SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
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Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement |_| Confidential, for Use of the
|X| Definitive Proxy Statement Commission Only (as permitted
|_| Definitive Additional Materials by Rule 14a 6(e)(2))
|_| Soliciting Material Pursuant to
ss.240.14a-12
Isotope Solutions Group, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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ISOTOPE SOLUTIONS GROUP, INC.
700 Stewart Avenue
Garden City, New York 11530
________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
________________________________________________
To be held on June 6, 2002
________________________________________________
The annual meeting of shareholders of Isotope Solutions Group, Inc.
will be held at the offices of Davis & Gilbert LLP, 1740 Broadway, New York, New
York 10019, on June 6, 2002, at 10:00 a.m. The matters to be considered and
voted upon at the meeting are set forth below and more fully described in the
attached proxy statement:
o The election of five (5) directors to serve until the next
annual meeting of shareholders and until their respective
successors are duly elected and qualified;
o A proposal to ratify the selection of Lazar Levine & Felix
LLP as our independent public accountants for the fiscal
year ending December 31, 2002; and
o To transact such other business as may properly be brought
before the meeting or any postponement or adjournment
thereof.
Our board of directors has fixed the close of business on April 15,
2002, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting or any adjournment thereof.
A copy of the 2001 Annual Report accompanies this notice.
By order of the Board of Directors,
Shraga David Aranoff
Secretary
Garden City, New York
April 30, 2002
Whether or not you plan to attend the meeting, please complete, sign, date and
return the accompanying proxy in the enclosed envelope.
ISOTOPE SOLUTIONS GROUP, INC.
_______________
PROXY STATEMENT
_______________
GENERAL INFORMATION
This proxy statement is furnished to our shareholders in connection
with the solicitation of proxies, in the accompanying form, by our board of
directors for use in voting at the annual meeting of shareholders, to be held at
the offices of Davis & Gilbert LLP, 1740 Broadway, New York, New York 10019, on
June 6, 2002, at 10:00 a.m., and at any and all adjournments thereof.
On or about April 30, 2002, this proxy statement and the accompanying
form of proxy are being mailed to each shareholder of record at the close of
business on April 15, 2002.
Our principal executive offices are located at 700 Stewart Avenue,
Garden City, New York 11530.
QUESTIONS AND ANSWERS
What matters am I voting on?
You are being asked to vote on the following matters:
o The election of five (5) directors to serve until the next
annual meeting of shareholders and until their respective
successors are duly elected and qualified; and
o A proposal to ratify the selection of Lazar Levine & Felix
LLP as our independent public accountants for the fiscal
year ending December 31, 2002.
Who is entitled to vote?
Persons who were holders of our common stock as of the close of
business on April 15, 2002, the record date, are entitled to vote at the
meeting. As of April 15, 2002, we had issued and outstanding 11,052,232 shares
of common stock, comprising all of our issued and outstanding voting stock.
Each holder of our common stock is entitled to one vote for each share
held on the record date.
What is the effect of giving a proxy?
Proxies in the form enclosed are solicited by and on behalf of the
board. The persons named in the proxy have been designated as proxies by the
board. If you sign and return the proxy in accordance with the procedures set
forth in this proxy statement, the persons designated as proxies by the board
will vote your shares at the meeting as specified in your proxy.
If you sign and return your proxy in accordance with the procedures set
forth in this proxy statement but you do not provide any instructions as to how
your shares should be voted, your shares will be voted as follows:
o FOR the election of the nominees listed below under Proposal
I; and
o FOR the ratification of the selection of Lazar Levine &
Felix LLP as our independent public accountants for the
fiscal year ending December 31, 2002, as described below
under Proposal II.
If you give your proxy, your shares also will be voted in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the meeting and any adjournments thereof. In the
event that any other matters are properly presented at the meeting for action,
the persons named in the proxy will vote the proxies in accordance with their
best judgment.
Can I change my vote after I return my proxy card?
Any proxy given pursuant to this solicitation may be revoked by you at
any time before it is exercised. You may revoke your proxy by:
o delivering written notification of your revocation to our
corporate secretary;
o voting in person at the meeting; or
o delivering another proxy bearing a later date.
Please note that your attendance at the meeting will not alone serve to
revoke your proxy.
What is a quorum?
The presence, in person or by proxy, of a majority of the votes
entitled to be cast at the meeting will constitute a quorum at the meeting. A
proxy submitted by a shareholder may indicate that all or a portion of the
shares represented by the proxy are not being voted ("shareholder withholding")
with respect to a particular matter. Similarly, a broker may not be permitted to
vote stock ("broker non-vote") held in street name on a particular matter in the
absence of instructions from the beneficial owner of the stock. The shares
subject to a proxy that are not being voted on a particular matter because of
either shareholder withholding or broker non-vote will not be considered shares
present and entitled to vote on that matter. These shares, however, may be
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considered present and entitled to vote on other matters and will count for
purposes of determining the presence of a quorum if the shares are being voted
with respect to any matter at the meeting. If the proxy indicates that the
shares are not being voted on any matter at the meeting, the shares will not be
counted for purposes of determining the presence of a quorum. Abstentions are
voted neither "for" nor "against" a matter, but are counted in the determination
of a quorum.
What is a "broker non-vote"?
A "broker non-vote" occurs when a broker submits a proxy that states
that the broker does not vote for some of the proposals because the broker has
not received instructions from the beneficial owners on how to vote on such
proposals and does not have discretionary authority to vote in the absence of
instructions.
How do I vote?
You may vote your shares by mail or, if you attend the meeting in
person, by ballot. The prompt return of the completed proxy card will help us
prepare for the meeting.
To vote by mail, date, sign and return the accompanying proxy in the
envelope enclosed for that purpose (to which no postage need be affixed if
mailed in the United States). You can specify your choices by marking the
appropriate boxes on the proxy card. If you attend the meeting, you may deliver
your completed proxy card in person or fill out and return a ballot that will be
supplied to you.
How many votes are needed for approval of each matter?
o Proposal I, the election of directors, requires a plurality
vote of the voting stock voted at the meeting. "Plurality"
means that the individuals who receive the largest number of
votes cast "FOR" them are elected as directors. Any shares
not voted "FOR" a particular nominee (whether as a result of
a direction of the shareholder to withhold authority,
abstentions or broker non-vote) will not be counted in such
nominee's favor.
o Proposal II, the ratification of Lazar Levine & Felix LLP as
our independent public accountants for the fiscal year
ending December 31, 2002, must be approved by the
affirmative vote of a majority of the votes cast at the
meeting.Shares deemed present at the meeting but not
entitled to vote on Proposal II (because of either
shareholder withholding or broker non-vote) are not deemed
"votes cast" with respect to such proposal and therefore
will have no effect on such vote.
Security Ownership of Certain Beneficial Owners and Management
As of April 24, 2002, there were 11,458,987 shares of our common stock
outstanding. Each share of common stock is entitled to one vote.
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The following table sets forth, as of April 24, 2002, the number of
shares of common stock beneficially owned by:
o each person who is known by us to be the beneficial owner of
more than five percent of our common stock;
o each of our directors; and
o all directors and executive officers as a group.
Amount and Nature Percentage of
of Beneficial Outstanding
Name and Address of Beneficial Owner(1) Ownership (2) Shares Owned(3)
- -------------------------------------- -------------- -------------
Jack Schwartzberg (4) 1,534,644 13.3%
Shraga David Aranoff (5) 150,807 1.3%
Harry Barnett(6) 10,000 *
Stanley F. Barshay(7) 10,000 *
Jay M. Haft (8) 60,000 *
c/o Reed Smith LLP
529 Fifth Avenue
New York, New York 10017
Robert G.M. Keating 1,020,496 8.9%
Bruce Baron 2,264,959 19.8%
2509 Avenue U
Brooklyn, New York 11229
All directors and officers as a
group (5 persons) (9) 1,755,451 15.2%
_____________________________________________________________________________
* Less than one percent.
(1) The address of each of the persons named in the table, if not included under
each person's name, is 700 Stewart Avenue, Garden City, New York 11530.
(2) Unless otherwise indicated, we believe that all persons named in the table
have sole voting and investment power for all shares of common stock
beneficially owned by them. A person is deemed to be the beneficial owner
of common stock that can be acquired by such person within 60 days from
April 24, 2002 upon the exercise of options or warrants or the conversion
of convertible securities.
(3) Each beneficial owner's percentage ownership is determined by assuming
that options, warrants or convertible securities that are held by the
person (but not those held by any other person) and that are exercisable
within 60 days from April 24, 2002 have been exercised or converted.
(4) Includes 58,333 shares subject to options that are currently exercisable.
Does not include 116,667 shares subject to options that are not currently
exercisable.
(5) Includes 33,333 shares subject to options that are currently exercisable.
Does not include 166,667 shares subject to options that are not currently
exercisable.
(6) Includes 10,000 shares subject to options that are currently exercisable.
Does not include 70,000 shares subject to options that are not currently
exercisable.
(7) Includes 10,000 shares subject to options that are currently exercisable.
Does not include 70,000 shares subject to options that are not currently
exercisable.
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(8) Includes 10,000 shares subject to options that are currently exercisable.
Does not include 70,000 shares subject to options that are not currently
exercisable.
(9) Includes 121,666 shares subject to options that are currently exercisable.
Does not include 493,334 shares subject to options that are not currently
exercisable.
Information contained in this table about stock ownership was obtained
from our shareholder list, filings with governmental authorities, or from the
named individuals, directors and officers.
Proposal I
Election of Directors
The board presently consists of five directors. The incumbent
directors are Jack Schwartzberg, Shraga David Aranoff, Harry Barnett, Stanley F.
Barshay and Jay M. Haft. The board is not classified.
Five persons will be elected at the meeting to serve as directors for a
term of one year. The board has nominated Jack Schwartzberg, Shraga David
Aranoff, Harry Barnett, Stanley F. Barshay and Jay M. Haft, the incumbent
directors, as the candidates for election. Unless otherwise specified in the
form of proxy, the proxies solicited by management will be voted "FOR" the
election of these candidates. In case any of these nominees becomes unavailable
for election to the board, an event that is not anticipated, the persons named
as proxies, or their substitutes, shall have full discretion and authority to
vote or refrain from voting for any other nominee in accordance with their
judgment.
Information Concerning Nominees
The following table sets forth the names of the nominees and certain
information with regard to each nominee as of the record date:
Name Age Title
---- --- -----
Jack Schwartzberg 67 Chief Executive Officer, President, and
Chairman of the Board of Directors
Shraga David Aranoff 34 Chief Operating Officer, Vice President,
Treasurer and Director
Harry Barnett 40 Director, Audit Committee Member
Stanley F. Barshay 62 Director, Audit Committee Member
Jay M. Haft 66 Director, Audit Committee Member
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Jack Schwartzberg has served as our Chairman of the Board, Chief Executive
Officer, and President since September 13, 2000. He has been Chairman of the
Board, Chief Executive Officer and President of ISI since November 1997. He
served as a Vice President of Complete Management, Inc., a New York Stock
Exchange-listed physician practice management company, from 1994 to June 1997
and as a marketing consultant to Complete Management, Inc. from June 1997 to
October 1997. Mr. Schwartzberg was president and publisher of Madison Avenue
Magazine and Runway New York Publishing Company from 1976 to 1993. Mr.
Schwartzberg practiced law as a partner in the law firm of Schwartzberg & Sack
from 1963 to 1976. He holds a J.D. degree from Brooklyn Law School and a B.A.
degree from Hunter College. Mr. Schwartzberg was also a commissioned officer in
the United States Navy, serving as Commanding Officer of the United States Naval
Base in South Portland, Maine, from 1957 to 1960.
Shraga David Aranoff has served as our Chief Operating Officer, Vice President
and on our Board of Directors since September 13, 2000, and as our Treasurer
since September 25, 2000. He has been Chief Operating Officer and Vice President
of ISI since August 1998. He served as a consultant to ISI from ISI's inception
in November 1997 and joined ISI on a full-time basis in August 1998. Mr. Aranoff
was Director of Medical / Legal Affairs for Complete Management, Inc. from
October 1996 through July 1998. He was an attorney with the law firm of
Slotnick, Shapiro & Crocker, LLP from August 1994 to September 1996. From 1991
to 1994, Mr. Aranoff was a law student. From 1989 to 1991 Mr. Aranoff was a
programmer analyst for Goldman Sachs & Company. He holds a J.D. from Benjamin N.
Cardozo School of Law and a B.S. degree, summa cum laude, in Computer Science
from Brooklyn College.
Harry Barnett has served on our Board of Directors since May 4, 2001, and as a
member of our Audit Committee since August 16, 2001. Since December 1999, he has
been the manager of Clinical Assistance Programs LLC, a company he founded that
provides comprehensive training and consulting services to biotechnology and
pharmaceutical companies conducting clinical trials. Since January 1997, he has
been the manager of Biomodels LLC, a full-service, pre-clinical research firm
affiliated with Brigham and Women's Hospital that he founded. He has also been
the president of the corporate general partner of IBT, LP, which holds the
exclusive rights to a patent for the treatment of heartburn used in the
over-the-counter product Pepcid Complete, since January 1996. From 1993 to June
1997, Mr. Barnett was Vice President and General Counsel of Faneuil Advisors,
Inc., a mortgage acquisition and investment banking firm. Mr. Barnett is a
graduate of Tufts University and holds a J.D. degree from Boston University
School of Law.
Stanley F. Barshay has served on our Board of Directors since January 15, 2001,
and as a member of our Audit Committee since August 16, 2001. He retired in 1997
as Senior Vice President of American Home Products Corporation, where he was
employed for 32 years in various capacities. He was President of the Whitehall
Laboratories division of American Home Products Corporation from 1978 to 1986.
He served as Vice President of American Home Products Corporation from 1975 to
1977. He was the President of its Boyle-Midway Household Products Corporation
subsidiary from 1972 to 1974 and he held various other positions with
Boyle-Midway from 1964 to 1971. He holds a B.S. in Business Administration from
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Long Island University. Mr. Barshay serves on the Executive Committee of the
Board of Trustees of Long Island University. He also serves on the Board of
Directors of Nice-Pak Corp. and J.C.C.A.
Jay M. Haft has served on our Board of Directors since September 13, 2000 and as
a member of our Audit Committee since August 16, 2001. He has acted as a
strategic and financial consultant for growth stage companies since 1993. From
1989 to 1994, Mr. Haft was a partner with Parker Duryee Rosoff & Haft, a law
firm in New York City. From 1994 through 2001, Mr. Haft served as of counsel to
Parker Duryee Rosoff & Haft until its merger with Reed Smith LLP, a national law
firm, in January 2002. Since January 2002, Mr. Haft has been Counsel to Reed
Smith LLP. Mr. Haft has also been a managing general partner of GenAm "1"
Venture Fund, an international venture capital fund, since 1988. He is a
director of Robotic Vision Systems, Inc., NCTI Group, Inc., DCAP Group, Inc.,
Encore Medical Corporation, DUSA Pharmaceuticals, Inc., Oryx Technology Corp.
and Thrift Management, Inc. He is a Trustee of Florida International University
and a Trustee of the Wolfsonian Museum. He is a graduate of Yale College and
Yale Law School.
Board and Committee Meetings
Our board held four meetings in 2001 and acted by written consent on
nine occasions in 2001. Our board has not held any meetings in 2002, but has
acted by written consent on three occasions in 2002 through the date of this
proxy statement.
Audit Committee
Our board established an Audit Committee in August 2001. The Audit
Committee consists of three members and is currently comprised of Harry Barnett,
Stanley F. Barshay and Jay M. Haft. We believe that Messrs. Barnett, Barshay and
Haft each qualify as independent directors under the listing standards of the
National Association of Securities Dealers, Inc. for Nasdaq National Market and
Nasdaq SmallCap Market issuers.
Our management is responsible for our internal controls and the
financial reporting process. Our independent public accountants are responsible
for performing an independent audit of our consolidated financial statements in
accordance with the generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes. The primary duties of the committee are to serve as an independent
and objective party to monitor our financial reporting process and internal
control systems, review and appraise the audit efforts of our independent public
accountants and provide an open avenue of communication among the independent
public accountants, financial and senior management and our board of directors.
In addition, the committee has oversight responsibility relating to the
engagement of independent public accountants and the planning, scope and timing
of any audit as well as the review of the independent public accountants' report
on the financial statements following completion of each audit.
Following its authorization and formation in August 2001, the Audit
Committee met one time during 2001. Each member participated in the meeting.
7
The board has reviewed, assessed the adequacy of, and adopted a written
charter for the Audit Committee. A copy of the charter is attached to this proxy
statement as Appendix A.
The Report of the Audit Committee is set forth below.
THE AUDIT COMMITTEE REPORT SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE
INTO ANY FILING MADE BY US UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934, NOTWITHSTANDING ANY GENERAL STATEMENT CONTAINED IN ANY
SUCH FILINGS INCORPORATING THIS PROXY STATEMENT BY REFERENCE, EXCEPT TO THE
EXTENT WE INCORPORATE SUCH REPORT BY SPECIFIC REFERENCE.
Report of the Audit Committee:
The Audit Committee has reviewed and discussed our audited consolidated
financial statements with management. The Committee has also reviewed the
written disclosures and the letter from Lazar Levine & Felix LLP required by
Independent Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and has reviewed and discussed with Lazar Levine & Felix LLP the
independence of Lazar Levine & Felix LLP from us.
The committee has met and held discussions with management and the
independent public accountants. Management represented to the committee that our
financial statements were prepared in accordance with generally accepted
accounting principles, and the committee has reviewed and discussed the
consolidated financial statements with management and the independent public
accountants. The committee discussed with the independent public accountants the
matters required to be discussed by the Statement on Auditing Standards No. 61.
Based upon the committee's discussions with management and the
independent public accountants and the committee's review of the representations
of management and the report of the independent public accountants to the
committee, the committee recommended to our board of directors that the audited
consolidated financial statements be included in our Annual Report on Form
10-KSB for the year ended December 31, 2001, filed with the Securities and
Exchange Commission. The committee has also recommended the selection of Lazar
Levine & Felix LLP as our independent auditors for the fiscal year ending
December 31, 2002.
This report is submitted by the members of the Audit Committee:
Harry Barnett
Stanley F. Barshay
Jay M. Haft
Directors' Compensation
All directors are reimbursed for certain expenses in connection with
attendance at board meetings. Directors are also eligible to be granted options
to purchase shares of our common stock under our 2000 Long-Term Incentive Plan.
8
Other than with respect to participation in the 2000 plan and reimbursement of
expenses, directors who are employees or officers or who are associated with us
do not receive compensation for service as directors.
Executive Compensation
The following table sets forth certain information with respect to the
compensation paid to Jack Schwartzberg, our Chief Executive Officer, for
services rendered by him in all capacities for the fiscal years ended December
31, 2001, 2000 and 1999 and to Shraga David Aranoff, our Chief Operating
Officer, for services rendered by him in all capacities for the fiscal years
ended December 31, 2001 and 2000. There were no other executive officers whose
total annual salary and bonus exceeded $100,000 for those fiscal years. We
sometimes refer to Messrs. Schwartzberg and Aranoff in this proxy statement as
the Named Executive Officers.
Long-Term
Compensation
Annual Compensation Awards
_________________________________________________________________________________________________________
Other Annual Securities
Salary Bonus Compensation Underlying
Name and Principal Position Year ($) ($) ($) Options (#)
_________________________________________________________________________________________________________
Jack Schwartzberg 2001 200,000(1) - 27,920(2) -
Chairman, CEO and President 2000 200,000 - 29,161(2) 175,000
1999 200,000 - 30,673(2) -
_________________________________________________________________________________________________________
Shraga David Aranoff 2001 127,042 - 24,547(2) 100,000
COO, Vice President and Treasurer 2000 103,333 - 22,081(2) 100,000
_________________________________________________________________________________________________________
<FN>
__________________________
(1) Includes $16,666 of accrued salary, payment of which has been deferred at Mr. Schwartzberg's election.
(2) Includes costs associated with a leased automobile and health benefits package.
</FN>
Stock Option Grants
The following table sets forth certain information about stock options
granted during 2001 to the Named Executive Officers.
Number of Securities Percent of Total
Underlying Options Options Granted to Exercise Price Expiration
Name Granted Employees in 2001 ($/Sh) Date
________________________________________________________________________________________________________
Jack Schwartzberg 0 0% - -
________________________________________________________________________________________________________
Shraga David Aranoff 100,000 60.6% $3.00 07/11/11
________________________________________________________________________________________________________
Stock Option Exercises and Holdings
The Named Executive Officers did not exercise any options in 2001. The
following table sets forth the number of shares of common stock underlying
unexercised options held by the Named Executive Officers at December 31, 2001,
and the value of such stock options at December 31, 2001.
9
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at December 31, 2001 December 31, 2001
Name Exercisable/Unexercisable Exercisable/Unexercisable
___________________________________________________________________________________
Jack Schwartzberg 58,333/116,667 $94,079.46/$188,160.54
___________________________________________________________________________________
Shraga David Aranoff 33,333/166,667 $56,449.44/$112,900.56
___________________________________________________________________________________
Employment Agreements
Effective September 8, 2000, we and Jack Schwartzberg entered into an
employment agreement for a term ending on September 7, 2003, subject to
automatic extension thereafter until either party gives 180 days' advance notice
of termination to the other party. The employment agreement provides for an
annual salary of $200,000, a cash bonus based on performance in an amount to be
determined by our board of directors, the grant of options to purchase 175,000
shares of our common stock at a price of $.8872 per share under the 2000 plan,
one leased automobile at our expense and participation in other executive and
employee benefit programs if and when put into effect by us. Mr. Schwartzberg
may be discharged for cause, including failure or refusal to perform his duties,
misappropriation of our funds or property, the use of alcohol or illegal drugs
in a manner that interferes with his duties to us, and conviction of a felony or
a crime involving moral turpitude, dishonesty or theft. Mr. Schwartzberg may
terminate the employment agreement for "good reason," including the assignment
to Mr. Schwartzberg of any duties inconsistent with his position, our requiring
him to be based at an office outside the New York City metropolitan area without
his consent, a failure by us to comply with the compensation provisions of the
agreement, any other material breach by us of the employment agreement, Mr.
Schwartzberg's removal as a director or a change in control (as defined in the
employment agreement). If the employment agreement is terminated by Mr.
Schwartzberg for good reason or by us other than for cause or at any time after
the end of the initial term, Mr. Schwartzberg will be entitled to be paid his
base salary and bonus through the later of September 7, 2004, or the 12-month
anniversary of the date of termination, he will be entitled to continue to
participate during such period in all executive and employee benefit programs,
and his stock options will become fully vested. The employment agreement
includes noncompete restrictions during its term and for 12 months thereafter
and a confidentiality provision.
Effective September 8, 2000, we and Shraga David Aranoff entered into
an employment agreement for a term ending on September 7, 2003, subject to
automatic extension thereafter until either party gives 90 days' advance notice
of termination to the other party. The employment agreement provides for an
annual salary of $125,000, a cash bonus based on performance in an amount to be
determined by our board of directors, the grant of options to purchase 100,000
shares of our common stock at a price of $.8065 per share under the 2000 plan,
one leased automobile at our expense and participation in other executive and
employee benefit programs if and when put into effect by us. Mr. Aranoff may be
10
discharged for cause, including failure or refusal to perform his duties,
misappropriation of our funds or property, the use of alcohol or illegal drugs
in a manner that interferes with his duties to us, and conviction of a felony or
a crime involving moral turpitude, dishonesty or theft. Mr. Aranoff may
terminate the employment agreement for "good reason," including the assignment
to Mr. Aranoff of any duties inconsistent with his position, our requiring him
to be based at an office outside the New York City metropolitan area without his
consent, a failure by us to comply with the compensation provisions of the
employment agreement, any other material breach by us of the employment
agreement, Mr. Aranoff's removal as a director or a change in control (as
defined in the employment agreement). If the employment agreement is terminated
by Mr. Aranoff for good reason or by us other than for cause or at any time
after the end of the initial term, Mr. Aranoff will be entitled to be paid his
base salary and bonus through the later of September 7, 2003, or the three-month
anniversary of the date of termination, he will be entitled to continue to
participate during such period in all executive and employee benefit programs,
and his stock options will become fully vested. The employment agreement
includes noncompete restrictions during its term and for 12 months thereafter
and a confidentiality provision.
2000 Long-Term Incentive Plan
In September 2000 our board of directors adopted, and in July 2001 our
shareholders ratified, the Isotope Solutions Group, Inc. 2000 Long-Term
Incentive Plan. The 2000 plan was established to enable us and our subsidiaries
to attract, retain and motivate employees, directors and consultants. The 2000
plan authorizes the grant of individual incentive stock options or non-qualified
options to purchase shares of our common stock. In November 2001, our
stockholders approved an amendment to the 2000 plan increasing the number of
shares that may be issued under the 2000 plan to 2,500,000, subject to
adjustment in the event of stock splits, stock dividends, split-ups, spin-offs,
combinations or exchanges or any other change affecting the common stock. Unless
we terminate it earlier, the 2000 plan will expire on December 31, 2010. Our, or
our subsidiaries', employees, directors, advisory board members and consultants
are eligible to receive options under the 2000 plan. The 2000 plan is
administered by our board of directors, which determines the persons to whom
awards will be granted, the number of options to be granted and the specific
terms of each grant. Under the 2000 plan, no incentive stock option may be
granted having a term of more than 10 years and an exercise price less than the
fair market value of our common stock on the date of grant, and no incentive
stock option having a term of more than five years and an exercise price less
than 110% of the fair market value of our common stock on the date of grant may
be granted to a person who holds 10% or more of our outstanding common stock.
As of April 24, 2002, options to purchase an aggregate of 973,000
shares were outstanding under the 2000 plan.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who beneficially own more than 10
percent of our common stock to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock. Executive officers,
directors and greater-than-ten percent shareholders are required by SEC
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regulations to furnish us with copies of all such reports they file. To our
knowledge, based solely on review of the copies of such reports furnished to us
and written representations that no other reports were required during the year
ended December 31, 2001, all filings under Section 16(a) were made as required.
Certain Transactions
No member of our current management and no beneficial owner of five
percent or more of our outstanding common stock has had any transactions with us
or ISI during the past year, nor proposes any such transaction, in which the
amount involved exceeded $60,000, except as follows:
In connection with our acquisition of ISI, we and each of Jack
Schwartzberg, Robert G.M. Keating, Bruce Baron, Shraga David Aranoff and certain
other former shareholders of ISI entered into a registration rights agreement.
The registration rights agreement gives Messrs. Schwartzberg, Keating and
Aranoff and the other former shareholders of ISI who signed the registration
rights agreement the right to have their shares of our common stock included in
any registration statement we file, except for the registration statement we
filed in February 2000 covering the resale of certain shares we issued in a
private placement in September 2000 and subject to certain other customary
exceptions. All of the former shareholders of ISI have agreed that in the event
their shares of our common stock are included in a registration statement filed
by us for an underwritten public offering, if requested by the managing
underwriter, they will agree not to sell or otherwise transfer the shares
without the consent of the managing underwriter for a period of up to one year
following consummation of the underwritten offering.
In December 2001, we raised $130,000 in a private placement in which we
sold, pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended, $130,000 of units, each unit consisting of a
first priority security interest in our patent No. 6,074,626, a convertible
promissory note in the principal amount of $50,000 and a common stock purchase
warrant to purchase 12,500 shares of our common stock. The notes are payable on
the earliest of (i) December 26, 2002, (ii) the date of the first closing of a
pending private offering of common stock (iii) the date of consummation of a
sale of all or substantially all of our assets or a merger or consolidation
involving Isotope Solutions Group, Inc. in which Isotope Solutions Group, Inc.
is not the surviving entity, (iv) the date of consummation of the sale or
exchange (including by way of merger) of all or substantially all of our
outstanding shares of common stock, or (v) upon the termination of the pending
private offering of common stock. If we are unable to repay the principal and
accrued interest on these notes when they become due, we could lose our patent
rights to our Radioactive Cisplatin technology. Jack Schwartzberg, our Chief
Executive Officer, President and Chairman, purchased $10,000 principal amount of
the notes and received warrants to purchase 2,500 shares of common stock.
Jay M. Haft, a member of our board of directors and a member of our
Audit Committee, has been providing consulting services to us since April 2002,
and we anticipate that he will continue to provide consulting services to us in
the future. We are presently preparing a consulting agreement with Mr. Haft. We
anticipate that we will pay Mr. Haft compensation for his services, but at this
time we have not determined the amount or form of the compensation.
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Proposal II
Ratification of Selection of Independent Public Accountants
Our board of directors has approved the engagement of Lazar Levine &
Felix LLP as our independent public accountants for the fiscal year ending
December 31, 2002. Lazar Levine & Felix LLP audited our financial statements for
the fiscal year ended December 31, 2001, and for the fiscal year ended December
31, 2000, which was the year in which we acquired ISI. The board believes that
it is appropriate to submit for ratification by the shareholders its selection
of Lazar Levine & Felix LLP as our independent public accountants for the fiscal
year ended December 31, 2002.
Change in Accountants
On September 29, 2000, we dismissed Scott & Guilfoyle as our
independent accountants. Our Board of Directors approved the decision to change
independent accountants on September 29, 2000.
The reports of Scott & Guilfoyle on the financial statements for the
fiscal years ended June 30, 1999 and 2000 contained no adverse opinion or
disclaimer of opinion and were not modified as to uncertainty, audit scope or
accounting principles. In connection with its audits for the fiscal years ended
June 30, 1999 and 2000, there were no disagreements with Scott & Guilfoyle on
any matter of accounting principles or practices, financial statement
disclosure, financial or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Scott & Guilfoyle would have caused them to make
reference thereto in their report on the consolidated financial statements for
such years.
We engaged Lazar Levine & Felix LLP as our new independent
accountants as of September 29, 2000. During the fiscal years ended June 30,
1999 and 2000, we did not consult with Lazar Levine & Felix LLP regarding either
(i) the application of accounting principles to a specified completed or
contemplated transaction, or the type of audit opinion that might be rendered on
our financial statements and either written or oral advice was provided that was
an important factor considered by the registrant in reaching a decision as to
the accounting, auditing or financial reporting issue; or (ii) any matter that
was the subject of a disagreement or event identified in response to Item 304(a)
(1) (iv) of Regulation S-B.
Audit Fees
The aggregate fees incurred for professional services rendered by Lazar
Levine & Felix LLP for the audit of our annual financial statements for the
fiscal year ended December 31, 2001, and the reviews of the financial statements
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included in our Quarterly Reports on Form 10-QSB for the quarters ended March
31, 2001, June 30, 2001, and September 30, 2001, were approximately $57,000.
Financial Information Systems Design and Implementation Fees
We did not pay any fees in 2001 to Lazar Levine & Felix LLP for
financial information systems design and implementation.
All Other Fees
The aggregate fees incurred for other professional services rendered by
Lazar Levine & Felix LLP during the fiscal year ended December 31, 2001 were
$23,675. These fees related principally to services rendered in connection with
the preparation of a registration statement on Form SB-2 that we filed on behalf
of certain selling shareholders.
We have been advised that neither Lazar Levine & Felix LLP nor any of
its partners has any material direct or indirect relationship with us. The audit
committee of our board has considered whether the provision of non-audit
services to us is compatible with maintaining Lazar Levine & Felix LLP's
independence.
Representatives of Lazar Levine & Felix LLP are expected to be present
at the meeting, will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
If the shareholders do not approve Proposal II, the selection of
independent public accountants will be reconsidered by the board.
The board of directors recommends voting "FOR" Proposal II.
2003 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 2003 Annual Meeting of
Shareholders to be eligible for inclusion in our proxy statement, such proposals
must be received by us at our principal office in Garden City, New York by
December 31, 2002. A shareholder who desires to have a qualified proposal
considered for inclusion in our proxy statement must have been a record or
beneficial owner of at least 1% of our outstanding stock or stock with a market
value of at least $2,000 for a period of at least one year prior to submitting
the proposal, and the shareholder must continue to own such stock through the
date on which the 2003 Annual Meeting of Shareholders is held.
OTHER MATTERS
The board knows of no matter that will be presented for consideration
at the meeting other than the matters referred to in this proxy statement.
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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.
SOLICITATION OF PROXIES
The cost of proxy solicitations will be borne by us. In addition to
solicitations of proxies by use of the mails, some of our officers or employees,
without additional remuneration, may solicit proxies personally, by telephone or
by facsimile machine. We may also request brokers, dealers, banks and their
nominees to solicit proxies from their clients, where appropriate, and may
reimburse them for reasonable expenses related thereto.
Shraga David Aranoff
Secretary
Garden City, New York
April 30, 2002
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE OF THE
ISOTOPE SOLUTIONS GROUP, INC. BOARD OF DIRECTORS
I. PURPOSE
The primary purpose of the Audit Committee is to assist the Board of Directors
of Isotope Solutions Group, Inc. (the "Company") in fulfilling its oversight
responsibilities to the Company's shareholders and the investment community.
The Audit Committee's primary duties and responsibilities are to: (a) serve as
an independent and objective party to monitor the Company's financial reporting
process and internal control systems; (b) review and appraise the audit efforts
of the Company's independent auditors; and (c) provide an open avenue of
communication among the independent auditors, financial and senior management
and the Board of Directors.
The Audit Committee will fulfill these responsibilities primarily by carrying
out the activities enumerated in Section IV of this Charter.
It is recognized that members of the Audit Committee are not employees of the
Company and are not, and do not represent themselves to be, accountants or
auditors by profession or experts in the fields of accounting and auditing. As
such, it is not the duty or responsibility of the Committee or its members (i)
to plan or conduct audits, (ii) to determine that the Company's financial
statements are complete and accurate and are in accordance with generally
accepted accounting principles or (iii) to conduct other types of auditing or
accounting reviews or procedures. Each member of the Committee shall be entitled
to rely on (i) the integrity of those persons and organizations within and
outside the Company that provide information to the Committee and (ii) the
accuracy and completeness of the financial and other information provided to the
Committee by such persons or organizations absent actual knowledge to the
contrary (which shall be promptly reported to the Board of Directors).
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined
by the Board. During any period in which the Company files reports with the
Securities and Exchange Commission in accordance with the SEC's Regulation S-B,
at least two of the members of the Committee shall be independent directors free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee. At
all other times all of the members shall be independent directors. All members
of the Committee shall have a working familiarity with basic finance and
accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise or any other comparable
experience resulting in financial sophistication.
The members of the Audit Committee shall be elected by the Board annually and
shall serve until their successors shall be duly elected and qualified. Unless a
Chair of the Committee is elected by the full Board, the members of the
Committee may designate a Chair by majority vote of the full Committee
membership.
III. MEETINGS
The Audit Committee shall meet as required to fulfill its responsibilities set
forth in this charter. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
auditors, in separate executive sessions, to discuss any matters that the
Committee or either of these groups believes should be discussed privately. In
addition, the Committee, or at least its Chair, should communicate with the
independent auditors and management quarterly to review the Company's quarterly
financial statements consistent with IV.3, below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review, at least annually, and, if necessary, revise this Charter
periodically as conditions dictate. Upon any revision, submit the revised
Charter to the Board for approval.
2. Review the Company's annual audited financial statements and any reports
or other financial information, as appropriate, prior to filing, which review
should include discussion with management and the independent auditors of
significant issues regarding accounting principles, practices and judgments and
recommend to the Board whether the annual audited financial statements should be
included in the Annual Report on Form 10-K or Form 10-KSB.
3. Review with financial management and the independent auditors the
Company's quarterly financial results prior to filing. Discuss any significant
changes to the Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with applicable
regulatory requirements and auditing standards. The Chair of the Committee may
represent the entire Committee for purposes of this review.
Independent Auditors
4. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Committee shall recommend to the Board
of Directors on an annual basis the selection of the independent auditors,
considering their independence and effectiveness, and approve the fees and other
significant compensation to be paid to the independent auditors. On an annual
basis, the Committee should review and discuss with the auditors all significant
relationships the auditors have with the Company to determine their independence
and receive a letter from the independent auditors, on a periodic basis,
delineating all relationships between the independent auditors and the Company
consistent with applicable regulatory requirements and auditing standards.
5. Review the performance of the independent auditors and approve any
proposed discharge of the independent auditors when circumstances warrant.
6. Periodically consult with the independent auditors, out of the presence
of management, about internal controls and the completeness and accuracy of the
Company's financial statements.
7. Review the independent auditors' audit plan, which review should include
the scope of work, staffing, locations, reliance upon management and internal
audit and general audit approach.
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8. Prior to filing of the Company's year-end financial statements, discuss
the results of the audit with the independent auditors, including matters
required to be discussed by auditing standards, and obtain from the independent
auditors assurance that the audit was conducted in a manner consistent with
Section 10A of the Securities Exchange Act of 1934.
Financial Reporting Processes
9. Consider the independent auditors' written judgments about the quality
and appropriateness of the Company's accounting principles as applied in its
financial reporting.
10. Consider and approve, if appropriate, major changes to the Company's
accounting principles and practices as suggested in writing by the independent
auditors or management.
Process Improvement
11. Establish regular and separate systems of reporting to the Audit
Committee by each of management and the independent auditors regarding any
significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgments.
12. Following completion of the annual audit, review separately with each of
management and the independent auditors any significant difficulties encountered
during the course of the annual audit, including any restrictions on the scope
of work or access to required information.
13. Review any significant disagreement among management and the independent
auditors in connection with the preparation of the financial statements.
14. Review with the independent auditors and management the extent to which
changes or improvements in financial or accounting practices, as approved by the
Committee, have been implemented. (This review should be conducted at an
appropriate time after implementation of changes or improvements, as decided by
the Committee.)
Other Responsibilities
15. Annually prepare a report to shareholders and cause the report to be
published in the Company's annual report or proxy statement as required by the
Securities and Exchange Commission.
16. Perform any other activities consistent with this Charter, the Company's
By-laws and applicable law as the Committee of the Board deems necessary or
appropriate.
17. Review with the Company's legal counsel significant legal matters that
may have a material impact on the financial statements and any material reports,
notices or inquiries received from regulators or governmental agencies.
18. Authorize or conduct special investigations and studies that arise out of
the Committee's areas of responsibility. The Committee shall be empowered to
retain independent counsel, accountants or others to assist it in connection
with any investigation.
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ISOTOPE SOLUTIONS GROUP, INC.
Form of Proxy for Annual Meeting of Shareholders
June 6, 2002
The undersigned hereby appoints Jack Schwartzberg and Shraga David
Aranoff, and each of them, as agents and proxies, each with the power to appoint
his substitute, to represent and to vote, as designated below, all of the shares
of Common Stock, $.001 par value, of ISOTOPE SOLUTIONS GROUP, INC. (the
"Company"), held of record by the undersigned at the close of business on April
15, 2002 at the Annual Meeting of Shareholders (the "Meeting") of ISOTOPE
SOLUTIONS GROUP, INC. on June 6, 2002, at 10:00 a.m. local time, or at any
adjournments or postponements thereof.
1. Election of Directors
[ ] For all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated otherwise below)
INSTRUCTION: To withhold authority to vote for an individual nominee,
write such nominee's name in the space below.
NOMINEES: Shraga David Aranoff, Harry Barnett, Stanley F. Barshay,
Jay M. Haft and Jack Schwartzberg.
NOMINEE(S) FOR WHOM AUTHORITY IS WITHHELD: ___________________________
______________________________________________________________________
2. Ratification of the selection of Lazar, Levine & Felix LLP as the
Company's auditors for the fiscal year ending December 31, 2002.
For ______ Against ______ Abstain ______
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
For ______ Against ______ Abstain ______
(To be signed below)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN ABOVE
Please sign exactly as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please indicate the capacity in which
signing. When a proxy is given by a corporation, please give your full
corporation name and have the proxy signed by the president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
DATED: ________________, 2002
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Shareholder Name
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Shareholder Signature
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Signature if held jointly
PLEASE SIGN, DATE AND MAIL THIS PROXY IMMEDIATELY IN THE ENCLOSED ENVELOPE