SCIENCE DYNAMICS CORPORATION
1919 Springdale Road
Cherry Hill, NJ 08003
(856) 424-0068
DATED June 29, 2001
PROXY STATEMENT
This Proxy Statement is furnished with the attached Notice of Annual
Meeting and with accompanying proxy on or about July 3, 2001, to each
stockholder of record of Science Dynamics Corporation (the "Company"
or "SciDyn") at the close of business on June 25, 2001 ("Record
Date"), in connection with the solicitation of proxies by the Board
of Directors to be voted at the Annual Meeting of Stockholders of the
Company to be held on July 30, 2001 at 10:30 A.M. at the Radisson
Hotel, 915 Route 73, Mt. Laurel, New Jersey, 08054, and at any
postponement or adjournments thereof for the purposes stated below.
The Proxy form is enclosed.
REVOCABILITY OF PROXY
Unless you give other instructions on your proxy card, the persons named
as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendation
is set forth together with the description of each item in this proxy
statement. In summary, the Board recommends a vote for:
- Election of seven (7) directors to hold office for the
ensuing year and until their successors have been duly
elected and qualified; and
- Ratification of appointment of Independent Accountants.
- Approval of the issuance of common stock, pursuant to the
financing transaction with Laurus Master Fund, Ltd., equal to
20% or more of the common stock outstanding before the
issuance, in order to comply with NASD Rule 4350.
With respect to any other matters that properly come before the meeting,
the proxy holders will vote as recommended by the Board of Directors or,
if no recommendation is given, in their own discretion.
What vote is required to approve each item?
- Election of Directors. The affirmative vote of a plurality of
the votes cast at the meeting is required for the election of
directors. A properly executed proxy marked "WITHHOLD
AUTHORITY" with respect to the election of one or more
directors will not be voted with respect to the director or
directors indicated, although it will be counted for purposes
of determining whether there is a quorum.
- -1-
- Ratification of the Company's Independent Public Auditors. The
affirmative vote of a majority of the votes cast at the meeting
is required for the ratification of the auditors.
- Approval of the issuance of common stock, pursuant to the
financing transaction with Laurus Master Fund, Ltd., equal to
20% or more of the common stock outstanding before the
issuance, in order to comply with NASD Rule 4350. The
affirmative vote of a majority of the votes cast at the meeting
is required for the approval of this item./
- Other Items. If you hold your shares in "street name", through
a broker or other nominee, your broker or nominee may not be
permitted to exercise voting discretion with respect to some of
the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining
the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be
counted in determining whether there is a quorum.
PERSONS MAKING THE SOLICITATION
The accompanying Proxy is being solicited on behalf of the Board of
Directors of the Company. In addition to mailing the proxy
materials, solicitation may be made in person or by telephone, fax,
or e-mail by directors, officers or regular employees of the Company,
none of whom will receive any additional compensation in connection
with such solicitation. The expense of the solicitation of the
Proxies for the Annual Meeting will be borne by the Company. The
Company will request banks; brokers and other nominees to forward
proxy materials to beneficial owners of stock held by them and will
reimburse such banks, brokers and other nominees for their reasonable
out-of-pocket expenses in doing so.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on the record date,
June 20, 2001, are entitled to receive notice of the Annual Meeting and
to vote the shares of common stock that they held on that date at the
meeting, or any postponement or adjournment of the meeting. Each
outstanding share entitles its holder to cast one vote on each matter to
be voted upon.
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting. Please note that if you hold your shares in
"street name" (that is, through a broker or other nominee), you will
need to bring a copy of a brokerage statement reflecting your stock
ownership as of the record date.
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date
will constitute a quorum, permitting the meeting to conduct its
business. As of the record date, June 20, 2001, 17,657,901 shares of
common stock of the Company were outstanding. Proxies received but
marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the
meeting.
- -2-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock of the Company as of the Record Date by each person who was
known by the Company to beneficially own more than 5% of the common
stock, by each director, director nominee and executive officers, and
by all directors and executive officers as a group. Unless otherwise
specifically stated, such person has sole voting power and sole
investment power with respect to such shares.
Percent
Name and Address of of Outstanding
Beneficial Owner Number of Shares Shares
- -------------------------------------------------------------------------
Sheldon C. Hofferman, (Chairman)(1) 2,619,921 14.84
Alan C. Bashforth, (Director) (2) 1,520,000 8.61
Edwin S. Marks, 5% Owner 1,129,000 6.39
Charles Bresler, 5% Owner 1,322,666 7.49
Joy C. Hartman (President,
Chief Executive Officer,
Treasurer and Director)(3) 215,185 1.22
Kenneth P. Ray (Director) (4) 46,300 .26
Joseph Giegerich (Vice President
Sales & Marketing) 25,000 .14
Thomas Spadaro (Vice President
of Engineering) (5) 82,455 .47
Robert O'Connor (Vice President
of Finance & Administration) (6) 20,000 .11
- -------------------------------------------------------------------------
All Directors, Beneficial Owners
and Officers as a Group (9 persons) 6,980,527 39.53
- -------------------------------------------------------------------------
(1) The total includes 2,619,921 shares owned by Golden Phoenix, LP.,
of which Mr. Hofferman is General Partner.
(2) Shares in the name of Innovative Communications Technology, LTD., a
corporation, controlled by Mr. Bashforth.
(3) The 215,185 shares in Ms. Hartman's name include incentive options,
exercisable within sixty days to acquire 155,000 shares, and
20,000 warrants, and 300 shares owned by Ms. Hartman's children.
(4) The 46,300 shares owned by Mr. Ray include incentive options,
exercisable within sixty days to acquire 30,000 shares.
(5) The 82,455 shares owned by Mr. Spadaro include incentive options,
exercisable within sixty days to acquire 56,200 shares.
(6) The 20,000 shares owned by Mr. O'Connor include incentive options,
exercisable within sixty days to acquire 20,000 shares.
- -3-
PROPOSAL 1
ELECTION OF DIRECTORS
Seven (7) directors will be elected to hold office subject to the
provisions of the Company's by-laws until the next Annual Meeting of
Stockholders, and until their respective successors are duly elected
and qualified. The vote of a majority of the votes entitled to be
cast by stockholders present in person or by proxy, is required to
elect members of the Board of Directors. The following table sets
forth the name, age, position with the Company, and respective
director service dates of each person who has been nominated to be a
director of the Company:
Name Age Positions(s) Director Since
With the Company
- --------------------------------------------------------------------------
Sheldon C. Hofferman 56 Chairman of the Board, 1997
Incumbent Director
Joy C. Hartman 52 President, Chief Executive 1991
Officer, Corporate
Treasurer, Incumbent
Director
Kenneth P. Ray 67 Incumbent Director 1990
Alan C. Bashforth 50 Incumbent Director 1996
John Innes 68 Incumbent Director 2000
L. Michael Hone 51 Incumbent Director 2000
Louis Padulo 64 Incumbent Director 2001
Business Experience of the Directors
Sheldon C. Hofferman, has been an Attorney and Private Investor
since 1971. Mr. Hofferman graduated from the University of
Pennsylvania in 1966 and Temple University Law School in 1971. He
was in private law practice in Washington, D.C., specializing in
communications law, from 1971 to 1974. He served as Senior Trial
Attorney for the Federal Trade Commission from 1974 to 1983, and re-
entered private law practice thereafter. Mr. Hofferman has also
served as General Partner of Golden Phoenix Limited Partnership, an
investment concern, since 1983.
Joy C. Hartman became President and Chief Executive Officer in
January 2000, and continues to serve as, Assistant Secretary and
Treasurer. Ms. Hartman joined us in January 1982. In addition to
holding these positions, other positions she has held with us include
CFO, Treasurer, Corporate Secretary, and Executive Vice President.
Her prior experiences included TeleSciences, Inc., and Peat Marwick
Mitchell. Ms. Hartman is a graduate of The Wharton School of Business
of the University of Pennsylvania. She is a member of the Financial
Executives Institute, the National Association of Corporate
Directors, and the American Society of Corporate Secretaries.
Kenneth P. Ray is President of DelRay, Inc., an active
telecommunications consulting firm. From 1964 to 1987, he was
associated with ITT in various responsible positions and in 1976
became Vice President of ITT Telecommunications, with responsibility
for engineering, marketing and sales departments. In 1981, he became
Vice President and Director of Operations for the Transmission
Division of ITT Space Communications. In January 1987, ITT's
telecommunications group was acquired by Alcatel and Mr. Ray became
Vice President of Marketing and Development for Alcatel Network
Systems. From 1988 to 1991, he was Vice President for Technology and
Business Development for Alcatel North America, a telecommunications
company. Mr. Ray received a BSEE from Polytechnic Institute of New
York in 1954 and a Masters in Economics from North Carolina State
University in 1970.
- -4-
Alan C. Bashforth, President and Chief Executive Officer of SciDyn
until January 2000, relinquished those positions and served as
Chairman of the Board until November 15, 2000. He was President of
Cascadent Communications, a major customer of SciDyn until December
15, 2000. Previously he was President of Innovative Communications
Technology, LTD. (ICT), a data communications company, located in
Jersey, Channel Islands, until the acquisition of the intellectual
property of ICT by us in November 1996. Prior experience included
ownership of the CSL Group of companies from its inception in 1975.
CSL is a Communications and Computer engineering group and employed
over 100 people in 1992 when Mr. Bashforth sold the company. From
1970 to 1975, Mr. Bashforth was employed by Automaten CI, LTD., an
office equipment and telecommunications company, in various
engineering and sales positions leading to the position of General
Manager. Mr. Bashforth was educated in electronic engineering at Mid
Herts Polytechnic College in England and holds a Higher National
Diploma in Electronic Engineering. Mr. Bashforth also serves as a
Director of Satellite Media Services Ltd.
John Innes, is Chairman of ACHP, a company started to meet the need
of electronic banking/funds transfer marketing and processing. He
has 30 years of experience managing, reorganizing, and financing
public and private companies. Since 1971, he has been an attorney,
consultant and investor in companies in various industries including
investment banking, media, aviation, waste management and electronic
commerce. From 1992 to 1994, Mr. Innes was Chairman of Commonwealth
Associates, a New York based investment banking firm. Mr. Innes
served as Vice-Chairman of Wheeling-Pittsburgh Steel Corporation;
Managing Director of Sabre Insurance Company Limited from 1986-1991;
he also served as General Counsel of Gulfstream Aerospace Corporation
from 1976-1986. Mr. Innes graduated from Williams College and from
Temple University Law School.
L. Michael Hone, President and Chief Executive Officer of Centennial
Technologies, Inc. from August, 1997 through June 2001; Chairman and
Chief Executive Officer of PSC, Inc., a publicly-held manufacturer of
hand-held and fixed-position laser based bar code scanners, scan
engines and other scanning products, from 1992 to 1997: Director of
Rochester Healthcare Information Group, Inc., a company principally
engaged in providing data processing management to the healthcare
industry; Director of the Association for the Blind and Visually
impaired, a company principally engaged in assisting the blind and
visually impaired to achieve vocational and social independence. Mr.
Hone is a named inventor on six United States patents. Age 51;
Director of Centennial Technologies, Inc. since 1997. Attended Ohio
State University where he majored in Business. Previous chairman of
AIM USA and AIM International.
Louis Padulo, a President Emeritus of University City Science Center
in Philadelphia, Pennsylvania since 1997, served as President and
Chief Executive Officer of the non-profit consortium of leading
universities and organizations, between 1991 and 1996. Previously,
he served as President of the University of Alabama in Huntsville and
has held a number of administrative and faculty positions with Boston
University, Stanford University, Morehouse College, Massachusetts
Institute of Technology, and the University of Tokyo among others.
Additionally, Mr. Padulo possesses extensive industry and consulting
experience, and has held and continues to hold a number of board and
directorship positions with both public and private organizations.
Mr. Padulo received a Bachelor of Science degree from Fairleigh
Dickinson University, a Masters of Science degree in Electrical
Engineering from Stanford University, and a Ph.D. from the Georgia
Institute of Technology.
- -5-
General Information
Board of Directors. The Board of Directors is responsible for
supervision of the overall affairs of the Company. To assist it in
carrying out its duties, the Board has delegated certain authority to
several committees. In the opinion of the Board, each of the six
outside directors is independent of management and free of any
relationship with the Company that would interfere with his or her
exercise of independent judgment in performing the duties of a
director.
The Board of Directors held eight meetings during 2000. Overall and
individual attendance at the Board and committee meetings was 100
percent. Following the Annual Meeting, the Board will consist of
seven directors. In the interim between Annual Meetings, the Board
has the authority under the By-laws to increase or decrease the size
of the Board.
Directors Compensation
Cash Compensation. During the Company's fiscal year ending December
31, 2000, each non-employee Director received $250.00 per meeting as
standard compensation for service as Directors. Directors who are
employees of the Company received no additional compensation for
service as Directors.
During 2000, Mr. Bashforth, Director was paid $96,928 pursuant to a
Consulting Agreement with the Company. This Agreement expired on
April 30, 2001 and has not been renewed.
BOARD COMMITTEE MEMBERSHIP
NAME AUDIT STOCK OPTION COMPENSATION
COMMITTEE COMMITTEE COMMITTEE
- -----------------------------------------------------------------
Kenneth P. Ray * * *
John Innes *
L. Michael Hone * *
Sheldon Hofferman *
Joy C. Hartman *
Alan Bashforth *
- -6-
Audit Committee
The Audit Committee is responsible for reviewing reports of the
Company's financial results, audits, internal controls, and adherence
to its Business Conduct Guidelines in compliance with federal
procurement laws and regulations. The committee recommends to the
Board of Directors the selection of the Company's outside auditors
and reviews their procedures for ensuring their independence with
respect to the services performed for the Company.
The Audit Committee is composed of outside Directors who are not
officers or employees of SciDyn. In the opinion of the Board, these
Directors are independent of management and free of any relationship
that would interfere with their exercise of independent judgment as
members of this committee.
Stock Option Committee
The Stock Option Committee during 2000 consisted of three of the
Board members: Kenneth Ray, Joy Hartman, and Sheldon Hofferman. Its
function is to oversee the Company's Incentive Stock Option Plan.
There was one meeting of the Stock Option Committee during 2000.
Legal Proceedings
The Company is not now a party to any material litigation and no
material action against the Company has been threatened or is known
to be contemplated by any governmental agency or subdivision or any
other entity.
Executive Compensation
The Company's Executive Compensation committee consisted of three of
the Board members: Kenneth Ray, Alan Bashforth, and L. Michael Hone.
The committee establishes the remuneration for the Company's Chief
Executive Officer and other executive officers and/or directors.
Base salaries for the Company's executive officers, as well as
changes in such salaries, are established by the Board of Directors,
taking into account such factors as competitive industry salaries; a
subjective assessment of the nature of the position; the contribution
and experience of the officer and the length of the officer's
service.
Periodic grants of stock options. Under the stock option guidelines
adopted by the Board of Directors, stock option grants may be made to
executive officers upon initial employment and from time to time for
increased responsibility.
- -7-
Executive Compensation Summary Table
The following table sets forth all information concerning total
compensation earned or paid to the Company's Chief Executive Officer
during each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
Annual Compensation Long term compensation
----------------------- --------------------------
Name and Year Salary Bonus Other Awards All
Principal ($) ($) Annual Restrict- Options/ LTIP Other
Position Compen- ed Stock SARs(#) Pay- Compensa-
sation ($) Awards($) outs($) tion ($)
- ---------- ---- ------ ----- ---------- --------- ---------- ------ --------
Joy C. Hartman, 2000 161,185 -0- -0- -0- 100,000 -0- -0-
CEO, Treas. 1999 113,237 -0- -0- -0- 10,000 -0- -0-
1998 111,000 -0- 5,632* -0- -0- -0- -0-
Ms. Hartman served as Executive Vice President, Chief Financial Officer,
Secretary and Treasurer of SciDyn until her appointment as President and
CEO of SciDyn in January 2000.
In January 1996 the Board of Directors adopted a resolution whereby
the then present officers of the Corporation are protected from
termination without cause should there be a change in control or
ownership of the Company by acquisition or merger.
The employment agreements would entitle Ms. Hartman to receive up to
2.99 times her annual salary if there is a change in control of the
Company (as defined) and a termination of her employment. The
maximum contingent liability under these agreements in such event is
approximately $523,250.
Options Grants for Fiscal 2000
100,000 options were granted to Ms. Hartman during 2000.
AGGREGATED OPTION EXERCISES DURING FISCAL 2000
AND OPTION VALUES ON DECEMBER 31, 2000
The table below sets forth information with respect to the number and
value of exercised and unexercised options held by the named
executive officers of the Company on December 31, 2000. There were
no stock options exercised by management in 2000. There are no
outstanding stock appreciation rights.
Value of Unexercised
Name Shares Acquired Value Number of Unexercised Options In-The-Money Options
---- on Exercise Realized at December 31, 2000 at December 31, 2000
----------- -------- Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Joy C. Hartman 0 0 155,000 - $8,469 None
- -8-
The Company currently has no standing plans or formal arrangements for
contingent forms of compensation such as bonuses, commissions, executive
stock options, stock appreciation rights, profit sharing, pension,
retirement plans or other like benefit programs, except for the past and
present Incentive Stock Option Plan. Except as stated, no officer,
director, or other employee consequently received or was entitled to any
form of non-cash compensation under any form of plan described or
included within Regulation S-B, Section 402(b)(1), Reg. 228.402, Section
(b)(1).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED
HEREIN
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed Peter C. Cosmas Co., CPA's as the Company's
independent accountants for the fiscal year ending December 31, 2001.
Peter C. Cosmas Co., CPA's (formerly Nemiroff, Cosmas, Titus and
Cochamiro) has served as public auditors for the Company during the
entire calendar year 2000, having been re-engaged as Company auditors on
December 21, 1990, succeeding Coopers & Lybrand (which had been the
Company auditors from 1985 until December 17, 1990). Peter C. Cosmas
Co., CPA's previously served as public auditors for the Company from
1981 through 1985. Services provided to the Company and its subsidiary
by Peter C. Cosmas Co., CPA's in fiscal year 2000 included the
examination of the Company's financial statements, limited reviews of
quarterly reports and services related to filings with the Securities
and Exchange Commission.
Representatives of Peter C. Cosmas Co., CPA's will be present at the
Annual Meeting to respond to appropriate questions and to make such
statements as they may desire.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF PETER C. COSMAS CO., CPA'S AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL 2001. In the event
stockholders do not ratify the appointment, the appointment will be
reconsidered by the Board of Directors.
- -9-
PROPOSAL 3
APPROVAL PURSUANT TO NASD RULE 4350
Pursuant to our transaction with Laurus Master Fund, Ltd we issued
$1,200,000 of 8% convertible notes, due May 22, 2003, to three
investors. The conversion of these notes and issuance of shares under
the warrants which were issued as part of the transaction will
require us to issue more than 20% of the common stock outstanding
before the issuance, at prices which may be less than the then-
current market price.
Because our common stock is listed on The Nasdaq SmallCap Market, we
are subject to Nasdaq's corporate governance rules, including Rule
4350, which provides that an issuer must obtain stockholder approval
for the sale or issuance of common stock (or securities convertible
into common stock) equal to 20% or more of the common stock
outstanding before the issuance which are issued below market price.
The consummation of the foregoing financing may result in an
issuance of greater than 20% of our common stock, depending on the
actual number of shares issued upon conversion of the convertible
notes. The investors have contractually agreed with us that we shall
not be obligated to issue more than 19.9% of our common stock upon
conversion of the notes and exercise of the warrants. We have agreed
to file this proxy statement and hold a shareholders meeting to seek
approval from our shareholders to issue more than 20% of our common
stock to the investors, if required. If we do not receive
shareholder approval, we will be required to repay the balance of the
convertible notes in cash.
Specific details concerning the Laurus transaction and the issues
pertinent to this proposal may be found in the Form 8-K filed with
the Securities and Exchange Commission on May 24, 2001.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS APPROVAL PURSUANT
TO NASD RULE 4350.
- -10-
OTHER MATTERS
As of the date of this proxy statement, the Company knows of no
business that will be presented for consideration at the annual
meeting other than the items referred to above. In the event that
any other matter is properly brought before the meeting for action by
the stockholders, proxies in the enclosed form returned to the
Company will be voted in accordance with the recommendation of the
Board of Directors or, in the absence of such a recommendation, in
accordance with the judgment of the proxy holder.
ADDITIONAL INFORMATION
Stockholder Proposals for the 2002 Annual Meeting. Stockholders
interested in presenting a proposal for consideration at the Company's
Annual Meeting of Stockholders in 2002 may do so by following the
procedures prescribed in Rule 14a-8 under the Securities Exchange Act of
1934 and the Company's By-laws. To be eligible for inclusion,
stockholder proposals must be received by the Company's Corporate
Secretary no later than 120 days preceding the 2002 stockholders meeting
that is scheduled for June 20, 2002.
By Order of the Board of Directors:
/s/John Innes
-----------------------
John Innes
Corporate Secretary
June 29, 2001
Cherry Hill, New Jersey
- -11-