UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
PURSUANT TO SECTION 14(C) of the SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 3, 2004
Reality Wireless Networks, Inc.
Nevada
000-26369
(Commission File Number)
88-0422026
(IRS Employer Identification No.)
7235 North Creek Loop, Gig Harbor, WA 98335
Registrant's telephone number, including area code: (253) 853-3632
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[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2)
[ ] Definitive Information Statement
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[ ] Fee computed on table below per Exchange Act Rules 14(c)-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
Preferred Series A
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2) Aggregate number of securities to which transaction applies: 504,894,921
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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 of which the filing fee is
calculated and state how it was determined): N/A
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4) Proposed maximum aggregate value of transaction: N/A
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5) Total fee paid: N/A
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number,
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4) Date
Reality Wireless Group, Inc.
7235 North Creek Loop
Gig Harbor, WA 98335
We Are Not Asking You For a Proxy and You Are Requested Not to Send Us A Proxy
To the Stockholders of Reality Wireless Group, Inc.:
This Information Statement is furnished to the stockholders of Reality
Wireless Networks, Inc., a Nevada corporation ("Reality"), in connection with
the following corporate action by resolutions of the Board of Directors and the
written consent of holders of in excess of 50% of the voting capital stock of
Reality providing for a reverse split of the common stock as follows:
o To authorize the board of directors to effect up to a one
hundred-for-one reverse stock split of the common stock.
Stockholders of record at the close of business on September __, 2004 shall be
given a copy of the Information Statement.
By Order of the Board of Directors
/s/ Steve Careaga
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Steve Careaga, President
This information statement is being furnished to all holders of the
common stock and preferred stock of Reality in connection with the Proposed
Action by Written Consent to authorize the board of directors to carry out a
reverse split of the common stock and preferred stock for one hundred-to-one
(100:1) basis.
ITEM 1.
INFORMATION STATEMENT
This information statement is being furnished to all holders of the
common stock of Reality Wireless Group, Inc., a Nevada Company ("Reality"), in
connection with resolutions of the Board of Directors and the written consent of
the holders of in excess of 50% of the voting capital stock of Reality providing
for a reverse split of the voting capital stock of Reality on a basis of up to
one hundred-for-one (100:1) shares. The reverse split will be conducted at a
time to be determined by the board of directors subject to filing of required
notices with the Nevada Secretary of State's office.
The Form 10QSB for the quarterly period ended June 30, 2004 and the
form 10KSB for the year ended September 30, 2003, filed by Reality with the
Securities and Exchange Commission may be viewed on the Securities and Exchange
Commission's web site at www.sec.gov in the Edgar Archives. Reality is presently
current in the filing of all required reports. See the caption Additional
Information, below.
GRANT AUTHORITY TO THE BOARD OF DIRECTORS TO CONDUCT UP TO A ONE HUNDRED-FOR-ONE
SHARE REVERSE STOCK SPLIT OF REALITY'S COMMON STOCK AND SERIES A PREFERRED
STOCK.
Reality's board had determined that it would be in the Company's best
interest in the near future to conduct a reverse split of its common stock on up
to a one for one hundred-for-one (100:1) basis and has received the consent of
holders of a majority of the votes available as to the voting capital to
authorize the board to conduct such a reverse split in the Board's discretion.
The board believes that a reverse split would provide for the
combination of the presently issued and outstanding shares of common stock into
a smaller number of shares of identical stock. This process that is known as a
reverse split would take up to one hundred shares of the presently issued and
outstanding voting capital stock and convert those shares into one share of the
post-reverse stock split common stock and Series A Preferred, respectively.
The board has indicated that fractional shares will not be issued.
Instead, Reality will issue one full share of the post-reverse stock split
common stock to any shareholder who entitled to receive a fractional shares as a
result of the process. Each shareholder will hold the same percentage of the
outstanding common stock immediately following the reverse stock split as that
shareholder did immediately prior to the stock split, except for minor
adjustment as a result of the additional shares that will need to be issued a
result of the treatment of fractional shares.
Reasons for the reverse stock split:
The primary purposes of the reverse stock split are to accomplish the following:
a) increase the per share price of the common stock to help maintain
the interest of the markets;
b) reduce the number of outstanding shares of common stock to a level
more consistent with other public companies with a similar anticipated market
capitalization; and
c) provide the management of the Company with additional flexibility to
issue shares to facilitate future stock acquisitions and financing for the
Company.
For the above reasons, the board believes that the reverse stock split
is in the best interest of the Company and its shareholders. There can be no
assurance, however, that the reverse stock split will have the desired benefits.
Effects of the reverse stock split:
The reverse stock split will be effected by filing an amendment to the
Company's Articles of Incorporation with the Nevada Secretary of State's office
and will become effective upon such filing and final approval of the board of
directors of the Company. The actual timing of any such filing will be made by
the board of directors based upon its evaluation as to when the filing will be
most advantageous to the Company and its shareholders.
Reality is currently authorized to issue 500,000,000 shares of its
common stock of which 499,892,880 shares are currently issued and outstanding
and 200,000,000 shares of Preferred Stock of which 5,102,041 shares of Series A
Preferred are issued and outstanding as of September 1, 2004. Currently,
shareholders of voting capital stock providing for the right to 510,204,100
voted have consented in writing to the reverse-split proposal, constituting
approval of 50.50% of the shares entitled to vote. A reverse split on a on
hundred for one (100:1) basis reduces the number of issued and outstanding
shares to approximately 5,000,000 shares of voting capital stock, but will not
reduce the number of shares of common or preferred stock which the Board of the
company is authorized to issue. The reverse split will not have any effect on
the stated par value of the common stock.
The effect of the reverse split upon existing shareholders of the
voting capital stock will be that the total number of shares of Reality's voting
capital stock held by each shareholder will automatically converted into the
number of whole shares of voting capital stock equal to the number of shares of
voting capital stock, respectively, owned immediately prior to the reverse stock
split divided by to 100, with an adjustment for any fractional shares.
(Fractional shares will be rounded up into a whole share).
If acted upon by the Company's board of directors, the consent by the
majority of the available votes, as voting capital stock provides, reported
herein would result in each shareholder's percentage ownership interest in the
company and proportional voting power to remain virtually unchanged except for
minor changes and adjustments that will result from rounding fractional s
hares into whole shares. The rights and privileges of the holders of shares of
voting capital stock will be substantially unaffected by the reverse stock
split. All issued and outstanding options, warrants, and convertible securities
would be appropriately adjusted for the reverse stock split automatically on the
effective date of the reverse stock split. All shares, options, warrants or
convertible securities that the Company has agreed to issue (or agrees to issue
prior to the effective date of the reverse stock split) also will be
appropriately adjusted for the reverse stock split.
The reverse stock split may also result in some shareholders holding
"odd lots" of less than 100 shares of common stock. Brokerage commissions and
other costs of transactions in odd lots may be higher, particularly on a
per-share basis, than the cost of transactions in even multiples of 100 shares.
If in the future the Company issues additional equity or quasi-equity securities
combined with a reverse stock split there is a significant risk of shareholder
value represented by the common stock being diluted. The proposed increase to
the number of authorized shares of common stock creates a risk that current
shareholders of the common stock will see the value of those shares diluted
through the issuance of the additional authorized shares. The current net
tangible book value per share will be diluted if additional shares are issued
without a concurrent increase in the net book value of the assets of the
Company. The current book value of shares held by existing shareholders would
not be maintained in the event additional shares are issued. If all additional
shares of authorized common stock were issued, without any increase in the net
book value of the assets of the Company, the net book value per share would
decrease by a factor of 100.
After the reverse split there is not a requirement that shareholders
obtain new or replacement share certificates. Each holders of record of shares
of the Company's common stock that is outstanding on the effective date of the
reverse stock split may contact the Company's transfer agent to exchange the
certificates for new certificates representing the number of whole shares of
post-reverse stock split into which the existing shares have been converted as a
result of the reverse stock split.
Until the shareholder forwards a completed letter of transmittal,
together with certificates representing such shareholder's shares of pre-reverse
stock split common stock to the transfer agent and receives in return a new
certificate representing shares of post-reverse stock split common stock, such
shareholder's pre-reverse stock split common stock shall be deemed equal to the
number of whole shares of post- reverse stock split common shares to which such
shareholder is entitled as a result of the reverse stock split.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes certain material federal income tax
considerations relating to the proposed reverse stock split. This discussion is
based upon the Internal Revenue Code, existing and proposed regulations
thereunder, legislative history, judicial decisions, and current administrative
rulings and practices, all as amended and in effect on the date hereof. Any of
these authorities could be repealed, overruled, or modified at any time. Any
such change could be retroactive and, accordingly, could cause the tax
consequences to vary substantially from the consequences described herein. No
ruling from the Internal Revenue Service (the "IRS") with respect to the matters
discussed herein have been requested, and there is no assurance that the IRS
would agree with the conclusions set forth in this discussion.
This discussion may not address federal income tax consequences that
may be relevant to particular shareholders in light of their personal
circumstances or to shareholders who may be subject to special treatment under
the federal income tax laws. This discussion also does not address any tax
consequences under state, local or foreign laws.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCE OF THE REVERSE STOCK SPLIT FOR THEM, INCLUDING THE APPLICABILITY OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY
PENDING OR PROPOSED LEGISLATION.
The reverse stock split is intended to be a tax-free recapitalization
to the Company and its shareholders, except for those shareholders who receive a
whole share of stock in lieu of fractional shares. Hence, shareholders will not
recognize any gain or loss for federal income tax purposes as a result of the
reverse stock split, except for those shareholders receiving a whole share of
common stock in lieu of a fractional share (as described below). The holding
period for such shares of stock after the reverse split will include the holding
period of shares of stock before the reverse stock split, provided that such
shares of stock are held as a capital asset at the effective date of the
amendment. The adjusted basis of the shares of common stock after the reverse
stock split will be the same as the adjusted basis of the shares of stock before
the reverse stock split excluding the basis of fractional shares.
A shareholder who receives a whole share of common stock in lieu of a
fractional share generally may recognize gain in an amount not to exceed the
excess of the fair market value of such whole share over the fair market value
of the fractional shares to which the shareholder was otherwise entitled.
QUESTIONS AND ANSWERS REGARDING THE PROPOSED INCREASE IN THE NUMBER OF
AUTHORIZED COMMON STOCK, INCREASE OF THE AUTHORIZATION OF A CLASS OF PREFERRED
STOCK AND AUTHORIZING BOARD TO CONDUCT A REVERSE STOCK SPLIT OF THE COMMON
STOCK.
Q. WHY IS APPROVAL SOUGHT FOR THE PROPOSED REVERSE STOCK SPLIT OF THE COMMON
STOCK ON A 100 FOR 1 BASIS?
A. The Board seeks approval of a reverse stock split of the common stock of up
to 100 for 1 shares of the currently issued voting capital stock. The Board
believes that the reverse stock split will enhance the Company's flexibility
with regard to the ability to issue capital stock for proper corporate purposes
that may be identified from time to time, such as financing, acquisitions,
compensation of employees, the establishment of strategic business relationships
with other companies or the expansion of Reality's business or product lines
through the acquisition of other businesses or products. Further, it is the
expectation of the Board that such a reverse stock split would increase the
market price of the resulting stock and thus maintain a higher level of market
interest in the shares, including shares issued pursuant to the Company's
Employee Benefit Plans, thereby providing additional flexibility to management
with regard to the issuance of shares and with regard to maintaining the proper
market capitalization of the Company.
Q. HAS THE BOARD OF DIRECTORS APPROVED THE PROPOSED REVERSE STOCK SPLIT?
A. The sole member of the Board of Directors has approved the reverse stock
split of the of issued capital stock in the best interest of Reality and the
best interest of the current shareholders of Reality.
Q. WILL I RECEIVE ANY ADDITIONAL SHARES OR A DIFFERENT CLASS OF SHARES AS A
RESULT OF THESE PROPOSALS?
A. As a current shareholder of Reality your class of stock and the number of
shares that you hold will be affected only as a result of the adoption of the
proposal to authorize a reverse stock split. For example, a current holder of
100 shares of common stock will remain a holder of 1 share of common stock in
the event that the board declares the 100 for 1 reverse stock split; none of the
other proposed changes will result in different or additional shares being sent
to existing shareholders.
Q. WILL THE CHANGES TO THE ARTICLES OF INCORPORATION RESULT IN ANY TAX LIABILITY
TO ME?
A. The proposed changes are intended to be tax free for federal income tax
purposes.
Q. WHAT VOTE OF THE SHAREHOLDERS WILL RESULT IN THE PROPOSALS BEING PASSED?
A. To approve the proposal, the affirmative vote of a majority of the votes of
eligible voting securities is required. Consents in favor of the proposal have
already been received from shareholders holding a majority of the votes of
eligible voting securities of Reality.
Q. WHO IS PAYING FOR THIS INFORMATION STATEMENT?
A. The Company will pay for the delivery of this information statement.
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND FIVE PERCENT
STOCKHOLDERS
The following table sets forth information about the beneficial
ownership of Reality's Capital Stock, as of September 1, 2004 by (i) each person
who is known by Reality to own beneficially more than five percent (5%) of the
outstanding shares of Capital Stock; (ii) each of Reality's named Executive
Officers and Directors; and (iii) all Directors and Executive Officers as a
group:
AMOUNT/NATURE/ % OWNERSHIP NAME/ADDRESS
TITLE OF CLASS OF CLASS BENEFICIAL OWNER
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52,770,000 10% HEM Mutual Assurance
(.001 par value) C/O Gottbetter & Partners
Common Stock 448 Madison Ave
New York, NY 10017
5,102,041 100% Nelana Holdings Ltd.(2)
(.01 par value) Post Office Box 257
Preferred Series A Town Centre
Town Centre Building
Providenciales
Turks and Caicos
Directors
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5,000,000 1% Steve Careaga
(.001 par value) 7235 No. Creek Loop
Common Stock Gig Harbor, WA 98335
Shareholder Executives
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(none)
(1) considered the beneficial owner of the other's shares.
(2) holder of shares of class A Preferred stock, the approval of this class of
stock is also required to approve the actions set forth herein, he has provided
his written consent to such actions.
As of September 1, 2004, Reality had 499,999,990 shares of its common voting
stock And 5,102,041 shares of Series A Preferred issued and outstanding.
ITEM 5.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
No director, executive officer, nominee for election as a director,
associate of any director, executive officer or nominee or any other person has
any substantial interest, direct or indirect, by security holdings or otherwise,
in the proposed amendment to Reality's Articles of Incorporation or in any
action covered by the related resolutions adopted by the Board of Directors,
which is not shared by all other stockholders.
ADDITIONAL INFORMATION
Additional information concerning Reality Wireless Group, Inc.
including its Form 10-KSB annual report for the year ended September 30, 2003
and quarterly reports on Form 10-QSB for the past quarters ended June 30, 2004
and March 31, 2004, which have been filed with the Securities and Exchange
Commission, may be accessed through the EDGAR archives, at www.sec.gov.
Dated: September 3, 2004
By Order of the Board of Directors
/s/ Steve Careaga
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Chief Executive Officer and Director