SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
PRELIMINARY
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 approve the spin off to shareholders of MS Oil, Inc., a
wholly owned subsidiary;
(3) To authorize the Board of Directors to set a ratio for the
reverse split (pro-rata reduction of outstanding shares) of the issued
and outstanding common shares of the Company, such ratio not to exceed
one new share of common stock for 20 each shares of common stock now
issued and outstanding, to be determined by March 31, 1999 and amend to
the Articles of Incorporation as may be necessary;
(4) 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;
(5) To ratify the designation of Michael B. Johnson & Co. as
independent auditors for period ending May 31, 1999;
(6) To transact such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on ___________,
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: _______________ By Order of the Board of Directors
-----------------------------------
__________________, 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
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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
_____________, 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. February 28, 1999, shall be
the record date for determining shareholders entitled to vote and receive notice
of the meeting.
PROPOSAL NUMBER 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
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.
PROPOSAL #2
SPIN OFF OF MS OIL, INC. A WHOLLY OWNED SUBSIDIARY
The Company proposes to "Spin off" the MS Oil subsidiary to its
shareholders, pro rata on the basis of one share of MS Oil for each 100 shares
of common stock owned by a shareholder. MS Oil currently has minimal activity,
retaining interests in a few oil leases which are non-producing and retaining a
receivable from a wireline business.
Management of MS Oil consists of:
Rick A. Jenson, President and CEO. Mr. Jenson has 23 years of executive
and financial management experience. He obtain a BBA from the University of
Oklahoma in 1975. As a CPA, Mr. Jenson began his career in public accounting
with Peat Marwick, Mitchell & Co., serving primarily publicly traded companies
as their independent auditor. His experience includes positions as CFO of an
independent exploration and production company in Oklahoma and President of
commercial banks in Oklahoma and Louisiana, where he was active in energy
lending. From 1992 to 1999, he has served as a consultant to banks, small
businesses, and start-up companies, with an emphasis in the energy field.
Kevin W. Canton, Vice President - Marketing and Acquisitions. Mr. Canton
holds a Bachelor's degree in Marketing from the University of South Alabama
(1993). Additional studies include business research techniques and
international business. His professional career includes marketing positions
with a telecommunications emphasis. Mr. Canton's background also includes being
an officer and member of the Board of Directors of M.B. Canton Company, Inc.,
and Diamond River Investment Company, Inc., private investment companies. As a
member of these companies' managements, Mr. Canton has served as a team member
for numerous investment evaluation decisions. Mr. Canton has been employed as a
sales representative for Bell South Mobility since 1993.
Kresley Canton Kjellander, Vice President - Shareholder Relations. Ms.
Kjellander is a graduate of the University of Alabama (1997), earning a B.A. in
English with Emphasis in Writing. She currently serves as an officer and
director of M.B. Canton Company, Inc., and Diamond River Investment Company,
Inc. Her role will include, among other things, shareholder communications,
public reporting and dissemination of information to analysts and market makers.
The management team of MS has identified the domestic oil and gas
industry as a long term profit and growth opportunity. For those companies with
proper resources to capitalize upon acquisition of crude oil and natural gas
properties at the historically low prices present today, management believes the
cash flow potential is attractive.
The domestic oil and gas industry is highly competitive. While
decreasing in number in recent years, there are numerous companies and
individuals engaged in the exploration for and production of oil and gas. There
is a high degree of competition for desirable producing properties, leases, and
suitable prospects for oil and gas exploratory operations. However, the near
abdication of onshore exploration by the major oil and gas companies, combined
with the age of many producing properties and the decreasing costs of
exploration and production, present unique acquisition opportunities.
The MS management seeks to exploit the current low acquisition costs of
producing properties in anticipation of future price increases. Additionally, MS
will seize opportunities to increase production from old wells through
completion of previously untapped geological zones and via application of proven
work over techniques to enhance
<PAGE>
production from zones already perforated. Longer term strategies may include the
drilling of developmental wells on prospects and secondary and tertiary
production methods. With cash generated from stock sales and operations, as well
as the availability of publicly traded stock as currency, MS may ultimately seek
to acquire weaker oil and gas producing companies.
MS plans to utilize management contacts in Texas, Oklahoma, Louisiana,
Mississippi and other regional oil and gas producing states to identify and
acquire desirable properties consistent with the company's objectives. By
concentrating its efforts upon existing properties, the company immediately
overcomes potential hurdles in gas transmission availability, crude oil
marketing contracts, and other marketing challenges. Further, through the
acquisition of producing properties, much of the risk is steeply declining
production is eliminated.
It is the company's intent to employ financial acquisition models which
return initial investments and adequate profits over relatively short term
periods. By so doing, the company may limit its acquisition targets, but
alternatively will provide internally generated growth capital for further
acquisition and/or development.
Management of Nelx, Inc. and Management of MS Oil believes that the
interests of the shareholders may be better served by allowing MS Oil to be
sun-off to Nelx shareholders since the MS Oil business plan differs
substantially from that of Nelx, and MS Oil will, after spin-off, be in a
position to attempt to raise capital separately for its business plan.
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 spin
off of MS Oil, Inc. to shareholders.
Unless marked to the contrary, proxies received will be voted "FOR" the
spin-off proposal. Management recommends a vote "FOR" the proposal.
PROPOSED CHANGES IN CORPORATE CAPITALIZATION
AND AMENDMENT TO ARTICLES OF INCORPORATION
PROPOSAL #3
CHANGE OF OUTSTANDING SHARES
The Board of Directors of the Company is asking stockholders to
authorize a reverse split of the Company's issued and outstanding common shares.
The Board of Directors will be authorized to determine the ratio for the reverse
split (pro-rata reduction in outstanding shares), such ratio not to exceed 1 new
common stock share for every 20 shares of common stock issued and outstanding in
the hands of shareholders. The Board of Directors shall be authorized to set
such ratio in its discretion based upon factors including but not limited to:
a) NASDAQ listing requirements
b) then current trading price of the shares
c) asset values of the Company
d) advice of investment banking community
e) potential mergers
<PAGE>
The Board of Directors shall make such determination of reverse split
on or before March 31, 1999. 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. 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
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.
<PAGE>
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.
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 #4
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
Charter 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.
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 #5
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.
<PAGE>
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.
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
____________________, Secretary
Date: _________________
