<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
March 10 2000
Date of Report
(Date of Earliest Event Reported)
SOLOMON ALLIANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
3025 Windward Plaza
Suite 300
Alpharetta, GA 30005
(Address of principal executive offices (zip code))
(770) 753-3130
(Registrant's telephone number, including area code)
MADISON HOLDINGS, INC.
39 Broadway, Suite 2250
New York, New York 10006
(Former Name and Former Address)
Arizona 0-29973 86-0843235
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(a) Pursuant to a Share Exchange Agreement (the "Agreement") dated March 8,
2000, Solomon Alliance Group, Inc., an Arizona corporation ("Sage" or the
"Company"), acquired all of the issued and outstanding capital stock of Madison
Holdings, Inc. ("Madison") from the shareholders of Madison in a pro rata
exchange for an aggregate of 300,000 shares of Sage's common stock, par value
$0.001 per share (the "Share Exchange"). There were seven shareholders of
Madison immediately prior to the Share Exchange. They were MHE Projix LLC, a
Florida limited liability company, Mark Elenowitz, Louis Taubman, David
Simonetti, Thomas Bostic Smith, William Quigley, Jr., and Barry Labell, who held
5,000,000 shares of Madison common stock in the aggregate. As a result of the
Share Exchange, 100% of the outstanding capital stock of Madison is owned by
Sage and Madison became a wholly-owned subsidiary of Sage. Prior to the Share
Exchange, Sage had 22,793,155 shares of common stock issued and outstanding.
Following the Share Exchange, Sage had 23,093,155 shares of common stock issued
and outstanding. A copy of the Agreement is filed as an exhibit to this Form 8-K
and is incorporated in its entirety herein. The foregoing description is
modified by such reference.
<PAGE>
Upon effectiveness of the Share Exchange, pursuant to Rule 12g-3(a) of the
General Rules and Regulations of the Securities and Exchange Commission, Sage
became the successor issuer to Madison for reporting purposes under the
Securities Exchange Act of 1934 and elects to report under the Act effective
March 10, 2000.
(b) The following table contains information regarding the shareholdings of the
Company's current directors and executive officers and those persons or entities
who beneficially own more than 5% of the Company's common stock:
<TABLE>
<CAPTION>
Amount of Common Stock Percent of Common Stock
Beneficially Owned Beneficially Owned(1)
------------------ ---------------------
<S> <C> <C>
Directors and Officers
Thomas I. Weston, Jr. 1,000,000(3) 4.33
President, Chief Executive Officer,
Treasurer and Director
Lawrence M. Rotkin 66,667(2) 0.29
Secretary and Director
All current directors and officers
as a group (2 Persons) 1,066,667 4.62
5% or More Stockholders
Mark E. Bayliss 4,152,000(4) 17.98
GEM Global Yield Fund Limited N/A(5) N/A
Master Q & Company Limited 1,449,662 6.28
Rick Joshi N/A(5) N/A
</TABLE>
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(1) Based on 23,093,155 shares issued and outstanding after the Share
Exchange.
(2) Assumes exercise of warrants, options or other rights to purchase
securities held by the named shareholder exercisable within six months of
the date hereof.
(3) Does not include 1,303,111 shares which may be issuable pursuant to
exercise or conversion of certain warrants and convertible debentures
issued.
(4) Does not include warrants to purchase up to 692,000 shares.
(5) Information has not been provided to the Company. The Company believes
that the majority of shares controlled by these parties have been held in
"street name." The Company believes that GEM Global Yield Fund Limited,
which provided bridge financing and received, together with its affiliate
at the time, Mr. Rick Joshi, 5,891,629 shares in connection therewith, may
still control in excess of 5% of the shares of the registrant.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration provided by the parties pursuant to the Agreement
was negotiated between Sage and the former Madison shareholders. In evaluating
the Share Exchange transaction, the former Madison shareholders used criteria
such as the value of the assets of Sage, Sage's ability to compete in its
markets, the current and anticipated business operations of Sage. Sage
considered the value of Madison's status as a publicly reporting company and its
ability to succeed to the reporting status of Madison.
<PAGE>
BUSINESS
Solomon Alliance Group, Inc. was incorporated in Arizona on October 25, 1996. In
July 1998 Visual Link Telecommunication, LC merged into a subsidiary which
became Visual Link Wireless, Inc.
Sage is a development stage company with plans to become a leading provider of
customized wireless data communications solutions for individual and business
needs. The Company designs, develops and markets wireless network products and
services under the "Knowledge2Go" brand that provide low-cost, high performance,
easy-to-use IP-based data communications. The products can be used in a broad
range of personal computer and industrial applications. The Company's primary
service provides users of portable and desktop computers and hand-held computing
devices with fast, reliable, portable wireless access to the Internet, private
intranets, local area networks ("LANs"), e-mail and on-line services.
COMPETITION.
Competition in the market for data communications services is intensifying and a
large number of companies in diverse industries are expected to enter the
market. There can be no assurance that the Company will be able to compete
successfully in this market. A number of privately and publicly held
communications companies have developed or are developing new wireless and wired
data communications services and products using competing technologies. The
competition can be placed into two categories: portable and fixed access. While
Sage's products can be used as a fixed-access service, it is positioned
primarily as a portable service with its largest competitive advantages being
portability and low flat rate pricing.
BUSINESS EXPANSION
The Company has determined to diversify its current services and products
by acquiring additional technologies. The Company seeks to acquire companies in
the wireless data, e-commerce and telecommunications marketplace through merger,
acquisition and strategic alliance. It prefers the general strategy of
acquisition rather than undertaking the high cost of research and development.
Sage is engaged in serious discussions with acquisition prospects in these
three industries and, although it has not reached the point of signing letters
of intent or agreements, it believes that it will eventually be able to
negotiate terms for these or similar acquisitions that will be beneficial for
its shareholders.
As the Company adds selected technologies that will complement its current
offerings of products and services, it intends to expand its marketing and sales
staff with a focus on revenue generation. Since the Company is in an industry
with rapidly-changing technology, it will continue to consider the acquisition
of companies with cutting-edge technology. The Company has not restricted the
type of companies it may acquire. The Company may acquire a business that only
recently commenced operations, or a developing company in need of additional
funds to expand into new products or markets, or an established business that
may be experiencing financial or operating difficulties and needs additional
capital which is perceived to be easier to raise by a public company. In some
instances, a business opportunity may involve acquiring or merging with a
corporation which does not need substantial additional cash but which desires to
establish a public trading market for its common stock. The Company may purchase
assets and establish wholly owned subsidiaries in various businesses or purchase
existing businesses as subsidiaries.
Because business opportunities may occur in many different industries and
at various stages of development, the task of comparative investigation and
analysis of such business opportunities will be extremely difficult and complex.
The Company will also incur significant legal and accounting costs in connection
with the acquisition of a business opportunity, including the
<PAGE>
legal fees for preparing acquisition documentation, due diligence investigation
costs and the costs of preparing reports and filings with the Securities and
Exchange Commission.
The Company will seek potential business opportunities from all known
sources, but will rely principally on personal contacts of its officers and
directors as well as indirect associations between them and other business and
professional people. From time to time, the Company may engage the services of
consultants and or other outside professionals for their assistance in locating
and evaluating appropriate business opportunities.
The Company requires significant additional funding in order to accomplish
its business plan.
EMPLOYEES
The Company currently has 2 fulltime employees located in Alpharetta,
Georgia operating the business. The Company relies heavily on the use of
temporary contract employees and consultants to satisfy its other staffing
needs. Management believes that it is more cost effective to contract skill
labor appropriate to each project on an as needed basis.
TRADEMARKS AND PATENTS
The Company has no patents or trademarks and has not applied for any
patents or trademarks. The Company believes that its technology is at present
best protected by maintaining control over its distribution and keeping it a
trade secret. Sage anticipates that one or more of the companies that it may
acquire will have patent protection for proprietary technology.
PROPERTY
The Company maintains administrative offices at 3025 Windward Plaza, Suite
300, Alpharetta, GA 30005. The Company leases these offices on a month-to-month
basis.
LITIGATION
There is no outstanding litigation in which the Company is involved and
the Company is unaware of any pending actions or claims against it.
DESCRIPTION OF SECURITIES
The Company has an authorized capitalization of 100,000,000 shares of
common stock, $.001 par value per share ("Common Stock").
Common Stock
Following the Share Exchange, there were 23,093,155 shares of the
Company's Common Stock issued and outstanding. The holders of the Company's
common stock are entitled to one non-cumulative vote for each share held of
record on all matters submitted to a vote of shareholders. Subject to
preferences that may be applicable to outstanding shares of preferred stock, if
any, the holders of common stock are entitled to receive ratably any dividends
that are declared by the Company's Board of Directors out of funds legally
available therefor and are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common Stock upon liquidation
dissolution or winding up of the affairs of the Company. Holders of Company's
Common Stock have no preemptive, subscription or conversion rights and there are
no redemption or sinking fund provisions or rights applicable thereto.
<PAGE>
Preferred Stock
At present, the Company has no plans to authorize or issue any shares of
preferred stock.
Transfer Agent
The transfer agent for the Company's Common Stock is Manhattan Transfer
Registrar Company. Their offices are located at 58 Dorcester Rd., Lake
Ronkonkoma, NY 11779 and their telephone number is (516) 585-7341.
MARKET FOR SAGE'S SECURITIES
The Company's Common Stock is traded on the OTC Bulletin Board, a service
provided by the Nasdaq Stock Market Inc., under the symbol, "SAGE". The Nasdaq
Stock Market has implemented a change in its rules requiring all companies
trading securities on the OTC Bulletin Board to become reporting companies under
the Securities Exchange Act of 1934. The Company was required to become a
reporting company by the close of business on April 5, 2000. Sage acquired all
the outstanding shares of Madison to become successor issuer to it pursuant to
Rule 12g-3 in order to comply with the reporting company requirements
implemented by the Nasdaq Stock Market.
The following table sets forth for the periods indicated the high and low
bid prices for the common stock as reported each quarterly period within the
last two fiscal years on the OTC Bulletin Board. The prices are inter-dealer
prices, do not include retail mark up, mark down or commission and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
QUARTER ENDED OPEN PRICE HIGH PRICE LOW PRICE CLOSING PRICE
- ------------- ---------- ---------- --------- -------------
<S> <C> <C> <C> <C>
March, 1998 N/A N/A N/A N/A
June, 1998 4.250 4.250 4.000 4.250
September, 1998 4.250 4.375 3.812 3.875
December, 1998 3.750 4.000 1.625 1.687
March, 1999 1.875 2.687 0.875 1.125
June, 1999 1.250 1.875 0.531 1.093
September, 1999 1.093 1.125 0.437 0.540
December, 1999 0.500 0.625 0.090 0.260
March 10, 2000 0.290 9.625 0.250 6.562
</TABLE>
During the last two years, no dividends have been paid on the Company's
stock and the Company does not anticipate paying any cash dividends in the
foreseeable future. Although it is the Company's intention to utilize all
available funds for the development of the Company's business, no restrictions
are in place that would limit or restrict the ability of the Company to pay
dividends.
<PAGE>
MANAGEMENT
Information as to the directors and officers of the Company is as follows:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Thomas I. Weston, Jr. President, Treasurer and Director
Lawrence M. Rotkin Secretary and Director
</TABLE>
All directors of the Company hold office until the next annual meeting of
shareholders and until their successors are elected and qualified. At present,
the Company's Bylaws provide for not less than two directors. Currently, there
are two directors of the Company. The Bylaws permit the Board of Directors to
fill any vacancy and such director may serve until the next annual meeting of
shareholders or until his successor is elected and qualified. Officers serve at
the discretion of the Board of Directors.
Thomas I. Weston, Jr. Mr. Weston was elected to the Company's Board of
Directors and became the President of the Company in July 1998. Prior to Sage,
he served as Corporate Controller for Hayes Corporation, a company that
designed, manufactured and marketed computer communication products worldwide,
and CFO of Cooper Industries' Abex Friction Products Group, an international
manufacturer of brake friction materials. Mr. Weston earned an MBA from the Owen
Graduate School of Management at Vanderbilt University.
Lawrence M. Rotkin. Mr. Rotkin joined Sage as Vice President of Sales in
February 1999 and was elected to the Company's Board of Directors in November
1999. Prior to joining Sage, he held senior sales positions with several
international data communications companies including Hayes Communications,
Motorola, Honeywell and Zoom Telephonics.
EXECUTIVE COMPENSATION
None of the Company's officers and/or directors has received any
compensation for their services rendered to the Company in 2000.
No retirement, pension, profit sharing, stock option, or insurance
programs or other similar programs have been adopted by the Company for the
benefit of its employees.
RELATED TRANSACTIONS
Transactions with Management and Related Transactions:
Sage and MHE Projix, LLC ("MHE"), the former majority shareholder of
Madison Holdings, Inc., the predecessor filer to Sage, entered into a service
agreement on March 2, 2000. Under the terms of this agreement MHE agreed to (i)
assist Sage in locating a reporting company for possible acquisition by Sage;
(ii) provide advice to Sage regarding the acquisition of such company by Sage;
(iii) assist Sage in maintaining its listing on the OTCBB and (iv) assist Sage
with the preparation and filing of this Form 8-K with the Commission. In
consideration for the foregoing services, MHE will receive a consulting fee of
$150,000. As a result of the Share Exchange, MHE is a shareholder of Sage.
Mr. Weston has from time to time as needed advanced funds to the Company
under the terms of a Revolving Convertible Debenture Agreement. As of March 10,
2000 there is $100159,000 outstanding under this Agreement.
The Company has been discussing an exchange of shares for rights in
technology with Mark Bayliss, a major shareholder and former director of the
Company. No formal agreement
<PAGE>
effecting such exchange and transfer has been signed yet. In the event rights to
technology are transferred, the Company will retain a license for the continued
use of such technology.
Indebtedness of Management
No member of the management, officers, or directors is or has been
indebted to the Company. No director or officer is personally liable for the
repayment of amounts by any financing received by the Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Arizona law authorizes an Arizona corporation to indemnify its officers
and directors against claims or liabilities arising out of such person's conduct
as officers or directors if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
Company. The Articles of Incorporation provide for indemnification of the
directors of the Company. In addition, the Bylaws of the Company provide for
indemnification of the directors, officers, employees or agents of the Company.
In general, these provisions provide for indemnification in instances when such
persons acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the Company.
RISK FACTORS
The Company's business is subject to numerous risk factors, including the
following:
UNCERTAINTY OF MARKET ACCEPTANCE
Commercialization of Knowledge2Go is subject to market acceptance risks. A broad
market for customized wireless data communications services has not yet
developed. As a result, the extent of the potential demand for Knowledge2Go's
services cannot be reliably estimated. In addition, the Company has limited
experience marketing its services.
The Company believes that market acceptance depends principally on cost
competitiveness, data rate, ease of use, including compatibility with existing
applications, cost and size of modems, extent of coverage, customer support,
marketing, distribution and pricing strategies of the Company and competitors,
Company reputation, and general economic conditions. Some of the foregoing
factors are beyond the control of the Company.
If the Company's customer base does not expand as required to support the
deployment of additional networks, the Company's business, financial condition
and operating results will be materially adversely affected. In addition, the
market for wireless communications services is characterized by a high customer
turnover rate. There can be no assurance that the Company will be able to retain
future customers.
CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company intends to continue the development, deployment and
commercialization of its Knowledge2Go services. The timing and amount of capital
expenditures may vary significantly depending on numerous factors including
market acceptance of its services, availability and financial terms of site
agreements for the Company's network infrastructure, technological feasibility,
availability of modems, and availability of sufficient management, technical,
marketing and financial resources.
The Company will need to raise additional funds through the sale of its equity
or debt securities in private or public financing or through strategic
partnerships in order to complete the deployment
<PAGE>
and commercialization of Knowledge2Go. There can be no assurance that such funds
will be sufficient to fund such deployment as planned.
In addition, no assurance can be given that additional financing will be
available or that, if available, such funding can be obtained on terms favorable
to the Company. Should the Company be unable to obtain additional financing, it
may be required to scale back the planned deployment of its services and reduce
capital expenditures, which would have a materially adverse effect on the
Company's business, financial condition and operating results.
EARLY-STAGE TECHNOLOGY; FUTURE OPERATING LOSSES AND NEGATIVE CASH FLOW FROM
OPERATIONS
The Company's Knowledge2Go services offering is at an early stage of development
and has been in commercial operation for only a short period of time;
consequently, the Company has limited historical financial information upon
which a prospective investor could perform an evaluation. The Company will incur
significant expenses in advance of generating revenues and is expected to
realize significant operating losses in the future as a result of the continuing
development, deployment and commercialization of its products and services.
The Company's future operating results are subject to a number of risks,
including the Company's ability to: implement its strategic plan; attract and
retain qualified individuals; and raise appropriate financing as necessary. As
such, no assurance can be given as to the timing and extent of revenue receipts
and expense disbursements or the Company's ability to successfully complete all
of the tasks associated with developing and maintaining a successful enterprise.
In addition, there can be no assurance that the Company will be able to
successfully manage operations.
Management's failure to guide and control growth effectively (including
implementing adequate systems, procedures and controls in a timely manner) could
have a material adverse effect on the Company's financial condition and results
of operations. The Company expects to incur significant operating losses and to
generate negative cash flow from operating activities during the next several
years while it continues to develop and deploy its services and build its
customer base. There can be no assurance that the Company will achieve or
sustain profitability or positive cash flow from operating activities in a
timely manner.
REGULATION OF COMMUNICATIONS ACTIVITIES
The Company is subject to various FCC regulations. The FCC, pursuant to the
Communications Act, regulates non-government use of the electromagnetic spectrum
in the United States. Part 15 of the FCC's regulations provides that the 900 MHz
and 2.4 GHz Bands may be authorized for the operation of certified radio
equipment without the requirement for a license.
The Company's products must not cause harmful interference to any non-Part 15
equipment operating in the band and must accept interference from any of them,
as well as from any other Part 15 equipment operating in the band. If the
Company were unable to eliminate any such harmful interference caused by its
products through technical or other means, or were unwilling to accept
interference caused by others to its services, the Company or its customers
could be required to cease operations in the band in the locations affected by
the harmful interference.
Additionally, in the event the license-free 900 MHz or 2.4 GHz Bands become
unacceptably crowded, and no additional frequencies are allocated by the FCC,
the Company's business, financial condition and results of operations could be
materially and adversely affected.
The regulatory environment in which the Company operates is subject to change.
Changes in the regulation of the Company's activities by the FCC, as a result of
its own regulatory process or as directed by legislation or the courts,
including changes in the allocation of available spectrum,
<PAGE>
could have a material adverse effect on the Company, and the Company might deem
it necessary or advisable to move to another of the Part 15 bands or to obtain
the right to operate in additional licensed spectrum or other portions of the
unlicensed spectrum. Redesigning products to operate in another band could be
expensive and time consuming, and there can be no assurance that such redesign
would result in commercially viable products. In addition, there can be no a
ssurance that, if needed, the Company could obtain appropriate licensed or
unlicensed spectrum on commercially acceptable terms, if at all.
On an ongoing basis, the FCC proposes and issues new rules and amendments to
existing rules that affect the Company's business. The Company closely monitors
the FCC's activities and, when appropriate, actively participates in policy and
rulemaking proceedings. The Company is currently monitoring several proceedings
at the FCC that could have an impact on the Company. If the FCC adopts rules
that directly or indirectly restrict the Company's ability to conduct its
business as currently conducted or proposed to be conducted, the Company's
business, financial condition or operating results could be materially adversely
affected.
In a pending Rulemaking, the FCC has solicited comments on a private entity's
proposal to authorize non-government, wind profiler radar systems in the 900 MHz
Band. While not currently the subject of proposed rules, if the FCC ultimately
adopts such rules, there can be no assurance that such regulation would not have
a materially adverse effect on the Company's business, financial condition or
operating results.
In March 1997, the FCC initiated a rulemaking proceeding in response to a
request filed by the American Radio Relay League, Inc. on behalf of amateur
radio operators. The FCC proposed to amend its rules for the Amateur Radio
Services to allow amateur stations greater flexibility in the use of
high-powered spread spectrum technologies in, among others, the 900 MHz Band. To
protect other users, including Part 15 users such as the Company, the FCC
proposes to require spread spectrum equipment used by amateur radio licensees to
use the minimum power necessary and to incorporate automatic power control
circuitry in their equipment to reduce the potential for interference. If the
FCC ultimately adopts rules as proposed, amateur spread spectrum operations may
interfere with the Company's operations in certain discrete geographic areas.
Although the Company believes it would be able to overcome such interference, if
any, by installing additional network radios and other measures, there can be no
assurance to that effect.
The FCC adopted a rule making proceeding and inquiry to determine, among other
things, whether to permit local exchange carriers to assess interstate access
charges on information service providers like the Company. The FCC has
tentatively concluded that access charges should not apply to information
service providers and left standing an earlier decision that such charges would
not apply to enhanced services, which includes access to the Internet and other
interactive computer networks. However, the FCC also sought comment on whether
to initiate a separate rulemaking proceeding and inquiry to consider additional
rules or actions that may be necessary relating to information services and the
Internet.
There can be no assurance that the final rules adopted, if any, will reflect the
FCC's tentative conclusion with regard to the imposition of access charges or
that the outcome of any rulemaking proceeding and inquiry concerning information
services and the Internet would not have a material adverse effect on the
Company's business, financial condition and results of operations.
Wireless network services such as the Company's are subject to certain Federal
Aviation Administration and FCC guidelines regarding the location, lighting,
construction and modification of structures and antennas used in connection with
the radio spectrum. In addition, the FCC has authority to enforce certain
provisions of the National Environmental Policy Act as they may apply to the
Company's facilities. The FCC recently adopted rules containing guidelines and
methods
<PAGE>
for evaluating the environmental effects of radio frequency emissions from
FCC-regulated transmitters.
These rules categorically exclude low power, Part 15 devices of the type used by
the Company from routine environmental evaluation because they offer little or
no potential for exposure in excess of specified health and safety guidelines.
The environmental evaluation rules do apply to the 2.3 GHz equipment being
developed by the Company for WCS operations. The FCC also incorporated into its
rules provisions of the Telecommunications Act of 1996 that preempt state and
local governmental regulation over the placement of radio frequency devices
based on radio frequency environmental effects. Despite these actions, some
public concerns about radio frequency emissions remains. Regulatory action in
response to these concerns could have a material adverse effect on the Company's
business, financial condition and results of operations.
The FCC has issued a Notice of Proposed Rulemaking concerning implementation of
the Communications Assistance For Law Enforcement Act ("CALEA"). CALEA requires
entities offering certain communications services to provide a means by which
law enforcement agencies can conduct electronic surveillance in the face of
changing communications technologies. Because of exemptions provided in the act
itself, the Company believes that the CALEA provisions are not applicable to its
operations. If the FCC or the courts nevertheless require the Company to
implement CALEA compliance capability, such action could have a material adverse
impact on the Company's business, financial condition and results of operations.
State and Local Regulation. The Company often requires the siting of its network
radios and WAPs on public rights-of-way and other public property. Due to state
and local right-of-way, zoning and franchising issues, the Company is not always
able to place its radios in the most desirable locations, on an optimal schedule
or in the most cost-effective manner. There can be no assurance that state and
local processes associated with radio location will not have a material adverse
effect on the Company's business, financial condition or operating results.
As a result of amendments to the Communications Act of 1934, certain states may
attempt to regulate the Company with respect to the terms and conditions of
service offerings. While the Company believes that state regulation, if any,
will be minimal, there can be no assurance that such regulation will not have a
material adverse effect on the Company's business, financial condition or
operating results.
RISKS OF DEVELOPING TECHNOLOGY
The Company's products and services have not been in commercial operation for an
extended period of time. There can be no assurance that unforeseen problems will
not develop with respect to the Company's technology or products or that the
Company will be successful in completing the development of its technology and
products. Significant risks remain as to the technological performance of the
Company's services and products.
These include, for example, firmware failures, problems associated with
large-scale deployment, inability of networks to meet expected performance in
data rate, latency, capacity and range, hardware reliability and performance
problems, problems associated with links between Sage network radios, WAPs, the
wired backbone and other wired networks, excessive interference with or by the
Company's networks, failure to receive FCC certification, inability to reduce
product size and cost, timing of completion of development and preclusion from
commercialization by proprietary rights of third parties.
Given the limited deployment to date, there can be no assurance that selected
Knowledge2Go network components will be adequate to meet the geographic and
radio frequency propagation characteristics of new areas of development. Delays
in implementation of the Company's networks as a result of technical
difficulties could have a material adverse effect on the Company's business,
financial condition and operating results.
<PAGE>
HIGHLY COMPETITIVE INDUSTRY
Competition in the market for data communications services is intensifying and a
large number of companies in diverse industries are expected to enter the
market. There can be no assurance that the Company will be able to compete
successfully in this market. A number of privately and publicly held
communications companies have developed or are developing new wireless and wired
data communications services and products using competing technologies. The
competition can be placed into two categories: portable and fixed access.
The Company's competitors are becoming increasingly aware of the commercial
value of technical findings and are becoming more active in seeking patent
protection and licensing arrangements for the use of technology that others have
developed. The development by others of new products and processes competitive
with or superior to those of the Company could render the Company's products
obsolete or uncompetitive. The Company's competitive position also depends upon
its ability to attract and retain qualified personnel, obtain patents or
otherwise develop proprietary products or processes, and secure sufficient
capital resources.
TECHNOLOGICAL CHANGE
The market for data communications systems is characterized by rapidly changing
technology and evolving industry standards in both the wireless and wireline
industries. The Company's success will depend to a substantial degree on its
ability to develop and introduce in a timely and cost-effective manner
enhancements to its existing systems and new products that meet changing
customer requirements and evolving industry standards.
For example, increased data rates, such as those provided by wired solutions
like ISDN, may affect customer perceptions as to the adequacy of the Company's
services and may also result in the widespread development and acceptance of
applications that require a higher data rate than the Company's service
currently provides.
There can be no assurance that the Company's technology or systems will not
become obsolete upon the introduction of alternative technologies. If the
Company does not develop and introduce new products and services and achieve
market acceptance in a timely manner, its business, financial condition and
operating results could be materially and adversely affected.
CONTROL OF STOCK BY GEM INVESTMENTS AND GEM ADVISORS
In June, 1999, GEM Investments, GEM Advisors and their Affiliates (collectively,
"GEM") acquired warrants for approximately 2,500,000 shares of the Company's
Common Stock, bringing GEM's beneficial ownership at that time to approximately
25.0% of the Company's outstanding Common Stock. Gem later converted debentures
for an additional 3,391,629 shares. It is impossible for the Company to
determine how many shares Gem still controls - the Company has presumed that the
great majority was placed in "street name." In the event Gem still controls some
or all of those shares, GEM would be able to control most matters submitted to a
vote of the stockholders, including the election of members of the Board (other
than the independent directors) and significant corporate transactions.
Accordingly, GEM may be able to control or significantly influence actions taken
by the Board or the Company and to limit the ability of the Company's current
stockholders to affect or influence the direction of the Company and the
composition of the Board.
In addition, conflicts of interest may arise as a consequence of the control
relationship between GEM and the Company, including (a) conflicts between GEM,
as a stockholder with effective control of the Company and the other
stockholders of the Company, whose interests may differ with respect to, among
other things, the strategic direction of the Company or significant corporate
transactions, (b) conflicts arising in respect of corporate opportunities that
could be
<PAGE>
pursued by the Company, on the one hand, or by GEM and any of its other
affiliated entities, on the other hand, or (c) conflicts arising in respect of
any new contractual relationships between the Company, on the one hand, and GEM
and any of its other affiliated entities, on the other hand.
In addition, GEM's beneficial ownership of such a large percentage of the
outstanding Common Stock makes it more difficult for a third party to effect a
change in management or to acquire control of the Company without the approval
of GEM and, therefore, may delay, prevent or deter a proxy contest for control
of the Company or other changes in management, or discourage bids for a merger,
acquisition or tender offer, in which the Company's stockholders could receive a
premium for their shares.
To the extent that conflicts arise as a result of GEM's control relationship
that are not subject to such requirement, it is anticipated that the Board of
Directors would be guided by its fiduciary obligations as directors under the
Arizona General Corporate Law, included the directors' duty of loyalty.
Although the Stock Purchase Agreement contains a number of provisions designed
to protect stockholders in the event of, among other things, a proposal by GEM
to acquire the Company or a proposal to sell the Company to a third party, the
Stock Purchase Agreement does not require GEM to sell its controlling block of
shares, even if an offer is made that might be attractive to the other
stockholders. Moreover, there can be no assurance that any of the stockholder
protection measures included in the Stock Purchase Agreement will be effective
in any particular case.
NO FUTURE FUNDING COMMITMENT
The Company intends to continue development of its next-generation, high-speed
network and modem and deployment and commercialization of Knowledge2Go. In order
to do so, the Company will need to raise additional funds through the sale of
equity or debt securities in private or public financing or through strategic
partnerships. The Stock Purchase Agreement contains no commitment on GEM's part
to provide additional financing to the Company.
There can be no assurance that additional financing will be available on terms
favorable to the Company, if at all. In addition, it is possible that GEM's
control position may deter or discourage investors who may otherwise have
provided financing to the Company. Should the Company be unable to obtain
additional financing, it may be required to scale back its development and
commercialization activities, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
UNCERTAINTY OF PROPRIETARY RIGHTS
The Company believes that patents and other proprietary rights are important to
its business. The Company's policy is to file patent applications to protect its
technology, inventions and improvements to its inventions that it considers
important to its business. The Company relies on a combination of patent,
copyright, trademark and trade secret protection and non-disclosure agreements
to establish and protect its proprietary rights.
There can be no assurance that any of the Company's future patents or trademarks
will not be challenged, invalidated, circumvented or rendered unenforceable, or
that the rights granted thereunder will provide significant proprietary
protection or commercial advantage to the Company. The Company is not aware of
any infringement of its patents, trademarks or other proprietary rights by
others.
Although the Company intends to pursue patent protection of inventions that it
considers important, the Company does not believe that its patent position has
as much significance as other competitive factors. However, these patents may
not preclude competitors from developing equivalent or superior products and
technology to those of the Company. There can be no
<PAGE>
assurance that the measures adopted by the Company for the protection of its
intellectual property will be adequate to protect its interests
The Company also relies upon trade secrets, know-how, continuing technological
innovations and licensing opportunities to develop and maintain its competitive
position. There can be no assurance that others will not independently develop
substantially equivalent proprietary information or otherwise gain access to or
disclose such information of the Company.
It is the Company's policy to require its employees, certain contractors,
consultants, directors and parties to collaborative agreements to execute
confidentiality agreements upon the commencement of such relationships with the
Company. There can be no assurance that these agreements will not be breached,
that they will provide meaningful protection of the Company's trade secrets or
adequate remedies in the event of unauthorized use or disclosure of such
information, or that the Company's trade secrets will not otherwise become known
or be independently discovered by the Company's competitors.
The commercial success of the Company will also depend in part on the Company
not infringing the proprietary rights of others and not breaching technology
licenses that cover technology used in the Company's products. It is uncertain
whether any third-party patents will require the Company to develop alternative
technology or to alter its products or processes, obtain licenses, or cease
certain activities.
If any such licenses are required, there can be no assurance that the Company
will be able to obtain such licenses on commercially favorable terms, if at all.
Failure by the Company to obtain a license to any technology that it may require
commercializing its products and services could have a material adverse effect
on the Company. Litigation, which could result in substantial cost to the
Company, may also be necessary to enforce any patents issued or licensed to the
Company or to determine the scope and validity of third party proprietary
rights.
MANAGEMENT OF GROWTH
Management of growth is especially challenging for a company with a short
operating history and the failure to effectively manage growth could have a
material adverse effect on the Company's business, financial condition and
operating results. Development, deployment and commercialization of Knowledge2Go
has required and will continue to require management of a number of operational
activities in which the Company has little or no prior experience, including the
administration of its subscriber base, maintenance and support of hardware and
software and management of Company activities and properties in dispersed
locations. There can be no assurance that the Company will be able to manage the
growth of its business successfully.
SOLE SOURCES OF SUPPLY
The Company generally uses standard component parts that are available from
multiple sources. However, certain component parts used in the Company's
products are available only from sole or limited source vendors. The Company's
reliance on these sole or limited source vendors involves certain risks,
including the possibility of a shortage of certain key component parts and
reduced control over delivery schedules, manufacturing capability, quality and
costs. In addition, some key component parts require long delivery times. The
Company has in the past experienced delays in its ability to obtain certain key
component parts from suppliers. In the event of future supply problems from the
Company's sole or limited source vendors, the inability of the Company to
develop alternative sources of supply quickly and on a cost-effective basis
could materially impair the Company's ability to manufacture and deliver its
products and to implement its services.
DEPENDENCE ON KEY PERSONNEL
<PAGE>
The Company is highly dependent on certain members of its management; the loss
of the services of one or more of might impede the achievement of the Company's
business objectives. None of these individuals has an employment contract with
the Company. Furthermore, recruiting and retaining qualified technical personnel
to perform research, development and technical support work is critical to the
Company's success. If the Company's business grows, the Company will also need
to recruit a significant number of management, technical and other personnel for
such business. Competition for employees in the Company's industry is intense.
Although the Company believes that it will be successful in attracting and
retaining skilled and experienced personnel, there can be no assurance that the
Company will be able to continue to attract and retain such personnel on
acceptable terms.
The Company is dependent to a large extent on the services of its management
personnel and any inability on the part of the Company to attract and retain
new, highly qualified persons to fill key management positions could have a
material adverse effect on the Company. It is possible that, due to the
Acquisition, certain key technical, management and other personnel may elect to
leave the employ of the Company, which could have a material adverse effect on
the Company's business. In addition, if the Company is to realize the
anticipated benefits of the Acquisition, any new personnel must be integrated
into the Company efficiently. The integration of new personnel will result in
some disruption to the Company's ongoing operations and any failure to complete
such integration in an efficient manner could have a material adverse effect on
the Company's business, financial condition and results of operations.
LIMITED MANUFACTURING EXPERIENCE AND CAPABILITY; INVENTORY MANAGEMENT
The Company has limited experience in large-scale manufacturing. The Company's
printed circuit boards and other subassemblies are assembled on a contract basis
by local manufacturers. Final assembly and testing operations have been
performed internally. The Company believes that it has or can secure adequate
capacity to meet forecasted demand for its products and networks for at least
the next 12 months. However, if customers begin to place large orders for the
Company's products or if the Company decides to accelerate deployment, the
Company's present manufacturing capacity may prove inadequate.
To be successful, the Company's products and components must be manufactured in
commercial quantities at competitive cost and quality. The Company's long-term
manufacturing strategy is to supplement its manufacturing capabilities by
increasing outsourcing of product assembly and testing and by licensing other
companies to manufacture certain of the Company's products. In the future, the
Company will be required to achieve significant product and component cost
reductions. If the Company is unable to develop or contract for manufacturing
capabilities on acceptable terms and if product and component cost reductions
are not achieved, the Company's competitive position, and the ability of the
Company to achieve profitability, would be materially impaired.
Effective inventory management requires the Company to accurately forecast
demand for its services and products and to adequately take into account the
introduction of new or replacement products. Failure to manage this process
effectively could result in insufficient inventory to meet demand, thereby
limiting revenues and deployment, or could result in excess inventory that may
become obsolete before it is sold, either of which could have a material adverse
effect on the Company's business, financial condition or operating results.
QUARTERLY FLUCTUATIONS
The Company believes that its future operating results over both the short and
long term will be subject to annual and quarterly fluctuations due to several
factors, some of which are outside the control of the Company. These factors
include the significant cost of building its networks (including any
unanticipated costs associated therewith), fluctuating market demand for the
Company's services, establishment of a market its service, pricing strategies
for competitive
<PAGE>
services, delays in the introduction of the Company's services, new offerings of
competitive services, changes in the regulatory environment, the cost and
availability of infrastructure and subscriber equipment and general economic
conditions.
RISKS ASSOCIATED WITH ENTRY INTO NEW BUSINESS AREAS
The Company will choose to expand its operations by developing new business
alliances, promoting new or complementary products or sales formats, expanding
the breadth and depth of products and services offered, or expanding its market
presence through relationships with third parties. In addition, the Company may
pursue the acquisition of new or complementary businesses, or technologies.
MANAGEMENT INFORMATION SYSTEMS
The Company's success will be dependent on the accuracy and proper utilization
of its management information systems, including its telephone system. The
Company's ability to manage its inventory and accounts receivable collections;
to purchase, sell and ship its products efficiently and on a timely basis; and
to maintain its operations is dependent upon the quality and effective
utilization of the information generated by its management information systems.
The Company recognizes the need to continually upgrade its management
information systems to most effectively manage its operations and customer
database.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has been volatile and may be
volatile in the future. Future announcements concerning the Company or its
competitors, including technological innovations, new commercial products,
status of network implementation, government regulations, proprietary rights or
product or patent litigation, operating results and general market and economic
conditions may have a significant impact on the market price of the Company's
Common Stock. In addition, any delays or difficulties in establishing or
attracting Knowledge2Go subscribers are likely to result in pronounced
fluctuations in the market price of the Company's Common Stock.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
As the parent company of Madison, Sage has replaced Madison's auditors,
Cohen & Kameny CPAs PLCC, and will use it own auditors, Stokes & Company, P.C.,
as the Company's principal independent accountant for the fiscal year ended
December 31, 1999. Cohen & Kameny's report on Madison's financial statements for
the past fiscal year did not contain an adverse opinion or disclaimer of opinion
and was not modified as to uncertainty, audit scope, or accounting principles.
The Company's decision use Stokes & Company, P.C. and not Cohen & Kameny was
approved by the Company's Board of Directors. There were no disagreements with
Madison's former accountant, whether or not resolved, on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which if not resolved would have caused Madison's former
accountant to make reference to the subject matter of the disagreement(s) in
connection with its report.
<PAGE>
ITEM 5. OTHER EVENTS
Successor Issuer Election
Pursuant to Rule 12g-3(a) of the General Rules and Regulations of the Securities
and Exchange Commission, upon effectiveness of the Share Exchange, the Company
became the successor issuer to Madison for reporting purposes under the
Securities Exchange Act of 1934 and elects to report under the Act effective
March 10, 2000.
ITEM 6. RESIGNATION OF DIRECTORS AND EXECUTIVE OFFICERS
The officers and directors of Madison Holdings, Inc. resigned such offices
as a result of the merger with Sage. The officers and directors of Sage will
continue as the officers and directors of the successor issuer.
ITEM 7. FINANCIAL STATEMENTS
No financial statements are filed herewith. The Registrant is required to file
financial statements by amendment hereto not later than 60 days after the date
that this Current Report on Form 8-K must be filed.
ITEM 8. CHANGE IN FISCAL YEAR
Sage has a December 31 fiscal year end. The fiscal year end of Madison is
September 30. The Company will file a Transitional Report on Form 10-KSB, if
required.
EXHIBITS
2.1 Share Exchange Agreement between Solomon Alliance Group, Inc. and the
shareholders of Madison Holdings Inc., dated March 8, 2000
3.1 Articles of Incorporation of Solomon Alliance Group, Inc.
3.2 By-Laws of Solomon Alliance Group, Inc.
16.1 Letter Re Change in Certifying Accountant
21.1 List of Subsidiaries of Solomon Alliance Group, Inc.
24.1 Consent of accountants
24.2 Audited Financials for December 1999 and 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
SOLOMON ALLIANCE GROUP, INC.
By: /s/
-----------------------
Thomas Weston
President
March __, 2000
<PAGE>
Exhibit 2.1
Share Exchange Agreement between Solomon Alliance Group, Inc.
and the shareholders of Madison Holdings Inc., dated March 8, 2000
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement") between Solomon Alliance
Group, Inc., an Arizona corporation ("Sage"), and the persons listed in EXHIBIT
A hereof (collectively the "Shareholders"), being the owners of record of all of
the issued and outstanding stock of Madison Holdings, Inc., a Delaware
corporation ("Madison"), is entered into as of March 8, 2000.
RECITALS
A. Madison Holdings Inc., a Delaware corporation ("Madison"), is a public
shell company with no active business and no material assets or liabilities.
B. The Shareholders own all of the issued and outstanding shares of common
stock, par value $0.0001 of Madison (the "Madison Shares").
C. The Shareholders have agreed to sell to Sage, and Sage has agreed to
purchase, the Madison Shares from the Shareholders in exchange for shares of
Sage common stock, pursuant to the terms and conditions set forth in this
Agreement.
D. The Shareholders and Sage intend that the share exchange transaction
contemplated by this Agreement qualify as a reorganization within the meaning of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended
In consideration of the mutual representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
1. EXCHANGE OF STOCK
(a) The Shareholders agree to transfer to Sage, and Sage agrees to
purchase from the Shareholders, all of the Shareholders' right, title and
interest in the Madison Stock, representing 100% of the issued and outstanding
stock of Madison, free and clear of all mortgages, liens, pledges, security
interests, restrictions, encumbrances, or adverse claims of any nature.
(b) At the Closing (as defined in Section 2 below), upon surrender by the
Shareholders of the certificates evidencing the Madison Stock duly endorsed for
transfer to Sage or accompanied by stock powers executed in blank by the
Shareholders, Sage will cause 300,000 shares (subject to adjustment for
fractionalized shares as set forth below) of the common voting stock, par value
$0.001 of Sage (the "Sage Stock") to be issued to the Shareholders, in full
satisfaction of any right or interest which each Shareholder held in the Madison
Stock. The Sage Stock will be issued to the
<PAGE>
Shareholders on a pro rata basis, in the same proportion as the percentage of
their ownership interest in the Madison Stock, as set forth on EXHIBIT A. Any
fractional shares that will result due to such pro rata distribution will be
rounded up to the next highest whole number. As a result of the exchange of the
Madison Stock in exchange for the Sage Stock, Madison will become a wholly owned
subsidiary of Sage.
(c) Sage and the Shareholders have agreed that the Sage Stock to be
received by the Shareholders pursuant to this Agreement will be afforded certain
"piggyback" registration rights for a period of one year after the Closing.
2. CLOSING.
(a) The parties to this Agreement will hold a closing (the "Closing") for
the purpose of executing and exchanging all of the documents contemplated by
this Agreement and otherwise effecting the transactions contemplated by this
Agreement. The Closing will be held as soon as possible but not later than March
15, 2000, at the offices of Kogan & Taubman, LLC, 39 Broadway, Suite 2250, New
York, NY 10006, unless another place or time is mutually agreed upon by the
parties. All proceedings to be taken and all documents to be executed and
exchanged at the Closing will be deemed to have been taken, delivered and
executed simultaneously, and no proceeding will be deemed taken nor documents
deemed executed or delivered until all have been taken, delivered and executed.
If agreed to by the parties, the Closing may take place through the exchange of
documents by fax and/or express courier.
(b) With the exception of any stock certificates which must be in their
original form, any copy, fax, e-mail or other reliable reproduction of the
writing or transmission required by this Agreement or any signature required
thereon may be used in lieu of an original writing or transmission or signature
for any and all purposes for which the original could be used, provided that
such copy, fax, e-mail or other reproduction is a complete reproduction of the
entire original writing or transmission or original signature.
3. REPRESENTATIONS AND WARRANTIES OF SAGE.
Sage represents and warrants as follows:
(a) Sage is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Arizona and is licensed or qualified as
a foreign corporation in all states in which the nature of its business or the
character or ownership of its properties makes such licensing or qualification
necessary.
(b) The authorized capital stock of Sage consists of (i) 100,000,000
shares of common stock, $0.001 par value per share, of which, based on the
records of Sage's stock transfer agent, 22,793,155 shares are issued and
outstanding as of March 8, 2000. To the knowledge of Sage, all issued and
outstanding shares of Sage's common stock are fully paid and nonassessable.
<PAGE>
(c) Sage has one subsidiary, namely, Visual Link Wireless, Inc.
(d) Execution of this Agreement and performance by Sage hereunder has been
duly authorized by all requisite corporate action on the part of Sage, and this
Agreement constitutes a valid and binding obligation of Sage, and Sage's
performance hereunder will not violate any provision of any charter, bylaw,
indenture, mortgage, lease, or agreement, or any order, judgment, decree, or, to
Sage's knowledge any law or regulation, to which any property of Sage is subject
or by which Sage is bound.
(e) Sage has full corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder, and will deliver at the
Closing a certified copy of resolutions of its board of directors authorizing
execution of this Agreement by its officers and performance hereunder.
(f) Sage has provided all financial statements and financial information
in its possession as has been requested by the Shareholders.
(g) There is no litigation or proceeding pending, or to the Company's
knowledge threatened, against or relating to Sage, its properties or business.
(h) Sage is acquiring the Madison shares to be transferred to it under
this Agreement for investment and not with a view to the sale or distribution
thereof.
4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
The Shareholders, jointly and severally, represent and warrant as follows:
(a) Madison is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and is licensed or qualified as
a foreign corporation in all states in which the nature of its business or the
character or ownership of its properties makes such licensing or qualification
necessary.
(b) The authorized capital stock of Madison consists of (i) 120,000,000
shares of common stock, $0.0001 par value per share, of which 5,000,000 shares
are issued and outstanding (the "Madison Shares"). Madison there are no
agreements purporting to restrict the transfer of the Madison Shares, nor any
voting agreements, voting trusts or other arrangements restricting or affecting
the voting of the Madison Shares, other than certain lock up agreements that
terminate upon the Closing. The Madison Shares held by the Shareholders are duly
and validly issued, fully paid and non-assessable, and issued in full compliance
with all federal, state, and local laws, rules and regulations. There are no
subscription rights, options, warrants, convertible securities, or other rights
(contingent or otherwise) presently outstanding, for the purchase, acquisition,
or sale of the capital stock of Madison, or any securities convertible into or
exchangeable for capital stock of Madison or other securities of Madison, from
or by Madison.
<PAGE>
(c) The Shareholders have full right, power and authority to sell,
transfer and deliver the Madison Shares, and upon delivery of the certificates
therefor as contemplated in this Agreement, the Shareholders will transfer to
Sage valid and marketable title to the Madison Shares, including all voting and
other rights to the Madison Shares, free and clear of all pledges, liens,
security interests, adverse claims, options, rights of any third party, or other
encumbrances. Each of the Shareholders owns and holds that the number of Madison
Shares, which are, listed opposite their name on Exhibit A attached hereto.
(d) There is no litigation or proceeding pending, or to any Shareholder's
knowledge threatened, against or relating to Madison or to the Madison Shares.
(e) Madison is not a party to any material contract other than those
listed in Madison's Form 10-SB or any subsequent periodic report as filed with
the Securities Exchange Commission.
(f) Madison has no material assets and no liabilities whatsoever.
(g) Madison has no employees.
(h) Madison has filed in correct form all federal, state, and other tax
returns of every nature required to be filed by it and has paid all taxes as
shown on such returns and all assessments, fees and charges received by it to
the extent that such taxes, assessments, fees and charges have become due.
Madison has also paid all taxes which do not require the filing of returns and
which are required to be paid by it. To the extent that tax liabilities have
accrued, but have not become payable, they have been adequately reflected as
liabilities on the books of Madison.
(i) The current residence address or principal place of business (for any
non-individual shareholder) of the Madison Shareholders is as listed on Exhibit
A attached hereto.
(j) Madison is a publicly reporting company pursuant to Section 12(g) of
the Securities Exchange Act of 1934, as amended (the "Act") and is in compliance
with all periodic reporting requirements of the Act. Madison's Form 10-SB and
any other periodic filings made by Madison as filed with the SEC, including all
exhibits, documents and attachments thereto, are true and correct in all
material respects and do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
any statement therein not materially misleading.
(k) The Madison Shareholders have had the opportunity to perform all due
diligence investigations of Sage and its business as they have deemed necessary
or appropriate and to ask questions of Sage's officers and directors and have
received satisfactory answers to all of their questions. The Shareholders have
had access to all documents and information about Sage and have reviewed
sufficient information to allow them to evaluate the merits and risks of the
acquisition of the Sage Stock.
<PAGE>
(l) The Shareholders are acquiring the Sage Stock for their own account
(and not for the account of others) for investment and not with a view to the
distribution therefor. The Shareholders will not sell or otherwise dispose of
the Sage Stock without registration under the Securities Act of 1933, as
amended, or an exemption therefrom, and the certificate or certificates
representing the Sage Stock will contain a legend to the foregoing effect.
5. CONDUCT PRIOR TO THE CLOSING.
Sage and the Shareholders covenant that between the date of this Agreement
and the Closing as to each of them:
(a) No change will be made in the charter documents, by-laws, or other
corporate documents of Sage or Madison.
(b) Sage and Madison will each use its best efforts to maintain and
preserve its business organization, employee relationships, and goodwill intact,
and Madison will not enter into any material commitment except in the ordinary
course of business. The Shareholders acknowledge that Sage is currently engaged
in a number of acquisition transactions and is pursuing such transactions
simultaneously with the transactions contemplated by this Agreement.
(c) None of the Shareholders will sell, transfer, assign, hypothecate,
lien, or otherwise dispose or encumber the Madison Shares owned by them.
6. CONDITIONS TO OBLIGATIONS OF SHAREHOLDERS.
The Shareholder's obligation to complete the transactions contemplated
herein is subject to fulfillment on or before the Closing of each of the
following conditions, unless waived in writing by the Shareholders as
appropriate:
(a) The representations and warranties of Sage set forth herein will be
true and correct at the Closing as though made at and as of that date, except as
affected by transactions contemplated hereby.
(b) Sage will have performed all covenants required by this Agreement to
be performed by it on or before the Closing.
(c) This Agreement will have been approved by the Board of Directors of
Sage.
(d) Sage will have delivered to the Shareholders the documents set forth
below in form and substance reasonably satisfactory to counsel for the
Shareholders, to the effect that:
<PAGE>
(i) Sage is a corporation duly organized, validly existing, and in
good standing;
(ii) Sage's authorized capital stock is as set forth herein;
(iii) Certified copies of the resolutions of the board of directors
of Sage authorizing the execution of this Agreement and the consummation
hereof;
(iv) Secretary's certificate of incumbency of the officers of Sage;
and
(vi) Any further document as may be reasonably requested by counsel
to the Shareholders in order to substantiate any of the representations or
warranties of Sage set forth herein.
(e) Sage will have executed and delivered to the Shareholders a
registration rights agreement reasonably satisfactory to the Shareholders
affording the Sage Shares received by the Shareholders "piggyback" registration
rights for a period of one year after Closing.
(f) There will have occurred no material adverse change in the business,
operations or prospects of Sage.
7. CONDITIONS TO OBLIGATIONS OF SAGE.
Sage's obligation to complete the transaction contemplated herein will be
subject to fulfillment on or before the Closing of each of the following
conditions, unless waived in writing by the Sage, as appropriate:
(a) The representations and warranties of the Shareholders set forth
herein will be true and correct at the Closing as though made at and as of that
date, except as affected by transactions contemplated hereby.
(b) The Shareholders will have performed all covenants required by this
Agreement to be performed by them on or before the Closing.
(c) The Shareholders will have delivered to Sage the documents set forth
below in form and substance reasonably satisfactory to counsel for Sage, to the
effect that:
(i) Madison is a corporation duly organized, validly existing, and
in good standing;
(ii) Madison's authorized capital stock is as set forth herein;
<PAGE>
(iii) Any further document as may be reasonably requested by counsel
to the Shareholders in order to substantiate any of the representations or
warranties of Sage set forth herein.
(d) There will have occurred no material adverse change in the business,
operations or prospects of Madison.
8. ADDITIONAL COVENANTS.
(a) Between the date of this Agreement and the Closing, the Shareholders,
with respect to Madison, and Sage, with respect to itself, will, and will cause
their respective representatives to, (i) afford the other party and its
representatives access to their personnel, properties, contracts, books and
records, and other documents and data, as reasonably requested by the other
party; (ii) furnish the other party and its representatives with copies of all
such contracts, books and records, and other existing documents and data as the
other may reasonably request in connection with the transaction contemplated by
this Agreement; and (iii) furnish the other party and its representatives with
such additional financial, operating, and other data and information as the
other may reasonably request. The Shareholders will cause Madison to, and Sage
will provide the Shareholders, with complete copies of all material contracts
and other relevant information on a timely basis in order to keep the other
party fully informed of the status of their respective business and operations.
(b) Sage and the Madison Shareholders will cooperate with each other in
the preparation of a Form 8-K to be filed with the SEC describing the
transaction contemplated by this Agreement and such other items as are required
by the SEC rules and regulations.
(c) Each of the Madison Shareholders will deliver a written statement to
Sage resigning from all officer and director positions held by them at Madison.
(d) The Madison Shareholders will deliver Madison's corporate books and
records, including all records relating to Madison's audited financial
statements, to Sage at Closing.
(e) The parties agree that they will not make, and the Shareholders will
not permit Madison to make, any public announcements relating to this Agreement
or the transactions contemplated herein without the prior written consent of the
other party, except as may be required upon the written advice of counsel to
comply with applicable laws or regulatory requirements after consulting with the
other party hereto and seeking their consent to such announcement.
9. TERMINATION.
<PAGE>
This Agreement may be terminated (1) by mutual consent in writing; (2) by
either the Shareholders or Sage if there has been a material misrepresentation
or material breach of any warranty or covenant by any other party that is not
cured by March 15, 2000; or (3) by any of the Shareholders or Sage if the
Closing has not taken place within seven days following execution of this
Agreement, unless adjourned to a later date by mutual consent in writing.
10. EXPENSES.
Whether or not the Closing is consummated, each of the parties will pay
all of his, her, or its own legal and accounting fees and other expenses
incurred in the preparation of this Agreement and the performance of the terms
and provisions of this Agreement.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Shareholders and Sage set out in
this Agreement will survive the Closing for a period of one year.
12. WAIVER.
Any failure on the part of either party hereto to comply with any of its
obligations, agreements, or conditions hereunder may be waived in writing by the
party to whom such compliance is owed.
13. BROKERS.
Each party agrees to indemnify and hold harmless the other party against
any fee, loss, or expense arising out of claims by brokers or finders employed
or alleged to have been employed by the indemnifying party. The parties
acknowledge that Sage and MHE/PROJIX, LLC ("MHE/PROJIX") have entered into a
Service Agreement dated, on or about March 2, 2000, pursuant to which Sage is
obligated to pay MHE/PROJIX a fee in connection with services to be rendered by
MHE/PROJIX to Sage.
14. NOTICES.
All notices and other communications under this Agreement must be in
writing and will be deemed to have been given if delivered in person or sent by
prepaid first-class certified mail, return receipt requested, or recognized
commercial courier service, as follows:
If to Sage, to: Solomon Alliance Group, Inc.
P.O. Box 2904
Alpharetta, GA 30023
Attention: Thomas I. Weston, Jr.
Phone: (770) 619-0116
Fax: (770) 619-0115
<PAGE>
If to the Shareholders, to: MHE/PROJIX, LLC
15245 Shady Grove Road, Suite 400
Rockville, MD 20850
Attention: Mark Elenowitz
Phone: (301) 947-8010
Fax: (301) 947-8087
15. GENERAL PROVISIONS.
(a) This Agreement will be governed by and under the laws of the State of
Delaware, USA without giving effect to conflicts of law principles. If any
provision hereof is found invalid or unenforceable, that part will be amended to
achieve as nearly as possible the same effect as the original provision and the
remainder of this Agreement will remain in full force and effect.
(b) Any dispute arising under or in any way related to this Agreement will
be submitted to binding arbitration before a single arbitrator by the American
Arbitration Association in accordance with the Association's commercial rules
then in effect. The arbitration will be conducted in the State of Maryland. The
decision of the arbitrator will set forth in reasonable detail the basis for the
decision and will be binding on the parties. The arbitration award may be
confirmed by any court of competent jurisdiction.
(c) In any adverse action, the parties will restrict themselves to claims
for compensatory damages and/or securities issued or to be issued and no claims
will be made by any party or affiliate for lost profits, punitive or multiple
damages.
(d) This Agreement constitutes the entire agreement and final
understanding of the parties with respect to the subject matter hereof and
supersedes and terminates all prior and/or contemporaneous understandings and/or
discussions between the parties, whether written or verbal, express or implied,
relating in any way to the subject matter hereof. This agreement may not be
altered, amended, modified or otherwise changed in any way except by a written
agreement, signed by both parties.
(e) This Agreement will inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns; provided, however, that any
assignment by either party of its rights under this Agreement without the
written consent of the other party will be void.
(f) The parties agree to take any further actions and to execute any
further documents, which may from time to time be necessary or appropriate to
carry out the purposes of this Agreement. The Shareholders specifically agree to
provide reasonable assistance to Sage in connection with Sage including Madison
in its consolidated financial statements.
<PAGE>
(g) The headings of the Sections, paragraphs and subparagraphs of this
Agreement are solely for convenience of reference and will not limit or
otherwise affect the meaning of any of the terms or provisions of this
Agreement. The references in this Agreement to Sections, unless otherwise
indicated, are references to sections of this Agreement.
(h) This Agreement may be executed in counterparts, each one of which will
constitute an original and all of which taken together will constitute one
document. This Agreement may be executed by delivery of a signed signature page
by fax to the other parties hereto and such fax execution and delivery will be
valid in all respects.
SIGNATURE PAGE FOLLOWS
<PAGE>
EXECUTED:
SOLOMON ALLIANCE GROUP, INC.
By: /s/
------------------------------------
Thomas I. Weston, Jr.
President & CEO
THE SHAREHOLDERS OF
MADISON HOLDINGS, INC.:
MHE/PROJIX, LLC
By: /s/
------------------------------------
Mark Elenowitz
Managing Director
/s/
----------------------------------------
Mark Elenowitz
/s/
----------------------------------------
Louis Taubman
/s/
----------------------------------------
David Simonetti
/s/
----------------------------------------
Thomas Bostic Smith
/s/
----------------------------------------
William Quigley, Jr.
/s/
----------------------------------------
Barry Labell
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
MADISON SHAREHOLDERS
- --------------------------------------------------------------------------------
NAME AND ADDRESS MADISON SHARES % SAGE SHARES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MHE/PROJIX, LLC 4,750,000 95% 285,000
516 NE 9th Avenue
Ft. Lauderdale, FL 33301-1218
- --------------------------------------------------------------------------------
Mark Elenowitz 87,500 1.75% 5,250
15245 Shady Grove Road, Suite 400
Rockville, MD 20850
- --------------------------------------------------------------------------------
Louis Taubman 87,500 1.75% 5,250
39 Broadway, Suite 2250
New York, NY 20006
- --------------------------------------------------------------------------------
David Simonetti 25,000 0.5% 1,500
516 NE 9th Avenue
Ft. Lauderdale, FL 33301-1218
- --------------------------------------------------------------------------------
Thomas Bostic Smith 25,000 0.5% 1,500
192 Lawton Road
Riverside, IL 60546
- --------------------------------------------------------------------------------
William Quigley, Jr. 12,500 0.25% 750
22801 Howard Chapel Road
Brookeville, MD 20833
- --------------------------------------------------------------------------------
Barry Labell 12,500 0.25% 750
9805 J Gable Ridge Terrace
Rockville, MD 20850
- --------------------------------------------------------------------------------
Total 5,000,000 100% 300,000
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 3.1
Articles of Incorporation, as amended of
Solomon Alliance Group, Inc.
ARTICLE OF INCORPORATION
OF
SOLOMON ALLIANCE GROUP, INC.
ARTICLE I
NAME: The name of the corporation shall be SOLOMON ALLIANCE GROUP, INC.
ARTICLE II
PURPOSE: The purpose for which this corporation is organized is the transaction
of any or all lawful business for which corporations may be incorporated under
the laws of the State of Arizona, as they may be amended from time to time.
ARTICLE Ill
INITIAL BUSINESS: The corporation initially intends to conduct business in the
consulting arena. Initially, its principal office will be located at 5255
Williams Circle, Suite 3900 Tucson, AZ 85711 with its mailing address at the
same location.
ARTICLE IV
AUTHORIZED CAPITAL: The corporation shall have the authority to issue 1,000,000
shares of common stock, each share to have .01 par value.
The corporation elects to qualify the common stock offered and issued as
"Section 1244 stock", as such item is defined in the Internal Revenue Code and
Regulations issued thereunder.
ARTICLE V
STATUTORY AGENT: The name and address of the initial Statutory Agent for the
corporation who agrees to accept service of process on behalf of the corporate
entity is:
Daniel L. Hodges, 5505 N. Indian Trail, Tucson, AZ 85750.
ARTICLE VI
BOARD OF DIRECTORS: The initial Board of Directors shall consist of three (3)
Directors. The persons who are to serve as Directors until the first annual
meeting of shareholders or until their successor(s) are elected and qualified
are:
1. Daniel L. Hodges 2. J. Christopher Stevenson
5255 Williams Circle, Suite 3900 5255 Williams Circle, Suite 3900
Tucson, AZ 85711 Tucson, AZ 85711
3. Jim Karten
<PAGE>
5255 Williams Circle, Suite 3900
Tucson, AZ 85711
The Board of Directors is expressly authorized to make alter or repeal file
Bylaws of this corporation or any article therein.
ARTICLE VII
THE INCORPORATORS: The incorporators of this corporation consist of the
following individuals whose names and addresses are listed below:
1. Daniel L. Hodges, 5505 N. Indian Trail, Tucson, AZ 85750
ARTICLE VIII
The initial officer(s) of the corporation who shall serve at the pleasure of the
board of directors is (are):
Daniel L. Hodges, President Jim Karten, Vice President
J. Christopher Stevenson, Secretary/Treasurer
ARTICLE IX
FISCAL YEAR: The fiscal year of the corporation shall be from January 1 to
December 31 of each year.
ARTICLE X
PRIVATE PROPERTY: The private property of the incorporators, directors,
officers, employees, or stockholders of the corporation shall be forever exempt
from all corporate debts and obligations.
ARTICLE XI
INDEMNIFICATION: The corporation shall indemnify any person who incurs expenses
by reason of the fact that he or she is or was an officer, director, employee or
agent of the corporation. The indemnification shall be mandatory in all
circumstances in which indemnification is permitted by law.
LIMITATION OF LIABILITY: To the fullest extent permitted by the Arizona Revised
Statutes as the same exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its shareholders for the
monetary damages for any action taken or any failure to take any action as the
director. No repeal, amendment of modification of this article, whether direct
or indirect, shall eliminate or reduce its effect with respect to any act or
omission of a director of the Corporation occurring prior to such repeal,
amendment or modification.
IN WITNESS WHEREOF, on behalf of Solomon Alliance Group, Inc., we have set our
hands this 24th Day of October, 1996.
The signatures of the all of the Incorporators are affixed below:
<PAGE>
/s/
- -----------------------------------
Daniel L. Hodges
I, Daniel L. Hodges, having been designated to act as statutory agent, hereby
consent to act in that capacity until removed or resignation is submitted in
accordance with the Arizona Revised Statutes as amended from time to time.
/s/
- -----------------------------------
Daniel L. Hodges
<PAGE>
AMENDMENTS TO THE ARTICLES
OF INCORPORATION OF
SOLOMON ALLIANCE GROUP, INC.
PURSUANT to the bylaws of the Corporation, a special meeting of the Board of
Directors, also representing a majority of the Shareholders of the Corporation
was held this 15th day of August in Tucson, Arizona to discuss and vote upon the
following Amendments to the Articles of Incorporation of the Corporation:
THAT the Corporation amend its Articles to reflect a change in the number of
authorized common stock shares, and thus the par value of the shares of the
common stock of the Corporation. Article IV should be amended to read as
follows:
ARTICLE IV
AUTHORIZED CAPITAL: The Corporation shall have the authority to issue
100,000,000 shares of common stock, each share to have $.001 par value.
The shares may be issued for consideration expressed in dollars, personal
property. Interests, real property interests, or as otherwise lawfully allowed,
and as may be fixed from time to time by the Board of Directors, and may be
designated as voting or non-voting at the time of issuance.
The Corporation elects to qualify the common stock offered and issued "Section
1244 stock," as such item is defined in the Internal Revenue Code and
Regulations.
UPON MOTION duly made and seconded, the resolution described above was passed
upon and the Secretary of the Corporation was directed to file the Amendments to
the Articles of Incorporation with the State of Arizona Corporation Commission.
By: /s/
-------------------------------
Daniel Hodges
President/Chairman/Shareholder
By: /s/
-------------------------------
Frank Anjakos
Secretary/Shareholder
<PAGE>
Exhibit 3.2
By-Laws of Solomon Alliance Group, Inc.
BY LAWS
OF
SOLOMON ALLIANCE GROUP, INCORPORATED
ARTICLE I. OFFICES
The Corporation may have such offices, either within or without the State
of Arizona, as the Board of Directors may designate or as the business of the
Corporation may require fi7om time to time. The initial principle office of the
corporation shall be located in Tucson, Arizona, County of Pima.
ARTICLE II. SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders shall be
held on the 15th day in the month of January in each year, beginning with the
year 1996, at the hour of 10:00 am, for the purpose of electing Directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the State of
Arizona, such meeting shall be held on the next succeeding business day. If the
election of Directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as conveniently may be.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders, for any
purpose, unless otherwise prescribed by statute, may be called by the Chairman
of the Board of Directors, and shall be called by the President at the request
of the holders of not less than twenty percent (20%) of all then issued and
outstanding shares of the Corporation entitled to vote at the meeting.
SECTION 3. PLACE OF THE MEETING. The Board of Directors may designate any
place, either within or without the State of Arizona, unless otherwise
prescribed by statute, as the place of meeting for any annual meeting of for any
special meeting. A waiver of notice signed by all shareholders entitled to vote
at a meeting may designate any place, either within or without the State of
Arizona, unless otherwise prescribed by statute, as the place for the holding of
such meeting, If no designation is made, the place of the meeting shall be the
principal office of the Corporation.
SECTION 4. NOTICE OF THE MEETING. Written notice stating the place, day
and hour of the meeting and, in case of a special meeting, the purpose or
purposes of which the meeting is called, shall unless otherwise prescribed by
<PAGE>
statute, be delivered not less than (10) ten nor more than (15) fifteen days
before the date of the meeting, to each shareholder of record entitled to vote
at such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his address
as it appears on the stock transfer book of the corporation, with postage
thereon prepaid.
SECTION 5. CLOSING OF TRANSFER BOOKS OF FIXING OF RECORD. For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders of any adjournment thereof, of shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books shall be closed for a stated period, but not to
exceed in any case five (5) days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least (5) five days
immediately preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than (10)
ten days and, in case of a meeting of shareholders, not less than (10) ten days,
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed of the
date on which the resolution of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof
SECTION 6. VOTING LIST. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such list shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purpose thereof
SECTION 7. QUORUM. A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as
<PAGE>
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
SECTION 8. PROXIES. At all meetings of shareholders, a shareholder may
vote in person or by proxy executed in writing by the shareholder or by his or
her duly authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. A meeting of
the Board of Directors may be held by means of a telephone conference or similar
communication equipment by which all persons participating in the meeting can
hear each other and participation in a meeting under such circumstances shall
constitute presence at the meeting.
SECTION 9. VOTING OF SHARES. Each outstanding share entitled to vote shall
be entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares outstanding in the
name of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe or, in the absence of such provision,
as the Board of Directors of such Corporation may determine.
Shares held by an administrator, executor, guardian or conservator may be
voted by him either in person or by proxy, without a transfer of such shares
into his name, Shares outstanding in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares outstanding in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name, if authority to do so
be contained in an appropriate order of the court by which receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation shall not be voted
directly or indirectly, at any meeting, and shall not be counted in determining
the total number of outstanding shares at any given time.
SECTION 11: INFORMAL ACTION BY SHAREHOLDERS. Unless otherwise provided by
law, any action required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders, may be taken
without a meeting if a consent in writing, setting forth
<PAGE>
the action so taken, shall be signed by all of the shareholders entitled to vote
with respect to the subject matter thereof
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of
the Corporation shall be fixed by the Board of Directors, but in no event shall
be less than two (2). Each Director shall hold office until the next annual
meeting of shareholders and until his successor shall have been duly elected and
qualified.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place for the holding of additional regular
meetings without notice other than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by, or at the request of, the President or any two Directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. Notice. Notice of any special meeting shall be given at least
three (3) days previous thereto by written notice delivered personally or mailed
to each director at his business address, or by telegram. If mailed, such notice
shall be deemed to be delivered when deposited in the United States Mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. Any director may waive notice of any meeting. The attendance
of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 6. QUORUM. A majority of the number of directors fixed by Section
2 of this Article III shall constitute a quorum for the transaction of business
at any meeting of the Board of Directors, but if less than such majority is
present at a meeting, a majority of the Directors present may adjourn the
meeting from time to time without further notice.
<PAGE>
SECTION 7. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
SECTION 8. ACTION WITHOUT A MEETING. Any action that may be taken by the
Board of Directors at a meeting may be taken without a meeting if consent in
writing, setting forth the action so to be taken, shall be signed before such
action by all of the directors.
SECTION 9. Vacancies. Any vacancy occurring in the Board of Directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors, unless otherwise provided
by law. A director elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the Board of
Directors for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 10. COMPENSATION. By resolution of the Board of Directors, each
director may be paid his expenses, if any, of attendance at each meeting of the
Board of Directors, and may be paid a stated salary, as a director, a fixed sum
for attendance to each meeting of the Board of Directors or both. No such
payment shall preclude any director fi7om serving the Corporation in any other
capacity and receiving compensation thereof
SECTION 11. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the Secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE IV. OFFICERS
SECTION 1. Number. The Officers of the Corporation shall be a President,
one or more Vice Presidents, a Secretary and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors,
including a Chairman of the Board. In its discretion, the Board of Directors may
leave unfilled for any such period as it may determine any office except those
of President and Secretary. Any two or more offices may be held by the same
person, except for the offices of President and Secretary
<PAGE>
which may not be held by the same person. Officers may be directors and/or
shareholders of the Corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation to
be elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as convenient. Each
officer shall hold office until Ms successor shall have been duly elected and
qualified, or until his death, or until he shall resign or shall have been
removed in the manner hereinafter provided.
SECTION 3. Removal. Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights, and such appointment shall
be terminable at win.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. President. The President shall be the principal executive
officer of the Corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the shareholders and of the Board of Directors, unless there is a Chairman of
the Board, in which case the Chairman shall preside. He may sign, with the
Secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
bylaws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of the President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. THE VICE PRESIDENT. In the absence of the President or in event
of his death, inability or refusal to act, the Vice President shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. The Vice President shall
perform such other duties as from time to time may be assigned to him by the
Chairman of the Board of Directors. If there is more than one Vice President,
each Vice President shall succeed to the duties of the President in order of
rank
<PAGE>
as determined by the Board of Directors. If no rank has been determined, the
each Vice President shall succeed to the duties of the President in order of
date of election, the earliest date having the first rank.
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes of the
proceedings of the shareholders and of the Board of Directors in one or more
minute books provided for that purpose- (b) see that all notices are duly given
in accordance with the provisions of the Bylaws or required by law- (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the Secretary by such shareholder- (e) sign with the President certificates
for shares of the Corporation, the issuance of which shall have been authorized
by resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the Corporation- and (g) in general perform all duties
incident to the office of the Secretary and such other duties as from time to
time may be assigned him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the Corporation; (b) receive
and give receipts for money due and payable to the Corporation from any source
whatsoever, and deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws- and (c) in general perform
all of the duties as from time to time may be assigned to him by the President
or by the Board of Directors. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such sureties as the Board of Directors shall determine.
SECTION 9. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE V. INDEMNITY
The Corporation shall indemnify it directors, officers and employees as
follows:
(a) Every director, officer, or employee of the Corporation shall be indemnified
by the Corporation against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon him in connection with any proceeding to
which he may become involved, by reason of his being or having been a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of the
corporation, partnership, joint venture, trust, or enterprise, or any settlement
<PAGE>
thereof, whether or not he is a director, officer, employee or agent at the time
such expenses are incurred, except in such cases wherein the director, officer,
or employee is adjudged guilty of willful misfeasance or malfeasance in the
performance of his duties--provided that in the event of a settlement the
indemnification herein shall apply only when the Board of Directors approves
such settlement and reimbursement as being for the best interest of the
Corporation.
(b) The Corporation shall provide to any person who is or was a director,
officer, employee, or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of the
corporation, partnership, joint venture, trust or enterprise, the indemnity
against expenses of suit, litigation or other proceedings which is specifically
permissible under applicable law.
(c) The Board of Directors may, in its discretion, direct the purchase of
liability insurance by way of implementing the provision of the Article V.
ARTICLE VI: CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. AR checks, drafts or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the Corporation, shall be signed by such officers or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
select.
ARTICLE VII: CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the Corporation shall be in a form as shall be determined by the Board of
<PAGE>
Directors. Such certificates shall be signed by the President and by the
Secretary or by such other officers authorized by law, and sealed with the
corporate seal. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. AR certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificates shall be issued until the former certificates for a like number of
shares shall have been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued therefore upon such
terms and with indemnity to the Corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation shall
be made only on the stock transfer books of the Corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
surrender for cancellation of the certificate for such shares. The person on
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes. Provided, however, that
upon any action undertaken by the shareholders to elect S Corporation Status
pursuant to Section 1362 of the Internal Revenue Code and upon any shareholders
agreement thereto restricting the transfer of said shares so as to disqualify
said S Corporation status, said restriction on transfer shall be made a part of
the Bylaws so long as said agreement is in force and effect.
ARTICLE VIII: FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st day of January
and end on the 31st day of December of each year.
ARTICLE IX: DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law and its Articles of Incorporation.
ARTICLE X: CORPORATE SEAL
The Board of Directors shall provide a corporate seal, which shall be
circular in form and shall have inscribed thereon, the name of the Corporation
and the State of the incorporation and the words, CORPORATE SEAL.
<PAGE>
ARTICLE XI: WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any shareholder or director of the Corporation under the provisions of
these Bylaws or under the provisions of the Articles of Incorporation or under
the provisions of the applicable Business Corporation Act, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice.
ARTICLE XII: AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the Board
of Directors.
THE ABOVE BYLAWS ARE CERTIFIED TO HAVE BEEN ADOPTED BY THE
BOARD OF DIRECTORS OF
THE CORPORATION ON THE
25TH DAY OF OCTOBER
1996.
By: /s/
-------------------------------
Secretary
By: /s/
-------------------------------
Board Chairman
<PAGE>
Exhibit 16.1
Letter Re Change in Certifying Accountant
COHEN & KAMENY CPA'S PLLC
3530 HENRY HUDSON PARKWAY, SUITE B
RIVERDALE, NY 10463
(718) 548-7200 FAX (718) 796-0184
ELI COHEN, CPA
DAVID KAMENY, CPA
- -----------------
Solomon Alliance Group, Inc.
3125 Windward Plaza, Ste 300
Alpharetta, Georgia 30005
Attention: Board of Directors
Re: Madison Holdings, Inc.
Dear Sirs:
We have been advised that Madison Holdings, Inc. ("Madison") has been acquired
by Solomon Alliance Group, Inc. ("SAGE"). We have been further advised that as a
result of such acquisition, SAGE will use it own auditors, Stokes & Company,
P.C., as the Company's principal independent accountant for the fiscal year
ended December 31, 1999.
This letter shall confirm that our report on Madison's financial statements for
the past fiscal year did not contain an adverse opinion or disclaimer of opinion
and was not modified as to uncertainty, audit scope, or accounting principles.
Further, there were no disagreements with us, whether or not resolved, on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which if not resolved would have caused us to make
reference to the subject matter of the disagreement(s) in connection with our
report.
COHEN & KAMENY CPA'S PLLC
/s/
-----------------------------------
<PAGE>
RIVERDALE, NEW YORK
MARCH 13, 2000
<PAGE>
Exhibit 21.1
Subsidiaries of Solomon Alliance Group, Inc.:
Visual Link Wireless, Inc., a Virginia corporation.
<PAGE>
Exhibit 24.1
[Stokes & Company, P.C. Letterhead]
May 12, 2000
Solomon Alliance Group, Inc.
3025 Windward Plaza, Suite 300
Alpharetta, GA 30005
Gentlemen:
We consent to the use of our report dated May 10, 2000, with respect to the
financial statements of Solomon Alliance Group, Inc. and Subsidiary that are
made part of this Current Report on Form 8K.
/s/ Stokes & Company, P.C.
-------------------------------
Stokes & Company, P.C.
Washington, D.C.
<PAGE>
Exhibit 24.2
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
Consolidated Financial Statements
and
Independent Auditor's Report
December 31, 1999 and 1998
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT 3
FINANCIAL STATEMENTS
Consolidated Balance Sheet 4
Consolidated Statements of Operations 5
Consolidated Statements of Changes in Stockholders' Equity (Deficit) 6
Consolidated Statements of Cash Flows 7
Notes to Financial Statements 8 - 14
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Solomon Alliance Group, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Solomon Alliance
Group, Inc. and Subsidiary (a development stage enterprise) as of December 31,
1999, and the related consolidated statements of operations, changes in
stockholders' equity (deficit) and cash flows for the years ended December 31,
1999 and 1998. We did not audit the financial information contained in the
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the period beginning with the Company's inception, October
25, 1996, through December 31, 1997 included in the inception through December
31, 1999 period. That information was audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for the period of the Company's inception, October 25, 1996, through
December 31, 1997, is based solely on the report of the other auditors. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Solomon Alliance Group, Inc. and Subsidiary as of
December 31, 1999, and the consolidated results of their operations and their
cash flows for the years ended December 31, 1999 and 1998, and from October 25,
1996 (inception), to December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ Stokes & Company, P.C.
- ---------------------------
STOKES & COMPANY, P.C.
Washington, D.C.
May 10, 2000
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 2,470
Employee receivables 5,719
----------
Total current assets 8,189
PROPERTY AND EQUIPMENT - AT COST
Furniture and office equipment, net of accumulated
depreciation of $14,946 55,968
OTHER ASSETS
Goodwill, net of accumulated amortization of $80,056 202,493
----------
$ 266,650
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 140,437
Accrued salaries 45,000
Accrued payroll taxes 34,934
Officer loans 100,673
Note payable 50,000
----------
Total current liabilities 371,044
----------
LONG-TERM LIABILITIES
Convertible debentures 757,305
----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $.001 par value; 100,000,000 shares
authorized; 18,959,000 shares issued and 17,350,629
outstanding 17,351
Additional paid in capital 644,557
Deficit accumulated during development stage (1,523,607)
----------
(861,699)
----------
$ 266,650
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998 AND THE
PERIOD FROM OCTOBER 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
OCTOBER 25, 1996
(INCEPTION) TO
DECEMBER 31,
1999 1998 1999
---- ---- ------------
<S> <C> <C> <C>
REVENUE
Sales $ 2,400 $ 5,456 $ 7,856
COST OF MERCHANDISE SOLD 2,035 4,954 6,989
----------- ----------- -----------
Gross profit 365 502 867
----------- ----------- -----------
EXPENSES
Interest 72,254 9,378 81,632
Depreciation and amortization 68,781 26,221 95,002
Selling and administrative 1,103,635 645,462 1,800,879
----------- ----------- -----------
1,244,670 681,061 1,977,513
----------- ----------- -----------
Loss from operations (1,244,305) (680,559) (1,976,646)
OTHER INCOME AND EXPENSE
Interest income 1,221 1,818 3,039
----------- ----------- -----------
Loss before income tax expense
and extraordinary item (1,243,084) (678,741) (1,973,607)
INCOME TAXES -- -- --
----------- ----------- -----------
Loss before extraordinary item (1,243,084) (678,741) (1,973,607)
EXTRAORDINARY ITEM:
Gain on extinquishment of debt, less applicable 450,000 -- 450,000
----------- ----------- -----------
Net loss $ (793,084) $ (678,741) $(1,523,607)
=========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Loss before extraordinary item $ (0.09) $ (0.09)
Extraordinary item 0.03 --
------------ -----------
Net loss $ (0.06) $ (0.09)
============ ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FROM OCTOBER 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING
-------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 5,454,000 $ 5,454 $ 46,436 $ (51,782) $ 108
Common stock issued for the acquisition
of Visual Link Wireless, Inc. 6,000,000 6,000 -- -- 6,000
Net Loss -- -- -- (678,741) (678,741)
---------- ------- --------- ----------- ---------
Balance, December 31, 1998 11,454,000 11,454 46,436 (730,523) (672,633)
Common stock issued as collateral for
convertible debentures 1,608,371 -- -- -- --
Common stock issued for conversion of
convertible debentures 3,391,629 3,392 500,594 -- 503,986
Subscribed common stock -- -- 97,532 -- 97,532
Common stock issued for
exercised warrants 2,500,000 2,500 -- -- 2,500
Common stock issued for the
acquisition of MPTG
Communications, Inc. 5,000 5 (5) -- --
Net Loss -- -- -- (793,084) (793,084)
---------- ------- --------- ----------- ---------
Balance, December 31, 1999 18,959,000 $17,351 $ 644,557 $(1,523,607) $(861,699)
========== ======= ========= =========== =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998 AND THE
PERIOD FROM OCTOBER 25, 1996 (INCEPTION) TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
OCTOBER 25, 1996
(INCEPTION) TO
DECEMBER 31,
1999 1998 1999
---------- ---------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales $ 2,400 $ 5,456 $ 7,856
Interest income 1,221 1,818 3,039
Payments to vendors, suppliers and employees (900,573) (533,518) (1,485,873)
--------- --------- -----------
NET CASH USED BY OPERATING ACTIVITIES (896,952) (526,244) (1,474,978)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (42,021) (9,002) (51,023)
--------- --------- -----------
NET CASH USED BY INVESTING ACTIVITIES (42,021) (9,002) (51,023)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans -- 20,000 20,000
Repayments of loans (20,000) (10,000) (30,000)
Proceeds from convertible debentures 880,557 409,343 1,289,900
Proceeds from warrants 2,500 -- 2,500
Proceeds from issuance of common stock -- -- 51,890
Proceeds from acquisition of subsidiary -- 194,181 194,181
---------- --------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 863,057 613,524 1,528,471
---------- --------- -----------
NET INCREASE (DECREASE) IN CASH (75,916) 78,278 2,470
CASH at beginning of year 78,386 108 --
---------- --------- -----------
CASH at end of year $ 2,470 $ 78,386 $ 2,470
========== ========= ===========
RECONCILIATION OF NET LOSS TO NET CASH
USED BY OPERATING ACTIVITIES:
Net Loss $ (793,084) $(678,741) $ 1,523,607)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 68,781 26,221 95,002
Accrued interest not paid 62,563 9,379 71,942
Debt forgiveness (450,000) -- (450,000)
(Increase) decrease in assets:
Employee receivables (5,719) -- (5,719)
Prepaids 14,167 (14,167) --
Increase (decrease) in liabilities:
Accounts payable 113,769 43,028 156,797
Accrued salaries (11,250) 56,250 45,000
Accrued payroll taxes 34,057 877 34,934
Officer loans 69,764 30,909 100,673
---------- ---------- ------------
NET CASH USED BY OPERATING ACTIVITIES $ (896,952) $ (526,244) $ (1,474,978)
========== ========== ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
7
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ORGANIZATION
Solomon Alliance Group, Inc. was incorporated in the State of Arizona on October
25, 1996. The Company was incorporated for the purpose of seeking potential
business ventures. The Company is classified as a development stage enterprise
because it has had no significant operations since its inception. In 1998, the
Company decided to target the emerging wireless data industry and on July 17,
1998 the Company acquired 100% of the common stock of Visual Link Wireless, Inc.
(VLW), which became a wholly owned subsidiary. VLW was a startup company in the
wireless data industry focusing on applications for the mobile professional. On
August 5, 1999, the Company acquired MPTG Communications, Inc., another startup
company that designed wireless data devices for niche markets. During the fourth
quarter of 1999 the Company was reorganized and is now repositioning itself to
take advantage of new opportunities in the wireless industry.
Solomon is positioning itself to be a premier wireless data solutions provider
in the new and rapidly expanding wireless data market. Under the Knowledge2Go
brand, it focuses on integrated wireless Internet products and services for both
the business to business and personal use markets. In addition, Solomon plans to
expand into other segments of the industry through selected acquisitions and
joint ventures.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All material intercompany accounts,
transactions, and profits are eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers deposits that can be redeemed on demand and investments
that have original maturities of less than three months, when purchased, to be
cash equivalents. As of December 31, 1999, the Company had no cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for major additions
and improvements are capitalized, and minor replacements, maintenance, and
repairs are charged to expense as incurred. When property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the
results of operations for the respective period. Depreciation is provided over
the estimated useful lives of the related assets using the straight-line method
for financial statement purposes. The Company uses other depreciation methods
(generally accelerated) for tax purposes where appropriate. The estimated useful
lives for significant property and equipment categories are as follows:
Computers and Equipment 5 years
Office Furniture and Fixtures 5 years
8
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES
Preparing the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities. The components
of the deferred tax assets and liabilities are individually classified as
current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. As of December 31, 1999 there were no deferred tax assets or
liabilities.
GOODWILL
The excess of acquisition cost over the fair value of net assets (goodwill) of
Visual Link Wireless, Inc. (VLW), the Company's operating subsidiary is being
amortized using the straight-line method over 5 years. Management believes that
there has been no impairment of the goodwill as reflected in the Company's
consolidated financial statements as of December 31, 1999. The Company has
adopted a reduced period of amortization reflecting the approximate utility of
the purchased goodwill. The subsidiary is subject to changes occurring in the
high-tech communications industry. Cost in excess of net assets of VLW, net of
amortization, was $202,493 as of December 31, 1999. Amortization for the years
ending December 31, 1999 and 1998 was $56,510 and $23,546, respectively.
EARNINGS PER SHARE
Basic net earnings (loss) per common share (EPS) is computed by dividing net
earnings (loss) applicable to common shareholders by the weighted-average number
of common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon the conversion of
debt. In periods where losses are reported, the weighted-average number of
common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive.
The average shares outstanding for basic EPS during 1999 and 1998, were
14,060,039 and 7,226,201, respectively.
9
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GOING CONCERN
As shown in the accompanying consolidated financial statements, the Company has
incurred recurring losses from operations, and as of December 31, 1999, the
Company's current liabilities exceeded its current assets by $362,855 and its
total liabilities exceeded its total assets by $861,699. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management has instituted a cost reduction program that included a reduction in
labor and fringe costs as well as the operating overhead. In addition, the
Company has converted substantial debt to capital and is actively seeking
additional capital resources. Management believes these factors will contribute
toward achieving profitability. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
NOTE B - MERGERS AND ACQUISITIONS
On July 17, 1998, the Company acquired a 100% interest in Visual Link Wireless,
Inc. (VLW), in exchange for 6 million shares of the Company's common stock,
warrant rights to an additional 1 million shares at $4 per share and the
assumption of a note payable in the amount of $500,000. VLW was formed by a
tax-free incorporation of Visual Link Telecommunications, LC. VLW is involved in
the development of wireless communications technologies and products. This
acquisition has been accounted for under the purchase method of accounting and,
accordingly, the results of operations have been included in the Company's
consolidated financial statements since the date of acquisition. The purchase
price has been allocated based on estimated fair values at the date of
acquisition. The allocation has resulted in acquired goodwill of $282,549, which
is being amortized on a straight-line basis over 5 years. Subsequent to the
acquisition, the assumed debt was renegotiated and the Company settled the
entire obligation for $50,000. The remaining balance was recognized as income
during 1999 as more fully discussed in Note G.
On August 5, 1999, the Company's wholly-owned subsidiary, VLW, completed a
business combination with MPTG Communications, Inc. (MPTG) The combination is a
stock for stock merger, which is characterized as a forward triangular merger.
The merger is qualified as a tax-free exchange and was accounted for as a
pooling of interests. Solomon Alliance Group, Inc. issued 1 share of its common
stock for each share of MPTG's outstanding common stock. A total of 5,000 shares
of the Company's common stock was issued as a result of the merger. The
Company's consolidated financial statements for 1999 and 1998 include the
accounts of MPTG as if the companies had combined as of the beginning of the
first period presented.
There were no significant transactions between MPTG and VLW or Solomon Alliance
Group, Inc. before the combination and no adjustments were necessary to conform
MPTG's accounting policies.
10
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1999 and 1998
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment are summarized by major classifications as follows:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Computer and Equipment $ 62,963
Office Furniture and Fixtures 7,951
--------
70,914
Less accumulated depreciation 14,946
--------
$55,968
========
</TABLE>
NOTE D - NOTE PAYABLE AND CONVERTIBLE DEBENTURES
During June 1999, the company issued its $500,000, 2% Convertible Debenture Due
June 23, 2004 to GEM Advisors, Inc. The Debenture contains a conversion
provision for shares of the Company's stock, not to exceed 5 million shares. The
conversion price is based on a formula contained in the Debenture. The Debenture
was secured by the convertible shares, which were placed in escrow with the
lender's attorneys. As of December 31, 1999, the Debenture and the accumulated
interest thereon, was fully converted into 3,391,629 shares of common stock, at
an average conversion price of $0.149 per share. The remaining 1,608,371 shares
were returned to the Company during April of 2000 and have been cancelled. In
connection with this lending activity, the Company also issued warrants for 2.5
million shares of the stock, which were immediately exercised.
During 1999, the Company assumed $789,900 in 8% Convertible Debentures in
connection with its subsidiary's merger with MPTG. The Debentures have a
maturity date of three years from the date of issue. During the year ending
December 31, 1999, $89,500 of the Debentures along with $8,032 of accrued
interest was converted to common stock of the Company. The balance of the
Debenture at December 31, 1999 consists of a $700,400 in principal and $56,905
in accrued interest. These remaining Debentures were substantially converted
into 3,443,828 shares of the Company's common stock during the first quarter of
2000. As of December 31, 1999, under the terms of the Debenture, the maturities
of principal would have been $346,343 for 2001 and $354,057 for 2002.
The Company is obligated on a demand note for $50,000, at 0% interest, which
represents the remaining balance of an obligation assumed at the time it
purchased its subsidiary, Visual Link Wireless, Inc. The balance of this
obligation is reflected as a current liability.
NOTE E - CAPITAL STOCK
During the month of December 1999 certain Debenture holders provided the Company
with their Notice of Conversion to the Company's common stock. The Company has
transferred $97,532 of debt and accumulated interest to its paid in capital for
these subscribed shares. In satisfaction of these conversions, the Company
issued 444,014 of fully assessed and paid shares during the first quarter of
2000.
11
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1999 and 1998
NOTE E - CAPITAL STOCK (Continued)
During the years ended December 31, 1999, and December 31, 1998, the board of
directors approved the issuance of warrants to purchase an aggregate of
3,500,000 shares of the Company's common stock. Such warrants are exercisable at
prices ranging from $.001 to $4.00 per share, all of which are fully vested at
December 31, 1999, and expire at various times through July 2002.
During the year ended December 31, 1999, certain warrant holders exercised
warrants to purchase 2,500,000 shares of the Company's common stock for an
aggregate of $2,500.
A summary of warrant activity for 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER OF EXERCISE WARRANTS EXERCISE
WARRANTS PRICE EXERCISABLE PRICE
---------- ---------- ----------- ----------
<S> <C> <C> <C>
Outstanding,
December 31, 1997 -- -- -- --
Granted 1,000,000 $ 4.00 1,000,000 $ 4.00
Exercised -- -- -- --
---------- ---------- ---------- ----------
Outstanding,
December 31, 1998 1,000,000 4.00 1,000,000 4.00
Granted 2,500,000 .001 2,500,000 .001
Exercised (2,500,000) (.001) (2,500,000) (.001)
---------- ---------- ---------- ----------
Outstanding,
December 31, 1999 1,000,000 $ 4.00 1,000,000 $ 4.00
========== ========== ========== ==========
</TABLE>
At December 31, 1999, the range of warrant prices for shares under
warrants and the weighted average remaining contractual life is as follows:
<TABLE>
<CAPTION>
WARRANTS OUTSTANDING WARRANTS EXERCISABLE
-------------------------------------- -----------------------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF AVERAGE REMAINING AVERAGE
WARRANT NUMBER OF EXERCISE CONTRACTUAL NUMBER EXERCISE
EXERCISE PRICE WARRANTS PRICE LIFE EXERCISABLE PRICE
- ------------------------- --------------- ------------------ ------------------- -- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
$4.00-- 5.00 1,000,000 $4.00 2.63 1,000,000 $4.00
--------------- -------------------
1,000,000 1,000,000
=============== ===================
</TABLE>
During July 1999, the board authorized the issue of non-qualified stock options
for 350,000 shares of the Company's common stock. Options representing 150,000
shares at an average exercise price of $.194 vested
12
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1999 and 1998
NOTE E - CAPITAL STOCK (Continued)
upon issue, the remaining 200,000 shares which may be exercised for 50% of the
prior two months average trading price at the date of exercise, vest on January
7, 2000. All of the options will expire on July 7, 2000.
NOTE F - COMPENSATION OF OFFICERS
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
$
- ---------------------------------------------------------------------------------------------------------------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SAR PAYOUTS SATION
POSITION YEAR $ $ $ $ # $ $
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tom Weston-CEO 1998 123,750
- ---------------------------------------------------------------------------------------------------------------------------
Tom Weston-CEO 1999 135,000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE G - EXTRAORDINARY GAIN RELATED TO EARLY EXTINGUISHMENT OF DEBT
In June 1999, the Company renegotiated the debt acquired during its acquisition
of Visual Link Wireless, Inc. to Stixs Investments Limited (the Lender). The
Company entered into an agreement whereby for a $50,000 cash payment, the Lender
agreed to waive the remaining balance of $450,000. In addition, the Lender has
released the Company from all obligations, claims or liabilities associated or
in connection with the loan and waive the right and agree not to institute or
threaten any litigation against the Company or to otherwise take an action
detrimental to the Company. The extinguishment of this obligation has been
reflected in the net income of the Company for 1999.
NOTE H - SUBSEQUENT EVENTS
During March 2000, the Company entered into non-binding letters of intent to
acquire all or part of three separate businesses within the wireless industry as
part of its Expansion Through Acquisition strategy. Solomon's goal is to enter
into business combinations which will result in an increased valuation per share
in both the near and long term, based on both a balance sheet and a going
concern analysis. It is the Company's strategy to complete two or more
acquisitions during 2000 with companies that, upon completion, would
significantly increase Solomon's asset base and revenue stream.
On March 8, 2000, the Company entered into a stock exchange agreement with
Madison Holdings, Inc. (MHI) under which Solomon acquired MHI, a fully reporting
and SEC registered company. In connection with the stock exchange, Solomon
elected successor issuer status to become a fully reporting company under
13
<PAGE>
SOLOMON ALLIANCE GROUP, INC. AND SUBSIDIARY
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (Continued)
Years Ended December 31, 1999 and 1998
NOTE H - SUBSEQUENT EVENTS (Continued)
Rule 12g of the 1934 Securities Exchange Act and filed a Form 8-K with the SEC.
The Company transferred 300,000 shares of its common stock for 100% of the
outstanding shares of MHI.
The Company will account for this transaction under the pooling of interests
method of accounting. MHI had no operations and no assets or liabilities at the
date of acquisition, therefore the Company has not provided pro-forma financial
statements with respect to this merger. The Company incurred $150,000 of
expenses in connection with the merger.
NOTE I - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Noncash Investing and Financing Activities:
Issuance of Common Stock for VLW Acquisition -- $ 6,000
Conversion of Debentures to Common Stock $589,500 --
Conversion of Accrued Interest to Common Stock $ 12,018 --
</TABLE>
NOTE J - RELATED PARTY TRANSACTIONS
During the year ending December 31, 1999, the Company has borrowed monies from
one of its officers either directly or through the payment of expenses by the
officer. The balance of the loan at December 31, 1999 is $100,673 and it bears
interest at the rate of 8% per annum. The loan is a demand loan and is
unsecured.
14
