SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
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SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
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Check the appropriate box:
| | Preliminary Information Statement |_| Confidential, for Use of the
Commission Only
(as permitted by Rule 14c-5(d)(2))
|X| Definitive Information Statement
MOBILE REACH INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Information Statement,
if Other Than the Registrant(s))
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on the table below per Exchange Act Rules 14c05(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| 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:
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(2) Form, Schedule or Registration No.:
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(3) Filing Party:
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(4) Date Filed:
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MOBILE REACH INTERNATIONAL, INC.
2054 Kildaire Farm Road #353
Cary, North Carolina 27511
June 27, 2005
Dear Stockholder:
This Information Statement is being furnished to all of the holders of
shares of common stock of Mobile Reach International, Inc. (the "Company," "we"
or "us"). The purpose of this Information Statement is to notify the
stockholders that the holders of a majority of the outstanding shares of common
stock and preferred stock of the Company have taken action by written consent to
approve the following actions:
(1) An amendment to the Company's certificate of incorporation to increase
the number of authorized shares of common stock, par value $0.0001 per share
("Common Stock") from 50,000,000 to 500,000,000 (the "Authorized Shares
Increase"); and
(2) An amendment to the Company's certificate of incorporation to effect a
reverse stock split of the Company's Common Stock at a specific ratio, ranging
from one-for-sixty to one-for-eighty (the "Reverse Stock Split"), to be
determined by the Board of Directors, in its sole discretion, until December 31,
2005.
The Board of Directors of the Company believes that the Authorized Shares
Increase and Reverse Stock Split are beneficial to the Company and its
stockholders.
You have the right to receive this notice if you were a stockholder of
record of our Common Stock at the close of business on June 13, 2005. The
enclosed Information Statement is being furnished to you to inform you that the
foregoing actions have been approved by the holders of a majority of the
outstanding shares of Common Stock. We are not asking you for a proxy, and you
are not requested to send us a proxy. The Authorized Shares Increase and Reverse
Stock Split cannot take effect until 20 calendar days after this Information
Statement is first mailed to stockholders. You are urged to read the Information
Statement in its entirety for a description of the actions taken by the holders
of a majority of the outstanding shares of common stock of the Company. The
Information Statement also constitutes notice of corporate action without a
meeting by less than unanimous written consent of our stockholders pursuant to
Section 228(e) of the Delaware General Corporation Law.
Sincerely,
Alan Christopher Johnson
Chief Executive Officer
MOBILE REACH INTERNATIONAL, INC.
2054 Kildaire Farm Road #353
Cary, North Carolina 27511
Telephone: (919) 376-0231
INFORMATION STATEMENT
DATED JUNE 27, 2005
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THE ACTIONS DESCRIBED BELOW HAVE ALREADY BEEN APPROVED BY THE WRITTEN CONSENT OF
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK. A
VOTE OF THE REMAINING STOCKHOLDERS IS NOT NECESSARY.
This Information Statement is being mailed on or about June 27, 2005, to
all holders of record of the shares of common stock, par value $0.0001 per share
("Common Stock"), of Mobile Reach International, Inc., a Delaware corporation
(the "Company"), as of the close of business on June 13, 2005 (the "Record
Date"), in connection with the adoption of (1) a Certificate of Amendment (the
"Increase Amendment") to the Company's Certificate of Incorporation by the
written consent of the holders of a majority of the outstanding shares of Common
Stock, increasing the number of authorized shares of our Common Stock from
50,000,000 to 500,000,000, and (2) a Certificate of Amendment (the "Reverse
Split Amendment" together with the Increase Amendment, the "Amendments") to the
Company's Certificate of Incorporation by the written consent of the holders of
a majority of the outstanding shares of Common Stock, effecting a reverse stock
split of the Company's Common Stock at a specific ratio, ranging from
one-for-sixty to one-for-eighty (the "Reverse Stock Split"), to be determined by
the Board of Directors, in its sole discretion, until December 31, 2005. A copy
of the form of the Increase Amendment is attached to this Information Statement
as Exhibit A and a copy of the form of the Reverse Split Amendment is attached
as Exhibit B.
On May 23, 2005, the Company's Board of Directors unanimously declared the
advisability of, and recommended that the stockholders adopt the Amendments. On
June 13, 2005, the Amendments were adopted by the written consent of holders of
a majority of the Company's outstanding shares of stock entitled to vote thereon
in accordance with Section 228 of the General Corporation Law of the State of
Delaware (the "DGCL"). The Board of Directors decided to obtain the written
consent of the holders of a majority of the voting rights represented by the
Company's outstanding shares of stock entitled to vote upon the Amendments in
order to eliminate the costs and management time required to hold a special
meeting of the stockholders and to implement the increase in the number of
authorized shares and reverse stock split in a timely manner.
The increase in the number of authorized shares and reverse stock split
will become effective on the date the Amendments are filed with and accepted by
the Delaware Secretary of State. Pursuant to the regulations promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Amendments may not be effected until at least 20 calendar days after this
Information Statement is sent or given to the stockholders of the Company.
Accordingly, promptly following the expiration of such 20-day period, we intend
to file the Increase Amendment with the Delaware Secretary of State and the
increase in the number of authorized shares will become effective on the date of
such filing. Also following the expiration of the 20-day period, we intend to
the Reverse Split Amendment with the Delaware Secretary of State upon the
determination of the Board of Directors. The Board of Directors has the
authority, without any further stockholder approval, to determine the specific
ratio of the reverse stock split within the range already approved and to
determine the exact timing of the reverse stock split, which may occur at any
time on or prior to December 31, 2005.
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All necessary corporate approvals in connection with the matters referred
to herein have been obtained, and this Information Statement is furnished solely
for the purposes of (1) informing stockholders, in the manner required under
Section 228 of the DGCL, of this transaction, and (2) informing stockholders, in
the manner required under the Exchange Act, of this transaction before it takes
effect. The Company is not seeking written consent from any of its other
stockholders.
The Company will bear all of the costs associated with the preparation and
dissemination of this Information Statement and the accompanying materials. No
consideration has been or will be paid to any officer, director or employee of
the Company in connection with the increase in number of authorized shares and
reverse stock split or the preparation and dissemination of this Information
Statement and the accompanying materials.
OUTSTANDING STOCK AND VOTING RIGHTS
As of the Record Date, the Company had 46,845,484 shares of Common Stock
and no shares of Series A Preferred Stock, $0.001 par value per share
("Preferred Stock"), issued and outstanding, with each such share of Common
Stock entitled to one vote with respect to the approval of the Amendments. The
Common Stock constitute the Company's only outstanding securities eligible to
vote on the approval and adoption of the Amendments. The holders of 23,577,550
shares of the issued and outstanding Common Stock, representing approximately
50.33% of the votes entitled to be cast with regard to the Amendments, approved
the Amendments by written consent.
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
General
The Company's current Certificate of Incorporation provides for an
authorized capitalization consisting of 10,000,000 shares of Preferred Stock,
and 50,000,000 shares of Common Stock. As of June 13, 2005, there were
46,845,484 shares of Common Stock outstanding and no shares of Preferred Stock
outstanding. The Board of Directors believes that the increase in authorized
shares will provide the Company greater flexibility with respect to the
Company's capital structure for such purposes as additional equity financing.
The Board of Directors believes that it is in the best interests of both
the Company and its stockholders to effect the Increase Amendment. The Increase
Amendment has been approved by the Board of Directors, the stockholders holding
approximately 50.33% of the outstanding shares of our Common Stock as of the
date of this Information Statement.
Vote Required; Manner of Approval
Amending the Certificate of Incorporation under the DGCL requires the
affirmative vote of the holders of a majority of the outstanding stock entitled
to vote thereon and a majority of the outstanding stock of each class entitled
to vote thereon as a class. Section 242(a) of the DGCL permits a corporation to
amend its certificate of incorporation from time to time.
Section 228 of the DGCL provides in substance that, unless the Company's
certificate of incorporation states otherwise, stockholders may take action
without a meeting of stockholders and without prior notice if a consent or
consents in writing, setting forth the action so taken, is signed by the holders
of outstanding voting stock holding not less than a minimum number of votes that
would be necessary to approve such action at a stockholders meeting. Under the
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applicable provisions of the DGCL, this action is effective when written
consents from holders of record of a majority of the outstanding shares of
voting stock are executed and delivered to the Company.
In accordance with the DGCL and as stated above, an affirmative vote
approving the Increase Amendment by holders holding at least a majority of the
outstanding shares of the Company's Preferred Stock and Common Stock, [voting as
a separate class], has been obtained. As a result, no further vote or proxy is
required by the stockholders of the Company to approve the Increase Amendment of
the Company.
Under Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as
amended, the amendment of the Certificate of Incorporation cannot take effect
until 20 calendar days after this Information Statement is first mailed to the
Company's Stockholders. Accordingly, the Increase Amendment will be filed with
the Secretary of State of the State of Delaware promptly after July 18, 2005, 20
calendar days after the mailing of this Information Statement.
EFFECTS OF INCREASE IN AUTHORIZED CAPITAL
After the increase in the authorized number of shares of Common Stock,
there will be 46,845,484 shares of our Common Stock issued and outstanding,
leaving approximately 453,154,516 shares of our Common Stock available for
future issuance. The par value of our Common Stock will remain $0.0001 per
share. The terms of the additional shares of Common Stock will be identical to
those of the currently outstanding shares of Common Stock. The Increase
Amendment will not alter the current number of issued shares. The relative
rights and limitations of the shares of Common Stock would remain unchanged
under the Increase Amendment.
The availability of additional authorized shares of Common Stock will
enable the Company to satisfy its obligations to purchasers of its 8%
convertible promissory notes (the "Notes"). As of June 13, 2005, the Company has
issued $225,000 in principal amount of the Notes to various accredited investors
(each an "Investor" and collectively the "Investors"). The Notes are
convertible, at the Investor's option, into shares of the Company's Common Stock
at a per share conversion price equal to the lesser of (i) $0.0077 (the "Closing
Date Conversion Price"), or (ii) the average of the three lowest closing bid
prices for the ten trading days preceding the conversion date. In connection
with the issuance of the Notes, the Company issued to the Investors five-year
common stock purchase warrants (the "Warrants") to purchase the number of shares
of Common Stock which would be issued on the closing date assuming the
conversion of all of the outstanding Notes on the closing date at the Closing
Date Conversion Price. The exercise price of the Warrants is equal to the
Closing Date Conversion Price. Therefore, the conversion of all of the Notes
would require the Company to issue a minimum of 45,354,491 shares of Common
Stock and the exercise of all the Warrants would require the Company to issue
45,354,491 shares of Common Stock.
Additionally, the availability of the additional authorized shares of
Common Stock will enable the Company to satisfy its obligations to certain old
investors, vendors, service providers and other creditors (collectively, the
"Stakeholders"). Over the past three months as part as an overall reorganization
process, the Company has entered into a number of settlement and release
agreements with the Stakeholders whereby the Company has agreed, in
consideration of the release of all claims held by the Stakeholders, to issue
121,000,000 shares of Common Stock to the Stakeholders. One of the Stakeholders,
A. Christopher Johnson, also a member of the Board of Directors and the
Company's Chief Executive Officer, will be issued 35,000,000 shares in
consideration of his release of all claims relating to approximately $500,000
lent to the Company in the past.
More generally, the increase in the authorized number of shares of Common
Stock will enable us to engage in (i) possible future financings and (ii) such
other corporate purposes as the Board of Directors determines in its discretion.
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These corporate purposes may include future stock splits, stock dividends or
other distributions, future financings, acquisitions and stock options and other
equity benefits under our employee benefit plans. The increase in the number of
authorized shares of common stock will enable us to promptly take advantage of
market conditions and the availability of favorable opportunities without the
delay and expense associated with holding a special meeting of stockholders.
Specifically, the Company is currently in negotiation to purchase all of
the outstanding capital stock of Objective Spectrum, Inc. ("Objective
Spectrum"), which is wholly owned by Mark J. Lloyd, a member of the Board of
Directors and the Company's President and Chief Technology Officer, for between
20,000,000 to 40,000,000 shares of the Company's Common Stock pending further
legal, financial and technical due diligence. Objective Spectrum owns licenses
various products which provide an end-to-end toolset that allows the user of the
products to draw complex software as a graphical model, then to execute the
graphical model to verify that it works properly then to generate standard
software source code.
The increase in the authorized number of shares of our Common Stock could
have an anti-takeover effect, although that is not the intention of the Company.
If the Board of Directors desires to issue additional shares of our common stock
in the future, such issuance could dilute the voting power of a person seeking
control of the Company, thereby deterring a merger, tender offer, proxy contest
or an extraordinary corporate transaction opposed by the Board of Directors. The
availability of this defensive strategy to the Company could discourage
unsolicited takeover attempts, thereby limiting the opportunity for the
Company's stockholders to realize a higher price for their shares than might be
generally available in the public markets. The Board of Directors is not aware
of any attempt, or contemplated attempt, to change the control of the Company,
and the Increase Amendment is not being effectuated with the intent that it be
used as a type of anti-takeover device.
The issuance of any additional shares of Common Stock would also have the
effect of diluting the equity interests of existing stockholders and the
earnings per share, if any, of existing shares of Common Stock. Such dilution
may be substantial, depending upon the amount of shares issued.
THE REVERSE STOCK SPLIT
The Company, as authorized by the necessary actions of its Board of
Directors and stockholders, has approved the effectuation of a reverse stock
split of the Company's Common Stock at a specific ratio, ranging from a minimum
ration of one-for-sixty to a maximum ratio of one-for-eighty, to be determined
by the Board of Directors, in its sole discretion, at any time within a six (6)
month period from the date of stockholder approval by written consent (the
"Reverse Stock Split"). Any fractional shares resulting from the Reverse Stock
Split shall be rounded up to the nearest whole share. As such, there will be no
fractional shares following the Reverse Stock Split. The par value of the new
Common Stock (the "New Common Stock") will remain as $0.0001 per share as before
the Reverse Stock Split. The New Common Stock issued pursuant to the Reverse
Stock Split will be fully paid and non-assessable. The number of stockholders as
of the Record Date will remain unchanged and unaffected by the Reverse Stock
Split.
The complete text of the form of the Reverse Split Amendment is set forth
on Exhibit B to this Information Statement. The Reverse Split Amendment shall
include the specific ratio of Reverse Split determined by the Board of Directors
and any non-substantive changes as may be required by the Secretary of State of
the State of Delaware. The Board of Directors has the authority, for the six
month period following the date of stockholder approval by written consent, and
without any further stockholder approval, to determine the specific ratio of the
Reverse Stock Split within the range set forth above; provided, however, that
the Board of Directors may effect only one reverse stock split of the Company's
Common Stock in one specific ratio. To effectuate the Reverse Stock Split,
pursuant to which each of the Company's presently outstanding shares of Common
Stock would be exchanged for such lesser number of new shares of Common Stock at
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the specific ratio approved by the Board of Directors (the "Exchange Ratio"),
the Company will set forth the Exchange Ratio in the attached Reverse Split
Amendment and file the Reverse Split Amendment with the Secretary of State of
the State of Delaware (the "Effective Date"). Following the Reverse Stock Split,
all of the Company's securities convertible into or exercisable for Common Stock
will be exercisable or convertible at a higher price for such lesser number of
shares of Common Stock for or into which such security was previously
exercisable or convertible as determined by the Exchange Ratio and such
documents governing such security. The Board of Directors will also have the
authority to determine the exact timing of the Reverse Stock Split, which may
occur at any time on or prior to December 31, 2005, without further stockholder
approval. The timing will be determined in the sole business judgment of the
Board of Directors. See "Purposes of the Reverse Split" below.
The Board of Directors also reserves the right, notwithstanding stockholder
approval and without further action by stockholders, to determine not to proceed
with the Reverse Stock Split, if, at any time prior to filing the Reverse Split
Amendment with the Secretary of State of the State of Delaware, the Board of
Directors, in its sole discretion, determines that the Reverse Stock Split is no
longer in the best interests of the Company and its stockholders. The Board of
Directors may consider a variety of factors in determining whether or not to
implement the Reverse Stock Split, including, but not limited to, business,
transactional and financing developments and the Company's actual and projected
financial performance.
The Board of Directors believes that stockholder approval of a range of
exchange ratios (rather than a fixed exchange ratio) provides the Company with
the flexibility necessary to achieve the desired results of the Reverse Stock
Split at a ratio that, at the time of a Reverse Stock Split, would be in the
best interests of the Company and its stockholders at that time. If the Board of
Directors determines to implement the Reverse Stock Split, the Company would
communicate to the public, prior to the effective date of the Reverse Stock
Split, additional details regarding the Reverse Stock Split, including the
Exchange Ratio. If the Board of Directors does not implement the Reverse Stock
Split within six months from the date of stockholder approval, the authority
granted by the stockholders to the Board of Directors to implement the Reverse
Stock Split will terminate.
PURPOSES OF THE REVERSE STOCK SPLIT
The Board of Directors believes that the current per share price of the
Company's Common Stock negatively impacts the marketability of the existing
shares, the amount and percentage of transaction costs paid by individual
stockholders and the Company's potential ability to raise capital by issuing new
shares. The Board of Directors believes that the reasons summarized below
largely account for such effects.
Most brokerage firms do not permit lower-priced securities to be purchased
on margin or used as collateral for margin accounts. Certain policies and
practices of the securities industry, such as time-consuming procedures that
make the handling of lower-priced securities economically unattractive, may tend
to discourage individual brokers within those firms from dealing in lower-priced
securities. Moreover, the brokerage commission on the purchase or sale of a
lower-priced stock may represent a higher percentage of the price than the
brokerage commission on a higher-priced stock. For the foregoing, among other
reasons, many brokerage firms and institutional investors are reluctant to
recommend lower-priced securities to their clients or to hold them in their own
portfolios. For these reasons, the Board of Directors believes that the low per
share price of the Company's Common Stock has the effect of limiting the
effective marketability of the Common Stock and other negative consequences for
the Company and its stockholders. The proposed Reverse Stock Split could result
in a price level for the Common Stock that will reduce, to some extent, the
effect of the above-referenced policies and practices of brokerage firms and
diminish the adverse impact of trading commissions on the market for the Common
Stock. Any reduction in brokerage commissions resulting from the Reverse Stock
Split may be offset, however, in whole or in part, by increased brokerage
commissions required to be paid by stockholders selling "odd lots" (fewer than
100 shares) created by the Reverse Stock Split.
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On June 2, 2005, the closing sale price of the Company's Common Stock was
$0.012 per share. By decreasing the number of shares of the Company's Common
Stock outstanding without altering the aggregate economic interest in the
Company represented by the shares, the Board of Directors believes that the
market price of the Common Stock will increase over time to a more appropriate
price; however, there can be no assurance that this will occur. The new Common
Stock will continue to be traded on the Over-the-Counter Bulletin Board.
The Board of Directors believes that the decrease in the number of shares
of Common Stock outstanding and the resulting increased price level as a
consequence of the Reverse Stock Split will encourage greater interest in the
Company by the financial community and investing public. THERE CAN BE NO
ASSURANCE, HOWEVER, THAT THE FOREGOING EFFECTS WILL OCCUR; THAT THE INCREASE IN
THE MARKET PRICE OF THE COMPANY'S COMMON STOCK IMMEDIATELY FOLLOWING THE REVERSE
STOCK SPLIT WILL BE SUSTAINED; OR THAT THE MARKET PRICE WILL EVER RISE TO A
PRICE APPROXIMATING SIXTY TO EIGHTY TIMES THE MARKET PRICE PRIOR TO THE REVERSE
STOCK SPLIT.
PRINCIPAL EFFECTS OF THE REVERSE STOCK SPLIT
The Reverse Stock Split will decrease the outstanding shares of Common
Stock by a certain percentage dependent on the Exchange Ratio. The Reverse Stock
Split will not affect any stockholder's proportionate equity interest in the
Company, except for negligible amounts resulting from the rounding up of
fractional shares. The Board of Directors does not expect the number of shares
of New Common Stock to be issued in connection with rounding up such fractional
shares to be material.
The par value of the Common Stock will remain at $0.0001 per share
following the Reverse Stock Split, and the number of shares of the Common Stock
outstanding will be reduced. As a consequence, the aggregate par value of the
outstanding Common Stock will be reduced, while the aggregate capital in excess
of par value attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The Reverse Stock Split
will not affect the Company's total stockholders' equity.
Stockholders should note that certain disadvantages may result from the
Reverse Stock Split. The number of outstanding shares of Common Stock will be
decreased as a result of the Reverse Stock Split, but the number of authorized
shares of Common Stock will not be so decreased. The Company will therefore have
the authority to issue a greater number of shares of Common Stock following the
Reverse Stock Split without the need to obtain stockholder approval to authorize
additional shares. Any such additional issuance may have the effect of
significantly reducing the interest of the existing stockholders of the Company
with respect to earnings per share, voting, liquidation value and book and
market value per share.
The increase in the authorized shares of Common Stock available for
issuance, as described above, could also have an anti-takeover effect. Issuance
of additional shares of Common Stock in the future could dilute the voting power
of a person seeking control of the Company, thereby making it more difficult for
a takeover attempt opposed by the Company to succeed, and thus limiting the
opportunity for the stockholders to realize a higher price for their shares than
that generally available in the public markets. The Board of Directors is
unaware of any attempt, whether potential or actual, to takeover the Company,
and the Amendment is not intended as any type of anti-takeover measure. The
Board of Directors has no current plans to issue additional shares of Common
Stock.
The Reverse Stock Split will increase the number of stockholders who own
odd-lots of fewer than 100 shares of Common Stock. Stockholders who hold
odd-lots may experience increased costs of selling their shares and may have
greater difficulty in making sales.
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All outstanding options and warrants entitling the holders thereof to
purchase shares of the Company's Common Stock will enable such holders to
purchase, upon exercise of their options or warrants, a fraction of the number
of shares of the Company's Common Stock that such holders would have been able
to purchase upon exercise of their options or warrants immediately preceding the
Reverse Stock Split. The per-share exercise price of such options and warrants
will be higher than the per-share exercise price specified before the Reverse
Stock Split, resulting in approximately the same aggregate price being required
to be paid after the Reverse Stock Split as would have been required if such
holder had exercised prior to the Reverse Stock Split.
The following table represents the shares of the Company's Common Stock
immediately prior to and immediately after the Reverse Stock Split:
Approximate Shares of Approximate Shares of
Common Stock Outstanding Common Stock Outstanding
Before Reverse Stock After Reverse Stock
Ratio of Reverse Stock Split Split Split
---------------------------- ------------------------ -------------------------
None 46,845,484 46,845,484
1:60 46,845,484 780,758
1:70 46,845,484 669,221
1:80 46,845,484 585,569
If a stockholder owns 100,000 shares of common stock prior to the Reverse
Stock Split, after the Reverse Stock Split that same stockholder would own 1,666
shares in the case of a Reverse Stock Split in the ratio of 1:60, 1,428 shares
in the case of a Reverse Stock Split in the ratio of 1:70, 1,250 shares in the
case of a Reverse Stock Split in the ratio of 1:80.
STOCK CERTIFICATES AND FRACTIONAL SHARES
The Reverse Stock Split will occur on the close of business on the
Effective Date without any further action on the part of stockholders of the
Company and without regard to the date or dates on which certificates
representing shares of outstanding Common Stock are actually surrendered by each
holder thereof for certificates representing the number of shares of the New
Common Stock that the stockholder is entitled to receive as a consequence of the
Reverse Stock Split. After the Effective Date, each certificate representing
shares of outstanding Common Stock will be deemed to represent a number of
shares of New Common Stock equal to the Exchange Ratio of the number of shares
stated on the certificate. Certificates representing shares of New Common Stock
will be issued in due course as old certificates are tendered for exchange or
transfer to Interwest Transfer Company Inc., 1981 East Murray Holladay Road,
Suite 100, Salt Lake City, Utah 84117, Attention: Shareholder Relations (the
"Transfer Agent"), telephone number: (801) 272-9294. No fractional shares of New
Common Stock will be issued. If the conversion shall result in a fraction of a
share, then the Company will round up such fraction of a share and the holder
shall be entitled to receive a whole share for such fraction.
NUMBER OF HOLDERS
As of June 13, 2005, there were approximately 750 holders of record of
outstanding Common Stock. The Company does not anticipate that the Reverse Stock
Split will cause the number of holders of record or beneficial owners of Common
Stock to change significantly. There are currently no dividends in arrears due
to the holders of the Company's Common Stock.
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NO CHANGE IN COMPANY'S STATUS OR BUSINESS
The Company does not anticipate any change in the Company's status as a
reporting company for federal securities law purposes as a result of the Reverse
Stock Split. The Company's business, and the location of its principal executive
offices, will remain the same after the Reverse Stock Split.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable following the Effective Date, the Company will
provide a transmittal form that each stockholder of record on the Effective Date
should use to transmit certificates representing shares of outstanding Common
Stock ("Old Certificates") to the Transfer Agent for exchange or transfer. The
transmittal form contains instructions for the surrender of Old Certificates to
the Transfer Agent in exchange for certificates representing the appropriate
number of whole shares of New Common Stock. No new certificates will be issued
to a stockholder until such stockholder has surrendered its Old Certificates
together with a properly completed and executed transmittal form to the Transfer
Agent.
Upon proper completion and execution of the transmittal form and its return
to the Transfer Agent together with a stockholder's Old Certificates and/or an
affidavit of loss for any lost or destroyed certificates, as applicable, that
stockholder will receive a new certificate or certificates representing the
number of whole shares of New Common Stock into which the shares of Common Stock
represented by the Old Certificates are being converted as a result of the
Reverse Stock Split. Until surrendered to the Transfer Agent, Old Certificates
retained by stockholders will be deemed for all purposes, including voting and
payment of dividends, if any, to represent the number of whole shares of New
Common Stock to which such stockholders are entitled as a result of the Reverse
Stock Split. Stockholders should not send their Old Certificates to the Transfer
Agent until after receiving instructions from the transfer agent following the
Effective Date. Old Certificates surrendered after the Effective Date will be
replaced by certificates representing shares of New Common Stock as soon as
practicable after such surrender. Stockholders whose shares are held in
brokerage accounts or in a street name need not submit old certificates for
exchange as those shares will automatically reflect the new share amount based
on the Reverse Stock Split. No service charge will be payable by holders of
shares of outstanding Common Stock in connection with the exchange of shares,
and the Company will pay for all expenses of the exchange and issuance of new
certificates.
Old Certificates that contain a restrictive legend will be exchanged for
new certificates representing New Common Stock with the same restrictive legend.
As applicable, the time period during which a stockholder has held the
outstanding Common Stock will be included in the time period during which such
stockholder actually holds the New Common Stock received in exchange for such
outstanding Common Stock for the purposes of determining the term of the
restrictive period applicable to the New Common Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material federal income tax
consequences of the Reverse Stock Split and does not purport to be a complete
discussion of all of the possible federal income tax consequences of the Reverse
Stock Split and is included for general information only. Further, it does not
address any state, local or foreign income or other tax consequences. For
example, the state and local tax consequences of the Reverse Stock Split may
vary significantly as to each stockholder, depending upon the state in which he
or she resides. Also, it does not address the tax consequences to holders that
are subject to special tax rules, such as banks, insurance companies, regulated
investment companies, personal holding companies, foreign entities, nonresident
alien individuals, broker-dealers and tax-exempt entities. The outstanding
Common Stock discussion is based on the provisions of the United States federal
income tax law as of the date hereof, which is subject to change retroactively
-8-
as well as prospectively. This summary also assumes that the outstanding Common
Stock was, and the New Common Stock will be, held as a "capital asset," as
defined in the Internal Revenue Code of 1986, as amended (the "Code") (i.e.,
generally, property held for investment). The tax treatment of a stockholder may
vary depending upon the particular facts and circumstances of such stockholder.
Each stockholder is urged to consult with such stockholder's own tax advisor
with respect to the tax consequences of the Reverse Stock Split.
No gain or loss should be recognized by a stockholder upon such
stockholder's exchange of outstanding Common Stock for New Common Stock pursuant
to the Reverse Stock Split. The aggregate tax basis of the New Common Stock
received in the Reverse Stock Split (including any fraction of a New Common
Stock deemed to have been received) will be the same as the stockholder's
aggregate tax basis in the outstanding Common Stock exchanged therefore. The
stockholder's holding period for the New Common Stock will include the period
during which the stockholder held the outstanding Common Stock surrendered in
the Reverse Stock Split.
The Company's view regarding the tax consequences of the Reverse Stock
Split is not binding on the Internal Revenue Service or the courts. Accordingly,
each stockholder should consult with his or her own tax advisor with respect to
all of the potential tax consequences to him or her of the Reverse Stock Split.
THE DISCUSSION SET FORTH ABOVE CONCERNING CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE REVERSE STOCK SPLIT IS INCLUDED HEREIN FOR GENERAL
INFORMATION ONLY. ALL STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
AS TO ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM
WHICH COULD RESULT FROM THE REVERSE STOCK SPLIT.
DISSENTER'S RIGHTS
Stockholders have no right under DGCL or the Company's Certificate of
Incorporation, as amended, or bylaws, as amended, to exercise dissenters' rights
of appraisal with respect to the Reverse Stock Split.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock by each person (including any "group" as that term is used in
Section 13(a)(3) of the Exchange Act of 1934) known to the Company to
beneficially own 5% or more of the outstanding Common Stock, each of the
Company's directors and nominees, each of the Company's executive officers and
each of the Company's directors and executive officers as a group. The
calculation of the percentage of the Company's Common Stock beneficially owned
as of June 6, 2005 is based on 46,845,484 shares of Common Stock issued and
outstanding as of that date.
In accordance with the rules promulgated by the Securities and Exchange
Commission (the "Commission"), the ownership includes shares currently owned as
well as shares that the named person has the right to acquire beneficial
ownership of within 60 days, including through the exercise of options, warrants
or other rights, or through the conversion of a security. Accordingly, more than
one person may be deemed to be beneficial owner of the same securities. Except
as otherwise indicated, each stockholder listed below has sole voting and
investment power of the shares beneficially owned by that person.
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Name and Address of Amount and Nature of
Beneficial Owner Beneficial Owner Percent of Class
- ------------------------------------- -------------------- ----------------
A. Christopher Johnson 9,719,410 20.74%
Mark J. Lloyd 2,438,525 5.21%
Richard Rosenblum 1,530,161 (1) 3.27%
David Stefansky 1,610,161 (2) 3.44%
Directors and officers as a group
(4 persons) 15,298,257 32.66%
- ------------------------------------------------------------------------------------------------------
(1) Includes 64,711 shares of Common Stock issuable upon exercise of warrants
issued to Mr. Rosenblum. Also includes 1,000,000 shares of Common Stock
held by Harborview Capital Management, LLC ("Harborview") of which Mr.
Rosenblum is a principal; and 405,469 shares of Common Stock issuable upon
exercise of various convertible debentures and warrants issued to Redwood
Capital Partners, Inc of which Mr. Rosenblum is a principal ("Redwood").
Mr. Rosenblum disclaims beneficial ownership for shares or rights to
acquire shares held Harborview and Redwood.
(2) Includes 64,711 shares of Common Stock issuable upon exercise of warrants
issued to Mr. Stefansky; and 80,000 shares of Common Stock held by Mr.
Stefansky's wife. Also includes 1,000,000 shares of Common Stock held by
Harborview of which Mr. Stefansky is a principal; and 405,469 shares of
Common Stock issuable upon exercise of various convertible debentures and
warrants issued to Redwood of which Mr. Stefansky is a principal. Mr.
Stefansky disclaims beneficial ownership for shares or rights to acquire
shares held Harborview and Redwood.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director, officer, or associate of any director or officer, or any other
person, has any substantial interest, direct or indirect, by security holdings
or otherwise, in the proposed Amendments.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the Commission. You can read and copy any materials
that the Company files with the Commission at the Commission's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can obtain
information about the operation of the Commission's Public Reference Room by
calling the Commission at 1-800-SEC-0330. The Commission also maintains a Web
site that contains information we file electronically with the Commission, which
you can access over the Internet at http://www.sec.gov. Copies of these
materials may also be obtained by mail from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
Copies of this Information Statement, our most recent annual report filed
with the Commission on Form 10-KSB and our most recent proxy statement filed
with the Commission are available to stockholders at no charge upon written or
oral request directed as follows:
MOBILE REACH INTERNATIONAL, INC.
2054 Kildaire Farm Road #353
Cary, North Carolina 27511
Telephone: (919) 376-0231
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INCORPORATION OF INFORMATION WE FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION
The following documents and other materials, which have been filed by the
Company with the Commission, are incorporated into and specifically made a part
of this Information Statement by this reference:
o The Company's Annual Report on Form 10-KSB for the fiscal year ended July
31, 2004; and
o The Company's Quarterly Reports on Form 10-QSB for the quarterly periods
ended January 31, 2005 and April 30, 2005.
BY ORDER OF THE BOARD OF DIRECTORS
Alan Christopher Johnson
Chief Executive Officer
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EXHIBIT A
---------
INCREASE AMENDMENT
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
MOBILE REACH INTERNATIONAL, INC.
(Pursuant to section 242)
The undersigned, being the Chief Executive Officer of Mobile Reach
International, Inc., does hereby certify the following:
1. The name of the Corporation is Mobile Reach International, Inc.
2. The Certificate of Incorporation was filed with the Secretary of State of
the State of Delaware on July 23, 2003.
3. The first paragraph of Paragraph 4 of the Certificate of Incorporation is
hereby amended to read as follows:
"The total number of shares of all classes of stock which the Corporation shall
have authority to issue shall be five hundred and ten million (510,000,000)
shares, of which five hundred million (500,000,000) shares shall be common
stock, par value $0.0001 per share (the "COMMON STOCK") and ten million
(10,000,000) shares shall be preferred stock, par value $0.0001 per share (the
"PREFERRED STOCK"). All of the shares of Common Stock shall be of one class."
IN WITNESS WHEREOF, this certificate of Amendment has been signed this ____
day of ___________ 2005.
/s/ A. Christopher Johnson
-----------------------------------
Name: A. Christopher Johnson
Title: Chief Executive Officer
A-1
EXHIBIT B
---------
REVERSE SPLIT AMENDMENT
Every ______** outstanding share of Common Stock of the Corporation will be
combined into and automatically become one (1) outstanding share of Common Stock
of the Corporation and the authorized shares of the Corporation shall remain as
set forth in this Certificate of Incorporation. No fractional share shall be
issued in connection with the foregoing stock split; all shares of Common Stock
so split that are held by a stockholder will be aggregated subsequent to the
foregoing split and each fractional share resulting from such aggregation of
each series held by a stockholder shall be rounded up to the nearest whole
share.
* Prior to the effectiveness of the foregoing amendment, without further action
by the stockholders, the Board is authorized to abandon such amendment if it
determines that it is not in the best interest of the Company and its
stockholders.
** By approving this amendment, stockholders will approve the effectuation of
the reverse stock split in all possible combinations between 1:60 to 1:80. The
certificate of amendment to be filed with the Delaware Secretary of State will
include only that ratio determined by the Board to be in the best interest of
the Company and its stockholders. The Board will not implement any amendment
providing for a different split ratio.
A-2