SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
SOLUTIONS INCORPORATED
(Name of Registrant as Specified In Its Charter)
SOLUTIONS INCORPORATED
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-(6)(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies: ________________________________________________
2) Aggregate number of securities to which transaction
applies: ________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: _/
__________________________________________________________
4) Proposed maximum aggregate value of transaction:
__________________________________________________________
_/ Set forth the amount on which the filing fee is calculated and
state how it was determined.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the off setting fee was paid previously. Identify the
previous filings by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
$0.00
2) Form, Schedule or Registration Statement No.:
SEC File No. 0-24512
3) Filing Party:
Solutions Incorporated
4) Date Filed:
August 16, 1996
<PAGE>
SOLUTIONS INCORPORATED
(a Nevada corporation)
Notice of Special Shareholder Meeting
and
Proxy Statement
<PAGE>
CONTENTS
Letter from the Chairman...................................... 3
Notice of Special Shareholder Meeting......................... 4
Proxy Statement............................................... 6
* Share Exchange Agreement and Plan of Reorganization........ 8
Proposed Terms of Acquisition............................ 10
Allocation of Shares..................................... 10
Material Risk Factors.................................... 11
Suarro Communications,Inc.-Description of Business....... 15
Directors and Executive Officers of Suarro............... 25
Financial Statements of Suarro........................... 28
* Proposed Amendments to Articles of Incorporation Regarding
Increasing the Authorized Capital and Changing the Name of
Company................................................. 32
Rights of Dissenting Shareholders............................ 33
Other Matters................................................ 35
* To be voted on at meeting
Every Shareholder's Vote Is Important
Please Complete, Sign, Date and Return
Your Proxy Form
<PAGE>
SOLUTIONS INCORPORATED
#6 Venture, Suite 207
Irvine, California 92718
August 16 , 1996
Dear Shareholder:
You are invited to attend the special meeting of shareholders
of Solutions Incorporated, to be held on August 30
, 1996 in
Irvine, California.
The Special Meeting will begin with a discussion and voting of
the matters set forth in the accompanying Notice of Special Meeting
and Proxy Statement and on other business matters properly brought
before the meeting.
Whether or not you plan to attend, you can be sure your shares
are represented at the meeting by promptly completing, signing,
dating and returning your proxy form in the enclosed envelope.
Cordially,
Randel C. Sherwood,
President and Chairman
of the Board
<PAGE>
SOLUTIONS INCORPORATED
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD
AUGUST 30 , 1996
To The Shareholders Of
SOLUTIONS INCORPORATED:
Please take notice that a Special Meeting of Shareholders of
Solutions Incorporated will be held at the principal offices of the
Company, #6 Venture, Ste. 207, Irvine, California, on August 30 , 1996 at
11:00 A.M. to consider and vote on the following matters:
1. To consider and act upon a proposal to ratify a Share
Exchange Agreement and Plan of Reorganization providing
for the acquisition of all of the issued and
outstanding common shares of Suarro Communications, Inc.
("SCI"), the terms of which are more fully described in
the accompanying Proxy Statement;
2. To consider and act upon a proposal to approve two
amendments to the Articles of Incorporation, including
(i) changing the name of the Company from Solutions
Incorporated to Suarro Communications, Inc. and
(ii) increasing the number of common shares authorized for
issuance from 1,000,000 common shares, $.001 par value, to
20,000,000 common shares, $.001 par value and authorizing
1,000,000 preferred shares, no par value per share;
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
April 25, 1996 has been fixed as the record date of the
shareholders entitled to vote at the meeting and only holders of
shares of common stock of record at the close of business on that
day will be entitled to vote. The stock transfer books will not be
closed. The proposals my be confirmed earlier by unanimous consent.
All shareholders are cordially invited to attend the meeting.
To insure your representation at the meeting, please complete and
promptly mail your proxy, which is solicited by the Board of
<PAGE>
Directors, in the return envelope provided. This will not prevent
you from voting in person, should you so desire, but will help to
secure a quorum and avoid added solicitation costs.
By Order of the Board of Directors
Suzanne R. Johnson, Secretary
Dated: August 16 , 1996
Please date and sign the accompanying Proxy Card and mail it
promptly in the enclosed envelope.
SOLUTIONS INCORPORATED
#6 Venture, Ste. 207
Irvine, California 92718
<PAGE>
PRELIMINARY COPY - FOR THE INFORMATION OF
THE SECURITIES AND EXCHANGE COMMISSION ONLY.
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
To Be Held August 30 , 1996
This Proxy Statement is furnished to Shareholders in
connection with the proposals to approve a Share Exchange Agreement
and Plan of Reorganization provided for acquisition of all of the
issued and outstanding common stock of Suarro Communications, Inc.,
("SCI"), to amend the Company's Articles of Incorporation, changing
the name of the Company to "Suarro Communications, Inc." and
increasing the number of common shares authorized for issuance from
1,000,000 common shares, $.001 par value, to 20,000,000 common
shares, $.001 par value and authorizing 1,000,000 preferred shares,
no par value per share.
GENERAL
This Proxy Statement is being mailed to Shareholders on or
about August 16 , 1996, and is furnished in connection with the
solicitation by the Board of Directors of SOLUTIONS INCORPORATED
(the "Company"), of proxies in the enclosed form to be used and the
Special Meeting of Shareholders of the Company, to be held
, 1996 and any adjournment or adjournments thereof. However, if it
appears to the Company's Board of Directors that there is no
shareholder opposition to the Proposals presented herein, the
Company may not hold a formal meeting of shareholders, but will
obtain the consent of a majority of the Company's shareholders
pursuant to the laws of the state of Nevada.
The form of proxy accompanying this Proxy Statement and the
persons named therein as proxies have been approved by the Board of
Directors of the Company. Any proxy given pursuant to this
solicitation is revocable at any time prior to the exercise thereof
by filing with the Secretary of the Company written notice revoking
it or a duly executed proxy bearing a later date and the person
executing the same, if in attendance at the meeting, may vote in
person instead of by proxy. When proxies in the form accompanying
this Proxy Statement are returned properly executed, the shares
represented thereby will be voted as indicated therein and in this
Proxy Statement, and where a choice has been specified by the
shareholder on the proxy, the shares will be voted in accordance
with the specifications so made. Additional solicitations may be
made by telephone and personal contact by the Company's directors
and officers, for which no compensation shall be paid other than
their regular salary (if any). The expense of solicitation of
<PAGE>
proxies, including the cost of preparing, assembling and mailing
the material submitted herewith, will be paid from the funds of the
Company.
Matters to be considered and acted upon at the meeting are set
forth in the Notice of Special Meeting accompanying this Proxy
Statement and are more fully outlined herein.
VOTING RIGHTS
Shareholders of record at the close of business on April 25,
1996 are entitled to vote at this meeting. On that date, the
Company had issued and outstanding 50,000 shares of its Common
Stock, par value $.001 per share. There were no other voting
securities issued and outstanding. A majority of the outstanding
shares will constitute a quorum at the meeting. Abstentions and
broker non-votes are counted for purposed of determining the
presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on
proposals presented to stockholders, whereas broker non-votes are
not counted for purposes of determining whether a proposal has been
approved. Holders of the issued and outstanding Common Shares are
entitled to one vote for each share held by them.
PRINCIPAL SHAREHOLDERS
Under Section 13(d) of the Securities Exchange Act of 1934, a
beneficial owner of a security is any person who directly or
indirectly has or shares voting or investment power over such
security. The following are the holders which are known by the
Company to own beneficially more than 5% of any class of its voting
shares as of April 25, 1996, the record date:
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Per Cent
of Beneficial Owner Beneficial Ownership of Class
___________________ _____________________ _________
<S> <C> <C>
Randel C. Sherwood 12,500 shares 25%
6110 Jacaranda Ln.
Yorba Linda, CA 92687
Suzanne R. Johnson 10,000 shares 20%
R.R. #1, Box 2790
Plainsfield, VT 05667
Kenneth L. Kisner 10,000 shares 20%
508 S. Montezuma
Prescott, AZ 86301
All Officers and 325,000 shares 65%
Directors as a
Group (three persons)
</TABLE>
The shareholders listed above represent all of the Company's
officers and directors. Each shareholder has indicated that he or
she intends to vote in favor of all of the Proposals submitted
herein. Therefore, approval of the two Proposals included herein
is assured.
PROPOSAL 1: SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
The Company has been in the developmental stage since
inception and has undertaken no business operations to date. Other
than issuing shares to its original shareholders, the Company has
never commenced any operational activities. As such, the Company
can be defined as a "shell" company, who's sole purpose at this
time is to locate and consummate a merger or acquisition with a
private entity, in order that the shareholders of the Company may
benefit from increased liquidity in their respective securities
holdings in the Company. Relevant thereto, the Company's Board of
Directors has unanimously approved, on behalf of the Company, terms
of a Share Exchange Agreement and Plan of Reorganization (the "SCI
Agreement"), with the Suarro Communications, Inc. ("SCI"), a
privately-held company organized in accordance with the laws of the
State of Texas.
In March 1996, representatives of management of SCI
contacted legal counsel to the Company, seeking to merge with a
public vehicle. SCI had indicated that it was interested in
effecting a reorganization with an entity that was a reporting
company under the Securities and Exchange Act of 1934, as
amended, in order to access the public capital markets to
implement its contemplated business plans. Counsel to the
<PAGE>
Company, being aware of the Company's status as a "shell" company
with a need to find a private entity with which to merge,
approached management to discuss the possibility of their
interest in a merger transaction. Thereafter, the Company and
SCI, through their respective management and counsel for the
Company, conducted a preliminary review of the business
prospects, management, corporate standing, financial condition
and other relevant matters with respect to the Company and SCI.
During this time, management of the Company also discussed the
proposed transaction with all or a significant number of the
Company's present shareholders in order to obtain input into the
proposed change in the Company's business and provide assurances
that the shareholders would support the transaction relevant
herein. The representative of the Company during this process
included Mr. Sherwood, the Company's President and the Company's
legal counsel; representatives of SCI included Mr. McAuliffe, its
President. On April 25, 1996, and as amended in May 1996, the
Company's Board of Directors unanimously approved the general
terms of the SCI transaction, authorized the execution of the
letter of intent and amendments thereto with SCI, calling for a
special meeting of shareholders, establishing the agenda
therefore and other relevant matters. The agreement provides,
among other things, for the Company to amend its Articles of
Incorporation to increase its authorized capital to 20,000,000
common shares, par value $0.001 per share and 1,000,000 preferred
shares, no par value per share, undertake a forward split of its
issued and outstanding common stock wherein twenty (20) shares of
common stock will be issued in exchange for each common share and
thereafter, issue up to 5,200,000 shares of its "restricted"
common stock (post forward split) in exchange for all of the
issued and outstanding common shares of SCI, representing 300,000
common shares. The balance of the terms of the letter of intent
included various representations by the two companies, including
their respective capitalization, authority to undertake the
proposed transaction, terms relevant to closing of the proposed
transaction and other miscellaneous matters. On June 5 , 1996,
the Company filed a Form 8-K with the Securities and Exchange
Commission ("SEC"), advising of the execution of the Letter of
Intent. The disclosure included in the aforementioned Form 8-K is
hereby incorporated by reference as if set forth herein.
The purpose of Proposal 1 is to obtain approval of the terms
of the SCI Agreement with SCI described herein. The Company
believes that the acquisition will be a non-taxable event which
will not result in any adverse tax consequences, either to the
Company or to its shareholders. A description of SCI's history,
business plan and financial information is included hereinbelow.
The principal reason for accepting the terms of the SCI
Agreement is to permit application of the Company as a public
<PAGE>
vehicle to what management of the Company believes to be the
strong, viable business potential provided by SCI and its
management. Management was attracted to SCI because of what the
Company's Board of Directors viewed as the timely product and the
type of business engaged by SCI and the potential for SCI's growth,
as well as the potential opportunity to provide liquidity for the
Company's shareholders.
Proposed Terms of Acquisition
The Company presently has 50,000 common shares issued and
outstanding. Under the proposed SCI Agreement, the Company would
issue 5,200,000 "restricted" common shares to the shareholders of
SCI (post forward split), in exchange for 300,000 common shares
of SCI, which number represents all of the issued and outstanding
shares of SCI.
Allocation of Shares of the Company
The number of shares of the Company's common stock to be
issued for the shares of SCI was determined initially by arms-
length negotiations between the two parties. Among the principal
factors considered by the Board of Directors of the companies in
determining the number of shares to be issued were each company's
respective cash, assets and liabilities and the arbitrary value
placed upon the Company in these negotiations for being a public
reporting company. Other considerations relevant to SCI were
available technical and managerial resources; prospects for the
future; nature of present and expected competition; and the
potential for growth or expansion; the potential for profit; the
perceived public recognition of acceptance of products, services,
or trades; name identification and other relevant factors, as
well as the necessity in managements' view to structure a
reorganization without incurring negative tax consequences.
Based upon the foregoing factors, if the proposed reorganization
described herein is consummated, the Company's shareholders will
hold nineteen percent (19%) of the common stock outstanding and
the SCI shareholders will hold eighty one percent (81%) of the
common stock outstanding in the post-reorganization Company. The
Company's shareholders will accordingly hold nineteen percent
(19%) of the votes for the election of the Board of Directors and
other corporate matters to which shareholders are entitled to
vote and the SCI shareholders will hold eighty one percent (81%)
of such votes. It is anticipated that SCI will represent one
hundred percent (100%) of the post-reorganization Company's
revenue, income, if any, and assets.
<PAGE>
Material Risk Factors
Following are various potential risk factors which the
shareholders of the Company should consider which may exist
relevant to the successful consummation of the SCI transaction.
1. Suarro Communications, Inc.
a. Going Concern. In the event SCI cannot obtain other
financing, this may impact its ability to continue as a going
concern. SCI's financial statements included in this Proxy
Statement have been prepared assuming that the Company will
continue as a going concern, which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. The financial statements do not include any adjustment
that might result from the outcome of this uncertainty.
b. Development Stage Company. SCI is a development stage
enterprise and has generated no revenues to date. The founders
and principal shareholders of SCI have undertaken the development
of the proprietary software and limited marketing of SCI's
"Annual Reports On-Line" (herein "ARO") before and since SCI's
inception. In order to fully undertake the marketing of the ARO
product (or any other SCI product) SCI must obtain significant
additional capital and/or equipment. There is no assurance that
SCI will obtain the needed additional capital. (See Risk Factor
"Undercapitalization".)
c. Undercapitalization/Need for Additional Financing. In
order to begin its business operations and generate revenues , SCI
requires substantial and immediate financing. Presently, SCI has no
commitments for any interim or permanent financing, including any
debt or equity financing and there is no assurance that any
financing will become available in order for SCI to begin its
operations. However management of SCI have and will continue to
undertake such discussions with venture capitalists, investment
bankers, banking institutions and others. The management of SCI
will also consider a public and/or private offering of the post-
reorganization Company's securities to obtain needed financing. If
any debt or equity financing becomes available, there can be no
assurance that the terms of such financing will be favorable to
SCI. Moreover, any such financing may result in the imposition of
restrictions on SCI's future borrowings and operating policies and,
in the case of equity financing, may substantially dilute the
equity position of SCI's shareholders. (See Risk Factor
"Dilution".)
d. Limited Operating History/Pro Forma Loss From Operations.
SCI was incorporated on March 1, 1996 and, in addition to acquiring
the proprietary software discussed herein since its inception, has
<PAGE>
devoted a substantial amount of its time to organizational
activities as of the date of this Proxy. The operations of SCI are
subject to all of the risks inherent in the establishment of a new
business enterprise. SCI's ability to succeed may be hampered by
the expenses, difficulties, complications and delays frequently
encountered in connection with the formation and commencement of
operations of a new business, including, but not limited to,
management's potential underestimation of initial and ongoing costs
associated with the enterprise, overestimation of gross receipts
and market penetration, the adverse impact of competition, as well
as the impact on SCI, and its cash flow, of delays in the
implementation of SCI's business plan, unavailability of parts,
lack of trained personnel and soft consumer demand. Further, there
can be no assurances that SCI will be successful in its proposed
developmental activities; that SCI's products will meet with
consumer acceptance; or that SCI's operations will ultimately be
profitable. No assurances can be provided that SCI will generate
a profit from its operations in the future. Shareholders of the
Company should be aware that the SCI's Financial Statements
included in this Proxy Statement for the period from March 1, 1996
(date of inception) to March 15, 1996 indicate no revenues since
inception of SCI in March 1996. There can be no assurances that
SCI will conduct any operations in the future.
e. Debt Service Requirements. SCI to date has incurred no
debt to finance its product research and development. However, in
order to initiate its operations, market its products and generate
sales, substantial debt financing may be required. SCI may be
required to encumber a majority of its assets to secure such debt.
No commitments have been made nor can be assured of any financing
whatsoever. If SCI is unable to obtain debt or other financing
there this event would have a material adverse effect on the
viability of SCI.
f. Liquidation Value of Assets. The only tangible asset of
SCI is its proprietary software technology which would operate its
ARO system on the Internet. In the event of a liquidation of SCI,
it is likely that this asset would be of little or no value.
g. Competition. Competition within the Internet service
industry is intense. Most of SCI's competitors possess
substantially greater financial resources and greater numbers of
personnel than does SCI.
h. Dependence Upon Current Management of SCI. After closing
of the share exchange with SCI, SCI's current officers and
directors shall assume control of the day-to-day executive
functions of the Company, should the Company's shareholders approve
the proposed transaction. The Company would be dependent on the
services of Messrs. McAuliffe and Zenner and to the extent that
<PAGE>
their services should become unavailable to the Company, the
Company would suffer materially. At this time SCI has not obtained
a "keyman" insurance policy for either Messrs. McAuliffe or Zenner.
Until such time as SCI becomes adequately capitalized in order to
begin its operations, no such insurance policy will be obtained.
There can be no assurance that in the event of the incapacity or
demise of either Mr. McAuliffe or Mr. Zenner that SCI would be able
to continue its operations or adequately replace either individual
with a person of similar ability or experience.
i. Dilution. If the SCI Agreement is approved by the
Company's shareholders, the Company's present shareholders will
experience significant dilution of their respective ownership in
the Company, retaining approximately 19% of the Company's
outstanding equity. In addition, proposed management of the
Company may elect to undertake an equity offering of the Company's
securities to generate additional capital after this proposed
transaction closes, or to issue additional stock to consummate a
transaction, or both, which will result in additional dilutive
effect on the present shareholders of the Company in the event such
an offering or transaction is successful.
2. Change in Control. Currently, shareholders of the Company
own 50,000 common shares of the Company (1,000,000 shares post
forward split). The applicable letter of intent between the
Company and SCI, as amended, provides that the Company will issue
5,200,000 "restricted" common shares to the present shareholders of
SCI (post forward split). Current Company shareholders should be
aware that they will not control a majority of the outstanding
common shares of the Company if the acquisition is approved and
consummated, as proposed.
The maximum percentage that current Company shareholders will
own is approximately 19% of the total issued and outstanding Common
Shares. Current Company shareholders should be aware that the
shares that will be issued to SCI's shareholders under the
Agreement would be "restricted" as that term is defined in Rule
144, but holders thereof would nonetheless possess the same voting
rights as those possessed by holders of free-trading stock.
Accordingly, SCI shareholders could adopt policies and will be in
the position to control virtually all decisions requiring
shareholder approval.
3. No Trading Market. Prior to this offering, there has been
no public market for the Company's securities and there is no
assurance such a market will develop at the conclusion of the
transaction proposed herein or, if developed, that it will
continue. In the absence of a public trading market, a shareholder
may be unable to liquidate his investment in the Company.
<PAGE>
4. Potential Adverse Effect on the Market for the Company's
Securities. Effective August 11, 1993, the Securities and Exchange
Commission adopted Rule 15g-9, which established the definition of
a "penny stock," for purposes relevant to the Company, as any
equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share,
subject to certain exceptions. For any transaction involving a
penny stock, unless exempt, the rules require: (i) that a broker or
dealer approve a person's account for transactions in penny stocks;
and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve
a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment
experience and objectives of the person; and (ii) make a reasonable
determination that the transactions in penny stocks are suitable
for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the
penny stock market, which, in highlight form, (i) sets forth the
basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a
signed, written agreement from the investor prior to the
transaction. Disclosure also has to be made about the risks of
investing in penny stock in both public offering and in secondary
trading, and about commissions payable to both the broker-dealer
and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for
the penny stock held in the account and information on the limited
market in penny stocks.
If the Company's securities were subject to the rules on penny
stocks, the market liquidity for the Company's securities could be
severely adversely affected.
5. Management of Potential Growth. SCI's management believes
that it is poised to fully begin marketing its Annual Reports On-
Line (ARO) product assuming needed operating capital or other
financing can be raised, of which there can be no assurance. If
such financing is obtained this could result in immediate and
significant growth of SCI. This growth, if effectuated, will
expose the Company to increased competition, greater overhead,
marketing and support costs and other risks associated with entry
into new markets and solicitation of new customers. To manage
growth effectively, the Company will need to continue to improve
and expand its operational, financial and management information
<PAGE>
systems and to expand, train, motivate and manage its employees.
Should the Company be unable to manage growth effectively, its
results of operations could be adversely effected.
6. Absence of Dividends. Neither SCI nor the Company has
paid any cash dividends on its Common Stock since their
respective inception and management of SCI does not anticipate
paying cash dividends in the foreseeable future. If the
transaction with SCI is approved by the shareholders of the
Company, the Company currently intends to retain future earnings,
if any, to fund continued operations and growth of the Company.
7. Proprietary Technology. The software technology which
will be employed to implement SCI's ARO product has been tested
by the management of SCI in conformity with the requirements of
Internet access providers. Even though the ARO product is
currently "on-line," there can be no assurance that it will
continue to remain compatible with the Internet. There can be no
assurance that the ARO software may require modification in order
to remain compatible with the Internet system which may require
additional capital and the loss of valuable time and sales for
SCI.
DESCRIPTION OF BUSINESS AND MANAGEMENT
OF SUARRO COMMUNICATIONS, INC.
SCI was incorporated under the laws of the State of Texas on
March 1, 1996, for the purpose of continuing to develop and to
market through the international computer Internet (herein
"Internet"), a cost-effective nationwide on-line business
information service, called Annual Reports On-Line. The Internet
is the world's largest electronic computer network. Since 1993,
the founders and sole shareholders of SCI, Messrs. Michael
McAuliffe and Christian Zenner have been developing computer
software technology to provide users of the Internet for free,
immediate access to the business information and annual reports
of companies trading on the national securities exchanges. This
information includes the companies annual reports, Securities and
Exchange Commission Form 10-K annual reports, press releases and
other material corporate information.
Michael McAuliffe and Christian Zenner are also the
developers and contributors of Annual Reports On-Line (ARO) to
SCI. From 1992 through February 1996, McAuliffe and Zenner (M&Z)
while associated with another Texas company, were the primary
developers of ARO. The associated Texas company was called Suarro
Communications Development, Inc. (SCDI), which is an Internet
Product development company. From 1992 through February 1996, M&Z
had advanced $458,685.71, in cash and services, to SCDI in
relation to developing the ARO technology, which became SCDI's
<PAGE>
only debt. As a result of negotiations on February 26, 1996, M&Z
exchanged their $458,685.71 debt with SCDI in exchange for Annual
Reports On-Line (ARO).
On March 1, 1996, M&Z organized a new Texas corporation
called Suarro Communications, Inc, for the purpose of marketing
ARO, and then contributed Annual Reports On-Line to Suarro as
additional paid in capital.
Currently, in the opinion of management of SCI, one of the
most widely used methods of distributing financial data regarding
public traded companies is in the form of current company
information and its annual report. It is management of SCI's
belief that the securities investment community (comprised of
institutional, brokerage and individual investors) look to
published information as one of the primary methods of
determining the suitability of making an investment in that
company's stock. To continually develop, publish and distribute
current company information to the public has become very
expensive. When an investor requires information about a
company, they must first locate that company's information. If
the investor has to request information directly from the company
or from a broker dealer, it could be some time before the
information is available and the investor may thereby miss a
timely investment opportunity.
ARO provides a distribution channel for instantaneous access
to a company's current information, (annual reports and other on-
line financial data provided by the company to SCI). This
service will drastically reduce distribution cost for companies
wishing to make their annual reports available in mass
quantities. For example, a firm printing 300,000 reports can
have costs approaching $1,000,000, but could potentially reduce
its printing cost to under $50,000 with ARO. Further, as this
means of distributing annual reports increases, it is likely that
the "exotic" reports (i.e. color, graphics, etc.) will be
reserved for on-line viewership and the printed documents in hard
copy form will be less attractive.
ARO, SCI's flagship on-line product, was originated to
satisfy a issue confronting the business community. Pertinent
Company Information At-A-Glance for the investing community.
Although there is an abundance of information available on
publicly traded and small cap companies it takes time to find it!
ARO provides the investment community a user friendly, single
source, for most of the information required to make an
intelligent investment decision. Further, the information
retrieved through ARO is provided in a fashion that is easy to
<PAGE>
understand, which can be instantly obtained - free, from the
desktop computer.
Another issue ARO was originated to satisfy is, Small Cap
Companies and their difficult time with public awareness. Many
small companies try to "solve" the lack of public awareness
problem by placing ads for their company information in various
financial publications. This invites the reader to request a
copy in the belief that this will promote awareness. The fact of
the matter is, that most of those potential investors who do
request a copy of the report do not know how to read the
financial statements or make an informed decision on the value of
the investment. Suarro will offer the small company a vehicle to
distribute their reports on a wide-scale basis. The Small Cap
Companies have no vehicle available to them to tell potential
investors who they are and what they do. Most analyst and wall
street brokerage houses do not give small caps recognition. ARO
offers Small Cap Companies the ability to be seen in the same
light as Big Board Giants - again free, from the desktop.
SCI will market its ARO product directly to companies on an
annual subscription basis. The fees charged to customers will
vary depending on the required service. The base ARO annual fee
for Publicly Traded Companies is currently priced at $9,500, with
a monthly maintenance fee of $75.00. The base annual fee includes
development of customer home page under SCI's Internet address,
creation of companies annual report, and quarterly reports, plus
on-going storage and technical maintenance related to customer
files.
The customer will pay additional fees for press releases On-
Line, for Corporate and Financial Services On-Line, for Marketing
and Promotional Material published On-Line, for Product
Specifications and Technical Data published On-Line and for back
annual reports published On-Line. The pricing of these
additional services will vary, depending on the customer needs
and specifications. Most additional services, except for Back
Annual Reports, will be billed for at the rate of $75.00 per
hour. Back Annual Reports will be developed and published on-line
at the rate of $3,500 each to customer.
SCI will market ARO through direct marketing to its
customers. The primary distinctions that provide a solid
foundation of success for Suarro's marketing strategy are:
<PAGE>
Market Experience
Product Experience
Proven Sales Strategies
Existing Customer Relationships
Existing Long Term Vendor Relationships
Identified Sales/Marketing Talent
Proven Telemarketing and Lead Generation Systems
SCI's overall marketing plan is based on systems and
strategies that have produced results in the principal's past
ventures. By staying current with the ever-changing Internet
marketplace, SCI has been able to keep its proprietary marketing
concepts up-to-date.
The overall marketing plan for the SCI product/service is
based on the following fundamentals:
SCI will focus on the Internet products/content.
SCI will primarily focus its activities on
the business use of its services.
SCI plans to out source public relations, media
campaigns, promotions and other key marketing
activities to agencies experienced in the field.
SCI intends to mature its Internet distribution
channel as the market becomes increasingly accepting to
this channel.
SCI plans to become a dominant player in the
distribution of annual reports and other financial
information.
There are many things in regard to the Internet that
are certain, but some are not. One is the data used to derive
market information (number of accesses), time spent in
certain areas of the Internet, demographic data and so forth
have not been clearly defined. Therefore, SCI has taken the
following approach for both aspects of its product offerings,
ARO and Internet services:
The power of marketing on the Internet MUST be
complimented by traditional marketing activities. In
other words, SCI will not depend upon the global
aspect of the Internet to bring customers to its
product lines.
The Market For ARO: SCI has done extensive research
both on local and national levels to position their primary
product, ARO. Research activity has included:
<PAGE>
Data Base Marketing Activities
Prospect Contact And Data Base Verification
Numerous Conversations With Other Information
Providers
Competitive Research
In the Houston, Texas market, nearly 300 companies were
polled to determine the marketability of the ARO product.
Overwhelmingly, the poll showed there indeed is a desire for the
product. Both the distribution of annual reports and taking part
in an Internet project that makes reports available on a global
basis.
Direct mail will be a key component in the SCI's marketing.
During the telemarketing sales cycle, it is important the
targeted customer receives information in a timely manner. The
target is called within one week after the mailing to ensure the
mailing was received. SCI intends to develop and execute an
extensive nationwide direct mail campaign based on data base
marketing techniques developed by Kuhlman, Lutz & Brown, Inc. a
prestigious Houston advertising agency.
There is a growing trend towards advertising products and
services on the Internet. SCI will take full advantage of
Internet advertising where appropriate.
Advertising will consist of four color and black and white
advertisements in the primary financial magazines and will give
SCI immediate visibility in the market. The Wall Street Journal
(Journal) will be the focal point of print advertising for SCI.
It is anticipated that not only will the advertisements in the
Journal attract current Internet users to the ARO product, but
may ultimately lead to thousands of potential clients. However,
there can be no assurances that this will occur.
Advertisements will also target local metropolitan markets
through the use of the business sections of the major newspaper
as well as local technology related periodicals (like the Houston
Business Journal and Computer Currents). The credibility
established with these advertisements is difficult to measure.
Rather than measure the advertisement from leads and revenue,
they will be viewed as a reinforcement to the other forms of
advertising. The same is true for trade shows. If potential
customers do not see a company at major trade shows, they will
see the competitors.
SCI also intends to develop initially four color brochures
to target both its ARO clients and on-line services. The
<PAGE>
brochures will be used in the mailings described above as well as
for direct response to inquiries to advertising pieces. SCI also
intends to set up a FAX back response system, and of course on-
line demonstrations of the ARO service.
SCI provides a demonstration diskette that allows potential
customers to "try before they buy" the ARO services. Once a
buying decision is made, the potential client will be able to
sign on for services immediately through SCI's Home Page located
at the Internet Address(http//www.suarro.com). All the customer
must do is point and click, and ARO activates that customers
file, which is pre-loaded with the customers pertinent company
information, and subscription agreement. The customer must then
only decide the method of electronic payment, wire transfer or
major credit card.
A number of cooperative marketing activities have been
planned with complimentary service vendors. These include
cooperative advertisements and sponsoring events to introduce
business customers to on-line services and technology. The goal
of these efforts is to give SCI added exposure to potential
customers and increased stature through being associated with
industry players. Several hardware vendors are expected by
management to refer customers to SCI for Internet solutions. SCI
will continue to seek referral programs with other hardware and
software suppliers. SCI will also seek co-operative marketing
agreements to further develop its Internet marketing and
promotional activities. These agreements could potentially be
with:
Advertising Agencies
Media Brokerage Firms
Promotional Firms
Public Relations Firms
SCI has developed a lead generation system using complex
criteria based on actual success in qualifying potential clients.
The systems are currently in place and leads are being generated.
SCI will also concentrate on generating quality leads through its
alternative marketing channels (strategic relationships, vendor
referrals, etc.). Since SCI's short and long-term objective is to
effectively cover as many accounts with a high ratio of technical
to sales, it is imperative that SCI concentrate on quality lead
generation systems and activities. SCI is currently processing
(in various stages of qualifications) a customer data base of
over 3,500 entries.
In addition to ARO, SCI offers a wide range of services to
the Internet community including:
<PAGE>
Internet Access Services: Services are provided to
individuals and businesses. On the Internet, users can access
thousands of data bases and talk electronically with experts
world-wide on countless business, technical and personal topics.
Internet Consulting Services: SCI will provide experienced
'Internet Operating' experts to aid customers in all phases of
network planning, implementation and operation related to
Internet access. This consulting will also lead to on-line
service sales of products offered by SCI.
Network Design: SCI has in-depth experience in network
design and will offer network analysis, specification and
decision for Internet access. This consulting will be provided
for small to medium sized companies who wish to develop and
Internet presence and/or utilize SCI's on-line services.
Installation and Support Services: SCI will install and/or
take responsibility for installing and testing any product
provided by or through SCI. After systems and software are
installed, SCI will support the installation through both
hardware and software support. This support will either be
through the manufacturer or using SCI support personnel depending
upon the circumstances.
Internet Advertising And Marketing Support: Internet
advertising is unlike any other type of advertising. SCI will
help its customers properly structure their Internet "electronic
advertising" approach to optimize their presence on the net. SCI
will provide a "turn-key" approach at delivering results oriented
marketing and advertising approaches for its clients.
SCI will offer several services in this area, including:
Creative Services and Concept Development
Web Page Design And Editing
Graphic Design and Image Manipulation
Audio Clips
SCI's Web advertising and marketing strategy allows clients to:
Interact Directly With Potential Customers
Worldwide
Provide On-line Services
Provide An Internal Network For Customers
Intranet"
Stay Ahead Of Competition, That Are Behind In
Their "Electronic Strategy"
<PAGE>
Commodity On-line Products: SCI has been researching other
opportunities for on-line services since its inception. There are
several of these that SCI will explore in a formal fashion during
the first year of operation, including, On-line Financial
Services, Banking Services, Information Systems, and Additional
Investor Information
The Overall Market For Internet Service Providers: Not since
the introduction of the Personal Computer by IBM in the early
1980's has there been such a robust marketing environment for a
high-tech industry. The numbers by all accounts are literally
"off-the-chart". The numbers of new companies being formed to
provide Internet Access are growing exponentially by quarter.
There is, however, one gigantic thorn in the side of the
Internet frenzy... When a company is chartered to appeal to a
world-wide "fad" as soon as the excitement wears, the company's
future is uncertain. This is beginning to happen in the Internet
marketplace in large numbers.
SCI's analysis strongly indicates that during 1996 and
beyond - only the strong will survive. In other words, Internet
Service Providers that add no value beyond a modem and a local
number will have a difficult time staying in business.
To fully implement SCI's plan, it is anticipated that SCI
will seek private debt/equity financing of approximately $300,000
in increments. Once the company is funded for the first $100,000,
it will immediately embark on planned business expansion
activities described below:
Continue The Technical Process Of Seeding Companies On ARO
Initiate ARO Subscription Agreements
Expand Corporate Facilities
Upgrade Administrative Computer System(s)
Secure Accounting Support In Establishing Systems,Policy's and
Procedures
Upon anticipated funding (no funding is presently assured) SCI
will immediately move forward with the activities outlined in the
following sections. The costs associated with these activities
provide the basis for SCI's overall revenue and expense
projections.
SCI plans to procure hardware, software and
telecommunications equipment through a competitive bidding
process by vendors. Procurement will utilize various vendor
financing packages such as open account, lease purchase, rental
purchase, lease financing, and time purchase contracts, which
greatly reduces the initial capital outlay.
<PAGE>
Relationships with outside services have already been
established, and SCI is ready to commence business operations
immediately after funding. SCO is a firm believer in
concentrating on its core business and will outsource services
wherever viable. Services that are currently planned to be
outsourced include:
Accounting Services
Legal Services
Data Base Marketing, Telemarketing and Fulfillment
Programming Services and Front-end Development
Advertising and Promotional Activities
Liquidity and Capital Resources
The activities of SCI since inception have been financed
from sources other than operations. SCI's sources of funds have
been the limited proceeds from initial sales of its Common Stock.
SCI plans to raise additional capital from two sources, private
sales of its common stock, and short term equipment financing
from vendors.
Plan of Operations
SCI is in the development stage of establishing a regional
marketing program for its ARO products and services, and
therefore has not derived any revenues from operations since its
inception.
Additionally, SCI has been analyzing and assessing Internet
Access Service markets utilizing its basic telecommunication
equipment.
Use of Proceeds
The net proceeds which are expected to be raised are
$300,000, that will be utilized as follows:
<TABLE>
<S> <C>
Capital Equipment................................. $180,000 (1)
Data Base Software ............................... 60,000 (2)
Facilities Expansion ............................. 10,000 (3)
Working Capital .................................. 50,000 (4)
<FN>
If the proceeds above are raised, SCI will be able to bring its
Annual Reports On-Line (ARO) product to the market place. The
proceeds will be used for capital equipment, data base
software, facilities expansion, and working capital to cover
administrative support cost over a period of approximately three
to four months. After this three to four month period, SCI will
<PAGE>
be able to continue operations from sales of its ARO product and
Internet Access Services.
(1) Includes all cost of essential capital equipment,
including installation, setup, and training to efficiently
operate SCI's ARO product, and on-line services. This essential
equipment includes, 1 Digital Server($17,500), 1
Digital Mini Computer($110,000), 1 T1 Hardware ($3,600),
4 Fax Machines($750 ea.), 4 Scanners($2,000 ea.), 1
Telephone System Upgrade ($5,000), 6 Personal Computer
Upgrades ($3,500 ea.) , and 1 Network Server ($12,500).
(2) Includes all cost ($60,000) to acquire specialized Data
Base Software which allows SCI to access corporate records filed
with the Securities Exchange Commission (SEC), and disseminated
by EDGAR Dissemination Service. The corporate records data base
is maintained by Lexis Nexus, and are updated weekly, and
electronically down loaded to SCI.
(3) Includes all cost ($10,000) to expand current facilities
to facilitate additional office staff, which includes additional
leased space, furniture and fixtures.
(4) SCI will use approximately $5,000 to obtain additional
office supplies, and the remaining $45,000 will be maintained to
cover negative cash flow during the first three to four months of
operations.
</TABLE>
In the event SCI's financing occurs more slowly, this will
result in implementation delays, which will also have a negative
affect on available cash flow. In regard to financing, certain
vendors have expressed to management a willingness to finance
their respective equipment and/or services for SCI. It is planned
that vendor financing coupled with interim financing will allow
SCI to implement full scale marketing of ARO. In regard to short
term (interim) financing, the controlling shareholders, McAuliffe
and Zenner, have limited capital available with which to finance
the company on an interim basis. Therefore obtaining permanent
financing remains critical to the long term financial well being
of SCI. There can be no assurances that SCI will obtain any
financing in the future, which will have a significant negative
impact on the Company's ability to commence business operations,
assuming that the SCI Agreement is adopted by the Company's
shareholders.
Despite the uncertainty of procuring long term financing,
SCI management is of the opinion that ARO will be widely accepted
by its targeted customers. This opinion is based on positive
response received from customers already On-Line in SCI's test
market, positive response from potential clients who are
<PAGE>
currently reviewing SCI's ARO Demonstration Disk and also on
positive response from polled potential customers in the greater
Houston area, of whom a great many expressed a sincere interest
in utilizing the ARO program for their company and products.
However, despite the studies undertaken by management of SCI,
there can be no assurances that the SCI marketing plan will be
successfully implemented.
Managements' positive opinion in regard to ARO acceptance,
is also based the following known facts:
The Internet industry and its market acceptance continues to
grow exponentially, at the rate of 15% each month (as
reported by major news sources).
That all companies are very interested in reducing cost,
especially cost associated with non-income producing
activities such as publishing and distributing written
company information.
That all publicly traded companies desire to have company
information readily available to potential investors.
That all potential investors desire to have immediate access
to pertinent company information, free of charge.
SCI's management is confident that ARO favorably addresses
all the issues mentioned hereinabove. ARO offers SCI customers a
very cost effective alternative and it is much faster than
conventional publishing and mailing volumes of written
information in hard copy form. One entire company file,
containing hundreds of pages, can be electronically distributed
by ARO to literally thousands of interested parties in less time
than was required to read this page. ARO is completely developed,
tested and currently On-Line, ready to be marketed full scale.
Coupled with these positive points, access to ARO is free to
millions of worldwide Internet users.
Currently, only Messrs. McAuliffe and Zenner are employed by
SCI, without pay. As anticipated financing is received by SCI,
additional independent contractors will be employed on an "as
needed" basis. The staff requirements for SCI will grow as
funding and, therefore, marketing develops.
Presently, there is no public trading market for SCI's common
stock. SCI has 2 shareholders. SCI has never paid a dividend on
its common stock and does not anticipate the payment of dividends
in the immediate future.
Directors and Executive Officers of SCI
In the event the shareholders of the Company approve the SCI
transaction, it is anticipated that the Company's present officers
<PAGE>
and directors will tender their respective resignations and appoint
the present directors of SCI as directors of the Company. Relevant
thereto, the following is a brief biography of the present officers
and directors of SCI:
Michael McAuliffe, President, CEO and a director, age 36, co-
founded SCI in March, 1996 and has acted as President/CEO since
that time. From December, 1983 through September 1992, Mr.
McAuliffe was involved in commercial real estate acting primarily
as a commercial real estate analyst and broker. He is a Designated
Member, Appraisal Institute, No. 9447, and was appointed to the
Regional Ethics and Counseling Panel of the Appraisal Institute.
Mr. McAuliffe is or has been a State Certified General Real Estate
Appraiser in the following states: Texas, Michigan, the
Commonwealths of Massachusetts and Pennsylvania, Connecticut, New
York, and New Jersey. Additionally, he is a licensed Real Estate
Broker with the Texas Real Estate Commission. From October, 1992
through February, 1996 Mr. McAuliffe acted as special consultant
and investor to Suarro Communications Development, Inc. (SCDI), a
Texas Development Company. SCDI, over a period of three years,
developed proprietary software, technology, marketing rights,
copyright(s), art work and html code for internet applications.
Additionally, SCDI was involved in software development, user
front-end, database search engines and database development. Mr.
McAuliffe graduated from Southwest Texas State University in
December, 1982 with a Bachelor of Business Administration Degree
with primary emphasis on management, finance and real estate. Mr.
McAuliffe devotes all of his time and effort to the business of SCI
and it is anticipated that he will continue to do so in the event
the proposed transaction with the Company described herein is
successfully consummated.
Christian Zenner, Secretary, Vice President of Operations
and a director, age 26, co-founded SCI along with Mr. McAuliffe
in March 1996. From August, 1992 through December, 1992, Mr.
Zenner was involved in cable TV, MMDS cable and the aggregation
of cellular licenses for various developers as a consultant, and
conducted feasibility studies and proforma analysis on various
related projects. From January, 1993 through February, 1996, Mr.
Zenner acted as special consultant and investor to Suarro
Communications Development, Inc. (SCDI), a Texas development
stage company, during which time SCDI developed proprietary
software, technology, marketing rights, copyright(s), art work
and html code for internet applications. Additionally, SCDI
developed software, user front-end, database search engines and
databases. Mr. Zenner, while with SCDI, was responsible for
creating proprietary software and operating technology for
applications for the Internet. During this same period Mr. Zenner
additionally authored various software applications, user front-
ends, data search engines and data bases for other outside
<PAGE>
parties. Mr. Zenner completed studies from the University of
Houston in 1992 with a Bachelor of Business Administration Degree
with a primary emphasis on Real Estate Finance. Mr. Zenner
devotes all of his time to the business of SCI and it is
expected that he shall continue to devote all of his time upon
the successful consummation of the transaction with SCI described
herein.
Executive Compensation
No compensation has been paid to the officers of SCI since its
inception. The following table reflects all potential compensation
which will be paid to Messrs. McAuliffe and Zenner if adequate
financing is obtained for SCI, of which there can be no assurance.
(See Footnote (1)):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
_____________________________ ______________________________________
Awards Payouts Other
____________ _______________ _________
Other All
Annual Restricted Other
Name and Comp- Stock Options Comp-
Principal Salary Bonus ensation Award(s) SARs LTIP ensation
Position Year ($) ($) ($) ($) ($) ($) Payouts ($)
____ _______ _____ ________ _______ ___ _______ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Michael 1996 $36,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
McAuliffe (1)
President-
CEO
<FN>
(1) It is anticipated that, after the closing of the transaction and
obtaining financing in the sum of at least $100,000, Mr. McAuliffe will begin
receiving a salary of $36,000 per year. No executive officer of the Company
received compensation during 1995, nor is expected to receive compensation
exceeding $100,000 in 1996.
</TABLE>
The Company has adopted a policy whereby the directors of
the Company may be compensated for out of pocket expenses
incurred by each of them in the performance of their relevant
duties. As of the date of this Proxy Statement, there is no
maximum established for reimbursement of the expenses.
Stock Option Plans
SCI may establish and adopt a non-qualified Incentive Stock
Option Plan and an Employee Stock Option Plan after successful
consummation of the proposed transaction with the Company.
<PAGE>
Effects of the SCI Transaction on the Company and its
Shareholders
Subsequent to the business combination with SCI, the SCI
shareholders will control a majority of the common stock of the
Company. As a result of the large number of common shares being
issued in connection with the business combination, the fact that
the shares represent unregistered, "restricted" securities and
there is no present market for the Company's securities, the
principal factors considered by the Company and SCI in
determining the number of shares to be issued were each company's
respective cash, assets and liabilities, as well as the necessity
in managements' view to structure a reorganization without
incurring negative tax consequences. In addition, values were
attributed to both companies for their respective managements,
professional personnel and operational prospects.
Financial Statements of Company
The balance sheet of the Company at April 30, 1996 and the
related statements of operations, shareholders' equity and cash
flows for each of the two years in the period ended April 30,
1996 and 1995, together with the report of Kish, Leake &
Associates, independent accountants, included in the
Company's annual report to its shareholders for the year ended April
30, 1996, as amended (the "1996 Annual Report"), are incorporated in
this Proxy Statement by reference. The information appearing under
the caption "Management's Discussion and Analysis of Financial Condition"
in the 1996 Annual Report is incorporated in this
Proxy Statement by reference.
Financial Statements of SCI
The following statements set forth the audited financial
condition of SCI for the period ended March 15, 1996, including a
balance sheet as of March 8, 1996 and the statements of
operations, shareholder equity and cash flows for the period from
March 1, 1996 (date of incorporation) through March 15, 1996,
together with the report of R. E. Bassie & Co., independent
Certified Public Accountants. Also, following are the unaudited
pro forma combined financial statements giving effect to the
recapitalization of the Company and SCI, which assume that the
proposed transaction was consummated on May 25, 1996, except for
the pro forma combined statement of income, which assumes the
proposed transaction was consummated as of April 30, 1996.
<PAGE>
Beneficial Ownership of Directors and Principal Shareholders as a
Result of the SCI Transaction
The following table sets forth, as of immediately prior to
the Closing of the SCI transaction and after giving effect to the
SCI transaction, information concerning the record and beneficial
ownership of the Company's Common Stock by the Company's
executive officers and directors, by SCI's executive officers and
directors and by each person known to the Company to own 5% or
more of its outstanding Common Stock after closing of the
proposed transaction.
<TABLE>
<CAPTION>
Shareholder: Prior to Transaction: After Transaction:
____________ _______________________ _______________________
Name of % of % of
Beneficial Number of Shares Number of Shares
Owner Shares Outstanding Shares Outstanding
__________ ________ ___________ _________ ___________
<S> <C> <C> <C> <C>
Randel C.
Sherwood 12,500 25% 250,000 4.0%
Suzanne R.
Johnson 10,000 20% 200,000 3.2%
Kenneth L.
Kisner 10,000 20% 200,000 3.2%
Michael
McAuliffe(2) 0 0 2,600,000 41.0%
Christian
Zenner(2) 0 0 2,600,000 41.0%
<FN>
(1) Reflects 20 to 1 forward split proposed to be effectuated
upon Closing of the SCI Agreement by the Company.
(2) Officer and director of SCI.
</TABLE>
Recommendations of Directors on SCI Acquisition
The Board of Directors has determined that the SCI
Acquisition is just and reasonable to the Company and in its best
interests, has authorized and approved the terms of the SCI
Acquisition and the transactions contemplated thereby and has
authorized its submission to the stockholders of the Company. In
support of its position that the SCI acquisition is just and
reasonable and in the Company's best interests, the relevant
<PAGE>
disclosure relating to the reasons supporting the decision of
management to undertake the SCI Acquisition included in the five
paragraphs under Proposal No. 1 beginning on page 7, above, as
well as the disclosure included under the subheading "Allocation
of Shares" on page 9, above, is hereby incorporated by reference
thereto.
The Board of Directors unanimously recommends that the
shareholders vote "FOR" for proposal to approve the Share
Exchange Agreement and Plan of Reorganization with SCI.
Approval of the SCI Agreement and the transactions
contemplated thereby will require the affirmative vote of a
majority of the shares of the Company's Common Stock entitled to
vote and represented at this Special Meeting in person or by
proxy. The proxies solicited hereby will be voted for approval
of the SCI acquisition unless the shareholder specifies
otherwise. Because the Company's present officers and directors
hold, in the aggregate, 65% of the Company's voting securities
and they each intend to vote in favor of the Proposal, approval
of the Proposal is assured.
The Terms of the Share Exchange Agreement and Plan of
Reorganization with SCI
The terms and conditions of the Share Exchange Agreement and
Plan of Reorganization between the Company and SCI are set forth
as Exhibit "A" to this Proxy Statement. The statements made in
this Proxy Statement with respect to the terms of the
transactions do not purport to be complete and are subject to,
and are qualified in their entirety to, all of the terms and
conditions of the Share Exchange Agreement and Plan of
Reorganization, which is attached hereto and incorporated herein
by reference. However, all of the material terms of the proposed
transaction are included hereinbelow.
1. Upon execution of the relevant Agreement with SCI, the
Company shall cause to be issued a total of 5,200,000 shares of
"restricted" common stock (post forward split) to the
shareholders of SCI, representing approximately 81% of the
Company's issued and outstanding shares of Common Stock. Shares
of the Company's Common Stock issued upon effectiveness of the
Agreement will be restricted and not transferable except in
connection with a registration statement filed under the
Securities Act of 1933, as amended (the "Act"), or an applicable
exemption under the Act.
<PAGE>
Rights of the shareholders of the Company will not be
affected by this transaction, except to the extent presently
outstanding shares will be reduced to approximately 19% of the
outstanding shares of the Company following the SCI transaction.
2. There is presently no trading market for the common or
preferred equity of the Company. Upon closing of the SCI
transaction, SCI has undertaken to cause to be filed an
application to list the Company's Common Stock for trading the
Electronic Bulletin Board operated by the National Association of
Securities Dealers, Inc. or such other exchange as the Company
may so qualify. If and when the Company meets the applicable
listing criteria, management of SCI has also undertaken to file
an application to cause the Company's securities to become listed
on a national exchange or on NASDAQ. There can be no assurances
that the Company's application to list its common stock for
trading will be accepted, or that the Company will satisfy the
requisite listing criteria, or whether the Company will ever have
sufficient assets to allow the Company to file an application for
listing on a national exchange or NASDAQ. However, regardless of
whether the Company is successful in causing its securities to be
traded on a national securities market, management of the Company
believes that the successful consummation of the SCI transaction
will provide a greater opportunity for the shareholders of the
Company to obtain liquidity in their respective stock ownership
than would exist if the Company attempted to continue to seek
potential private companies with which to reorganize and engage
in no business operations. There are no assurances that any
market will develop in the Company's securities after the SCI
transaction is consummated. See "Selected Risk Factors."
3. Because the Company is acquiring all of the issued and
outstanding stock of SCI, the Company believes the reorganization
will qualify as a tax-free reorganization pursuant to the
Internal Revenue Code of 1986, as amended (the "Code"),
including, without limitation, Section 368(a)(1)(B) thereof.
However, there can be no assurances of such tax-free nature, as
the Company does not intend to obtain an opinion of counsel as to
the tax-free nature of the reorganization, as the cost to the
Company would be prohibitive. Should the transaction not be tax-
free, then SCI's shareholders would be required to recognize gain
equal to the difference between their cost of SCI shares and the
value of Company shares received.
4. The SCI Agreement provides that a closing (the
"Closing") to consummate the transactions contemplated thereby
will take place as promptly as practicable after the Company's
shareholders approve the SCI Agreement, subject to certain
possible extensions.
<PAGE>
5. In the SCI Agreement, SCI makes certain representations
as to the ownership and title to the assets of SCI, the authority
to enter into the SCI Agreement, the organization, capitalization
and financial condition of SCI. The Company also makes certain
representations and warranties about its organization,
capitalization and financial condition and authorization of the
SCI Agreement and the shares of the Company's Common Stock to be
issued to SCI pursuant thereto.
6. Consummation of the SCI Agreement is subject to a number
of conditions, which may be waived, including, among others (i)
the performance of the terms, covenants and conditions set forth
in the SCI Agreement; (ii) the accuracy as of the Closing of
certain of the representations and warranties contained in the
SCI Agreement; and (iii) approval of the SCI Agreement by all of
the SCI shareholders. As of the date of this Proxy Statement,
the Company has been advised that 100% of the SCI shareholders
have elected to exchange their shares for shares of the Company.
In addition, the Company is not obligated to proceed with the
Closing unless, among other things, the SCI Agreement is approved
by at least a majority of the outstanding shares of the Company's
common stock entitled to vote and represented at a shareholder's
meeting, in person or by proxy.
PROPOSAL NUMBER 2: Amendments to Articles of Incorporation
Pursuant to Article II of the Company's Articles of
Incorporation and subject to the affirmative vote of Holders
holding a majority of the outstanding Common Stock of the
Company, the Board of Directors of the Company has approved and
hereby submits to the shareholders two (2) amendments to the
Company's Articles of Incorporation, including:
(i) Article II, which states the name of the Company as
"Solutions Incorporated" This amendment will change the name of
the Company to "Suarro Communications, Inc". In the event
Proposal No. 1, above, approval of the Share Exchange Agreement
and Plan of Reorganization with SCI is approved, management of
SCI has expressed an interest in maintaining the continuity of
SCI's business by changing the Company's name pursuant to the
Proposal submitted herein; and
(ii) Article V, which establishes the number of authorized
capital of the Company at 1,000,000 common shares, par value
$0.001 per share. The amendment proposes to increase the number
of authorized common shares of the Company to 20,000,000 common
shares, par value $0.001 per share and further, authorize
1,000,000 preferred shares, no par value per share. No changes
to the rights of the Company's authorized common stock are
proposed. Shares of preferred stock may be issued from time to
<PAGE>
time in one or more series as may be determined by the Board of
Directors. The voting powers and preferences, the relative
rights of each such series and the qualifications, limitations
and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have
preemptive rights. The Board of Directors does not plan to issue
any shares of Preferred Stock for the foreseeable future, unless
the issuance thereof shall be in the best interests of the
Company.
The Company's Board of Directors unanimously recommends
voting FOR the Proposal to amend the Company's Articles of
Incorporation, changing the name of the Company to "Suarro
Communications, Inc.", increasing the number of common shares
authorized to 20,000,000 common shares, par value $0.001 per
share and authorize 1,000,000 preferred shares, no par value per
share.
Pursuant to the provisions of the Company's Articles of
Incorporation, approval of the aforesaid Amendment to the
Articles of Incorporation will require the affirmative vote of a
majority of the shares of the Company's Common Stock entitled to
vote and represented at this Special Meeting of Shareholders in
person or by proxy. Because the Company's officers and directors
own, in the aggregate, over 50% of the Company's voting
securities and they each intend to vote in favor of the Proposal,
approval of the Proposal is assured.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to the Nevada Business Association; Securities
Commodities Act (herein "Act"), each Shareholder has the right to
dissent from the proposed Plan of Reorganization if the proposed
Plan of Reorganization is approved and not abandoned, also has
the right, upon compliance with the procedures set forth below,
to receive payment in cash for the fair market value of his or
her shares as of April 25, 1996, the day before the proposed
acquisition of SCI by the Company was first publicly announced.
However, no such right will exist for any Shareholder (except
with respect to certain shares as to which there may exist a
restriction on transfer imposed by the Company or by law or
regulation), unless demands for such payment are filed, as
described below.
The following summary does not purport to be a complete
statement of the law relating to dissenters' rights and is
qualified in its entirety by Chapter 92A of the Act, pertinent
provisions of which are attached as Exhibit "B" hereto. This
summary and Exhibit B should be reviewed carefully by any
shareholder who wishes to exercise dissenter's rights or who
<PAGE>
wishes to preserve his or her rights to do so, since failure to
comply with the procedures set forth below will result in the
loss of such rights.
Any Shareholders electing to exercise his or her right to
dissent from the Reorganization and have the Company purchase
some or all of his or her shares for cash must, as to those
shares ("Dissenting Shares") satisfy each of the following
requirements:
1. A dissenting Shareholder shall cause the Company to
receive, before any vote is taken, written notice of that
Shareholder's intention to demand payment for the Shareholder's
shares if the proposed corporate action is effectuated; and
2. Not vote the shares in favor of the Plan of
Reorganization.
A Shareholder who does not satisfy the requirements of (1)
and (2) above is not entitled to demand payment for the
Shareholder's shares under Chapter 92A. For further detailed
information regarding dissenter's rights, please see Exhibit "B"
hereto.
A Shareholder of the Company who chooses to receive cash for
shares of Common Stock pursuant to the exercise of dissenter's
rights may give rise to taxable income. Each such Shareholder is
urged to consult his or her own tax and financial advisor as to
such matter.
ANNUAL REPORT (FORM 10-KSB)
The Company undertakes on written request to provide,
without charge, each person from whom the accompanying Proxy is
solicited with a copy of the Company's Annual Report on Form 10-
KSB for the year ended April 30, 1996, as filed with the
Securities and Exchange Commission. The Exhibits will also be
available for a small charge. Requests should be addressed to
Solutions Incorporated, #6 Venture, Ste. 207, Irvine, California
92718, (714) 453-9262.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountants for the year
ended April 30, 1996, are Kish, Leake & Associates.
Representatives of Kish, Leake & Associates are expected to be
present at the meeting and will be given an opportunity to make a
statement if they so desire and will be available to respond to
appropriate questions from Shareholders. The Board of Directors
reviewed the fiscal 1996 audit plan and approved the performance
<PAGE>
of non-audit services by Kish Leake & Associates and concluded
that the performance of such non-audit services would not impair
the independence of the firm.
INCORPORATION OF OTHER MATERIALS
The Company's Form 10-KSB for its fiscal year ended April
30, 1996 filed with the SEC on or about June 12, 1996, together
with the financial information contained in this annual report to
stockholders which accompanies this proxy statement are
incorporated herein by reference.
It should also be noted that all documents subsequently
filed by the Company pursuant to Sections 13(a), 14 or 15(d) of
the Exchange Act, prior to August 30 , 1996, the date of the
Shareholders Meeting, shall be deemed to be incorporated by
reference into this proxy statement.
OTHER MATTERS
The Company knows of no other business to be presented at the
meeting. However, if any other business is brought before the
meeting, the proxies solicited hereby will be voted in the
discretion of management.
Any shareholder proposal intended to be presented at the
Special Meeting of Shareholders should be sent to the Company,
Attention: Corporate Secretary, and must be received not later
than August 29, 1996.
The cost of soliciting proxies will be borne by the Company.
The Company has not retained any third party to assist in the
solicitation of proxies and the Company does not expect to pay any
compensation for the solicitation of proxies; however, brokers and
other custodians, nominees, or fiduciaries will be reimbursed for
their expenses in forwarding proxy material to principals and
obtaining their proxies.
On April 25, 1996, the record date fixed for determination of
voting rights, the Company had outstanding 50,000 shares of common
stock, each share having one vote.
Cumulative voting of the Company's common stock is prohibited
pursuant to the Company's Articles of Incorporation.
The above Notice and Proxy Statement are sent by order of the
Board of Directors.
<PAGE>
It is important, to secure a quorum, that your stock be
represented at this Meeting regardless of the number of shares held
by you. Even if you do not expect to be present, please sign, date
and return the enclosed proxy promptly.
By Order of the Board of Directors
SUZANNE R. JOHNSON, Secretary
Dated: August 16 , 1996
<PAGE>
PROXY SOLUTIONS INCORPORATED PROXY
The undersigned hereby appoints Randel C. Sherwood or
Suzanne R. Johnson, or Bryan A. Gianesin, a shareholder and legal
counsel for the Company, or any of them, with power of
substitution, as proxies to vote the shares of Common Stock of
the undersigned in Solutions Incorporated the Special Meeting of
Shareholders to be held August 30 , 1996 at 11:00 A.M. at the
principal offices of the Company, #6 Venture, Ste. 207, Irvine,
California 92718 and at any adjournment thereof, upon all
business that may properly come before the meeting, including the
business identified (and in the manner indicated) on this proxy
and described in the proxy statement furnished herewith.
Indicate your vote by an (X). The Board of Directors recommends
voting FOR all items.
Item
1. Ratification of the Agreement and Plan of Reorganization
between the Company and Suarro Communications, Inc.:
FOR AGAINST ABSTAIN
2. Amendment to Article I and Article V of the Articles of
Incorporation, changing the name of the Company to "Suarro
Communications, Inc.", increasing the number of authorized common
shares to 20,000,000 and authorizing 1,000,000 preferred shares,
no par value per share.
FOR AGAINST ABSTAIN
(please return promptly in the stamped, enclosed envelope.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS WHICH
RECOMMENDS VOTING FOR ALL ITEMS. IT WILL BE VOTED AS SPECIFIED.
IF NOT SPECIFIED, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR ALL ITEMS.
________________, 1996 __________________________
Date Signature
________________ __________________________
No. Shares Printed Name
Please sign exactly as name(s) appear on this proxy. If joint
account, each joint owner should sign. If signing for a
corporation or partnership or as agent, attorney or fiduciary,
indicate the capacity in which you are signing.
ADDITIONAL SIGNATURES: __________________________
(if necessary) Signature
__________________________
Printed Name
<PAGE>
EXHIBIT A
(to Proxy)
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
<PAGE>
SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, made and entered into this 10th day of May,
1996, by and between Solutions, Inc. ("Public Company"), a
publicly held Nevada corporation, and Suarro Communications, Inc.
"Company"), a privately held Texas corporation ("Company") and
the individuals listed on Exhibit "A" attached hereto and
specifically incorporated herein by this reference (the "Company
Shareholders").
WITNESSETH:
WHEREAS, Public Company desires to acquire all of the issued
and outstanding capital stock of Company; and
WHEREAS, the Company Shareholders are the sole holders of
all Company's capital stock outstanding and they desire to
transfer the same to Public Company in exchange for such
consideration as is set forth herein; and
WHEREAS, it is the intention of the parties to this
Agreement that the transactions evidenced hereby qualify as a
reorganization pursuant to such sections of the Internal Revenue
Code of 1954, as amended (the "Code"), as are applicable,
including, without limitation, Section 368(a)(1)(b) thereof, and
that there not be a taxable gain or loss recognized by Public
Company, Company or the Company Shareholders upon consummation of
the transactions evidenced hereby; and
WHEREAS, the transactions evidenced hereby are to be
submitted for approval at a special meeting of the Board of
Directors of Public Company and Company and by the Company
Shareholders by unanimous consent, dated on even date herewith;
NOW, THEREFORE, in consideration of the foregoing premises
and the mutual covenants, terms and conditions set forth herein,
and such other and further consideration, the receipt and
sufficiency of which is hereby acknowledged, this Agreement is
adopted as a reorganization pursuant to the Code and THE PARTIES
AGREE AS FOLLOWS:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF PUBLIC COMPANY
Public Company represents and warrants to Company and the
Company Shareholders as follows:
1.1 Company Profile; Assets and Liabilities. Public Company
is not currently conducting, and has never been engaged in, any
business other than as set forth in the definitive prospectus for
its initial public offering dated July 7, 1994 (the
"Prospectus"). Other than the costs associated with the
<PAGE>
transaction proposed herein, Public Company has no liabilities of
any nature, whether accrued, absolute, contingent, known or
otherwise. Public Company has no assets except as disclosed on
its audited financial statements for the year ended April 30,
1996.
1.2 Financial Statements. Public Company has delivered
audited financial statements dated, and for the period ended
April 30, 1996, together with all notes thereto, prepared in
reasonable detail in accordance with generally accepted
accounting principles applied on a consistent basis, which
financial statements contain a balance sheet dated April 30, 1996
and the following statements for the period then ended: a
statement of operations, a statement of stockholders' equity, and
a statement of cash flows.
1.3 Absence of Certain Changes. Since the date of the most
recent financial statements delivered hereunder, Public Company
has not:
(a) Suffered any material and adverse change in its
financial condition, working capital, assets, liabilities,
reserves, business, operations or prospects;
(b) Suffered any loss, damage, destruction or other casualty
materially and adversely affecting any of its properties, assets
or business (whether or not covered by insurance);
(c) Borrowed or agreed to borrow any funds or incurred, or
assumed or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability, except as
related to the costs associated with the proposed transaction
herein and to its transfer agent;
(d) Paid, discharged or satisfied any claims, liabilities or
obligations, other than in the normal course of its business;
(e) Permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected
to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind;
(f) Canceled any debts or waived any claims or rights of
substantial value, or sold, transferred, or otherwise disposed of
any of its properties or assets (real, personal or mixed,
tangible or intangible);
(g) Granted any increase in the compensation of directors,
officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment),
or any increase in the compensation payable or to become payable
to any director, officer or employee;
<PAGE>
(h) Made any capital expenditure or commitment outside of
its normal course of business;
(i) Declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or, directly
or indirectly, redeemed, purchased or otherwise acquired any
shares of its capital stock or other securities, other than as
required hereunder;
(j) Made any change in any method of accounting or
accounting practice;
(k) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible), to, or entered into any affiliate
or associate of any of its directors or officers, except for
directors' fees and compensation to officers at rates set forth
in any Form 10-K or 10-KSB of Public Company filed with the
Securities and Exchange Commission, none of which shall result in
any liability or indebtedness which shall survive this closing;
(l) Entered into any transaction, contract or commitment,
other than that certain letter of intent with Company, dated
April 25, 1996;
(m) Been subject to any other event or condition of any
character that has or might reasonably have a material and
adverse effect upon the financial condition, business, assets or
properties of Public Company;
(n) Agreed, whether in writing or otherwise, to take any
action described in this paragraph of the Agreement.
1.4 Affirmative Representations Regarding Action of Public
Company between Date of Financial Statements Delivered and
Closing. Between the date of the most recent financial
statements delivered hereunder and the date of this Agreement,
Public Company has conducted its business in the same manner as
conducted before the date of such financials. Public Company
will continue to conduct its business in the same manner as
conducted before the date of the financial statements through the
date of closing, as defined hereinbelow.
1.5 Employment Agreements; Benefit Plans. There is not
currently any employment or severance agreement to which Public
Company was or is subject, or by which it was or is bound.
Further, no such agreements will arise in the future as a result
of acts which have occurred previous to, or concurrent with, the
date hereof. Further, Public Company is not subject to, nor has
it established, a benefit plan, whether pursuant to the Code or
otherwise, other than disclosed in Public Company's Prospectus.
No shares of common stock, options to acquire common stock or
<PAGE>
other benefits have been issued under, or pursuant to, any such
plan or arrangement.
1.6 Permits and Licenses. The business of Public Company
has complied and currently complies in all material respects with
all applicable laws and regulations and with its Prospectus.
Further, the business of Public Company does not currently
require, and has not in the past required, application to procure
any license, permit, franchise, order or approval.
1.7 Litigation. There is no litigation or proceeding
pending or threatened against or relating to Public Company or
its business. There is no factual basis, whether known or
unknown, for any claim or action to be threatened or asserted
against Public Company.
1.8 Contracts, Agreements and Leases. Other than its
agreement with its legal counsel and transfer agent, Public
Company is not a party to any contracts, agreements, permits,
licenses, plans, leases or similar arrangements. The obligations
of Public Company owed to its legal counsel and transfer agent
will be paid in full through closing by Public Company, without
exception.
1.9 Principal Shareholders. Public Company has previously
provided to Company or its counsel a current list of its
shareholders and as of the date of this Agreement and
affirmatively states that no additional shares have been issued
by the Board of Directors of Public Company, nor is issuance of
such additional shares contemplated as of the date of this
Agreement, other than as described herein. The shareholder list
delivered to Company is accurate and complete as of the Closing
Date herein.
1.10 Authorization. Public Company has duly taken all
corporate action necessary to authorize the execution and
delivery of this Agreement, the consummation of the transactions
evidenced hereby and the performance of its obligations
hereunder.
1.11 Enforceable Obligations. This Agreement is a legal
and binding obligation of Public Company, enforceable in
accordance with the terms hereof, except as limited by
bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditors' rights and general
equitable principles.
1.12 No Conflicts or Consents. The execution and delivery
by Public Company of this Agreement and the performance of its
obligations have not conflicted and will not conflict with any
provision of law, statute, rule or regulation or any judgment
applicable to or binding upon Public Company, nor will it result
<PAGE>
in the creation of any lien, charge or encumbrance. No consent,
approval, authorization or order of any court or governmental
authority or third party has been or is required in connection
with the execution and delivery by Public Company of this
Agreement or the consummation of the transactions evidenced
hereby. Neither the execution nor the consummation of this
Agreement in accordance with the terms and conditions set forth
herein has conflicted or will conflict with or constitute a
default under or a breach or violation or grounds for termination
of or an event which with the lapse of time or notice and the
lapse of time could or would constitute a default under the
Articles of Incorporation or bylaws of Public Company.
1.13 Organization and Good Standing. Public Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all corporate
powers required to carry on its business and enter into and carry
out the transactions evidenced herein. Public Company is
qualified to do business and is in good standing as a foreign
corporation in all jurisdictions wherein the character of the
properties owned or held by it or the nature of the business
transacted makes such qualification necessary. As of the date
hereof, Public Company does not have any subsidiaries or
interests in any corporation, partnership, limited partnership or
other business entity.
1.14 Capitalization. Prior to execution of this Agreement,
the shareholders of Public Company have adopted certain
resolutions, including ratifying a forward split of the Public
Company common stock and caused the applicable Article relevant
to the Public Company capitalization included in the Articles of
Incorporation of Public Company, to be amended. As a result of
the adoption of these resolutions and amendments, the authorized
capital stock of Public Company now consists of 20,000,000 shares
of common stock, $.001 par value, of which 1,000,000 of such
shares are issued and outstanding, all fully paid for and
nonassessable, and 1,000,000 shares of preferred stock, no par
value per share, for which no such shares are issued or otherwise
outstanding. All references to the capitalization of Public
Company in this Agreement reflect the changes so authorized by
the Public Company shareholders.
Public Company has no other outstanding rights, options,
warrants, contracts, commitments or demands of any character
which would require the issuance (or transfer out of treasury),
by Public Company of any shares of its capital stock. All
outstanding securities were issued in accordance with applicable
federal and state securities laws or exemptions therefrom. The
Public Company Prospectus was duly registered with the U.S.
Securities and Exchange Commission ("SEC") and all applicable
state securities departments (collectively referred to as "State
Registrations"). All SEC and State Registrations complied with
<PAGE>
all applicable laws, rules and regulations. No claims or actions
have been threatened or asserted arising out of, or concerning,
the Prospectus, SEC Registrations, State Registrations or the
sale of securities of Public Company.
1.15 Filing of Reports. Public Company is presently
current in the requirement to file all Form 10-QSB, 10-KSB and 8-
K reports required to be filed pursuant to the Securities
Exchange Act of 1934, as amended. Further, Public Company has
filed all required reports of application of proceeds with all
applicable state securities departments on the appropriate forms
and will, prior to or at Closing, file the final Form SR with the
SEC. All forms, filings and reports, including but not limited
to the Prospectus, filed by Public Company with the SEC and each
state securities department were complete and accurate and
contained no material misstatements or omissions of a material
fact.
1.16 Tax Filings. Public Company has duly filed all
federal, state, local and foreign tax reports and returns
required to be filed by it and has duly paid all taxes and other
charges due or claimed to be due from it by any federal, state,
local or foreign tax authorities. Further, the reserve for
taxes, if any, reflected in the balance sheet delivered hereunder
is adequate and there are no tax liens upon any property or
assets of Public Company. Further, no state of facts exists or
has existed which would constitute grounds for the assessment of
any tax liability. All deficiencies and assessments resulting
from an examination of state, local, federal and foreign tax
returns and reports have been paid. There are no outstanding
agreements or waivers extending the statutory period of
limitation applicable to any federal, state, local, or foreign
tax return or report for any period. Public Company is not a
"consenting corporation" within the meaning of Section 341(f)(1)
of the Code.
1.17 Compliance With Law. Public Company is in compliance
with all laws, regulations and orders applicable to its business,
including but not limited to, all applicable laws, rules and
regulations of the U.S. Securities and Exchange Commission and
all applicable state securities departments. Further, Public
Company has not received any notification that it is in violation
of any laws, regulations or orders and, to the best knowledge of
management of Public Company, no such violations exist. Neither
Public Company nor any employee or agent of Public Company has
made any payment to any person which violates any statutes or law
required to be disclosed under applicable disclosure policies of
the Securities and Exchange Commission.
1.18 Disclosure. No representations or warranties by
Public Company in this Agreement and no statement contained in
any document (including, without limitation, financial
<PAGE>
statements), certificate or other writing furnished or to be
furnished by Public Company to Company or the Company Shareholder
pursuant to the provisions hereof or in connection with the
transactions contemplated hereby, contained or will contain any
untrue statement of material facts or omits or will omit to state
any material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they
were made, not misleading. There are no facts known to Public
Company which, either individually or in the aggregate, could or
would materially and adversely affect or involve any substantial
possibility of having a material and adverse effect on the
condition (financial or otherwise), results of operations,
assets, liabilities or business of Public Company.
1.19 Officers' Certificates. At closing, the President of
Public Company shall provide a Certificate, dated as of the
closing date and certified by the Secretary of Public Company, to
the effect that:
(a) Public Company is not currently conducting, and has
never been engaged in, any business other than set forth in its
Prospectus.
(b) Public Company has delivered audited financial
statements dated, and for the fiscal year ended, April 30, 1996,
together with all Notes thereto, prepared in reasonable detail in
accordance with generally accepted accounting principles applied
on a consistent basis, which financial statements contain a
balance sheet dated April 30, 1996, and the following statements
for the period then ended: a statement of operations, a
statement of stockholders' equity, and a statement of cash flows.
Further, Public Company has delivered, or will deliver upon
request of Company, all books and records, as well as all
required substantiating documentation, to Company, which are
necessary to compile financial statements for periods subsequent
to the date of, and the periods covered by, the most recent
financial statements delivered hereunder. Further, Public
Company has delivered, or otherwise made available, true and
correct copies of the Articles of Incorporation and bylaws of
Public Company, minutes of all meetings of its directors and
shareholders, true and correct copies of all filings made in
respect of Public Company's initial public offering and such
other and further material as has been requested.
(c) Since the date of the most recent financial statements
delivered hereunder, Public Company has not (unless otherwise
described herein):
(1) Suffered any material and adverse change in its
financial condition, working capital, assets, liabilities,
reserves, business, operations or prospects;
<PAGE>
(2) Suffered any loss, damage, destruction or other
casualty materially and adversely affecting any of its
properties, assets or business (whether or not covered by
insurance);
(3) Borrowed or agreed to borrow any funds or incurred, or
assumed or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability;
(4) Paid, discharged or satisfied any claims, liabilities
or obligations, other than in the ordinary course of its
business;
(5) Permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected
to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind;
(6) Canceled any debts or waived any claims or rights of
substantial value, or sold, transferred, or otherwise disposed of
any of its properties or assets (real, personal or mixed,
tangible or intangible);
(7) Granted any increase in the compensation of directors,
officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment)
or any increase in the compensation payable or to become payable
to any director, officer or employee;
(8) Made any capital expenditure or commitment other than
in the normal course of its business or as disclosed herein;
(9) Declared, paid or set aside for payment any dividend or
other distribution in respect of its capital stock or, directly
or indirectly, redeemed, purchased or otherwise acquired any
shares of its capital stock or other securities, other than as
required hereunder to consummate the transaction proposed herein;
(10) Made any change in any method of accounting or
accounting practice;
(11) Paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement
or arrangement with, any of its directors or officers or any
affiliate or associate of any of its directors or officers;
(12) Entered into any transaction, contract or commitment
other than as described in the Public Company Prospectus, or as
otherwise previously described to Company;
<PAGE>
(13) Been subject to any other event or condition of any
character that has or might reasonably have a material and
adverse effect upon the financial condition, business, assets or
properties of Public Company;
(14) Agreed, whether in writing or otherwise, to take any
action described in this paragraph of the Agreement;
(d) Between the date of the most recent financial statements
delivered hereunder and the date of this Agreement, Public
Company has conducted its business in the same manner as
conducted before the date of such financials and in accordance
with the Public Company Business Plan described in its
Prospectus.
(e) There is not currently any employment or severance
agreement to which Public Company was or is subject, or by which
it was or is bound. Further, no such agreements will arise in
the future as a result of acts which have occurred previous to,
or concurrent with, the date hereof.
(f) There is no litigation or proceeding pending or
threatened against or relating to Public Company, or its
business.
(g) Public Company is not a party to any contract,
agreement, permit, license, plan, lease or similar arrangement
which will survive closing, other than its existing agreement
with its transfer agent.
(h) The execution and delivery by Public Company of this
Agreement and the performance of its obligations have not
conflicted and will not conflict with any provisions of law,
statute, rule or regulation or any judgment applicable to or
binding upon Public Company, nor will it result in the creation
of any lien, charge or encumbrance. No consent, approval,
authorization or order of any court or governmental authority or
third party has been or is required in connection with the
execution and delivery by Public Company of this Agreement or the
consummation of the transactions evidenced hereby. Neither the
execution nor the consummation of this Agreement in accordance
with the terms and conditions set forth herein, has conflicted or
will conflict with or constitute a default under or a breach or
violation or grounds for termination of or an event which with
the lapse of time or notice and the lapse of time could or would
constitute a default under the Articles of Incorporation, as
amended, or bylaws of Public Company.
(i) Public Company is in compliance with all laws,
regulations and orders applicable to its business. Further,
Public Company has not received any notification that it is in
violation of any laws, regulations or orders and no such
<PAGE>
violations exist. Neither Public Company, nor any employee or
agent of Public Company, has made any payment to any person which
violates any statutes or law required to be disclosed under
applicable disclosure policies of the Securities and Exchange
Commission.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and the Company Shareholders represent and warrant
to Public Company as follows:
2.1 Organization and Good Standing. Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and has all corporate powers
required to carry on its business. Company is qualified to do
business and is in good standing as a foreign corporation in all
jurisdictions wherein the character of its properties or the
nature of its business makes such qualification necessary.
2.2 Authorization. The Company Shareholders have duly
taken all action necessary to authorize the execution and
delivery of this Agreement and to authorize the consummation of
the transactions evidenced hereby and the performance of their
obligations and the obligations of Company hereunder.
2.3 No Conflicts or Consents. The execution and delivery
by the Company Shareholders of this Agreement and their
performance of those obligations set forth herein have not
conflicted and will not conflict with any provision of law,
statute, rule or regulation or of any agreement or judgment
applicable to or binding upon them or Company, or result in the
creation of any lien, charge or encumbrance upon any of their
assets or properties, or upon those of Company. No consent,
approval, authorization or order of any court or governmental
authority or third party is required in connection with the
execution and delivery by Company, or by the Company
Shareholders, of this Agreement or the consummation of the
transactions evidenced hereby. Neither the execution of this
Agreement nor its consummation in accordance with its terms has
conflicted or will conflict with or constitute a default under or
breach or violation or grounds for termination of or an event
which with the lapse of time or notice and the lapse of time
would or could constitute a default under any note, indenture,
mortgage, deed of trust or other agreement or instrument to which
Company or the Company Shareholders are a party or by which
either or all of them are bound.
2.4 Enforceable Obligations. This Agreement is a legal and
<PAGE>
binding obligation of Company and the Company Shareholders,
enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application
relating to the enforcement of creditor's rights and general
equitable principles.
2.5 Capitalization. The authorized capital stock of
Company consists of 1,000,000 shares of common stock, of which
300,000 are issued in outstanding and fully paid for and
nonassessable. Company has no outstanding rights, options,
warrants, contracts, commitments or demands of any character
which would require the issuance (or transfer out of treasury),
by Company of any shares of its capital stock. All outstanding
securities were issued in accordance with applicable federal and
state securities laws or exemptions therefrom.
2.6 Financial Statements. Company shall deliver audited
financial statements dated, and for the period ended, March 8,
1996, together with all notes thereto, prepared in reasonable
detail in accordance with generally accepted accounting
principles applied on a consistent basis, to Public Company on or
before the Closing Date.
2.7 Other Information and Inspections. Company has made
available for inspection and copying all books and records of
Company and has fully and completely furnished to Public Company
such information as has been requested.
2.8 Disclosure. No representations or warranties by
Company or the Company Shareholders in this Agreement and no
statement contained in any document, certificate or other writing
furnished or to be furnished by Company or the Company
Shareholders to Public Company pursuant to the provisions hereof,
or in connection with the transaction contemplated hereby,
contained or will contain any untrue statements of material facts
or omits or will omit to state any material fact necessary in
order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
Unanimous consents of the Company Shareholders and directors were
executed, to be effective on or before May 25, 1996. Under the
respective consents, all transactions evidenced hereby obtained
the requisite approval.
ARTICLE III
CLOSING AND EXCHANGE OF SHARES
3.1 Terms of the Exchange. On the Closing Date, or such
date as stated below:
(a) On or before ten (10) days after the Closing Date,
Public Company shall cause to be delivered to the Company
<PAGE>
Shareholders, in an acceptable form, certificates for 5,200,000
(post-split) "restricted" shares (post forward split), of its
$.001 par value voting common stock (the "Exchange Shares"), free
and clear of all mortgages, pledges, claims, liens and other
rights and encumbrances whatsoever, except as disclosed in
3.1(b), below. The Company Shareholders shall not be diluted as
a result of any debt, lien, encumbrance, action or liability, or
any cost or expense related thereto of Public Company, or any
breach of any representation or warranty of Public Company
contained herein ("Subsequent Liabilities"). Accordingly, in
addition to any other remedy, either in law or in equity, the
Company Shareholders shall be issued such additional shares of
Common Stock of Public Company as may be required to off-set any
such Subsequent Liabilities. The number of shares to be issued
to the Company Shareholders shall be determined as follows: (i)
in the event shares are sold by Public Company to pay or satisfy
the Subsequent Liabilities, Public Company shall issue such
number of shares as are necessary to maintain the same percentage
of ownership by the Company Shareholders as they had before said
issuance; or (ii) in the event Public Company does not issue
additional shares to satisfy the Subsequent Liabilities, shares
equal to the amount of the Subsequent Liabilities, with a market
value at bid price, will be issued to the Company Shareholders.
(b) The Exchange Shares shall not be subject to any
preemptive rights, options or similar rights on the part of any
shareholder or creditor of Public Company, or any other person
whatever.
(c) The Company Shareholders shall, in consideration for
their receipt of the Exchange Shares, transfer and deliver to
Public Company certificates representing all 300,000 of the
issued and outstanding Company Shares owned by them. Public
Company shall receive good and merchantable title to the Company
Shares, which shall be transferred to Public Company free and
clear of all liens, mortgages, pledges, claims or other rights or
encumbrances whatever.
3.2 Restrictions on Transfer. The Exchange Shares, when
issued and delivered hereunder, will not be registered under the
Securities Act of 1933, as amended, nor will the Company
Shareholders be granted any registration rights under such Act as
to such shares. The Company Shareholders shall execute and
deliver to Public Company an investment letter satisfactory in
form and substance to Public Company's counsel which states,
among other things, that the Exchange Shares have been acquired
for investment and with no present intent to make any resale,
assignment, transfer or hypothecation of all or any part thereof
and that the certificates representing the Exchange Shares will
bear a restrictive legend which states in effect that such shares
have not been registered under the Securities Act of 1933, as
amended, and consequently may not be resold, assigned,
<PAGE>
transferred or hypothecated unless registered under such Act or,
in the opinion of Public Company's counsel, an exemption from the
registration requirements of such Act is available for any such
transaction.
3.3 Changes in Capitalization of Public Company. If,
between the date of the most recent financial statements of
Public Company delivered to Company and the Company Shareholders
and the Closing Date, the outstanding shares of the capital stock
of Public Company are found to have been increased, decreased,
changed into or exchanged for a different number or kind of said
shares or securities of Public Company through reorganization,
reclassification, stock dividend stock split, reverse stock split
or similar change in the capitalization of Public Company and
such has not been disclosed to the Company Shareholders
hereunder, Public Company, at the election of the Company
Shareholders, shall issue and deliver to the Company Shareholders
such number of Public Company shares as will reflect an equitable
adjustment of the Public Company shares specified in Paragraph 1
of this Article III on account of any such increase, decrease,
change or exchange. In the event of any such change in the
capitalization of Public Company, all references to the shares
herein shall refer to the number of Public Company shares as thus
adjusted. However, it is specifically acknowledged, agreed and
understood that the shareholders of Public Company have
conditionally approved a proposal to undertake a "forward split"
of the Public Company common stock, wherein 20 shares of common
stock issued and outstanding will be exchanged for 1 share of
common stock, as well as additional matters more specifically
stated in that certain Proxy Statement, which is in progress and
which will, when completed, be attached hereto and incorporated
herein as Exhibit "B". The sole condition to the approval of the
aforesaid forward stock split is the successful consummation of
the transaction proposed herein. Public Company shall have no
obligation to issue any additional shares to the Company
Shareholders as described herein as a result of the aforesaid
reverse stock split. As part of the Closing, Public Company will
also amend the Articles of Incorporation to increase the
authorized common stock to 20,000,000 shares, $.001 par value and
to authorize the issuance of 1,000,00 shares of preferred stock,
no par value.
3.4 Closing Date/Effective Date. The Closing Date of the
transactions contemplated hereby shall be May 25, 1996, or such
later date as the parties may so choose thereafter. All
representations of the parties hereto shall survive the closing
and the representations and warranties shall be made as in effect
on the Closing Date.
The Effective Date shall be the date in which all of the
certificates necessary to effectuate this transaction have been
duly issued by the respective party and all other matters
<PAGE>
relevant to the closing of the transaction contemplated herein
have been accomplished.
3.5 Closing Documents.
A. To Be Delivered by Public Company:
(1) Certificates representing 5,200,000 shares of
"restricted" common stock to the Company Shareholders;
(2) Certified copy of minutes of shareholder and
directors, authorizing this transaction;
(3) Certificate of Good Standing;
(4) Opinion of legal counsel acceptable to Company;
(5) Certificate of President;
(6) Resignation letters of Randel C. Sherwood and
Suzanne Johnson as officers and directors, as applicable, along
with the resignation letter of Kenneth L. Kisner as director.
(7) Letter from present independent certified public
accountant, resigning from said position and further indicating
that the basis of their resignation does not arise from any
changes in or disagreements with the management of Public Company
on any issue of accounting practices or procedure.
B. To be delivered by Company or Company Shareholders:
(1) Certificates representing 300,000 shares of Company,
together with an assignment of said shares, separate from said
Certificates;
(2) Certified copy of minutes of shareholders and
directors of Company, authorizing this transaction;
(3) Certificate of Good Standing;
(4) Legal opinion of counsel, acceptable to Public
Company;
(5) Certificate of President;
(6) Investment letter from Company Shareholders relating
to issuance of Public Company common stock relevant herein.
<PAGE>
ARTICLE V
COVENANTS OF COMPANY AND THE COMPANY SHAREHOLDERS
Company and, insofar as they have the power to direct
Company by ownership of voting securities or otherwise, the
Company Shareholders (Company and the Company Shareholders being
collectively referred to below as the "Company Parties"),
covenant and agree that, prior to the Effective Date:
5.01 Effectuation of this Agreement. The Company Parties
will use their best efforts to cause this Agreement to become
effective, and all transactions herein contemplated to be
consummated, in accordance with their terms, to obtain all
required consents and authorizations of the Company Parties, to
make all filings and give all notices to those regulatory
authorities or other third parties which may be necessary or
reasonably required in order to effect the transactions
contemplated in this Agreement, and to comply with all federal
and state securities laws and other laws as may be applicable to
the contemplated transactions.
5.02 Transactions. The Company Parties will carry on
Company's business diligently and substantially in the same
manner as heretofore conducted, and will not enter into any
transactions which are not in the ordinary course of Company's
business, or which would singly or in the aggregate be materially
adverse to Company's business, prospects or financial condition,
taken as a whole, or which had not been previously disclosed to
Public Company.
5.03 Conduct of Business. (a) The Company Parties will not
(i) permit or do or cause to be done anything which Company has
represented in Article II not to have been done, except as
otherwise permitted in this Agreement or consented to by Public
Company in advance and in writing; (ii) make or permit any
amendment to Company's Articles of Incorporation or bylaws; (iii)
cause or permit to be declared or paid any dividend, stock split,
combination (reverse split) or other recapitalization or
distribution in respect of Company's common stock, nor cause or
permit the issuance of any additional shares of Company's common
stock; (iv) permit the increase of compensation of any type to
any director or officer or other employee of Company; (v) to the
best ability of the Company Parties, permit or do any act or
omission to act the effect of which would be to breach or violate
any contract or commitment to which Company is a party; (vi) to
the best ability of the Company Parties, permit or cause the
waiver of the provisions of any statute of limitations applicable
to the levy or assessment of any federal, state, municipal or
foreign taxes payable by Company; or (vii) organize any
subsidiary of Company, or acquire or permit the acquisition of
any equity interest in any other business or entity, with the
<PAGE>
exception of those proposed transactions presently in
negotiations and disclosed herein in Exhibit "C".
(b) To the best of their ability, the Company Parties will:
(i) maintain Company's books, accounts, and records as now being
maintained, on a consistent basis; (ii) maintain Company's
properties in good repair; (iii) comply with and not violate any
law, rule, regulation, or ordinance whatever applicable to
Company or its business or any license or permit issued to
Company; and (iv) take each and every step necessary to preserve
the charter issued by the State of Florida, including timely
filing of corporate reports and current payment of all taxes now
and hereafter due and owing.
5.04 Issuance of Additional Securities. Company shall not
issue or permit the issuance of any common stock of Company or of
any warrant, option or other right to subscribe for or acquire
common stock or any other securities whatever of Company, nor
shall any stock option or stock purchase plan, incentive stock
option plan or similar plan be adopted whereby persons could
acquire securities of Company, or any option or similar right to
acquire such securities.
5.05 Publicity and Filings. All press releases,
shareholder communications, filings with the Securities and
Exchange Commission or other governmental agency or body and
other information and publicity generated by Company regarding
the transactions contemplated in this Agreement shall be reviewed
and approved by Public Company and its counsel before release or
dissemination to the public or filing with any governmental
agency or body whatever.
5.06 Access. The Company Parties agree that they will
allow Public Company's directors, officers, accountants,
attorneys and other representatives full access, during normal
business hours throughout the term or applicability of this
Agreement, to all information whatever concerning Company's
respective affairs, operations and properties as Public Company
may reasonably request. All information provided shall be
furnished strictly subject to the confidentiality provisions of
this Agreement. The Company Parties may refuse to allow copies
or abstracts to be made of any formula, design plans for
machinery or equipment, or any plans or details as to
manufacturing or chemical processes, and the like; provided that
representatives of Public Company shall be allowed access to such
things for inspection, in order to satisfy themselves that such
things exist and are substantially as represented to Public
Company.
5.07 Stand-Still Agreement. Other than those potential
acquisitions which have previously been disclosed to Public
Company, the Company Parties agree not to solicit from any third
<PAGE>
party an offer or expression of interest in or with respect to
any acquisition, combination or similar transaction involving
Company, or substantially all of its assets or securities
(whether outstanding or authorized but unissued) and further
agree that they will promptly inform Public Company of the
existence of any such unsolicited offer or expression of
interest.
ARTICLE VI
COVENANTS OF PUBLIC COMPANY
Public Company covenants and agrees that, prior to the
Effective Date:
6.01 Effectuation of this Agreement. Public Company will
use its best efforts to cause this Agreement to become effective,
and all transactions herein contemplated to be consummated, in
accordance with their terms, to obtain all required consents and
authorizations of third parties, to make all filings and give all
notices to those regulatory authorities or other third parties
which may be necessary or reasonably required in order to effect
the transactions contemplated in this Agreement, and to comply
with all federal and state securities laws and other laws as may
be applicable to the contemplated transactions.
6.02 Conduct. (a) Public Company will not (i) permit or do
or cause to be done anything which Public Company has represented
in Article I not to have been done, except as otherwise permitted
in this Agreement, or consented to by Company in advance and in
writing; (ii) make or permit any amendment to the Public Company
Articles of Incorporation or bylaws, other than those matters
included in Exhibit "B" hereto; (iii) cause or permit to be
declared or paid any dividend, stock split, combination (reverse
split) or other recapitalization or distribution in respect of
Public Company's capital stock, other than as disclosed in the
aforesaid Proxy documents; (iv) to Public Company's best ability,
permit or cause the waiver of the provisions of any statute of
limitations applicable to the levy or assessment of any federal,
state, municipal or foreign taxes payable by Public Company.
(b) To the best of its ability, Public Company will: (i)
maintain its books, accounts and records as now being maintained,
on a consistent basis; (ii) comply with and not violate any law,
rule, regulation or ordinance whatsoever applicable to Public
Company; and (iii) take each and every step necessary to preserve
the charter issued by the State of Nevada, including timely
filing of corporate reports and current payment of all taxes now
and hereafter due and owing.
6.03 Access. Public Company agrees that it will allow
Company's directors, officers, accountants, attorneys and other
<PAGE>
representatives full access, during normal business hours
throughout the term or applicability of this Agreement, to all
information whatever concerning its affairs as the Company
Parties may reasonably request. All information provided shall
be furnished strictly subject to the confidentiality provisions
of this Agreement.
ARTICLE VII
GENERAL PROVISIONS
7.1 Further Assurances. At any time and from time to time
after the date of this Agreement, each and every party hereto
shall execute such additional instruments and take such other and
further action as may be reasonably requested by any other party
to carry out the intent and purpose of this Agreement.
7.2 Waiver. Any failure on the part of any party hereunder
to comply with any of their obligations, agreements or conditions
may be waived in writing by the party to whom such compliance is
owed; however, waiver on one occasion does not operate to
effectuate a waiver on any other occasion.
7.3 Brokers. Each party represents to every other party
that no brokers or finders have acted for it in connection with
this Agreement and that no obligations of Public Company, Company
and the Company Shareholders need to be satisfied as of the date
of this Agreement.
7.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
given if delivered in person or sent by prepaid, first class,
registered or certified mail, return receipt requested, as first
set forth above; and for the Company Shareholders as set forth
under their names on Exhibit A.
7.5 Entire Agreement. This Agreement constitutes the
entire agreement between the parties and supersedes and cancels
any other agreement, representation or communication, whether
oral or written, between the parties and relating to the
transactions evidenced hereby or the subject matter hereof.
7.6 Headings. The article and paragraph headings in this
Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
7.7 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State
of Nevada.
7.8 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
<PAGE>
be deemed an original, but all of which together shall constitute
one and the same instrument.
7.9 No Oral Modification. This Agreement may be amended
solely in writing, and only after the mutual agreement of the
parties affected hereby.
7.10 Survival of Representations, Warranties and Covenants.
The representations, warranties, covenants and agreements
contained herein shall survive the date and execution of this
Agreement.
7.11 Legal Counsel; Expenses. The parties hereby
acknowledge that they have had an opportunity to obtain legal
counsel for Company, that Gianesin & Associates, Bryan A.
Gianesin, Esq., has acted as counsel for Public Company and that
the Company Shareholders have consulted independent legal counsel
in respect of all matters leading to, and including, the
transactions evidenced hereby.
7.12 Simultaneous Closing. Public Company and the Company
Parties specifically acknowledge and represent that the closing
hereunder was, in effect, simultaneously completed with Public
Company and the Company Parties on the date of this Agreement.
IN WITNESS THEREOF, the parties hereto have caused this
Agreement to be executed on the date and year first above
written.
SOLUTIONS INCORPORATED, a Nevada
corporation ("PUBLIC COMPANY")
Randel C. Sherwood
Randel C. Sherwood, President
PUBLIC COMPANY
Attest:
Suzanne R. Johnson
Suzanne R. Johnson, Secretary
SUARRO COMMUNICATIONS, INC., a
Texas corporation ("COMPANY")
Michael D. McAuliffe
Michael D. McAuliffe, President
<PAGE>
COMPANY
Attest:
Christian E. Zenner
Christian E. Zenner, Secretary
COMPANY SHAREHOLDERS:
Michael D. McAuliffe
Michael D. McAuliffe
Christian E. Zenner
Christian E. Zenner
<PAGE>
EXHIBIT A
<TABLE>
COMPANY SHAREHOLDERS
<CAPTION>
Name and Address # of Company Shares # of Public Company Shares
________________ ___________________ __________________________
<S> <C> <C>
Michael D. McAuliffe 150,000 2,600,000
1635 NE Loop 410, #900
San Antonio, TX 78209
Christian E. Zenner 150,000 2,600,000
2630 Fountainview #300
Houston, TX 77057
</TABLE>
<PAGE>
EXHIBIT B
NOTICE OF SPECIAL SHAREHOLDER MEETING,
PROXY AND PROXY STATEMENT
<PAGE>
EXHIBIT C
LIST OF PENDING CONTRACTS OF COMPANY
No such contracts exist.
<PAGE>
EXHIBIT B
(to Proxy)
DISSENTER'S RIGHTS AND
OBLIGATIONS UNDER NEVADA
BUSINESS ASSOCIATIONS ACT
(Revised 1995)
<PAGE>
DISSENTER'S RIGHTS AND OBLIGATIONS
UNDER NEVADA BUSINESS ASSOCIATIONS ACT
(Revised 1995)
92A.420. Prerequisites to demand for payment for shares.
1. If a proposed corporate action creating dissenters'
rights is submitted to a vote at a stockholder's meeting, a
stockholder who wishes to assert dissenter's rights:
(a) Must deliver to the subject corporation, before the
vote is taken, written notice of his intent to demand payment for
his shares if the proposed action is effectuated; and
(b) Must not vote his shares in favor of the proposed
action.
2. A stockholder who does not satisfy the requirements of
subsection 1 is not entitled to payment for his shares under this
chapter. (1995, ch. 586, Sec. 51,p.2089.)
92A.440. Demand for payment and deposit of certificates;
retention of rights of stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of
the shares before the date required to be set forth in the
dissenter's notice for this certification; and
(c) Deposit his certificates, if any, in accordance with
the terms of the notice.
2. The stockholder who demands payment and deposits his
certificates, if any, retains all other rights of a stockholder
until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit
his certificates where required, each by the date set forth in
the dissenter's notice, is not entitled to payment for his shares
under this chapter. (1995, ch. 586, Sec. 53, p.2090.)
92A.460. Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30
days after receipt of a demand for payment, the subject
corporation shall pay each dissenter who complied with NRS
92A.440 the amount the subject corporation estimates to be the
fair value of his shares, plus accrued interest. The obligation
of the subject corporation under this subsection may be enforced
<PAGE>
by the district court:
(a) Of the county where the corporation's registered
office is located; or
(b) At the election of any dissenter residing or having
registered office int his state, of the county where the
dissenter resides or has its registered office. The court shall
dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the
end of a fiscal year ending not more than 16 months before the
date of payment, a statement of income for that year, a statement
of changes in the stockholder's equity for that year and the
latest available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of
the fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand
payment under NRS 92A.480; and
(e) A copy of NRS 92A.300 to 92A.500, inclusive. (1995,
ch. 586, Sec. 55, p. 2090.)
92A.480. Dissenter's estimate of fair value: Notification of
subject corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in
writing of his own estimate of the fair value of his shares and
the amount of interest due, and demand payment of his estimate,
less any payment pursuant to NRS 92A.460, or reject the offer
pursuant to NRS 92A.470 and demand payment of the fair value of
his shares and interest due, if he believes that the amount paid
pursuant to NRS 92A.460 or offered pursuant to NRS 92A.470 is
less than the fair value of his shares or that the interest due
is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant
to this section unless he notifies the subject corporation of his
demand in writing within 30 days after the subject corporation
made or offered payment for his shares. (1995, ch. 586, Sec. 57, p.
2091.)
<PAGE>
SOLUTIONS, INCORPORATED
FINANCIAL STATEMENTS
with
Independent Auditors' Report
For the Fiscal Year Ended April 30, 1996
and For the Period August 18, 1988 (Inception)
through April 30, 1996
<PAGE>
SOLUTIONS, INCORPORATED
TABLE OF CONTENTS
Page
Independent Auditors' Report 6
Financial Statements
Balance Sheet 7
Statement of Operations 8
Statement of Cash Flows 9
Statement of Shareholder's Equity 10
Notes to the Financial Statements 11-12
<PAGE>
Kish, Leake & Associates, P.C.
Certified Public Accountants
7901 East Belleview Avenue, Suite 220
Englewood, Colorado 80111
(303) 779-5006
Independent Auditor's Report
We have audited the accompanying balance sheet of Solution,
Incorporated, (a Developmental Stage Company), as of April 30,
1996, and the related statements of income, shareholders' equity,
and cash flows for the fiscal years ended April 30, 1996 and
1995, and period August 18, 1988 (Inception) through April 30,
1996. 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 conducted our audit in accordance with generally accepted
auditing standards. Those 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 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 the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Solutions, Incorporated at April 30, 1996 and the results of
its operations and its cash flows for the fiscal years ended
April 30, 1996 and 1995 and the period August 18, 1988
(Inception) through April 30, 1996 in conformity with generally
accepted accounting principles.
Kish, Leake & Associates, P.C.
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
June 1, 1996
<PAGE>
<TABLE>
Solutions, Incorporated
(A Development Stage Company)
Balance Sheet
_______________________________________________________________
<CAPTION>
April
NOTES 30, 1996
_____ ________
<S> <C> <C>
ASSETS $ 0
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES $ 0
SHAREHOLDERS' EQUITY 1,2
Common Stock, Par Value
$.001 Per Share; Authorized
1,000,000 Shares; Issued
And Outstanding 50,000 Shares 50
Capital Paid In Excess Of
Par Value Of Common Stock 2,232
Deficit Accumulated During
The Development Stage (2,282)
TOTAL SHAREHOLDERS' EQUITY 0
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 0
<FN>
The Accompanying Notes Are An Integral Part Of These
Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Solutions, Incorporated
(A Development Stage Company)
Statement Of Operations
________________________________________________________________
<CAPTION>
August
18, 1988
(Inception)
Through
April April April
NOTES 30, 1996 30, 1994 30, 1996
_____ ________ ________ ________
<S> <C> <C> <C> <C>
Revenue $ 0 $ 0 $ 0
Expenses 1,782 0 $2,282
Net (Loss) ($1,782) $0 ($2,282)
Net (Loss) Per
Common Share 1 ($0.04) $0.00 ($0.05)
Common Shares
Outstanding * 2 50,000 50,000 50,000
<FN>
*Takes In Account Stock Split In August 1994
The Accompanying Notes Are An Integral Part Of These
Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Solutions, Incorporated
(A Development Stage Company)
Statement Of Cash Flows
_______________________________________________________________
<CAPTION>
August
18, 1988
(Inception)
Through
April April April
NOTES 30, 1996 30, 1995 30, 1996
_____ ________ ________ ________
<S> <C> <C> <C> <C>
Net (Loss) Accumulated
During The Development Stage ($1,782) $ 0 ($2,282)
Services Provided in Exchange
For Stock 0 0 500
Expenses Paid By Shareholder
For the Company 1,782 0 1,782
Cash Flows From Operations 0 0 0
Cash Flows From Investing 0 0 0
Cash Flows From Financing 0 0 0
Net Increase In Cash 0 0 0
Cash At Beginning Of Period 0 0 0
Cash At End Of Period $ 0 $ 0 $ 0
Summary Of Non-Cash Investing And Financing Activities:
$500
<FN>
The Accompanying Notes Are An Integral Part Of These
Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Solutions, Incorporated
(A Development Stage Company)
Statement Of Shareholders' Equity
_______________________________________________________________________________
<CAPTION>
Capital Paid Deficit
In Excess of Accumulated
Number Of Par Value During The
Common Common Common Development
Notes Shares Stock Stock Stage Total
_____ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Balance At
August 18, 1988 0 0 0 0 0
Issuance Of
Common Stock: 1,2
August 18, 1988 -
Services At $.01
Per Share * 50,000 $ 50 $ 450 $ 500
Net (Loss) (500) (500)
_______ ______ ______ ______ _______
Balance At April 30,
1988, 1989, 1990, 1991,
1992, 1993, & 1994 50,000 $ 50 $ 450 ($500) $ 0
April 30, 1996
Activity 1,782 1,782
Net (Loss) (1,782) (1,782)
_______ _____ ______ ______ _______
Balance at
April 30, 1996 50,000 $ 50 $2,232 ($2,282) $ 0
<FN>
*Takes In Account Stock Split in August 1994
The Accompanying Notes Are An Integral Part Of These Financial
Statements.
</TABLE>
<PAGE>
Solutions, Incorporated
(A Development Stage Company)
Notes to Financial Statements
For The Years Ended April 30, 1996 and 1995
Note 1 - Organization and Summary of Significant Accounting Policies
Organization:
On August 18, 1988, Solutions, Incorporated (the Company) was
incorporated under the laws of Nevada, to engage in selected mergers
and acquisitions.
Developmental Stage:
The Company is currently in the developmental stage and has no
significant operations to date.
Statement of cash flows:
For the purposes of the statement of cash flows, the company
considers demand deposits and highly liquid-debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Cash paid for interest in fiscal year ended April 30, 1996 and 1995
was $-0-. Cash paid for income taxes in fiscal year ended April 30,
1996 and 1995 was -0-.
Net (Loss) Per Common Share:
The net loss per common share is computed by dividing the net loss
for the period by the number of shares outstanding at April 30, 1996
and April 30, 1995.
Note 2 - Capital Stock and Capital in Excess of Par Value
Common stock:
The Company initially authorized 1,000,000 shares of $.001 par value
common stock.
On August 18, 1988, the Company issued 500,000 shares of common
stock for services valued at $.001 per share. In August of 1994 the
shareholders of the Company adopted a 1 for 10 reverse stock split.
No dividends have been declared through April 30, 1996.
<PAGE>
Solutions, Incorporated
(A Development Stage Company)
Notes to Financial Statements
For The Years Ended April 30, 1996 and 1995
Note 3 - Related Party Events
The Company maintains its principal offices in space provided by its
legal council on a rent free basis. The office is located at 6 Venture
- - Suite 207, Irvine, California 92718.
Note 4 - Income Taxes
At April 30, 1996, the Company has net operating loss carryforwards
available for financial statement and Federal income tax purposes of
approximately $2,300 which, if not used, will expire in varying amounts
during the years 2003 and 2011.
The Company follows Financial Accounting Standards Board Statement No.
109, Accounting for Income Taxes (SFAS #109), which requires, among
other things, an asset and liability approach to calculating deferred
income taxes. As of April 30, 1996, the Company has a deferred tax
asset of $460 primarily for its net operating loss carryforward which
has been fully reserved through a valuation allowance. The change in
the valuation allowance for 1996 is $360.
<PAGE>
R. E. Bassie & Co.
Certified Public Accountants
7100 Regency Square Blvd., Suite 135
Houston, Texas 77036-3208
Tel: (713) 266-0691 Fax: (713) 266-0692
Independent Auditors' Report
The Board of Directors
Suarro Communications, Inc.:
We have audited the financial statements of Suarro Communications,
Inc. (a Development Stage Company) as listed in the accompanying
index. 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 conducted our audit in accordance with generally accepted
auditing standards. Those 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
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 that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents
fairly, in all material respects, the financial position of Suarro
Communications, Inc. as of March 15, 1996, and the results of its
operations and its cash flows for the period from March 1, 1996
(date of inception) to March 15, 1996, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 5 to the financial statements, the Company is a newly organized
development stage corporation with limited capital. Successful
development and marketing of the Company's products and the
procurement of additional financing is necessary for the Company to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
May 17, 1996
<PAGE>
<TABLE>
SUARRO COMMUNICATIONS, INC.
Balance Sheet
(A Development Stage Company)
March 15, 1996
<CAPTION>
Assets
<S> <C>
Cash $ 1,870
Proprietary telecommunication and
Internet costs (note 2) 349,382
Total assets 351,252
<CAPTION>
Stockholders' Equity
<S> <C>
Stockholders' equity (notes 2 and 3):
Common stock, no par value.
Authorized 1,000,000 shares;
issued and outstanding 300,000 shares 351,252
Deficit accumulated during the development stage 0
________
Commitments and contingencies (notes 3, 4 and 5) 351,252
________
Total stockholder's equity $351,252
<FN>
See accompanying notes to financial statement.
</TABLE>
<PAGE>
<TABLE>
SUARRO COMMUNICATIONS, INC.
Statement of Operations
(A Development Stage Company)
<CAPTION>
For the period from March 1, 1996
(date of inception) to March 15, 1996
<S> <C>
Revenue $ 0
Expenses 0
________
Net earnings $ 0
________
Earnings per common share $ 0
<FN>
See accompanying note to financial statements.
</TABLE>
<PAGE>
<TABLE>
SUARRO COMMUNICATIONS, INC.
Statement of Stockholders' Equity
(A Development Stage Company)
For the period from March 1, 1996
(date of inception) to March 15, 1996
<CAPTION>
Deficit
Accumulated
during the Total
Common Development Stockholders'
Stock Stage Equity
__________ ___________ _____________
<S> <C> <C> <C>
Balance, March 1, 1996 $ 351,252 $ 0 $ 351,252
Net earnings 0 0 0
__________ ___________ ____________
Balance, March 15, 1996 $ 351,252 $ 0 $ 351,252
<FN>
See accompanying notes to financial
</TABLE>
<PAGE>
<TABLE>
SUARRO COMMUNICATIONS, INC.
Statement of Cash Flows
(A Development Stage Company)
<CAPTION>
For the period from March 1, 1996
(date of inception) to March 15, 1996
<S> <C>
Cash flows from operating activities:
Deficit accumulated during the development state $ 0
______
Net cash provided by operating activities 0
______
Cash flows from investing activities 0
Cash flows from financing activities 0
______
Net increase in cash 0
Cash March 1, 1996 1,870
______
Cash March 15, 1996 1,870
_______
Supplemental
Noncash investing and financing 0
-------
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Pro Forma Combined Balance Sheet
The following pro forma combined balance sheet presents, under the "pooling of
interest" method of accounting, the balance sheet of Solutions, Incorporated as of April 30,
1996, combined with the balance sheet of Suarro Communications, Inc. as of March 15, 1996.
SOLUTIONS, INCORPORATED
(A Development Stage Company)
PRO FORMA COMBINED BALANCE SHEET
April 30, 1996
<CAPTION>
Suarro
Solutions, Communications Adjustments
Incorporated Inc. (a) (b) Pro Forma
____________ ______________ ___________ _________
<S> <C> <C> <C> <C>
Cash $ 0 $ 1,870 $ 0 $ 1,870
Proprietary telecommunication 0 349,382 0 349,382
and Internet Costs ____________ ______________ ___________ _________
Total Assets 0 351,252 0 351,252
Liabilities 0 0 0 0
Total Liabilities 0 0 0 0
Stockholders' equity:
Preferred Stock 0 0 0 0
Common stock 50 351,252 (345,102) 6,200
Additional paid-in capital 2,232 0 345,102 347,334
Deficit accumulated during the (2,282) 0 0 (2,282)
development stage ____________ ______________ ___________ _________
Total stockholders' equity 0 351,252 0 351,252
____________ ______________ ___________ _________
Total liabilities and
stockholders' equity $ 0 $ 351,252 $ 0 $ 351,252
<FN>
Notes to Pro Forma Combined Financial Statements
(a) Solutions, Incorporated amended its articles of incorporation in May 1996 to increase
its authorized stock to 20,000,000 shares. Solution, Incorporated will have a twenty-
to-one stock split resulting in an increase of its outstanding shares from 50,000 to
1,000,000.
(b) Solutions, Incorporated will issue 5,2000,000 shares of common stock in exchange for the
300,000 outstanding shares of Suarro Communications, Inc. The transaction will be
accounted for using the "pooling of interest" method of accounting.
</TABLE>
<PAGE>
<TABLE>
Pro Forma Combined Statements of Operations
The following pro forma combined statements of operations presents, under the "pooling of
interest" method of accounting, the statement of operations of Solutions, Incorporated for
the year ended April 30, 1996, combined with the statement of operations of Suarro
Communications, Inc. for the period from March 1, 1996 (date of inception) to March 15, 1996.
SOLUTIONS, INCORPORATED
(A Development Stage Company)
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED April 30, 1996
<CAPTION>
Suarro
Solutions, Communications Adjustments
Incorporated Inc. Pro Forma
____________ ______________ ___________ _________
<S> <C> <C> <C> <C>
Sales and revenue $ 0 $ 0 $ 0 $ 0
Costs and Expenses:
Cost of sales 0 0 0 0
Selling, general and
administrative 0 0 0 0
Research and development 1,782 0 0 1,782
Other expense 0 0 0 0
____________ ______________ ___________ _________
Net loss before income taxes (1,782) 0 0 (1,782)
Income taxes 0 0 0 0
Net loss $ (1,782) $ 0 $ 0 $ (1,782)
Net loss per common share $ (0.0003)(a) $ 0 $ 0 $ (0.0003)
<FN>
Notes to Pro Forma Combined Financial Statements
(a) Based on Solution, Incorporated average shares outstanding of 1,000,000 and issuance of
5,200,000 shares to acquire Suarro Communications, Inc.
</TABLE>
<PAGE>
SUARRO COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
(1) Organization
Suarro Communications, Inc. (the Company) was incorporated on March 1,
1996 under the laws of the State of Texas. The Company was formed as
a consolidation vehicle for the purpose of delivering cost effective
national on-line business services and products through the Internet.
The Company acquired proprietary telecommunication products developed
for the Internet from the two common stock shareholders. The Company
is in the process of initiating the marketing of its first product,
Annual Reports On-Line, as well as other Internet related products.
To date there have been no sales orders.
(2) Proprietary Telecommunication and Internet Costs
The costs of developing the proprietary telecommunication and Internet
products were incurred prior to incorporation of the Company. Material
and contract services totaling $141,382 were paid by two individuals
or their wholly-owned company. In addition, the shareholders valued
their personal time in producing the technology at $208,000. Upon
incorporation, the Company recorded as an asset, $349,382 of purchased
proprietary telecommunication and Internet costs acquired from the two
individuals by issuing 300,000 shares of common stock.
The cost of proprietary telecommunication and Internet costs will be
amortized on a straight-line basis over the estimated economic lives
of the respective products.
(3) Development Stage Operations
The Company is currently in the developmental stage and has no
significant operations to date.
(4) Preferred Stock
On March 8, 1996, the Company issued 500 shares of preferred stock for
$50,000. In addition, the Company had a commitment from the preferred
shareholder to purchase an additional $450,000 shares of preferred
stock. On March 15, 1996, the Company returned the $50,000 received
for the preferred stock and canceled the preferred stock. The
commitment by the preferred stockholder to purchase an additional
$450,000 of preferred stock was also canceled.
<PAGE>
SUARRO COMMUNICATIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
(5) Going Concern
The Company is a newly organized development stage corporation that has
not commenced operations as of March 15, 1996; therefore, it has not
incurred a profit or a loss. This factor, together with its limited
capital, among others, indicate that the Company may be unable to
continue its operations without successful development and marketing
of the Company's products and the procurement of additional financing.
The accompanying financial statements have been prepared on the
assumption that the Company will continue in business, which
contemplates the realization of assets through continuing operations.
No adjustments have been made to reflect potentially lower realizable
value of assets should the Company be unable to continue its
operations, as the outcome of the above matter is not currently
determinable.
