SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
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Rule 14c-5(d)(21)
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MRI Medical Diagnostics, Inc.
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(Name of Registrant as Specified In Its Charter)
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MRI MEDICAL DIAGNOSTICS, INC.
3 Hutton Centre Drive
Suite 150
Santa Ana, California 92707
INFORMATION STATEMENT
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INTRODUCTION
We are furnishing this information statement in connection with a
special meeting of the shareholders of MRI Medical Diagnostics, Inc. The meeting
will be held at 10:00 am on September 5, 2000 at 3 Hutton Centre Drive, Suite
150, Santa Ana, California 92707.
We are sending this information to our shareholders on or about August
15, 2000. Our board of directors has fixed the close of business on August 14,
2000 as the record date for the determination of MRI shareholders entitled to
notice of and to vote at the meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
MATTERS TO BE CONSIDERED AT THE MEETING
At the meeting, and at any adjournment or postponement of the meeting,
we will ask our Shareholders:
1. To authorize an amendment to our Articles of Incorporation to:
(a) Reverse split our common stock on a 1 for 18.85077263
basis, as described in more detail below; and
(b) To change our corporate name to HomeZipR Corp.;
2. To approve our 2000 Stock Option Plan;
3. To ratify the appointment of Lesley, Thomas, Schwarz &
Postma, Inc. as our independent public accountants; and
4. To transact any other business that may properly come before
the meeting.
VOTES REQUIRED AND QUORUM
Approval of the matters brought before the meeting requires the
affirmative vote of the holders of a majority of the shares entitled to vote on
such matters. As of August 14, 2000, there were 38,416,828 shares of our common
stock outstanding and 5,320,463 shares of our Series A Preferred Stock
outstanding. Holders of our common stock are entitled to one vote per share.
Holders of our Series A Preferred Stock are entitled to 50 votes per share.
Accordingly, there are the equivalent of 304,439,988 votes outstanding, so the
proposals will pass if holders of at least 152,219,995 such votes cast their
vote in favor.
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A quorum of the shareholders is necessary to take action at the
meeting. A quorum is present if shareholders holding shares which represent a
majority of the outstanding votes are present at the meeting. Accordingly, as
described above, shareholders entitled to a total of at least 152,219,995 votes
will need to be present in order to hold a valid meeting.
BOARD RECOMMENDATIONS - INSIDERS' INTENT TO VOTE IN FAVOR
Our board of directors has determined that approval of the reverse
split, name change and stock option plan, and ratification of the appointment of
our independent public accountants are in the best interests of the company and
our shareholders. Accordingly, the board has unanimously approved the proposals
and recommends that the shareholders who choose to attend the meeting vote in
favor of these matters as well.
Certain officers, directors and affiliates of the company who
beneficially own an aggregate of approximately 62% of the outstanding votes have
indicated that they intend to vote in favor of each of the proposals discussed
herein.
THE REVERSE SPLIT
(Proposal 1(a))
INTRODUCTION
On July 31, 2000, our board of directors approved a proposal to effect
a reverse split of our common stock, subject to the approval of our
shareholders. The reverse split, if approved, would combine our outstanding
common stock on 1 for 18.85077263 basis. In other words, once the reverse split
takes place, every 18.85077263 shares of common stock that you hold will be
combined into 1 share. Your percentage ownership in the company and relative
voting power will remain essentially unchanged. The number of authorized shares
of common stock will remain unchanged at 50,000,000 following the reverse split.
The reverse split will not affect the number of shares of preferred
stock outstanding, but the terms of our Series A Preferred Stock provide for a
reduction in the conversion ratio in proportion to the reverse split ratio.
Accordingly, shares of Series A Preferred Stock which are currently convertible
into 50 shares of common stock each, will be convertible into approximately
2.652411176 shares of common stock following the reverse split. Each Series A
Preferred Stock holder's conversion rights and proportional voting power will
remain effectively unchanged.
REASONS FOR THE REVERSE SPLIT
We expect that we will have to raise additional equity capital in the
near future in order to finance the development and growth of our business. We
cannot promise that any offering of our securities will take place or will be
successful, but we believe that reducing the number of outstanding shares and
increasing the number of authorized and unissued shares will make our capital
structure more attractive to potential investors and provide us with greater
flexibility in structuring financings and pursuing other corporate development
opportunities.
Further, we believe that our current low stock price negatively affects
the marketability of our existing shares and our ability to raise additional
capital. Although we cannot guarantee it, we assume that the reverse split will
increase the market price of our stock in a direct inverse proportion to the
reverse split ratio. In other words, with a reverse split ratio of 1 to
18.85077263, the assumption is that the market price of our stock should
increase by 18.85077263 times following the reverse split. Based upon our
stock's closing bid price of $0.25 on August 1, 2000, then, if every 18.85077263
shares of common stock were combined into one share, the initial adjusted market
value would be expected to increase to approximately $4.71 per share.
Finally, we are hopeful that the reverse split and the resulting
anticipated increased price level will encourage interest in our common stock
and possibly promote greater liquidity for our shareholders. Again, however, we
cannot guarantee that this will be the case or, indeed, that any of the
foregoing hoped-for effects will result from the reverse split.
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CERTAIN EFFECTS OF THE REVERSE SPLIT
The following table illustrates the principal effects of the reverse
split on our common and preferred stock based on the number of shares
authorized, issued and outstanding as of August 14, 2000.
Prior to the After the
Number of Shares Reverse Split Reverse Split
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Authorized Common Stock 50,000,000 50,000,000
Issued and Outstanding
Common Stock 38,416,828 2,037,945
Common Stock Available
for Issuance 11,583,172 47,962,055
Series A Preferred Stock
Outstanding 5,320,463 5,320,463
Common Stock Issuable upon
Conversion of Series A
Preferred Stock 266,023,150 14,112,055
Issued and Outstanding Common
Stock Assuming Conversion of
all Outstanding Preferred Stock 304,439,978 16,150,000
Shares of common stock issued pursuant to the reverse split will be
fully paid and nonassessable. The relative voting and other rights of holders of
the common stock will not be altered by the reverse split, and each share of
common stock will continue to entitle its owner to one vote.
As a result of the reverse split, the number of shares of common stock
presently outstanding will be consolidated but the number of shares authorized
for issuance will remain unchanged at 50,000,000. Accordingly, we will have the
ability to issue more shares of common stock than is presently the case and
without additional shareholder approval. Doing so may have a dilutive effect on
the equity and voting power of our existing shareholders.
No fractional shares will be issued in connection with the reverse
split. Instead, fractional shares will be rounded up and one whole share will be
issued. We expect that most shareholders will receive one additional share of
common stock, but we do not anticipate that this will materially affect any
shareholder's proportional interest. We do not anticipate that the reverse split
will result in any material reduction in the number of holders of common stock.
The reverse split may result in some shareholders owning "odd-lots" of
less than 100 shares of common stock. Brokerage commissions and other costs of
transactions in odd-lots are generally somewhat higher than the costs of
transactions in round lots of even multiples of 100 shares.
The reverse split will not affect the company's stockholders' equity as
reflected on our financial statements, except to change the number of issued and
outstanding shares of common stock.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of the material anticipated federal income tax
consequences of the proposed reverse split. This summary is based upon existing
law which is subject to change by legislation, administrative action and
judicial decision, and is necessarily general. In addition, this summary does
not address any consequence of the reverse split under any state, local or
foreign tax laws. Accordingly, this summary is not intended as tax advice to any
person or entity, and we advise you to consult with your own tax advisor for
more detailed information relating to your individual tax circumstances.
We understand that the reverse split will be a "recapitalization" under
applicable federal tax laws and regulations. As a result of such tax treatment,
no gain or loss should be recognized by the company or our shareholders as a
result of the reverse split or the exchange of pre-reverse split shares for
post-reverse split shares. A shareholder's aggregate tax basis in his or her
post-reverse split shares should be the same as his or her aggregate tax basis
in the pre-reverse split shares. In addition, the holding period of the
post-reverse split shares received by such shareholder should include the period
during which the pre-reverse split shares were held, provided that all such
shares were held as capital assets in the hands of the shareholder at the time
of the exchange.
EFFECTIVE DATE OF THE REVERSE SPLIT
If the proposal is approved by the shareholders, the reverse split will
become effective after we file an amendment to our Articles of Incorporation
with the Secretary of State of Colorado. We anticipate that this will take place
on or about September 6, 2000. Upon filing the amendment, all of our outstanding
common stock will be converted into new common stock in accordance with the
reverse split ratio described above. After the reverse split is effective,
certificates representing shares of pre-reverse split common stock will be
deemed to represent only the right to receive the appropriate number of shares
of post-reverse split common stock.
EXCHANGE OF CERTIFICATES
You are not being asked to exchange your certificates at this time,
however you are entitled to do so after the reverse split takes place if you
wish by contacting our transfer agent. Otherwise, certificates representing
pre-reverse split shares will be exchanged for certificates reflecting
post-reverse split shares at the first time they are presented to the transfer
agent for transfer.
RIGHT TO ABANDON REVERSE SPLIT
Although we do not anticipate doing so, we may abandon the proposed
reverse split at any time prior to its effectiveness if our board of directors
deems it advisable to do so. Any decision as to the appropriateness of the
reverse split will be made by solely our board of directors and will depend upon
numerous factors including the future trading price of our stock, the growth and
development of our business and our financial condition and results of
operations.
VOTE REQUIRED
We are required to obtain the affirmative vote of at least a majority
of the shares that are present or represented at the meeting in order to effect
the reverse split. Certain officers, directors and affiliates of the company who
beneficially own an aggregate of approximately 62% of the outstanding votes have
indicated that they intend to vote their shares in favor of the reverse split.
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NAME CHANGE TO HOMEZIPR CORP
(Proposal 1(b))
On July 31, 2000, in connection with the reverse acquisition of MRI by
HomeZipR.com Corp., a Delaware corporation (see "Change in Control," below, for
further information), our board of directors approved a proposal to change our
corporate name from MRI Medical Diagnostics, Inc. to "HomeZipR Corp.," subject
to the approval of the shareholders.
VOTE REQUIRED
We are required to obtain the affirmative vote of at least a majority
of the shares that are present or represented at the meeting in order to change
our name. Certain officers, directors and affiliates of the company who own an
aggregate of approximately 62% of the outstanding votes have indicated that they
intend to vote their shares in favor of the proposed name change.
2000 STOCK OPTION PLAN
(Proposal 2)
INTRODUCTION
On July 31, 2000, our board of directors adopted, subject to
shareholder approval, our 2000 Stock Option Plan. The plan provides for the
grant of non-qualified stock options to our employees, officers, directors,
consultants and independent contractors and for the grant of incentive stock
options to employees that qualify for such options under Section 422 of the
Internal Revenue Code of 1986. The plan terminates on July 31, 2010. We have
reserved 2,000,000 shares of our common stock for issuance, subject to
adjustment upon occurrence of certain events affecting our capitalization.
PURPOSE OF THE PLAN
We believe that the plan will help us to attract and retain highly
qualified employees, officers, directors and consultants by affording such
persons an opportunity for equity participation in the company. We also believe
that our shareholders benefit when we tie our executive compensation, at least
in part, to maximizing shareholder value and align our management's financial
interests with those of our shareholders.
SUMMARY OF THE PLAN
The stock option plan is administered by the board of directors or, at
the board's option, a committee of the board of directors. The board has,
subject to specified limitations, full authority to grant options and establish
the terms and conditions of vesting and exercise. The exercise price of
incentive stock options granted under the plan is required to be no less than
the fair market value of our common stock on the date of grant (110% in the case
of a greater than 10% stockholder).
The board may grant options for terms of up to 10 years, or 5 years in
the case of incentive stock options granted to greater than 10% stockholders. No
optionee may be granted incentive stock options such that the fair market value
of the options which first become exercisable in any one calendar year exceeds
$100,000. If an optionee ceases to be employed by us or ceases to have a
relationship with us, his or her options will expire one year after termination
by reason of death or permanent disability, thirty days after termination for
cause and three months after termination for any other reason.
In order to exercise an option granted under the plan, the optionee
must pay the full exercise price of the shares being purchased. Payment may be
made either in cash or in such other form of compensation, including payment in
shares of our common stock already owned by the optionee, as the board may
determine in its discretion.
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Subject to the foregoing, the board has broad discretion to set the
terms and conditions applicable to options granted under the plan. The board may
discontinue or suspend option grants under the plan, or amend or terminate the
plan entirely, at any time. With the consent of an optionee, the board may also
make such modification of the terms and conditions of such optionee's option as
the board shall deem advisable. However, the board has no authority to make any
amendment or modification to the plan or any outstanding option which would:
o increase the maximum number of shares which may be purchased
pursuant to options granted under the stock option plan,
either in the aggregate or by an optionee, except in
connection with certain antidilution adjustments;
o change the designation of the class of employees eligible to
receive qualified options;
o extend the term of the stock option plan or the maximum option
period thereunder;
o decrease the minimum qualified option price or permit
reductions of the price at which shares may be purchased for
qualified options granted under the stock option plan, except
in connection with certain antidilution adjustments; or
o cause qualified stock options issued under the stock option
plan to fail to meet the requirements of incentive stock
options under Section 422 of the Internal Revenue Code.
Any such amendment or modification shall be effective immediately,
subject to stockholder approval within 12 months before or after the effective
date. No option may be granted during any suspension or after termination of the
plan.
CERTAIN FEDERAL TAX CONSEQUENCES
Following is a summary of the material anticipated federal income tax
consequences to the company and to optionees of the proposed stock option plan.
This summary is based upon existing law which is subject to change by
legislation, administrative action and judicial decision and is necessarily
general. In addition, this summary does not address any consequence of the plan
under any state, local or foreign tax laws. Accordingly, this summary is not
intended as tax advice to any person or entity, and you are advised to consult
with you own tax advisor for more detailed information relating to your
individual tax circumstances.
NON-QUALIFIED STOCK OPTIONS
Holders of non-qualified stock options do not realize income as a
result of a grant of the option, but normally realize compensation income upon
the exercise of the option to the extent that the fair market value of the
underlying shares of common stock on the date of exercise exceeds the exercise
price paid. We will be required to withhold taxes on ordinary income realized by
an optionee on the exercise of a non-qualified option.
In the case of an optionee subject to the "short-swing" profit
recapture provisions of Section16(b) under the Securities Exchange Act of 1934,
the optionee realizes income only upon the lapse of the six-month period under
Section 16(b), unless the optionee elects to earlier recognize the income.
INCENTIVE STOCK OPTIONS
Holders of incentive stock options will not be considered to have
received taxable income upon either the grant of the option or its exercise,
except that the difference between the fair market value of the stock on the
date of exercise and the exercise price is included as income for purposes of
calculating Alternative Minimum Tax.
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If no sale or other taxable disposition of the shares acquired upon
exercise is made by the optionee within two years from the date of grant or
within one year from the date the shares are transferred to the optionee, any
gain realized upon the subsequent sale of the shares will be taxable as a
capital gain. In such case, we will be entitled to no deduction for federal
income tax purposes in connection with either the grant or the exercise of the
option. If, however, the optionee disposes of the shares within either of the
periods mentioned above, the optionee will realize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise, or the amount realized on disposition if less over the exercise price,
and we will be allowed a deduction for a corresponding amount.
GRANTS UNDER THE PLAN
As of August 14, 2000, no options have been granted under the plan.
Option grants to plan participants, including officers, directors and employees,
are at the discretion of the board of directors. Accordingly, future grants to
such persons are not determinable at this time.
VOTE REQUIRED
We are required to obtain the affirmative vote of at least a majority
of the shares that are present or represented at the meeting in order to approve
the plan. Certain officers, directors and affiliates of the company who
beneficially own an aggregate of approximately 62% of the outstanding votes have
indicated that they intend to vote their shares in favor of the plan
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal 3)
On July 31, 2000, we appointed Lesley, Thomas, Schwarz & Postma, Inc.
as our independent public accountants and we are seeking shareholder
ratification of such appointment. If ratified, Lesley, Thomas will audit our
financial statements for our current fiscal year and perform such other
appropriate services as we may request. We expect that a representative of
Lesley, Thomas will be present at the meeting to respond to appropriate
questions or to make a statement if he or she so desires.
VOTE REQUIRED
The ratification of Lesley, Thomas Schwarz & Postma, Inc. requires the
affirmative vote of at least a majority of the shares that are present or
represented at the meeting. Certain officers, directors and affiliates of the
company who beneficially own an aggregate of approximately 62% of the votes have
indicated that they intend to vote their shares for the ratification of Lesley,
Thomas as our independent public accountants.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information with respect to
beneficial ownership of our stock as of August 14, 2000 by:
o persons known by us to be the beneficial owners of more than
five percent of our issued and outstanding common or preferred
stock;
o each of our executive officers and directors; and
o all of our officers and directors as a group.
The information provided reflects projected ownership of common stock
assuming that all outstanding shares of Series A Preferred Stock have been
converted into common stock and the proposed 1 for 18.85077263 reverse split has
been effected. Accordingly, percentages are computed using a denominator of
16,150,000 shares outstanding.
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES (1) PERCENT OF CLASS
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SFC West, Ltd.
c/o International Management Services, Ltd.
Harbour Centre Building
Georgetown
Caymen Islands, British West Indies 4,226,783 (2) 26.2%
Kenneth C. Ketner (Chairman and Director)
3 Hutton Centre Drive, Suite 150
Santa Ana, CA 92707 2,536,070 15.7%
Kevin Bonds
1000 Parkwood Circle, Suite 500
Atlanta, Georgia 30339 1,268,034 7.9%
Beverly Fleming (Executive Vice President and
Secretary)
3 Hutton Centre Drive, Suite 150
Santa Ana, CA 92707 140,893 <1%
Michael Barron (Executive Vice President)
3 Hutton Centre Drive, Suite 150
Santa Ana, CA 92707 845,357 5.2%
Donald Olsen (Director)
3 Hutton Centre Drive, Suite 150
Santa Ana, CA 92707 0 0
Thomas Deemer (Director)
3 Hutton Centre Drive, Suite 150
Santa Ana, CA 92707 140,893 <1%
Javaid Sheikh (Director)
988 St. Joseph Avenue
Los Altos, CA 94024 161,429 1.0%
Randy Bristol
3223 Bob Cox Road
Marieta, GA 30064 1,972,499 12.2%
Mortgage Capital Resource Corporation
2038 Iowa Avenue, Suite 100
Riverside, California 92508 850,000 5.2%
All officers and directors as a group
(7 persons) 9,319,460 (3) 57.7%
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(1) Figures are approximate due to rounding
(2) Kenneth Ketner has voting control over the shares held by SFC West, Ltd.
(3) Includes shares of SFC West, Ltd. over which Kenneth Ketner has voting
control.
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RECENT CHANGES
CHANGE IN CONTROL
On July 31, 2000, HomeZipR.com, Corp., a Delaware corporation,
completed a reverse acquisition of MRI pursuant to which MRI purchased all of
the outstanding shares of HomeZipR common stock in exchange for 22,393,671
shares of MRI's common stock and 5,000,000 shares of MRI's Series A Preferred
Stock. As a result, HomeZipR is now a wholly-owned subsidiary of MRI.
Upon the closing of the transaction, the former shareholders of
HomeZipR owned approximately 42% of MRI's outstanding common stock and
approximately 94% of MRI's outstanding preferred stock. Together, this accounts
for approximately 90% of the company's total outstanding voting power. After
giving effect to the reverse split and assuming conversion of all of the
outstanding Series A Preferred Stock into common stock, the former HomeZipR
shareholders will own approximately 90% of the company's outstanding common
stock.
CHANGE IN ACCOUNTANTS
On or about July 31, 2000, in connection with the transaction described
above, we dismissed Ludlow & Harrison, a CPA corporation as our independent
public accountants and appointed Lesley, Thomas, Schwarz & Postma, Inc., who
were HomeZipR's independent public accountants, in their place. Reports issued
by Ludlow & Harrison for the fiscal years ended March 31 1999 and 2000 did not
contain any adverse opinion or disclaimer of opinion and were not qualified as
to audit scope or accounting principles, nor were there any material
disagreements with the former accountants on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
during these years.
We engaged Lesley, Thomas Schwarz & Postma, Inc. as our new independent
public accountants in July 2000. We did not consult with any other accounting
firm regarding the application of accounting principles to a specified
transaction, either contemplated or proposed, or the type of opinion that might
be rendered regarding our financial statements, nor did we consult with Lesley,
Thomas with respect to any accounting disagreement or any reportable event at
any time prior to their appointment as our independent public accountants.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION OF EXECUTIVE OFFICERS.
The following table sets forth the annual salaries for our chief
executive officer and each of our executive officers who will earn over $100,000
this year. Because of the reverse acquisition of HomeZipR.com described
elsewhere in this information statement, we are only including information for
our current officers and are not providing information for the period prior to
the reverse acquisition. In addition, because HomeZipR was only formed in March
2000, the information presented below represents the officers' annual salaries
rather than amounts actually paid to date.
Name and Title Salary
-------------- ------
Kenneth Ketner, Chairman $330,000
Kevin Bonds, President and CEO $240,000
Michael Barron, Executive Vice President $150,000
To date, we have not granted any options or other long-term
compensation to any of our executive officers or directors.
COMPENSATION OF DIRECTORS.
We reimburse our directors for out-of-pocket expenses for attending
board meetings and we pay our outside directors $500 per meeting.
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