SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section
14(c) of the Securities Exchange Act of 1934
Check the appropriate box:
|X| Preliminary Information Statement.
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2).
|_| Definitive Information Statement
Commission File No. 000-30294
DIALOG GROUP, INC.
----------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11. (1)
Title of each class of securities to which the transaction applies: (2)
Aggregate number of securities to which transaction applies: (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): (4) Proposed maximum
aggregate value of the transaction: Total proposed maximum aggregate value
of the transaction: (5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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Dialog Group, Inc
----------------------
Notice of Special Meeting
2:00 O'clock PM, Thursday September 28, 2006
------------------------------------
Please take notice that a Special Meeting of the holders of the Common
Stock and the Class B and B-1, and Class E Preferred Stock of Dialog Group, Inc,
(the "Company") shall be held at the Offices of the Company 257 Park Avenue
South, 12th Floor New York, New York 10010 at two o'clock, PM on the 28th day of
September 2006 to consider all of the following:
1. Authorize the sale of most of the Company's Assets
2. Any other business as may properly come before the meeting.
No proxies will be solicited by the Company's management in connection
with this meeting.
Respectfully submitted,
Mark Alan Siegel
Secretary of the Company
Dialog Group, Inc.
----------------------
INFORMATION STATEMENT
Special Meeting of Stockholders
to be held September 28th, 2006
----------------------
This Information Statement is furnished by Dialog Group, Inc. (the "Company") in
connection with the Company's Special Meeting of Stockholders to be held on
September 28, 2006 at 2:00 P.M. at the Company's offices, 257 Park Avenue South
(Twelfth Floor Conference Room), New York, New York. This Information Statement
was first mailed to holders of Class B and B-1, and Class E Preferred and Common
Stock on or about September 14, 2006. The mailing address of the Company's
executive office is 257 Park Avenue South, New York, NY 10010. The telephone
number is 212.254.1917.
Outstanding Voting Securities and Voting Rights
The Board of Directors fixed the close of business on September 11th, 2006 as
the record date for determining the stockholders eligible to vote at the
meeting. As of the record date, the Company had outstanding 49,332 and 256,526
shares, respectively of its B and B-1 Preferred Stock, 99.5 shares of its Class
E Preferred Stock, and 1,984,828* shares of its Common Stock. The holder of each
share of the Class B and B-1 Preferred Stock is entitled to one vote per share.
The holder of each share of Class E Preferred Stock is entitled to 10,000 votes.
The holder of each share of Common Stock is entitled to one vote per share.
You may vote your shares either by attending the meeting or submitting a written
consent in lieu of a meeting indicating how you cast your vote on any question
scheduled to come before the Annual Meeting. The Company will not provide any
consent form to you. Any written consent you may submit is solely for your
convenience and does not appoint or authorize anyone to vote on your behalf.
This is not a solicitation to send a proxy appointing anyone to vote on your
behalf, which will not be accepted if submitted.
The number of shares held by investors who are present or who have submitted a
written consent will determine the presence of a quorum.
We Are Not Asking You for a Proxy and
You are Requested Not To Send Us a Proxy
- ----------
* Does not include approximately 1,214 shares to which creditors are entitled
under the Plan of Reorganization which have
not been claimed.
Introduction and Summary
The purpose of this Special Meeting is to approve the sale of all of the
Company's working assets to an unrelated company for One Million Nine Hundred
Thousand Dollars. The Board of Directors has unanimously approved this sale.
o The Purchase Price is $1,900,000.
o All of the Company's working assets, including its equipment,
intangibles, work in progress, telephone numbers and web addresses,
intellectual property and trade names.
o The Company will be relieved of its lease obligations.
o The Company will retain its accounts receivable.
o The Company will be barred for three years from employing any of its
current employees or contractors used in the current business.
o The company will use the proceeds of the sale for the following
purposes:
o $200,000 to pay off the bridge loan.
o $551,000 to pay an existing secured creditor.
o $186,000 to settle bank overdrafts
o $553,000 to settle past due salary, payroll taxes, and
retirement contributions.
o $73,000 to pay a deposit from another purchaser.
o $172,000 to pay past due rent and credit cards
o The balance of the funds will be used for general corporate overhead
while the Company seeks new acquisitions.
General
Dialog Group, Inc. (DGI) is a publicly traded corporation (OTCBB:DLGO),
headquartered at 257 Park Avenue South, Suite 1201, New York, New York 10010,
with an office in Sunrise, Florida. DGI provides a suite of technology and
database solutions and services that enable marketers to advertise, generate
leads, and manage customers. DGI is an original compiler and distributor of
proprietary and licensed data products and online and off-line marketing
services as well as a creative services support.
DGI has two operating segments, Data Services, including Online Services
and Communications Services. Data Services (New York and Sunrise) offers its
customers Data, Data Compiling, Appending and Verification, List Management,
Broker and Direct Client services. Communications Services (New York) offers its
clients Creative, Strategy, Customer Relationship Management, Website
Development, and Account Services.
Agenda Item 1 Approval of Sale to Redi-Mail
On August 31, 2006, Dialog Group, Inc (the "DGI") entered into an
agreement with Dialog Marketing Services, Inc. a subsidiary of Redi-Direct
Marketing, Inc. a privately held information services company. The agreement
provides for the sale of substantially all of DGI's operating assets for a cash
purchase price of $1,900,000. DGI would retain its financial assets, including
its receivables, and would be relieved of the liability for its office and
equipment leases. The agreement provides a breakup fee of $150,000 to be paid by
the DGI if the sale is not consummated for any reason. Prior to the execution of
the agreement, there was no material relationship between either party and the
other or the other's affiliates.
Dialog Group, Inc. (DGI) is a publicly traded corporation (OTCBB:DLGG),
headquartered at 257 Park Avenue South, Suite 1201, New York, New York 10010,
with an office in Sunrise, Florida. DGI provides a suite of technology and
database solutions and services that enable marketers to advertise, generate
leads, and manage customers. DGI is an original compiler and distributor of
proprietary and licensed data products and online and off-line marketing
services. The following unaudited pro forma condensed consolidated financial
statements have been prepared to give effect to the completed sale of assets.
Also, on August 31, 2006, Dialog Marketing Services lent DGI $200,000. The
note bears interest at the annual rate of eight percent and, after December 1,
2006, is payable on demand. The debt is secured by the pledge of the Company's
assets, including its databases.
The affirmative vote or consent of the holders of more than half of the
votes cast by all outstanding shares of stock is necessary for the approval of
this amendment. As there are a total of about 3, 103,000 potential votes, about
1,552,000 will be needed to approve the proposed sale. The directors, who own,
directly or indirectly, shares casting approximately 1,120,000 votes, and Cindy
Lanzendoen, and Mark Alan Siegel, who collectively control, directly or
indirectly, almost 375,000 votes have informed the Company that they intend to
vote in the affirmative.
The board of directors has reviewed this proposed sale, and all the
directors recommend it to the shareholders as in the best interests of the
Company.
No Dissenter's Rights
Under the Delaware General Corporation Law, stockholders are not entitled
to dissenter's rights with respect to the sale of the assets, and Dialog Group's
documents do not independently provide stockholders with any such right.
Interest of Related Parties in this Transaction
As a condition of closing, the Purchaser has required that two officers
and directors, Peter V. DeCrescenzo and Vincent DeCrescenzo, Sr., the Chief
Executive Officer and the Chief Financial Officer respectively, sign employment.
agreements with the Purchaser. The levels of compensation provided in the
agreements is less than the amounts provided in their present employment
agreements.
Peter DeCrescenzo's contract extends through March, 2009 and provides for
a base compensation of $150,000 per year with increases eventually reaching
$250,000 if the executive performs successfully for the Purchaser. The agreement
also provides for bounces of up to $75,000 for successful performance as defined
in the agreement. In addition, if certain sales and results targets are met, Mr.
DeCrescenzo could receive an equity interest of up to 10% of the purchaser.
Vincent DeCrescenzo Sr.'s agreement is identical except that the salary
commences at $95,000 and does not provide for increase or bonuses. In addition,
the maximum amount that he may receive in Purchaser equity is two and one-half
percent.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF
DIALOG GROUP, INC.
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 2006 and the unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 2005 and the six months ended June
30, 2006 are derived from the historical financial statements of the DGI as of
and for the six months ended June 30, 2006 and for the year ended December 31,
2005. The assumptions, estimates and adjustments herein have been made solely
for purposes of developing these pro forma financial statements.
The unaudited pro forma condensed consolidated balance sheet gives effect
to the sale of assets as if it had occurred on June 30, 2006. The unaudited pro
forma condensed consolidated statement of operations for the six months ended
June 30, 2006 gives effect to the sale of assets as if it had occurred on
January 1, 2006. The unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 2005 gives effect to the sale of
assets as if it had occurred on January 1, 2005.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical audited financial statements and
related notes of the DGI and its "Plan of Operation" contained in the DGI's Form
10-KSB/A filed on July 28, 2006. The unaudited pro forma condensed consolidated
financial statements are not intended to represent or be indicative of the
results of operations or financial condition of the DGI that would have been
reported had the asset sale been completed as of the dates presented, and should
not be construed as representative of the future results of operations or
financial condition after the asset sale.
Dialog Group, Inc.
Proforma Condensed Consolidated Balance Sheet
Unaudited
Pro Forma
June 30, Pro Forma June 30,
2006 Adjustments 2006
------------- -----------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - a 200,000 $ 366,040
d 1,900,000
e (1,733,960)
Accounts receivable (net) 357,226 357,226
Notes receivable, current portion 43,703 43,703
Prepaid expenses and other current assets 68,205 f (68,205) -
------------- ---------------
Total current assets 469,134 766,969
------------- ---------------
PROPERTY AND EQUIPMENT, NET 22,086 d (22,086) -
------------- ---------------
OTHER ASSETS:
Data assets (net) 226,062 d (226,062) -
Website (net) 39,917 d (39,917) -
Security deposits 55,080 d (55,080) -
Notes receivable (net) 111,297 111,297
------------- ---------------
Total other assets 432,356 111,297
------------- ---------------
TOTAL ASSETS $ 923,576 $ 878,266
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft $ 186,311 e (186,311) $ -
Accounts payable 1,357,493 e (171,858) 1,185,635
Accrued expenses 1,139,173 e (552,689) 586,484
Deferred revenue 243,827 243,827
Due to officer 73,102 e (73,102) -
Pearl Street Holdings convertible note - related party 1,105,000 1,105,000
Current notes and loans payable 265,688 a 200,000 46,219
e (219,469)
e (200,000)
Convertible notes - related parties 244,045 244,045
Other current liabilities 47,300 47,300
------------- ---------------
Total current liabilities 4,661,939 3,458,510
------------- ---------------
LONG TERM DEBT
Convertible debentures 479,778 479,778
Loan payable - Commadore 330,531 e (330,531) -
------------- ---------------
Total long term debt 810,309 479,778
------------- ---------------
STOCKHOLDERS' DEFICIENCY:
Preferred stock, $.001 par value; 1,500,000 authorized 306 306
Class B, 305,858 shares issued and outstanding
Class E, 200 shares authorized,
99.5 shares issued and outstanding
Common stock, $.001 par value, 200,000,000 shares authorized; 198,483 198,483
198,482,755 shares issued and outstanding
Additional paid-in-capital 8,022,757 8,022,757
Accumulated deficit (12,770,218) d 1,556,855 (11,281,568)
f (68,205)
------------- ---------------
Total stockholders' deficiency (4,548,672) (3,060,022)
------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 923,576 $ 878,266
============= ===============
Dialog Group, Inc.
Proforma Condensed Consolidated Statement of Operations
(Unaudited)
Pro Forma
Year ended Year ended
December 31, Pro Forma December 31,
2005 Adjustments 2005
---------------- -------------------------------------
REVENUES $ 6,722,703 h (6,722,703) $ -
COST OF REVENUES 3,150,128 h (3,150,128) -
---------------- ----------------
GROSS PROFIT 3,572,575 -
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,169,803 h (2,167,508) 3,002,295
---------------- ----------------
LOSS FROM OPERATIONS (1,597,228) (3,002,295)
---------------- ----------------
OTHER INCOME (EXPENSES):
Interest expense (274,634) c (8,000) (222,634)
h 60,000
Other expense (8,816) (8,816)
Gain on sale of assets - d 1,077,876 1,077,876
---------------- ----------------
Total Other Income (Expenses) (283,450) 846,426
---------------- ----------------
LOSS FROM CONTINUING OPERATIONS (1,880,678) (2,155,869)
---------------- ----------------
INACTIVE AND DISCONTINUED OPERATIONS
Income (Loss) from inactive operations (290) (290)
Income (loss) from operations of discontinued operations (637,804) (637,804)
Gain on disposal of discontinued operations 736,815 736,815
---------------- ----------------
Total Gain from discontinued operations 98,721 98,721
---------------- ----------------
NET LOSS $ (1,781,957) $ (2,057,148)
================ ================
LOSS PER SHARE, BASIC AND DILUTED ON NET LOSS
FROM CONTINUING OPERATIONS $ (0.013) $ (0.014)
================ ================
LOSS PER SHARE ON DISCONTINUED OPERATIONS, BASIC AND DILUTED $ 0.001 $ 0.001
======== =======
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.012) $ (0.013)
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
BASIC AND DILUTED 149,782,653 149,782,653
================ ================
Dialog Group, Inc.
Proforma Condensed Consolidated Statement of Operations
(Unaudited)
Pro Forma
Six Months Six Months
Ended June 30, Pro Forma Ended June 30,
2006 Adjustments 2006
------------------- ---------------- ----------------
REVENUES $1,902,353 g (1,902,353) -
COST OF REVENUES 641,987 g (641,987) -
------------------- ----------------
GROSS PROFIT 1,260,366 -
OPERATING EXPENSES
Selling, general and administrative expenses 1,827,859 g (791,570) 1,036,289
------------------- ----------------
LOSS FROM OPERATIONS (567,493) (1,036,289)
OTHER INCOME (EXPENSES)
Interest income 9,938 9,938
Interest expense (157,606) b (4,000) (131,606)
g 30,000
Gain on sale of assets - d 1,320,841 1,320,841
------------------- ----------------
Net Other Income (Expenses) (147,668) 1,199,173
------------------- ----------------
(LOSS) INCOME FROM CONTINUING OPERATIONS (715,161) 162,884
INACTIVE & DISCONTINUED OPERATIONS
Income from discontinued operations 210,894 210,894
------------------- ----------------
NET (LOSS) INCOME $ (504,267) $ 373,778
=================== ================
(LOSS)/EARNINGS/ PER SHARE, BASIC AND DILUTED ON NET (LOSS)/INCOME
FROM CONTINUING OPERATIONS ($0.002) $0.002
EARNINGS PER SHARE ON DISCONTINUED OPERATIONS, BASIC AND DILUTED $0.001 $0.001
------------------- ----------------
NET (LOSS)/EARNINGS PER SHARE, BASIC AND DILUTED ($0.001) $0.003
=================== ================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
BASIC AND DILUTED 198,482,755 198,482,755
=================== ================
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA OF DIALOG
GROUP, INC.
Note 1. Basis of presentation
On August 31, 2006, Dialog Group, Inc (the "DGI") entered into an
agreement with Dialog Marketing Services, Inc. a subsidiary of Redi-Direct
Marketing, Inc. a privately held information services company. The agreement
provides for the sale of substantially all of DGI's operating assets for a cash
purchase price of $1,900,000. DGI would retain its financial assets, including
its receivables, and would be relieved of the liability for its office and
equipment leases. The agreement provides a breakup fee of $150,000 to be paid by
the DGI if the sale is not consummated for any reason. Prior to the execution of
the agreement, there was no material relationship between either party and the
other or the other's affiliates. Dialog Group, Inc. (DGI) is a publicly traded
corporation (OTCBB:DLGG), headquartered at 257 Park Avenue South, Suite 1201,
New York, New York 10010, with an office in Sunrise, Florida. DGI provides a
suite of technology and database solutions and services that enable marketers to
advertise, generate leads, and manage customers. DGI is an original compiler and
distributor of proprietary and licensed data products and online and off-line
marketing services. The following unaudited pro forma condensed consolidated
financial statements have been prepared to give effect to the completed sale of
assets.
Also, on August 31, 2006, Dialog Marketing Services has lent the DGI
$200,000. The note bears interest at the annual rate of eight percent and, after
December 1, 2006, is payable on demand. The debt is secured by the pledge of the
Company's assets, including its databases.
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 2006 and the unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 2005 and the six months ended June
30, 2006 are derived from the historical financial statements of the DGI as of
and for the six months ended June 30, 2006 and for the year ended December 31,
2005. The assumptions, estimates and adjustments herein have been made solely
for purposes of developing these pro forma financial statements.
The unaudited pro forma condensed consolidated balance sheet gives effect
to the sale of assets as if it had occurred on June 30, 2006. The unaudited pro
forma condensed consolidated statement of operations for the six months ended
June 30, 2006 gives effect to the sale of assets as if it had occurred on
January 1, 2006. The unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 2005 gives effect to the sale of
assets as if it had occurred on January 1, 2005.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical audited financial statements and
related notes of the DGI and its "Plan of Operation" contained in the DGI's Form
10-KSB/A filed on July 28, 2006. The unaudited pro forma condensed consolidated
financial statements are not intended to represent or be indicative of the
results of operations or financial condition of the DGI that would have been
reported had the asset sale been completed as of the dates presented, and should
not be construed as representative of the future results of operations or
financial condition after the asset sale.
Note 2. Pro forma adjustments
Pro forma adjustments are necessary to adjust amounts to reflect the sale of
assets and the resultant use of proceeds.
The pro forma adjustments included in the unaudited pro forma condensed combined
financial statements are as follows:
A - to reflect loan of $200,000 from Dialog Marketing Services
B - to reflect interest at 8% on the loan (six months)
C - to reflect interest at 8% on the loan (annual)
D - to reflect the sale of certain assets to Dialog Marketing Services for
$1,900,000 in cash
E - to reflect the use of proceeds to pay-off certain obligations identified by
management to be paid off with the proceeds
F - to reflect the immediate recognition of prepaid expenses upon the sale of
the operating assets and related discontinuance of operations
G - to reflect the removal of all operations related to the sale of the assets
(six months)
H - to reflect the removal of all operations related to the sale of the assets
(annual)
Control Persons and their Holdings
On the record date, Peter V. DeCrescenzo, President, Chief Executive
Officer, and a Director of the Company, controlled, directly or indirectly,
103,795 shares Class B-1 Preferred Stock, constituting about 40% of the
outstanding Class B-1 Preferred Shares (about 34% of all Class B preferred
shares as a group), 24 shares of the outstanding Class E Preferred Stock,
constituting about 24 % of the outstanding Class E Shares, and 608,184 shares of
Common Stock, constituting about 31 % of the outstanding Common Shares. In the
aggregate, Mr. DeCrescenzo holds about 29.8% of the total voting shares. Mr.
DeCrescenzo has informed the Company that he intends to vote his shares for the
election of the entire slate of directors and in favor of all the other agenda
items.
In April 2005, Pearl Street Holdings plc, an English company controlled by
Stephen Dean and Vince Nicholls lent Dialog Group $550,000 and purchased
$555,000 of the Company's Convertible Notes from the Griffin Crossover Fund,
LLC. These shares are convertible into 1,105,000 shares of common stock. Pearl
could own, after conversion of all its notes, almost 35.8% of the Dialog Group
common stock, representing about 33.0% of the total voting shares. At that time,
Pearl, and its directors and officers, Stephen Dean and Vince Nichols, would be
included in the control group of Dialog Group. Pearl has the right to elect a
Pearl designee so long as Pearl Street Holdings owns or can obtain on exercise
of instruments already owned at least twenty-five percent of the fully diluted
common stock of Dialog Group. Pearl declined to designate a successor to John
Hand, its original designee, for election at this meeting. Mr. Hand had served
as a director from August 11, 2005 to February 9, 2006.
On March 22, a group of five investors associated with Midtown Partners &
Co. LLC purchased convertible debentures with an aggregate initial principal of
$278,778. The debentures mature in 2008 and bear interest at the rate of 12% per
annum; it is payable monthly in cash. The principal and any unpaid interest is
convertible, at the holders election, into common stock at the rate of one share
of common stock for each $1.00 or principal or interest converted.
In addition, the investors received warrants to purchase a total of 83,933
for $1.00 per share. The warrants are exercisable immediately and expire on the
tenth anniversary of their issue. In addition, they provide for cashless
exercise.
In connection with this transaction, the investment banking firm of
Midtown Partners & Co. LLC received an investment banking fee of $ 27,778 plus a
$2,000 non-accountable expense allowance. In addition, as additional
compensation, the Company issued identical ten-year warrants to purchase 50,090
shares of common stock for $1.00 per share.
If all the debentures and warrants were converted or exercised, the
Midtown group would own a total of up to about 400,000 shares, about 29% of the
then outstanding common shares and about 15% of all the voting shares. If all
the convertible securities now outstanding were to be converted, the Midtown
group would own about 9 percent of the equity securities. Thus, depending on the
circumstances under which the debentures are converted and the warrants
exercised, the Midtown group might join the present control group.
On March 24, 2006 Peter DeCrescenzo, the company's president agreed that
he would convert $100,000 of and past due 2005 and 2006 accrued salary and
unpaid vacation pay and part of the Company's debt to him into convertible
debentures on the same terms as the Midtown Partners investors. In addition, on
the same day, Vincent DeCrescenzo, Sr. the company's executive vice president
agreed that he would convert $100,000 of past due 2005 and 2006 accrued salary
and unpaid vacation pay into convertible debentures on the same terms as the
Midtown Partners investors. However, no compensation was paid with respect to
these transactions. This transaction was consummated on May 1, 2006
Common Stock Ownership by Directors and Executive Officers
The following table sets forth information, as of September 11, 2006, with
respect to the beneficial ownership of the Company's Common Stock by (a) the
present executive officers and directors and nominees for Director of the
Company and (b) the present directors and officers of the Company as a group.
Peter DeCrescenzo and Vincent DeCrescenzo, Sr. are the Company's only executive
officers. Unless otherwise noted, the shares are owned directly or indirectly
with sole voting and investment power. All numbers reflect the 100 into one
consolidation of the Company's common stock effective September 18, 2006
------------------------------------------------------ ----------------------------- -------------------
Name and Address of Beneficial Owner Amount and Nature of Percent of Class
Beneficial Ownership (1) (1)
------------------------------------------------------ ----------------------------- -------------------
Peter V. DeCrescenzo,
President and a Director 1,219,702 (2) 23.1%
257 Park Avenue South
New York, NY 10010
------------------------------------------------------ ----------------------------- -------------------
Vincent DeCrescenzo,
Executive Vice-President and a Director 375,335 (3) 7.1%
257 Park Avenue South
New York, NY 10010
------------------------------------------------------ ----------------------------- -------------------
Adrian Stecyk, a Director
17 State Street 31,890 (4) * %
New York, New York 10021
------------------------------------------------------ ----------------------------- -------------------
Richard P. Kundrat, a Director
39 Flaming Arrow Road 25,118 (5) * %
Mahwah, New Jersey 07430
------------------------------------------------------ ----------------------------- -------------------
All present officers and directors 2,335,664 (6) 44.2 %
as a group (8 persons)
------------------------------------------------------ ----------------------------- -------------------
* Less than one percent
(1) All numbers include, as of the record date, 122,343 shares issuable upon
conversion of the Class B and B-1 Preferred Stock, 995,000 shares issuable
upon conversion of the Class E Preferred Stock, 1,828,823 shares issuable
upon conversion of convertible notes, and 353,215 shares issuable upon
exercise of warrants or options but do not reflect approximately 1,214
shares to which creditors are entitled under the Plan of Reorganization
which have not been claimed. They are based upon information furnished to
the Company by the security holders or obtained from the stock transfer
books of the Company. Other than indicated in the notes, the Company has
been informed that these persons have sole voting and investment power
with respect to their shares. Certain options disclosed hereunder may not
have been fully vested as of the date of this report.
(2) This includes 608,184 shares of Common Stock now held by Mr. DeCrescenzo
personally and by retirement trusts for him and his spouse, 41,518 shares
of Commons Stock issuable upon conversion of 103,795 shares Class B-1
Preferred, 240,000 issuable upon conversion of 24 shares of the Class E
Preferred Stock, and 330,000 shares issuable upon the exercise of
convertible notes, warrants, and employee stock options.
(3) This includes 152,437 shares of Common Stock now held and 6,648 shares of
Common Stock issuable upon conversion of 16,619 shares Class B-1
Preferred, 50,000 issuable upon conversion of 5 shares of the Class E
Preferred Stock, and 166,250 shares issuable upon the exercise of
convertible notes, warrants, and employee stock options.
(4) Includes 2,390 shares of Common Stock and 29,500 shares issuable upon the
exercise of convertible notes and stock options.
(5) Includes 22,118 shares of Common Stock and 3,000 shares issuable upon the
exercise of stock options.
(6) This includes 1,018,863 shares of Common Stock now held and 59,406 shares
of Common Stock issuable upon conversion of 148,515 shares Class B-1
Preferred, 465,000 shares issuable upon conversion of 47 shares of the
Class E Preferred Stock, and 575,670 shares issuable upon the exercise of
convertible notes, warrants, and employee stock options.
Principal Holders of Common Stock.
The following table sets forth information, as of September 11, 2006, with
respect to the beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of more than five percent (5%)
of the Company's outstanding Common Stock. All numbers reflect the 100 into one
consolidation of the Company's common stock effective September 18, 2006
---------------------------------------------------- ------------------------------- -------------------
Name and Address of Beneficial Owner Amount and Nature of Percent of Class
Beneficial Ownership (1) (1)
---------------------------------------------------- ------------------------------- -------------------
Peter V. DeCrescenzo
257 Park Avenue South 1,219,702 (2) 23.1%
New York, NY 10010
---------------------------------------------------- ------------------------------- -------------------
Vincent DeCrescenzo
257 Park Avenue South 375,335 (3) 7.1%
New York, NY 10010
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Cede & Co. (4)
55 Water Street 216,614 5.0 %
New York, NY 10004
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Mercury Group plc
f/k/a Cater Barnard PLC 137,080 (5) 3.1%
6 Lloyds Avenue
London EC3N 3AX
England
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Peter Bordes
62 White Street, Suite 3E 139,194 (6) 3.2%
New York, NY 10013
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(1) All numbers include, as of the record date, 122,343 shares issuable upon
conversion of the Class B and B-1 Preferred Stock, 995,000 shares issuable
upon conversion of the Class E Preferred Stock, 1,828,823 shares issuable
upon conversion of convertible notes, and 353,215 shares issuable upon
exercise of warrants or options but do not reflect approximately 1,214
shares to which creditors are entitled under the Plan of Reorganization
which have not been claimed. They are based upon information furnished to
the Company by the security holders or obtained from the stock transfer
books of the Company. Other than indicated in the notes, the Company has
been informed that these persons have sole voting and investment power
with respect to their shares. Certain options disclosed hereunder may not
have been fully vested as of the date of this report.
(2) This includes 608,184 shares of Common Stock now held by Mr. DeCrescenzo
personally and by retirement trusts for him and his spouse, 41,518 shares
of Commons Stock issuable upon conversion of 103,795 shares Class B-1
Preferred, 240,000 issuable upon conversion of 24 shares of the Class E
Preferred Stock, and 330,000 shares issuable upon the exercise of
convertible notes, warrants, and employee stock options.
(3) This includes 152,437 shares of Common Stock now held and 6,648 shares of
Common Stock issuable upon conversion of 16,619 shares Class B-1
Preferred, 50,000 issuable upon conversion of 5 shares of the Class E
Preferred Stock, and 166,250 shares issuable upon the exercise of
convertible notes, warrants, and employee stock options.
(4) Cede & Co, as the nominee of Depository Trust Company, is the record but
not the beneficial owner of 216,614 shares of Common Stock.
(5) This includes 137,080 shares held of record, constituting 6.9% of the
outstanding Common Stock.
(6) This includes 106,756 shares of Common Stock, constituting 5.4% of the
issued and outstanding common, 349 shares of Commons Stock issuable upon
conversion of 872 shares Class B-1 Preferred, and 32,000 shares issuable
upon the exercise of warrants.
Agenda Item 2 Other Matters
Management knows of no other matters to be brought before the Annual
Meeting, but if other matters properly come before the meeting, the votes cast
as directed by the Messrs. DeCrescenzo, Ms. Lanzendoen, and Mr. Siegel. These
votes constitute more than a majority of the votes that may be cast by all class
of stock as a group.
Expenses of Meeting
The Company will bear the expenses in preparing, printing, and mailing the
Information Statement to the stockholders. No proxies will be solicited by the
Company's management in connection with this meeting. We are not asking you for
a proxy and you are requested not to send us a proxy.
By Order of the Board of Directors,
Mark Alan Siegel
Secretary of the Company
Dated: September 25, 2006