SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
BioSpecifics Technologies Corp.
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(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
BIOSPECIFICS TECHNOLOGIES CORP.
35 WILBUR STREET
LYNBROOK, NEW YORK 11563
August 26, 2002
TO THE STOCKHOLDERS:
You are cordially invited to attend the 2002 Annual Meeting of
Stockholders of BioSpecifics Technologies Corp., which will be held at the
Rockville Holiday Inn, 173 Sunrise Highway, Rockville Centre, New York 11570 on
September 24, 2002 at 11:00 A.M. local time.
The Notice of the 2002 Annual Meeting and Proxy Statement, which are
attached, provide information concerning the matters to be considered at the
meeting. In addition, the general operations of the Company will be discussed
and stockholders will be afforded the opportunity to ask questions.
We would appreciate your signing and returning your proxy in the
enclosed envelope as soon as possible, whether or not you plan to attend the
meeting. Please sign, date and return the enclosed proxy in the self-addressed,
postage prepaid envelope. If you do not return the signed proxy, your vote
cannot be counted. We value your opinion and encourage you to participate in
this year's annual meeting by voting your proxy.
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO MARK, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING.
Very truly yours,
Edwin H. Wegman
CHAIRMAN OF THE BOARD
BIOSPECIFICS TECHNOLOGIES CORP.
35 WILBUR STREET
LYNBROOK, NEW YORK 11563
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD September 24, 2002
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
BioSpecifics Technologies Corp. (the "Company") will be held at the Rockville
Holiday Inn, 173 Sunrise Highway, Rockville Centre, New York 11570 on September
24, 2002 at 11:00 A.M. local time, for the following purposes:
1. To elect two directors of the Company for the ensuing
three years, and until their successors shall be duly
elected and qualified; and
2. To transact such other business as may properly come
before the meeting, or any or all adjournments or
postponements thereof.
Only stockholders of record at the close of business on August 15,
2002 will be entitled to notice of, and to vote at, the meeting and any
adjournments or postponements thereof.
YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, WHICH CONTAINS
INFORMATION RELEVANT TO THE ACTION TO BE TAKEN AT THE MEETING. YOU ARE CORDIALLY
INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED ADDRESSED, POSTAGE PREPAID ENVELOPE (FOR USE IN
THE UNITED STATES).
By Order of the Board of Directors,
Albert Horcher
SECRETARY
Lynbrook, New York
August 26, 2002
BIOSPECIFICS TECHNOLOGIES CORP.
35 WILBUR STREET
LYNBROOK, NEW YORK 11563
-------------------
PROXY STATEMENT
-------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 24, 2002
This Proxy Statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by the Board of Directors of
BioSpecifics Technologies Corp. (the "Company") to be used at the Annual Meeting
of Stockholders of the Company to be held at the Rockville Holiday Inn, 173
Sunrise Highway, Rockville Centre, New York 11570 on September 24, 2002 and any
adjournments or postponements thereof ("Annual Meeting"). The matters to be
considered at the meeting are set forth in the attached Notice of Meeting.
The Company intends to send the proxy materials and the 2002 Annual
Report to Stockholders on or about August 26, 2002.
INFORMATION CONCERNING SOLICITATION AND VOTING
OUTSTANDING SHARES ENTITLED TO VOTE
On May 22, 2002, there were outstanding 4,550,836 shares of common
stock, $.001 par value per share, of the Company ("Common Stock"). Record
holders of shares of Common Stock on August 15, 2002, the record date, will be
entitled to one vote for each share of such stock.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of
the Company and the Company is paying the cost of this solicitation. In addition
to the use of the mails, proxies may be solicited personally or by direct
communication using the services of directors, officers and regular employees of
the Company at nominal cost. Banks, brokerage firms and other custodians,
nominees and fiduciaries will be reimbursed by the Company for expenses incurred
in sending proxy material to beneficial owners of the Common Stock.
RECORD DATE; REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on August 15,
2002 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting.
The proxy will be voted (or withheld from voting) in accordance with
any specifications made. Unless otherwise specified in the proxy, shares
represented by proxy will be voted "FOR" election of the nominees listed herein.
A proxy may be revoked by giving notice to the Secretary of the Company in
person, or by written notification actually received by the Secretary, at any
time prior to its being exercised, by delivery of a later dated proxy prior to
the Annual Meeting or by attending the meeting and voting in person.
QUORUM; VOTING
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of the Common Stock authorized
to vote constitutes a quorum for the transaction of business at the Annual
Meeting. If a quorum should not be present, the Annual Meeting may be adjourned
from time to time until a quorum is obtained.
Each unrevoked proxy card properly signed and received prior to the
close of the meeting will be voted as indicated. Unless otherwise specified on
the proxy, the shares represented by a signed proxy card will be voted "FOR" the
Board's nominees for directors as listed on the proxy card and will be voted at
the discretion of the persons named as proxies on other business that may
properly come before the meeting. The Board of Directors is not aware of any
other matters to be presented for action at the Annual Meeting. Concerning the
election of directors, by checking the appropriate box on your proxy card, you
may: (a) vote "FOR" each of the director nominees; or (b) withhold authority to
vote for any or all of the director nominees. Stockholders may vote by either
completing and returning a signed proxy card prior to the meeting, voting in
person at the meeting or submitting a signed proxy card at the meeting.
If a proxy card indicates an abstention or a broker non-vote on a
particular matter, the shares represented by such proxy will be counted as
present for quorum purposes.
The election of directors requires a plurality vote of those shares
voted at the meeting with respect to the election of directors. "Plurality"
means that the individuals who receive the largest number of votes cast "FOR"
are elected as directors. Consequently, any shares not voted "FOR" a particular
nominee (whether as a result of a direction to withhold authority or a broker
non-vote) will not be counted in such nominee's favor. All other matters to be
voted on will be decided by the affirmative vote of a majority of the shares
present or represented at the meeting and entitled to vote. On any such matter,
an abstention will have the same effect as a negative vote, but because shares
held by brokers will not be considered entitled to vote on matters as to which
the brokers withhold authority, a broker non-vote will have no effect on the
vote.
OWNERSHIP OF EQUITY SECURITIES
To the Company's knowledge, the table that follows sets forth the
beneficial ownership of shares of Common Stock as of May 22, 2002 of (i) those
persons or groups known to the Company to beneficially own more than 5% of the
Common Stock, (ii) each director and nominee of the Company, (iii) each
executive officer whose compensation exceeded $100,000 (each, a "named executive
officer") in fiscal 2002 (which ended January 31, 2002), and (iv) all directors
and executive officers of the Company as a group. The information is determined
in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), based on information furnished by the
persons listed or contained in filings made by them with the Securities and
Exchange Commission. Unless indicated below, the stockholders listed possess
sole voting and investment power with respect to their shares and the business
address of each stockholder is c/o BioSpecifics Technologies Corp., 35 Wilbur
St., Lynbrook, New York 11563.
NUMBER OF SHARES
NAME OF OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
---------------- ------------------ -----
Edwin H. Wegman (1) 2,415,242 46.6%
Thomas L. Wegman (2) 195,544 3.8%
Paul A. Gitman, MD. (3) 75,500 1.5%
Henry Morgan (4) 62,528 1.2%
Rainer Friedel (5) 125,000 2.4%
Louis Lasagna 20,000 *
John T. Lane 128,100 2.5%
Albert Horcher (6) 58,000 1.1%
Directors and executive officers as a 3,079,914 59.5%
group (8 persons)
----------
(*) Less than 1%.
(1) Includes 1,843,327 shares of Common Stock owned by The S.J. Wegman
Company, a partnership of which Edwin H. Wegman is the sole general
partner. Includes 120,000 shares beneficially owned by The Isabel H.
Wegman Rev. Trust. The sole trustee of this trust is Mr. Wegman's
brother. Includes options to purchase 188,500 shares of Common Stock
that are currently exercisable. Does not include options to purchase
2,000 shares of Common Stock that are not currently exercisable.
Edwin H. Wegman is the father of Thomas L. Wegman.
(2) Includes 7,300 shares of Common Stock held by Thomas L. Wegman's wife
and child. Includes options to purchase 160,800 shares of Common
Stock that are currently exercisable. Thomas L. Wegman is a son of
Edwin H. Wegman.
(3) Includes 16,500 shares of Common Stock held by Dr. Gitman's wife and
children. Includes options to purchase 30,000 shares of Common Stock
that are currently exercisable. Dr. Gitman's business address is c/o
Long Island Jewish Medical Center, 270-05 76th Ave., New Hyde Park,
New York 11040.
(4) Includes 8,000 shares of Common Stock held by Garrubbo and Morgan, a
partnership of which Mr. Morgan is a general partner owning a 50%
equity position. Mr. Morgan disclaims beneficial ownership of 4,000
of such shares. Includes options to purchase 30,000 shares of Common
Stock that are currently exercisable. Mr. Morgan's business address
is c/o Morgan, Melhuish, Monaghan, Arvidson, Abrutyn & Lisowski, 651
West Mt. Pleasant Avenue, Livingston, New Jersey 07039-1873.
(5) Includes options to purchase 125,000 shares of Common Stock that are
currently exercisable.
(6) Includes options to purchase 53,000 shares of Common Stock which are
currently exercisable.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each of which
is for a term of three years, with only one class of directors being elected in
each year. The term of office of the third class of directors, consisting of
Edwin H. Wegman and Dr. Rainer Friedel will expire on the date of the Annual
Meeting, the term of office of the first class of directors, presently
consisting of Thomas L. Wegman and Dr. Paul A. Gitman will expire at the Annual
Meeting in 2003 and the term of office of the second class of directors,
presently consisting of Henry Morgan, John T. Lane, and Dr. Louis Lasagna, will
expire on the date of the Annual Meeting in 2004. In each case, barring death,
resignation or removal, each director serves from the date of his election until
the end of his term and until his successor is elected and qualified.
Two persons will be elected at the Annual Meeting to serve as
director for a term of three years. The Company has nominated Edwin H. Wegman
and Dr. Rainer Friedel as candidates for election. Unless authority is withheld,
the proxies solicited by management will be voted "FOR" the election of these
nominees. In case a nominee becomes unavailable for election to the Board of
Directors, an event that is not expected, the persons named as proxies, or their
substitutes, shall have full discretion and authority to vote or refrain from
voting for any other candidate in accordance with their judgment. The election
of directors requires a plurality vote of those shares voted at the meeting.
Each nominee has informed the Company that he will serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
EACH NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR
The nominees for director have the positions with the Company and
principal occupations set forth in the table below.
AGE AT MAY POSITION WITH THE COMPANY TERM
NAME 22, 2002 AND PRINCIPAL OCCUPATION DIRECTOR SINCE EXPIRES
---- -------- ---------------------------------- -------------- -------
Edwin H. Wegman 82 Chairman of the Board and President 1990 2001
Dr. Rainer Friedel 60 Director; Managing Director of 1995 2001
Biospecifics Pharma GmbH, the Company's
German subsidiary ("Pharma")
Edwin H. Wegman has had the positions with the Company, principal
occupation and certain directorships set forth in the table above for the past
five years, and has held similar positions with the Company's subsidiaries,
Advance Biofactures Corporation ("ABC-New York") and Advance Biofactures of
Curacao ("ABC-Curacao"), for the past five years.
Dr. Rainer Friedel has been a director of the Company since November
1995 and managing director of BioSpecifics Pharma since January 1, 1996. From
January 1994 to January 1, 1996, Dr. Friedel served as Chief Executive Officer
of GBM Technology Transfer and Technology Risk Assessment, GmbH. The Company and
Dr. Friedel have entered into an employment agreement effective January 1, 1999
pursuant to which Dr. Friedel has agreed to devote all of his working capacity
to the Company and its subsidiaries in Germany and the United States. In fiscal
2002, Dr. Friedel received a salary of $192,500. Dr. Friedel is entitled to one
year's notice of the Company's termination of the employment agreement.
INFORMATION CONCERNING CONTINUING DIRECTORS
Each of the directors named in the following table will continue in
office after the Annual Meeting and until his term expires in the year indicated
and his successor is elected and qualified.
AGE AT MAY POSITION WITH THE COMPANY TERM
NAME 22, 2002 AND PRINCIPAL OCCUPATION DIRECTOR SINCE EXPIRES
---- -------- ---------------------------------------- -------------- -------
Thomas L. Wegman 47 Director, Executive Vice President 1994 2003
Dr. Paul A. Gitman 61 Director; Director, Quality and Resource 1990 2003
Management, Long Island Jewish Medical
Center
Henry Morgan 81 Director; Senior partner of the law firm 1990 2004
Morgan, Melhuish, Monaghan, Arvidson,
Abrutyn & Lisowski
Dr. Louis Lasagna 78 Dean, Sackler School of Graduate 1999 2004
Biomedical Sciences; Dean for Scientific
and Academic Affairs
Tufts University School of Medicine
John T. Lane 60 Retired managing director, J.P. Morgan & 1999 2004
Co.
Thomas L. Wegman was Secretary and Treasurer of the Company from
inception to July 1997, at which time he assumed his current position. In
addition, he has held for the past five years similar positions with the
Company's subsidiaries, ABC-New York and ABC-Curacao.
Dr. Gitman has been Vice President, Clinical Care and Resource
Management at Long Island Jewish Medical Center since January 1, 1995 and prior
thereto was an independent physician engaged in the practice of internal
medicine with Spellman Mykoff & Gitman, MD., P.C.
Henry Morgan has had the principal occupation set forth in the table
above for the past five years.
Dr. Lasagna was appointed as a director of the Company effective June
1999. He has been Dean of the Sackler School of Graduate Biomedical Sciences
since 1984, and Dean for Scientific and Academic Affairs since 1995, in each
case at Tufts University School of Medicine. Since 1998, he has served as
Chairman of the Board of the Tufts Center for the Study of Drug Development, an
independent, non-profit, multidisciplinary research organization affiliated with
Tufts University, committed to the exploration of scientific, economic, legal,
and public policy issues related to pharmaceutical and biopharmaceutical
research, development, and regulation throughout the world. Dr. Lasagna has been
a member of BioSpecifics' Scientific Advisory Board since 1997.
John T. Lane was appointed as a director effective November 1999. He
has been an organizational consultant since 1994. He currently serves as a
director for Medix Resources, Inc., Vytra HealthCare, Toyo Trust Company of New
York, Acme Metals, and Winthrop South Nassau University Health Care System. Mr.
Lane retired from J.P. Morgan & Co. in 1994 as Managing Director, Head of U.S.
Private Clients.
EXECUTIVE OFFICERS
In addition to the executive officers named above, the Company
employs Albert Horcher as its Secretary, Treasurer, and Principal Financial and
Chief Accounting Officer. Mr. Horcher, a certified public accountant, has served
in these positions since July 1997 and is 43 years old. From February 1991 to
July 1997, he served as the Company's Controller and Principal Financial and
Chief Accounting Officer. In addition, he has held for the past five years
similar positions with the Company's subsidiaries, ABC-New York and ABC-Curacao.
Executive officers are elected annually by the Board of Directors and serve at
the discretion of the Board.
BOARD MEETINGS AND COMMITTEES
The Board held three meetings during the last fiscal year. The
directors attended in person or by telephone the following numbers of meetings
(number of meetings attended in parenthesis): Edwin H. Wegman (3); Thomas L.
Wegman (3); John Lane (3); Paul Gitman (3); Rainer Friedel (2); Henry Morgan
(3); and Louis Lasagna (1). The Board does not have nominating or compensation
committees. The Board has an Audit Committee consisting of Henry Morgan, Dr.
Paul A. Gitman, and John Lane. The Board has a Stock Option Committee consisting
of Dr. Paul A. Gitman and Henry Morgan, and an Executive Committee consisting of
Edwin H. Wegman and Thomas L. Wegman. The function of the Audit Committee is to
(i) recommend selection of the Company's independent accountants, (ii) review
with the independent accountants the results of their audits, (iii) review with
the independent accountants and management the Company's financial reporting and
operating controls and the scope of audits, (iv) review all budgets of the
Company and its subsidiaries and (v) make recommendations concerning the
Company's financial reporting, accounting practices and policies and financial,
accounting and operating controls and safeguards and review matters relating to
the relationship between the Company and its auditors. The function of the
Executive Committee is, except for certain matters reserved to the full Board,
to exercise all of the powers of the Board in the management of the business of
the Company during intervals between Board meetings, if necessary. The function
of the Stock Option Committee is to administer the Company's 1991 Stock Option
Plan (the "1991 Plan"), the Company's 1993 Stock Option Plan (the "1993 Plan"),
the Company's 1997 Stock Option Plan (the "1997 Plan"), and the Company's 2001
Stock Option Plan (the "2001 Plan"). The Audit Committee met three times during
the 2001 fiscal year. The Stock Option Committee met twice and the Executive
Committee did not meet during the 2002 fiscal year.
EXECUTIVE COMPENSATION
OFFICERS
The following table sets forth information concerning compensation
for services rendered in all capacities awarded to, or earned by, certain of the
Company's executive officers for the fiscal years indicated. There are no other
officers who earned an aggregate salary and bonus in excess of $100,000 during
the fiscal year ended January 31, 2002. These executive officers also serve in
the same capacities in ABC-New York, and ABC-Curacao, except for Dr. Friedel.
Salaries of the executive officers are paid by the Company's subsidiary, ABC-New
York, except for Dr. Friedel, who is paid approximately 50% of his salary by the
Company's subsidiary, BioSpecifics Pharma GmbH.
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SUMMARY COMPENSATION TABLE
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Annual Compensation Long-Term
Compensation
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Securities
Name and Principal Underlying Options
Position Fiscal Year Salary ($) (#)
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Edwin H. Wegman 2002 405,169 100,000
President 2001 412,961 -
2000 405,169 -
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Thomas L. Wegman 2002 205,895 50,000
Executive 2001 209,855 20,000
Vice President 2000 188,502 70,000
--------------------------------------------------------------------------------
Rainer Friedel 2002 192,500 50,000
Managing Director 2001 192,500 -
2000 192,500 17,500
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Albert Horcher 2002 120,692 20,000
Secretary and 2001 123,013 10,000
Treasurer 2000 118,772 8,000
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The following table contains information concerning the grants of
stock options to the named executive officers of the Company during the fiscal
year ended January 31, 2002.
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OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
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Number of Securities Percentage of Total
Underlying Options Options Granted to Exercise or Base Price
Name Granted (1),(2) Employees in Fiscal Year ($ Per Share) (3) Expiration Date
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Edwin H. Wegman 100,000 23.5% $1.10 4/19/06
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Thomas L. Wegman 50,000 11.8% $1.00 4/19/11
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Rainer Friedel 50,000 11.8% $1.00 4/19/11
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Albert Horcher 20,000 4.7% $1.00 4/19/11
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(1) All outstanding options set forth in this table are currently
exercisable.
(2) These options were granted pursuant to the 2001 Plan.
(3) The exercise price is equal to the fair market value of the
underlying common stock on the date of grant.
The following table sets forth information concerning each exercise
of stock options during the 2002 fiscal year by each of the named executive
officers, along with the fiscal year-end value of unexercised options.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
------------------------------------------------------------------------------------------------------------------------------------
Number of Unexercised Options at Value of Unexercised In-the-Money
Fiscal Year-End (#) Options at Fiscal Year-End ($) (1)
------------------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
Edwin H. Wegman - - 188,500 2,000 $96,000 -
------------------------------------------------------------------------------------------------------------------------------------
Thomas L. Wegman - - 160,800 - $83,450 -
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Rainer Friedel - - 125,000 - $56,238 -
------------------------------------------------------------------------------------------------------------------------------------
Albert Horcher - - 53,000 - $32,725 -
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(1) The dollar values are calculated by determining the differences
between $2.06 per share, the fair market value of the Common Stock at
January 31, 2002, and the exercise price of the respective options
and then multiplying this amount by the number of shares underlying
the options.
DIRECTOR COMPENSATION
Mr. John Lane, Dr. Paul Gitman, and Mr. Henry Morgan each received
$4,500 for attending Board meetings in fiscal year 2002. Dr. Louis Lasagna
received $6,000 as a member of the Company's Scientific Advisory Board in fiscal
year 2002. The Company has no specific policy for compensating directors. In
general, directors are compensated for meetings attended in person at the
Company's headquarters, at a rate of $1,500 per meeting.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than ten percent of the Common
Stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. These reporting persons also are required to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies
of such forms furnished to it, the Company believes that all Section 16(a)
reporting requirements were complied with during the fiscal year ended January
31, 2002.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is providing this
report to enable stockholders to understand how it monitors and oversees the
Company's financial reporting process. The Audit Committee operates pursuant to
an Audit Committee Charter that is reviewed and approved by the Board of
Directors in 2001. This report confirms that the Audit Committee has (i)
reviewed and discussed the audited financial statements for the year ended
January 31, 2002 with management and the Company's independent public
accountants, (ii) discussed with the Company's independent public accountants
the matters required to be reviewed pursuant to the Statements on Auditing
Standards No. 61 (Communications with Audit Committees); (iii) reviewed the
written disclosures letter from the Company's independent public accountants as
required by Independence standards Board Standard No. 1 (Independence
Discussions with Audit Committees); and (iv) discussed with the Company's
independent public accountants their independence from the Company.
Based upon the above review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements for
the year ended January 31, 2002 be included in the Company's Annual Report on
Form 10-KSB for filing with the Securities and Exchange Commission.
Respectfully submitted,
Audit Committee
John T. Lane, Chairman
Paul Gitman
Henry Morgan
CERTAIN TRANSACTIONS
The S.J. Wegman Company owns Wilbur Street Corporation ("WSC"), which
has leased to ABC-New York a building serving as a manufacturing facility and
headquarters in Lynbrook, New York for over 30 years. The building also serves
as the Company's administrative headquarters. Edwin H. Wegman, the Company's
Chairman of the Board and President, is the President of WSC and the sole
general partner of The S.J. Wegman Company, a limited partnership. In January
1998, WSC and the Company entered into a triple net lease agreement that
provides for an annual rent starting at $125,000, which can increase annually by
the amount of annual increase in the Consumer Price Index for the greater New
York metropolitan region. The lease term is 7 years, expiring January 31, 2005.
The Company believes that the terms of this lease are reasonable and the rent
charged is no greater than that which would be charged by an unaffiliated
landlord for comparable facilities, based on appraisals of the property. At
January 31, 2002, the Company has advanced $35,647 to WSC, and has a 9%
non-amortizing mortgage, secured by the Company's headquarters building, from
WSC in the amount of $82,606.
The Company has two loans to the Company's chairman. One loan, whose
principal balance at January 31, 2002 is $941,306 is a demand promissory note,
bears interest at 9% per annum, is collateralized by approximately 1,800,000
shares of the Company's stock. Another loan, whose principal balance at January
31, 2002 is $56,820 is a demand promissory note, bears interest at 9% per annum,
an is uncollateralized. The Company also has two loans with Wilbur St.
Corporation ("WSC"), an affiliate of the chairman. One loan is a non-amortizing
mortgage from WSC in the amount of $82,606 and bears interest at 9% per annum;
the other is for advances to WSC which amount to $35,646. For financial
statement purposes, all these loans, which aggregate $1,116,378 are classified
as components of stockholders' equity in the balance sheet as at January 31,
2002 and appear as "Notes due from chairman and other related party". Interest
income accrued for these loans but not recognized for financial statement
purposes aggregated approximately $105,000 and $72,000 for the years ended
January 31, 2002 and 2001, respectively.
ABC-New York has notes payable to a former director of the Company
and to a limited partner of the S.J. Wegman Company, an affiliate, amounting to
$14,010 at January 31, 2002. The notes, which bear interest at 9% per annum, are
payable on demand.
INDEPENDENT ACCOUNTANTS
The Company intends to use BDO Seidman LLP as its independent
auditors for the 2002 fiscal year. A representative of BDO Seidman LLP is
expected to be present at the meeting, will have the opportunity to make a
statement if he or she chooses and is expected to be available to respond to
appropriate questions.
AUDIT FEES
The aggregate fees for professional services rendered by BDO Seidman
LLP for the audit of the Company's annual financial statements on Form 10-KSB
and reviews of the financial statements included in the Company's Forms 10-QSB
for the year ended January 31, 2002 amounted to $60,000, of which an aggregate
amount of $45,000 had been billed through January 31, 2002.
OTHER FEES
The aggregate fees for professional services rendered by BDO Seidman
LLP for tax returns filed in the United States and related compliance for the
year ended January 31, 2002 amounted to $20,000, of which $5,000 had been billed
through January 31, 2002.
The Audit Committee of the Company's Board of Directors has
considered whether the provisions of non-audit professional services rendered by
BDO Seidman LLP is compatible with maintaining their independence, and believes
that the provision of such services is so compatible.
2003 STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Annual
Meeting to be held following the end of the 2003 fiscal year for inclusion in
the proxy statement of the Company in accordance with Rule 14a-8 of the Exchange
Act must be received at the Company's offices by April 28, 2003. In addition, no
proposal by a stockholder submitted outside the process of Rule 14a-8 of the
Exchange Act shall be presented for vote at the Annual Meeting unless such
stockholder shall, not later than the close of business on the fifth day
following the date on which notice of the meeting is first given to
stockholders, provide the Board of Directors or the Secretary of the Corporation
with written notice of intention to present a proposal for action at the
forthcoming meeting of stockholders.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the meeting other than the matters referred to in this Proxy
Statement. Should any other matter properly come before the meeting, it is the
intention of the persons named in the accompanying proxy to vote such proxy in
accordance with their best judgment.
By Order of the Board of Directors,
Albert Horcher
SECRETARY
Lynbrook, New York
May 30, 2002