NELX INC
DEF 14C, 1999-03-03
DRILLING OIL & GAS WELLS
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                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                -----------------



                                      FINAL
                             INFORMATIONAL STATEMENT

                          PURSUANT TO SECTION 14(c) OF

                       The Securities Exchange Act of 1934

                                   NELX, INC.

             (Exact name of registrant as specified in its charter)


                         Commission File Number: 0-21210

                                 CIK: 0000857501



         Kansas                                         84-0922335
- ---------------------------------                      ---------------------
(State or other jurisdiction                            (I.R.S. Employer
of incorporation or organization                        Identification No.)



 5750 W. 60th Avenue, Arvada, CO             80003
- ----------------------------------------     ----------
(Address of principal executive offices)     (Zip Code)




       Registrant's telephone number, including area code: (304) 622-9599




<PAGE>



                                   NELX, INC.

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                                 MARCH 12, 1999

     The Annual Meeting of  Stockholders  of Nelx,  Inc. (the "Company") will be
held on March 12, 1999 at 10:00 a.m., for the purpose of considering  and acting
upon the following proposals:

                  (1) To  elect a Board  of four (4)  directors  to hold  office
         until the next annual meeting of stockholders or until their respective
         successors have been elected and qualified;

                  (2) To authorize a the reverse  split  (pro-rata  reduction of
         outstanding  shares) of the issued and outstanding common shares of the
         Company of one new share of common  stock for 20 each  shares of common
         stock  now  issued  and  outstanding  and  amend  to  the  Articles  of
         Incorporation as may be necessary;

                  (3) To Amend the Articles of  Incorporation to change the name
         of the  Company  to a name  chosen  by the Board of  Directors,  in its
         discretion, within 60 days after date of meeting;

                  (4) To ratify the  designation  of Michael B. Johnson & Co. as
         independent auditors for period ending May 31, 1999;

                  (5) To  transact  such other  business  as may  properly  come
         before the meeting.

         The Board of Directors has fixed the close of business on March 1, 1999
as the record date for determination  of stockholders entitled  to notice of and
to vote at  the  Annual  Meeting   and  at  any  postponements  or  adjournments
thereof.

         The Company's May 31, 1998 Annual  Report to  Stockholders  accompanies
this Notice of Meeting and Proxy Statement.

Dated:  March 1, 1999                       By Order of the Board of Directors


                                            /s/ John Cowan
                                            -----------------------------------
                                            Secretary


YOU ARE  CORDIALLY  INVITED TO ATTEND THE MEETING IN PERSON.  WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ACCOMPANYING PROXY CARD.

<PAGE>



                                   NELX, INC.

                               5750 W. 60th Avenue
                                Arvada, CO 80003
                                 (304) 622-9599

                               ------------------

                                 PROXY STATEMENT

                               ------------------

                         ANNUAL MEETING OF STOCKHOLDERS

                                 MARCH 12, 1999


         This Proxy Statement is furnished in connection  with the  solicitation
by the Board of Directors (the "Board") of Nelx, Inc., a Kansas corporation (the
"Company"),  of proxies  for use at the Annual  Meeting of  Stockholders  of the
Company to be held on March 12, 1999. This proxy statement and the  accompanying
form of proxy are being mailed to stockholders on or about March 11, 1999.


                                  VOTING RIGHTS

     Stockholders  of record of the Company as of the close of business on March
1, 1999 have the right to receive  notice of and to vote at the Annual  Meeting.
On February 12, 1999, the Company had issued and outstanding  44,352,042  shares
of Common  Stock  (the  "Common  Stock"),  the only  class of voting  securities
outstanding.  Each  share of Common  Stock is  entitled  to one vote for as many
separate  nominees as there are  directors  to be elected and for or against all
other  matters  presented.  For  action to be taken at the Annual  Meeting,  the
majority of the shares  entitled to vote must be  represented  at the meeting in
person or by proxy. Shares of stock may not be voted  cumulatively.  Abstentions
and broker  non-votes each will be included in determining  the number of shares
present and voting at the Meeting. Abstentions will be counted in tabulations of
the votes cast on proposals,  whereas  broker  non-votes will not be counted for
purposes of determining whether a proposal has been approved.


                                     PROXIES

         Proxies for use at the Annual meeting are being  solicited by the Board
of Directors of the Company from its stockholders.

         Shares represented by properly executed proxies received by the Company
will be voted at the Annual Meeting in accordance with the instructions thereon.
It is intended that shares  represented by proxies  received by the Company with
no instructions  will be voted in favor of all proposals set forth in the Notice
of Meeting and for the nominees as described below.

         Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke it at any time  before its  exercise  by (i) filing with
the  Secretary of the Company a signed,  written  statement  revoking his or her
proxy,  or (ii)  submitting an executed  proxy bearing a date later than that of
the proxy being revoked. A proxy may also be revoked by attendance at the Annual
Meeting and election to vote in person.  Attendance  at the Annual  Meeting will
not, by itself, constitute the revocation of a proxy.

<PAGE>

         Additional  copies of the  Company's  Annual Report on Form 10- KSB for
the year ended May 31, 1998,  with exhibits,  may be obtained by any stockholder
of the Company,  without charge,  by writing to Nelx, Inc., 5750 W. 60th Avenue,
Arvada, CO 80003. One copy of Form 10KSB accompanies this Proxy Statement.


                               EXPENSE OF MAILING

         The expense of preparing and mailing of this  Information  Statement to
the shareholders of the Company is being paid for by the Company. The Company is
also requesting brokers,  custodians,  nominees, and fiduciaries to forward this
Information  Statement to the beneficial owners of the shares of common stock of
the Company held of record by such persons.  The Company will not reimburse such
persons for the cost of forwarding.


                 INTEREST OF PERSONS IN MATTERS TO BE ACTED UPON

         None. No director or shareholder  owning 10% or more of the outstanding
shares has  indicated  her or his intent to oppose any action to be taken at the
meeting. No officer or director or shareholder has any interest in any matter to
be voted upon.


                   VOTING SECURITIES AND BENEFICIAL OWNERSHIP

         As of the call date of the meeting, February 12, 1999, the total number
of common shares outstanding and entitled to vote was 44,352,042.

         The holders of such shares are entitled to one vote for each share held
on the record date. There is no cumulative voting on any matter on the agenda of
this meeting.  No additional  shares will be issued  subsequent to call date and
prior to meeting.


                                   RECORD DATE

     Stock transfer records will remain open. March 1, 1999, shall be the record
date for  determining  shareholders  entitled to vote and receive  notice of the
meeting.


                                  PROPOSAL # 1

                      NOMINATION AND ELECTION OF DIRECTORS

         The Company's Bylaws  currently  provide for the number of directors of
the  Company to be  established  by  resolution  of the Board of  Directors.  By
resolution dated January 11, 1999, the Board fixed the size of the Board at four
(4)  persons.  At the  Annual  Meeting,  a Board of four (4)  directors  will be
elected.  Except as set forth  below,  unless  otherwise  instructed,  the proxy
holders will vote the proxies  received by them for that any Management  nominee
shall become  available,  or it other persons are  nominated,  the proxy holders
will vote in their  discretion for a substitute  nominee.  The term of office of
each person elected as a director will continue until the next Annual Meeting of
Stockholders or until a successor has been elected.

         The proxies  solicited  hereby  cannot be voted for a number of persons
greater  than  the  number  of  nominees   named  below.   The   Certificate  of
Incorporation of the company does not permit  cumulative  voting. A plurality of
the votes of the holders of the outstanding  shares of Common Stock  represented
at a meeting at which a quorum is present may elect directors.


<PAGE>

         THE DIRECTORS NOMINATED BY MANAGEMENT ARE:

Charles L. Stout, age 48

         President  and  Director,  obtained a B.S.  in  Mechanical  Engineering
Technology  from Fairmont  State  College.  He has post  graduate  study at West
Virginia  University.   He  is  President  and  Director  of  Applied  Mechanics
Corporation which he founded in 1983, a West Virginia Oil and Gas producer. From
1984 to  present,  he has been  President  of  Appalachian  Labor  and  Economic
Development  Corps., Ltd. He is a director of Square Roots, Inc. and is owner of
Applied Machining, Inc., a tool and die shop.

John Cowan, age 50

         Director and Secretary of Registrant,  is a Professional Engineer and a
practicing  attorney.  He received a BA in Math in 1980 from Metropolitan  State
College, a BS in Civil Engineering in 1983 and a Juris Doctorate from University
of Denver in 1988. From 1988 to 1991 he was an attorney in the firm of Welborne,
Dufford,  Brown, and Tooley in Denver. From 1991 to 1992 he was a staff attorney
with CDM Federal Programs Corp., an EPA contractor. In 1992 until 1993 he was an
associate with the Musick & Associates,  a law firm in Boulder,  Colorado.  From
1993 to 1995 he was Special  Counsel to Welborn  Sullivan  Meck & Tooley,  a law
firm in Denver,  Colorado.  From 1995 to present he has been a sole practitioner
attorney.

Bruce Bowler, age 57

     Director of the  Registrant,  received  his  education  at  Colorado  State
University from 1959 to 1961 and University of Denver from 1961 to 1963 where he
received a BSBA in Building  Industry and Real Estate. He has been a Real Estate
Broker in Colorado  since 1973. In the lending  industry,  he was: a) Designated
FNMA  Underwriter;  b) Designated VA Automatic  Underwriter;  c) Designated  FHA
Underwriter for FHA Coinsurance program; d) Designated FHA Underwriter under HUD
Direct  Endorsement  Program;  and e) Certified FHA 203(k)  Rehabilitation  Loan
Program  Trainer.  From 1984 to July 31, 1998 was CEO and Chairman and principal
in Universal Lending  Corporation,  a mortgage banker.  From 1982 to 1984 he was
Senior Vice  President/Director  of Mortgage  Banking  Division of Van Schaack &
Company.  From 1980 to 1982 he was Senior Vice President of Secondary  Marketing
for Moore Mortgage Company. From 1979 to 1980 Mr. Bowler was a Vice President at
Western Bancorp Mortgage Corp. From 1975 to 1979 he advanced from Branch Manager
to Assistant Vice President to Vice President in Mortgage Banking at Van Schaack
& Company.

Denis Iler, age 60

         Mr.  Iler  received  a BA in Math  from San Jose  State  University  in
California,  and a MBA from Regis  University in 1982. He was a comptroller with
Berge  Exploration  from 1978 to 1984.  Since 1984,  he has been  President  and
principal  accountant  for Business  Financial  Systems,  Inc.,  an  independent
accounting  firm,  providing tax and accounting  services for the small business
community,  including  oil and  gas,  construction,  and real  estate  brokerage
accounting.


                          VOTING REQUIRED FOR APPROVAL

APPROVAL  OF THIS  PROPOSAL  #1  REQUIRES  AN  AFFIRMATIVE  VOTE  OF AT  LEAST A
PLURALITY  OF THE SHARES  VOTING AT THE ANNUAL  MEETING,  IN PERSON OR BY PROXY.
PROXIES GIVEN WITHOUT INSTRUCTION WILL BE VOTED IN FAVOR OF THE NOMINEES.


      THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" MANAGEMENT'S NOMINEES



<PAGE>



Committees and Meetings

         The Board of Directors held three meetings during fiscal  1997-98.  The
Board of Directors have a standing Audit and Compensation  Committee.  The Audit
Committee  conducted  its business  during the regular  meetings of the Board of
Directors  during the last fiscal year and, in addition,  conferred from time to
time as necessary.  The Compensation  Committee, in addition to meetings as part
of the regular  meetings of the Board of Directors,  also conferred from time to
time as necessary.  The Board of Directors has no standing nominating committee.
All directors  attended more than 75% of the Board  meetings and the meetings of
the committees of the Board on with such directors served.

         The Audit  Committee of the Board  presently  consists of Mr. Stout and
Mr. Bowler.  The Audit Committee has the  responsibility  to review the scope of
the annual audit,  recommended to the Board of Directors the  appointment of the
independent  auditors,  and meet with the  independent  auditors  for review and
analysis of the Company's systems, the adequacy of controls, and the sufficiency
of financial reporting and accounting compliance.

     Messrs. Cowan and Bowler currently serve on the Compensation Committee. The
Compensation   Committee   administers  the  Company's   Compensation  Plan  and
determines  the  compensation  to be paid to  each  of the  Company's  executive
officers.

          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS

         The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of February 12, 1999 by: (1) each person who is
known by the Company to  beneficially  own more than five  percent of the Common
Stock,  (ii)  each  of the  Company's  directors,  (iii)  all  of the  Company's
Officers,  and (iv) all  directors  and  executive  officers of the Company as a
group.  Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and  investment  power with  respect to the shares of
Common Stock shown as beneficially  owned by them, subject to community property
laws where applicable.

<TABLE>
<CAPTION>

<S>                                          <C>                         <C>
                                             Amount and Nature           Percent
                                             of Beneficial               of
Name of Beneficial Owner                     Ownership                   Class  
- -------------------------                    --------------------        -------

Charles L. Stout                             14,025,000                   31.5%

John Cowan                                    1,000,000                    2%

Bruce Bowler                                  3,250,000                    7.4%

Denis Iler                                            0                    0%

Total owned by Officers and Directors        18,275,000                   41%

</TABLE>

                      COMPENSATION COMMITTEE INTERLOCKS AND
                 INSIDER PARTICIPATION IN COMPENSATION DECISIONS


         The Securities and Exchange  Commission  requires  disclosure  where an
executive  officer  of a  company  served  or  serves  as a  director  or on the
compensation  committee  of an entity  other than the Company  and an  executive
officer  of  such  other  entity  served  or  serves  as a  director  or on  the
compensation  committee  of the  Company.  The  Company  does  not have any such
interlocks.  Decisions as to executive compensation are made by the Compensation
Committee. Messrs. Cowan and Bowler are members of the Compensation Committee.


<PAGE>


                              CERTAIN TRANSACTIONS

     On October 9, 1997, Charles L. Stout purchased  20,000,000 shares of common
stock for $20,000 and a commitment to fund additional payables. Charles L. Stout
was then appointed President and Director. Subsequently, Mr. Stout provided over
$200,000 to pay debts of the Company.

         In July, 1998, the Company entered into an agreement whereby subject to
certain  conditions due diligence and audits,  the Company would acquire 100% of
Applied Mechanics,  Inc. an oil and gas producer owned by director and President
Charles  Stout  for  approximately  100  million  shares of  common  stock.  The
transaction has not been  consummated,  and it is subject to several  conditions
and due diligence by the directors.

         In July,  1998,  Charles and Marilyn Stout have returned a total of six
(6) million shares of common stock to treasury to reduce dilution.

         In July, 1998, Bruce Bowler, a newly appointed director,  purchased two
(2) million shares of common stock for $.08 per share ($160,000).

         In July,  1998, the Board approved the issuance of 1,000,000  shares of
common stock each to directors Harry Bullock, Bruce Bowler, and John Cowan for a
purchase price of $1,000 and the agreement to serve as directors and officers of
the Company without further compensation for no more than two years.

     In July, 1998, the Board approved the issuance of one (1) million shares of
common stock to  Mind2Market,  Inc. in  consideration  of full settlement of all
claims against NELX, Inc. and pursuant to a prior agreement between Mind2Market,
Inc. and NELX, Inc.


                             EXECUTIVE COMPENSATION

Summary Compensation Table

        The following  table sets forth all  compensation  for the fiscal years
ending  May 31,  1997 and 1998  awarded  to,  earned  by,  or paid for  services
rendered to the Company in all capacities by, the Named Individuals.

<TABLE>
<CAPTION>

<S>                                     <C>                 <C>           <C>
                                        ANNUAL COMPENSATION ($$)
Name and Position                       Year                Fees          Bonus
- -----------------                       ----                --------      -----
Charles L. Stout, President & Dir.      1997                 $0           $0
                                        1996                 $0           $0

Kenneth L. Curry, V.P.                  1997                 $0           $0
(now resigned)                          1996                 $0           $0

Harry Bullock, Vice President           1997                 $0           $0
(deceased)                              1996                 $0           $0

Bruce Bowler - Director                 1997                 $0           $0
                                        1996                 $0           $0

Kenneth L. Curry, Director              1997                 $0           $0
(now resigned)                          1996                 $0           $0

Directors as a group                    1997                 $0           $0

                                        1996                 $0           $0
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                             LONG TERM COMPENSATION

<S>                      <C>                <C>          <C>          <C>       <C>
                                            Options
                         Restricted                      & SARs
                         Stock                           LTIP                   LTIP
Other                    Awards             Payouts      Payouts      Other     Compensation
- -----                    ------             -------      -------      -----     ------------

Charles L. Stout         0                  None         None         None      0

John Cowan               1,000,000*         None         None         None      0

Harry Bullock            1,000,000*         None         None         None      0
(deceased)

Bruce Bowler             1,000,000*         None         None         None      0

Kenneth L. Curry         None               None         None         None      0

</TABLE>

All directors and officers as a group  received  3,000,000  shares as additional
compensation


         Option/SAR Granted During the Last Fiscal Year

         Registrant  does not have a stock option or stock  appreciation  rights
plan. Therefore, this section is not applicable.

Option Grants in Last Fiscal Year

         No options  were  granted  during the fiscal year ended May 31, 1998 to
the Named Individuals.

Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value Table

         No options were exercised  during the fiscal year ended May 31, 1998 by
any of the  Named  Individuals.  The  last  sale  price of the  Common  Stock as
reported on the NASDAQ Stock Market on May 31, 1998,  the fiscal  year-end,  was
$.045 per share.

Directors' Compensation

         Non-employee  directors may be compensated as follows: $500 per meeting
attended, $100 per year for committee membership.  Directors must serve one full
quarter in order to be eligible for  compensation.  Directors are reimbursed for
expenses in attending Board meetings.

Employment Agreements

         The Company has no Employment Agreement with any officer.

Indemnification of Directors and Officer

         As permitted by the Kansas  Corporation Law, the Company will indemnify
for the personal  liability of its directors for monetary  damages for breach or
alleged  breach of their duty of care.  In addition,  as permitted by the Kansas
Corporation  Law, the Bylaws of the Company  provide  generally that the Company
shall  indemnify its directors and officers to the fullest  extent  permitted by
Kansas  law,  including  those  circumstances  in  which  indemnification  would
otherwise be discretionary.


<PAGE>


         This indemnification  provision in the Bylaws may be sufficiently broad
to permit  indemnification of the officers and directors for liabilities arising
under the Securities Act of 1933, as amended (the "Securities Act").

         Insofar as indemnification for liabilities arising under the Securities
act may be permitted to  directors,  officers,  and  controlling  persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised  that in the opinion of the  Securities  and  Exchange  Commission  such
indemnification  is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.


                  PROPOSED CHANGES IN CORPORATE CAPITALIZATION
                   AND AMENDMENT TO ARTICLES OF INCORPORATION

                                   PROPOSAL #2
                          CHANGE OF OUTSTANDING SHARES

         The Board of Directors of the Company is asking stockholders to approve
a reverse split of the Company's issued and outstanding common shares. The ratio
for the reverse split (pro-rata  reduction in outstanding  shares), 1 new common
stock share for every 20 shares of common  stock issued and  outstanding  in the
hands of shareholders.

         The reverse split shall be effective as of date of shareholder meeting.
The Board believes that such reverse split of the Company's  capital shares will
lend itself better to the Company's organization and capitalization and allow it
to find an  acquisition  or merger  candidate  and make  private  placements  of
capital.  The  Company  may  file  Articles  of  Amendment  to the  Articles  of
Incorporation as may be required under Kansas law.

         Management Discussion of the Proposal

     Management of the Company  believes that the proposed  amendment  will make
the  Company  better  able  to  comply  with  NASDAQ's  ever  changing   listing
requirements in the event it finds an  acquisition/merger  candidate by reducing
the outstanding shares in the Company. The Company currently has over 46 million
shares outstanding with no net worth and minimal market capitalization. It would
be practically  impossible to find an  acquisition  candidate even if its assets
made  it  otherwise  NASDAQ  eligible,  which  would  accept  such a high  share
capitalization,  even if no more  shares  were  issued.  Further,  it is  highly
unlikely  that the  trading  price of shares of a 46 million  share  capitalized
company would ever meet the NASDAQ trading price requirements.

         Current NASDAQ "Small Cap" listing requirements are:

         a)       Net Tangible Assets                           $ 4,000,000
                  ---

                           or

                  Market Capitalization                         $50,000,000

                           or

                  Net Income                                    $   750,000
                  (in latest fiscal year or
                  2 of last 3 fiscal years)

         b)       Public Float (shares)                           1,000,000

         c)       Market Value of Public                        $ 5,000,000

         d)       Minimum Bid Price                             $         4.00


<PAGE>


         e)       Market Makers                                           3

         f)       Shareholders - (round lots)                           300

         g)       Market History                                     1 Year

         h)       Corporate Governance -
                  Standards                                           Yes

         Once  the  reverse  split  has  occurred,  more  potential  acquisition
candidates may consider the Company  attractive in its then restructured  state.
Further,  the Company will then be better  structured to seek equity  financing,
because  investors shy away from the very high dilution  which would occur if an
investment were made in the current structure.

         Management  recommends  a vote  "FOR" the  proposal  to  authorize  the
reverse split.


                          VOTING REQUIRED FOR APPROVAL

         I. A majority of the shares of common stock  outstanding  at the record
date must be  represented  at the Annual  Meeting in person or by proxy in order
for a quorum to be present,  but if a quorum should not be present,  the meeting
may be  adjourned  without  further  notice  to  shareholders  until a quorum is
assembled.  Each  shareholder  will be  entitled  to cast one vote at the Annual
Meeting for each share of common stock registered in such  shareholder's name at
the record date.

         II.  The  Kansas  Corporation  Act and the  Articles  of  Incorporation
require that 51% of the outstanding shares vote in favor of the proposed reverse
split and any Amendment to the Articles of Incorporation which may be required.


<PAGE>


         Unless marked to the contrary, proxies received will be voted "FOR" the
reverse  split   authorization   and  for  the  Amendment  to  the  Articles  of
Incorporation.


                                   PROPOSAL #3
                            CHANGE IN CORPORATE NAME

         The Board is asking  shareholders  to  authorize  a name  change of the
Corporation  at the  discretion  of the Board and to approve an amendment to the
Articles of Incorporation upon such new name being determined by the Board.


                          VOTING REQUIRED FOR APPROVAL

         I. A majority of the shares of common stock  outstanding  at the record
date must be  represented  at the Annual  Meeting in person or by proxy in order
for a quorum to be present,  but if a quorum should not be present,  the meeting
may be  adjourned  without  further  notice to  shareholders,  until a quorum is
assembled.  Each  shareholder  will be  entitled  to case one vote at the Annual
Meeting for each share of common stock registered in such  shareholder's name at
the record date.

         II.  The  Kansas  Corporation  Act and the  Articles  of  Incorporation
require  that  51% of the  outstanding  shares  vote in  favor  of the  proposed
Amendment to the Articles of Incorporation.


<PAGE>




         Unless marked to the contrary, proxies received will be voted "FOR" the
amendment to the Articles of Incorporation to change the name of the Corporation
in the Articles of Incorporation.

         The  Board  recommends  a vote  "FOR"  the  proposed  Amendment  to the
Articles of Incorporation to change the name of the Corporation.

                                   PROPOSAL #4
                      RATIFICATION OF INDEPENDENT AUDITORS

     The Board of Directors  has approved the  retention of Michael B. Johnson &
Co. as  independent  auditors for the Company for the current  fiscal year.  The
stockholders  are asked to ratify the designation of Michael B. Johnson & Co. as
independent auditors for the Company for the fiscal year ending May 31, 1999.


     Should  the  stockholders  fail to ratify  the  designation  of  Michael B.
Johnson & Co. as independent auditors, retention of the firm for the fiscal year
ending May 31, 1999 will be reconsidered by the Board of Directors.

     Unless  marked  to the  contrary,  proxies  received  will be  voted  "FOR"
ratification  of the  designation  of  Michael B.  Johnson & Co. as  independent
auditors for the Company's fiscal year ending May 31, 1999.


THE BOARD OF DIRECTORS  RECOMMENDS A VOTE "FOR"  RATIFICATION  OF THE  COMPANY'S
INDEPENDENT AUDITORS.


                          VOTING REQUIRED FOR APPROVAL

         I. A majority of the shares of common stock  outstanding  at the record
date must be  represented  at the Annual  Meeting in person or by proxy in order
for a minimum to be present,  but if a quorum should not be present, the meeting
may be  adjourned  without  further  notice  to  shareholders  until a quorum is
assembled.  Each  shareholder  will be  entitled  to cast one vote at the Annual
Meeting for each share of common stock registered in such  shareholder's name at
the record date.

         II.  The  Kansas  Corporation  Act and the  Articles  of  Incorporation
require that a plurality  of the shares  present at the meeting vote in favor of
the proposed ratification of independent auditor.



<PAGE>


                                  OTHER MATTERS

         Proposals  Intended  to  be  Presented  at  the  Next  Annual  Meeting.
Proposals of security  holders  intended to be presented at the  Company's  next
Annual Meeting of Stockholders  must be received by the Company for inclusion in
the Company's proxy statement and form of proxy no later than October 1, 1999.

         Other Matters.  Management  knows of no business that will be presented
for  consideration  at the Annual  Meeting other than as stated in the Notice of
Meeting. If, however,  other matters are properly brought before the meeting, it
is the intention of the persons named in the accompanying  form of proxy to vote
the shares  represented  thereby on such matters in  accordance  with their best
judgment.

         Proxy  Solicitation.  The expense of  solicitation  of proxies  will be
borne by the Company.  In addition to solicitation  of proxies by mail,  certain
officers,  directors,  and  company  employees  who will  receive no  additional
compensation for their services may solicit proxies by telephone,  telegraph, or
personal interview.  The company is required to request brokers and nominees who
hold stock in their name to furnish this proxy material to beneficial  owners of
the stock and will  reimburse  such brokers and  nominees  for their  reasonable
out-of-pocket expenses in so doing.

                                           By Order of the Board of Directors


                                           /s/ John Cowan
                                           -------------------------------------
                                           Secretary
Date: March 1, 1999



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