SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Definitive Information Statement
HQ Sustainable Maritime Industries, Inc.
(Name of Registrant As Specified In Charter)
Not Applicable
(Name of Person(s) Filing the Information Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, $.001 par value
2) Aggregate number of securities to which transaction applies:
115,903,032 shares of Common Stock
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:
/ / 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 offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
Wall Street Center, 14 Wall Street, 20th Floor,
New York, New York 10005
(212) 618-1712
- --------------------------------------------------------------------------------
INFORMATION STATEMENT
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
- --------------------------------------------------------------------------------
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
- --------------------------------------------------------------------------------
INTRODUCTION
This notice and information statement (the "Information Statement") was
mailed on or about October 3, 2005 to the stockholders of record, as of October
3, 2005, of HQ Sustainable Maritime Industries, Inc., a Delaware corporation
(the "Company") pursuant to Section 14(c) of the Exchange Act of 1934, as
amended. This Information Statement is circulated to advise the shareholders of
action already approved by written consent of the shareholders who collectively
hold a majority of the voting power of our capital stock. Pursuant to Rule 14c-2
under the Securities Exchange Act of 1934, as amended, the proposal, approved
and ratified by the holders of a majority of the voting power of our capital
stock will not be effective until 20 days after the date this Information
Statement is mailed to the shareholders. Therefore, this Information Statement
is being sent to you for informational purposes only.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY
The actions approved and ratified by the holders of a majority of the
voting power of our capital stock to be effective twenty days after the
mailing of this Information Statement are as follows:
1. We approved that the Certificate of Incorporation be amended a
follows:
Article IV: Capital Stock. The total number of authorized shares
of all classes of stock which the Corporation shall have the
authority to issue is 210,000,000 shares, of which 200,000,000
shares are Common Stock, $0.001 par value per share, and which
10,000,000 shares are Preferred Stock, $0.001 par value per share
with such rights and preferences as designated by the Board of
Directors, of which 100,000 will be designated as Series A
Preferred Stock with such rights and preferences as described
below.
Attached hereto for your review is an Information Statement relating to the
above-described actions.
Please read this notice carefully. It describes the essential terms of the
amendment to the Certificate of Incorporation and contains certain information
concerning the amendment to the Certificate of Incorporation. Additional
information about the Company is contained in its periodic reports filed on
periodic and current reports filed with the United States Securities and
Exchange Commission (the "Commission"). These reports, their accompanying
exhibits and other documents filed with the Commission may be inspected without
charge at the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549. Copies of such material may also be
obtained from the Commission at prescribed rates. The Commission also maintains
a Web site that contains reports, proxy and information statements and other
information regarding public companies that file reports with the Commission.
Copies of these reports may be obtained from the Commission's EDGAR archives at
http://www.sec.gov/index.htm.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDERS' MEETING
WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
By Order of the Board of Directors
New York, New York /s/ Norbert Sporns
October 3, 2005 ----------------------------------
NORBERT SPORNS
CHIEF EXECUTIVE OFFICER
2
HQ SUSTAINABLE MARITIME INDUSTRIES, INC.
Wall Street Center, 14 Wall Street, 20th Floor,
New York, New York 10005
(212) 618-1712
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION STATEMENT
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934
AND REGULATION 14C AND SCHEDULE 14C THEREUNDER
- --------------------------------------------------------------------------------
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the following action was taken pursuant to a Written
Consent of the Majority Stockholders of the Company:
1. We approved that the Certificate of Incorporation be amended a
follows:
Article IV: Capital Stock. The total number of authorized shares
of all classes of stock which the Corporation shall have the
authority to issue is 210,000,000 shares, of which 200,000,000
shares are Common Stock, $0.001 par value per share, and which
10,000,000 shares are Preferred Stock, $0.001 par value per share
with such rights and preferences as designated by the Board of
Directors, of which 100,000 will be designated as Series A
Preferred Stock with such rights and preferences as described
below.
The Board of Directors has fixed the close of business on October 3, 2005, as
the Record Date for determining the Stockholders entitled to Notice of the
foregoing.
The Company has asked brokers and other custodians, nominees and fiduciaries to
forward this Information Statement to the beneficial owners of the Common Stock
held of record by such persons and will reimburse such persons for out-of-pocket
expenses incurred in forwarding such material.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDERS' MEETING
WILL BE HELD TO CONSIDER ANY MATTER DESCRIBED HEREIN.
Shareholders of record at the close of business on October 3, 2005, the Record
Date, are entitled to notice of the action to be effective on or about October
19, 2005. Each share of our common stock entitles its holder to one vote on each
matter submitted to the shareholders. However, because the shareholders holding
at least a majority of the voting rights of all outstanding shares of capital
stock as of the Record Date have voted in favor of the foregoing actions by
resolution; and having sufficient voting power to approve such proposals through
their ownership of the capital stock, no other consents will be solicited in
connection with this Information Statement.
The elimination of the need for a meeting of stockholders to approve this action
is made possible by Delaware General Corporation Law which provides that the
written consent of the holders of outstanding shares of voting capital stock,
having not less than the minimum number of votes which would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, may be substituted for such a meeting. In order
to eliminate the costs involved in holding a special meeting of our
stockholders, our Board of Directors voted to utilize the written consent of the
holders of a majority in interest of our voting securities. This Information
Statement is circulated to advise the shareholders of action already approved by
written consent of the shareholders who collectively hold a majority of the
voting power of our capital stock and shall serve as our Annual Meeting.
3
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE HARBOR"
FOR FORWARD LOOKING STATEMENTS. This Information Statement contains statements
that are not historical facts. These statements are called "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements involve
important known and unknown risks, uncertainties and other factors and can be
identified by phrases using "estimate," "anticipate," "believe," "project,"
"expect," "intend," "predict," "potential," "future," "may," "should" and
similar expressions or words. Our future results, performance or achievements
may differ materially from the results, performance or achievements discussed in
the forward-looking statements. There are numerous factors that could cause
actual results to differ materially from the results discussed in
forward-looking statements, including:
o Changes in existing product liability, tort or warranty laws or the
introduction of new laws, regulations or policies that could affect
our business practices: these laws, regulations or policies could
impact our industry as a whole, or could impact only those portions in
which we are currently active.
o Changes in relationships with major customers and/or suppliers: an
adverse change in our relationships with major customers and/or
suppliers would have a negative impact on our earnings and financial
position.
o Armed conflicts and other military actions: the considerable political
and economic uncertainties resulting from these events, could
adversely affect our order intake and sales, particularly in the
limousine market.
o Factors that we have discussed in previous public reports and other
documents filed with the Securities and Exchange Commission.
This list provides examples of factors that could affect the results described
by forward-looking statements contained in this Information Statement. However,
this list is not intended to be exhaustive; many other factors could impact our
business and it is impossible to predict with any accuracy which factors could
result in which negative impacts. Although we believe that the forward-looking
statements contained in this Information Statement are reasonable, we cannot
provide you with any guarantee that the anticipated results will be achieved.
All forward-looking statements in this Information Statement are expressly
qualified in their entirety by the cautionary statements contained in this
section and you are cautioned not to place undue reliance on the forward-looking
statements contained in this Information Statement. In addition to the risks
listed above, other risks may arise in the future, and we disclaim any
obligation to update information contained in any forward-looking statement.
CURRENT INFORMATION REGARDING THE COMPANY
This summary highlights important information about our company and business.
Because it is a summary, it may not contain all of the information that is
important to you. Unless the context requires otherwise, "we," "us," "our", "
and the "company" and similar terms refer to HQ SUSTAINABLE MARITIME INDUSTRIES,
INC. , and our subsidiaries collectively, while the term "HQ Sustainable" refers
to HQ SUSTAINABLE MARITIME INDUSTRIES, INC. in its corporate capacity.
THE COMPANY
- -----------
HQ Sustainable Maritime Industries, Inc. ("HQSM") was initially incorporated as
Sharon Capital Corporation, or Sharon, on September 21, 1989 under the laws of
the State of Nevada. Sharon was a "blind pool/blank check" corporation organized
for the purpose of purchasing, merging with or acquiring a business or assets
from another company. In July 1990, Sharon was changed to PEI, Inc., which was
subsequently changed to Process Equipment, Inc. in November 1990. On March 17,
2004, Process Equipment, Inc., Process Equipment Acquisition Corporation, a
Nevada corporation and wholly-owned subsidiary of Process Equipment, Inc., or
PEAC, and Jade Profit Investment Limited, or Jade, a British Virgin Islands
limited liability corporation, entered into an agreement and plan of merger.
Pursuant to that agreement, Process Equipment, Inc., through PEAC, acquired
Jade, and 84.42% ownership in Jade's subsidiary Hainan Quebec Ocean Fishing Co.
Ltd, a People's Republic of China, limited liability corporation, which we refer
to as HQOF. As a result of that transaction, HQOF became our main operating
subsidiary. In April of 2004, pursuant to the above agreement and plan of
merger, the board of directors of Process Equipment, Inc. and a majority of the
stockholders approved a name change and change of domicile of that company to
Delaware via a merger with the newly formed wholly-owned Delaware subsidiary,
HQSM. The name change, change of domicile and merger became effective on May 19,
2004, with HQSM being the surviving entity in the merger and acquiring all the
4
assets and liabilities of Process Equipment, Inc. On August 17, 2004, we have
entered into a Purchase Agreement with Sino-Sult Canada (S.S.C.) Limited, a
Canadian limited liability corporation ("SSC"), whereby we acquired Sealink
Wealth Limited ("Sealink"), SSC's wholly owned subsidiary incorporated in the
British Virgin Islands. That purchase agreement has been filed as an exhibit to
our current report on Form 8K filed with the Commission on August 18, 2004.
Sealink is the sole owner of Hainan Jiahua Marine Bio-Products Co. Ltd., a
limited liability company existing in China ("Jiahua Marine") which is primarily
engaged in the production and sales of marine bio-products and healthcare
products in the PRC, as described in more detail in the above current report.
Also as previously disclosed, in the same current report, SSC is owned by three
of our current directors and executive officers who are also, together, indirect
beneficial owners of the majority of our capital stock.
Further, as previously disclosed in the above current report, effective August
17, 2004, HQSM caused Jade Profit Investment Limited, its wholly-owned
subsidiary, to acquire the minority equity interest equal to 15.58% that Jade
did not already own in HQOF, HQSM's principal operating subsidiary. This
purchase was effected by Jade pursuant to the Purchase Agreement, dated as of
August 17, 2004, between Jade and Hainan Fuyuan Investment Company Limited, the
holder of the minority equity interest of HQOF being acquired by Jade. Jade has
previously obtained all requisite governmental approvals in the PRC in order to
consummate this transaction.
HQSM and its subsidiaries, collectively referred to in this report as the Group,
is principally engaged in the vertically integrated business of aquaculture
through co-operative supply agreements, ocean product harvesting, and processing
and sales of farm-bred and ocean harvested aquatic products. The principal
products of HQOF are cross-bred hybrid of tilapia and white-legged shrimp
exporting, directly and indirectly, to the United States, Canada, Japan and
European countries. The major market is for export.
The Group has also engaged in the production and sales of marine bio-products
and healthcare products in the PRC. The principal products of Hainan Jiahua
Marine Bio-Product Company Limited (wholly-owned subsidiary of Sealink) are
Shark Cartilage Capsule, Shark Liver Oil and Shark Liver (Soft gel). The major
market for these products is the PRC.
Our principal executive office is located at Wall Street Center, 14 Wall Street,
20th Floor, New York, New York 10005, and our telephone number is (212)
618-1712. The URL for our website is http://www.hqfish.com.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information known to us about the beneficial
ownership of our common stock as of__________, 2005 for: (1) each person, entity
or group that is known by us to beneficially own five percent or more of our
common stock; (2) each of our directors (and former directors, as applicable);
(3) each of our named executive officers (and former officers, as applicable) as
defined in Item 402(a)(2) of Regulation S-B; and (4) our directors and executive
officers as a group. To the best of our knowledge, each stockholder identified
below has voting and investment power with respect to all shares of common stock
shown, unless community property laws or footnotes to this table are applicable.
The number of shares beneficially owned and the percent of shares outstanding
are based on 115,903,032 shares outstanding as of October ____, 2005. Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Except as
otherwise noted below, the address of each of the shareholders in the table is
c/o HQ Sustainable Maritime Industries, Inc., Wall Street Center, 14 Wall
Street, 20th Floor, New York, New York 10005.
Shares of Common Stock
Beneficially Owned
Beneficial Owner Number Percent
- ---------------- ----------------------
Harry Wang Hua 36,006,113(1) 31.1%
Lillian Wang Li 17,904,957(1) 15.5%
Norbert Sporns 17,208,759(1) 14.8%
Fusheng Wang 1,000,000(2) *
Jacques Vallee 86,904 *
5
Fred Bild 86,904 *
Daniel Too 69,047 *
All such directors and executive
officers as a group (7 persons) 72,362,684 62.4%
*less than 1%
(1) Beneficially owns the shares indicated, which are owned of record by
Red Coral Group Limited (41,189,258 in the aggregate) and Sino-Sult
Canada (S.S.C.) Limited (28,430,571 in the aggregate). Each of Mr.
Sporns, Ms. Wang and Mr. Wang own, respectively, 24%, 25% and 51% of
the issued capital of Red Coral and share voting and investment power
over the shares held by Red Coral and Sino-Sult Canada. In addition,
the total includes options for each person to purchase 500,000 shares
of common stock and additional shares indirectly owned.
(2) Consists of 1,000,000 options to purchase shares of common stock.
6
AMEND THE CERTIFICATE OF INCORPORATION
--------------------------------------
We approved that the Certificate of Incorporation be amended a follows:
Article IV: Capital Stock. The total number of authorized shares
of all classes of stock which the Corporation shall have the
authority to issue is 210,000,000 shares, of which 200,000,000
shares are Common Stock, $0.001 par value per share, and which
10,000,000 shares are Preferred Stock, $0.001 par value per share
with such rights and preferences as designated by the Board of
Directors, of which 100,000 will be designated as Series A
Preferred Stock with such rights and preferences as described
below.
CERTIFICATE OF DESIGNATION OF SERIES A PREFERRED STOCK
HQ Sustainable Maritime Industries, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify:
FIRST: Pursuant to authority conferred upon the Board of Directors by its
Certificate of Incorporation, and pursuant to the provisions of Section 151 of
the General Corporation Law of the State of Delaware, said Board of Directors is
authorized to issue Preferred Stock of the Company in one or more series:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation by the provisions of the Certificate
of Incorporation of the Corporation, as amended, out of the authorized but
unissued shares of Preferred Stock of the Corporation this Board of Directors
hereby creates a series of the Preferred Stock, par value $.001 per share (the
"Preferred Stock"), of the Corporation, and this Board of Directors hereby fixes
the powers, designations, preferences and relative, participating, optional or
other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof (in addition to the powers, designations,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation of the Corporation which are applicable to
Preferred Stock of all series) as follows:
1. Designation. The designation of the series shall be "Series A Preferred
Stock" (the "Series A Preferred Stock").
2. Number. The number of shares constituting the Series A Preferred Stock shall
be 100,000.
3. Voting Rights.
a. General Voting Rights. The holder of each share of Series A Preferred
Stock shall have the right to the voting power equal to that of one thousand
shares of the Corporation's common stock, par value $.001 per share (the "Common
Stock") and with respect to such vote, each such holder shall have full voting
rights and powers equal to the voting rights and powers of the holders of Common
Stock, and shall be entitled, notwithstanding any provision hereof, to notice of
any stockholders' meeting in accordance with the by-laws of the Corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
b. Consent Needed for Authorization. Without the vote or consent of the
holders of at least a majority of the shares of Series A Preferred Stock then
outstanding, the Corporation may not (i) authorize, create or issue, or increase
the authorized number of shares of, any class or series of capital stock ranking
prior to or on a parity with the Series A Preferred Stock either as to dividends
or liquidation, (ii) authorize, create or issue any class or series of common
stock of the Corporation other than the Common Stock, (iii) authorize any
7
reclassification of the Series A Preferred Stock, (iv) authorize, create or
issue any securities convertible into or exercisable for capital stock
prohibited by Section 3(b)(i) or (ii), (v) amend this Certificate or (vi) enter
into any disposal, merger or reorganization involving 20% of the total
capitalization of the Corporation.
4. Liquidation.
a. Preference. Subject to the rights of the holders of any other series of
Preferred Stock ranking senior to or on a parity with the Series A Preferred
Stock with respect to liquidation and any other class or series of capital stock
of the Corporation ranking senior to or on a parity with the Series A Preferred
Stock with respect to liquidation, in the event of any liquidation, dissolution
or winding up of the affairs of the Corporation, whether voluntary or
involuntary, the holders of record of the issued and outstanding shares of
Series A Preferred Stock shall be entitled to receive, out of the assets of the
Corporation available for distribution to the holders of shares of Series A
Preferred Stock, prior and in preference to any distribution of any of the
assets of the Corporation to the holders of Common Stock and any other series of
Preferred Stock ranking junior to the Series A Preferred Stock with respect to
liquidation and any other class or series of capital stock of the Corporation
ranking junior to the Series A Preferred Stock with respect to liquidation, an
amount in cash per share equal to $1.00, plus an amount equal to all dividends
accrued and unpaid on each such share (whether or not declared) up to the date
fixed for distribution. If, upon such liquidation, dissolution or winding up of
the affairs of the Corporation, the assets of the Corporation distributable
among the holders of Series A Preferred Stock and any other series of Preferred
Stock ranking on a parity therewith in respect thereto or any class or series of
capital stock of the Corporation ranking on a parity therewith in respect
thereto shall be insufficient to permit the payment in full to all such holders
of shares of the preferential amounts payable to them, then the entire assets of
the Corporation available for distribution to such holders of shares shall be
distributed ratably among such holders in proportion to the respective amounts
that would be payable per share if such assets were sufficient to permit payment
in full. After payment of the full amount to which they are entitled upon
liquidation pursuant to this Section 4(a), the holders of shares of Series A
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation or other entity nor a sale, transfer,
lease or exchange of all or part of the Corporation's assets will be considered
a liquidation, dissolution or winding up of the affairs of the Corporation for
purposes of this Section 4(a).
b. Adjustments. The liquidation preference provided for herein with respect
to the Series A Preferred Stock shall be equitably adjusted to reflect any stock
dividend, stock distribution, stock split or reverse stock split, combination of
shares, subdivision of shares or reclassification of shares with respect to the
Series A Preferred Stock.
5. Optional Conversion Rights. The Series A Preferred Stock shall be convertible
as follows:
a. Optional Conversion. Subject to and upon compliance with the provisions
of this Section 5, the holder of any shares of Series A Preferred Stock shall
have the right at such holder's option (an "Optional Conversion"), at any time
or from time to time, and without the payment of any additional consideration
therefor, to convert any of such shares of Series A Preferred Stock into fully
paid and nonassessable shares of Common Stock at the ratio of one share of
Series A Preferred Stock for two shares of the Common Stock of the Corporation
("Optional Conversion Price"). In case the Corporation shall (i) declare a
dividend or make a distribution on its outstanding shares of Common Stock or
(ii) subdivide or reclassify its outstanding shares of Common Stock into a
smaller number of shares, the Optional Conversion Price in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be adjusted so that it
shall equal the price determined by multiplying such conversion price by a
fraction, the denominator of which shall be the number of shares of Common Stock
outstanding after giving effect to such action and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action. The number and kind of securities shall also be proportionately
adjusted. Such adjustment shall be made successively whenever any event listed
above shall occur.
b. Costs. The Corporation shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of shares of
Common Stock upon conversion of any shares of Series A Preferred Stock; provided
8
that the Corporation shall not be required to pay any taxes which may be payable
in respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the holder of the
shares of Series A Preferred Stock in respect of which such shares are being
issued.
c. Dividends Upon Conversion. In connection with any conversion of shares
of Series A Preferred Stock, the Corporation shall pay accrued and unpaid
dividends thereon in accordance with the provisions of
Section 6.
6. Dividends.
a. Dividends.
(i) Subject to the rights of the holders of any other series of
Preferred Stock ranking senior to or on a parity with the Series A Preferred
Stock with respect to dividends and any other class or series of capital stock
of the Corporation ranking senior to or on a parity with the Series A Preferred
Stock with respect to dividends, other than the Common Stock, the holders of the
Series A Preferred Stock shall be entitled to receive, when and as declared by
the Board of Directors, cumulative dividends per share of Series A Preferred
Stock at a rate per annum as determined by the Board of Directors during the
period commencing after the date of original issuance of any shares of Series A
Preferred Stock until converted pursuant to Section 5 above; provided, however,
in the event of an Optional Conversion, all accumulated dividends will
automatically be eliminated and no such dividends will be due or payable to
holders of Series A Preferred Stock.
(ii) Dividends on the Series A Preferred Stock will accrue on each
December 15, March 15, June 15, and September 15, occurring after the date of
original issuance, provided that the Corporation shall have the option to pay
dividends when and as declared by the Board of Directors of the Corporation. The
party that holds the Preferred Stock on an applicable record date for any
dividend payment will be entitled to receive such dividend payment and any other
accrued and unpaid dividends which accrued prior to such dividend payment date,
without regard to any sale or disposition of such shares of Series A Preferred
Stock subsequent to the applicable record date but prior to the applicable
dividend payment date.
(iii) The Corporation shall pay the dividends on the Series A Preferred
Stock described in Section 6(a)(i), at the Corporation's option and in its sole
discretion, out of funds legally available therefor (A) in cash, (B) in shares
of Common Stock, such that the number of shares of Common Stock to be
distributed as a dividend to each holder of Series A Preferred Stock shall be
equal to the cash amount of such dividend payable to such holder on such
dividend payment date divided by the average quote per share of Common Stock
reported by OTC Bulletin Board or any other stock exchange on which the Common
Stock is traded, as determined by the Company (the "Per Share Market Value") for
the fifteen (15) trading days immediately preceding such dividend payment date,
or (C) in any combination of cash and shares of Common Stock that the
Corporation may determine in its sole discretion, with the number of shares of
Common Stock to be distributed in connection therewith to be calculated on the
basis set forth in Section 6(a)(iii)(B).
(iv) No fractional shares of Common Stock or scrip shall be issued upon
payment of any dividends in shares of Common Stock. If more than one share of
Series A Preferred Stock shall be held by the same holder at the time of any
dividend payment date, the number of full shares of Common Stock issuable upon
payment of such dividends shall be computed on the basis of the aggregate
dividend amount that the Corporation has determined to pay in Common Stock
shares. Instead of any fractional shares of Common Stock which would otherwise
be issuable upon payment of such dividends, the Corporation shall pay out of
funds legally available therefor a cash adjustment in respect of such fractional
interest, rounded to the nearest one hundredth (1/100th) of a share, in an
amount equal to that fractional interest of the average Per Share Market Value
for the fifteen (15) trading days immediately preceding such dividend payment
date, rounded to the nearest cent ($.01).
9
b. Allocation of Dividends. Dividends on the Series A Preferred Stock, if
paid, or if declared and set apart for payment, must be paid or declared and set
apart for payment on all outstanding shares of Series A Preferred Stock
contemporaneously. In the event dividends on the Series A Preferred Stock and
any other series of Preferred Stock ranking on a parity therewith in respect
thereto or any other class or series of capital stock of the Corporation ranking
on a parity therewith in respect thereto are declared and paid in an amount less
than all accumulated and current dividends on all of such shares, the total
amount declared and paid shall be allocated among all of such shares so that the
per share dividend to be declared and paid on each share is the same percentage
of the sum of the accumulated dividends for each such share. In the event
dividends are declared and paid on the Series A Preferred Stock in a combination
of cash and shares of Common Stock, the percentage of the dividend paid in cash
and the percentage of the dividend paid in stock must be the same for each share
of Series A Preferred Stock.
c. Dividend Priorities. The Corporation shall not declare or pay any
distributions to the holders of the Common Stock or any other class or series of
capital stock ranking junior to the Series A Preferred Stock in respect of
dividends during any period of time in which any shares of Series A Preferred
Stock are outstanding or in which any dividends payable on any shares of Series
A Preferred Stock have not been declared and paid in full. In this Section 6(c),
"distribution" means the transfer of cash or property without consideration,
whether by way of dividend or otherwise (except a dividend solely in shares of
Common Stock), or the purchase or redemption by the Corporation of shares of
Common Stock or any other shares of capital stock of the Corporation ranking
junior to the Series A Preferred Stock in respect of dividends for cash or
property, but does not include the repurchase by the Corporation of shares from
an officer, director, employee or consultant of the Corporation.
7. Reacquired Shares. Any shares of Series A Preferred Stock purchased,
converted or otherwise acquired by the Corporation in any manner whatsoever
shall not be reissued as part of such series and shall be retired promptly after
the acquisition thereof. All such shares shall upon their retirement become
authorized but unissued shares of Preferred Stock.
THE AMENDMENT HAS BEEN APPROVED BY THE BOARD AND THE WRITTEN CONSENTS OF THE
HOLDERS OF THE MAJORITY OF THE OUTSTANDING VOTING CAPITAL STOCK OF THE COMPANY.
DISSENTER'S RIGHTS OF APPRAISAL
The general corporation law of the State of Delaware does not provide for
dissenter's rights of appraisal in connection with the amendment to the
Certificate of Incorporation.
10
Additional Information
----------------------
If you have any questions about the actions described above, you may
contact Joseph I. Emas, 1224 Washington Avenue, Miami Beach, Florida 33139. We
are subject to the informational requirements of the Securities Exchange Act of
1934 and in accordance with the requirements thereof, file reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC"). Copies of these reports, proxy statements and other information can be
obtained at the SEC's public reference facilities at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington, D.C., 20549. Additionally, these filings may
be viewed at the SEC's website at http://www.sec.gov.
Information Incorporated By Reference
-------------------------------------
The following documents are incorporated herein by reference and to be a part
hereof from the date of filing of such documents:
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004.
Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2005, and
June 30, 2005.
All documents filed by the Company with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Information
Statement and prior to the effective date of the action taken described herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Information Statement to the extent that a statement
contained herein or in any other subsequently filed document that also is, or is
deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Information
Statement. This Information Statement incorporates, by reference, certain
documents that are not presented herein or delivered herewith. Copies of any
such documents, other than exhibits to such documents which are not specifically
incorporated by reference herein, are available without charge to any person,
including any shareholder, to whom this Information Statement is delivered, upon
written or oral request to our Secretary at our address and telephone number set
forth herein.
Distribution of Information Statement
-------------------------------------
The cost of distributing this Information Statement has been borne by us
and certain shareholders that consented to the action taken herein. The
distribution will be made by mail.
Pursuant to the requirements of the Exchange Act of 1934, as amended, the
Registrant has duly caused this Information Statement to be signed on its behalf
by the undersigned hereunto authorized.
By Order of the Board of Directors
New York, New York /s/ Norbert Sporns
October 3, 2005 ----------------------------------
NORBERT SPORNS
CHIEF EXECUTIVE OFFICER