SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X]ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [
FOR THE YEAR ENDED DECEMBER 31, 1998 [Fee Required]
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
Commission File Number 0-14724
ARNOX CORPORATION
(Name of small business issuer in its charter)
Delaware 59-3453156 (state or other jurisdiction of incorporation or
organization) (IRS Employer identification No.)
1612 N. Osceola Avenue, Clearwater, Florida 33755
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (727) 443 3434
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share.
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the Issuer was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No [
]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
The issuer's revenues for its most recent fiscal year were $0.
The aggregate market value of the 2,047,181 shares of Common Stock, $.01
par value per share, held by non-affiliates of the Issuer, based on the closing
sale price December 31, 1998 of $0.018375 per share is $37,616.95. However,
since trading is sporadic and rare, the non-affiliates holding cannot be
reasonably assessed and the audit financials reflect zero value. The number of
shares of the Common Stock, outstanding on 12/31/98 was 3,438,363.
Check whether the issuer has filed all documents and reports required to
be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes [ ] No [X]
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
<PAGE>
PART I
Item 1. Description of Business
Corporate Background Information
ARNOX CORPORATION (the "Registrant") was incorporated on October 17, 1983
under the laws of the State of DELAWARE. The Company's business consisted of
specializing in the culturing of mammalian cells and the production of cellular
proteins, such as antibodies, blood factors, enzymes and hormones. The
Registrant conducted an initial public offering of its Common Stock in October,
1985 pursuant to a Form S-1 Registration Statement under the Securities Act of
1933 (the "Securities Act"). In connection with an application to list its
Common Stock on the NASDAQ system, the Company also registered its Common Stock
pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange
Act").
After pursuing its business for several years, the Registrant filed a
voluntary petition under Chapter 11 of the Bankruptcy Act on September 11, 1989.
This proceeding was filed in with the U.S. Bankruptcy Court for the District of
New Jersey and designated as Case # 89-97155. On December 18, 1989, the
Company's Chapter 11 case was voluntarily converted to a case in Chapter 7 which
resulted in the orderly liquidation of all corporate assets and the use of the
proceeds to repay the Company's creditors. On July 12, 1994 the Company's case
under Chapter 7 was closed by an order of the Court and the trustee was
discharged. As a result of the Bankruptcy, the Company has no assets,
liabilities, management or ongoing operations and had not engaged in any
business activities since September, 1989. The Registrant was totally inactive
from July 12, 1994 to June 13, 1996.
During the pendancy of the Bankruptcy, the Company neglected to file
franchise tax returns with and pay the required franchise taxes to the State of
Delaware. As a result, the Company's corporate charter was revoked by order of
the Secretary of State of the State of Delaware on March 1, 1990. Similarly, the
Company neglected to file with the SEC either (a) the regular reports that are
required of all companies that have securities registered under the Exchange
Act, or (b) a certification on Form 15 terminating its registration under the
Exchange Act. As a result, the Company remained a Registrant under the Exchange
Act but was seriously delinquent in its SEC reporting obligations. According to
the National Quotation Bureau, the last published quotation for the Company's
Common Stock was posted by Gruntal & Co., Inc., one of the Company's market
makers, on March 5, 1990. At that time, the published quote was $.01 bid and .10
asked.
Acting in its capacity as a Stockholder of the Company, and without first
receiving any consent, approval or authorization of any other Stockholder or
former officer or director of the Company, Capston effected a renewal, revival
and restoration of the Company's certificate of incorporation pursuant to
Section 312 of the General Corporation Law of the State of Delaware. In general,
Section 312 provides that any corporation may "procure an extension,
restoration, renewal or revival of its certificate of incorporation, together
with all the rights, franchises, privileges and immunities and subject to all of
its duties, debts and liabilities which had been secured or imposed by its
original certificate of incorporation" upon compliance with certain procedural
requirements.
After reviewing the applicable files, Capston determined that the only
debt of the Company that was "secured or imposed by its original certificate"
was the obligation of the Registrant to pay its Delaware taxes. Therefore,
Capston paid all past due franchise taxes on behalf of the Company and then
filed a Certificate of Renewal, Revival, Extension and Restoration of the
Company's Certificate of Incorporation on behalf of the Company under the
authority granted by Section 312(h). This Certificate was filed in the office of
the Secretary of State of the State of Delaware on June 10, 1996 and at the date
of this filing the Company is lawfully incorporated, validly existing and in
good standing under the laws of the State of Delaware.
On June 13, 1996, Capston Network Company, acting in its capacity as a
Stockholder of the Company, and without first receiving any consent, approval or
authorization of any other Stockholder or former officer or director of the
Company, Capston filed a 10-K for the years ending December 31, 1989-1995. On
the same day, Capston filed a proxy seeking approval and ratification of its
actions, along with approval to seek a suitable business transaction. After
receiving comments from both the Accounting and Corporate Finance divisions,
Capston filed an amended 10-K with included an audit at the close of bankruptcy.
In July, 1996, the Company filed an 8-K reporting the positive results of the
proxy.
To date a suitable business transaction has not secured. in a
Proxy Statement dated June 13, 1996, Capston Network Company ("Capston") sought
stockholder approval of a financial restructuring plan for ARNOX that
contemplated a 1 for 10 reverse split and the issuance of a 90% equity interest
in the Company to the stockholders of an unidentified privately-held company.
The plan proposed by Capston was approved by the holders of a majority of the
issued and outstanding common stock of the Company and Capston has been actively
seeking a business combination opportunity for the Company since August 16,
1996.
As a result of conversations with the management of several
potential acquisition candidates, Capston has determined that the original plan
has a number of features that will make difficult, if not impossible, to arrange
a suitable business combination transaction. First, the plan approved by the
Stockholders did not provide for an optimal capital structure for the Company.
Instead, it left the existing capital structure of the Company intact. Second,
that plan did not provide for the payment of finders' fees and other third party
costs in the event that a suitable business combination opportunity is
identified and a combination transaction is negotiated. Third, that plan did not
provide for any payments to Capston in the event that a suitable business
combination opportunity is identified and a combination transaction is
negotiated. Finally, the plan did not authorize Capston to enter into a
transaction on behalf of the Company. Rather, it merely authorized Capston to
seek out a suitable business combination and then present the details of the
proposed transaction for a second stockholder vote.
As a result of those discussions, Capston developed a revised plan (the
"REVISED PLAN") whereby the Company was restructured as a "public shell" for the
purpose of effecting a business combination transaction with a suitable
privately-held company that has both business history and operating assets as of
July, 1997.
Proposed Operations
The Registrant has no assets, liabilities, management or ongoing
operations and has not engaged in any business activities since September 1989.
In July, 1997, the Registrant was restructured as a "public shell" for the
purpose of effecting a business combination transaction with a suitable
privately-held company that has both business history and operating assets.
Capston believes the Registrant will offer owners of a suitable
privately-held company the opportunity to acquire a controlling ownership
interest in a public company at substantially less cost than would otherwise be
required to conduct an initial public offering. Nevertheless, Capston is not
aware of any empirical statistical data that would independently confirm or
quantify Capston's beliefs concerning the perceived value of a merger or
acquisition transaction for the owners of a suitable privately-held company. The
owners of any existing business selected for a business combination with the
Registrant will incur significant costs and expenses, including the costs of
preparing the required business combination agreements and related documents,
the costs of preparing the a Current Report on Form 8-K describing the business
combination transaction and the costs of preparing the documentation associated
with any future reporting under the Exchange Act and registrations under the
Securities Act.
As a result of vote of the Stockholders, the Registrant is used as a
corporate vehicle to seek, investigate and, if the results of such investigation
warrant, effect a business combination with a suitable privately-held company or
other business opportunity presented to it by persons or firms that seek the
perceived advantages of a publicly held corporation. The business operations
proposed in the Plan are sometimes referred to as a "blind pool" because
Stockholders will not ordinarily have an opportunity to analyze the various
business opportunities presented to the Registrant, or to approve or disapprove
the terms of any business combination transaction that may be negotiated by
Capston on behalf of the Registrant. Consequently, the Registrant's potential
success will be heavily dependent on the efforts and abilities of Capston and
its officers, directors and consultants, who will have virtually unlimited
discretion in searching for, negotiating and entering into a business
combination transaction. Capston and its officers, directors and consultants
have had limited experience in the proposed business of the Registrant. Although
Capston still believes that the Registrant will be able to enter into a business
combination transaction within 12 months after the approval of the Plan by the
Stockholders, there can be no assurance as to how much time will elapse before a
business combination is effected, if ever. The Registrant will not restrict its
search to any specific business, industry or geographical location, and the
Registrant may participate in a business venture of virtually any kind or
nature.
Capston and its officers, directors and consultants anticipate that the
selection of a business opportunity for the Registrant will be complex and
extremely risky. Because of general economic conditions, rapid technological
advances being made in some industries, and shortages of available capital,
Capston believes that there are numerous privately-held companies seeking the
perceived benefits of a publicly traded corporation. Such perceived benefits may
include facilitating debt financing or improving the terms on which additional
equity or may be sought, providing liquidity for the principals of the business,
creating a means for providing incentive stock options or similar benefits to
key employees, providing liquidity for all stockholders and other factors.
Potential business opportunities may occur in many different industries
and at various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities extremely
difficult and complex. Capston anticipates that the Registrant will be able to
participate in only one business venture. This lack of diversification should be
considered a substantial risk inherent in the Plan because it will not permit
the Registrant to offset potential losses from one venture against gains from
another. Moreover, due to the Registrant's lack of any meaningful financial,
managerial or other resources, Capston believes the Registrant will not be
viewed as a suitable business combination partner for either developing
companies or established business that are in need of substantial additional
capital.
Acquisition of Opportunities
In implementing a particular business combination transaction, the
Registrant may become a party to a merger, consolidation, reorganization, joint
venture, franchise or licensing agreement with another corporation or entity. It
may also purchase stock or assets of an existing business. After the
consummation of a business combination transaction, it is likely that the
present Stockholders of the Registrant will only own a small minority interest
in the combined companies. In addition, as part of the terms of the acquisition
transaction, all of the Registrant's officers and directors will ordinarily
resign and be replaced by new officers and directors without a vote of the
Stockholders. Capston does not intend to obtain the approval of the Stockholders
prior to consummating any acquisition other than a statutory merger that
requires a Stockholder vote. Capston and its officers, directors and consultants
do not intend to sell any shares held by them in connection with a business
acquisition.
It is anticipated that any securities issued in a business combination
transaction will be issued in reliance on exemptions from registration under
applicable Federal and state securities laws. In some circumstances, however, as
a negotiated element of a business combination, the Registrant may agree to
register such securities either at the time the transaction is consummated or at
some specified time thereafter. The issuance of substantial additional
securities and their potential sale into any trading market that may develop may
have a depressive effect on such market. While the actual terms of a transaction
to which the Registrant may be a party cannot be predicted, it may be expected
that the parties to the business transaction will find it desirable to avoid the
creation of a taxable event and thereby structure the acquisition in a so called
"tax free" reorganization under Sections 368(a)(1) or 351 of the Internal
Revenue Code of 1986, as amended (the "Code") In order to obtain tax free
treatment under the Code, it may be necessary for the owners of the acquired
business to own 80% or more of the voting stock of the surviving entity. In such
event, the stockholders of the Registrant would retain less than 20% of the
issued and outstanding shares of the combined companies, which could result in
significant dilution in the equity of such stockholders. The Registrant intends
to structure any business combination in such manner as to minimize Federal and
state tax consequences to the Registrant and any target company.
As part of the Registrant's investigation of potential business
opportunities, Capston and its officers, directors and consultants will
ordinarily meet personally with management and key personnel, may visit and
inspect material facilities, obtain independent analysis or verification of
certain information provided, check reference of management and key personnel,
and take other reasonable investigative measures, to the extent of the
Registrant's limited resources and Capston's limited expertise. The manner in
which the Registrant participates in an opportunity will depend on the nature of
the opportunity, the respective needs and desires of the Registrant and other
parties and the relative negotiating strength of the Registrant and such other
management.
With respect to any business combination negotiations, Capston will
ordinarily focus on the percentage of the Registrant which target company
stockholders would acquire in exchange for their ownership interest in the
target company. Depending upon, among other things, the target company's assets
and liabilities, the Registrant's stockholders will in all likelihood only own a
small minority interest in the combined companies upon completion of the
business combination transaction. Any business combination effected by the
Registrant can be expected to have a significant dilutive effect on the
percentage of shares held by the Registrant's current Stockholders.
Upon completion of a business combination transaction, there can be no
assurance that the combined companies will have sufficient funds to undertake
any significant development, marketing and manufacturing activities.
Accordingly, the combined companies may be required to either seek additional
debt or equity financing or obtain funding from third parties, in exchange for
which the combined companies might be required to issue a substantial equity
position. There is no assurance that the combined companies will be able to
obtain additional financing on terms acceptable to the combined companies.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial costs for accountants, attorneys
and others. If a decision were made not to participate in a specific business
opportunity the costs incurred in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the participation
in a specific business opportunity, the failure to consummate that transaction
may result in the loss of the Registrant of the related costs incurred.
Item 2. Description of Property
As a result of its 1989 Bankruptcy, the Company has no assets,
liabilities, or ongoing operations and has not engaged in any business
activities since September 1989. The Company had no operations during the year
ended December 31, 1998 and no material assets or liabilities as of December 31,
1998.
Item 3. Legal Proceedings
Not Applicable
Item 4. Submission of matters to a vote of Security Holders
Not Applicable
PART II
Item 5. Market for Registrant's Common Equity
There has been no active trading in the Issuer's common stock for over
seven years, but ARNOX does currently have a bid of .018375 and an ask of .30625
under the symbol ARXC.
Item 6. Management Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Potential Acquisition
We have an acquisition , please see recent 8-K filings.
Financial Condition
As a result of its 1989 Bankruptcy, the Company has no assets,
liabilities, or ongoing operations and has not engaged in any business
activities since September 1989. The Company had no operations during the year
ended December 31, 1998 and no material assets or liabilities as of December 31,
1998.
Plan of Operation.
Refer to recent 8-k filings.
Item 7. Financial Statements.
For the information called for by this Item, see the Financial Statements
attached.
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure.
None. Want & Ender of New York, New York
remain the Company's public accountants.
PART III
Item 9. Directors and Executive Officers of the Registrant
Ms. Sally Fonner, age 48, the president and sole stockholder
of Capston, performs the duties of President, Secretary,
Treasurer and Sole Director of the Registrant. Ms. Fonner's sole
purpose is to seek out qualified new operations and management.
Item 10. Executive Compensation.
Ms. Fonner is the sole officer and director of the Registrant and has
received no monetary compensation for services performed during her tenure.
Further, no future monetary compensation agreement between Ms. Fonner and the
Registrant is contemplated. Notwithstanding the foregoing, the Ms. Fonner was
approved by the stockholders in a Special Meeting, to have compensation of
300,000 shares of stock. To avoid administrative complexity associated with
effecting a reverse split and requiring the stockholder to change certificates
twice, Management has elected to defer the issuance of stock to Capston, Ms.
Fonner or her designees until an acquisition is completed.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table presents certain information regarding the beneficial
ownership of the Company's equity securities at December 31, 1998 by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each of the Company's directors and officers, and
(iii) all directors and officers as a group.
Number of Shares Percent of
Name Beneficially Owned (1) Class
George W. Schiele 1,170,162 34.25%
19 Hill Road
Greenwich, CT 06830
James M. Fail 476,018 13.93%
c/o NPL Corp.
1700 Daniel Bldg.
Birmingham, AL 35233
Edmund A. Hajim 241,984 7.08%
c/o Furman Selz
230 Park Avenue
New York, NY 10169
Timothy M. Burke 197,162 5.77%
2131 Stateline Road
Niles, Michgan 49120
Sally Fonner
Capston Network Company 884 --
1612 N. Osceola Avenue
Clearwater, Florida 34615 (2)
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to all listed shares. (2) In addition, Capston and
or Sally Fonner are now entitled to the 300,000 shares approved as compensation
by shareholders.
The Company knows of no arrangements that will result in a change in
control at a date after this Annual Report on Form 10-KSB.
Item 12. Certain Relationships and Related Transactions
No officer, director or family member of an officer or director has
engaged in any material transaction with the issuer since the beginning of the
Issuer's most recent fiscal year..
Item 13. Exhibits and Reports on Form 8-K.
None
Financial statements filed with this report:
Independent Auditor's report for December 31, 1997 and 1998. Consolidated
Balance Sheets December 31, 1998 and 1997.
Consolidated Statements of Operations For the Years Ended December 31,
1998 and 1997
Consolidated Statement of Changes in Shareholders' Equity/(Deficit)For the years
ended December 31, 1998 and 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ARNOX
Date: __4/15/98_____________ By_________/s/___________
Sally Fonner,
Director
President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the date indicated.
Date : __4-15-98____________ By________/s/_____________
Sally Fonner,
Director
President
and Chief Financial Officer
<PAGE>
WANT & ENDER
C PA, P.C.
Certified Public Accountants
MARTIN ENDER CPA
STANLEY Z. WANT CPA, CFP
Independent Auditor's
Report
To the Shareholders and Board of Directors
ARNOX CORPORATION
We have audited the accompanying consolidated balance sheet of ARNOX CORPORATION
(A Dormant State Company) at December 31, 1998 and the related consolidated
statements of operations, shareholders' equity/ deficit) and cash flows for the
year then ended. 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 audit.
We have conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ARNOX CORPORATION (A
Dormant State Company) at December 31, 1998 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/
Martin Ender
Want & Ender CPA, P.C.
Certified Public
Accountants
New York, NY
February 10, 1999
386 PARK AVENUE SOUTH Suite 1618 New York, NY 10016
TEL 212.684 2414 FAX 212.684.5433 EMAIL [email protected]
a
<PAGE>
ARNOX CORPORATION
( A Dormant State Company)
Consolidated Balance Sheets
December 31, 1998 and 1997
1998 1997
ASSETS
Organization Cost 0.00 0.00
Total Assets 0.00 0.00
LIABILITIES AND STOCKHOLDERS'EQUITY
STOCKHOLDERS' EQUITY
Common Stock, par value $.001 per share;
10,000,000 shares authorized;
3,439,247 shares issued and outstanding 0.00 0.00
Additional Paid in Capital 32,254.66 21,838.66
Accumulated Deficit (32,254.66)(21,838.66)
Total Stockholders' Equity 0.00 0.00
Total Liabilities and Stockholders' Equity 0.00 0.00
See accompanying notes to financial
statements
<PAGE>
ARNOX CORPORATION
(A Dormant State Company)
Consolidated Statements of Operations
For the Year Ended December 31, 1998 and 1997
1998 1997
Revenues $ 0.00 $ 0.00
Expenses
Administrative Expenses 10,416.00 15,024.00
Filing Fees
Net Income/Loss for the year (10,416.00) (15,024.00)
See accompanying notes to financial statements
<PAGE>
ARNOX CORP0RATION
(A Dormant State Company)
Consolidated Statement of Changes in Shareholders'
Equity/(Deficit)
For the years ended December 31, 1998 and 1997
Common Stock $ 0.00 $ 0.00
(3,439,247 SHARES ISSUED
& OUTSTANDING)
Additional Paid in Capital 32,254.66 21,838.66
32,254.66 21,838.66
Balance January 1 ( 21,838.66) ( 6,814.66)
Net Income/(Loss) for the year ( 10,416.00) ( 15,024.00)
Balance December 31 -0- -0
See accompanying notes to financial
statements
<PAGE>
ARNOX CORPORATION
Statement of Cash Flows
For the Period Ended December 31, 1998
1998 1997
Cash Flows from Operating
Activities
Net Income ($10,416.00) ($15,024.00)
Net Cash Provided (Used)
By operating Activities ($10,416.00) ($15,024.00)
Cash Flows from Financing Activities
Proceeds from Capston
Paid in Capital 10,416.00 15,024.00
Net Cash Provided (Used)
By Financing Activities 10,416.00 15,024.0 0
Net Increase (Decrease) in Cash 0.00 0.00
Cash at Beginning of Period 0.00 0.00
Cash at End of Period $0.00$ 0.00
<PAGE>
ARNOX CORPORATION
(A Dormant State Company)
December 31, 1998
Note 1. HISTORY OF THE
COMPANY
Arnox Corporation, (A Dormant State Company), was incorporated on October 17,
1983 , under the laws of the State of Delaware. The Company conducted an initial
public offering of its Common Stock in October, 1985 and in connection with an
application to list its Common Stock on the NASDAQ system, the Company also
registered it Common Stock pursuant to Section 12(g) of the Securities Exchange
Act of 1934. The Company's Common Stock remained listed on the NASDAQ exchange
until April 25, 1989.
On September 11, 1989, the Company filed a voluntary petition under Chapter 11
of the Bankruptcy Act (Case No. 89-97155), in the U.S. Bankruptcy Court for the
District of New Jersey. On December 18, 1989, the Company's case under Chapter
11 was voluntarily converted into a case under Chapter 7 of the Bankruptcy Act.
As result of the voluntary conversion of the Company's bankruptcy case, all
assets of the Company were transferred to the Trustee in Bankruptcy on the
conversion date and the Company ceased all operations. Subsequently, the Trustee
in Bankruptcy effected an orderly liquidation of corporate assets and used the
proceeds to repay the Company's creditors. On July 12, 1994 the Company's case
under Chapter 7 was closed by the order of the Court and the Trustee in
Bankruptcy was discharged. As a result of the Bankruptcy, the Company has no
assets, liabilities, management or ongoing operations and has not engaged in any
business activities since December 18, 1989.
Note 2. RESTORATION OF CORPORATE
STATUS
On June 10, 1996, acting in its capacity as the holder of 884 shares (0.026%) of
the Company's common stock, and without first receiving the consent, approval or
authorization of any other person associated with the Company, Capston Network
Company effected a renewal, revival and restoration of the Company's certificate
of incorporation pursuant to Section 312 of the General Corporation Law of
Delaware. Thereafter, Capston filed a 10-K for the years ending December
1989-1995, and a Proxy Statement seeking approval and ratification of its
actions, along with authorization to seek a suitable business combination
transaction. This proxy statement was ultimately distributed to the Company's
stockholders and the proposals therein were approved by the holders of a
majority of the Company's issued and outstanding shares.
Under the terms of the original Proxy Statement, Capston was authorized to seek
a suitable business combination transaction on behalf of the Company and to
submit the terms of any proposed business combination transaction to the
Company's stockholders for their approval. Capston did not receive and was not
entitled to receive any equity interest in the Company as a result of its
actions prior to the date of the Proxy Statement. Moreover, Capston was not
entitled to reimbursements for any expenses incurred by it on behalf of the
Company except to the extent that the terms of a business combination
transaction provided for the reimbursement of such expenses. However, because
Sally Fonner is both the President of ARNOX and Capston. Prior Staff Accounting
Bulletins require under generally accepted accounting the treatment of debiting
the expenses with corresponding credit to paid-in capital. Future expenses of
Capston. or others will be treated this way. These expenses are actual.
.
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