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
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 Sec. 240.14a-12
FIRST CAPITAL INTERNATIONAL, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 the 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 Statement No.:
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3) Filing Party:
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4) Date Filed:
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FIRST CAPITAL INTERNATIONAL, INC.
5120 WOODWAY, SUITE 9000
HOUSTON, TX 77056
(713) 629-4866
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 14, 2006
The Annual Meeting of Stockholders (the "Annual Meeting") of First Capital
International, Inc. (the "Company") will be held at the Sheraton Suites Hotel,
2400 West Loop South, Houston, Texas, on Friday, July 14, 2006 at 10:00 a.m.
(CDT) for the following purposes:
(1) To elect three (3) Directors.
(2) To ratify the selection of McConnell & Jones, LLP as the Company's
independent registered public accounting firm for the year ending December
31, 2006.
(3) To approve a three-to-one reverse split of the common stock.
(4) To approve an amendment to the Certificate of Incorporation increasing the
authorized number of shares of common stock from 100,000,000 to 200,000,000
and increasing the authorized number of shares of preferred stock from
10,000,000 to 20,000,000.
(5) To act upon such other business as may properly come before the Annual
Meeting.
Only holders of common stock of record at the close of business on June 1,
2006, will be entitled to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please sign, date and return your proxy to us
promptly. Your cooperation in signing and returning the proxy will help avoid
further solicitation expense.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ ALEX GENIN
CHAIRMAN OF THE BOARD
JUNE 26, 2006
HOUSTON, TEXAS
FIRST CAPITAL INTERNATIONAL, INC.
5120 WOODWAY, SUITE 9000
HOUSTON, TX 77056
(713) 629-4866
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 14, 2006
This proxy statement (the "Proxy Statement") is being furnished to stockholders
(the "Stockholders") in connection with the solicitation of proxies by the Board
of Directors of First Capital International, Inc., a Delaware corporation (the
"Company") for their use at the Annual Meeting (the "Annual Meeting") of
Stockholders of the Company to be held at the Sheraton Suites Hotel, 2400 West
Loop South , Houston, Texas, on July 14, 2006 at 10:00 a. m. (CDT), and at any
adjournments thereof, for the purpose of considering and voting upon the matters
set forth in the accompanying Notice of Annual Meeting of Stockholders (the
"Notice"). This Proxy Statement and the accompanying form of proxy (the
"Proxy") are first being mailed to Stockholders on or about June 26, 2006. The
cost of solicitation of proxies is being borne by the Company.
The close of business on June 1, 2006 has been fixed as the record date for the
determination of Stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment thereof. As of the record date, there were
95,608,532 shares of the Company's common stock, par value $.001 per share (the
"Common Stock") issued and outstanding and entitled to vote. As of the record,
we had 4,500,000 shares of the Company's preferred stock ("Preferred Stock")
issued and outstanding. The presence, in person or by proxy, of holders of a
majority of the outstanding shares of Common Stock on the record date is
necessary to constitute a quorum at the Annual Meeting. Each share of common
stock is entitled to one vote on all issues requiring a Stockholder vote at the
Annual Meeting.
Each nominee for Director named in Proposal Number 1 must receive a plurality of
the votes cast in person or by proxy of our Common Stock in order to be elected.
The affirmative vote of a majority of the issued and outstanding shares of
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting is required for the approval of Proposal Number 2, Proposal Number 3,
and Proposal Number 4 set forth in the accompanying Notice.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Annual Meeting in accordance
with the directions on the proxies. If no direction is indicated, the shares
will be voted (I) FOR THE ELECTION OF THE NOMINEES NAMED IN PROPOSAL NUMBER 1,
(II) FOR THE RATIFICATION OF MCCONNELL AND JONES, LLP AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
2006, (III) FOR THE APPROVAL OF A THREE-FOR-ONE REVERSE STOCK SPLIT AND (IV) FOR
THE APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF
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AUTHORIZED COMMON STOCK FROM 100,000,000 TO 200,000,000 AND TO INCREASE THE
NUMBER OF SHARES OF PREFERRED STOCK FROM 10,000,000 TO 20,000,000. The Board of
Directors is not aware of any other matters to be presented for action at the
Annual Meeting. However, if any other matter is properly presented at the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
to vote in accordance with their best judgment on such matters.
The enclosed Proxy, even though executed and returned, may be revoked at any
time prior to the voting of the Proxy (a) by execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company, or (c) by
voting in person at the Annual Meeting.
REVOCABILITY OF PROXY
Any Proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the President of our Company, at or before the taking of the vote at the
Meeting, a written notice of revocation bearing a later date than the date of
the Proxy; (ii) duly executing a subsequent Proxy relating to the same shares
and delivering it to the President of our Company before the Meeting; or (iii)
by attending the Meeting and voting in person (although attendance at the
Meeting will not in and of itself constitute a revocation of a Proxy). Any
written notice revoking a Proxy should be sent to First Capital International,
Inc., 5120 Woodway, Suite 9000, Houston, Texas 77056, Attn: Alex Genin,
President, or hand delivered to the President, at or before the taking of the
vote at the Meeting.
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(1) TO ELECT THREE (3) DIRECTORS FOR THE ENSUING YEAR
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NOMINEES FOR DIRECTORS
The persons named in the enclosed Proxy have been selected by the Board of
Directors to serve as proxies (the "Proxies") and will vote the shares
represented by valid proxies at the Annual Meeting of Stockholders and
adjournments thereof. They have indicated that, unless otherwise specified in
the Proxy, they intend to elect as Directors the nominees listed below. All the
nominees are presently members of the Board of Directors. Each duly elected
Director will hold office until his death, resignation, retirement, removal,
disqualification, or until his successor shall have been elected and qualified.
Each nominee for Director named in Proposal Number 1 must receive a plurality of
the votes cast in person or by proxy in order to be elected. Stockholders may
not cumulate their votes for the election of Directors.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed Proxy will be voted FOR the election of the nominees listed below.
Although our Board of Directors does not contemplate that any of the nominees
will be unable to serve, if such a situation arises prior to the Annual Meeting,
the persons named in the enclosed Proxy will vote for the election of such other
person(s) as may be nominated by the Board of Directors.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES LISTED BELOW.
The nominees for Director are:
Alex Genin
Merrill P. O'Neal
Andew Grebe
BIOGRAPHIES
ALEX GENIN has been our Director, Chairman, CEO and President, and our major
shareholder since August, 1998. Since 1992, Mr. Genin has been the President of
ECL Trading Company, which trades goods and commodities in Europe and countries
of the former Soviet Union. Since 1985, Mr. Genin has been the President of
Eastern Credit Ltd. Inc. which provides financial consulting services in Europe,
Asia and the United States. Mr. Genin has extensive experience in business
activities in Europe, Asia and countries of the former Soviet Union.
MERRILL P. O'NEAL has been our Director since December, 2001. In 1970's Mr.
O'Neal had a substantial part in growing a small freight forwarding company into
a major international freight forwarding company, Behring International. In the
early 1980's through early 1990's, Mr. O'Neal served as the President of the
Texas Ocean Freight Forwarders Association, and as a director of the Brookhollow
National Bank (now a part of Compass Bank) and Woodway National Bank. Since
1995, Mr. O'Neal has been a business management consultant to small businesses,
helping them to grow by providing assistance in areas of corporate direction,
strategy and management. Mr. O'Neal has a BBA Degree in International Trade from
the University of Texas.
H. ANDREW GREBE, Ph.D, has been our Director since January 2005. Mr. Grebe has
an extensive background and experience of over 20 years within industrial
companies around the world, as well as teaching experience as a Professor at the
Texas A&M University. For the last eleven years Mr. Grebe has been a manager
with Tex-Tube Company, one of the leading pipe manufacturers. His involvement
within the academic circles and the energy and petroleum industry will help to
facilitate the marketing of VIP Systems product line to industrial markets.
OUR DIRECTORS AND EXECUTIVE OFFICERS
Our Directors may be elected annually and hold office until our next annual
meeting of stockholders, or until their successors are elected and qualified.
Officers serve at the discretion of the Board of Directors. There is no family
relationship between or among any of our directors and executive officers.
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Our current Board of Directors consists of three (3) persons:
NAME AGE POSITION
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Alex Genin 54 President, Chief Executive Officer
and Chairman of the Board of Directors
Merrill P. O'Neal 77 Director
Andrew Grebe 50 Director
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS
We held two meetings of the Board of Directors during the fiscal year ended
December 31, 2005, and the Board of Directors took action at Board meetings or
by unanimous written consent 15 times during that period. Mr. Genin is our
only Director who is also an officer. Due to the size of our business, the
Board of Directors does not currently have any committees.
Although we are not required to have an Audit Committee, the Board of Directors,
consisting of Alex Genin, Merrill P. O'Neal, and Andrew Grebe, perform the
equivalent functions of the Audit Committee. In preparation for filing our
annual report on Form 10-KSB, as amended, Management:
(1) reviewed and discussed the audited financial statements with the
Board of Directors;
(2) discussed with the independent registered public accounting firm
the matters required to be discussed by SAS 61, as may be modified or
supplemented;
(3) received the written disclosures and the letter from the
independent registered public accounting firm required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard
No. 1, Independence Discussions with Audit Committees), as may be
modified or supplemented, and has discussed with the independent
registered public accounting firm the independent registered public
accounting firm's independence; and
(4) based on the review and discussions referred to in paragraphs (1)
through (3) above, Management recommended to the Board of Directors
that the audited financial statements be included in the company's
Annual Report on Form 10-KSB for the last fiscal year for filing with
the SEC.
We do not currently have a process for security holders to send communications
to the Board of Directors which we believe is appropriate based on the size of
the Company, the limited number of our shareholders and the limited number of
communications which we receive. However, we welcome comments and questions from
our shareholders. Shareholders can direct communications to our Chief Executive
Officer, Alex Genin, at our executive offices, 5120 Woodway, Suite 9000,
Houston, Texas 77056. While we appreciate all comments from shareholders, we may
not be able to individually respond to all communications. We attempt to address
shareholder questions and concerns in our press releases and documents filed
with the SEC so that all shareholders have access to information about the
Company at the same time. Mr. Genin collects and evaluates all shareholder
communications. If the communication is directed to the Board of Directors
generally or to a specific director, Mr. Genin will disseminate the
communications to the appropriate party at the next scheduled Board of Directors
meeting. If the communication requires a more urgent response, Mr. Genin will
direct that communication to the appropriate executive officer. All
communications addressed to our directors and executive officers will be
reviewed by those parties unless the communication is clearly frivolous.
COMPENSATION OF DIRECTORS
We do not currently pay any cash directors' fees.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and
Executive Officers, and persons who own beneficially more than ten percent of
our common stock, to file
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reports of their stock ownership and changes of their stock ownership with the
Securities and Exchange Commission. Based solely on the reports we have received
and on written representations from certain reporting persons, we believe that
the directors, executive officers, and our greater than ten percent beneficial
owners have complied with all applicable filing requirements for the fiscal year
ended December 31, 2005.
CODE OF ETHICS
We have adopted a code of business conduct and ethics for directors, officers
(including our Chief Executive Officer, Chief Financial Officer and Chief
Accounting Officer) and employees, known as the Code of Conduct. The copy of the
Code of Conduct was filed with our Form 10-KSB the fiscal year ending December
31, 2003.
EXECUTIVE COMPENSATION
The following sets forth all forms of compensation in excess of $100,000 per
year per person that we paid our executive officers for the years ended December
31, 2005, 2004 and 2003.
SUMMARY COMPENSATION TABLE
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Long Term Compensation
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Annual Compensation Awards Payouts
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Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principle Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------- ---- -------- ------- -------------- ----------- ------------- --------- --------------
Alex Genin 2005 $ 26,640 $ -0- $ -0- -0- 2,500,000(1) $ -0- $ -0-
Director, ---- -------- ------- -------------- ----------- ------------- --------- --------------
Chairman, 2004 $ 79,920 $ -0- $ -0- -0- 5,200,000(2) $ -0- $ -0-
CEO and ---- -------- ------- -------------- ----------- ------------- --------- --------------
President 2003 $ 76,960 $ -0- $ -0- -0- -0- $ -0- $ -0-
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(1) During 2005, we issued 2,500,000 immediately exercisable options as
compensation to Mr. Genin. This option has an exercise price of $0.03 per share
and expires on February 1, 2007.
(2) During 2004, we cancelled all 4,400,000 options granted to Mr. Genin with an
exercise price ranging from $0.05 to $0.10 per share and issued a new 5,200,000
immediately exercisable option. This option has an exercise price of $0.015 per
share and expires on December 20, 2007.
OPTION/SAR GRANTS FOR FISCAL YEAR 2005
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Individual Grants
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Number of Securities
Underlying Options/SARs % of Total Options/SARs Granted to Exercise or Base Expiration
Name Granted (#) Employees in Fiscal Year Price ($/Sh) Date
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Alex Genin 2,500,000 94% $ 0.03 2/1/2007
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AGGREGATED OPTION/SAR EXERCISES IN FISCAL
YEAR 2005 AND DECEMBER 31, 2005 OPTION/SAR VALUES
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Number of Securities Underlying Value of Unexercised In-the
Unexercised Options/SARs at FY- Money Options/SARs at FY-End
Shares End (#) ($)
Acquired on Value
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---------- ------------ ------------ -------------------------------- -----------------------------
Alex Genin -0- -0- -0-/-0- -0-/-0-
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EMPLOYMENT AGREEMENTS
We do not have an employment contract with any of our employees. We presently
intend to negotiate an employment contract with Alex Genin which would require
the Board approval; however, no terms have been discussed at this time.
DIRECTOR COMPENSATION
We do not currently pay any cash directors' fees.
EMPLOYEE STOCK OPTION PLAN
We presently do not have any employee stock option plan but we may adopt one in
the future. We believe that equity ownership is an important factor in our
ability to attract and retain skilled personnel, and our Board of Directors may
adopt an employee stock option plan in the future. The purpose of the stock
option program will be to further our interests by providing incentives in the
form of stock options to key employees and directors who contribute materially
to our success and profitability. The option grants will recognize and reward
outstanding individual performance and contributions and will give such persons
a proprietary interest in us, thus enhancing their personal interest in our
continued success and progress. This program will also assist us in attracting
and retaining key employees and directors.
REPRICING OF OPTIONS
None.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of June 1, 2006, with
respect to the beneficial ownership of shares of common stock by: (i) each
person who is known to us to beneficially own more than 5% of our outstanding
shares of common stock, (ii) each of our directors, (iii) each of our executive
officers, and (iv) all of our executive officers and directors as a group.
Unless otherwise indicated, each stockholder has sole voting and investment
power with respect to the shares shown. At June 1, 2006, we had outstanding
95,608,532 shares of common stock and 4,500,000 share of preferred stock
outstanding.
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NAME/ADDRESS NUMBER OF SHARES TITLE OF CLASS PERCENT OF CLASS(9)
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Alex Genin - Director, CEO, 65,570,000 Common stock 64.4%
Acting CFO, President (1)(2)(3)(4)
5120 Woodway, Suite 9000
Houston, Texas 77056
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Merrill P. O'Neal - Director 100,000 Common stock 0.1%
5120 Woodway, Suite 9000
Houston, Texas 77056
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H. Andrew Grebe - Director 200,000 Common stock 0.2%
5120 Woodway, Suite 9000
Houston, Texas 77056
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ALL OF OUR DIRECTORS AND 65,870,000 COMMON STOCK 64.7%
OFFICERS AS A
GROUP OF THREE (3) PERSONS
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Eurocapital Group, Ltd 28,500,000 (3) Common stock 30.6%
19 Peel Road
Douglas, Isle of Man
British Isles 1M1 4LS
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United Capital Group Limited 22,370,000 (3)(4)(5) Common stock 23.8%
50 Town Range, Suite 7B
Gibraltar
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NefteCredit Ltd. 4,640,000 Common stock 5.0%
13/F, Silver Fortune Plaza
1 Wellington Street,
Central, Hong Kong
- ---------------------------- -------------------- --------------- -------------------
- ---------------------------- -------------------- --------------- -------------------
- ---------------------------- -------------------- --------------- -------------------
Alex Genin - Director, CEO, 1,500,000 (3)(6) Preferred stock 33.3%
Acting CFO, President
5120 Woodway, Suite 9000
Houston, Texas 77056
- ---------------------------- -------------------- --------------- -------------------
Merrill P. O'Neal - Director 0 Preferred stock 0.0%
5120 Woodway, Suite 9000
Houston, Texas 77056
- ---------------------------- -------------------- --------------- -------------------
H. Andrew Grebe - Director 0 Preferred stock 0.0%
5120 Woodway, Suite 9000
Houston, Texas 77056
- ---------------------------- -------------------- --------------- -------------------
ALL OF OUR DIRECTORS AND 1,500,000 PREFERRED STOCK 33.3%
OFFICERS AS A
GROUP OF THREE (3) PERSONS
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(1) Includes options to purchase up to 5,200,000 shares of our common stock at
an exercise price of $0.015 was granted in December 2004. This option expires on
December 20, 2007.
(2) Includes an option to purchase up to 2,500,000 shares of our common stock
which is presently exercisable at an exercise price of $.03 per share. This
option expires on February 1, 2007.
(3) Alex Genin currently holds powers of attorney from Eurocapital Group, Ltd.
and United Capital Group Limited pursuant to which Mr. Genin is granted voting
and investment power with respect to our shares. Mr. Genin is deemed to be the
beneficial owner of these shares. Mr. Genin does not own any stock of
Eurocapital Group, Ltd. or United Capital Group Limited.
(4) Includes shares of common stock owned by Eurocapital Group, Ltd. and United
Capital Group Limited. Excludes 13,846,154 shares of our common stock which
would be issuable upon the conversion of shares of preferred stock held by
United Capital Group Limited but which have not been converted because there is
not currently a sufficient number of authorized shares of common stock
available.
(5) Includes an option to purchase up to 1,000,000 shares of our common stock
which is presently exercisable at an exercise price of $.04 per share. This
option expires on October 14, 2006.
(6) Shares owned by United Capital Group Limited.
RELATED TRANSACTIONS
Except as described below, none of the following persons has any direct or
indirect material interest in any transaction to which we were or are a party
during the past two years, or in any proposed transaction to which the Company
proposes to be a party:
(A) any of our directors or executive officers;
(B) any nominee for election as one of our directors;
(C) any person who is known by us to beneficially own, directly or indirectly,
shares carrying more than 5% of the voting rights attached to our common
stock; or
(D) any member of the immediate family (including spouse, parents, children,
siblings and in-laws) of any of the foregoing persons named in paragraph
(A), (B) or (C) above.
We believe that the terms and conditions of all of the following transactions
were no less favorable to us than terms attainable from unaffiliated third
parties. The terms of these transactions were determined by the parties through
arms length negotiations.
Pursuant to a letter agreement signed on February 6, 2003, during 2004 the
Company received the last installments of $163,800 from United Capital Group for
the purchase of preferred stock. United Capital Group is controlled by Alex
Genin, the Company's chief executive officer. Pursuant to the letter
agreement, United Capital Group purchased the following shares of our preferred
stock:
A. 500,000 shares of preferred stock, convertible, at the option of the
holder, into common shares of the Company prior to June 30, 2006 by
multiplying the number of shares of preferred stock being converted by the
applicable conversion rate as provided in the agreement. The conversion
rate in effect at any time is determined by dividing the initial
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stock issue price of $1.00 by the conversion price, which is 50% of the
market price of common stock on the date of conversion, not exceeding
$0.05. In addition, these stocks carry a cumulative coupon dividend of 6%
per annum. The total accumulated coupon dividend due on these shares as of
December 31, 2005, was $34.68. The conversion feature of these shares has
been extended to June 30, 2008 by agreement of the parties; and
B. 1,000,000 shares of preferred stock, convertible, at the option of the
holder, into common shares of the Company prior to May 15, 2006 by
multiplying the number of shares of preferred stock being converted by the
applicable conversion rate as provided in the agreement. The conversion
rate in effect at any time is determined by dividing the initial stock
issue price of $.25 by the conversion price, which is 50% of the market
price of common stock on the date of conversion, not exceeding $0.05. In
addition, these stocks carry a cumulative coupon dividend of 6% per annum.
The total accumulated coupon dividend due on these shares as of December
31, 2005, was $192.16. The conversion feature of these shares has been
extended to May 15, 2008 by agreement of the parties.
In January, 2004, we cancelled all options granted to Mr. Genin and in December
2004 granted a new 5,200,000 immediately exercisable option. This option has an
exercise price of $0.015 per share and expires on December 20, 2007.
In December 2005, we granted Mr. Genin an immediately exercisable option to
purchase up to 2,500,000 shares of our common stock and 300,000 shares of our
common stock to related party investors exercisable at $0.03 per share that
expire in February, 2007.
In February, 2004, we granted Mr. Dashkovsky an option to purchase 2,500,000
shares of our common stock exercisable at $0.12 per share that expires in
February, 2005. This option was not exercised and presently expired.
During 2004, the Company received approximately $305,333 of advances from Mr.
Genin, its chief executive officer and a company controlled or related to him.
During 2005, the Company received $423,295 of advances from its chief executive
officer and companies controlled or related to him. The principle due under
these advances as of December 31, 2005 was $899,640. The following is a summary
of all loan transactions with entities related to Mr. Genin:
On March 11, 2004, United Capital also made a loan to the Company under an
$80,000 promissory note bearing interest of 6%. This note was due on March 11,
2005, but has been extended until March 11, 2007. On March 25, 2005, United
Capital also made a loan to the Company under a $22,000 promissory note bearing
interest of 8% which is due March 25, 2007. During May-December 2005, United
Capital made several loans to the Company under twelve separate promissory notes
for a total principal amount of $109,000 which bear interest at the rate of 8%
and which are due between November 2006 and December 2007. None of these notes
are collateralized.
During 2004, Alex Genin, the Company's chief executive officer, made several
loans to the
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Company under six separate promissory notes for a total principal amount of
$41,700 which bear interest at the rate ranging from 6% to 7% and which are due
between November 2006 and October 2008. During 2005, Alex Genin made several
loans to the Company under 20 separate promissory notes for a total principal
amount of $93,190 which bear interest at the rate ranging from 7% to 8% and
which are due between October 2006 and April 2008. None of these notes are
collateralized.
During 2004, Eastern Credit Limited, Inc., a company controlled by Alex Genin,
the Company's chief executive officer, made several loans to the Company under
13 separate promissory notes for a total principal amount of $145,700 which bear
interest at the rate ranging from 6% to 7% and which are due between October
2006 and October 2008. During 2005, Eastern Credit Limited, Inc. made several
loans to the Company under 18 separate promissory notes for a total principal
amount of $141,250 which bear interest at the rate ranging from 6% to 8% and
which are due between May 2007 and March 2008. None of these notes are
collateralized.
During 2004, Stromberg Development, Inc., a company owned by the spouse of Alex
Genin, the Company's chief executive officer, made several loans to the Company
under two separate promissory notes for a total principal amount of $3,433 which
bear interest at the rate of 8% and which are due between November 2006 and
October 2007. These notes were paid off in 2005. During 2005, Stromberg
Development, Inc. made several loans to the Company under four separate
promissory notes for a total principal amount of $28,000 which bear interest at
the rate of 8% and which are due between February 2007 and February 2008. Three
of these notes were paid off in 2005, the remaining principle balance on the
last note as of December 31, 2005 was $8,248. None of these notes are
collateralized.
During 2005, ECL Trading, Inc., a company controlled by Alex Genin, the
Company's chief executive officer, made several loans to the Company under two
separate promissory notes for a total principal amount of $20,000 which bear
interest at the rate of 6% and which are due in February 2008. One of these
notes was partially paid off in 2005, the remaining principle balance on these
notes as of December 31, 2005 was $14,448. None of these notes are
collateralized.
During 2005, First National Petroleum, Inc., a company controlled by Alex Genin,
the Company's chief executive officer, made several loans to the Company under
two separate promissory notes for a total principal amount of $14,500 which bear
interest at the rate of 8% and which are due between April 2007 and June 2007.
None of these notes are collateralized.
During 2005, Pacific Commercial Credit, Inc., a company controlled by Alex
Genin, the Company's chief executive officer, made several loans to the Company
under ten separate promissory notes for a total principal amount of $29,855
which bear interest at the rate of 8% and which are due between November 2006
and December 2007. None of these notes are collateralized.
CHANGES IN CONTROL
We know of no circumstances that could result in a change of control of the
Company.
10
________________________________________________________________________________
(2) TO RATIFY THE SELECTION OF MCCONNELL & JONES, LLP
AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
ENDING DECEMBER 31, 2006
________________________________________________________________________________
The Board of Directors has selected McConnell & Jones, LLP as the Company's
independent registered public accounting firm for the year ending December 31,
2006.
Although not required by law or otherwise, the selection is being submitted to
the Stockholders of the Company as a matter of corporate policy for their
approval. The Board of Directors wishes to obtain from the Stockholders a
ratification of their action in appointing their existing independent registered
public accounting firm, McConnell & Jones, LLP as independent registered public
accounting firm of the Company for the year ending December 31, 2006. The
affirmative vote of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting is required for
the approval of Proposal 2.
In the event the appointment of McConnell & Jones, LLP as independent registered
public accounting firm is not ratified by the Stockholders, the adverse vote
will be considered as a direction to the Company's Board of Directors to select
other independent registered public accounting firm for the year ending December
31, 2006. A representative of McConnell & Jones, LLP is expected to be present
at the Annual Meeting. The Board of Directors unanimously recommends a vote FOR
the ratification of McConnell & Jones, LLP as independent registered public
accounting firm for year ending December 31, 2006.
Previous Independent Registered Public Accounting Firm
- ------------------------------------------------------
On October 5, 2005, our Chief Executive Officer received formal notice that our
independent registered public accounting firm, Ham, Langston & Brezina, L.L.P.,
had made the decision to resign as our independent registered public accounting
firm effective October 3, 2005. On October 10, 2005, the Board of Directors
voted unanimously to accept the resignation.
The audit report of Ham, Langston & Brezina, L.L.P. for the past two fiscal
years contained no adverse opinion or disclaimer of opinion, or was modified as
to audit scope or accounting principles. Ham, Langston & Brezina, L.L.P. did
modify its opinion to state that substantial doubt exists concerning the
registrant's ability to continue as a going concern.
For the past two fiscal years and subsequent interim periods through the date of
resignation, there have been no disagreements with the former auditors on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Ham, Langston & Brezina, L.L.P., would have caused them to make
reference thereto in there report on the financial statements.
During the two most recent fiscal years and the interim period to the date of
their resignation, there have been no reportable events, as that term is defined
in Item 304(a)(1)(v) of Regulation S-B.
11
We have provided Ham, Langston & Brezina a copy of the disclosure made in
response to this Item 4.01 and have requested that Ham, Langston & Brezina
provide a letter addressed to the Securities & Exchange Commission confirming
their agreement with the disclosure contained herein. Pursuant to our request,
Ham, Langston & Brezina has provided the SEC with such a letter. The copy of the
letter was attached to our Form 8-K dated November 15, 2005.
New Independent Registered Public Accounting Firm
- -------------------------------------------------
On October 10, 2005, the Board of Directors unanimously voted to engage
McConnell & Jones, LLP, as our new independent registered public accounting
firm.
During the two most recent fiscal years and the interim period to October 10,
2005, the Registrant has not consulted with McConnell & Jones, LLP, regarding
either (i) the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on our financial statements, and neither a written report was provided
to us or oral advice was provided that the Registrant concluded was an important
factor considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304(a)(1)(iv) or Regulation S-B
and the related instructions to Item 304 of Regulation S-B, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation S-B.
AUDIT FEES
Our former independent registered public accounting firm Ham, Langston and
Brezina, L.L.P. billed us in the aggregate amount of $8,492 and our current
independent registered public accounting firm McConnell and Jones, L.L.P. billed
us in the aggregate amount of $15,500 for professional services rendered for
their audit of our annual financial statements and their reviews of the
financial statements included in our Form 10-KSB for the year ended December 31,
2005. Our former independent registered public accounting firm Ham, Langston and
Brezina, L.L.P. billed us in the aggregate amount of $27,000 for professional
services rendered for their audit of our annual financial statements and their
reviews of the financial statements included in our Form 10-KSB for the year
ended December 31, 2004.
AUDIT-RELATED FEES
Our independent registered public accounting firms did not bill us for, nor
perform professional services rendered for assurance and related services that
were reasonably related to the performance of audit or review of the Company's
financial statements for the fiscal years ended December 31, 2005 and December
31, 2004.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal years ended December 31, 2005 and December 31, 2004, our
independent registered public accounting firms did not bill us for, nor perform,
any financial information
12
systems design or implementation. For the fiscal years ended December 31, 2005
and December 31, 2004, we were not billed for professional services from any
other accounting firm for information systems design or implementation.
TAX FEES
Our independent registered public accounting firms did not bill us for, nor
perform professional services rendered for tax related services for the fiscal
years ended December 31, 2005 and December 31, 2004.
ALL OTHER FEES
We were not billed for any other professional services for the fiscal year ended
December 31, 2005.
INDEPENDENCE OF REGISTERED PUBLIC ACCOUNTING FIRM
Our Board of Directors considers that the work done for us in the year ended
December 31, 2005 by McConnell and Jones, L.L.P. is compatible with maintaining
McConnell and Jones, L.L.P.'s independence. Our Board of Directors considers
that the work done for us in the year ended December 31, 2005 by Ham, Langston
and Brezina, L.L.P. is compatible with maintaining Ham, Langston and Brezina,
L.L.P.'s independence.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S TIME ON TASK
All of the work expended by McConnell and Jones, L.L.P. on our December 31, 2005
audit was attributed to work performed by McConnell and Jones, L.L.P.'s
full-time, permanent employees. All of the work expended by Ham, Langston and
Brezina, L.L.P. on our December 31, 2005 audit was attributed to work performed
by Ham, Langston and Brezina, L.L.P.'s full-time, permanent employees.
___________________________________________________________________
(3) TO APPROVE A THREE-TO-ONE REVERSE SPLIT
OF THE COMMON STOCK
___________________________________________________________________
The Company's shareholders are being asked to approve a three-to-one reverse
split of the common stock (the "Reverse Split"). If the proposal is approved,
the Board of Directors will effect the reverse stock split. The Board of
Directors has adopted resolutions declaring the advisability of the reverse
stock split, subject to shareholder approval.
The affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is required for the actions described in
this Proposal Number 3.
If the proposed three-to-one reverse split of the common stock is approved, the
total number of shares of common stock outstanding, reserved for issuance and
available for issuance shares will be as follows:
- --------------------------------------------------------------------------------------------
Before three-to-one reverse After three-to-one reverse split
split (as of the record date)
- --------------------------------------------------------------------------------------------
Common shares authorized 100,000,000 33,333,333
- --------------------------------------------------------------------------------------------
Common shares outstanding 95,608,532 31,869,511
- --------------------------------------------------------------------------------------------
Common shares reserved for 4,391,468 1,463,822
issuance
- --------------------------------------------------------------------------------------------
Common shares available for 0 0
issuance
- --------------------------------------------------------------------------------------------
In the event that the Shareholders do not approve Proposal 4 of this Proxy
Statement to increase the number of shares of common stock, then we will not
have sufficient share of common stock available to issue if the holders of the
stock options and preferred stock elect to exercise their rights.
As of June 14, 2006, the market price of our common stock was $0.17 per share.
Following approval of the Reverse Split at the Annual Meeting, the Board of
Directors will have
13
the authority, without further stockholder consent, to effect the Reverse Split
approved by the stockholders at such time as the Board of Directors may
determine is in the best interest of the Company and its stockholders. In the
event the Board of Directors determines to implement a reverse stock split, the
Company will file the Reverse Split Amendment.
REVERSE SPLIT
Our Stockholders will vote to approve a proposal to reverse split the issued and
outstanding shares of common stock of the Company on the basis of 1 share for
each 3 shares held.
INTRODUCTION
The Board of Directors unanimously adopted a resolution declaring the
advisability of, and the Board submits to the shareholders for approval, a
proposal to reverse split the issued and outstanding shares of common stock of
the Company on the basis of 1 share for each 3 shares held. The Reverse Split
will result in one share of common stock being outstanding for each 3 shares
issued and outstanding immediately prior to the Reverse Split. The proposal
would reduce the number of authorized shares of the Company's Common Stock from
100,000,000 to 33,333,333. The proposal would reduce the number of outstanding
shares of the Company's Common Stock from 95,608,532 shares to approximately
31,869,511 shares. Upon the affirmative vote of shareholders to effect this
Reverse Split, the conversion of shares of the Company's common stock in
connection with the Reverse Split will occur immediately and without any action
on the part of shareholders of the Company and without regard to the date or
dates certificates representing shares of the Company's common stock are
physically surrendered for transfer or exchange ("Effective Date").
EFFECT OF REVERSE STOCK SPLIT
The effect of the proposed stock split on the holders of common stock will be as
follows:
1. Holders of record of fewer than 3 shares of common stock on the
Effective Date of the Reverse Split will receive one whole share.
2. Holders of record of 3 shares or more on the Effective Date will have
their shares automatically converted in the Reverse Split into the
number of shares equal to the number of their shares divided by 3. Any
fractional shares resulting from the Reverse Split will automatically
be rounded to the nearest whole share.
The common stock is currently registered under section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and as a result, the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The proposed stock splits will not affect the registration of the
common stock under the Exchange Act, and the Company has no present intention of
terminating the registration under the Exchange Act in order to become a
"private" company.
Because the reverse stock split will apply to all issued and outstanding shares
of Common Stock and outstanding rights to acquire Common Stock, the proposed
reverse stock split will not alter
14
the relative rights and preferences of existing stockholders. As a result, at
the Effective Time of the reverse stock split, the stated capital with respect
to the Common Stock on the Company's balance sheet will be reduced to one-third
of its present amount, and the additional paid-in capital account will be
credited with the amount by which such stated capital account is reduced. The
per share net income or loss and net book value of the Common Stock will be
increased because there will be fewer shares of the Common Stock outstanding.
If the proposed Reverse Split Amendment is approved at the Annual Meeting and
effected by the Board of Directors, some stockholders may consequently own less
than one hundred shares of Common Stock. A purchase or sale of less than one
hundred shares (an "odd lot" transaction) may result in incrementally higher
trading costs through certain brokers, particularly "full service" brokers.
Therefore, those stockholders who own less than one hundred shares following the
reverse stock split may be required to pay modestly higher transaction costs
should they then determine to sell their shares of Common Stock.
Stockholders have no dissenter's right under Delaware law or the Company's
Certificate of Incorporation, as amended, or the Company's Bylaws with respect
to the reverse stock split.
REASONS FOR THE REVERSE STOCK SPLIT
The Board believes that the Reverse Split of the issued and outstanding shares
of common stock of the Company is in the best interests of the Company and its
shareholders for several reasons. The Reverse Split should enhance the
acceptability of the common stock by the financial community and the investing
public. The reduction in the number of issued and outstanding shares of common
stock caused by the Reverse Split is expected to increase the market price per
share of the common stock. The Board also believes that the proposed Reverse
Split may result in a broader market for the common stock than that which
currently exists. Additionally, the purpose of this amendment, in conjunction
with Proposal Number 4, is to allow us a sufficient number of shares of common
stock available for future issuance related to the exercise of stock options and
the conversion of the currently outstanding preferred stock. In addition, it
will allow us to have shares of common stock authorized for future potential
capital raising, potential future acquisitions and/or transactions and
compensation plans. Although we continually evaluate and discuss potential
capital raising, potential acquisitions and/or transactions and compensation
plans, we currently have no plans, proposals or arrangements, written or
otherwise, at this time.
The Board believes that many securities brokerage houses tend to have policies
that discourage individual brokers within the firms from making transactions in
low priced stocks. Some of those policies and practices pertain to the payment
of broker's commissions and to time-consuming procedures that function to make
the handling of lower priced stocks economically unattractive to brokers. In
addition, the structure of trading commissions also tends to have an adverse
impact upon holders of lower priced stock because the brokerage commission on a
sale of lower priced stock generally represent a higher percentage of the sales
price than the commission on a relatively higher priced issue. The proposed
Reverse Split may 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 may diminish the adverse impact of trading commissions on
the market for the common stock, although there can be no assurance that such
will be the case.
There can be no assurance that any or all of these effects will occur;
including, without limitation, that the market price per share of common stock
after the Reverse Split will be greater than the market price pre-split, or that
such price will either exceed or remain in excess of the current market price.
Further, there is no assurance that the market for the common stock will be
15
improved. Stockholders should note that the Board cannot predict what effect the
reverse split will have on the market price of the Common Stock.
REDUCTION OF SHAREHOLDER BASE.
As of June 1, 2006, the Company believes that none of the record holders of
common stock owned fewer than 3 shares of common stock. Therefore, there should
be no reduction in the shareholder base.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company will send Letters
of Transmittal to all shareholders of record on the Effective Date for use in
transmitting stock certificates ("old certificates") to the Transfer Agent. Upon
proper completion and execution of the Letter of Transmittal and return thereof
to the Transfer Agent, together with old certificates, each shareholder will
receive certificates ("new certificates") representing the number of whole
shares of common stock into which their shares of common stock have been
converted as a result of the proposed stock splits. Until surrendered or
exchanged, each outstanding old certificate held by a shareholder who holds of
record 3 or more shares shall be deemed for all purposes to represent the number
of whole shares to which the holder is entitled as a result of the proposed
Reverse Split and if transferred or sold, will automatically be reissued in the
transferee's name in the new post-split number of shares. Further, any rights to
acquire the Company's common stock will be subject to automatic adjustment to
reflect the one share for 3 shares Reverse Split.
The Board of Directors reserves the right, even after stockholder approval, to
forego or postpone the filing of the Reverse Split Amendment approved by the
stockholders if it determines such is not in the best interests of the Company
and the Company's stockholders.
In this proposal, the Company's stockholders are being asked to authorize the
Board of Directors, in its discretion, to amend the Company's Certificate of
Incorporation, as amended, to effect a one-for-three reverse split of the issued
and outstanding Common Stock without further approval or authorization of the
Company's stockholders, at any time prior to the Company's next annual meeting
of stockholders.
If approved by the Company's stockholders and implemented by the Board of
Directors, the proposed one-for-three reverse stock split would become effective
by filing the Reverse Split Amendment attached hereto as Exhibit "A" with the
Delaware Secretary of State. At 5:00 p.m. eastern time on the date of filing the
Reverse Split Amendment (the "Effective Time"):
- each outstanding share of Common Stock would automatically be changed into
one-third of a share of Common Stock; and
- the number of shares of Common Stock subject to the Company's outstanding
options, and the number of shares reserved for future issuances under the
Company's stock plans will be reduced by a factor of three.
16
ANTI-TAKEOVER PROVISIONS
The increase in the number of shares of common stock authorized for issuance
could, under certain circumstances, be construed as having an anti-takeover
effect. For example, in the event a person seeks to effect a change in the
composition of our Board of Directors or contemplates a tender offer or other
transaction involving the combination of the Company with another company, it
may be possible for us to impede the attempt by issuing additional shares of
common stock, thereby diluting the voting power of the other outstanding shares
and increasing the potential cost to acquire control of the Company. By
potentially discouraging initiation of any such unsolicited takeover attempt,
our Articles of Incorporation may limit the opportunity for our stockholders to
dispose of their shares at the higher price generally available in takeover
attempts or that may be available under a merger proposal. The proposed
amendment may also have the effect of permitting our current management,
including our board of directors, to retain its position indefinitely and place
it in a better position to resist changes that stockholders may wish to make if
they are dissatisfied with the conduct of our business.
The proposed amendment also increases the number of shares of preferred stock
which could be issued by the Board in series with such rights (including voting,
dividends and conversion), preferences and designations as it deems necessary or
advisable without any action by the Company's stockholders. This is commonly
referred to as "blank check" preferred stock which is available to and utilized
by corporations to satisfy their continuing capital requirements. Having the
authority to create equity instruments with any number of provisions will
provide us with the greatest possible flexibility in financing the future
operations of the Company. For example, the availability of blank check
preferred stock will permit the Board negotiate the precise terms of an equity
investment by simply creating a new series of preferred stock without incurring
the cost and delay of obtaining stockholder approval. This flexibility will
permit us to take advantage of market conditions as they occur and put us in a
better position to effectively negotiate with and satisfy the precise financial
criteria of any investor in a timely manner.
The availability of undesignated preferred stock may have certain negative
effects on the rights of the Company's common stockholders. The proposed
amendment will permit the Board, without stockholder approval, to issue
additional shares of preferred stock with dividend, liquidation, conversion,
voting or other rights which are superior to and could adversely affect the
voting power or other rights of the holders of our common stock. Specifically,
the Company will be in a position to issue securities which would grant to the
holders thereof, preferences or priorities over the holders of common stock with
respect to, among other things, liquidation, dividends and voting. This could
result in holders of common stock receiving less in the event of a liquidation,
dissolution or other winding up of the Company, reduce the amount of funds, if
any, available for dividends on common stock, and dilute the voting power of the
holders of common stock.
In addition, the additional shares of preferred stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. For example, the Board could designate and
issue a series of preferred stock in an amount that sufficiently increases the
number of outstanding shares to overcome a vote by the holders of our common
stock or with rights and preferences that include special voting rights to veto
a change in control. The effect of such provisions could delay or frustrate a
merger, tender offer or proxy contest, the removal of incumbent directors, or
the assumption of control by stockholders, even if such proposed actions would
be beneficial to our stockholders. This could include discouraging bids for the
Company even if such bid represents a premium over the Company's then existing
trading price and thereby prevent stockholders from receiving the maximum value
for their shares.
17
FEDERAL INCOME TAX CONSEQUENCES
The following description of the material federal income tax consequences of the
reverse stock split is based on the Code, applicable Treasury Regulations
promulgated thereunder, judicial authority and current administrative rulings
and practices as in effect on the date of this Proxy Statement. Changes to the
laws could alter the tax consequences described below, possibly with retroactive
effect. The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the reverse stock split. This discussion is for general
information only and does not discuss the tax consequences which may apply to
special classes of taxpayers (e.g., non-resident aliens, broker/ dealers or
insurance companies). The state and local tax consequences of the reverse stock
split may vary significantly as to each stockholder, depending upon the
jurisdiction in which such stockholder resides. Stockholders are urged to
consult their own tax advisors to determine the particular consequences to them.
The Company believes that because the reverse stock split is not part of a plan
to increase periodically a stockholder's proportionate interest in the Company's
assets or earnings and profits, the reverse stock split will likely have the
following federal income tax effects:
A stockholder who receives solely a reduced number of shares of
Common Stock will not recognize gain or loss. In the aggregate, such a
stockholder's basis in the reduced number of shares of Common Stock
will equal the stockholder's basis in its old shares of Common Stock.
The Company will not recognize any gain or loss as a result of the reverse
stock split.
_________________________________________________________
(4) PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION INCREASING THE AUTHORIZED NUMBER
OF SHARES OF COMMON STOCK FROM 100,000,000 TO 200,000,000
AND INCREASING THE AUTHORIZED NUMBER OF SHARES
OF PREFERRED STOCK FROM 10,000,000 TO 20,000,000
_________________________________________________________
18
The board of directors unanimously recommends a vote FOR the proposal to approve
an amendment to the Certificate of Incorporation increasing the authorized
number of shares of common stock from 100,000,000 to 200,000,000 and increasing
the authorized number of shares of preferred stock from 10,000,000 to 20,000,000
after the three-to-one reverse stock split discussed in Proposal Number 3. The
affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Annual Meeting is required for the actions described in
this Proposal Number 4.
Our Certificate of Incorporation presently authorizes 100,000,000 shares of
common stock, $.001 par value. The proposed amendment to the Certificate of
Incorporation will increase the number of authorized shares of common stock from
100,000,000 to 200,000,000 with a stated par value of $.001. On June 1 2006, we
had 95,608,532 shares of common stock outstanding. On June 1, 2006, we had
9,410,000 options for common stock outstanding. If, on June 1, 2006, all
options had been exercised, then on that date we would have had an obligation to
issue an additional 9,410,000 shares of common stock which would have increased
our outstanding shares of common stock to a total of 105,238,532 shares of
common stock.
Our Certificate of Incorporation presently authorizes 10,000,000 shares of
preferred stock, $.001 par value. The proposed amendment to the Certificate of
Incorporation will increase the number of shares of preferred stock from
10,000,000 to 20,000,000 with a stated par value of $.001. On June 1, 2006, we
had 4,500,000 shares of preferred stock outstanding which are convertible into
20,046,154 shares of common stock. If, on June 1, 2006, all preferred shares
had been converted into common stock, then on that date we would have had an
obligation to issue an additional 20,046,154 shares of common stock which would
have increased our outstanding shares of common stock to a total of 115,654,686
shares of common stock.
If, on June 1, 2006, all preferred shares had been converted into common stock
and all options had been exercised, then on that date we would have had an
obligation to issue an additional 29,456,154 shares of common stock which would
have increased our outstanding shares of common stock to a total of 125,064,686
shares of common stock.
If both Proposal 3 and Proposal 4 are approved by the Shareholders, our
authorized common stock would increase from 33,333,333 to 200,000,000. The
purpose of this amendment is to allow us to reserve a sufficient number of
shares of common stock available for future issuance related to the exercise of
stock options and the conversion of the currently outstanding preferred stock.
In addition, it will allow us to have shares of common stock authorized for
future potential capital raising, potential future acquisitions and/or
transactions and compensation plans. Although we continually evaluate and
discuss potential capital raising, potential acquisitions and/or transactions
and compensation plans, we currently have no plans, proposals or arrangements,
written or otherwise, at this time. In the event the Shareholders do not approve
this Proposal 4 to increase the number of authorized shares of common stock and
preferred stock, it would reduce or eliminate our ability to raise additional
capital through the issuance of common stock or to issue any convertible debt as
we will not have sufficient shares of common stock available for conversion.
The amendment will amend ARTICLE IV to read as follows:
"ARTICLE IV
The aggregate number of shares of common stock which the corporation shall
have authority to issue is 200,000,000 shares of common stock, par value
$.001 per share. No share of common stock shall be issued until it has been
paid for and it shall thereafter be non-assessable.
The amount of the total authorized preferred stock of this corporation is
divided into 20,000,000 shares of preferred stock at $.001 par value.
The Board of Directors is authorized to: (i) designate the voting power,
preferences, relative participating, optional or other special rights, and
qualifications, limitations or restrictions of capital stock and preferred
stock, and, (ii) create one or more classes of capital stock and preferred
stock and one or more series of capital stock and preferred stock."
19
In compliance with Item 13(a), we hereby incorporate by reference all relevant
information contained in our Form 10-KSB for the fiscal year ended December 31,
2005, which is delivered herewith.
The impact of the proposed increased in our authorized capital on the number of
shares of preferred and common stock currently outstanding, reserved for
issuance and available for issuance will be as follows:
- -----------------------------------------------------------------------------------------------
Before the increase After the increase After the increase
in authorized capital in authorized in authorized
(as of the record capital upon capital upon
date) disapproval of approval of reverse
reverse split split proposal
proposal
- -----------------------------------------------------------------------------------------------
Preferred shares outstanding 4,500,000 4,500,000 4,500,000
- -----------------------------------------------------------------------------------------------
Preferred shares available for 5,500,000 15,500,000 15,500,000
issuance
- -----------------------------------------------------------------------------------------------
Common shares authorized 100,000,000 200,000,000 200,000,000
- -----------------------------------------------------------------------------------------------
Common shares outstanding 95,608,532 95,608,532 31,869,511
- -----------------------------------------------------------------------------------------------
Common shares reserved for 4,391,468 29,456,154 9,818,718
issuance
- -----------------------------------------------------------------------------------------------
Common shares available for 0 74,935,314 158,311,771
issuance
- -----------------------------------------------------------------------------------------------
___________________________________________________________________
(5) OTHER MATTERS
___________________________________________________________________
The Board of Directors is not aware of any other matters to be presented for
action at the Annual Meeting. However, if any other matter is properly
presented at the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment on such matters.
FUTURE PROPOSALS OF STOCKHOLDERS
The deadline for stockholders to submit proposals to be considered for inclusion
in the Proxy Statement for the 2006 Annual Meeting of Stockholders is January
15, 2007.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ ALEX GENIN
CHAIRMAN OF THE BOARD
JUNE 26, 2006
HOUSTON, TEXAS
20
Exhibit "A"
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
FIRST CAPITAL INTERNATIONAL, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: At a meeting of the Board of Directors of FIRST CAPITAL
INTERNATIONAL, INC., resolutions were duly adopted setting forth one proposed
amendment of the Certificate of Incorporation of said corporation, declaring
said amendments to be advisable and calling a meeting of the stockholders of
said corporation for consideration thereof. The resolution setting forth the
proposed amendments is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "Article IV" so that, as
amended, said Article shall be and read as follows:
"The aggregate number of shares of common stock which the corporation shall
have authority to issue is 200,000,000 shares of common stock, par value
$.001 per share. No share of common stock shall be issued until it has been
paid for and it shall thereafter be non-assessable.
The amount of the total authorized preferred stock of this corporation is
divided into 20,000,000 shares of preferred stock at $.001 par value.
The Board of Directors is authorized to: (i) designate the voting power,
preferences, relative participating, optional or other special rights, and
qualifications, limitations or restrictions of capital stock and preferred
stock, and, (ii) create one or more classes of capital stock and preferred
stock and one or more series of capital stock and preferred stock."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a meeting of the stockholders of said corporation was duly called and held upon
notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
21
IN WITNESS WHEREOF, said FIRST CAPITAL INTERNATIONAL, INC. has caused this
certificate to be signed by Alex Genin, its President and attested by
, its , this day of 2006.
- ---------- ---------------- ----- --------------------
First Capital International, Inc.
By:
------------------------------------------
Alex Genin, President
ATTEST:
By:
-----------------------------
,
------------------- -------------------
THE STATE OF TEXAS Sec.
COUNTY OF HARRIS Sec.
BEFORE ME, the undersigned authority, on this day personally appeared Alex
Genin, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he executed the same for the purposes and
consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of this office the day of June 2006.
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/seal/
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NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
THE STATE OF TEXAS Sec.
COUNTY OF HARRIS Sec.
BEFORE ME, the undersigned authority, on this day personally appeared
, known to me to be the person whose name is subscribed to the
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foregoing instrument and acknowledged to me that he executed the same for the
purposes and consideration therein expressed.
GIVEN UNDER MY HAND AND SEAL of this office the day of June 2006.
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/seal/
-----------------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
22
FIRST CAPITAL INTERNATIONAL, INC.
5120 Woodway, Suite 9000
Houston, Texas 77056
(713) 629-4866
Dear Shareholders,
First Capital International, Inc., made solid progress on our strategic plan of
becoming a premiere technology company for industrial and commercial security
applications.
In the past we focused on the Home Automation market segment and we have made
significant developments in this area including a Patent (US # 6,628,510) that
we received on September 30, 2003. Our efforts in the Home Automation segment
lead us to developing a turn-key solution for high-rises, mid-rises and
multifamily developments in the U.S.A. We have obtained our first contract for
mid-rise condominium development with the Dinerstein Companies in Ft.
Lauderdale, FL. We believe this project will demonstrate the strengths of our
system and pave the way to the utilization of our system as a standard feature
in new residential developments.
Our next series of projects will be with the Sunhill Group that has high-rise
condominium projects in the Galveston, Texas area. In the future, we will start
marketing our full system as a "standard feature" in residential projects to a
number of developers nationwide.
Additionally, we have set goals for our Industrial Security Division and are
moving rapidly in this direction. As a result of our research and development
efforts, we have designed a new Marine Anti-terrorist System that includes a
state of the art video, and a communication and biometric technology solution
(U.S. Patent Pending). This system was first demonstrated at the Port of Houston
in 2004 with a second, full demonstration held in May of 2006. Further, we have
expanded our marketing efforts in order to be able to place this system on large
marine vessels transporting hazardous materials.
Currently we are in the process of expanding our efforts to bring additional
financial capabilities from outside sources in order to maintain our goals and
bring our state of the art technology to the global marketplace.
Our vision of business is providing outstanding technology capabilities through
integrity and teamwork, leading to new success stories and providing great
benefits to our shareholders.
Thank you for the opportunity to serve you as the President and CEO of our fast
growing Company.
Sincerely,
/s/ Alex Genin
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Alex Genin
President and CEO
PROXY
FIRST CAPITAL INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, JULY 14, 2006
The undersigned hereby appoints Alex Genin as the true and lawful attorney,
agent and proxy of the undersigned, with full power of substitution, to
represent and to vote all shares of Common Stock of First Capital International,
Inc. held of record by the undersigned on June 1, 2006, at the Annual Meeting of
Stockholders to be held at the Sheraton Suites Hotel, 2400 West Loop South,
Houston, Texas, on Friday, July 14, 2006 at 10:00 a.m. (CST), and at any
adjournments thereof. Any and all proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED (I) FOR THE
ELECTION OF THE NOMINEES NAMED IN PROPOSAL NUMBER 1, (II) FOR THE RATIFICATION
OF MCCONNELL AND JONES, LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2006, (III) FOR THE APPROVAL OF
A THREE-FOR-ONE REVERSE STOCK SPLIT AND (IV) FOR THE APPROVAL OF AN AMENDMENT TO
THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED
COMMON STOCK FROM 100,000,000 TO 200,000,000 AND TO INCREASE THE NUMBER OF
SHARES OF PREFERRED STOCK FROM 10,000,000 TO 20,000,000.
1. ELECTION OF DIRECTORS OF THE COMPANY. (INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR OTHERWISE
STRIKE, THAT NOMINEE'S NAME IN THE LIST BELOW.)
[_] FOR all nominees listed [_] WITHHOLD authority to
below except as marked vote for all nominees
to the contrary. Below.
Alex Genin Merrrill P. O'Neal Andrew Grebe
2. PROPOSAL TO RATIFY THE SELECTION OF MCCONNELL & JONES, LLP AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006.
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO AUTHORIZE A THREE-TO-ONE REVERSE STOCK SPLIT.
[_] FOR [_] AGAINST [_] ABSTAIN
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
INCREASING THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 100,000,000
TO 200,000,000 AND INCREASING THE AUTHORIZED NUMBER OF SHARES OF PREFERRED
STOCK FROM 10,000,000 TO 20,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
[_] FOR [_] AGAINST [_] ABSTAIN
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. 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.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE MEETING. PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
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Signature
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(Typed or Printed Name)
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Signature if held jointly
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(Typed or Printed Name)
DATED:
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