UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-12
Commission File Number 0-24185
Central American Equities Corp.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report on Form 10-KSB of Registrant for
the year ended December 31, 2004
Central American Equities
Hotel Alta, Santa Ana, Costa Rica
011-506-282-4160
Hotel Alta
Interlink 964
P.O. Box 02-5635
Miami, FL 33102
September 23, 2005
Dear Shareowner,
You are invited to attend the 2005 Annual Meeting to be held
on Saturday, November 12, 10:00 AM in Hotel Alta in Santa
Ana, Costa Rica.
The annual meeting will begin with a report on our
operations, followed by discussion and voting on the matters
set forth in the accompanying notice of annual meeting and
proxy statement, and discussion of any other business matters
properly brought before the meeting.
As described in the enclosed proxy statement, at the annual
meeting, you will be asked to approve the election of members
of the board of directors, ratify the appointment of the
independent certified public accountant of the Company, and
three important proposals that the board believes will lead
to increased shareholder value:
1) The transfer of the assets of the corporation to a Costa
Rican corporation that is wholly owned by the current
shareholders of the company. In this action, each share of
our common stock fully paid and assessed, issued and
outstanding shall be granted a pro rata share of the Costa
Rica company. This will not change your share ownership in
Central American Equities.
2) A change in the articles of incorporation that creates a
new class of super voting preferred shares. These shares
will be used by the board of directors to vote for merger
opportunities created by the shell corporation resulting from
item 1 above. (It is important to note that the preferred
shares issued to the board of directors will NOT increase the
company ownership of individual board members.)
3) A change in the articles of incorporation that increases
the authorized number of common shares to 100 million. These
shares may be used to facilitate a business combination and
will not be used to dilute current shareholder value in the
assets of the Company.
Our board of directors has unanimously approved these
actions. There are four major reasons why the board is
recommending these actions:
a) The current assets of the Company should no longer be in
a public company because the Company is not receiving the
expected benefits from being public (higher stock price,
liquidity, and a currency to structure mergers or
acquisitions).
b) Compliance and audit costs are very high. By removing
the assets, the Company will save money and time, as the
costs of being public will not come out of the earnings of
the current assets.
c) By removing the assets from the Company, the Company can
create a publicly trading shell corporation that it can
combine (merge) with another company resulting in significant
benefits to the Company and its shareholders.
d) By creating super-preferred shares, the board can move
quickly to negotiate a future business combination without
the obligation of a special meeting, a new proxy or a full
shareholder vote. To date the board has engaged in several
negotiations with other companies concerning a possible
merger with CAE. One of the key reasons for the failure of
these discussions is the board's inability to act quickly and
decisively.
Once the assets are removed from the public corporation we
plan to find a suitable merger candidate for the public
shell, negotiate the best possible agreement for
shareholders, and engage in a business combination. No
matter what combination the Company transacts as a result of
an affirmative vote on these items, shareholders will
continue to have the same (pro-rata) share ownership in the
hotel assets of the Company.
The board has concluded that the proposed actions are fair
and in the best interests of our shareholders, and therefore,
the board recommends that you vote in favor of these
proposals. It is the ultimate goal of the board to achieve
returns for CAE shareholders. The board believes that these
voting proposals will put the Company in a significantly
better position to accomplish this end through the possible
future sale of assets, the distribution of dividends, and the
merger with a larger company able to reap the benefits of
public status and achieve a good share price for CAE
shareholders.
Details of the proposals and other important information are
described in the accompanying notice of shareholder meeting,
proxy statement and annual report. You are urged to read
these important documents carefully before casting your vote.
If you plan to attend the meeting, please contact me at
MCaggiano@thealtahotel.com. Whether or not you plan to
attend, you can be sure your shares are represented at the
meeting by promptly voting, signing, dating and submitting
your proxy card by phone or by mail. These proposals cannot
be completed unless our stockholders approve.
We thank you for your prompt attention to this matter and
appreciate your support.
Cordially,
/s/ Michael N. Caggiano
- ----------------------------------------
Michael N. Caggiano, Ph.D.
President and Chief Executive Officer
Your vote is important. Please mark, sign, date and return
the enclosed proxy card promptly, whether or not you plan to
attend the special meeting. After the actions are approved,
stockholders will receive a letter of transmittal and related
instructions concerning the outcome of the vote.
PROXY STATEMENT
DATE, TIME AND PLACE INFORMATION (ITEM 1)
The Annual Meeting of Stockholders of Central American
Equities, Inc., a Florida corporation (the "Company" or
"CAE") will be held at Hotel Alta in Santa Ana, Costa Rica on
Saturday November 12, 2005 at 10:00 AM (local Costa Rica
time) for the following purposes:
1) To consider the election of directors.
2) To ratify the appointment of Killman, Murrell & Company,
P.C. as the independent certified public account of the
Company.
3) To consider the transfer of Company assets to a Costa
Rican corporation.
4) To consider a change in the articles of incorporation
that creates a super voting preferred shares.
5) To consider a change in the articles of incorporation
that increases the authorized number of common shares.
6) To transact such other business as may properly come
before the annual meeting and at any adjournment
thereof.
By Order of the Board of Directors:
Richard Wm. Talley, Chairman of the Board
P. James Voloshin, Board Director
Michael N. Caggiano, President and CEO
The address of the meeting is:
Hotel Alta
Alto de las Palomas
Santa Ana, Costa Rica
011-506-282-4160 (Phone)
011-506-282-4162 (Fax)
The proxy statement and form of proxy accompanying this
notice are being mailed to stockholders on or about October
6, 2005. Only stockholders of record at the close of
business on September 15, 2005 are entitled to notice of and
to vote at the Annual meeting or any adjournment or
postponement.
The date by which Stockholder proposals must be received by
the Company so that they may be considered for inclusion in
the proxy statement and form of proxy for its 2005 Annual
Meeting of Stockholders is not less than 120 days prior to
the anniversary of the preceding Annual Meeting (unless the
date of an Annual Meeting is changed by more than 30 days
from the anniversary of the date of the previous Annual
Meeting, in which case the deadline will be no more than 20
days after the announcement of the Annual Meeting date).
Stockholder proposals or notices of intent to nominate
candidates for election as directors should be submitted to
Central American Equities, Inc., Attention: Corporate
Secretary at Hotel Alta, Alto de las Palomas, Santa Ana,
Costa Rica (mailing address: Hotel Alta, Interlink 964, P.O.
Box 02-5635, Miami, Florida 33102).
REVOCABILITY OF PROXY (ITEM 2)
The execution of a proxy does not affect the right to vote in
person at the Annual Meeting. A proxy may be revoked by the
person giving it at any time before it has been vote at the
Annual Meeting by submitting a later date proxy or by giving
written notice to the Secretary of the Company. Unless a
proxy is revoked or there is a direction to abstain on one or
more proposals, it will be voted on each proposal and, if a
choice is made with respect to any matter to be acted upon,
in accordance with such choice. If no choice is specified,
the proxy will be voted as recommended by our Board of
Directors.
PERSONS MAKING THE SOLICITATION (ITEM 4)
Solicitation of proxies is being made by management at the
direction of the Board of Directors, without additional
compensation, through the mail, in person, or by telephone
fax. In addition, the Company will request brokers and other
custodian, nominees and fiduciaries to forward proxy-
solicitation material to the beneficial owners of Common
Stock held of record by such persons.
Management has engaged the Company's transfer agent, Olde
Monmouth Transfer Company and its affiliates to print and
forward proxy solicitation material and count proxies.
Management anticipates that the cost of this solicitation
shall be less than $5000. The cost will be borne by the
Company.
No director of the Company has informed the Company in
writing that he intends to oppose any action intended to be
taken by the Company.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON (ITEM 5)
The following table displays the interest of certain persons in
matters to be acted upon at the meeting. Mr. Talley, Dr.
Voloshin, and Mr. Caggiano are current board members who are
standing for re-election to the board.
Name Number of Shares Percent of Class
Beneficially Owned Total
September 15, 2005
Richard Wm. Talley 174,443 8.2% Common Stock
Michael Caggiano 212,120 9.9% Common Stock
P. James Voloshin 164,852 7.7% Common Stock
Total Shares Held by Board
551,415 25.7% Common Stock
Total Shares Outstanding
2,141,553 100.0% Common Stock
Shares of P. James Voloshin are held in P.J. Voloshin MD Inc.
Pension Fund and PJ Voloshin.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF (ITEM 6)
As of September 15, 2005, the Company's authorized capital
stock consisted of 25,000,000 shares of common stock, par
value $.001 per share, and 1,000,000 shares of convertible
preferred stock, par value $.001 per share. As of September
15, 2005, 2,141,553 shares of common stock were issued and
outstanding and no (0) shares of preferred stock were issued
or outstanding.
Only stockholders of record at the close of business on
September 15, 2005, the record date for the annual meeting,
will be entitled to notice of and vote at the Annual Meeting
(Company By-Laws, Article II, Section 4). On the record
date, the Company had outstanding approximately 2,141,553
shares of Common Stock, which are the only securities of the
Company entitled to vote at the Annual Meeting, each share
being entitled to one vote.
A majority of the shares entitled to vote on the record date
for the Annual Meeting, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. Any
number of shareholders, even if less than a quorum, may
adjourn the meeting without further notice until a quorum is
obtained. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of
the shareholders. Each outstanding share shall be entitled
to one vote on each matter submitted to a vote at a meeting
of the shareholders (Company By-Laws, Article II, Section 4).
Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the
transaction of business, but are not treated as a vote cast
on any matter.
PROPOSAL 1: ELECTION OF DIRECTORS (ITEM 7)
The shareholders are meeting to consider the election of
directors. Directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at
a meeting at which a quorum is present (Company By-Laws,
Article I, Section 5). The nominating committee of the board
of directors has submitted the following names to the
shareholders for election to the board of directors:
Richard Wm. Talley
Michael N. Caggiano, Ph.D.
P. James Voloshin, M.D.
RICHARD WM. TALLEY Chairman and Director of Central
American Equities Corp (age 62, time spent on Company
business: 10 (ten) percent). Mr. Talley was (with Mr. King)
a representative of Cal TKCo, S.A., and the general partner
in several of the California Limited Partnerships that raised
the seed money for the Costa Rican corporations that built
the hotels. Since August 1999, Mr. Talley has been the CEO
of Talley and Co., an investment banking and general
securities company located in Irvine, California. Mr. Talley
is a partner in this firm with Michael Caggiano.
Mr. Talley began his finance career with Smith Barney in New
York. He opened and managed the Shearson office in Santa
Barbara until its sale to American Express in 1983, at which
time he founded Talley, McNeil, and Tormey, a regionally
focused investment bank and brokerage firm. The firm was
merged into a larger Southern California investment banking
and brokerage firm in 1989. In 1993, Mr. Talley and Paul D.
King founded Talley, King and Co., Inc. ("Talley King") with
offices in Irvine, California. Talley, King & Co., Inc. was
an investment bank that focused on private placement
financing.
Mr. Talley has been actively involved in Costa Rica for the
last ten years. Mr. Talley holds a Bachelor of Arts degree in
European History from the University of California, Santa
Barbara and an MBA in Finance from Cornell University,
Ithaca, New York.
As voted at the 2004 shareholder meeting, Mr. Talley has
received from the Company $500 per attendance at board
meetings (a total of $500 in 2004). See below for a full
table of compensation of all directors and executive
officers.
MICHAEL N. CAGGIANO, Ph.D. President, Chief Executive
Officer, and Director of Central American Equities (age: 52,
time spent on Company business: ninety-five percent). Dr.
Caggiano is also, with Richard Wm. Talley, an officer and
owner of Talley & Co. During 2000, Dr. Caggiano was also a
Director of Cafe Britt, a roaster and distributor of premium
Costa Rican coffee.
Prior to joining CAE, as a private consultant to
corporations, Dr. Caggiano has also provided public policy
and litigation analysis for local governments and private
entities. Prior to establishing his own company, Dr.
Caggiano was Executive Vice President in Charge of Consulting
Operations at Robert Charles Lesser & Co. a 50-person, 5-
office, national consulting firm based in Los Angeles. In
1990, Dr. Caggiano was elected to the first City Council of
Malibu and later served as its Mayor Pro Tem. Before serving
as an elected official, he was a Fellow and Policy Analyst
with The RAND Corporation. While at RAND, he specialized in
solving state and local government financial and criminal
justice problems.
Dr. Caggiano holds a Ph.D. and M.Ph. in Public Policy
Analysis from the RAND Graduate School of The RAND
Corporation, an M.P.A. from the University of Southern
California, and a B.A. in Government from Pomona College.
Dr. Caggiano is currently paid $80,000 per year in salary as
an executive officer. See Schedule (Compensation of
Directors) below for a full list of compensation of all
directors and executive officers.
P. JAMES VOLOSHIN, M.D. Director of Central American Equities
Corp (age 64, has been nominated for election by the board of
directors. Dr. Voloshin has been a director of MedPlus
Inc., a public company since January 1996. Dr. Voloshin is a
plastic surgeon and has been President of the Newport Surgery
Institute, located in Newport Beach, California, since
1986. Dr. Voloshin co-founded Surgical Funding Group, Inc.
in 1992 and was its President until the company was acquired
by MedPlus, Inc. in November 1995. Dr. Voloshin is or has
been a member of ten medical societies including the American
Society of Plastic Surgery. He holds a medical degree from
the University of Alberta, Canada in 1966, and Board
Certification in Plastic Surgery since 1972. Dr. Voloshin is
a resident of Dana Point, California.
Dr. Voloshin has been a shareholder of Central American
Equities since 1997. The nomination committee originally
nominated him to increase shareholder representation and
because of his experience in other public companies
especially in the area of audits and the sale of public
shells. As voted at the 2004 shareholder meeting, Mr.
Voloshin has received from the Company $500 per attendance at
board meetings (see schedule below).
Compensation of Directors and Executive Officers (Item 8)
The following table sets forth the total compensation of
current officers and directors during the fiscal years ended
December 31, 1997 through 2004. The footnotes are an
integral part of the table. No officer or director of the
Company earned more than $100,000 from the Company during
such fiscal years.
Name Title Compensation
Richard Wm. Talley (1) Director 1997 0
Director 1998 0
Director 1999 0
Director 2000 0
Director 2001 0
Director 2002 0
Director 2003 0 (11)
Director 2004 $500 (10)
P. James Voloshin Director 2004 $500 (10)
Michael N. Caggiano (2) NA 1997 NA
CEO/Pres/Director 1998 $65,000
CEO/Pres/Director 1999 $65,000 (3)
CEO/Pres/Director 2000 $65,000 (4)(5)
CEO/Pres/Director 2001 $72,500 (6)
CEO/Pres/Director 2002 $75,000 (7)(8)
CEO/Pres/Director 2003 $75,000 (9)
CEO/Pres/Director 2004 $75,000 (10)
NOTES:
(1) Does not include $100,100 in management fees received by
Talley, King & Company, Inc. in 1997. Messrs. Talley and King
were owners of Talley, King & Company, Inc.
(2) During the third quarter of 1998 the Company issued 19,200
shares of its Common Stock to Michael N. Caggiano, the Company's
Consultant CEO/President. The shares were issued in lieu of
payment for services rendered prior to him being appointed to his
current position as CEO and President.
(3) Mr. Caggiano's annual salary in 1999 was $65,000. As of
December 31, 1999, Mr. Caggiano was owed $22,500 in past salary
and $34,668 in compensation due for services rendered prior to
becoming the CEO. These amounts were included in accounts
payable.
(4) Mr. Caggiano's annual salary was increased to $75,000 in April
2000. As of December 31, 2000, Mr. Caggiano was owed $89,400 in
past salary and $34,668 in compensation due for services rendered
prior to becoming the CEO. These amounts were included in
accounts payable.
(5) On April 12, 2000 the board additionally compensated Mr.
Caggiano with 100,000 shares of CAE Common stock (one-third, or
33,333 shares, equally from the holdings of directors Talley, King
and Rosenmiller). Mr. Caggiano was also granted options to buy
CAE shares of Common Stock as follows: 100,000 shares @ $0.75;
100,000 shares @ $1.25; and 100,000 shares @ $1.75 (to expire on
April 12, 2005).
(6) Mr. Caggiano's annual salary was $75,000 in 2001. The amount
of $54,668 is the value of past salary owed that was
collateralized by Sunset Reef (see Notes to Financial Statements
in previous 10-KSBs). As of December 31, 2001, Mr. Caggiano was
owed $109,772 in past salary and $34,668 in compensation due for
services rendered prior to becoming the CEO. These amounts were
included in accounts payable.
(7) Mr. Caggiano's annual salary was $75,000 in 2002. However,
as of December 31, 2002, Mr. Caggiano was owed $162,464.72 in past
salary. This amount was included in accounts payable.
8) In the fourth quarter of 2002 the board additionally
compensated Mr. Caggiano with 700,000 shares of CAE stock and
granted options to Mr. Caggiano as follows: 100,000 shares @
$0.10; 100,000 shares @ $0.15; and 100,000 shares @ $0.20 (all to
expire in 5 years). In addition to salary, the board compensates
Mr. Caggiano with housing, motor vehicle, and laundry and food in
the hotels.
9) Mr. Caggiano's annual salary was $75,000 in 2003 and 2004.
However, as of December 31, 2004, Mr. Caggiano was owed $15,550 in
past salary. This amount was included in loans from officers. In
addition to salary, the board compensates Mr. Caggiano with
housing, motor vehicle, and laundry and food in the hotels.
10) At the shareholder meeting on May 15, 2004, the Company
granted board directors (Talley, Voloshin, Caggiano) each 25,000
shares of common stock as compensation for board services. To
defer board expenses, the board also approved a $500 payment per
board meeting for non-employee board members (Talley and
Voloshin).
11) During the fourth quarter of 2003, the Company raised cash by
selling securities. The Company paid Richard Wm. Talley, a
director of the Company, $19,800 (10% of gross proceeds) in
commission on the sale of the stock.
PROPOSAL 2: INDEPENDENT PUBLIC ACCOUNTANTS (ITEM 9)
The shareholders will be asked to ratify the appointment of
Killman, Murrell & Company P.C. as the independent certified
public accountant of the Company. At a board of directors
meeting held on September 15, 2005 of which a quorum was
present, the Board of Directors of accepted the resignation of
Clyde Bailey as its Certified Accountant for the fiscal years
ended December 31, 2002, 2003, and 2004. At no time did Clyde
Bailey's financial statements contain an adverse opinion or
disclaimer of opinion or was modified as to uncertainty, audit
scope, or accounting principles. Nor were there any
disagreements with Clyde Bailey on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure.
On September 21, 2005, Central American Equities engaged
Killman, Murrell & Company P.C., Certified Public Accountant.
It is not anticipated that Killman, Murrell & Company P.C, nor
their representative, will be present at the shareholder
meeting.
SUMMARY OF ADDITIONAL BUSINESS OF THE MEETING
The board of directors is unanimously recommending the approval
of the following proposals:
Proposal 3. To transfer the assets of Central American
Equities (CAE) to a Costa Rican corporation that is wholly
owned by the current shareholders of the Company. If this
action is approved, each share of common stock that is fully
paid and assessed, issued and outstanding will be given a pro-
rata share of stock in the Costa Rican corporation. This
action will not change the shareholder's current stock
ownership in CAE.
Proposal 4. To amend the Company's Articles of Incorporation
and the Company's By-laws as necessary to provide for the
authorization of 3000 shares of a new class of super-voting,
preferred stock. Each preferred share will be entitled to 1000
votes and in total all shares will equal 3 million votes.
After the amendment is filed, it is the intent of the Board of
Directors to issue the super-voting preferred stock to the
Company's board of directors. This will allow the board to
vote a majority of the Company's stock. The purpose will be to
enable the Company to complete a business combination (merger)
in the future without the necessity of an additional
shareholder meeting.
Proposal 5. To amend the Company's Articles of Incorporation
and the Company's By-laws as necessary to authorize the Company
to issue up to 100 million shares of common stock.
Proposal 3 will effectively authorize the board to put the
assets of the company into a non-trading corporation ("take the
assets private"). Proposal 4 will permit the board to quickly
effect a business combination (merger or sale) with the
remaining publicly trading shell corporation (a publicly
trading shell corporation is a company that is incorporated and
publicly trading but has no significant assets or operations).
Proposal 5 may be needed to facilitate a business combination.
After many years of trying to create shareholder value as a
publicly trading company, the board is convinced that putting
the assets in a non-trading Costa Rican company and merging the
shell into another company is in the best interests of the
shareholders. Below we explain each proposal in greater
detail.
PROPOSAL 3: TRANSFER OF ASSETS TO COSTA RICA CORPORATION (ITEM
15)
Proposal 3. To transfer the assets of Central American
Equities to a Costa Rican corporation that is wholly owned by
the current shareholders of the Company. Each share of common
stock that is fully paid and assessed, issued and outstanding
will be given a pro-rata share of stock in the Costa Rican
company. This action will not change the shareholder's current
stock ownership in CAE.
Result of an Affirmative Vote
An affirmative vote for this proposal will allow management to
transfer all the assets of CAE to a Costa Rican corporation
that is wholly owned by the current shareholders of the
Company. Each shareholder of common stock that is fully paid
and assessed, issued and outstanding will be given a pro-rata
share in a Costa Rican company that owns all of the assets and
liabilities of the Company. Each common shareholder will also
continue to retain his or her current ownership in Central
American Equities, which will become a publicly trading shell
(without assets) corporation.
The Company will transfer all CAE assets and liabilities (as is
legally possible) to a Costa Rica company. A summary of CAE's
assets and liabilities are listed on the balance statement in
the attached 10-KSB for December 31, 2004. As of September 15,
2005, the major real estate assets of the corporation include
two properties in Costa Rica. Hotel Alta (including
Restaurante La Luz) is a 23-unit, luxury hotel located on
approximately one acre of land in Alto de las Palomas, Santa
Ana, 8 miles from downtown San Jose. Sunset Reef Marine Hotel
is a 14-room hotel with restaurant located in the small Pacific
beachfront town of Mal Pais near the southern tip of the Nicoya
Peninsula. Sunset Reef contains about 3 acres of beachfront
land with 1500 feet of ocean frontage.
Reasons for the Proposal
There are three major reasons why the board is recommending
this proposal:
1) The Company has not received the expected benefits from
being public.
2) The Company will save money and time if the assets of the
Company are not publicly trading.
3) The Company will create a publicly trading shell corporation
that it can combine with another company (merge) resulting in
significant benefit to the Company and its shareholders.
1. The Company has not benefit from being public.
In August 2000, Central American Equities qualified and listed
its stock on the Over the Counter Bulletin Board (OTCBB) under
the symbol "CENE" (the current symbol is CEAQ). The board took
the Company public at that time to obtain for its shareholders
the advantages of a publicly trading company. The board
believed that the main advantages were to include:
a) Promoting a higher stock valuation;
b) Providing stock liquidity; and
c) Creating a currency to structure mergers and acquisitions
(M&A).
However, with five years of experience, we have unfortunately
determined that the Company is too small to reap the benefits
of being a public company:
a) The stock price has not reflected the Company's value. In
2004, CAE's common stock had a price range of
approximately $0.02 to $0.14 per share. On May 23, 2005,
the Company's board of directors unanimously approved a 1
for 10 reverse split of the Company's common stock to pave
the way for a possible merger. This action reduced the
Company's outstanding shares to 2,141,553 shares; but the
share price barely budged. At today's stock price ($0.11
per share) the current market capitalization of the
Company is about $218,000. Clearly current prices do not
reflect the greatly improved financial state of the
company, nor do they reflect its underlying book value
(approximately $5.1 million).
b) Stock liquidity is very low. Perhaps the most significant
advantage of being public for most companies is the
increase in the liquidity of a company's stock. However,
over the past 5 years daily trading in CAE shares has been
very light. On extremely rare occasions daily trading has
reached 25,000 shares but most days volume has been zero.
Any stockholder wishing to sell shares at a good value has
encountered great difficulty.
c) Public status has been a detriment to merger and
acquisitions. In August 2000, the Board took CAE public
partly to increase the Company's ability to raise capital
and structure mergers or acquisitions (particularly stock-
for-stock deals). However, CAE's low stock price has made
it difficult to entice or acquire candidates. Most merger
or acquisition candidates have actually considered CAE's
public status a disadvantage. They fear the added costs
of regulation and the potential for litigation inherent in
being public.
2. The Company will receive financial benefit from putting its
current assets in a private company.
There are several cost advantages to putting the Company's
assets into a private company. By taking the Company's assets
out of the public markets we will reduce the cost of SEC
registration and reporting. This will reduce significantly our
future out-of-pocket compliance costs including auditing,
legal, accounting, printing, mailing, filing, transfer agent
and D&O insurance expenses. Additionally, the Company will
save the significant time spent in-house by the accounting
department and senior management.
_ Reduce Compliance-Related Expenses. The Sarbanes-Oxley
Act, passed by Congress in 2002, significantly increased
regulation and related compliance expenses for all
publicly traded companies. The most difficult part of the
act, Section 404, requires public companies and their
external auditors to appraise the internal controls over
all financial transactions and report any weaknesses.
Although CAE is a small company, its hotels and
restaurants have numerous financial transaction points.
As a consequence, Section 404 requires significant review
and compliance costs.
Even before the passage of Sarbanes-Oxley, SEC regulation
created a burden for CAE. Writing and filing 10-KSB or
10-QSB reports every three months consumes significant
time from CAE's accounting staff and top management.
_ Reduce Audit-Related Expenses. To date, public auditors
have billed the Company more than $250,000 (about $100,000
of this amount is disputed by the Company). Although we
have successfully lowered our 2004 audit fee to about
$8500 dollars, Sarbanes-Oxley compliance, and the rising
cost of auditor liability insurance, are expected to more
than double fees for 2005.
Similar to other small companies, CAE has struggled to
comply with SEC audit requirements. When a Company fails
to file its reports on time it can receive an "E" on its
trading symbol and eventually be removed from the Over the
Counter Bulletin Board (OTCBB). Failure to file SEC
reports forced CAE's stock onto the Electronic Pink Sheets
during all of 2004. After much hard work, a change of
auditor, a search for new market makers, and the
successful filing of SEC-required reports, the Company re-
listed on the OTCBB in March 2005.
Additionally, in the wake of Sarbanes-Oxley, CAE has found
it difficult to find an affordable auditor. With
workload expanding rapidly due to Sarbanes-Oxley review,
some auditors are reportedly dropping less profitable
clients, usually smaller companies (Economist, December
18, 2004). Others are abandoning the public audit
business entirely due to fears of shareholder litigation
or the cost of liability insurance. Our 2004 auditor has
notified us that he has left the public audit business and
that he will not be auditing the Company's financial
statements in 2005 (please refer to the voting item
concerning the approval of a new auditor).
_ Possible Tax Reductions. By shifting the Company's assets
to a private company, most if not all of the Company's
profits may not be subject to US corporate income taxes.
This is an important and timely consideration as we
anticipate the Company may soon be profitable and, under
its current structure, is subject to corporate income tax
in both the US and Costa Rica.
Important Information about a Costa Rica Corporation
CAE plans to put the Company's assets into a Costa Rican
Company. A Costa Rican company would be subject to Costa Rican
laws and regulations. Actions brought by shareholders would be
brought in Costa Rican courts. Although it is management's
intent to continue to keep shareholders informed (through
direct communications as not currently allowed for a publicly
trading company) putting the assets in a private company would
reduce the corporation's legal reporting requirements.
We anticipate that the creation of the Costa Rica corporation,
including legal and registration fees, could cost the Company
approximately $5000.
Summary
Removing CAE's assets from the publicly trading company will
have three major effects. First, it will save the Company
money by lowering the direct cost of auditing and compliance.
Second, it will save management time and cost by freeing it
from many of the requirements of a publicly trading company.
Third, the removal of CAE's assets from the publicly trading
company will give management greater latitude to negotiate the
merger of the remaining shell corporation. This can be a
significant asset for our shareholders, and it is the reason
for Proposal 2 discussed next.
PROPOSAL 4: SUPER-MAJORITY PREFERRED SHARES (ITEM 19)
Proposal 4. To amend the Company's Articles of Incorporation
and the Company's by-laws as necessary to provide for the
authorization of 3000 shares of a new class of super-voting
preferred stock. Each preferred share will be entitled to 1000
votes and all preferred shares would total 3 million votes.
After the amendment is filed, it is the intent of the Board of
Directors to issue the super-voting preferred stock to the
Company's board of directors that will enable them to vote a
majority of the Company's stock. The purpose will be to enable
the Company to complete a business combination in the future
without the necessity of an additional shareholder meeting.
Result of an Affirmative Vote
We are proposing to amend the Company's Articles of
Incorporation to provide for the authorization of a super
voting class of preferred stock that can be voted by the board
of directors. If the shareholders pass this proposal, the
Board plans to issue the super-voting preferred stock to the
Company's board of directors. This will enable the board to
vote a majority of the Company's stock, specifically permitting
the board to complete a business combination (merger) without
the necessity of an additional shareholder meeting. (It is
important to note that the preferred shares issued to the board
of directors will NOT increase the company ownership of
individual board members.)
Using these preferred shares, the Company can move quickly to
accomplish the goal of an intended future business combination
without the obligation of a new proxy or full shareholder vote.
Instead, any proposed business combination will be done by
consent of those holding the super preferred shares, i.e., the
current members of the Board.
When the board votes these preferred shares, non-board
shareholders of the Company will not have a say in the type of
business combination in which the Company will engage. Some
shareholders may object to putting this decision solely in the
hands of the directors of the Company and may view this as a
disadvantage to their interests. However, management believes
that to accomplish a business combination as outlined above, it
is necessary to expedite the combination process. To date the
board has engaged in several negotiations with other companies
concerning a possible merger with CAE. One of the key reasons
for the failure of these discussions is the board's inability
to act quickly and decisively. Without the super-voting
preferred shares, the board currently must hold a special
meeting, obtain a fairness opinion, issue a proxy vote, and
generally follow the rules and regulations related to a
corporate merger, an expensive process that could take several
months.
Reason for the Proposal: To Facilitate a Future Business
Combination
Once the assets are removed from the public corporation we plan
to find a suitable merger candidate for the public shell. At
this point the shell will be clean (no assets nor liabilities)
and should be up-to-date in its SEC filings thereby increasing
its value for a merger. The board plans to find a suitable
candidate, negotiate the best possible result for shareholders,
and engage in a business combination. No matter what
combination is transacted with the Company, as a result of an
affirmative vote on Proposal 1, shareholders will continue to
have the same (pro-rata) share ownership in the hotel assets of
the Company.
PROPOSAL 5: AUTHORIZE ADDITIONAL COMMON STOCK (ITEM 19)
Proposal 5. To amend the Company's Articles of Incorporation
and the Company's by-laws as necessary to provide for the
authorization of 100 million shares of Common Stock, par value
$.001. The purpose will be to enable the Company to complete a
business combination in the future.
Result of an Affirmative Vote
As of September 15, 2005, the Company's authorized capital
stock consisted of 25,000,000 shares of common stock, par value
$.001 per share; 2,141,553 shares of common stock were issued
and outstanding. An affirmative vote will authorize the
Company to issue up to an additional 75 million common shares
for a total of 100 million common shares. These shares may be
important to facilitate a future business combination
(merger).
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE ACTION
It is management's belief that a continuing stockholder
generally will not recognize any gain or loss upon the receipt
of an interest in the Costa Rican company and that a gain or
loss would not be recorded until the sale of the stock in the
Company. Our opinion is not exhaustive and does not address
the specific tax consequences of the creation of a Costa Rican
company or a potential future combination to shareholders under
specific individual circumstances, which, if considered, may
lead to a different conclusion. Tax matters are complicated.
Shareholders should consult their own tax advisor for a full
understanding of the federal, state, local and foreign tax
consequences of the ownership in a new company and a possible
business combination once consummated.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains or incorporates by reference
certain forward-looking statements and information relating to
us that are based on the beliefs of management as well as
assumptions made by and information currently available to us.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance,
and underlying assumptions and other statements that are other
than statements of historical facts, including statements
regarding the completion of the combination. When used in this
document, the words "anticipate," "possible", "believe,"
"estimate," "expect," "plan," "intend," "project," "predict,"
"may," and "should" and similar expressions, are intended to
identify forward-looking statements. Such statements reflect
our current view with respect to future events, including the
completion of a combination, and are subject to numerous risks,
uncertainties and assumptions. Many factors could cause our
actual results, performance or achievements to be materially
different from any future results, performance or achievements
that may be expressed or implied by the forward-looking
statements, including, among others:
_ the failure of stockholders to approve the voting items;
_ the failure to identify or achieve a business combination;
_ general economic or market conditions;
_ changes in business strategy;
_ availability of financing on acceptable terms to fund
future operations;
_ competitive conditions in our markets;
_ general economic or market conditions;
_ changes in technology; and
_ various other factors, both referenced and not referenced
in this statement including those discussed in our
periodic and other filings with the SEC.
Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual
results may vary materially from those described in this proxy
statement as anticipated, believed, estimated, expected,
planned or intended. Although it is management's intent to
seek an appropriate business combination, shareholders should
not assume that such a combination is a certainty. Further
information about the risks of forward-looking statements
applicable to us can be found in our Form 10-KSB for the fiscal
years ended December 31, 2004, which has been incorporated
herein by reference and follows this proxy statement.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report on Form 10-KSB of Registrant for the years ended
December 31, 2004, 2003, 2002, 2001,Quarterly reports on Forms
10-QSB of registrant for the quarters ending March 31, 2005.
WHERE YOU CAN FIND MORE INFORMATION
Central American Equities has been a publicly trading company
since August 2000. Quarterly and annual financial information
can be found on the SEC EDGAR website: www.sec.gov.
CENTRAL AMERICAN EQUITIES CORP, INC
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTOR FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 12, 2005
INSTRUCTIONS FOR VOTING YOUR PROXY BY PHONE OR MAIL:
If you do not plan to attend the annual meeting in person, you are
requested to complete, sign and date the enclosed proxy and return
it promptly by mail or by fax (732-872-2728):
Olde Monmouth Fax: 732-872-2728
200 Memorial Pkwy
Atlantic Highlands, NJ 07716
(Owners of shares in street name may receive from their broker
different voting instructions.)
This proxy will be voted as directed. If no direction is
indicated, the proxies named below will vote this proxy: 1) FOR
the election of the candidates nominated by the board of directors
for directors; 2) FOR the director proposal to ratify the
selection of Killman, Murrell & Company P.C. Certified Public
Accountant, as independent auditors; 3) FOR the director proposal
to transfer the assets of the corporation to a Costa Rica
corporation that is wholly owned by the current shareholders of
the Company; 4) FOR the director proposal to change the articles
of incorporation to create a super voting preferred shares that
will be used by the board of directors to vote for merger
opportunities; 5) FOR the director proposal to change the articles
of incorporation to increase the authorized number of common
shares to 100 million, and 6) In their discretion, upon such
other matters as may properly come before the meeting.
The undersigned stockholder acknowledges receipt of the Notice of
Annual Meeting of Stockholders and the Proxy Statement, and hereby
appoints Michael N. Caggiano, President and CEO, and a director of
the Company, or failing him, Richard Wm. Talley, Chairman of the
Board and a director of the Company, or in the place and stead of
the foregoing, ___________________ _________the true and lawful
proxy of the undersigned, with full power of substitution, to vote
all of the undersigned's shares of common stock of Central
American Equities, Inc. at the Annual Meeting of Stockholders
to be held at the Company headquarters at Hotel Alta, Alto de las
Palomas, Santa Ana, Costa Rica on Saturday, November 12, 2005 at
10:00 A.M., Costa Rica Local Time, and at any adjournments or
postponements thereof. The undersigned hereby instructs said
proxy to vote the Common Shares represented by this instrument of
proxy in the following manner:
Proposal 1. The Board of Directors has nominated the following 3
persons for election as directors of the Company: Richard Wm.
Talley, Michael N. Caggiano, and P. James Voloshin. These
directors will serve for a term of one year or until such
director's successor is elected and qualified.
[ ] For All [ ] Against All
[ ] For All Except the Following
Nominees:________________________________
Proposal 2. To ratify the selection of Killman, Murrell &
Company, P.C. Certified Public Accountant, as independent auditors
of the Company for the fiscal years ending December 31, 2005.
[ ] For [ ] Against [ ] Abstain
Proposal 3. To transfer the assets of Central American Equities
(CAE) to a Costa Rican corporation that is wholly owned by the
current shareholders of the Company. If this action is approved,
each share of common stock that is fully paid and assessed, issued
and outstanding will be given a pro-rata share of stock in the
Costa Rican corporation. This action will not change the
shareholder's current stock ownership in CAE.
[ ] For [ ] Against [ ] Abstain
Proposal 4. To amend the Company's Articles of Incorporation and
the Company's By-laws as necessary to provide for the
authorization of 3000 shares of a new class of super-voting,
preferred stock. Each preferred share will be entitled to 1000
votes and in total all shares will equal 3 million votes. After
the amendment is filed, it is the intent of the Board of Directors
to issue the super-voting preferred stock to the Company's board
of directors. This will allow the board to vote a majority of the
Company's stock. The purpose will be to enable the Company to
complete a business combination (merger) in the future without the
necessity of an additional shareholder meeting.
[ ] For [ ] Against [ ] Abstain
Proposal 5. To amend the Company's Articles of Incorporation and
the Company's By-laws as necessary to authorize the Company to
issue up to 100 million shares of common stock.
[ ] For [ ] Against [ ] Abstain
Proposal 6. In their discretion, upon such other matters as may
properly come before the meeting.
[ ] For [ ] Against [ ] Abstain
Dated: ___________________, 2005
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Stockholder's Signature
Name of Stockholder or entity (please print)
- ---------------------------------------
Number of Shares Held
Certificate Numbers (if available)
Signature should agree with name printed hereon. If stock is held
in the name of more than one person, EACH joint owner should sign.
If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in
partnership name by authorized person. Executors, administrators,
trustees, guardians, and attorneys should indicate the capacity in
which they sign. Attorneys should submit powers of attorney.
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