Split common stock will carry over as the tax basis
and holding period of such stockholders shares of
post-Reverse/Forward Stock Split common stock.
Stockholders
Who Receive Cash
A stockholder who receives cash in the Reverse/Forward Stock
Split (i.e., a stockholder that owns fewer than twenty thousand
five hundred (20,500) shares of pre-Reverse Split common stock)
will be treated as having such shares redeemed in a taxable
transaction governed by Section 302 of the Code and,
depending on a stockholders situation, the transaction
will be taxed as either:
|
|
|
|
|
a sale or exchange of the redeemed shares, in which case the
stockholder will recognize gain or loss equal to the difference
between the cash payment and the stockholders tax basis
for the redeemed shares; or
|
|
|
|
a cash distribution which is treated: (i) first, as a
taxable dividend to the extent of allocable earnings and
profits, if any; (ii) second, as a tax-free return of
capital to the extent of the stockholders tax basis in the
redeemed shares; and (iii) finally, as gain from the sale
or exchange of the redeemed shares.
|
Amounts treated as gain or loss from the sale or exchange of
redeemed shares will be capital gain or loss. Capital gain or
loss recognized will be long-term if the stockholders
holding period with respect to the common stock surrendered is
more than one year at the time of the Reverse/Forward Stock
Split. A corporate taxpayer (other than an S corporation)
may be allowed a dividends received deduction subject to
applicable limitations and other special rules. If the
stockholder is an individual, long-term capital gain and
dividend income should generally be subject to United States
federal income tax at a maximum rate of 10%. In general,
dividends are taxed at ordinary income rates. However,
stockholders may qualify for a 15% federal income tax rate on
any cash received in the Reverse/Forward Stock Split that is
treated as a dividend as described above, if: (i) the
stockholder is an individual or other non-corporate stockholder,
(ii) the stockholder has held the common stock with respect
to which the dividend was received for more than 60 days
during the
120-day
period beginning 60 days before the Reverse/Forward Stock
Split, as determined under the Code, and (iii) the
stockholder was not obligated during such period (pursuant to a
short sale or otherwise) to make related payments with respect
to positions in substantially similar or related property.
Stockholders should consult with their own tax advisors
regarding their eligibility for such lower tax rates on dividend
income.
The deductibility of capital loss is subject to limitations. In
general, capital losses of individuals and other non-corporate
taxpayers may be used to offset other capital gains for the
taxable year, plus up to $3,000 of the taxpayers ordinary
income for such year. In general, the unused portion of such
loss may be carried forward indefinitely but may not be carried
back. Corporations are only permitted to apply capital losses
against capital gains and have a limited period to which such
losses can be carried back or forward.
Under Section 302 of the Code, a redemption of shares from
a stockholder as part of the Reverse/Forward Stock Split will be
treated as a sale or exchange of the redeemed shares if:
|
|
|
|
|
the Reverse/Forward Stock Split results in a complete
termination of such stockholders interest in the
Company;
|
|
|
|
the receipt of cash is substantially
disproportionate with respect to the stockholder; or
|
|
|
|
the receipt of cash is not essentially equivalent to a
dividend with respect to the stockholder.
|
22
These three tests are applied by taking into account not only
shares that a stockholder actually owns, but also shares that
the stockholder constructively owns pursuant to Section 318
of the Code. Under the constructive ownership rules of
Section 318 of the Code, a stockholder is deemed to
constructively own shares owned by certain related individuals
and entities in which the stockholder has an interest in
addition to shares directly owned by the stockholder. For
example, an individual stockholder is considered to own shares
owned by or for his or her spouse and his or her children,
grandchildren and parents (family
attribution). In addition, a stockholder is considered
to own a proportionate number of shares owned by estates or
certain trusts in which the stockholder has a beneficial
interest, by partnerships in which the stockholder is a partner,
and by corporations in which 50% or more in value of the stock
is owned directly or indirectly by or for such stockholder.
Similarly, shares directly or indirectly owned by beneficiaries
of estates of certain trusts, by partners of partnerships and,
under certain circumstances, by stockholders of corporations may
be considered owned by these entities (entity
attribution). A stockholder is also deemed to own
shares which the stockholder has the right to acquire by
exercise of an option or by conversion or exchange of a
security. Constructively owned shares may be reattributed to
another taxpayer. For example, shares attributed to one taxpayer
as a result of entity attribution may be attributed from that
taxpayer to another taxpayer through family attribution.
A stockholder who receives cash in the Reverse/Forward Stock
Split (i.e., owns fewer than twenty thousand five hundred
(20,500) shares of pre-Reverse Split common stock) and does not
constructively own any shares of post-Reverse/Forward Stock
Split common stock will have his or her interest in the Company
completely terminated by the Reverse/Forward Stock Split and
will therefore receive sale or exchange treatment on his or her
pre-Reverse Split common stock. That is, such a stockholder will
recognize gain or loss equal to the difference between the cash
payment and the stockholders tax basis for his or her
shares of pre-Reverse Split common stock.
A stockholder who receives cash in the Reverse/Forward Stock
Split and would only constructively own shares of
post-Reverse/Forward Stock Split common stock as a result of
family attribution may be able to avoid constructive ownership
of the shares of post-Reverse/Forward Stock Split common stock
by waiving family attribution and, thus, be treated as having
had his or her interest in the Company completely terminated by
the Reverse/Forward Stock Split. Among other things, waiving
family attribution requires: (i) that the stockholder have
no interest in the Company (including as an officer, director,
employee or stockholder) other than an interest as a creditor
and does not acquire such an interest during the ten-year period
immediately following the Reverse/Forward Stock Split other than
stock acquired by bequest or inheritance; and
(ii) including an election to waive family attribution in
the stockholders tax return for the year in which the
Reverse/Forward Stock Split occurs.
A stockholder who receives cash in the Reverse/Forward Stock
Split and immediately after the Reverse/Forward Stock Split
constructively owns shares of post-Reverse/Forward Stock Split
common stock must compare: (i) his, her or its percentage
ownership immediately before the Reverse/Forward Stock Split
(i.e., the number of voting shares actually or constructively
owned by him, her or it immediately before the Reverse/Forward
Stock Split divided by the number of voting shares outstanding
immediately before the Reverse/Forward Stock Split) with
(ii) his, her or its percentage ownership immediately after
the Reverse/Forward Stock Split (i.e., the number of voting
shares constructively owned by his, her or it immediately after
the Reverse/Forward Stock Split divided by the number of voting
shares outstanding immediately after the Reverse/Forward Stock
Split).
If the stockholders post-Reverse/Forward Stock Split
ownership percentage is less than 80% of the stockholders
pre-Reverse/Forward Stock Split ownership percentage, the
receipt of cash is substantially disproportionate
with respect to the stockholder, and the stockholder will,
therefore, receive sale or exchange treatment on the portion of
his, her or its shares of pre-Reverse Split common stock
exchanged for cash.
If the receipt of cash by a stockholder fails to constitute an
exchange under the substantially
disproportionate test or the complete
termination test, the receipt of cash may constitute an
exchange under the not essentially equivalent
to a dividend test. The receipt of cash by a stockholder
will be not
23
essentially equivalent to a dividend if the transaction
results in a meaningful reduction of the
stockholders proportionate interest in the Company. If:
(i) the stockholder exercises no control over the affairs
of the Company (e.g., is not an officer, director or high
ranking employee), (ii) the stockholders relative
stock interest in the Company is minimal, and (iii) the
stockholders post-Reverse/Forward Stock Split ownership
percentage is less than the stockholders
pre-Reverse/Forward Stock Split ownership percentage, the
receipt of cash will generally not be essentially equivalent to
a dividend with respect to the stockholder and the stockholder
will, therefore, receive sale or exchange treatment on the
portion of his, her or its shares of pre-Reverse Split common
stock exchanged for cash in lieu of fractional shares.
In all other cases, cash received by a stockholder who
immediately after the Reverse/Forward Stock Split constructively
owns shares of post-Reverse/Forward Stock Split common stock
will be treated: (i) first, as a taxable dividend to the
extent of allocable current or accumulated earnings and profits,
if any; (ii) second, as a tax-free return of capital to the
extent of the stockholders tax basis in the redeemed
shares; and (iii) finally, as gain from the sale or
exchange of the redeemed shares.
Backup
Tax Withholding
We are required to furnish to the holders of common stock, other
than corporations and other exempt holders, and to the IRS,
information with respect to dividends paid on the common stock.
You may be subject to backup withholding at the rate of 28% with
respect to proceeds received from a disposition of the shares of
common stock. Certain holders (including, among others,
corporations and certain tax-exempt organizations) are generally
not subject to backup withholding. You will be subject to backup
withholding if you are not otherwise exempt and you:
(a) fail to furnish your taxpayer identification number
(TIN), which, for an individual, is
ordinarily his or her social security number; (b) furnish
an incorrect TIN; (c) are notified by the IRS that you have
failed to properly report payments of interest or dividends; or
(d) fail to certify, under penalties of perjury, that you
have furnished a correct TIN and that the IRS has not notified
you that you are subject to backup withholding. Backup
withholding is not an additional tax but, rather, is a method of
tax collection. You generally will be entitled to credit any
amounts withheld under the backup withholding rules against your
United States federal income tax liability provided that the
required information is furnished to the IRS in a timely manner.
Structure
of the Reverse/Forward Stock Split
The Reverse/Forward Stock Split includes both the Reverse Split
and Forward Split of our common stock. The Reverse Split is
expected to occur on the Effective Date, which will be
approximately 20 calendar days following the date this
Information Statement is first mailed to our stockholders and
the Forward Split is expected to occur immediately thereafter.
Although the Reverse/Forward Stock Split has been approved by
the requisite number of stockholders, the Board reserves the
right, in its discretion, to abandon the Reverse/Forward Stock
Split prior to the proposed Effective Date if it determines that
abandoning the Reverse/Forward Stock Split is in the best
interests of the Company. Our Board believes that it is prudent
to recognize that, between the date of this Information
Statement and the date that the Reverse/Forward Stock Split will
become effective, factual circumstances could possibly change
such that it might not be appropriate or desirable to effect the
Reverse/Forward Stock Split at that time or on the terms
currently proposed, such as if we receive an offer from a third
party to acquire the Company that represents a superior offer to
our stockholders, if we experience a material change in our
business or if litigation is initiated affecting our ability to
proceed with the Reverse/Forward Stock Split. In the event our
Board decides to abandon the Reverse/Forward Stock Split, we
will file a Current Report on
Form 8-K
and issue a press release announcing the Boards decision.
The Reverse/Forward Stock Split will not impact any holders of
outstanding stock options or warrants to purchase shares of our
common stock.
Upon consummation of the Reverse Split, each registered
stockholder on the Effective Date will receive one
(1) share of common stock for each twenty thousand five
hundred (20,500) shares of common stock held in his, her or its
account immediately prior to the effective time of the Reverse
Split. In connection with the Reverse Split, the Company shall
not issue fractional shares to holders of less than twenty
thousand five
24
hundred (20,500) shares of common stock. Any registered
stockholder who holds fewer than twenty thousand five hundred
(20,500) shares of common stock in his, her or its account
immediately prior to the effective time of the Reverse Split
will receive a cash payment of One Cent ($0.01) per pre-Reverse
Split share instead of fractional shares. If a registered
stockholder holds at least twenty thousand five hundred (20,500)
shares of common stock in his, her or its account, any
fractional share in such account immediately after the Reverse
Split will not be cashed out after the Reverse Split but will be
subject to the Forward Split such that the total number of
shares held by such holder will not change as a result of the
Reverse/Forward Stock Split. Such holders will not need to
exchange or return any existing stock certificates, which will
continue to evidence ownership of the same number of shares as
set forth currently on the face of the certificates.
Immediately following the Reverse Split, in connection with the
Forward Split, each share of common stock then issued and
outstanding, including fractional shares of common stock then
held by holders who held twenty thousand five hundred (20,500)
or more shares of common stock immediately prior to the Reverse
Split, shall, without any further action on the part of the
Company or any stockholder, be reclassified as and converted
into shares of common stock at a ratio of one (1) to twenty
thousand five hundred (20,500), such that each such stockholder
shall hold at the effective time of the Forward Split the same
number of shares of common stock that such stockholder held
immediately prior to the Reverse Split.
The determination of the one (1) to twenty thousand five
hundred (20,500) Reverse/Forward Stock Split ratio was based on
the Companys intention to reduce the number of record
stockholders remaining after the Reverse Split to fewer than
300, in light of the Companys intention to terminate its
registration with the SEC. The Reverse/Forward Stock Split ratio
was determined in order to ensure that following the transaction
and taking into account anticipated future option and warrant
exercises, stock certificates that will ultimately be held of
record by current beneficial holders, as well as stock sales and
transfers, the Company could be reasonably assured that the
number of record holders would not increase to 300 which would
once again subject the Company to the reporting requirements of
the Exchange Act.
The resulting estimated cost to cash out these shares was
determined to be reasonable in light of the expected benefits
from the Reverse/Forward Stock Split. The Company has reserved
the right not to proceed with the Reverse/Forward Stock Split in
the event that it determines that abandoning the Reverse/Forward
Stock Split would be in the best interests of the Company. If
stockholders take actions to: (i) reduce their holdings to
under twenty thousand five hundred (20,500) shares; or
(ii) increase their holdings to at least twenty thousand
five hundred (20,500) shares prior to the proposed Effective
Date, the Company may be forced to make further changes to the
Reverse/Forward Stock Split ratio or to abandon the
Reverse/Forward Stock Split entirely.
We intend for the Reverse/Forward Stock Split to treat
stockholders holding common stock in street name through a
nominee (such as a bank or broker) in the same manner as
stockholders whose shares are registered in their names, and
nominees will be instructed to effect the Reverse/Forward Stock
Split for their beneficial holders. However, nominees may have
different procedures, and stockholders holding shares in street
name should contact their nominees. A stockholder holding fewer
than twenty thousand five hundred (20,500) shares of common
stock in street name who wants to receive cash in the
Reverse/Forward Stock Split should instruct his, her or its
nominee to transfer such stockholders shares into a record
account in such stockholders name prior to the Effective
Date to ensure that such stockholder will be considered a holder
of record prior to the Effective Date of the Reverse/Forward
Stock Split. A stockholder holding fewer than twenty thousand
five hundred (20,500) shares of common stock in street name
through a nominee who does not transfer such stockholders
shares into a record account prior to the Effective Date may not
have his, her or its shares cashed out in connection with the
Reverse/Forward Stock Split. For instance, a stockholders
shares may not be cashed out if such stockholders nominee
is a record holder of an aggregate of twenty thousand five
hundred (20,500) or more shares of common stock, holds shares
for multiple stockholders in street name and does not provide
such beneficial ownership positions prior to the Effective Date
to the Exchange Agent.
25
Fairness
of the Reverse/Forward Stock Split to Stockholders
Our Special Committee and our Board conducted a separate
analysis as to the fairness of this transaction to unaffiliated
stockholders owning shares being cashed out pursuant to the
Reverse Split and those who will retain an equity interest in us
subsequent to the consummation of the Reverse/Forward Stock
Split. Our Board also relied on the Valuation Consultants
valuation report, a copy of which is attached as
Appendix A to this Information Statement. Our Board
determined that the Reverse/Forward Stock Split, including the
proposed cash payment of One Cent ($0.01) per pre-reverse split
shares of our common stock held by stockholders holding less
than twenty thousand five hundred (20,500) shares that are to be
cashed out as a result of the Reverse/Forward Stock Split, is
substantively fair, from a financial point of view, to all of
our unaffiliated stockholders, including those whose shares will
be cashed out and those who will be continuing as our
stockholders. We have never repurchased our common stock, and
therefore the Board did not consider the prices at which we had
previously repurchased our shares of common stock. Our Board did
not consider our liquidation value because it determined that it
had no relevance in light of the fact that we will remain as a
continuing business and the Reverse/Forward Stock Split will not
result in a change of control of the Company. In addition,
management, our Board and the Special Committee adopted the
Valuation Consultants Discounted Cash Flow Analysis,which
included a going concern analysis.
The discussion below summarizes the material factors, both
positive and negative, considered by our Board in reaching its
fairness determinations, in addition to the detailed discussion
in this Information Statement under the captions Special
Factors Reasons for and Purposes of the
Reverse/Forward Stock Split on pages 8-10, Special
Factors Strategic Alternatives Considered on
page 10, Special Factors Background and
Timing of the Reverse/Forward Stock Split on pages
11-14,
Special Factors Effects of the Reverse/Forward
Stock Split on pages
14-16,
Special Factors Potential Disadvantages of the
Reverse/Forward
Stock Split to Stockholders; Accretion in Ownership and Control
of Certain Stockholders on page 16 and Special
Factors Procedural Fairness on pages
33-35 of
this Information Statement.
All of the members of our Board, and the following executive
officers: Philip T. Lavin, Ph.D. and Dr. Gene
Resnick, who own or control directly or indirectly, shares of
common stock have voted their shares, or caused all such
controlled shares to be voted, in favor of the Reverse/Forward
Stock Split. The stockholders that voted to approve the
Certificate of Amendment and Reverse/Forward Stock Split were
ComVest, Philip T. Lavin, Ph.D. and Dr. Gene Resnick. In
addition, our Board approved the Reverse/Forward Stock Split and
related transactions.
Substantive
Fairness
In determining the substantive fairness of the Reverse/Forward
Stock Split to unaffiliated stockholders, our Special Committee
and our Board considered, among others, the following factors:
(i) an analysis of the current market price of our common
stock as quoted on the OTCBB, (ii) an analysis of
historical market prices of our common stock as quoted on the
OTCBB, and (iii) the Valuation Consultants valuation
report, which included a discounted cash flow analysis, an
equity trading comparables analysis and a comparable
transactions analysis. Each of our Special Committee and our
Board reviewed and discussed the analyses of management and the
Valuation Consultants valuation report, asked management
and Special Committee members questions with respect thereto,
and ultimately adopted such analyses and its conclusions as
their own.
For those unaffiliated stockholders holding at least twenty
thousand five hundred (20,500) shares who would remain as
stockholders after the Reverse/Forward Stock Split, the Special
Committee and our Board found that although they would
experience a reduction in liquidity of their shares, the value
of their shares may increase as a result of our anticipated
reduced annual general and administrative expenses associated
with being a non-reporting company. In addition, our Board
concluded that the Reverse/Forward Stock Split is fair to the
stockholders who would remain our stockholders after the
transaction because the price per share to be paid for shares
for those stockholders being cashed out is within the range of
our common equity price per
26
share based on an analysis of our current stock price and recent
historical stock prices and not materially in excess of the
value attributable to our common stock in the Valuation
Consultants report.
For those unaffiliated stockholders holding less than twenty
thousand five hundred (20,500) shares and that would be cashed
out, the Special Committee and our Board determined that the
proposed cash payment of One Cent ($0.01) per pre-Reverse Split
share is substantively fair from a financial point of view. In
considering whether the cash payment of One Cent ($0.01) per
pre-Reverse Split share payable to unaffiliated stockholders
whose shares would be cashed out in connection with the Reverse
Split is substantively fair from a financial point of view, the
Special Committee and our Board considered, among other things,
the following factors:
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The price of One Cent ($0.01) to be paid for shares of our
common stock held by stockholders holding less than twenty
thousand five hundred (20,500) shares that are to be cashed out
as a result of the Reverse/Forward Stock Split is within the
range of recent historical prices of our common stock and
slightly in excess of the value attributed to our common stock
in the Valuation Consultants Report;
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The market price of a share of our common stock as of the date
of the Special Committees determination of the price to be
paid for shares of our common stock held by stockholders holding
less than twenty thousand five hundred (20,500) shares that are
to be cashed out as a result of the Reverse/Forward Stock Split
as quoted on the
over-the-counter
bulletin board, which was $0.008, with relatively low volumes of
shares traded, and that the offer of One Cent ($0.01) per
pre-reverse split share allows stockholders holding less than
twenty thousand five hundred (20,500) shares to be cashed out at
a slight premium to the value attributed to our shares in the
Valuation Consultants report; and
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Our Board also reviewed and considered the following additional
factors in determining the fairness of the Reverse/Forward Stock
Split to our unaffiliated stockholders:
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We have never received any bona fide offers for the merger or
consolidation of our Company with or into any other company, or
the sale or transfer of all or substantially all of our assets
to another company, or a purchase of the companys
securities by a third party that would involve a change of
control of our Company. Although we entered into preliminary
discussions with a single third party regarding a possible
business combination, these preliminary discussions never
resulted in a structure of the transaction, the amount of
consideration to be paid in the transaction or the form such
consideration would take. As a result, our Board was never
presented with an offer that it could accept or reject prior to
the termination of such discussions.
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The Reverse/Forward Stock Split will not materially change the
rights, preferences or limitations of unaffiliated stockholders
who will retain an interest in us subsequent to the consummation
of the Reverse/Forward Stock Split.
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Unaffiliated stockholders who continue to hold an equity
interest in us following the Reverse/Forward Stock Split will
not have readily available to them all of the information
regarding our operations and results that is currently available
to them in our filings with the SEC.
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Financial
Analysis Performed by Management
The following paragraphs summarize the financial analyses
performed by management to assist the Special Committee and our
Board in determining the price to be paid in lieu of issuing
fractional shares resulting from the Reverse/Forward Stock Split.
Management relied on both financial and non-financial
information in performing its analysis. Management also assumed
that the Reverse/Forward Stock Split would be consummated
substantially in accordance with the terms as generally set
forth in this Information Statement.
Management also relied on the fact that our smaller unaffiliated
stockholders may elect to remain stockholders by acquiring
sufficient shares so that they hold at least twenty thousand
five hundred (20,500) shares of common stock in their account
immediately prior to the Reverse/Forward Stock Split. Management
considers the structure of the Reverse/Forward Stock Split to be
fair to all unaffiliated stockholders because it
27
allows them to control the decision of whether to remain a
stockholder following the Reverse/Forward Stock Split or to
receive the cash consideration offered in connection with the
Reverse/Forward Stock Split. However, because the average daily
trading volume of our common stock is low, you may not be able
to acquire a sufficient number of shares prior to the Effective
Date.
Managements financial analyses is based upon market,
economic and other conditions as they existed on, and could be
evaluated as of, the date of their analyses. The estimates
contained in managements analyses and the ranges of
valuations resulting from any particular analysis are not
necessarily indicative of actual values or future results, which
may be significantly more or less favorable than those suggested
by such analyses. The analyses described below include
forward-looking statements and projections and were based upon a
variety of assumptions, including our ability to achieve
strategic goals, objectives and targets over the applicable
periods. These assumptions involve judgments with respect to
future economic, competitive and regulatory conditions,
financial market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and
many of which are beyond our control. Many important factors, in
addition to those discussed elsewhere in this information
statement and in our filings with the SEC, could cause our
results to differ materially from those expressed or implied by
the forward-looking statements. These factors include our
competitive environment, economic and other market conditions in
which we operate and matters affecting business generally, all
of which are difficult to predict and many of which are beyond
our control. Accordingly, we cannot assure you that the
projections and assumptions on which our management based its
financial analyses are in fact indicative of our future
performance or that actual results will not differ materially
from such projections.
Management conducted two (2) separate analyses, each of
which is summarized below:
Historical Market Price Analysis. Management
utilized a historical stock price analysis to review our stock
performance and provide context to the price to be paid in the
Reverse/Forward Stock Split. In addition, management reviewed
the liquidity of our shares in the public trading markets and
the daily closing market price and trading volume of our shares
for the 30, 60, and 90 day periods prior to August 27,
2009. Management noted that from May 29, 2009 to
August 27, 2009, the high closing price of our common stock
was $0.02 and the low closing price of our common stock during
this period was $0.0051. Management also noted the closing
prices of our common stock for various dates as summarized in
the table below:
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Closing
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Price
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August 27, 2009
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$
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0.01
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30 days prior (July 28, 2009)
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$
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0.006
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60 days prior (June 28, 2009)
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$
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0.01
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90 days prior (May 29, 2009)
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$
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0.0188
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Additionally, the average daily trading volume of our common
stock for the 30, 60, and 90 day periods prior to
August 27, 2009 were approximately 105,800, 105,000, and
211,000 shares, respectively. As there has not been a
market for large share transactions in our common stock, given
our financial condition, any large transaction would likely
result in significantly lower trading prices than the historical
prices noted above. Although our high sales price for a share of
our common stock exceeded One Cent ($0.01) at times
during the first and second quarters of 2009, our high sales
price for a share of our common stock did not exceed One Cent
($0.01) for the 90 days prior to the initial announcement
of the Reverse/Forward Stock Split. As a result, and together
with the analysis of our Valuation Consultant that our common
stock has no value, our Special Committee and Board concluded
that the value represented by the share price of One Cent
($0.01) per pre-Reverse Split share, was fair particularly given
our low historical trading volume and current financial
condition. In addition, management concluded that any
stockholder having shares cashed out as a result of the Reverse
Split would achieve liquidity without incurring brokerage costs
and that, with extremely limited liquidity in the public market
for our common stock, only a small portion of our unaffiliated
stockholders would have been able to attain the bid prices
before the stock price decreased measurably.
28
Current Market Price Analysis. On
September 3, 2009, the last trading day prior to the
initial announcement of the Reverse/Forward Stock Split, the
Companys common stock closing price per share was $0.0086.
Our Special Committee and Board determined that the value
represented by the recommended share price of One Cent ($0.01)
per pre-Reverse Split share is within the range of recent
historical prices of our common stock and slightly in excess of
the value attributed to our common stock in the Valuation
Consultants Report.
Independent
Valuation Report by Third Party Valuation Consultant
The Special Committee considered a number of alternative
investment banking firms and valuation experts to conduct a
third party valuation of the Company. Based upon the relative
qualifications and reputations, the length of time to complete
the engagement, the costs of each of the firms and the
recommendation of management, the Special Committee authorized
the engagement of the Valuation Consultant. Established in 1932,
the Valuation Consultant is a full service valuation consulting
firm specializing in enterprise valuations. The Valuation
Consultant has approximately 100 employees, serving clients
on a national basis from its offices in New York, Los Angeles,
Chicago, Philadelphia, St Louis and Tampa. In the first six
months of 2009 alone, the Valuation Consultant has advised
clients with respect to assets having a cost basis of more than
$5 billion.
On July 31, 2009, the Special Committee ratified
managements engagement of the Valuation Consultant to
provide a report to the Special Committee with respect to an
independent valuation report of the Company. We did not give the
Valuation Consultant any instructions on how to prepare their
report or the conclusions in their report, nor did we impose any
limitations on the Valuation Consultant in preparing their
report. On or about July 27, 2009, the Valuation Consultant
was engaged by the Company to provide an independent valuation
of the total equity of the Company on a controlling interest
basis in connection with a possible going private transaction.
In September 2008, the Valuation Consultant was previously
engaged by the Company to value the Companys common equity
as of October 31, 2007, for tax and planning purposes.
Except for that assignment, no other material relationship
exists or has existed within the past two (2) years between
the Valuation Consultant and the Company prior to this
transaction. Pursuant to an engagement letter dated
July 27, 2009, the Valuation Consultant will be paid fees
of $25,000 for its valuation report. An additional fee of
$10,000 will be paid for the use of the valuation report in this
Information Statement. Our engagement letter with the Valuation
Consultant includes other terms and provisions customary for an
advisory assignment such as this one, including an
indemnification by the Company as well as reimbursement of out
of pocket expenses. Such fees and expenses are not contingent
upon the successful completion of the Reverse/Forward Stock
Split. Below is a summary of the Valuation Consultants
valuation report. The full text of the valuation report is
attached as Appendix A to this Information
Statement. Such valuation report was the only presentation,
discussion, or report held with or presented by the Valuation
Consultant, whether oral or written, to the Board
and/or
Special Committee.
The Valuation Consultant:
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Reviewed a draft of our Information Statement.
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Reviewed certain agreements and contracts related to our
business.
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Reviewed and analyzed certain publicly available financial and
other data with respect to us.
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Conducted discussions with members of our senior management and
reviewed certain of our financial forecasts with respect to our
business prospects and financial outlook.
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Reviewed current and historical market prices and trading
activity of our common stock.
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Reviewed the financial terms, to the extent publicly available,
of selected precedent transactions which the Valuation
Consultant deemed generally comparable to the Reverse/Forward
Stock Split.
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Performed a valuation to arrive at the fair market value of our
common stock.
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The Valuation Consultant also considered such factors as it
deemed relevant, including, but not limited to:
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The timing of our financial requirements; and
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Our historical financial and operating characteristics.
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29
In rendering its report, the Valuation Consultant considered
such other information and conducted such other financial
studies, analyses and investigations as it deemed appropriate
under the circumstances. In connection with the review, the
Valuation Consultant relied upon and assumed the accuracy and
completeness of the financial and other information publicly
available or furnished to it by us or otherwise reviewed by it.
The Valuation Consultant did not independently verify the
accuracy or completeness of such information, nor did the
Valuation Consultant make or obtain any independent evaluations
or appraisals of any of our properties, assets or liabilities
(contingent or otherwise). In addition, neither the Company nor
the Special Committee authorized the Valuation Consultant to
solicit any indications of interest from any third party with
respect to the purchase of all or a part of our business. With
respect to our financial projections, the Valuation Consultant
assumed that they were reasonably prepared on a basis reflecting
the best currently available estimates and judgments of our
management as to our future financial performance, and the
Valuation Consultant expressed no opinion with respect to such
forecasts or the assumptions on which they were based. The
report of the Valuation Consultant was necessarily based upon
financial, economic, market and other conditions as they existed
and could be evaluated as of the date of the report.
The Valuation Consultant expressed no view as to, and its report
did not address, the relative merits of the Reverse/Forward
Stock Split as compared to any alternative business strategies
that might exist for us or the effect of any transaction in
which we might engage. No opinion was expressed as to the
substantive fairness of the Reverse/Forward Stock Split. No
fairness opinion was requested by the Company. The Valuation
Consultant did not express any opinion as to the prices or price
ranges at which our common stock has traded or may trade in the
future. The Valuation Consultant was not asked to and did not
recommend the specific consideration payable in the
Reverse/Forward Stock Split. The share consideration was
determined by our Special Committee. No limitations were imposed
by us on the Valuation Consultant with respect to the
investigations made or procedures followed by it in rendering
its opinion.
In preparing its report, the Valuation Consultant performed a
variety of financial and comparative analyses. The summary of
these analyses is not a complete description of them. The
preparation of a valuation report is a complex analytical
process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances
and, therefore, a valuation report is difficult to summarize.
Accordingly, the Valuation Consultant believes that its analyses
must be considered as a whole and that selecting portions of its
analyses and factors or focusing on information presented in
tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a
misleading or incomplete view of the process underlying its
analyses and opinion.
In its analyses, the Valuation Consultant considered industry
performance, general business, economic, market and financial
conditions and other matters existing as of the date of its
report. Many of these factors are beyond our control. No
company, transaction or business used in those analyses as a
comparison is identical to us or the Reverse/Forward Stock
Split, nor is an evaluation of those analyses entirely
mathematical; rather, the analyses involve complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the
acquisition, public trading or other values of the companies,
business segments or transactions being analyzed.
The estimates contained in the Valuation Consultants
analyses and the valuation resulting from any particular
analysis do not reflect actual values or future results or
values. Those values may be significantly more or less favorable
than those suggested by the analyses. In addition, analyses
relating to the value of our business or securities do not
purport to be appraisals or to reflect the prices at which our
business or securities actually may be sold. Accordingly, these
analyses and estimates are inherently subject to substantial
uncertainty.
The Valuation Consultant report and analyses were only one of
several factors considered by our Special Committee in its
evaluation of the Reverse/Forward Stock Split and should not be
viewed as determinative of the views of our Special Committee,
Board or management with respect to the share consideration to
be paid to those stockholders being cashed out if the
Reverse/Forward Stock Split is consummated, or with respect to
the Reverse/Forward Stock Split generally.
30
In performing its analyses, the Valuation Consultant relied on
the income approach applying the discounted cash flow method, as
well as on the market approach applying an equity trading
comparable analysis and a comparable transactions analysis. The
Valuation Consultant also considered both internal and external
factors that influence our value. Internal factors include,
among other things, our revenue concentration and organizational
and financial structure. External factors include, among other
things, the overall U.S. economy and the current state of
the healthcare industry.
The Income Approach Applying the Discounted Cash Flow
Method The Valuation Consultant received
financial projections from our management and discussed the
assumptions inherent in the projections with our management in
the context of the current and expected conditions in our
industry and the financial position of the Company. The
Valuation Consultant calculated our projected free cash flows to
equity holders for the fiscal years ending December 31,
2009 through December 31, 2018 and applied a cost of equity
capital-based discount rate to estimate the value of our common
equity. Below is a summary of our managements projections
which were used to calculate our free cash flows to equity
holders:
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Fiscal Years Ending December 31,
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2009
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2010
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2011
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2012
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2013
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2014
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2015
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2016
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2017
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2018
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Terminal
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Revenue
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$
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66,291,000
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$
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70,931,370
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$
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76,605,880
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$
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82,734,350
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$
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89,353,098
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$
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96,501,346
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$
|
104,221,453
|
|
|
|
$
|
112,559,170
|
|
|
|
$
|
121,563,903
|
|
|
|
$
|
131,289,016
|
|
|
|
$
|
141,792,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Growth
|
|
|
|
(11.6
|
)%
|
|
|
|
7.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold
|
|
|
|
37,143,000
|
|
|
|
|
39,721,288
|
|
|
|
|
42,898,991
|
|
|
|
|
44,477,674
|
|
|
|
|
48,035,888
|
|
|
|
|
51,878,759
|
|
|
|
|
56,029,060
|
|
|
|
|
60,511,385
|
|
|
|
|
65,352,295
|
|
|
|
|
70,580,479
|
|
|
|
|
76,226,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
29,148,000
|
|
|
|
|
31,210,082
|
|
|
|
|
33,706,888
|
|
|
|
|
38,256,676
|
|
|
|
|
41,317,210
|
|
|
|
|
44,622,587
|
|
|
|
|
48,192,394
|
|
|
|
|
52,047,785
|
|
|
|
|
56,211,608
|
|
|
|
|
60,708,537
|
|
|
|
|
65,565,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Revenue
|
|
|
|
44.0
|
%
|
|
|
|
44.0
|
%
|
|
|
|
44.0
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
21,740,000
|
|
|
|
|
23,261,800
|
|
|
|
|
25,122,744
|
|
|
|
|
27,132,564
|
|
|
|
|
29,303,169
|
|
|
|
|
31,647,422
|
|
|
|
|
34,179,216
|
|
|
|
|
36,913,553
|
|
|
|
|
39,866,637
|
|
|
|
|
43,055,968
|
|
|
|
|
46,500,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
7,408,000
|
|
|
|
|
7,948,282
|
|
|
|
|
8,584,144
|
|
|
|
|
11,124,112
|
|
|
|
|
12,014,041
|
|
|
|
|
12,975,165
|
|
|
|
|
14,013,178
|
|
|
|
|
15,134,232
|
|
|
|
|
16,344,971
|
|
|
|
|
17,652,568
|
|
|
|
|
19,064,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Revenue
|
|
|
|
11.2
|
%
|
|
|
|
11.2
|
%
|
|
|
|
11.2
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
1,655,000
|
|
|
|
|
1,903,449
|
|
|
|
|
2,360,200
|
|
|
|
|
2,931,138
|
|
|
|
|
3,626,867
|
|
|
|
|
2,914,747
|
|
|
|
|
3,503,885
|
|
|
|
|
4,120,309
|
|
|
|
|
4,722,197
|
|
|
|
|
5,271,339
|
|
|
|
|
2,777,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Amortization
|
|
|
|
1,232,958
|
|
|
|
|
1,125,756
|
|
|
|
|
895,805
|
|
|
|
|
886,638
|
|
|
|
|
822,948
|
|
|
|
|
609,373
|
|
|
|
|
262,083
|
|
|
|
|
140,000
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
|
4,520,042
|
|
|
|
|
4,919,076
|
|
|
|
|
5,328,140
|
|
|
|
|
7,306,336
|
|
|
|
|
7,564,227
|
|
|
|
|
9,451,044
|
|
|
|
|
10,247,209
|
|
|
|
|
10,873,923
|
|
|
|
|
11,622,774
|
|
|
|
|
12,381,229
|
|
|
|
|
16,287,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Revenue
|
|
|
|
6.8
|
%
|
|
|
|
6.9
|
%
|
|
|
|
7.0
|
%
|
|
|
|
8.8
|
%
|
|
|
|
8.5
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.7
|
%
|
|
|
|
9.6
|
%
|
|
|
|
9.4
|
%
|
|
|
|
11.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Interest
|
|
|
|
4,013,386
|
|
|
|
|
4,292,544
|
|
|
|
|
274,361
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Amortization
|
|
|
|
5,216,092
|
|
|
|
|
5,964,178
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable Income
|
|
|
|
(4,709,435
|
)
|
|
|
|
(5,337,645
|
)
|
|
|
|
5,053,779
|
|
|
|
|
7,306,336
|
|
|
|
|
7,564,227
|
|
|
|
|
9,451,044
|
|
|
|
|
10,247,209
|
|
|
|
|
10,873,923
|
|
|
|
|
11,622,774
|
|
|
|
|
12,381,229
|
|
|
|
|
16,287,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Revenue
|
|
|
|
(7.1
|
)%
|
|
|
|
(7.5
|
)%
|
|
|
|
6.6
|
%
|
|
|
|
8.8
|
%
|
|
|
|
8.5
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.7
|
%
|
|
|
|
9.6
|
%
|
|
|
|
9.4
|
%
|
|
|
|
11.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax Expense (@ 41.0)%
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
948,344
|
|
|
|
|
3,101,333
|
|
|
|
|
3,874,928
|
|
|
|
|
4,201,356
|
|
|
|
|
4,458,308
|
|
|
|
|
4,765,337
|
|
|
|
|
5,076,304
|
|
|
|
|
6,677,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
(4,709,435
|
)
|
|
|
|
(5,337,645
|
)
|
|
|
|
5,053,779
|
|
|
|
|
6,357,992
|
|
|
|
|
4,462,894
|
|
|
|
|
5,576,116
|
|
|
|
|
6,045,853
|
|
|
|
|
6,415,615
|
|
|
|
|
6,857,437
|
|
|
|
|
7,304,925
|
|
|
|
|
9,609,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Depreciation
|
|
|
|
1,655,000
|
|
|
|
|
1,903,449
|
|
|
|
|
2,360,200
|
|
|
|
|
2,931,138
|
|
|
|
|
3,626,867
|
|
|
|
|
2,914,747
|
|
|
|
|
3,503,885
|
|
|
|
|
4,120,309
|
|
|
|
|
4,722,197
|
|
|
|
|
5,271,339
|
|
|
|
|
2,777,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Intangible Amortization
|
|
|
|
1,232,958
|
|
|
|
|
1,125,756
|
|
|
|
|
895,805
|
|
|
|
|
886,638
|
|
|
|
|
822,948
|
|
|
|
|
609,373
|
|
|
|
|
262,083
|
|
|
|
|
140,000
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Debt Amortization
|
|
|
|
5,216,092
|
|
|
|
|
5,964,178
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Capital Expenditures
|
|
|
|
(1,298,651
|
)
|
|
|
|
(1,389,556
|
)
|
|
|
|
(1,500,721
|
)
|
|
|
|
(1,620,778
|
)
|
|
|
|
(1,750,441
|
)
|
|
|
|
(1,890,476
|
)
|
|
|
|
(2,041,714
|
)
|
|
|
|
(2,205,051
|
)
|
|
|
|
(2,381,455
|
)
|
|
|
|
(2,571,971
|
)
|
|
|
|
(2,777,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Increase in Working Capital
|
|
|
|
868,600
|
|
|
|
|
(464,037
|
)
|
|
|
|
(567,451
|
)
|
|
|
|
(612,847
|
)
|
|
|
|
(661,875
|
)
|
|
|
|
(714,825
|
)
|
|
|
|
(772,011
|
)
|
|
|
|
(833,772
|
)
|
|
|
|
(900,473
|
)
|
|
|
|
(972,511
|
)
|
|
|
|
(1,050,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Debt Repaid
|
|
|
|
0
|
|
|
|
|
(31,824,000
|
)
|
|
|
|
(5,700,000
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow to Equity
|
|
|
$
|
2,964,564
|
|
|
|
$
|
(30,021,855
|
)
|
|
|
$
|
541,612
|
|
|
|
$
|
7,942,143
|
|
|
|
$
|
6,500,393
|
|
|
|
$
|
6,494,936
|
|
|
|
$
|
6,998,097
|
|
|
|
$
|
7,637,101
|
|
|
|
$
|
8,297,705
|
|
|
|
$
|
9,031,782
|
|
|
|
$
|
8,559,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fraction of Year
|
|
|
|
0.38
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount Period (Mid-Year Convention)
|
|
|
|
0.19
|
|
|
|
|
0.88
|
|
|
|
|
1.88
|
|
|
|
|
2.88
|
|
|
|
|
3.88
|
|
|
|
|
4.88
|
|
|
|
|
5.88
|
|
|
|
|
6.88
|
|
|
|
|
7.88
|
|
|
|
|
8.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value Factor (@ 48.5)%
|
|
|
|
0.9276
|
|
|
|
|
0.7061
|
|
|
|
|
0.4755
|
|
|
|
|
0.3202
|
|
|
|
|
0.2156
|
|
|
|
|
0.1452
|
|
|
|
|
0.0978
|
|
|
|
|
0.0658
|
|
|
|
|
0.0443
|
|
|
|
|
0.0299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of Cash Flow
|
|
|
$
|
1,045,000
|
|
|
|
$
|
(21,199,140
|
)
|
|
|
$
|
257,539
|
|
|
|
$
|
2,543,112
|
|
|
|
$
|
1,401,654
|
|
|
|
$
|
943,083
|
|
|
|
$
|
684,271
|
|
|
|
$
|
502,864
|
|
|
|
$
|
367,920
|
|
|
|
$
|
269,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of Cash Flows
|
|
|
$
|
(13,184,020
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal Year Cash Flow
|
|
|
$
|
8,559,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of Terminal Value
|
|
|
|
561,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiplied by: Capitalization Rate
|
|
|
|
2.1978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Value
|
|
|
|
No Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal Year Value
|
|
|
$
|
18,811,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multiplied by: Present Value Factor
|
|
|
|
0.0299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of Terminal Value
|
|
|
$
|
561,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain
assumptions related to the Income Approach Analysis were as
follows:
|
|
|
|
|
Working capital was based on an assumed industry optimal amount
of 10.0% of the change in annual revenue. The 10.0% indication
was based on the equity comparables debt and excess
cash-free working capital/sales indications. An excess cash
approach was taken as companies in the subject industry
|
31
|
|
|
|
|
typically reserve approximately 60.0% of their cash and cash
equivalents relative to customer deposits/unearned revenue.
Thus, the full amount of cash on the books was not used as part
of the working capital calculation; rather, any cash remaining
after withholding 60.0% of our customer deposits/unearned
revenue was used in the calculation.
|
|
|
|
|
|
Taxes for the fiscal years ending December 31, 2009 through
December 31, 2011 were set equal to zero, and the tax
benefit was carried forward until the Company generated adequate
earnings to deplete the benefit. Taxes were estimated based on a
blended state and federal rate of 41.0%.
|
|
|
|
To account for the value of the common equity of the business
beyond the forecast period, a terminal cash flow to equity
holders was developed and was capitalized through application of
the Gordon Growth Model.
|
The Valuation Consultants DCF analysis concluded that our
equity has no value based on the present value of our free cash
flows to equity holders and our substantial debt burden.
Consequently, the Valuation Consultant concluded a total common
equity value of $0.00 ($0.00 per share) as of August 24,
2009.
The Market Approach Using Equity Trading
Comparables The Valuation Consultant analyzed
six (6) comparable public companies in our industry that
they deemed relevant. The enterprise value to EBITDA multiple
for the companies analyzed by the Valuation Consultant ranged
from -0.09x to 10.9x with a median multiple of 8.2x. All of the
companies reported enterprise value to EBITDA multiples, however
the -0.09x value was omitted from the median calculation.
Multiples based on EBITDA were selected because this cash flow
measure eliminates disparities in capital intensity,
depreciation methods, and income tax structures. Due to our
significant leverage and to the illiquidity of our common stock,
the Valuation Consultant believes that our market-implied
enterprise value multiple is ultimately not meaningful. Below is
a table of the public company comparisons analyzed and their
implied multiples:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Ticker
|
|
|
AVRO
|
|
|
|
CVD
|
|
|
|
ENCO
|
|
|
|
ICLR
|
|
|
|
KNDL
|
|
|
|
PRXL
|
|
|
|
PPDI
|
|
|
Guideline
|
|
|
Guideline
|
|
|
|
|
Company Name
|
|
|
Averion
|
|
|
|
Covance Inc.
|
|
|
|
Encorium
|
|
|
|
ICON plc
|
|
|
|
Kendle
|
|
|
|
Parexel
|
|
|
|
Pharma. Prod.
|
|
|
Average
|
|
|
Median
|
|
|
Selected
|
|
|
|
|
($ in thousands, except stock price data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Price(1)
|
|
|
$
|
0.01
|
|
|
|
$
|
54.74
|
|
|
|
$
|
0.17
|
|
|
|
$
|
22.30
|
|
|
|
$
|
11.57
|
|
|
|
$
|
12.64
|
|
|
|
$
|
20.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Common Shares (in Thousands)
|
|
|
|
639,258
|
|
|
|
|
63,973
|
|
|
|
|
20,524
|
|
|
|
|
58,610
|
|
|
|
|
14,869
|
|
|
|
|
57,531
|
|
|
|
|
118,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Capitalization
|
|
|
$
|
6,393
|
|
|
|
$
|
3,501,882
|
|
|
|
$
|
3,489
|
|
|
|
$
|
1,307,012
|
|
|
|
$
|
172,034
|
|
|
|
$
|
727,192
|
|
|
|
$
|
2,383,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Total Debt
|
|
|
|
39,546
|
|
|
|
|
58,000
|
|
|
|
|
227
|
|
|
|
|
99,602
|
|
|
|
|
153,610
|
|
|
|
|
286,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Minority Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Excess Cash(2)
|
|
|
|
|
|
|
|
|
99,620
|
|
|
|
|
|
|
|
|
|
16,005
|
|
|
|
|
2,543
|
|
|
|
|
|
|
|
|
|
424,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Value
|
|
|
$
|
45,939
|
|
|
|
$
|
3,460,262
|
|
|
|
$
|
3,716
|
|
|
|
$
|
1,390,609
|
|
|
|
$
|
323,101
|
|
|
|
$
|
1,017,448
|
|
|
|
$
|
1,959,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest Fiscal Year
|
|
|
|
12/31/2008
|
|
|
|
|
12/31/2008
|
|
|
|
|
12/31/2008
|
|
|
|
|
12/31/2008
|
|
|
|
|
12/31/2008
|
|
|
|
|
6/30/2008
|
|
|
|
|
12/31/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest 12 Months
|
|
|
|
6/30/2009
|
|
|
|
|
6/30/2009
|
|
|
|
|
3/31/2009
|
|
|
|
|
3/31/2009
|
|
|
|
|
6/30/2009
|
|
|
|
|
3/31/2009
|
|
|
|
|
6/30/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest Fiscal Year
|
|
|
$
|
3,696
|
|
|
|
$
|
335,221
|
|
|
|
$
|
(4,288
|
)
|
|
|
$
|
127,232
|
|
|
|
$
|
71,390
|
|
|
|
$
|
123,492
|
|
|
|
$
|
343,852
|
|
|
$
|
166,150
|
|
|
$
|
125,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest 12 Months
|
|
|
$
|
4,612
|
|
|
|
$
|
329,177
|
|
|
|
$
|
(2,768
|
)
|
|
|
$
|
134,027
|
|
|
|
$
|
63,346
|
|
|
|
$
|
147,183
|
|
|
|
$
|
325,553
|
|
|
$
|
166,086
|
|
|
$
|
140,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise Value / EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest Fiscal Year
|
|
|
|
12.4
|
x
|
|
|
|
10.3
|
x
|
|
|
|
(0.9
|
)x*
|
|
|
|
10.9
|
x
|
|
|
|
4.5
|
x
|
|
|
|
8.2
|
x
|
|
|
|
5.7
|
x
|
|
|
7.9
|
x
|
|
|
8.2
|
x
|
|
|
8.2
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latest 12 Months
|
|
|
|
10.0
|
x
|
|
|
|
10.5
|
x
|
|
|
|
(1.3
|
)x*
|
|
|
|
10.4
|
x
|
|
|
|
5.1
|
x
|
|
|
|
6.9
|
x
|
|
|
|
6.0
|
x
|
|
|
7.8
|
x
|
|
|
6.9
|
x
|
|
|
6.9
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
|
(1) |
|
Stock prices observed as of August 14, 2009. |
|
(2) |
|
Only excess cash was considered in this instance, as companies
in this industry typically need to reserve 60.0% of their cash
and cash equivalents relative to customer deposits/unearned
revenue. |
|
* |
|
Excluded from average and median calculations. |
Certain
assumptions related to the Market Approach were as
follows:
|
|
|
|
|
Because we are smaller and have significantly more leverage than
any other competitor analyzed, the market approach using
comparable transaction methods initially suggested that we
should trade at a
|
32
|
|
|
|
|
meaningful enterprise value discount to the publicly listed
peers. In order to capture the additional risks associated with
us when comparing us to the equity comparables, the Valuation
Consultant considered various adjustments to the multiples. Such
considerations included the following: (i) the equity
comparables exhibited greater financial size, service
diversification, earnings power, financial growth, and more
sophisticated operations in comparison to us; (ii) the
equity comparables had less customer concentration relative to
us, highlighting our significant customer concentration risk;
and (iii) the equity comparables were less risky from a
leverage perspective, due to their more conservative capital
structure relative to us.
|
|
|
|
|
|
In order to qualify an appropriate adjustment to the equity
comparables multiple range, the Valuation Consultant reviewed
various size discount studies, most notably the 2008 Mergerstat
Review. The discounts referenced are derived from comparing
price-to-earnings
multiples paid in
change-of-control
transactions for large and small companies. The data reveals
that investors require either a greater return, or a discount,
as offsetting compensation for an investment in a smaller, less
diversified company. Based on this study and the consideration
of the referenced risk factors, the Valuation Consultant
selected a size discount of 30.0% as the most appropriate for
application to the selected multiple range.
|
|
|
|
The adjusted equity comparables multiple range suggests that
there is no equity value for us.
|
The Market Approach Using Precedent M&A
Transactions The Valuation Consultant identified
change of control transactions involving target companies with
similar operations, characteristics, and business risks to us.
Capital IQs merger and acquisition database served as the
primary source to obtain the transaction data. The search
identified four (4) transactions that were made in the
subject industry since June, 30 2007, and disclosed sufficient
information from which to construct suitable multiples for
application to the subject entity. However, there is not an
active recent market for companies similar to us. Although
several transactions were analyzed, the Valuation Consultant
heavily relied upon the PharmaNet transaction, which closed on
March 13, 2009, for purposes of selecting an appropriate
multiple range. Not only was the PharmaNet transaction the most
recent, but the acquired company also has very similar
operations to us and faced comparable leverage issues. Thus, the
implied EV/LTM EBITDA multiple from the PharmaNet transaction
was used as the basis for the selected multiple range. The
adjusted precedent M&A transaction multiple range suggests
that there is no equity value for us.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
|
Multiple Range
|
|
|
|
Implied EV Range
|
|
|
|
Less: Total Debt
|
|
|
|
Equity Value
|
|
|
|
|
($ in thousands)
|
|
Selected Transaction Multiple Range LTM EBITDA
|
|
|
|
|
|
|
|
|
6.4x - 7.8
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted for Small Company Size Discount(1)
|
|
|
|
|
|
|
|
|
5.8x - 7.0
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LFY 12/31/08 EBITDA
|
|
|
$
|
3,696
|
|
|
|
|
5.8x - 7.0
|
x
|
|
|
$
|
21,437 - $25,872
|
|
|
|
$
|
39,546
|
|
|
|
|
No Value
|
|
LTM 6/30/09 EBITDA
|
|
|
$
|
4,613
|
|
|
|
|
5.8x - 7.0
|
x
|
|
|
$
|
26,755 - $32,291
|
|
|
|
$
|
39,546
|
|
|
|
|
No Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M&S Reference Range(2)
|
|
|
$
|
4,155
|
|
|
|
|
5.8x - 7.0
|
x
|
|
|
$
|
24,096 - $29,082
|
|
|
|
$
|
39,546
|
|
|
|
|
No Value
|
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Note:
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(1) |
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Selected multiple range includes a small company size discount
of 10.0%, based on an analysis of the Companys size,
growth, profitability, and leverage against the indications
demonstrated by the subject acquired companies. |
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(2) |
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Represents the average of the 2008 and LTM indications. |
Certain
assumptions related to the Comparable M&A Transactions
Analyses were as follows:
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Consideration was given to applicable discounts to the selected
multiple range. A similar size discount analysis was performed
as presented in the Valuation Consultants equity
comparables section of its report. In this instance, the
indications of the precedent M&A transactions are more
closely aligned with those of us, thus warranting a lower
discount for size. Ultimately, the Valuation Consultant
determined that a 10.0% discount for size would be most
appropriate for application to the selected
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precedent M&A multiple range. Multiples based on EBITDA
were selected because this cash flow measure eliminates
disparities in capital intensity, depreciation methods, and
income tax structures.
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The Valuation Consultant did not consider any asset-based or
liquidation value approaches. In the asset-based/liquidation
approach, the underlying assets of the enterprise are considered
individually, and the sum of these assets minus the stated
liabilities results in an indication of value. In this instance,
however, the Valuation Consultant deemed the income and market
approaches as most appropriate, particularly since the Company
is a service organization and owns very few tangible assets.
Conclusion. Based on the foregoing analyses,
the Valuation Consultant estimated that our common equity prior
to the Reverse/Forward Stock Split has no value.
Information Provided by Management. Our
management provided the information used by the Valuation
Consultant in connection with the foregoing analyses and in the
rendering of its report. This information statement includes all
of the financial forecasts that management and/or our Board
provided to the Valuation Consultant. The information provided
included forward-looking statements and projections and was
based upon the following assumptions: our ability to achieve
strategic revenue and profit goals and objectives and targets
related thereto over the applicable periods, specifically to
achieve
year-over-year
revenue growth targets of approximately eight percent (8%);
manage and maintain cost of goods in order to achieve a gross
profit percentage as compared to revenue of approximately forty
four to forty seven percent (44%-47%); and manage and maintain
operating costs in order to achieve EBITDA of between eleven and
fourteen percent
(11-14%).
The Valuation Consultant did not independently verify the
assumptions or conclusions set forth in those projections and
forecasts. These assumptions involve judgments with respect to
future economic, competitive and regulatory conditions,
financial market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and
many of which are beyond our control. Many important factors, in
addition to those discussed elsewhere in this information
statement and in our filings with the SEC, could cause our
results to differ materially from those expressed or implied by
the forward-looking statements. These factors include our
competitive environment, economic and other market conditions in
which we operate and matters affecting business generally, all
of which are difficult to predict and many of which are beyond
our control. Accordingly, we cannot assure you that the
projections and assumptions on which the Valuation Consultant
based its opinion are in fact indicative of our future
performance or that actual results will not differ materially
from such projections.
Our Special Committee and Board adopted the Valuation
Consultants analysis and conclusions in reaching its
decision as to the fairness of the Reverse/Forward Stock Split
to our unaffiliated stockholders.
THE FULL TEXT OF THE WRITTEN VALUATION REPORT OF VALUATION
CONSULTANT IS ATTACHED AS APPENDIX A AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. THE VALUATION CONSULTANTS
REPORT IS DIRECTED TO OUR SPECIAL COMMITTEE AND RELATES ONLY TO
THE COMPANYS VALUATION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO THE
REVERSE/FORWARD STOCK SPLIT OR ANY OTHER MATTER BEING VOTED UPON
BY OUR STOCKHOLDERS.
THE VALUATION CONSULTANT REPORT WILL BE MADE AVAILABLE FOR
INSPECTION AND COPYING AT OUR PRINCIPAL EXECUTIVE OFFICES DURING
OUR REGULAR BUSINESS HOURS BY ANY INTERESTED EQUITY SECURITY
HOLDER OF OURS OR BY THE REPRESENTATIVE OF SUCH A HOLDER WHO HAS
BEEN DESIGNATED IN WRITING. A COPY OF THE REPORT WILL BE
TRANSMITTED BY US TO ANY INTERESTED EQUITY SECURITY HOLDER OF
OURS OR SUCH REPRESENTATIVE UPON WRITTEN REQUEST AND AT THE
EXPENSE OF THE REQUESTING SECURITY HOLDER.
Conclusion. Based upon their review of these
factors, our Special Committee and our Board concluded that as
of the date of the financial analyses, the price of One Cent
($0.01) for shares of our common stock held by stockholders
holding less than twenty thousand five hundred (20,500) shares
that are to be cashed out as a result of the Reverse/Forward
Stock Split is fair from a financial point of view to our
unaffiliated stockholders. While the foregoing summary describes
the material analyses and factors reviewed by
34
management, it does not purport to be a complete description of
the analysis and report made by management to the Special
Committee or our Board with respect thereto. The preparation of
managements analysis is a complex process and is not
necessarily susceptible to partial analysis or summary
description. Management believes that its analyses must be
considered as a whole and that selecting portions of its
analysis considered by it, could create a misleading view of the
processes underlying the analyses. The analyses performed were
prepared solely as part of managements analysis of the
enterprise value and price per share to be paid in lieu of
issuing fractional shares in connection with the Reverse/Forward
Stock Split, and were provided to the Special Committee and our
Board solely in connection with their analysis of the same. The
Special Committee and our Board have adopted the extensive
financial review and conclusions of management and confirm the
fairness of the Reverse/Forward Stock Split.
Procedural
Fairness
Our Board, including all our nonemployee directors, also
analyzed the Reverse/Forward Stock Split and its anticipated
effects on all of our unaffiliated stockholders and has deemed
the related termination of our public reporting to be
procedurally fair to, and in the best interests of, our
unaffiliated stockholders, whether they are cashed out or remain
as stockholders following the Reverse/Forward Stock Split. In
reaching this conclusion, our Board conducted an independent
evaluation of the financial analysis performed by our management
as well as an independent evaluation of the material factors
favoring and disfavoring the Reverse/Forward Stock Split. In
addition, our Board appointed a committee of three non-employee,
independent directors to conduct its own independent analysis of
the Reverse/Forward Stock Split ratio and the price per
pre-Reverse Split share of our common stock held by stockholders
holding less than twenty thousand five hundred (20,500) shares
that are to be cashed out as a result of the Reverse/Forward
Stock Split and to recommend to the Board the Reverse/Forward
Stock Split ratio and a price to be paid for shares of our
common stock held by stockholders holding less than twenty
thousand five hundred (20,500) shares that are to be cashed out
as a result of the Reverse/Forward Stock Split. In addition, in
reaching its conclusion, our Board determined that our receipt
of the valuation report from the Valuation Consultant was an
additional safeguard protecting the interests of all
unaffiliated stockholders. The Valuation Consultant did not ask
us to provide, nor did we provide, any input regarding the
valuation methodology or conclusions of the Valuation Consultant.
Additional
Procedural Factors Favoring the Reverse/Forward Stock
Split
The
Reverse/Forward Stock Split Provides Certain Smaller
Unaffiliated Stockholders with Liquidity
Many of our unaffiliated stockholders hold small positions of
less than twenty thousand five hundred (20,500) shares which
cannot be cost effectively sold because the brokerage commission
in an open market transaction would eliminate most or all of the
proceeds to the stockholder. The Reverse/Forward Stock Split
will provide unaffiliated stockholders who hold fewer than
twenty thousand five hundred (20,500) shares at the effective
time the opportunity to liquidate their investment in us by not
being required to pay a brokerage commission.
The
Reverse/Forward Stock Split Includes the Opportunity to Remain a
Stockholder
Our smaller unaffiliated stockholders may elect to remain
stockholders by acquiring sufficient shares so that they hold at
least twenty thousand five hundred (20,500) shares of common
stock in their account immediately prior to the Reverse/Forward
Stock Split. Our Board considers the structure of the
Reverse/Forward Stock Split to be fair to all unaffiliated
stockholders because it allows them to control the decision of
whether to remain a stockholder following the Reverse/Forward
Stock Split or to receive the cash consideration offered in
connection with the Reverse/Forward Stock Split. However,
because the average daily trading volume of our common stock is
low, you may not be able to acquire a sufficient number of
shares prior to the Effective Date.
No
Unusual Conditions to the Reverse/Forward Stock Split
Our Board also considered the likelihood that the
Reverse/Forward Stock Split would be implemented. In this
regard, it considered that there are no unusual requirements or
conditions to the Reverse/Forward Stock Split, and that we have
the financial resources to implement the Reverse/Forward Stock
Split expeditiously.
35
The
Reverse/Forward Stock Split Ratio was Calculated Without Bias
Toward Any Particular Group of Stockholders
The purpose of the Reverse/Forward Stock Split is to reduce the
number of record holders to fewer than three hundred
(300) so that we can file to terminate the registration of
our common stock under the Exchange Act, thereby terminating our
public reporting obligations, and continue future operations as
a private company. The Reverse/Forward Stock Split ratio is a
result of calculations that were intended to determine how many
stockholders needed to be cashed out in order to reduce the
number of record holders to fewer than three hundred (300). The
Reverse/Forward Stock Split ratio was determined in order to
ensure that following the transaction and taking into account
anticipated future option and warrant exercises, stock
certificates that will ultimately be held of record by current
beneficial holders, as well as stock sales and transfers, the
Company could be reasonably assured that the number of record
holders would not increase to three hundred (300) which
would once again subject the Company to the reporting
requirements of the Exchange Act. Our Board feels the current
ratio of twenty thousand five hundred (20,500) to one
(1) is fair because it was calculated without bias toward
any one group of stockholders.
Approval
of the Reverse/Forward Stock Split by Disinterested
Directors
The Reverse/Forward Stock Split was approved by all of our
directors who are not our employees or affiliates of the Company.
Procedural
Factors Disfavoring the Reverse/Forward Stock
Split
Our Board
Did Not Structure the Transaction so that Approval of at Least a
Majority of Unaffiliated Security Holders was Required
Our Board determined not to condition the approval of the
Reverse/Forward Stock Split on approval by a majority of our
unaffiliated stockholders. Our Board believes that such a vote
would not provide additional protection to those unaffiliated
stockholders who would be cashed out in the transaction because
the majority of the shares held by unaffiliated stockholders are
held by stockholders who would not be cashed out in the
Reverse/Forward Stock Split. As a result, such a vote would be
controlled by the unaffiliated stockholders who would not be
cashed out in the Reverse/Forward Stock Split and these
stockholders would not necessarily have the same interests as
the unaffiliated stockholders who would be cashed out in the
Reverse/Forward Stock Split since they are necessarily retaining
an equity interest in our company after the Reverse/Forward
Stock Split is complete. For example, our unaffiliated
stockholders who would not be cashed out in the transaction may
not want to afford the unaffiliated stockholders who would be
cashed out in the Reverse/Forward Stock Split the liquidity that
would result from the repurchase of share of our common stock
held by stockholders holding less than twenty thousand five
hundred (20,500) shares that are to be cashed out as a result of
the Reverse/Forward Stock Split and could have voted against the
transaction, thereby depriving the unaffiliated stockholders who
would be cashed out of the liquidity that would result from the
repurchase of shares held by stockholders being cashed out in
the Reverse/Forward Stock Split. In addition, our Board
concluded that a separate vote of unaffiliated stockholders who
would be cashed out would not necessarily afford any greater
protection to those unaffiliated stockholders who would be
cashed out in the transaction due to the inactivity of our
smaller, unaffiliated stockholder base and the difficulty of
obtaining proxies from this group of stockholders. Based on
information available to us, approximately 85% of our holders
hold fewer than twenty thousand five hundred (20,500) shares of
our common stock. These same stockholders have been historically
inactive with respect to voting or trading our securities.
Further, the Reverse/Forward Stock Split is a matter that could
not be voted on by brokers without instruction from the
beneficial owners of the shares. Therefore, it is likely that
the majority of these shares held by small, inactive
unaffiliated stockholders, particularly those shares that are
held in brokerage accounts, would go unvoted. Finally, our Board
also noted that the vote of a majority of our unaffiliated
stockholders was not required under Delaware law.
36
Neither
our Board nor the Special Committee Requested or Relied on a
Fairness Opinion
Neither our Board nor the Special Committee requested or relied
on a fairness opinion on behalf of our unaffiliated stockholders
because costs associated with obtaining such an opinion, which
could be between $50,000 and $150,000, outweighed its perceived
benefits. While all of our affiliated stockholders will remain
stockholders following the Reverse/Forward Stock Split by virtue
of the size of their holdings, unaffiliated stockholders will
have the same opportunity if they so choose (by purchasing
additional shares prior to the effective time of the
Reverse/Forward Stock Split). In light of this fact, our Board
concluded that the additional expense associated with obtaining
a fairness opinion was not justified. However, our Board and
Special Committee did obtain the third party independent
valuation report from the Valuation Consultant that concluded
that our common stock had no value.
Neither
our Board nor the Special Committee Retained an Unaffiliated
Representative to Act Solely on Behalf of Unaffiliated
Stockholders
Neither our Board nor the Special Committee retained an
unaffiliated representative to act solely on behalf of
unaffiliated stockholders for purposes of negotiating the terms
of the Reverse/Forward Stock Split. Our Board and Special
Committee concluded that retaining a representative would be
costly, and under the circumstances, not the best use of
corporate assets. Based upon: (i) the financial analyses
performed by management to assist the Special Committee and our
Board in determining the price to be paid for shares to those
stockholders being cashed out in the Reverse Split;
(ii) our receipt of the Valuation Consultants
valuation report and (iii) the ability of our unaffiliated
stockholders to remain stockholders of the Company following the
Reverse/Forward Stock Split by buying shares in the market so as
to hold at least twenty thousand five hundred (20,500) shares of
our common stock immediately prior to the Reverse/Forward Stock
Split, our Board concluded that the transaction was procedurally
fair to our unaffiliated stockholders, even though the
procedural safeguard of appointing a representative was not
followed.
Fairness
Conclusions
Our Board, including all our nonemployee directors, concluded
that the advantages of the Reverse/Forward Stock Split to our
unaffiliated stockholders (both those being cashed out and those
remaining as stockholders after the Reverse/Forward Stock Split)
outweighed the disadvantages, and that it was substantively and
procedurally fair, and therefore, in the best interests of us
and our unaffiliated stockholders. Our Board concluded that for
those smaller unaffiliated stockholders holding less than twenty
thousand five hundred (20,500) shares who would be cashed out,
the price to be paid to them likely exceeds what they would
receive in an open market sale after deducting commissions. For
those unaffiliated stockholders holding at least twenty thousand
five hundred (20,500) shares who would remain as stockholders
after the Reverse/Forward Stock Split, the Special Committee and
our Board found that while the price to be paid for shares of
our common stock held by stockholders holding less than twenty
thousand five hundred (20,500) shares that are to be cashed out
as a result of the Reverse/Forward Stock Split likely exceeds
what they would receive in an open market sale after deducting
commissions, it is still within the range of our common equity
price per share as determined by our managements analysis
of our current and historical stock trading prices and that
although these stockholders would experience a reduction in
liquidity of their shares, the value of their shares may
increase as a result of our anticipated reduced annual general
and administrative expenses associated with being a
non-reporting entity.
Fairness
Determination by ComVest, Philip T. Lavin, Ph.D., James H.
McGuire, Cecilio Rodriguez and Michael Falk
ComVest, Philip T. Lavin, Ph.D., James H. McGuire, Cecilio
Rodriguez and Michael Falk, who have each been deemed a
filing person for purposes of
Schedule 13E-3,
have adopted the analysis and conclusions of the Special
Committee and our Board, including the adoption of the analysis
and conclusions of our management, regarding the material
factors upon which it was determined that the Reverse/Forward
Stock Split is procedurally and substantively fair to our
unaffiliated stockholders, both to stockholders who will retain
an equity interest in the Company and those who will not be
continuing stockholders of the Company.
37
Each of ComVest, Dr. Lavin and Mr. Falk voted the
shares of Company voting stock for which they have voting power
in favor of the Reverse/Forward Stock Split. Mr. McGuire
and Mr. Rodriguez do not hold any shares of capital stock of the
Company.
Reservation
of Rights
Although the Reverse/Forward Stock Split has been approved by
the requisite number of stockholders, our Board reserves the
right, in its discretion, to abandon the Reverse/Forward Stock
Split prior to the proposed Effective Date if it determines that
abandoning the Reverse/Forward Stock Split is in our best
interests and those of our stockholders. Our Board presently
believes that the Reverse/Forward Stock Split is in our best
interests, those of our unaffiliated stockholders being cashed
out pursuant to the Reverse/Forward Stock Split and those of our
unaffiliated stockholders who will retain an equity interest in
us subsequent to the consummation of the Reverse/Forward Stock
Split, and thus recommended a vote in favor of the proposed
Certificate of Amendment. Nonetheless, our Board believes that
it is prudent to recognize that, between the date of this
Information Statement and the date that the Reverse/Forward
Stock Split will become effective, factual circumstances could
possibly change such that it might not be appropriate or
desirable to effect the Reverse/Forward Stock Split at that time
or on the terms currently proposed. Such factual circumstances
could include a superior offer to our stockholders, a material
change in our business or litigation affecting our ability to
proceed with the Reverse/Forward Stock Split. If our Board
decides to withdraw or modify the Reverse/Forward Stock Split,
our Board will notify the stockholders of such decision promptly
in accordance with applicable rules and regulations.
Termination
of Exchange Act Registration
Our common stock is currently registered under
Section 12(g) of the Exchange Act and quoted on the OTCBB.
We are permitted to terminate such registration of our common
stock under the Exchange Act if there are fewer than three
hundred (300) record holders of outstanding shares of our
common stock. As of the Record Date, we had approximately eight
hundred fifty (850) record holders of our common stock.
Upon the effectiveness of the Reverse/Forward Stock Split, we
expect to have approximately one hundred twenty five
(125) record holders of our common stock. We intend to
terminate the registration of our common stock under
Section 12(g) of the Exchange Act, suspend our duty to file
periodic reports pursuant to Section 15(d) of the Exchange
Act and to have our common stock cease to be quoted on the OTCBB
as promptly as possible after the Effective Date.
Termination of the registration of our common stock under
Section 12(g) of the Exchange Act and suspension of our
duty to file periodic reports pursuant to Section 15(d) of
the Exchange Act will substantially reduce the information which
we will be required to furnish to our stockholders. After we
become a privately-held company, our stockholders will have
access to our corporate books and records to the extent provided
by the Delaware General Corporation Law, and to any additional
disclosures required by our directors and officers
fiduciary duties to us and our stockholders.
Termination of the registration of our common stock under
Section 12(g) of the Exchange Act and suspension of our
duty to file periodic reports pursuant to Section 15(d) of
the Exchange Act also will make many of the provisions of the
Exchange Act no longer applicable to us, including the
short-swing profit provisions of Section 16, the proxy
solicitation rules under Section 14 and the stock ownership
reporting rules under Section 13. In addition, continuing
stockholders may be deprived of the ability to dispose of their
common stock under Rule 144 promulgated under the
Securities Act of 1933, as amended. Furthermore, there will
likely no longer be a public market for our common stock, and
market makers will likely not be able to make a market in our
common stock.
Description
of the Reverse/Forward Stock Split
Certificate
of Amendment to Effect the Reverse/Forward Stock
Split
Our Board has determined that it is advisable to amend our
Certificate of Incorporation, as amended to date, to effect a
twenty thousand five hundred (20,500) to one (1) Reverse
Split immediately followed by a
38
one (1) to twenty thousand five hundred (20,500) Forward
Split and to provide for the cash payment of One Cent ($0.01)
per pre-Reverse Split share to all stockholders holding fewer
than twenty thousand five hundred (20,500) shares of our common
stock immediately prior to the Reverse Split. The
Reverse/Forward Stock Split has been approved by the requisite
number of stockholders.
Regulatory
Approvals
Aside from stockholder approval of the Certificate of Amendment,
which has been obtained, the amendment is not subject to any
regulatory approvals.
Vote
Required
The affirmative approval of a majority of the votes entitled to
be cast by holders of the issued and outstanding shares of
common stock is required to approve the Reverse/Forward Stock
Split. We have received the written consent of stockholders
holding an aggregate of 71% of the issued and outstanding shares
of voting stock, authorizing the Reverse/Forward Stock Split. No
special meeting of stockholders is required under Delaware law,
since the requisite vote for adoption of the Reverse/Forward
Stock Split has been obtained and the vote of other stockholders
is not necessary.
Our Board determined not to condition the approval of the
Reverse/Forward Stock Split on approval by a majority of our
unaffiliated stockholders. Our Board believes that such a vote
would not provide additional protection to those unaffiliated
stockholders who would be cashed out in the transaction because
a majority of the shares held by unaffiliated stockholders are
held by stockholders who would not be cashed out in the
Reverse/Forward Stock Split. As a result, such a vote would be
controlled by the unaffiliated stockholders who would not be
cashed out in the Reverse/Forward Stock Split and these
stockholders would not necessarily have the same interests as
the unaffiliated stockholders who would be cashed out in the
Reverse/Forward Stock Split since they are necessarily retaining
an equity interest in us after the Reverse/Forward Stock Split
is consummated. For example, our unaffiliated stockholders who
would not be cashed out in the transaction may not want to
afford the unaffiliated stockholders who would be cashed out in
the Reverse/Forward Stock Split the liquidity that would result
from the repurchase of shares of our common stock held by
stockholders holding less than twenty thousand five hundred
(20,500) shares that are to be cashed out as a result of the
Reverse/Forward Stock Split and could have voted against the
transaction, thereby depriving the unaffiliated stockholders who
would be cashed out of the liquidity that would result from the
repurchase of shares held by stockholders being cashed out in
the Reverse/Forward Stock Split. In addition, our Board
concluded that a separate vote of unaffiliated stockholders who
would be cashed out would not necessarily afford any greater
protection to those unaffiliated stockholders who would be
cashed out in the transaction due to the inactivity of our
smaller, unaffiliated stockholder base and the difficulty of
obtaining proxies from this group of stockholders. Based on
information available to us, approximately 85% of our holders
hold fewer than twenty thousand five hundred (20,500) shares of
our common stock. These same stockholders have been historically
inactive with respect to voting or trading our securities.
Further, the Reverse/Forward Stock Split is a matter that could
not be voted on by brokers without instruction from the
beneficial owners of the shares. Therefore, it is likely that
the majority of these shares held by small, inactive
unaffiliated stockholders, particularly those shares that are
held in brokerage accounts, would go unvoted. Finally, our Board
also noted that the vote of a majority of our unaffiliated
stockholders was not required under Delaware law.
Holders
as of Effective Date; Net Effect After Reverse/Forward Stock
Split
Stockholders holding fewer than twenty thousand five hundred
(20,500) pre-Reverse Split shares of common stock will be cashed
out at a price of One Cent ($0.01) per pre-Reverse Split share
and the holdings of all other stockholders will be unchanged
after implementation of the Reverse/Forward Stock Split. Any
holder whose shares are cashed out will have no continuing
equity interest in us at all.
NOMINEES AND BROKERS ARE EXPECTED TO DELIVER TO THE EXCHANGE
AGENT THE BENEFICIAL OWNERSHIP POSITIONS THEY HOLD. HOWEVER, IF
YOU ARE A BENEFICIAL OWNER OF COMMON STOCK WHO IS NOT THE RECORD
HOLDER OF THOSE
39
SHARES AND WISH TO ENSURE THAT YOUR OWNERSHIP POSITION
IS ACCURATELY DELIVERED TO OUR EXCHANGE AGENT, YOU SHOULD
INSTRUCT YOUR BROKER OR NOMINEE TO TRANSFER YOUR
SHARES INTO A RECORD ACCOUNT IN YOUR NAME PRIOR TO THE
EFFECTIVE DATE OF THE REVERSE/FORWARD STOCK SPLIT. NOMINEES AND
BROKERS MAY HAVE REQUIRED PROCEDURES. THEREFORE, SUCH HOLDERS
SHOULD CONTACT THEIR NOMINEES AND BROKERS DIRECTLY TO DETERMINE
HOW TO EFFECT THE TRANSFER IN A TIMELY MANNER PRIOR TO THE
EFFECTIVE DATE OF THE REVERSE/FORWARD STOCK SPLIT.
Exchange
of Certificates for Cash Payment or Shares
We will file the Certificate of Amendment with the Secretary of
State of the State of Delaware (the Secretary of
State) as set forth in Appendix B to this
Information Statement. The Reverse/Forward Stock Split will
become effective at the time set forth in the Certificate of
Amendment. American Stock Transfer & Trust Co.
has been appointed our Exchange Agent to carry out the exchange
of certificates for cash.
As soon as practicable after the Effective Date, record holders
holding fewer than twenty thousand five hundred (20,500) shares
will be notified and sent a letter of transmittal and
accompanying cover letter, each in substantially the form
attached hereto as Appendix C and instructed how to
transmit their certificates representing shares of common stock
to the Exchange Agent. We are instructing our Exchange Agent not
to cash out a stockholder owning at least twenty thousand five
hundred (20,500) shares in the aggregate even if such holder
holds such shares in multiple accounts each with less than
twenty thousand five hundred (20,500). However, if you are such
a stockholder, in order to ensure that you are not cashed out,
please take action, or instruct your broker to take action,
prior to the Effective Date, to consolidate your positions into
one account. Upon proper completion and execution of the letter
of transmittal, and the return of the letter of transmittal and
accompanying stock certificate(s) to the Exchange Agent, each
stockholder entitled to receive payment will receive a check for
such stockholders stock. Stockholders should allow for
approximately five (5) business days after mailing for the
Exchange Agent to receive the letter of transmittal and
accompanying stock certificate. The Exchange Agent will send a
check for such stockholders stock within approximately ten
(10) business days of receiving such letter of transmittal
and accompanying stock certificate. You will not receive any
interest on the cash payments after the Effective Date. In the
event we are unable to locate certain stockholders or if a
stockholder fails properly to complete, execute and return the
letter of transmittal and accompanying stock certificate to the
Exchange Agent, any funds payable to such holders pursuant to
the Reverse/Forward Stock Split will be held in escrow until a
proper claim is made, subject to applicable abandoned property
laws. Record holders owning fewer than twenty thousand five
hundred (20,500) shares of common stock on the Effective Date
will receive in exchange a cash payment in the amount of One
Cent ($0.01) per pre-Reverse Split share. Those record holders
beneficially owning at least twenty thousand five hundred
(20,500) shares of common stock will continue to hold the same
number of shares of common stock.
If the Reverse/Forward Stock Split is effected, any stockholder
owning fewer than twenty thousand five hundred (20,500) shares
of the currently outstanding common stock will cease to have any
rights with respect to our common stock, except to be paid the
cash consideration, as described in this Information Statement.
No interest will be paid or accrued on the cash payable to
holders of fewer than twenty thousand five hundred (20,500)
shares after the Reverse/Forward Stock Split is effected.
No service charges will be payable by stockholders in connection
with the exchange of certificates or the payment of cash, all
expenses of which will be borne by us.
For payment purposes, we intend for the Reverse/Forward Stock
Split to treat stockholders holding common stock in street name
through a nominee, such as a bank or broker, in the same manner
as stockholders whose shares are registered in their own names.
Nominees will be instructed to effect the Reverse/Forward Stock
Split for their beneficial holders. However, nominees may have
different procedures, and stockholders holding shares in street
name should contact their nominees directly to determine how the
Reverse/Forward Stock Split will affect them. However, if you
are a beneficial owner of fewer than twenty thousand five
hundred (20,500) shares of common stock, you should instruct
your nominee to transfer your
40
shares into a record account in your name in a timely manner and
in any event prior to the Effective Date, which is approximately
the twentieth (20th) calendar day following the date this
Information Statement is first mailed to our stockholders, to
ensure that you will be considered a holder of record
immediately prior to the Effective Date of the Reverse/Forward
Stock Split. Holders who hold their shares through a nominee or
broker are to be treated the same as record holders. Therefore,
if a stockholder who holds less than twenty thousand five
hundred (20,500) shares of common stock at the time of the
Reverse/Forward Stock Split, places those shares in street name
with a broker holding at least twenty thousand five hundred
(20,500) shares of common stock at such time, it will not enable
the stockholder to avoid being cashed out as nominees and
brokers will be instructed to effect the Reverse/Forward Stock
Split for their beneficial holders.
In the event that any certificate representing shares of common
stock is not presented for cash upon request by us, the cash
payment will be administered in accordance with the relevant
state abandoned property laws. Until the cash payments have been
delivered to the public official pursuant to the abandoned
property laws, such payments will be paid to the holder thereof
or his or her designee, without interest, at such time as the
certificate has been properly presented for exchange.
Appraisal
Rights
No appraisal rights are available to any stockholder under
either the Delaware General Corporation Law or our Certificate
of Incorporation, as amended. State law, as it relates to
appraisal rights, was not a factor in our choosing the structure
of the Reverse/Forward Stock Split. Notwithstanding the
foregoing, there may exist other rights or actions under state
law for stockholders who are aggrieved by the Reverse/Forward
Stock Split generally. Although the nature and extent of such
rights or actions are uncertain and may vary depending upon
facts or circumstances, stockholder challenges to corporate
action in general are related to the fiduciary responsibilities
of corporate officers and directors and to the fairness of
corporate transactions. For example, stockholders could, if they
deemed such to be applicable, take appropriate legal action
against us and our Board, and claim that the Reverse/Forward
Stock Split was unfair to the unaffiliated stockholders,
and/or that
there was no justifiable or reasonable business purpose for the
Reverse/Forward Stock Split. In addition, stockholders holding
fewer than twenty thousand five hundred (20,500) pre-split
shares who want to remain stockholders of the Company may
purchase a sufficient number of additional shares on the open
market in order to hold at least twenty thousand five hundred
(20,500) pre-split shares prior to the Effective Date of the
Reverse/Forward Stock Split; provided, however, that because the
average daily trading volume of our common stock is low, you may
not be able to acquire a sufficient number of shares prior to
the Effective Date. Further, those stockholders who do not
desire to remain stockholders of the Company may sell a
sufficient number of shares such that they hold fewer than
twenty thousand five hundred (20,500) pre-split shares in order
to be cashed out in the Reverse Stock Split. The Company is not
aware of any other right or relief that may be available to
stockholders in law or in equity.
Financing
of the Reverse/Forward Stock Split
Completion of the Reverse/Forward Stock Split will require
approximately $162,000, which includes legal, financial,
accounting and other fees and costs related to the transaction
as well as approximately $27,000 for purchase costs of shares of
our common stock held by stockholders holding less than twenty
thousand five hundred (20,500) shares that are to be cashed out
as a result of the Reverse/Forward Stock Split. We intend to
finance the Reverse/Forward Stock Split out of our working
capital. As a result, we will have decreased working capital
following the Reverse/Forward Stock Split. However, our Board
does not believe that such decrease in working capital will have
a material effect on our capitalization or operations. The costs
of the Reverse/Forward Stock Split and related fees and expenses
will be paid directly from cash available to us. You should read
the discussion under the caption Special
Factors Costs of the Reverse/Forward Stock
Split on this page 39 in this Information Statement for a
description of the fees and expenses we expect to incur in
connection with the Reverse/Forward Stock Split.
41
Costs of
the Reverse/Forward Stock Split
The following is an estimate of the costs incurred or expected
to be incurred by us in connection with the Reverse/Forward
Stock Split. Final costs of the transaction may be more or less
than the estimates shown below. We will be responsible for
paying these costs.
|
|
|
|
|
Legal fees
|
|
$
|
50,000
|
|
Accounting fees
|
|
|
15,000
|
|
Buy-back of Shares held by stockholders being cashed out
|
|
|
27,000
|
|
Valuation Consultants fees and estimated expenses
|
|
|
45,000
|
|
Miscellaneous (includes printing and mailing)
|
|
|
25,000
|
|
|
|
|
|
|
Total
|
|
$
|
162,000
|
|
|
|
|
|
|
Conduct
of the Companys Business After the Reverse/Forward Stock
Split
We expect our business and operations to continue as they are
currently being conducted and, except as disclosed in this
Information Statement, the Reverse/Forward Stock Split is not
anticipated to have any effect upon the conduct of our business.
We expect to realize time and cost savings as a result of
terminating our public company status. If the Reverse/Forward
Stock Split is consummated, all persons beneficially owning
fewer than twenty thousand five hundred (20,500) shares of
common stock at the effective time of the Reverse/Forward Stock
Split will no longer have any equity interest in us, and will
not be stockholders and therefore will not participate in our
future potential or earnings and growth.
When the Reverse/Forward Stock Split is effected, we believe
that, based on our stockholder records, one hundred twenty five
(125) stockholders will remain as holders of our common
stock, beneficially owning 100% of the outstanding common stock.
See also the information under the caption Security
Ownership of Certain Beneficial Owners and Management on
pages 46-49
in this Information Statement.
We plan, as a result of the Reverse/Forward Stock Split, to
become a privately-held company. The registration of our common
stock under Section 12(g) of the Exchange Act will be
terminated, our duty to file periodic reports pursuant to
Section 15(d) of the Exchange Act will be suspended and our
common stock will cease to be quoted on the OTCBB. In addition,
because our common stock will no longer be publicly held, we
will be relieved of the obligation to comply with the proxy
rules of Regulation 14A under Section 14 of the
Exchange Act, and our officers and directors and stockholders
owning more than ten percent (10%) of our common stock will be
relieved of the stock ownership reporting requirements and
short swing trading restrictions under
Section 16 of the Exchange Act. Further, we will no longer
be subject to the periodic reporting requirements of the
Exchange Act and will cease filing information with the SEC.
Among other things, the effect of this change will be a savings
to us in not having to comply with the requirements of the
Exchange Act.
As stated throughout this Information Statement, we believe that
there are significant advantages in effecting the
Reverse/Forward Stock Split and we plan to avail ourselves of
any opportunities we will have as a non-reporting company,
including, but not limited to, improving our ability to compete
in the marketplace.
OTHER THAN AS DESCRIBED IN THIS INFORMATION STATEMENT AND OTHER
THAN A POSSIBLE RENEGOTIATION OF THE TERMS OF OUR OUTSTANDING
INDEBTEDNESS, NEITHER THE COMPANY NOR ITS MANAGEMENT HAS ANY
CURRENT PLANS OR PROPOSALS TO EFFECT ANY EXTRAORDINARY
CORPORATE TRANSACTION, SUCH AS A MERGER, REORGANIZATION OR
LIQUIDATION; TO SELL OR TRANSFER ANY MATERIAL AMOUNT OF ITS
ASSETS; TO CHANGE ITS BOARD OR MANAGEMENT; OR OTHERWISE TO
EFFECT ANY MATERIAL CHANGE IN ITS CORPORATE STRUCTURE OR
BUSINESS.
42
OUR
DIRECTORS AND EXECUTIVE OFFICERS
Directors
The following are our directors:
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position with Averion
|
|
Director Since
|
|
James H. McGuire
|
|
|
65
|
|
|
Director, Chairman of the Board of Directors
|
|
July 2009
|
Philip T. Lavin, Ph.D.
|
|
|
62
|
|
|
Director, Vice Chairman of the Board of Directors, Founder
|
|
July 2006
|
Michael Falk
|
|
|
47
|
|
|
Director
|
|
November 2005
|
Cecilio M. Rodriguez
|
|
|
49
|
|
|
Director
|
|
November 2005
|
Robert D. Tucker
|
|
|
75
|
|
|
Director
|
|
December 2005
|
Alastair McEwan
|
|
|
53
|
|
|
Director
|
|
February 2006
|
James Powers
|
|
|
57
|
|
|
Director
|
|
September 2007
|
James H.
McGuire
Mr. McGuire was appointed as a director in July 2009.
Mr. McGuire is currently focused on assisting companies,
their boards of directors and their investors with oversight,
directional, transitional and restructuring guidance. In July of
2008, Mr. McGuire retired after 16 years in the role
of President of NJK Holding Corporation, a private equity firm
located in Minneapolis, MN. NJK is a privately-held company
whose investments have covered a broad industry scope including
financial services, health care, litigation services,
information services and enterprise software. Prior to NJK, his
background included commercial lending with a major Eastern
U.S. bank and executive positions, including CEO-level, in
the technology and software industry. Mr. McGuires
career included 12 years with Control Data Corporation
where he was a Vice President in the Peripheral Company.
Mr. McGuire has served on numerous public and private
company boards, including Laureate Education (international
post-secondary education) and Digital Insight Corporation
(Internet home banking now owned by Intuit.) He has
chaired both public company audit and compensation committees.
He currently serves as both chairman of the board and board
member for multiple private companies. Mr. McGuire is a
graduate of the University of Notre Dame with a BBA in finance.
Philip T.
Lavin, Ph.D.
Dr. Lavin has served as a director and an officer since
July 2006. Dr. Lavin has served as our Vice Chairman of the
Board and Founder since July 29, 2009. Dr. Lavin
previously served as our Executive Chairman from October 2007 to
July 29, 2009 and served as our Chief Executive Officer
from July 2006 to October 2007. Dr. Lavin was the founder
of Averion Inc. and from 1983 to July 2006 was the Chief
Executive Officer and President of Averion Inc. Since 1977,
Dr. Lavin has held faculty appointments at the Harvard
School of Public Health and Harvard School of Medicine.
Dr. Lavin received his PhD in Applied Mathematics at Brown
University in Providence, Rhode Island in 1972.
Michael
Falk
Mr. Falk has served as a director since November 2005.
Mr. Falk is currently Managing Partner of ComVest. In 1988,
Mr. Falk co-founded Commonwealth Associates, L.P.
(Commonwealth), ComVests predecessor.
Commonwealth is an affiliated New York City based investment
bank whose primary business has been private equity investments
led by the principals and partners of Commonwealth and ComVest.
From 1995 to 2002, Mr. Falk was Chairman and CEO of
Commonwealth. From 2002 to the present, Mr. Falk has served
as Chairman of ComVest Group Holdings (CGH),
and is a board member of Catalyst International, Allegiant
Airlines and The CARE Fund. Mr. Falk has extensive
experience successfully investing in, restructuring and
recapitalizing growth companies, many of which have created
significant equity valuations
and/or have
been acquired. Mr. Falk holds a B.A. degree in Economics
from Queens College and attended the Stanford University
Executive Program for Smaller Companies.
43
Cecilio
M. Rodriguez
Mr. Rodriguez has served as a director since November 2005.
Mr. Rodriguez has served as the Chief Financial Officer of
CGH and various related investment partnerships since May 2004.
From October 2000 to May 2004, Mr. Rodriguez was Senior
Vice President and Corporate Controller of Jet Aviation
International, a multinational aviation services corporation.
Robert D.
Tucker
Mr. Tucker has served as a director since December 2005.
Mr. Tucker is the Chairman and Chief Executive Officer of
MBC Direct, LLC, a financial card services company he founded in
2002. Mr. Tucker also acts as Chairman and Chief Executive
Officer of Throwleigh Technologies, LLC, a plasma research
company he co-founded in 1995. In 1997, Mr. Tucker
co-founded Specialty Surgicenters, Inc. for whom he served as
Chairman and Chief Executive Officer until 2001 and also as a
member of the board of directors until 2004 when the business
was acquired. Mr. Tucker was a member of the board of
directors of Horizon Medical Products, Inc. from 2001 until its
merger with RITA Medical Systems (RITA) in
2004. Mr. Tucker resigned from the RITA board of directors
in late 2005. Mr. Tucker is a graduate of Georgia State
University.
Alastair
McEwan
Mr. McEwan has served as a director since February 2006 and
served as our interim Chief Executive Officer from May to July
2006. Mr. McEwan is currently the Chairman of Cornerstone
BioPharma and has served as a member of the board of directors
of Cornerstone BioPharma since 2005. From 2002 to 2004,
Mr. McEwan was President, Global Clinical, of Inveresk with
responsibilities for all aspects of its global clinical trials
division. From 1999 to 2004, Mr. McEwan was a Group
Executive Vice President and a member of the Group Executive
Board of Inveresk which oversaw the groups operational
performance and set all aspects of its strategic direction.
Mr. McEwan is a graduate of the University of Edinburgh and
a member of the Institute of Chartered Accountants of Scotland.
James
Powers
Mr. Powers has served as a director since September 2007.
He currently serves as an independent business strategy
consultant, focusing on the pharmaceutical and medical device
services industries. Previously, he held various management
positions during his
18-year
tenure at global CRO leader PRA International Inc.
(PRA). Most recently at PRA, Mr. Powers
served for 10 years as Executive Vice President, Worldwide
Business Development, responsible for sales, marketing, proposal
development and customer contracts. In this capacity, he was
instrumental in growing PRA from a niche data management
services provider to a full-service contract research
organization with sales of $450 million. He also helped PRA
launch and achieve a leadership position in oncology clinical
development and was actively involved in eight global
acquisitions. Prior to that, while serving as President, North
American Operations, Mr. Powers supported international
expansion of PRAs operations and customer base. From 1985
to 1988, Mr. Powers was Vice President at University
Technology Corporation, where he identified and led medical
technology
start-up
businesses. Mr. Powers serves as a director for several
pharmaceutical services companies and advisor for venture
capital firms and medical research programs at the University of
Virginia. Mr. Powers holds a bachelor of science in
administration and management science from Carnegie Mellon
University.
44
Executive
Officers
The following are our executive officers:
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Age
|
|
Philip T. Lavin, Ph.D.
|
|
Vice Chairman of the Board of Directors, Founder and Director
|
|
|
62
|
|
Markus H. Weissbach, M.D., Ph.D.
|
|
Executive Chairman
|
|
|
54
|
|
Peter Gonze
|
|
President
|
|
|
60
|
|
Lawrence R. Hoffman
|
|
Chief Financial Officer
|
|
|
54
|
|
Dr. Gene Resnick
|
|
Chief Medical Officer, Founder, Executive Vice President
|
|
|
60
|
|
Abdallah Ennaji
|
|
Executive Vice President, Data Management and Statistics
|
|
|
49
|
|
Dr. Alison Messom
|
|
Executive Vice President, Clinical Operations
|
|
|
38
|
|
Philip T.
Lavin, Ph.D.
See the information under Directors Philip T.
Lavin, Ph.D. for a biography of Dr. Lavin.
Dr. Lavin resigned as our CEO and was reappointed as our
Executive Chairman on October 31, 2007, following the
acquisition of Hesperion Ltd.
Markus H.
Weissbach, M.D.
Dr. Markus Weissbach, former Chief Executive Officer of
Hesperion, has served as an officer since October 31, 2007.
Dr. Weissbach has served as our Executive Chairman since
July 29, 2009. Dr. Weissbach previously served as our
Chief Executive Officer from October 31, 2007 to
July 29, 2009. From October 2006 until October 2007,
Dr. Weissbach served as President and Chief Executive
Officer of Hesperion, an international contract research
organization with therapeutic expertise in cardiology and
oncology. From October 2004 until September 2006,
Dr. Weissbach served as Hesperions Chief Operating
Officer. Prior to that, from July 2003 to September 2004,
Dr. Weissbach served as Founder and Managing Director of
EHCOR Consult GmbH, a consulting firm providing advice to small
to medium sized companies in the health care sector. Previously,
from 1996 to 2003, Dr. Weissbach held various positions at
ICON plc, a global contract research organization with
operations in more than 30 countries, including serving as
President, ICON Europe. Dr. Weissbach was the head of the
Cardiovascular department of Takeda Euro R&D center from
1994 to 1996 and the Associate Director of Clinical
Cardiology/Nephrology at BASF Pharmaceuticals from 1990 to 1994.
Dr. Weissbach received his degree in medicine from the
University of Freiburg in 1982.
Peter
Gonze
Mr. Gonze joined the Company as Executive Vice President,
Global Business Development in August 2008 and has served as our
President since July 29, 2009. From May, 2002 to February,
2008, Mr. Gonze served as Chief Operating Officer at
Unither Pharmaceuticals, Inc. From August, 1999 to April, 2002,
Mr. Gonze served as Senior Vice President of Operations at
AltaRex Corp. From January, 1996 to July, 1999, Mr. Gonze
served as Divisional Vice President at Abbott Laboratories.
Lawrence
R. Hoffman
Effective May 12, 2008, Lawrence R. Hoffman was appointed
as our Chief Financial Officer (CFO). For the past four years,
from July 2004 to May 2008, Mr. Hoffman served as Executive
Vice President, General Counsel, Secretary and Chief Financial
Officer at Encorium Group (formerly Covalent Group, Inc.), a
publicly traded contract research organization. From January
2003 to July 2004, Mr. Hoffman was an independent financial
consultant. From July 2000 to January 2003, he was Vice
President and Chief Financial Officer of Cytogen Corporation, a
publicly traded biopharmaceutical company. From April 1998 to
July 2000, Mr. Hoffman was Vice President and Chief
Financial Officer of the Liposome Company, a publicly traded
biopharmaceutical company which was sold to Elan PLC in May
2000. Mr. Hoffman is a certified public accountant and
attorney with a J.D. from Temple University School of Law and an
LLM (Taxation) from Villanova University School of Law. He
received his B.S. with a major in accounting from LaSalle
University.
45
Dr. Gene
Resnick
Dr. Resnick has served as our Founder and Executive Vice
President since July 29, 2009 and as our Chief Medical
Officer since July 2006. From November 2005 through July 2006,
Dr. Resnick served as our Senior Vice President and
President of the Millennix Division. From 1997 through November
2005, Dr. Resnick served as President and Chief Executive
Officer of Millennix Inc., a contract research organization
specializing in oncology, immunology, gene therapy, vaccines,
complex infectious diseases, metabolic disease and other chronic
indications. Dr. Resnick received his Bachelor of Science
degree from Cornell University and his medical degree from
Cornell University Medical College.
Abdallah
Ennaji
Mr. Ennaji joined Averion through the acquisition of
Hesperion AG and has served as our Executive Vice President,
Data Management and Statistics since October 2007. Prior to
that, from January 2001 to October 2007, Mr. Ennaji served
as Hesperions Chief Operating Officer and previously as
the Head of Data Management and Statistics. Prior to joining
Hesperion, from 1996 to December 2000, Mr. Ennaji served as
regional head of Biostatistics and as senior Biostatistician of
a global contract research organization. Mr. Ennaji has an
M.Sc. in Statistics and an M.Sc. in Informatics and Data
Processing.
Dr.
Alison Messom
Alison Messom joined the Company as Executive Vice President,
Clinical Operations in November of 2008. Prior to that she held
various senior management positions at i3 Research, most
recently, Executive Director, Clinical Monitoring International.
Her responsibilities included leadership and oversight of the
clinical monitoring network for Europe, the Middle East and
Africa to ensure efficient and high quality monitoring and site
management. Dr. Messom previously held responsibilities for
the Asia Pacific and Latin American regions overseeing their
growth and transition to a new management structure, allowing
her to focus on developing operational excellence in Europe.
Prior to that, she worked in project management for both i3
Research and Hoffmann-La Roche and had been a clinical scientist
at AstraZeneca. Dr. Messom is a molecular geneticist and a
founding member of the Institute of Clinical Researchs
Genetics Special Interest Group.
46
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our common stock as of August 27,
2009 by: (i) each person (or group of affiliated persons)
known by us to be the beneficial owner of more than 5% of the
outstanding shares of our common stock; (ii) each of our
directors; (iii) our chief executive officer; (iv) our
two most highly compensated executive officers whose salaries
plus bonuses for 2008 exceeded $100,000 (collectively, the
Named Executive Officers); and (iv) all
of our directors and the Named Executive Officers as a group.
Beneficial ownership is determined in accordance with the rules
of the SEC and includes voting and investment power with respect
to the securities. Subject to applicable community property
laws, the persons named in the table have sole voting and
investment power with respect to all shares of our common stock
shown as beneficially owned by them, unless otherwise noted. The
number of shares of our common stock or preferred stock used to
calculate the percentage ownership of common stock or preferred
stock, as applicable, of each listed person includes the shares
of our common stock or preferred stock, as applicable,
underlying options, warrants or notes held by such persons that
are exercisable or convertible within sixty (60) days after
August 27, 2009. Percentage of beneficial ownership is
based on 639,257,754 shares of our common stock outstanding
as of August 27, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
Beneficially
|
|
|
Beneficially
|
|
|
|
|
|
Amount and Nature
|
|
|
Owned Prior to
|
|
|
Owned After the
|
|
|
|
|
|
of Beneficial
|
|
|
Reverse/Forward
|
|
|
Reverse/Forward
|
|
Class
|
|
Name and Address(1)
|
|
Ownership(2)
|
|
|
Stock Split
|
|
|
Stock Split
|
|
|
Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Philip T. Lavin, Ph.D., Founder and Director
|
|
|
114,918,159
|
(3)
|
|
|
17.98
|
%
|
|
|
18.05
|
%
|
Common
|
|
Alastair McEwan, Director
|
|
|
5,250,000
|
(4)
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
Robert D. Tucker, Director
|
|
|
1,500,000
|
(5)
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
Michael Falk, Director
|
|
|
323,829,235
|
(6)(7)
|
|
|
50.60
|
%
|
|
|
50.81
|
%
|
Common
|
|
Cecilio M. Rodriguez, Director
|
|
|
750,000
|
(8)
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
James C. Powers, Director
|
|
|
500,000
|
(9)
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
Gene Resnick, M.D., Founder, Chief Medical Officer
|
|
|
15,587,806
|
(10)
|
|
|
2.43
|
%
|
|
|
2.45
|
%
|
Common
|
|
Markus Weissbach, M.D., Ph.D., Executive Chairman
|
|
|
4,812,500
|
(11)
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
Lawrence Hoffman, Chief Financial Officer
|
|
|
2,500,000
|
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
Abdallah Ennaji, Executive Vice President Data Management and
Statistics
|
|
|
250,000
|
(12)
|
|
|
*
|
|
|
|
*
|
|
Common
|
|
All directors and executive officers as a group
(10 persons)
|
|
|
469,897,700
|
(13)
|
|
|
71.58
|
%
|
|
|
71.90
|
%
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
ComVest Investment Partners II LLC,
City Place Tower,
525 Okeechobee Blvd.,
Suite 1050, West Palm Beach, FL 33401
Attention: Cecilio Rodriguez
|
|
|
323,079,235
|
(7)
|
|
|
50.54
|
%
|
|
|
50.75
|
%
|
Common
|
|
Cumulus Investors LLC
|
|
|
57,600,000
|
|
|
|
9.01
|
%
|
|
|
9.05
|
%
|
Common
|
|
Dr. Philip T. Lavin, Founder and Director
|
|
|
114,918,159
|
(3)
|
|
|
17.98
|
%
|
|
|
18.05
|
%
|
|
|
|
* |
|
Indicates ownership of less than 1% of outstanding shares. |
47
|
|
|
(1) |
|
The address of each of the executive officers and directors and
certain of our stockholders is Averion International Corp., 225
Turnpike Road, Southborough, Massachusetts 01772. |
|
(2) |
|
Each person listed or included in the group has sole voting
power and sole investment power with respect to the shares owned
by such person, except as indicated below. |
|
(3) |
|
Includes 7,681,882 shares of common stock owned by
Dr. Lavins children. Dr. Lavin disclaims any
beneficial ownership of such shares owned by his children. |
|
(4) |
|
Consists of 5,250,000 shares of common stock subject to
options held by Mr. McEwan. |
|
(5) |
|
Consists of 1,500,000 shares of common stock subject to
options held by Mr. Tucker. |
|
(6) |
|
Includes 750,000 shares of common stock subject to options
held by Mr. Falk. |
|
(7) |
|
ComVest II Partners, LLC (ComVest II) is the
managing member of ComVest. The managing member of
ComVest II is ComVest Group Holdings, LLC (CGH)
and Mr. Falk is the Chairman and principal member of CGH.
Mr. Falk, by virtue of his status as managing member of
ComVest II (the managing member of ComVest) and as one of
the principal members of ComVest and ComVest II, may be deemed
to have indirect beneficial ownership of all of the shares
beneficially owned by ComVest. Mr. Falk disclaims any
beneficial ownership of all such shares. |
|
(8) |
|
Consists of 750,000 shares of common stock subject to
options held by Mr. Rodriguez. |
|
(9) |
|
Consists of 500,000 shares of common stock subject to
options held by Mr. Powers. |
|
(10) |
|
Includes 979,166 shares of common stock subject to options
held by Dr. Resnick. |
|
(11) |
|
Consists of 4,500,000 shares of common stock subject to
options held by Dr. Weissbach. |
|
(12) |
|
Consists of 250,000 shares of common stock subject to
options held by Mr. Ennaji. |
|
(13) |
|
Includes 16,479,166 shares of common stock subject to
options held by our directors and executive officers as a group.
Includes shares for which Mr. Falk disclaims beneficial
ownership. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Second
Omnibus Amendment
On July 30, 2009, we entered into that certain Second
Omnibus Amendment (the Second Omnibus
Amendment) with: (i) the 2007 Buyers (defined
below) holding at least sixty six and two thirds percent
(662/3%)
of the aggregate original principal amount of the 2007 Notes
(defined below) (a 2007 Required Majority);
and (ii) the 2008 Buyers (defined below) holding at least
sixty six and two thirds percent
(662/3%)
of the aggregate original principal amount of the 2008 Notes
(defined below) (a 2008 Required Majority).
The Second Omnibus Amendment amends: (i) those certain 2007
Notes entered into in connection with the Securities Purchase
Agreement, dated as of October 31, 2007, by and among the
Company and certain buyers (the 2007 Buyers),
as amended (the 2007 SPA), pursuant to which
the 2007 Buyers purchased senior secured notes in the aggregate
original principal amount of Twenty Six Million Dollars
($26,000,000) (the 2007 Notes);
(ii) those certain 2008 Notes entered into in connection
with that certain Securities Purchase Agreement, dated as of
June 27, 2008, by and among the Company and certain buyers
(the 2008 Buyers, and together with the 2007
Buyers, the Buyers), pursuant to which the
2008 Buyers purchased senior secured notes in the aggregate
original principal amount of Two Million Dollars ($2,000,000)
(the 2008 Notes), each as previously amended
by that certain Omnibus Amendment, dated March 13, 2009
(the First Amendment); and (iii) those
certain New Notes (defined below) issued in connection with the
First Amendment, pursuant to which certain 2007 Buyers were
issued additional senior secured notes, in the aggregate
original principal amount of Three Hundred Thirty Thousand
Dollars ($330,000), in lieu of payment of the applicable
transaction fees originally due to the 2007 Buyers under the
2007 SPA (the New Notes, and together with
the 2007 Notes and the 2008 Notes, the Notes).
As of June 30, 2009, the Company owed an aggregate of One
Million Nine Hundred Fifty Two Thousand Seven Hundred Sixty
Dollars ($1,952,760) to the Buyers for Quarterly Interest
Payments (as defined in the
48
Notes) that had not been paid by the Company in accordance with
the terms of the First Amendment (the Past Interest
Amount).
Pursuant to the Second Omnibus Amendment, the Company, a 2007
Required Majority and a 2008 Required Majority amended the Notes
to provide that the Past Interest Amount would be paid to the
Buyers, on a pro rata basis, as follows: (i) Five Hundred
Fifty Four Thousand Four Hundred Twelve Dollars ($554,412) on or
before July 31, 2009; (ii) Six Hundred Ninety Two
Thousand Thirty Nine Dollars ($692,039) on or before
August 31, 2009; and (iii) Seven Hundred Six Thousand
Three Hundred Nine Dollars ($706,309) on or before
September 28, 2009 (collectively, the Interest
Payments), such that, on September 28, 2009, the
Interest Payments would be paid in full and in full satisfaction
of the Past Interest Amount, it being understood that no
additional interest shall accrue on the Past Interest Amount
prior to its repayment.
In addition, pursuant to the Second Omnibus Amendment, each
Buyer agreed to waive: (i) any all rights and remedies with
respect to any existing payment default under the Notes,
including, without limitation, with respect to the Past Interest
Amount; and (ii) any and all rights with respect to any
payment default under any Note that may occur prior to
October 1, 2009 as well as any and all other rights and
remedies arising therefrom; provided, however, that if the
Company fails to timely pay any Interest Payment on or before
its respective due date, the waivers set forth in this paragraph
shall automatically be rescinded by the Buyers and the Buyers
shall have all of the rights and remedies with respect to all
payment defaults as provided for in the Notes.
Omnibus
Amendment
On March 13, 2009 (the Omnibus Amendment Effective
Date), we entered into an Omnibus Amendment with:
(i) the 2007 Buyers (defined below) holding at least sixty
six and two thirds percent
(662/3%)
of the aggregate original principal amount of the 2007 Notes
(defined below); and (ii) the 2008 Buyers (defined below)
holding at least sixty six and two thirds percent
(662/3%)
of the aggregate original principal amount of the 2008 Notes
(defined below) (the Omnibus Amendment). The
Omnibus Amendment amends: (i) that certain Securities
Purchase Agreement dated as of October 31, 2007, as amended
on November 5, 2007, and further amended on June 27,
2008 (the 2007 SPA) by and among the Company
and certain buyers (the 2007 Buyers),
pursuant to which the 2007 Buyers purchased senior secured notes
in the aggregate original principal amount of Twenty Six Million
Dollars ($26,000,000) (the 2007 Notes);
(ii) those certain 2007 Notes entered into in connection
with the 2007 SPA between the Company and the 2007 Buyers; and
(iii) those certain 2008 Notes (defined below) entered into
in connection with that certain Securities Purchase Agreement
dated as of June 27, 2008 by and among the Company and
certain buyers (the 2008 Buyers, and together
with the 2007 Buyers, the Buyers), pursuant
to which the 2008 Buyers purchased senior secured notes in the
aggregate original principal amount of Two Million Dollars
($2,000,000) (the 2008 Notes, and together
with the 2007 Notes, the Prior Notes).
Specifically, the Omnibus Amendment amends:
(i) Section 4(h) of the 2007 SPA to reflect that the
Transaction Fee (as such term is defined in the 2007 SPA) due to
the 2007 Buyers upon the one (1) year anniversary of their
respective Closing Dates (as such term is defined in the 2007
SPA) shall be paid on the Omnibus Amendment Effective Date, at
the option of each 2007 Buyer, either by: (a) paying to
each 2007 Buyer an amount of cash equal to such 2007
Buyers Transaction Fee amount, or (b) by issuing to
each 2007 Buyer, in lieu of a cash payment equal to such 2007
Buyers Transaction Fee amount, a new senior secured note
in principal amount equal to three percent (3%) of the purchase
price of such 2007 Buyers Prior Note and on the same terms
and conditions as the Prior Notes (the New
Notes); and (ii) Section 4 of each Prior
Note to provide that the Quarterly Interest Payments (as such
term is defined in the Prior Notes) for the calendar quarters
commencing on October 1, 2008 and January 1, 2009
shall be due and payable by the Company to each Buyer on
June 30, 2009.
In addition, the Omnibus Amendment provides that for a period of
one (1) year after the Omnibus Amendment Effective Date,
each Buyer waives any and all right to a Mandatory Prepayment
Upon a Financial Covenant Test Failure (as such term is defined
in the Prior Notes) and waives any and all rights and remedies
arising from any Financial Covenant Test Failure (as such term
is defined in the Prior Notes), including,
49
without limitation, rights and remedies arising if: (A) the
Revenue Ratio is less than the Required Revenue Ratio;
(B) the Net
Book-to-Bill
Ratio is less than the Required Net
Book-to-Bill
Ratio, (C) the EBITDA Ratio is less than the Required
EBITDA Ratio, or (D) the Cash and Cash Equivalents are less
than the Required Cash Amount (each as defined in the Prior
Notes). In addition, any New Note issued to a 2007 Buyer in lieu
of a cash payment equal to such 2007 Buyers Transaction
Fee amount shall be subject to the terms and conditions of the
Omnibus Amendment.
In accordance with the Omnibus Amendment, we: (i) issued
New Notes to the 2007 Buyers in an aggregate amount equal to
Three Hundred Thirty Thousand Dollars ($330,000); and
(ii) paid the 2007 Buyers an aggregate cash payment equal
to Three Hundred Thousand Dollars ($300,000) for the Transaction
Fee amounts.
Subject to the Omnibus Amendment, we will pay interest on the
New Notes quarterly in arrears, beginning with the calendar
quarter that commenced on January 1, 2009 as follows:
(i) for the period commencing on the Omnibus Amendment
Effective Date and ending on October 31, 2009, ten percent
(10%) per annum; and (ii) for the period commencing on
November 1, 2009 and ending on October 31, 2010,
fifteen percent (15%) per annum. The entire unpaid principal
balance of the New Notes, plus all accrued interest thereon
remaining unpaid, shall be due and payable by us to the Buyers
on October 31, 2010. In addition, we have agreed to certain
financial covenants as set forth in the New Notes. If we breach
any of the financial covenants set forth in the New Notes,
subject to the waivers provided for in the Omnibus Amendment and
described above, we will be required to make certain payments to
the holders of the New Notes.
The repayment of all outstanding principal and accrued interest
under the New Notes may be accelerated by the holders thereof
upon any of the following events of default: (i) default in
payment of any principal amount due under the New Notes;
(ii) failure by us for ten (10) business days to
comply with any other provision of the New Notes in all material
respects; (iii) initiation of a bankruptcy proceeding or
related proceeding; (iv) an involuntary case or other
proceeding is commenced directly against us or any of our
subsidiaries seeking liquidation, reorganization or other
relief; (v) breach of any covenant or other term or
condition of any Transaction Document (as such term is defined
in the New Notes), except, in the case of a breach of a covenant
or other term that is curable, only if such breach continues for
a period of at least ten (10) business days after written
notice to us thereof; (vi) one or more judgments,
non-interlocutory orders or decrees shall be entered by a
U.S. state or federal or a foreign court or administrative
agency of competent jurisdiction involving, in the aggregate, a
liability (to the extent not covered by independent third-party
insurance) as to any single or related series of transactions,
incidents or conditions, of Two Hundred Fifty Thousand Dollars
($250,000) or more, and the same shall remain unsatisfied,
unvacated, unbonded or unstayed pending appeal for a period of
forty-five (45) days after the entry thereof;
(vii) any lien created by any Transaction Document shall at
any time fail to constitute a valid and perfected first priority
lien on all of the collateral purported to be secured thereby
and the same is not cured within ten (10) business days of
any such failure; (viii) there shall occur a change of
control; or (ix) there occurs with respect to any issue or
issues of indebtedness having an outstanding amount of Two
Hundred Fifty Thousand Dollars ($250,000) or more in the
aggregate, whether such indebtedness exists on the issue date or
shall thereafter be created, an event of default that permits
the holder thereof to declare such indebtedness to be due and
payable prior to its stated maturity.
On March 13, 2009, in connection with the Omnibus
Amendment, we issued New Notes to the 2007 Buyers in the
aggregate principal amount of Three Hundred Thirty Thousand
Dollars ($330,000), which New Notes are due and payable as set
forth above.
The rights of holders of our common stock were limited by the
issuance of the Prior Notes as set forth in the Current Reports
on
Form 8-K
filed with the Securities and Exchange Commission on
November 6, 2007 and June 27, 2008. Similarly, the
rights of holders of our common stock have been limited by the
issuance of the New Notes on March 13, 2009. The New Notes,
together with the Prior Notes, are secured by all of our assets
and in the event of a liquidation event, repayment of the New
Notes and Prior Notes would come prior to any payment or
distribution to holders of our common stock. In addition, for so
long as the New Notes or Prior Notes are outstanding, we may not
declare, set aside or pay any dividends, or make any other
distributions, on our common stock.
50
Additional
Shares Issued
On January 1, 2009, we issued 4,285,714 shares of our
common stock to Dr. Gene Resnick as partial consideration
for our acquisition of substantially all of the assets of
Millennix, Inc. on November 9, 2005 (the Resnick
Shares). The Resnick Shares were issued pursuant to
that certain Amendment to Asset Purchase Agreement dated
September 6, 2006.
Amendment
to Weissbach Employment Agreement
Effective December 4, 2008, we entered into an Amendment
(the Weissbach Amendment) to that certain
Employment Agreement dated January 10, 2008 (the
Weissbach Employment Agreement) with
Dr. Markus H. Weissbach, our former Chief Executive
Officer. Pursuant to the Weissbach Amendment, Section 3.2
of the Weissbach Employment Agreement has been amended such that
(i) for calendar year 2008, the maximum annual bonus
Dr. Weissbach will be eligible to receive has been reduced
from one hundred percent (100%) to seventy five percent (75%) of
his then in effect base salary; and (ii) for calendar year
2009 and thereafter, the maximum annual bonus Dr. Weissbach
will be eligible to receive has been reduced from one hundred
percent (100%) to fifty percent (50%) of his then in effect base
salary. The remainder of the Weissbach Employment Agreement
remains unchanged and continues in full force and effect.
June 2008
Debt Financing Transaction
On June 27, 2008 (the June 2008 Debt Financing
Closing Date), we entered into the following
agreements pursuant to which we sold Two Million Dollars
($2,000,000) of senior secured notes (the
Notes) and issued an aggregate of nine
million six hundred thousand (9,600,000) shares of our common
stock (the Shares) (the June 2008
Debt Financing Transaction) to ComVest Investment
Partners II LLC, a Delaware limited liability company
(ComVest), and Cumulus Investors, LLC, a
Nevada limited liability company (Cumulus and
together with ComVest, each a Buyer and
collectively, the Buyers): (i) a
Securities Purchase Agreement between us and the Buyers (the
June 2008 Debt SPA); (ii) Amendment
No. 2 to Security Agreement between us and Hesperion US,
Inc., a Maryland corporation and our wholly owned indirect
subsidiary (Hesperion US), on the one hand,
and Cumulus in its capacity as collateral agent for the benefit
of the Buyers (the Collateral Agent), on the
other hand (the Amended Security Agreement);
(iii) Amendment No. 1 to Guaranty in favor of the
Collateral Agent for the benefit of the Buyers which was
executed by Hesperion US (the Amended
Guaranty); and (iv) Amendment No. 2 to
Securities Purchase Agreement and Waiver by and among us the
Buyers and the Prior Buyers (as defined below) (the
Amended SPA).
ComVest, which beneficially owned directly or through
affiliates, approximately 50.69% of our outstanding common stock
immediately prior to the Debt Financing Closing Date, purchased
a Note in the principal amount of One Million Dollars
($1,000,000) and was issued four million eight hundred thousand
(4,800,000) Shares in connection therewith. After the Debt
Financing Closing Date, ComVest, or its affiliates, beneficially
own approximately 50.68% of our common stock. Michael Falk,
chairman of our board of directors (the
Board) and Cecilio Rodriguez, one of our
directors, are affiliates of ComVest.
Our Board previously determined that it would be in our best
interests and the best interests of our stockholders to appoint
a special committee of disinterested directors to consider and
approve the Debt Financing Transaction. Alastair McEwan, Robert
Tucker and James Powers were appointed to the special committee
of the Board (the Special Committee) with the
power to approve the June 2008 Debt Financing Transaction. On
May 22, 2008, at a meeting of the Special Committee, the
Special Committee approved the June 2008 Debt Financing
Transaction.
June
2008 Debt SPA
Pursuant to the June 2008 Debt SPA, we are obligated to sell and
the Buyers are obligated to buy Notes in the aggregate principal
amount of Two Million Dollars ($2,000,000) and shares of our
common stock in the aggregate amount of nine million six hundred
thousand (9,600,000) Shares.
51
Pursuant to the June 2008 Debt SPA, from the June 2008 Debt
Financing Closing Date until the date that no Notes or Prior
Notes (as defined below) remain outstanding, Cumulus shall have
the right to appoint one (1) person to attend and observe
our Board meetings in an observer, non-voting capacity. Such
observation rights shall not be transferable to any third party
or assignee.
In addition, pursuant to the June 2008 Debt SPA, in the event
that any Buyers Note is outstanding on the first
(1st)
anniversary of the June 2008 Debt Financing Closing Date, we
shall pay such Buyer a transaction fee in an amount equal to two
percent (2%) of the purchase price of such outstanding Note.
Notes
We will pay interest on the Notes quarterly in arrears,
beginning with the calendar quarter that commenced on
April 1, 2008 as follows: (i) for the period
commencing on the June 2008 Debt Financing Closing Date and
ending on October 31, 2008, three percent (3%) per annum;
(ii) for the period commencing on November 1, 2008 and
ending on October 31, 2009, ten percent (10%) per annum;
and (iii) for the period commencing on November 1,
2009 and ending on October 31, 2010, fifteen percent (15%)
per annum. The entire unpaid principal balance of the Notes,
plus all accrued interest thereon remaining unpaid, shall be due
and payable by us to the Buyers on October 31, 2010. In
addition, we have agreed to certain financial covenants as set
forth in the Notes. If we breach any of the financial covenants
set forth in the Notes, we will be required to make certain
payments to the holders of the Notes.
The repayment of all outstanding principal and accrued interest
under the Notes may be accelerated by the holders thereof upon
any of the following events of default: (i) default in
payment of any principal amount due under the Notes;
(ii) failure by us for ten (10) business days to
comply with any other provision of the Notes in all material
respects; (iii) initiation of a bankruptcy proceeding or
related proceeding; (iv) an involuntary case or other
proceeding is commenced directly against us or any of our
subsidiaries seeking liquidation, reorganization or other
relief; (v) breach of any covenant or other term or
condition of any Debt Financing Transaction agreement, except,
in the case of a breach of a covenant or other term that is
curable, only if such breach continues for a period of at least
ten (10) business days after written notice to us thereof;
(vi) one or more judgments, non-interlocutory orders or
decrees shall be entered by a U.S. state or federal or a
foreign court or administrative agency of competent jurisdiction
involving, in the aggregate, a liability (to the extent not
covered by independent third-party insurance) as to any single
or related series of transactions, incidents or conditions, of
Two Hundred Fifty Thousand Dollars ($250,000) or more, and the
same shall remain unsatisfied, unvacated, unbonded or unstayed
pending appeal for a period of forty-five (45) days after
the entry thereof; (vii) any lien created by any Debt
Financing Transaction agreement shall at any time fail to
constitute a valid and perfected first priority lien on all of
the collateral purported to be secured thereby and the same is
not cured within ten (10) business days of any such
failure; (viii) there shall occur a change of control; or
(ix) there occurs with respect to any issue or issues of
indebtedness having an outstanding amount of Two Hundred Fifty
Thousand Dollars ($250,000) or more in the aggregate, whether
such indebtedness exists on the issue date or shall thereafter
be created, an event of default that permits the holder thereof
to declare such indebtedness to be due and payable prior to its
stated maturity.
Amendment
No. 2 to Security Agreement
The Buyers, along with additional buyers (collectively, the
Prior Buyers), previously purchased certain
secured notes in an original aggregate principal amount of
Twenty Six Million Dollars ($26,000,000) (the Prior
Notes) and entered into that certain Security
Agreement, dated October 31, 2007 (the Security
Agreement), pursuant to which we, IT&E
International, a California corporation and our former wholly
owned subsidiary (IT&E), and Averion
Inc., a Massachusetts corporation and our former wholly owned
subsidiary (Averion Inc., and together with
IT&E, the Former Subsidiaries), granted
to the Collateral Agent, for the benefit of itself and the
Buyers, a security interest in and lien upon all of our and our
Former Subsidiaries assets as security for our performance
of our obligations under the Notes. Pursuant to the Amended
Security Agreement, the Security Agreement was amended to:
(i) include the Notes, as well as the Prior Notes, as being
covered by the Security Agreement; and (ii) to reflect that
the security interest and lien that was granted as security for
our performance of our obligations under the Prior Notes and the
Notes now
52
also includes a security interest in and lien upon all of
Hesperion USs assets as well as our assets and no longer
includes a security interest in and lien upon our Former
Subsidiaries assets which are now owned directly by us.
Amended
Guaranty
The Former Subsidiaries previously entered into that certain
Guaranty, dated October 31, 2007 (the
Guaranty), pursuant to which the Former
Subsidiaries agreed to guarantee the full and prompt payment and
performance to the Prior Buyers and Collateral Agent when due,
upon demand, at maturity or by reason of acceleration or
otherwise, of any and all of our, or the Former Subsidiaries,
obligations, under the transaction documents related to the
Prior Notes. Pursuant to the Amended Guaranty, the Guaranty was
amended to: (i) include the Notes, as well as the Prior
Notes, as being covered by the Guaranty; and (ii) to
reflect that the guarantor under the Guaranty is now Hesperion
US, our indirect wholly owned subsidiary, and no longer the
Former Subsidiaries, which have each been dissolved.
Amended
SPA
The Buyers and Prior Buyers previously entered into that certain
Securities Purchase Agreement with the Company dated
October 31, 2007 (the Prior SPA),
pursuant to which the Buyers and Prior Buyers purchased the
Prior Notes. In addition, pursuant to the Prior SPA, the Prior
Buyers and the Buyers were given the right to participate in any
future Company financing. Pursuant to the Amended SPA:
(i) the Prior Buyers agreed to waive any right to
participate in the June 2008 Debt Financing Transaction; and
(ii) the Prior SPA was amended as follows: (a) the
definitions of Permitted Liens and Indebtedness were modified to
include those created or incurred by the June 2008 Debt SPA;
(b) the definition of Affiliate Transactions was amended to
allow for the transactions contemplated by the June 2008 Debt
SPA; and (c) the definition of Subsidiary was revised to
mean any person of which fifty percent (50%) or more of the
outstanding voting securities or other equity interests are
owned, directly or indirectly, by such person; provided,
however, that the change in definition of Subsidiary is not
intended to, and does not, in any way effect the representations
or warranties set forth in Section 3 of the Prior SPA which
were made as of the date of the Prior SPA and the closing date
of the Prior SPA.
Weissbach
Employment Agreement
Effective January 10, 2008, Dr. Markus Weissbach, our
chief executive officer (Weissbach), entered
into an employment agreement with us governed by the laws of the
Commonwealth of Massachusetts (the Massachusetts
Employment Agreement,) that will supersede a prior
employment agreement that Weissbach entered into with us on
October 31, 2007, that was governed by Swiss law (the
Swiss Employment Agreement). The
Massachusetts Employment Agreement will supersede the Swiss
Employment Agreement on the date on which Weissbach obtains a
United States L-1A visa (or comparable U.S. visa or work
permit).
The terms of the Swiss Employment Agreement were set forth in
our Current Report on
Form 8-K
which was filed with the Securities and Exchange Commission on
November 6, 2007. At such time as the Massachusetts
Employment Agreement becomes effective and supersedes the Swiss
Employment Agreement, the terms of the Swiss Employment
Agreement will no longer have any force or effect and the terms
of the Massachusetts Employment Agreement shall at that time
become effective. The Massachusetts Employment Agreement
provides that Weissbach will be paid an annual base salary of
Three Hundred Twenty Seven Thousand Dollars ($327,000). In
addition, Weissbach will be eligible to receive an annual bonus
of up to one hundred percent (100%) of his then in effect annual
base salary as determined by our Board based upon the
satisfaction of certain objective criteria and certain
performance goals to be determined by our Board. Either party
may terminate the Massachusetts Employment Agreement at any time
with or without Cause (as defined in the Massachusetts
Employment Agreement) or with or without Good Reason (as defined
in the Massachusetts Employment Agreement); provided, however,
that any termination by us without Cause or by Weissbach without
Good Reason must be preceded by sixty (60) days advance
written notice. If Weissbach is terminated without Cause, is
disabled or resigns for Good Reason, then we are obligated to
pay Weissbach an amount
53
equal to twelve (12) months of Weissbachs then in
effect base salary in accordance with our normal payroll
policies and continue Weissbachs benefits for a period of
eighteen (18) months. If a change of control transaction
occurs and, if following or in connection with, such change of
control transaction, Weissbach is terminated (other than for
Cause), or resigns for Good Reason, then we are obligated to pay
Weissbach an amount equal to the sum of: (i) twelve
(12) months of Weissbachs then in effect base salary,
plus (ii) Weissbachs target bonus for the year the
change of control occurs or for the year immediately prior to
the change of control, whichever is higher; and
(iii) continue Weissbachs benefits for a period of
eighteen (18) months.
In addition, during his employment under the Massachusetts
Employment Agreement and for a one (1) year period
following the termination of his employment for any reason,
Weissbach will not: (i) directly or indirectly, compete, or
undertake any planning to compete, with us, anywhere in the
world, whether as an owner, partner, investor, consultant,
employee or otherwise; or (ii) (a) solicit or encourage any
of our customers to terminate or diminish their relationship
with us; or (b) seek to persuade any such customer or
prospective customer to conduct with anyone else any business or
activity which such customer or prospective customer conducts or
could conduct with us; provided that the restrictions for
(b) above shall apply (y) only with respect to those
persons who are or have been a customer of ours at any time
within the immediately preceding two (2) year period or
whose business has been solicited on behalf of us or by any of
our officers, employees or agents within such two (2) year
period, other than by form letter, blanket mailing or published
advertisement, and (z) only if Weissbach has performed work
for such person during Weissbachs employment with us or
been introduced to, or otherwise had contact with, such person
as a result of his or other associations with us or has had
access to confidential information which would assist in
Weissbachs solicitation of such person.
Financing
Transaction
On October 31, 2007 (the Debt Financing Closing
Date), we also entered into the following agreements
pursuant to which we sold Twenty Four Million Dollars
($24,000,000) of senior secured notes (the
Notes) and issued an aggregate of one hundred
fifteen million two hundred thousand (115,200,000) shares of our
common stock (the Shares) (the Debt
Financing Transaction) to ComVest, Cumulus Investors,
LLC, a Nevada limited liability company
(Cumulus), and Dr. Philip T. Lavin
(Lavin and together with ComVest and Cumulus,
each a Buyer and collectively, the
Buyers): (i) a Securities Purchase
Agreement between us and the Buyers (the Debt
SPA); (ii) a Registration Rights Agreement
between us and the Buyers (the Registration Rights
Agreement); (iii) a Pledge Agreement between us
and Cumulus, in its capacity as collateral agent for the Buyers
(the Collateral Agent) (the Pledge
Agreement); (iv) a Security Agreement between us,
Averion Inc., a Delaware corporation and our wholly owned
subsidiary (Averion Inc.), and IT&E
International, a California corporation and our wholly owned
subsidiary (IT&E), on the one hand, and
the Buyers and Collateral Agent, on the other hand (the
Security Agreement); and (v) a Guaranty
in favor of the Collateral Agent for the benefit of the Buyers
which was executed by Averion Inc. and IT&E (the
Guaranty).
ComVest, which beneficially owned directly or through affiliates
approximately 52.98% of our outstanding common stock immediately
prior to the Debt Financing Closing Date, purchased a Note in
the principal amount of Eleven Million Dollars ($11,000,000) and
was issued fifty two million eight hundred thousand (52,800,000)
Shares in connection therewith. After the Second Closing
(defined below), ComVest, or its affiliates, beneficially own
approximately 50.84% of our common stock. Michael Falk, chairman
of our Board and Cecilio Rodriguez, one of our directors, are
affiliates of ComVest. In addition, Lavin, one of our directors,
our current Executive Chairman and former Chief Executive
Officer, and who beneficially owned directly or through
affiliates approximately 21.12% of our outstanding common stock
immediately prior to the Debt Financing Closing Date, purchased
a Note in the principal amount of Two Million Dollars
($2,000,000) and was issued nine million six hundred thousand
(9,600,000) Shares in connection therewith. After the Second
Closing, Lavin, or his affiliates, beneficially own
approximately 18.43% of our common stock.
In connection with the Debt Financing Transaction, our Board
determined that it would be in our best interests and the best
interests of our stockholders to appoint a special committee of
disinterested directors to
54
consider the terms and conditions of the Debt Financing
Transaction and approve such terms. To that end, our Board
appointed Alastair McEwan, Robert Tucker and James Powers to a
special committee of the Board with the sole power to approve
the Debt Financing Transaction. In addition, such special
committee retained independent counsel (Special
Counsel) to assist it in evaluating the Debt Financing
Transaction. On October 30, 2007, at a meeting of such
Special Committee at which Special Counsel was present, the
Special Committee approved the Debt Financing Transaction.
Debt
SPA
Pursuant to the Debt SPA, we are obligated to sell and the
Buyers are obligated to buy Notes in the aggregate principal
amount of Twenty Six Million Dollars ($26,000,000) and shares of
our common stock in the aggregate amount of one hundred twenty
four million eight hundred thousand (124,800,000) Shares as
follows: (i) on the Debt Financing Closing Date, we sold
and issued to the Buyers and the Buyers purchased from us Notes
in the aggregate principal amount of Twenty Four Million Dollars
($24,000,000) and shares of our common stock in the aggregate
amount of one hundred fifteen million two hundred thousand
(115,200,000) Shares; and (ii) within thirty (30) days
after the Debt Financing Closing Date, we were obligated to sell
and certain Buyers are obligated to buy from us Notes in the
aggregate principal amount of an additional Two Million Dollars
($2,000,000) and shares of our common stock in the aggregate
amount of nine million six hundred thousand (9,600,000) Shares
(the Second Closing).
Pursuant to the Debt SPA, from the Debt Financing Closing Date
until the date that no Notes remain outstanding, before we, or
any of our affiliates, enter into any debt or equity financing
or issue any debt or equity securities, subject to certain
standard and customary exceptions (each, a Future
Offering), we must give the Buyers the right to
participate in any such Future Offering as follows: the Buyers
will have the option to purchase up to an aggregate of twenty
five percent (25%) of the total amount of securities to be
issued in such Future Offering on a pro rata basis.
Pursuant to the Debt SPA, from the Debt Financing Closing Date
until the date that no Notes remain outstanding, Cumulus shall
have the right to appoint one (1) person to attend and
observe our Board meetings in a non-voting capacity. Such
observation rights shall not be transferable to any third party
or assignee.
In addition, pursuant to the Debt SPA, in the event that any
Buyers Note is outstanding on the first (1st) anniversary
of the Debt Financing Closing Date, we shall pay such Buyer a
transaction fee in an amount equal to two percent (2%) of the
purchase price of such outstanding Note.
Notes
We will pay interest on the Notes quarterly in arrears,
beginning with the calendar quarter that commenced on
October 1, 2007 as follows: (i) for the period
commencing on the Debt Financing Closing Date and ending on the
first (1st) anniversary thereafter, three percent (3%) per
annum; (ii) for the period commencing on the first (1st)
anniversary of the Debt Financing Closing Date and ending on the
second (2nd) anniversary of the Debt Financing Closing Date, ten
percent (10%) per annum; and (iii) for the period
commencing on the second (2nd) anniversary of the Debt Financing
Closing Date and ending on the third (3rd) anniversary of the
Debt Financing Closing Date, fifteen percent (15%) per annum.
The entire unpaid principal balance of the Notes, plus all
accrued interest thereon remaining unpaid, shall be due and
payable by us to the Buyers on October 31, 2010. In
addition, we have agreed to certain financial covenants as set
forth in the Notes. If we breach any of the financial covenants
set forth in the Notes, we will be required to make certain
payments to the holders of the Notes.
The repayment of all outstanding principal and accrued interest
under the Notes may be accelerated by the holders thereof upon
any of the following events of default: (i) default in
payment of any principal amount due under the Notes;
(ii) failure by us for ten (10) business days to
comply with any other provision of the Notes in all material
respects; (iii) initiation of a bankruptcy proceeding or
related proceeding; (iv) an involuntary case or other
proceeding is commenced directly against us or any of our
subsidiaries seeking liquidation, reorganization or other
relief; (v) breach of any covenant or other term or
condition of any Debt Financing Transaction agreement, except,
in the case of a breach of a covenant or other term that is
curable,
55
only if such breach continues for a period of at least ten
(10) business days after written notice to us thereof;
(vi) one or more judgments, non-interlocutory orders or
decrees shall be entered by a U.S. state or federal or a
foreign court or administrative agency of competent jurisdiction
involving, in the aggregate, a liability (to the extent not
covered by independent third-party insurance) as to any single
or related series of transactions, incidents or conditions, of
Two Hundred Fifty Thousand Dollars ($250,000) or more, and the
same shall remain unsatisfied, unvacated, unbonded or unstayed
pending appeal for a period of forty-five (45) days after
the entry thereof; (vii) any lien created by any Debt
Financing Transaction agreement shall at any time fail to
constitute a valid and perfected first priority lien on all of
the collateral purported to be secured thereby and the same is
not cured within ten (10) business days of any such
failure; (viii) there shall occur a change of control; or
(ix) there occurs with respect to any issue or issues of
indebtedness having an outstanding amount of Two Hundred Fifty
Thousand Dollars ($250,000) or more in the aggregate, whether
such indebtedness exists on the issue date or shall thereafter
be created, an event of default that permits the holder thereof
to declare such indebtedness to be due and payable prior to its
stated maturity.
Pledge
Agreement
Pursuant to the Pledge Agreement, we pledged and granted a first
priority security interest in all of the capital stock and other
equity interests of Averion Inc. and IT&E to the Collateral
Agent, for the benefit of itself and the Buyers, as security for
our performance of our obligations under the Notes.
Security
Agreement
Pursuant to the Security Agreement, we, Averion Inc. and
IT&E granted to the Collateral Agent, for the benefit of
itself and the Buyers, a security interest in and lien upon all
of our, Averion Inc.s and IT&Es assets as
security for our performance of our obligations under the Notes.
Guaranty
Pursuant to the Guaranty, Averion Inc. and IT&E (the
Guarantors), jointly and severally, agreed to
guarantee the full and prompt payment and performance to the
Buyers and Collateral Agent when due, upon demand, at maturity
or by reason of acceleration or otherwise, of any and all of
our, or the Guarantors, obligations, under the Debt Financing
Transaction agreements.
Further
Assurances
Pursuant to a side letter entered into between us and the
Buyers, we agreed to take, or cause to be taken, all applicable
action necessary in connection with the consummation of the
transactions contemplated by the Debt Financing Transaction
agreements, which includes, without limitation, perfecting the
Buyers security interests in the applicable jurisdictions,
entering into deposit account control agreements with our
financial institutions and obtaining pledges of capital stock
from our European subsidiaries.
Amendment
to Debt Financing Transaction Agreements and Financing
Transaction Second Closing
On November 5, 2007, we entered into an amendment to each
of the following agreements related to the Debt Financing
Transaction: (i) Debt SPA; (ii) Registration Rights
Agreement; and (iii) Security Agreement (collectively, the
Amendments). Pursuant to the Amendments, the
parties agreed to amend the Schedule of Buyers to add Gene
Resnick, M.D., (Resnick), MicroCapital
Fund, Ltd., a Cayman-domiciled investment corporation, and
MicroCapital Fund LP, a Delaware limited partnership, as
additional buyers (the Additional Buyers) to
participate in the Second Closing in place of the Buyer
originally designated to participate in the Second Closing and
to join the Additional Buyers as parties to the Debt SPA, the
Registration Rights Agreement and the Security Agreement. On
November 5, 2007, we sold Notes in the aggregate principal
amount of Two Million Dollars ($2,000,000) and issued an
aggregate of nine million six hundred thousand (9,600,000)
Shares to the Additional Buyers. Resnick, our Chief Medical
Officer, purchased a Note in the principal amount of One Hundred
Twenty Five Thousand Dollars ($125,000) and was issued six
hundred thousand (600,000) Shares in connection therewith.
56
Payments
to SCI, Inc.
In 2007, we paid $69,000 to SCI Inc., an entity controlled by
Fred Sancilio, a former member of our Board, for consulting
expenses.
Payments
to a Director
In 2007, we paid Mr. McEwan, a member of our Board, $30,000
for consulting services.
HOUSEHOLDING
OF PROXY MATERIALS
The SEC has adopted rules that permit companies and
intermediaries (e.g. brokers) to satisfy the delivery
requirements for information statements with respect to two or
more stockholders sharing the same address by delivering a
single information statement addressed to those stockholders.
This process, which is commonly referred to as
householding, potentially means extra convenience
for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are our
stockholders will be householding our Information
Statement. A single Information Statement will be delivered to
multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate Information Statement, please
notify your broker, and direct your written request to Averion
International Corp., Attn: Secretary, 225 Southborough Road,
Southborough, Massachusetts 01772. Stockholders who currently
receive multiple copies of the Information Statement at their
address and would like to request householding of
their communications should contact their broker.
IMPORTANT
NOTICE OF INTERNET AVAILABILITY OF INFORMATION
STATEMENT
As permitted by the federal securities laws, we are also making
this Information Statement available to our stockholders via the
Internet. A copy of this Information Statement is available to
you free of charge at
http://www.averionintl.com
under the heading Corporate Governance. We are not
soliciting your proxy or consent, but are furnishing this
Information Statement to you pursuant to
Rule 14c-2
promulgated under the Securities Exchange Act of 1934, as
amended.
INCORPORATION
BY REFERENCE
We are permitted to incorporate by reference certain
documents and information into this Information Statement. This
means that we are referring you to the information that we have
filed separately with the SEC. The information incorporated by
reference should be considered a part of this Information
Statement, except for any information superseded by information
contained directly in this Information Statement. Our Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2008, which includes
audited financial statements for the fiscal years ended
December 31, 2008 and December 31, 2007, and our
Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2009, which includes
unaudited financial statements for the three (3) months and
six (6) months ended June 30, 2009, are incorporated
by reference into this Information Statement. We undertake to
provide without charge to each stockholder to whom a copy of
this Information Statement has been delivered, upon request, by
first class mail or equally prompt means, a copy of any or all
such documents incorporated by reference into this Information
Statement. You may obtain copies of any or all such documents
incorporated by reference into this Information Statement by
submitting a request in writing addressed to Averion
International Corp., Secretary, 225 Southborough Road,
Southborough, Massachusetts 01772 or via telephone at
(508) 597-6000.
57
ADDITIONAL
INFORMATION
We will furnish without charge to any stockholder, upon written
or oral request, any documents filed by us pursuant to the
Exchange Act. Requests for such documents should be addressed to
Averion International Corp., Secretary, 225 Southborough Road,
Southborough, Massachusetts 01772. Documents filed by us
pursuant to the Exchange Act may be reviewed
and/or
obtained through the SECs Electronic Data Gathering
Analysis and Retrieval System, which is publicly available
through the SEC website at
http://www.sec.gov.
COMMUNICATIONS
WITH OUR BOARD OF DIRECTORS
Stockholders who wish to communicate with members of our board
of directors may send correspondence to them in care of: Averion
International Corp., Secretary, 225 Southborough Road,
Southborough, Massachusetts 01772.
DISSENTERS
RIGHTS OF APPRAISAL
Under the Delaware General Corporation Law, our stockholders
will not be entitled to appraisal rights in connection with the
above actions. Furthermore, we do not intend to independently
provide stockholders with any such rights.
By Order of our Board of Directors,
Chairman of the Board
58
Presentation
to the Special Committee of the Board of Directors of
Regarding
Valuation of Company as a Going Concern
August 24,
2009
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Quality Valuation
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Quality Decision-making
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Integrity and
Independence
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THE FULL TEXT OF THE WRITTEN VALUATION REPORT OF
MARSHALL & STEVENS SHOULD BE READ CAREFULLY IN ITS
ENTIRETY. IN PREPARING THIS VALUATION REPORT,
MARSHALL & STEVENS RELIED UPON INFORMATION PROVIDED BY
THE MANAGEMENT OF AVERION INTERNATIONAL. THE INFORMATION
PROVIDED INCLUDED FORWARD-LOOKING STATEMENTS AND PROJECTIONS AND
WAS BASED UPON A VARIETY OF ASSUMPTIONS, INCLUDING
MANAGEMENTS ABILITY TO ACHIEVE STRATEGIC GOALS, OBJECTIVES
AND TARGETS OVER THE APPLICABLE PERIODS. MARSHALL &
STEVENS DID NOT INDEPENDENTLY VERIFY THE ASSUMPTIONS OR
CONCLUSIONS SET FORTH IN THOSE PROJECTIONS AND FORECASTS.
MARSHALL & STEVENS WAS NOT ASKED TO ADVISE AND DID
NOT ADVISE AS TO THE FAIRNESS OF THE PROPOSED REVERSE/FORWARD
STOCK SPLIT, EITHER FROM A PROCEDURAL POINT OF VIEW OR FROM A
FINANCIAL POINT OF VIEW. NOR WERE WE ASKED TO CONSIDER OR ADVISE
UPON POSSIBLE ALTERNATIVE TRANSACTIONS. MARSHALL &
STEVENS REPORT IS DIRECTED TO THE SPECIAL COMMITTEE OF THE
BOARD OF DIRECTORS OF AVERION INTERNATIONAL AND RELATES ONLY TO
THE COMPANYS VALUATION AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER WITH RESPECT TO THE
REVERSE/FORWARD STOCK SPLIT OR ANY OTHER MATTER BEING VOTED
UPON.
Confidential
Table of
Contents
Confidential
Introduction
to Marshall & Stevens
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Headquartered in Los Angeles and founded in 1932
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Offices in 6 locations nationwide
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New York
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Los Angeles
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Philadelphia
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Chicago
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Tampa
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St. Louis
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More than 100 employees, including industry authorities and
thought leaders
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More than 500 engagements with more than 200 clients
served annually
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Full-service, independent valuation and financial advisory firm:
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Business Valuations;
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Fairness, Solvency Opinions;
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Strategic M&A Advisory Services (provided through MS
Capital, LLC, a wholly-owned subsidiary);
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Valuation of Intangible Assets;
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Commercial & Industrial Real Estate Valuation and
Consulting;
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Commercial Real Estate Loan Portfolio Credit Analysis; and
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Machinery & Equipment Valuation and Consulting
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Our
focus is on protecting and maximizing value for our clients by
providing independent and objective advice on issues related to
highly technical and complex assessments of value.
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Financial Valuation
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Real Estate Services
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Capital Asset Valuation
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Proven financial reporting expertise:
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Valuation and appraisal services
supporting:
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Proven expertise with:
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SFAS 141(R)
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Single and Multiple Asset Valuations
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Ghost Assets
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SFAS 142
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Whole Loan Credit Analysis
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Financings
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SFAS 144
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Property Portfolio Valuations
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Insurance Placement
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SFAS 123R
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Property Taxes
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Asset-Based Lending
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SFAS 157
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Transfer Taxes
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Depreciation Analysis & Cost Segregation
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Industry-leading capability:
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Syndications/Leasebacks
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Leasing Residual Value
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Transfer Pricing
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Leasing/Structured Finance
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Estate/Gift Tax Planning
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Fairness/Solvency Opinion
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Building Systems Integrity
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Expert Testimony/Litigation
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Estate/Gift Tax Planning
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Bankruptcy/Litigation
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Expert Testimony/Litigation
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CMBS Special Servicing
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Averion
Situation Analysis
Averion
International Corp. (Averion or the
Company) is a comparatively small participant in the
global contract research industry serving life sciences clients
in the US, Europe, and Russia.
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Averion provides support to clients in the pharmaceutical and
biotech industry through the provision of Contract Research
Organization (CRO) services
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CROs offer clients a wide range of outsourced pharmaceutical
research services to aid in the drug and medical device
research & development process
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This is a highly competitive business, dependent in large part
on the ability to attract and retain the high quality
professionals needed to design and supervise these services
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The Company, through its predecessors, was formed in 1983 and
has grown organically and through acquisitions, most notably its
October 31, 2007, purchase of Hesperion for approximately
$36.2 million
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While more than doubling Averions revenue (from
approximately $14.6 million in 2006 to combined revenue of
$39.9 million in 2007), the acquisition of Hesperion
burdened the Company with significant debt
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Total pro forma interest-bearing indebtedness of
$36.3 million vs. only $6.7 million immediately prior
to the completion of the Hesperion transaction
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In early 2009, the board of directors and management reviewed
Averions strategic alternatives and undertook an auction
process to sell the Company
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The results of the auction were unsatisfactory, and the sale
process was discontinued
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MS
Capital LLC (MS Capital) has been engaged by Averion
to provide a valuation analysis to support internal planning
efforts by the Companys management and board of
directors.
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Management and the board of directors continue to assess a range
of strategic alternatives for the Company
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MS Capital was engaged to provide an independent assessment of
value for the Companys equity capital in support of this
strategic review
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Valuation of Averion as a going concern on a
sale-of-control
basis
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This strategic review has added urgency, due to the debt
servicing burden the Company currently faces
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Total indebtedness as of June 30, 2009, was
$39.5 million (including accrued interest of
$2.0 million)1
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Description of Debt
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Amount
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($ in millions)
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Senior Secured Notes
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$
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26.3
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2
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Subordinated Promissory Notes
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5.7
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Cerep Promissory Note
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3.5
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3
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New Senior Secured Notes
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2.0
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Accrued Interest on Notes Payable
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2.0
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Total
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$
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39.5
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1 Source:
Averion 10-Q
dated June 30, 2009.
2 Includes
March 13, 2009 issuance of additional $0.3 million.
3 Equivalent
to EUR 2.5 million note face value at exchange rate in
effect at June 30, 2009 of $1.4014/Euro.
Preliminary
Value Conclusion
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Based upon the information and analysis in this presentation, it
is our preliminary view that, as of the date of this analysis,
Averions total common equity has no value
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Our assessment reflects in large part the companys high
leverage and balance sheet illiquidity, the nature of the
Companys business and competitive factors with respect to
its market, as well as current overall economic conditions
(including the limited availability of funding to refinance
existing debt). It also reflects managements projections
as to likely future revenues, costs and expenses, net profits
and cash flow for the Company
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We have assumed that all of Averions indebtedness is valid
and enforceable; as such, we note that the difference between
the amount of total indebtedness and the Companys
enterprise value is of such a magnitude, based on
managements business plan, that there is no option value
in the equity
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Averion has already defaulted on its financial obligations once,
and there is little doubt that it will do so again without the
consent of its creditors to restructure its existing
indebtedness. No assurances can be given that current lenders
would be willing to agree to a refinancing plan that would
preserve any shareholder value
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This finding of no value is also supported by the
value currently being placed by the public market on the
Companys shares. These shares, which trade sporadically
and are listed on the OTC pink sheets, are currently priced at
or below $0.01 per share, indicating only a speculative value
for such shares
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Considerations
Our
due diligence to date has consisted of a review of underlying
corporate documents, a study of relevant empirical financial
data, and discussions with representatives of the Company.
Specific due diligence to date has included, but was not limited
to, the following:
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We interviewed the Companys executive management at the
Companys executive offices on August 6, 2009 and for
several hours reviewed with management the industry, as well as
the Companys history, operations, business plan and
anticipated prospects; We also reviewed various SEC filings
submitted by the Company
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We reviewed the Companys projected cash flows for the
fiscal years ending December 31, 2009 through
December 31, 2018, as provided by management
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We reviewed publicly available economic and financial
information concerning the industry in which the Company
operates, as well as other materials available through public
sources. Sources of market and industry data included, but were
not limited to, the following:
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The Capital IQ database;
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Ibbotson Associates Stocks, Bonds, Bills and Inflation
Valuation Edition 2009 Yearbook;
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Duff and Phelps LLCs Risk Premium Report 2009;
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Business Valuation Resources Economic
Outlook; and
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IBIS World Industry Reports
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We were also provided access to a wide range of Company
information, both confidential and publicly available, through a
data room that remained in place following the Companys
recent auction process
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Overview
of Valuation Approaches
The
overwhelming factor underpinning our conclusion of no
value for the Companys common equity is the
Companys substantial debt burden.
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In reaching our conclusions as to value, we relied upon three
principal valuation methodologies, as follows:
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Income Approach Discounted Cash Flow Analysis (FCFE);
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Market Approach Publicly Traded Comparables
Analysis; and
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Market Approach Precedent M&A Transactions
Analysis
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These valuation approaches, discussed in detail in
Section 3 of this analysis, form the basis of our
conclusion that the Companys common equity has no value
and that the enterprise value of the Company is less than the
face amount of its debt
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Generally
Accepted Valuation Approaches
The
valuation of an enterprise is typically based on three basic
approaches to value: the income, market, and asset
approaches.
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A discounted cash flow (DCF) analysis of the
business provides a value indication based upon the present
value of anticipated future cash flows, discounted at an
appropriate present value factor reflecting the risk inherent in
the companys operations
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The market approach is based upon the valuation principle of
substitution. The approach develops value measures based upon
prices for comparable interests. There are two techniques
typically employed in the market approach:
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The market approach using equity comparables utilizes financial
and market information regarding publicly traded securities of
companies engaged in businesses similar to those of the Company
so that prevailing investor attitudes and expectations can be
used; and
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The market approach using precedent M&A transactions relies
upon prior transactions involving the Companys equity or
the equity of similar companies to develop appropriate market
multiples which can be applied to the Companys income and
cash flow streams to develop value indications
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In the asset-based or liquidation value approaches, the
underlying assets of the enterprise are considered individually,
and the sum of these assets minus the stated liabilities results
in an indication of value
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In
this instance, we deemed the income and market approaches as
most appropriate, particularly since the Company is a service
organization and owns very few tangible assets.
Section 3-A
Income Approach
DCF
Analysis Free Cash Flow to Equity
We
developed a stream of free cash flows to equity based on
managements projections for the fiscal years ending
December 31, 2009, through December 31, 2018. A free
cash flow to equity model was selected to properly capture the
risks associated with the Companys debt
obligations.
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Managements projections were relied upon for the basis of
the free cash flow to equity model; however, certain line items
were developed from market observations, particularly working
capital
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Working capital was based on an assumed industry optimal amount
of 10.0% of the change in annual revenue. The 10.0% indication
was based on the equity comparables debt and excess
cash-free working capital/sales indications. An excess cash
approach was taken as companies in the subject industry
typically reserve approximately 60.0% of their cash and cash
equivalents relative to customer deposits/unearned revenue.
Thus, the full amount of cash on the books was not used as part
of the working capital calculation; rather, any cash remaining
after withholding 60.0% of the Companys customer
deposits/unearned revenue was used in the calculation. The
following table presents the working capital analysis:
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LTM Period Adjusted Working Capital Analysis
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AVRO
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CVD
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ENCO
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ICLR
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KNDL
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PRXL
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PPDI
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Average
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Median
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Selected
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($ in millions)
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Cash and Cash Equivalents
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$
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5.4
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$
|
204.4
|
|
|
$
|
2.3
|
|
|
$
|
97.0
|
|
|
$
|
61.8
|
|
|
$
|
99.5
|
|
|
$
|
572.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unearned Revenue
|
|
|
17.6
|
|
|
|
|
174.6
|
|
|
|
6.0
|
|
|
|
135.0
|
|
|
|
98.7
|
|
|
|
244.3
|
|
|
|
248.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess Cash (> 60% of Unearned Revenue)
|
|
$
|
|
|
|
|
$
|
99.6
|
|
|
$
|
|
|
|
$
|
16.0
|
|
|
$
|
2.5
|
|
|
$
|
|
|
|
$
|
424.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
71.9
|
|
|
|
$
|
1,888.9
|
|
|
$
|
36.1
|
|
|
$
|
883.7
|
|
|
$
|
629.6
|
|
|
$
|
1,286.4
|
|
|
$
|
1,494.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working Capital
|
|
|
(4.6
|
)
|
|
|
|
332.4
|
|
|
|
(1.6
|
)
|
|
|
209.1
|
|
|
|
61.6
|
|
|
|
141.3
|
|
|
|
603.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Total Current Debt
|
|
|
2.0
|
|
|
|
|
58.0
|
|
|
|
0.1
|
|
|
|
38.2
|
|
|
|
0.1
|
|
|
|
57.1
|
|
|
|
0.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt-Free Working Capital
|
|
|
(2.6
|
)
|
|
|
|
390.4
|
|
|
|
(1.5
|
)
|
|
|
247.3
|
|
|
|
61.7
|
|
|
|
198.4
|
|
|
|
603.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Sales(1)
|
|
|
(3.6
|
)%
|
|
|
|
20.7
|
%
|
|
|
(4.1
|
)%
|
|
|
28.0
|
%
|
|
|
9.8
|
%
|
|
|
15.4
|
%
|
|
|
40.4
|
%
|
|
|
18.4
|
%
|
|
|
18.0
|
%
|
|
|
|
|
Less: Excess Cash
|
|
|
0.0
|
|
|
|
|
99.6
|
|
|
|
0.0
|
|
|
|
16.0
|
|
|
|
2.5
|
|
|
|
0.0
|
|
|
|
424.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt and Excess Cash-Free Working Capital
|
|
$
|
(2.6
|
)
|
|
|
$
|
290.7
|
|
|
$
|
(1.5
|
)
|
|
$
|
231.3
|
|
|
$
|
59.2
|
|
|
$
|
198.4
|
|
|
$
|
179.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Sales(1)
|
|
|
(3.6
|
)%
|
|
|
|
15.4
|
%
|
|
|
(4.1
|
)%
|
|
|
26.2
|
%
|
|
|
9.4
|
%
|
|
|
15.4
|
%
|
|
|
12.0
|
%
|
|
|
12.4
|
%
|
|
|
13.7
|
%
|
|
|
10.0
|
%
|
Note:
|
|
|
(1) |
|
Averion is excluded from the average and median calculations. |
|
|
|
|
|
Taxes for the fiscal years ending December 31, 2009 through
December 31, 2011 were set equal to zero, and the tax
benefit was carried forward until the Company generated adequate
earnings to deplete the benefit. Taxes were estimated based on a
blended state and federal rate of 41.0%
|
|
|
|
To account for the value of the common equity of the business
beyond the forecast period, a terminal cash flow to equity
holders was developed and was capitalized through application of
the Gordon Growth Model
|
|
|
|
|
|
Terminal CFLO/(r g), where r is the selected
discount rate, calculated at 48.5% (as calculated in
Appendix A) and g is the long-term growth rate,
assumed at 3.0%
|
DCF
Analysis Conclusion Free Cash Flow to
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ending December 31,
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
2010
|
|
|
|
2011
|
|
|
|
2012
|
|
|
|
2013
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2017
|
|
|
|
2018
|
|
|
|
Terminal
|
|
Revenue
|
|
|
$
|
66,291,000
|
|
|
|
$
|
70,931,370
|
|
|
|
$
|
76,605,880
|
|
|
|
$
|
82,734,350
|
|
|
|
$
|
89,353,098
|
|
|
|
$
|
96,501,346
|
|
|
|
$
|
104,221,453
|
|
|
|
$
|
112,559,170
|
|
|
|
$
|
121,563,903
|
|
|
|
$
|
131,289,016
|
|
|
|
$
|
141,792,137
|
|
% Growth
|
|
|
|
(11.6
|
)%
|
|
|
|
7.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
|
|
|
8.0
|
%
|
Cost of Goods Sold
|
|
|
|
37,143,000
|
|
|
|
|
39,721,288
|
|
|
|
|
42,898,991
|
|
|
|
|
44,477,674
|
|
|
|
|
48,035,888
|
|
|
|
|
51,878,759
|
|
|
|
|
56,029,060
|
|
|
|
|
60,511,385
|
|
|
|
|
65,352,295
|
|
|
|
|
70,580,479
|
|
|
|
|
76,226,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
29,148,000
|
|
|
|
|
31,210,082
|
|
|
|
|
33,706,888
|
|
|
|
|
38,256,676
|
|
|
|
|
41,317,210
|
|
|
|
|
44,622,587
|
|
|
|
|
48,192,394
|
|
|
|
|
52,047,785
|
|
|
|
|
56,211,608
|
|
|
|
|
60,708,537
|
|
|
|
|
65,565,220
|
|
% of Revenue
|
|
|
|
44.0
|
%
|
|
|
|
44.0
|
%
|
|
|
|
44.0
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
|
|
|
46.2
|
%
|
Operating Expenses
|
|
|
|
21,740,000
|
|
|
|
|
23,261,800
|
|
|
|
|
25,122,744
|
|
|
|
|
27,132,564
|
|
|
|
|
29,303,169
|
|
|
|
|
31,647,422
|
|
|
|
|
34,179,216
|
|
|
|
|
36,913,553
|
|
|
|
|
39,866,637
|
|
|
|
|
43,055,968
|
|
|
|
|
46,500,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
7,408,000
|
|
|
|
|
7,948,282
|
|
|
|
|
8,584,144
|
|
|
|
|
11,124,112
|
|
|
|
|
12,014,041
|
|
|
|
|
12,975,165
|
|
|
|
|
14,013,178
|
|
|
|
|
15,134,232
|
|
|
|
|
16,344,971
|
|
|
|
|
17,652,568
|
|
|
|
|
19,064,774
|
|
% of Revenue
|
|
|
|
11.2
|
%
|
|
|
|
11.2
|
%
|
|
|
|
11.2
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
|
|
|
13.4
|
%
|
Depreciation
|
|
|
|
1,655,000
|
|
|
|
|
1,903,449
|
|
|
|
|
2,360,200
|
|
|
|
|
2,931,138
|
|
|
|
|
3,626,867
|
|
|
|
|
2,914,747
|
|
|
|
|
3,503,885
|
|
|
|
|
4,120,309
|
|
|
|
|
4,722,197
|
|
|
|
|
5,271,339
|
|
|
|
|
2,777,729
|
|
Intangible Amortization
|
|
|
|
1,232,958
|
|
|
|
|
1,125,756
|
|
|
|
|
895,805
|
|
|
|
|
886,638
|
|
|
|
|
822,948
|
|
|
|
|
609,373
|
|
|
|
|
262,083
|
|
|
|
|
140,000
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
|
4,520,042
|
|
|
|
|
4,919,076
|
|
|
|
|
5,328,140
|
|
|
|
|
7,306,336
|
|
|
|
|
7,564,227
|
|
|
|
|
9,451,044
|
|
|
|
|
10,247,209
|
|
|
|
|
10,873,923
|
|
|
|
|
11,622,774
|
|
|
|
|
12,381,229
|
|
|
|
|
16,287,045
|
|
% of Revenue
|
|
|
|
6.8
|
%
|
|
|
|
6.9
|
%
|
|
|
|
7.0
|
%
|
|
|
|
8.8
|
%
|
|
|
|
8.5
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.7
|
%
|
|
|
|
9.6
|
%
|
|
|
|
9.4
|
%
|
|
|
|
11.5
|
%
|
Cash Interest
|
|
|
|
4,013,386
|
|
|
|
|
4,292,544
|
|
|
|
|
274,361
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Debt Amortization
|
|
|
|
5,216,092
|
|
|
|
|
5,964,178
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable Income
|
|
|
|
(4,709,435
|
)
|
|
|
|
(5,337,645
|
)
|
|
|
|
5,053,779
|
|
|
|
|
7,306,336
|
|
|
|
|
7,564,227
|
|
|
|
|
9,451,044
|
|
|
|
|
10,247,209
|
|
|
|
|
10,873,923
|
|
|
|
|
11,622,774
|
|
|
|
|
12,381,229
|
|
|
|
|
16,287,045
|
|
% of Revenue
|
|
|
|
(7.1
|
)%
|
|
|
|
(7.5
|
)%
|
|
|
|
6.6
|
%
|
|
|
|
8.8
|
%
|
|
|
|
8.5
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.8
|
%
|
|
|
|
9.7
|
%
|
|
|
|
9.6
|
%
|
|
|
|
9.4
|
%
|
|
|
|
11.5
|
%
|
Income Tax Expense (@ 41.0)%
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
948,344
|
|
|
|
|
3,101,333
|
|
|
|
|
3,874,928
|
|
|
|
|
4,201,356
|
|
|
|
|
4,458,308
|
|
|
|
|
4,765,337
|
|
|
|
|
5,076,304
|
|
|
|
|
6,677,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
(4,709,435
|
)
|
|
|
|
(5,337,645
|
)
|
|
|
|
5,053,779
|
|
|
|
|
6,357,992
|
|
|
|
|
4,462,894
|
|
|
|
|
5,576,116
|
|
|
|
|
6,045,853
|
|
|
|
|
6,415,615
|
|
|
|
|
6,857,437
|
|
|
|
|
7,304,925
|
|
|
|
|
9,609,356
|
|
Add: Depreciation
|
|
|
|
1,655,000
|
|
|
|
|
1,903,449
|
|
|
|
|
2,360,200
|
|
|
|
|
2,931,138
|
|
|
|
|
3,626,867
|
|
|
|
|
2,914,747
|
|
|
|
|
3,503,885
|
|
|
|
|
4,120,309
|
|
|
|
|
4,722,197
|
|
|
|
|
5,271,339
|
|
|
|
|
2,777,729
|
|
Add: Intangible Amortization
|
|
|
|
1,232,958
|
|
|
|
|
1,125,756
|
|
|
|
|
895,805
|
|
|
|
|
886,638
|
|
|
|
|
822,948
|
|
|
|
|
609,373
|
|
|
|
|
262,083
|
|
|
|
|
140,000
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Add: Debt Amortization
|
|
|
|
5,216,092
|
|
|
|
|
5,964,178
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
Less: Capital Expenditures
|
|
|
|
(1,298,651
|
)
|
|
|
|
(1,389,556
|
)
|
|
|
|
(1,500,721
|
)
|
|
|
|
(1,620,778
|
)
|
|
|
|
(1,750,441
|
)
|
|
|
|
(1,890,476
|
)
|
|
|
|
(2,041,714
|
)
|
|
|
|
(2,205,051
|
)
|
|
|
|
(2,381,455
|
)
|
|
|
|
(2,571,971
|
)
|
|
|
|
(2,777,729
|
)
|
Less: Increase in Working Capital
|
|
|
|
868,600
|
|
|
|
|
(464,037
|
)
|
|
|
|
(567,451
|
)
|
|
|
|
(612,847
|
)
|
|
|
|
(661,875
|
)
|
|
|
|
(714,825
|
)
|
|
|
|
(772,011
|
)
|
|
|
|
(833,772
|
)
|
|
|
|
(900,473
|
)
|
|
|
|
(972,511
|
)
|
|
|
|
(1,050,312
|
)
|
Less: Debt Repaid
|
|
|
|
0
|
|
|
|
|
(31,824,000
|
)
|
|
|
|
(5,700,000
|
)
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow to Equity
|
|
|
$
|
2,964,564
|
|
|
|
$
|
(30,021,855
|
)
|
|
|
$
|
541,612
|
|
|
|
$
|
7,942,143
|
|
|
|
$
|
6,500,393
|
|
|
|
$
|
6,494,936
|
|
|
|
$
|
6,998,097
|
|
|
|
$
|
7,637,101
|
|
|
|
$
|
8,297,705
|
|
|
|
$
|
9,031,782
|
|
|
|
$
|
8,559,044
|
|
Fraction of Year
|
|
|
|
0.38
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
1.00
|
|
|
|
|
|
|
Discount Period (Mid-Year Convention)
|
|
|
|
0.19
|
|
|
|
|
0.88
|
|
|
|
|
1.88
|
|
|
|
|
2.88
|
|
|
|
|
3.88
|
|
|
|
|
4.88
|
|
|
|
|
5.88
|
|
|
|
|
6.88
|
|
|
|
|
7.88
|
|
|
|
|
8.88
|
|
|
|
|
|
|
Present Value Factor (@ 48.5)%
|
|
|
|
0.9276
|
|
|
|
|
0.7061
|
|
|
|
|
0.4755
|
|
|
|
|
0.3202
|
|
|
|
|
0.2156
|
|
|
|
|
0.1452
|
|
|
|
|
0.0978
|
|
|
|
|
0.0658
|
|
|
|
|
0.0443
|
|
|
|
|
0.0299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value of Cash Flow
|
|
|
$
|
1,045,000
|
|
|
|
$
|
(21,199,140
|
)
|
|
|
$
|
257,539
|
|
|
|
$
|
2,543,112
|
|
|
|
$
|
1,401,654
|
|
|
|
$
|
943,083
|
|
|
|
$
|
684,271
|
|
|
|
$
|
502,864
|
|
|
|
$
|
367,920
|
|
|
|
$
|
269,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|