SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[x] Preliminary Information Statement
[ ] Definitive Information Statement
[ ] Confidential, for use of the Commission only
CARBONICS CAPITAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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is calculated and state how it was determined.)
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[ ] Fee paid previously with preliminary materials.
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CARBONICS CAPITAL CORPORATION
One Penn Plaza, Suite 1612
New York, New York 10119
INFORMATION STATEMENT
To the Holders of Our Voting Stock:
The purpose of this Information Statement is to notify you that the holder
of shares representing a majority of the voting power of Carbonics Capital
Corporation has given its written consent to a resolution adopted by the Board
of Directors of Carbonics to amend the certificate of incorporation of Carbonics
so as to increase the number of shares of authorized common stock from
500,000,000 shares, $.001 par value, to 10,000,000,000 shares, $.0001 par value.
We anticipate that this Information Statement will be mailed on ____________,
2009 to shareholders of record. On or after _____________, 2009, the amendment
to the Certificate of Incorporation will be filed with the Delaware Secretary of
State and become effective.
The Board of Directors approved the amendment in order to comply with
Carbonics' agreements with its senior creditor, YA Global Investments, L.P. ("YA
Global"). The convertible debt instruments held by YA Global require that
Carbonics maintain a sufficient number of shares of authorized common stock to
enable conversion of the convertible debt issued by Carbonics to YA Global. At
the present time, Carbonics has no shares available for issuance upon conversion
and is therefore in default of those debt instruments. Although Carbonics'
ambition is to satisfy its debt to YA Global in cash deriving from one or more
potential future financing transactions, it is necessary that this default be
cured in the meantime.
Delaware corporation law permits holders of a majority of the voting power
to take shareholder action by written consent. Accordingly, Carbonics will not
hold a meeting of its shareholders to consider or vote upon the proposed
amendment to Carbonics' certificate of incorporation.
WE ARE NOT ASKING YOU FOR A PROXY.
YOU ARE REQUESTED NOT TO SEND US A PROXY.
November 3, 2009 KEVIN KREISLER, Chairman
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
We determined the shareholders of record for purposes of this shareholder
action at the close of business on October 30, 2009 (the "Record Date"). The
table below lists the authorized voting stock as of the Record Date, the number
of shares of each class that were outstanding on the Record Date, and the voting
power of each class. Each share of common stock is entitled to one vote. The
holder of the Series C shares are entitled to a portion of the aggregate voting
power equal to 80% multiplied by a fraction, the numerator of which is the
number of outstanding Series C shares and the denominator of which is 1,000,000.
Security Authorized Outstanding Voting Power
- -------- ---------- ----------- ------------
Common Stock 500,000,000 500,000,000 500,000,000
Series C Preferred Stock 1,000,000 973,054 1,756,758,635
-----------------
2,256,757,635
The following table sets forth information regarding the voting stock
beneficially owned by any person who, to our knowledge, owned beneficially more
than 5% of any class of voting stock as of October 30, 2009, as well as by the
member of our Board of Directors and by all officers and directors as a group.
Amount and Nature of Beneficial Ownership
Name and Address(1) Series C Percentage of
Of Beneficial Owner Common % of Class Preferred % of Class Voting Power
--------- ------------ ----------- ------------ --------------
Kevin Kreisler(2) -- -- 791,459 100% 77.84%
--------- ------------ ------------ ----------- -------------
Officers and Directors -- -- 791,459 100% 77.84%
<FN>
(1) The address of Mr. Kreisler is c/o Carbonics Capital Corporation, One Penn
Plaza, Suite 1612, New York, NY 10119.
(2) All shares listed for Mr. Kreisler are owned of record by Viridis Capital,
LLC, of which Mr. Kreisler is the sole member.
</FN>
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
On October 30, 2009, Carbonics' Board of Directors approved an amendment to
Carbonics' Certificate of Incorporation to increase the authorized common stock
from 500 million shares, $.001 par value, to 10 billion shares, $.0001 par
value. The Board approved the amendment in order to comply with Carbonics'
agreements with its senior creditor, YA Global Investments, L.P. ("YA Global").
The convertible debt instruments held by YA Global require that Carbonics
maintain a sufficient number of shares of authorized common stock to enable
conversion of the convertible debt issued by Carbonics to YA Global.
On October 30, 2009, the holder of a majority of the voting power of the
outstanding voting stock gave its written consent to the amendment. The
amendment will be filed and become effective approximately twenty days after
this Information Statement is mailed to the shareholders.
At the October 30, 2009 Record Date, 500,000,000 of the currently
authorized 500,000,000 common shares were issued and outstanding, leaving none
available for issuance. The effect of the amendment will be to increase the
number of authorized shares of common stock from 500,000,000, $.001 par value,
to 10,000,000,000, $.0001 par value.
The primary reason why the Board of Directors and the majority shareholder
have approved the increase in authorized common stock is the requirement
contained in Carbonics' agreements with YA Global to maintain a sufficient
number of shares of authorized common stock to enable conversion of debt issued
by Carbonics to YA Global. In addition, Carbonics needs to have shares available
in the event that other outstanding convertible debentures are converted.
The following table shows the derivative securities currently outstanding
that may result in the issuance of more than 1,000,000 common shares. The column
headed "Shares Issuable" indicates the number of common shares into which the
security is convertible based on the closing price of $.0014 on October 30,
2009. In each case the creditor has the right to convert the principal amount of
the debt into Carbonics common stock. In no case does Carbonics have a
contractual or other right to redeem the debt with stock or to force the
creditor to convert the debt into stock.
Issue Original Principal Shares
Derivative Security Creditor Date Principal Amount Issuable
- ------------------- ------------------------ ------------- -------------- ------------ ---------------
Secured Convertible Debenture YA Global Investments, L.P. October 2005 $ 602,907 $ 655,650 468,321,429(1)
Secured Convertible Debenture YA Global Investments, L.P. February 2006 $ 1,150,369 $ 1,158,417 827,440,714(1)
Secured Convertible Debenture YA Global Investments, L.P. June 2007 $ 570,000 $ 689,559 492,542,143(1)
Secured Convertible Debenture YA Global Investments, L.P. June 2009 $ 4,000,000 $ 4,120,986 2,943,561,429(1)
Unsecured Convertible Debt Sustainable Creditors June 2009 $ 3,000,000 $ 3,390,892 2,422,065,014(2)
Unsecured Convertible Debt RAKJ Holdings, Inc. January 2009 $ 60,000 $ 46,109 65,870,000(3)
Unsecured Convertible Debt Minority Interest Fund (II), LLC January 2009 $ 223,185 $ 282,748 201,962,857(4)
Unsecured Convertible Debt Minority Interest Fund (II), LLC April 2009 $ 1,000,000 $ 1,100,274 785,910,000(4)
-------------
8,207,673,586
- ------------------------
<FN>
(1) The principal amount and accrued interest on the Secured Convertible
Debentures issued to YA Global Investments, L.P. ("YA Global"), are
convertible by the holder into common stock at a conversion rate equal
to 90% of the average closing market price of the Company's common
stock for the 20 days prior to conversion. The Secured Convertible
Debentures accrue interest at 10% per annum and are due December 31,
2011. At a conversion rate of $0.0014, the Convertible Secured Notes
could be converted into 4,731,865,714 common shares.
(2) The amount shown for Sustainable Creditors relates to the Company's
assumption of the convertible debt ostensibly due to the former
shareholders of the Company's recently acquired Sustainable Systems,
Inc. subsidiary. The terms of the relevant acquisition agreements with
the prior owners are in default and are currently the subject of a
litigation against the prior owners. While this litigation is
currently ongoing and the Company is unable to predict the outcome at
this time, the Company has booked the amounts that would have been due
to the prior owners as if they had not breached the relevant
acquisition agreements. Thus, the principal amount and accrued
interest on the Unsecured Debentures that may be due to the former
shareholders of Sustainable are treated as if it were convertible into
common stock at a conversion rate equal to 90% of the average closing
market price of the Company's common stock for the 20 days prior to
conversion. The Unsecured Debenture accrues interest at 5% per annum.
At a conversion rate of $0.0014, these debentures could be converted
into 2,422,065,714 common shares.
(3) The principal amount and accrued interest on the unsecured debenture
issued to RAKJ Holdings, Inc. ("RAKJ"), are convertible by the holder
into common stock at a conversion rate equal to 50% of the average
closing market price of the Company's common stock for the 5 days
prior to conversion. The Related Party Debenture accrues interest at
20% per annum and is due December 31, 2010. At a conversion rate of
$0.0014, the Unsecured Convertible Debenture could be converted into
65,870,000 common shares.
(4) The principal amount and accrued interest on the Unsecured Convertible
Debenture issued to Minority Interest Fund (II), LLC ("MIF"), are
convertible by the holder into common stock at a conversion rate equal
to 90% of the average closing market price of the Company's common
stock for the 20 days prior to conversion. The Unsecured Convertible
Debenture accrues interest at 20% per annum and is due December 31,
2010. At a conversion rate of $0.0014, the Unsecured Convertible
Debenture could be converted into 987,872,857 common shares. The owner
of Minority Interest Fund (II), LLC is a relative of Kevin Kreisler,
the sole member of Carbonics' Board of Directors.
</FN>
All of the foregoing derivative securities are currently exercisable and
will remain exercisable until satisfied. In the event that any of the foregoing
derivative securities were converted or exercised, Carbonics would not be able
to issue the requisite common stock, and would be in default, unless the number
of authorized common shares is increased. Conversion of those debentures would
improve Carbonics' balance sheet by reducing its debt to equity ratio, and
increase its ability to obtain future financing. However, conversion would also
dilute the interest of current shareholders in the equity in Carbonics. The
additional authorized common stock is necessary to accommodate those
conversions, should they occur.
All of the outstanding convertible debentures are convertible into common
stock based on the market price of the common stock at the time of conversion.
The table above assumes a conversion rate of $0.0014. In order to be prepared
for the possibility of lower conversion rates, the Board of Directors and
majority shareholder have agreed to increase the authorized common stock to 10
billion shares and have authorized a reduction in the par value of the common
stock.
The secondary reason why the Board of Directors and the majority
shareholder have approved the increase in authorized common stock is to provide
Carbonics with flexibility in pursuing its long-term business objectives.
Additional reasons for the increase include:
>> Management plans in the future to pursue opportunities to obtain the
capital in order to fully implement Carbonics' business plan. A
reserve of common shares available for issuance from time-to-time will
enable Carbonics to entertain a broad variety of financing proposals.
>> Management may utilize the additional shares in connection with
corporate acquisitions, joint venture arrangements, or for other
corporate purposes, including the solicitation and compensation of key
personnel.
Management has not entered into any commitment to issue any shares except
upon conversion of the outstanding debentures. Moreover, Management has no plans
at this time that will involve the issuance of additional shares, other than a
general plan to pursue additional financing. Management has not, however,
discussed the terms of any specific financing with any potential investor.
The amendment of the Certificate of Incorporation will increase the number
of common shares available for issuance by the Board of Directors from 0 to
9,500,000,000. The Board of Directors will be authorized to issue the additional
common shares without having to obtain the approval of Carbonics' shareholders.
Delaware law requires that the Board use its reasonable business judgment to
assure that Carbonics obtains "fair value" when it issues shares. Nevertheless,
the issuance of the additional shares could have the following adverse effects
on Carbonics' shareholders:
>> The issuance of the additional shares would dilute the proportionate
interest of current shareholders in the equity and voting power in
Carbonics.
>> The issuance of the additional shares could also result in the dilution
of the value of shares now outstanding, if the terms on which the
shares were issued were less favorable than the current market value of
Carbonics common stock.
>> The shares that are issued upon conversion of debentures are usually
promptly sold into the market. These sales are likely to have a
negative effect on the market price of Carbonics' common stock.
>> The reduction in the par value of the common stock means that the
Board will be authorized to issue common stock for as little as $.0001
per share, and that possibility may have a negative effect on the
market price for the common stock.
The amendment of the Certificate of Incorporation is not being done for the
purpose of impeding any takeover attempt, and Management is not aware of any
person who is acquiring or plans to acquire control of Carbonics. Nevertheless,
the power of the Board of Directors to provide for the issuance of shares of
common stock without shareholder approval has potential utility as a device to
discourage or impede a takeover of Carbonics. In the event that a non-negotiated
takeover were attempted, the private placement of stock into "friendly" hands,
for example, could make Carbonics unattractive to the party seeking control of
Carbonics. This would have a detrimental effect on the interests of any
stockholder who wanted to tender his or her shares to the party seeking control
or who would favor a change in control.
No Dissenters Rights
Under Delaware law, shareholders are not entitled to dissenters' rights
with respect to the amendment of the Certificate of Incorporation to increase
the authorized capital stock.
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