UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
Of the Securities Exchange Act of 1934
File No. 0-18299
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
NEWS COMMUNICATIONS, INC.
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(Name of Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth 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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News Communications, Inc.
2 Park Avenue, Suite 1405
New York, NY 10016
(212) 689-2500
_______, 2005
Dear Stockholder:
The purpose of this letter is to inform you, the holders of the capital
stock of News Communications, Inc., that our board of directors has approved
following corporate actions:
(1) Implementing a reverse stock split of our common stock on the basis
of one post-split share for each 100 pre-split shares. Holders of
fractional shares will be entitled to receive cash in lieu of
fractional interests in an amount equal to $1.10 per share for each
pre-split share that becomes a fractional interest as a result of
the reverse split; and
(2) Decreasing our authorized shares of common stock from 100,000,000
shares to 1,000,000 shares.
Under Nevada Law, we may effect the corporate actions described above
by resolutions adopted by the board of directors without obtaining the approval
of the stockholders. Therefore, we are not seeking stockholder approval for
these actions and no vote is sought in connection with these actions.
Often referred to as a "going private transaction," these corporate
actions will reduce the number of holders of record of our common stock to less
than 300 and enable us to elect to terminate the registration of our common
stock under Section 12(g) of the Securities Exchange Act of 1934. The
termination of our Exchange Act registration will eliminate the significant
expense required to comply with the reporting and related requirements under
these laws.
After careful consideration, the board of directors has concluded that
the costs associated with being a "public" company are not justified by the
benefits. The board has reviewed the proposed transaction and considered its
fairness to stockholders who hold fewer than 100 shares as well as those
stockholders holding 100 or more shares. After careful consideration, the board
of directors believes that the transaction is in the best interests of the
stockholders, and the per share cash amount to be paid to the stockholders in
lieu of a fractional share is fair.
The attached document contains details on the proposed transaction and
we urge you to read it very carefully.
By Order of the Board of Directors,
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[Title]
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IMPORTANT
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
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News Communications, Inc.
2 Park Avenue, Suite 1405
New York, NY 10016
(212) 689-2500
Information Statement
This Information Statement is being mailed on or about July ___, 2005
to holders of the capital stock of News Communications, Inc. This Information
Statement is being sent to you for information purposes only; no action is
requested on your part.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
This Information Statement is being furnished to you to inform you
of the adoption of resolutions by the board of directors on June 30, 2005, which
resolutions approved the following corporate actions:
(1) Implementing a reverse stock split of our common stock on the basis
of one post-split share for each 100 pre-split shares. Holders of
fractional shares will be entitled to receive cash in lieu of
fractional interests in an amount equal to $1.10 per share for each
pre-split share that becomes a fractional interest, as a result of
the reverse split; and
(2) Decreasing our authorized shares of common stock from 100,000,000
shares to 1,000,000 shares.
Under Nevada Law, we may effect the corporate actions described above
by resolutions adopted by the board without obtaining the approval of the
stockholders and the stockholders are not entitled to dissenters' rights in
connection with the proposed actions.
The resolutions adopted by the board give us the authority to file a
Certificate of Amendment to the Articles of Incorporation of News
Communications, Inc. (the "Certificate of Amendment"). The Certificate of
Amendment shall be filed in Nevada on or after the expiration of 20 calendar
days following the date this Information Statement is first mailed to our
stockholders and will become effective immediately thereafter (the "Effective
Date"). We reserve the right to abandon the transaction any time before the
filing of the Certificate of Amendment in Nevada. We also reserve the right to
abandon or delay the transaction for any reason if the board determines that
such action would be in the best interest of News Communications, Inc. and its
stockholders.
The reverse split will provide for the conversion of each 100 shares of
common stock outstanding into one share of common stock as of the Effective
Date. You will be deemed to own, on the Effective Date, one share of common
stock for each 100 shares of common stock you hold and will receive a cash
payment in lieu of any fractional shares to which you would otherwise be
entitled. The cash payment will be equal to $1.10 per pre-split share. As a
result, if you own less than 100 shares, you will no longer be a stockholder of
our company. As of June 30, 2005, we had 12,024,597 shares of common stock
outstanding and immediately following the effectiveness of the Certificate of
Amendment, we will have approximately 119,880 shares of common stock
outstanding.
Following the Effective Date, we will provide you with a Letter of
Transmittal that explains how you can surrender your share certificate(s) in
exchange for your cash payment and/or, if applicable, a new share certificate
evidencing the number of shares of common stock which you will hold after giving
effect to the reverse split. If you hold your shares in "street name" through a
bank, broker or nominee, you should contact your bank, broker or nominee
regarding the treatment of your shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE TRANSACTION; PASSED UPON THE
MERITS OR FAIRNESS OF THE TRANSACTION; OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THE DISCLOSURE IN THE DOCUMENTS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
SUMMARY...........................................................................................................1
Reverse Stock Split............................................................................................1
Fairness of the Transaction....................................................................................1
Stockholder Approval...........................................................................................1
Effects of Reverse Split.......................................................................................1
Purposes of the Transaction....................................................................................1
Potential Conflicts of Interest................................................................................1
No Dissenters' Rights..........................................................................................2
Fees and Expenses..............................................................................................2
Reservation....................................................................................................2
Method of Payment..............................................................................................2
NEWS COMMUNICATIONS, INC. AND ITS SUBSIDIARIES FINANCIAL INFORMATION..............................................3
Consolidated Balance Sheet.....................................................................................3
Consolidated Statements of Operations..........................................................................4
Consolidated Statements of Stockholders' Equity (Deficit)......................................................5
Consolidated Statements of Cash Flows..........................................................................6
Historical Market Prices.......................................................................................7
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS.........................................................8
SPECIAL FACTORS...................................................................................................9
Background.....................................................................................................9
Purposes of the Transaction....................................................................................9
Alternatives Considered.......................................................................................10
Reasons for the Structure and Timing of the Transaction.......................................................11
Going Private Transaction; Effects............................................................................11
Fairness of the Transaction...................................................................................12
Potential Conflicts of Interest...............................................................................14
Employee and Director Stock Options...........................................................................15
Warrants to Purchase Shares of Common Stock...................................................................15
Certain Impact of the Transaction.............................................................................15
Conduct of Business Following Transaction.....................................................................16
Stockholder Approval..........................................................................................16
Dissenters' Rights............................................................................................16
Exchange Of Stock Certificates................................................................................16
Federal Tax Consequences......................................................................................17
Fees and Expenses.............................................................................................18
Reservation...................................................................................................18
PAST CONTRACT, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.........................................................19
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................20
WHERE YOU CAN FIND MORE INFORMATION..............................................................................24
DOCUMENTS INCORPORATED BY REFERENCE..............................................................................24
SUMMARY
This summary highlights selected information from this Information
Statement about the proposed transaction. This summary may not contain all of
the information that is important to you. For a more complete description of the
transaction, you should carefully read this disclosure document and all of its
annexes. For your convenience, we have directed your attention to the location
in this disclosure document where you can find a more complete discussion of
each item listed below.
As used in this disclosure document, "the company," "we," "ours" and
"us" refers to News Communications, Inc. and its Subsidiaries, "the common
stock" refers to the common stock, par value $0.01 per share, of the company,
and "the transaction" refers to the reverse stock split, together with the
related cash payment to certain stockholders in lieu of fractional shares of
common stock, and the reduction of authorized shares of common stock.
Reverse Stock Split
The reverse split will provide for the conversion of each 100
outstanding shares of common stock into one share of common stock. In the
reverse stock split, the common stockholders will be deemed to own one share of
common stock for each 100 shares they hold, and they will receive cash in lieu
of any fractional shares to which they would otherwise be entitled. The cash
payment for the common stock will be equal to $1.10 per pre-split share. We will
also amend our Articles of Incorporation to reduce the authorized shares of
common stock correspondingly. Please see "SPECIAL FACTORS -- Going Private
Transaction; Effects -- The Reverse Stock Split" for a more detailed discussion.
Fairness of the Transaction
The board believes that the transaction is fair from a financial point
of view to the unaffiliated stockholders, including those stockholders being
cashed out and those who will retain an equity interest in us subsequent to the
consummation of the transaction. We did not request nor receive any report,
opinion or appraisal from an outside adviser in connection with this
transaction. See "SPECIAL FACTORS -- Fairness of the Transaction."
Stockholder Approval
We are not asking the stockholders to vote on the transaction. Under
Nevada law, the board may implement the reverse stock split and the
corresponding reduction of authorized shares of common stock without the
approval of the stockholders. See "SPECIAL FACTORS -- Stockholder Approval."
Effects of Reverse Split
The reverse split would reduce the number of record holders of the
common stock to less than 300 and enable us to elect to terminate the
registration of our common stock under Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Terminating our registration will
significantly change our public disclosures. After the transaction, we
anticipate the common stock will continue to trade on the pink sheets. However,
we do not plan on regularly publishing business or financial information, if at
all. See "SPECIAL FACTORS -- Going Private Transaction; Effects" and "SPECIAL
FACTORS -- Certain Effects of the Transaction."
Purposes of the Transaction
The principal purpose of effecting the reverse stock split is to
terminate our registration and periodical reporting obligations under federal
securities laws and relieve us of the costs, administrative burdens and
competitive disadvantage associated with operating a public company. See
"SPECIAL FACTORS -- Purposes of the Transaction."
Potential Conflicts of Interest
Our executive officers and directors as well as certain other persons
may have interests in the transaction that are different from your interests as
a stockholder, or relationships that may present conflicts of interest, relating
to their ownership of the common stock and options or warrants to purchase the
common stock before and after the
-1-
consummation of the transaction. See "SPECIAL FACTORS -- Potential Conflicts of
Interest," "SPECIAL FACTORS -- Employee and Director Stock Options," "SPECIAL
FACTORS -- Warrants to Purchase Shares of Common Stock" and "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
No Dissenters' Rights
Under Nevada law, stockholders are not entitled to dissenters' rights
in connection with the transaction. See "SPECIAL FACTORS --Dissenters' Rights."
Fees and Expenses
Approximately $155,000 is necessary to pay for all of the fractional
shares of common stock exchanged for cash in the transaction and the expenses
relating to the transaction and such funds will come from cash from operations.
We do not have any other plans for financing the transaction. See "SPECIAL
FACTORS -- Fees and Expenses."
Reservation
We reserve the right to abandon the transaction any time before the
filing of the necessary amendments to the Articles of Incorporation with the
Secretary of State of the State of Nevada, if the board determines that such
action would be in our best interest. See "SPECIAL FACTORS -- Reservation."
Method of Payment
Following the Effective Date, we will provide you with a Letter of
Transmittal that explains how you can surrender your share certificate(s) in
exchange for your cash payment and/or, if applicable, a new share certificate
evidencing the number of shares of common stock which you will hold after giving
effect to the reverse split. We will not pay interest on cash sums due to any
stockholder in connection with the transaction.
If your shares are held in a stock brokerage account or by a bank or
other nominee, you are considered the beneficial owner of shares held in "street
name" with respect to those shares, and the Information Statement is being
forwarded to you by your broker or other nominee. Your broker or other nominee
is considered, with respect to those shares, the stockholder of record. Although
the transaction is designed to reduce the number of stockholders of record, we
will treat stockholders holding common stock in street name in substantially the
same manner as stockholders whose shares are registered in their names for
purposes of the transaction. However, banks, brokers or other nominees may have
different procedures, and stockholders holding common stock in street name
should contact their bank, broker or nominee regarding the treatment of their
shares. See "SPECIAL FACTORS -- Exchange of Stock Certificates."
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NEWS COMMUNICATIONS, INC. AND ITS SUBSIDIARIES
FINANCIAL INFORMATION
Consolidated Balance Sheet
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As of As of
March 31, 2005 December 31, 2004
Assets
Current:
Cash and cash equivalents $ 74,206 $ 421,255
Accounts receivable - net of allowance for doubtful
accounts of $182,397 and $229,022, respectively 973,559 1,015,297
Notes receivable 10,000 10,000
Other 151,936 218,231
------------ ------------
Total current assets 1,209,701 1,664,783
Restricted cash 34,102 34,102
Notes receivable, net of current portion 80,000 80,000
Property and equipment at cost - net 226,290 243,904
Goodwill 314,809 314,809
Trade names, net 456,096 462,612
Other - net 39,779 23,526
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Total assets $ 2,360,777 $ 2,823,736
============ ============
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 749,942 $ 787,994
Accrued expenses 1,143,667 1,167,003
Income taxes payable 16,077 10,077
Notes payable and capital leases, current portion 17,411 18,752
Unearned revenue 776,358 528,900
Due to related parties 304,274 631,418
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Total current liabilities 3,007,729 3,144,144
Due to related parties 355,143 261,150
Notes payable and capital leases, net of current portion 34,415 39,394
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Total liabilities 3,397,287 3,444,688
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Commitments
Stockholders' deficit:
Preferred stock, $1.00 par value; 500,000 shares
authorized: 177,529 shares issued and outstanding:
$1,864,000 aggregate liquidation value 177,529 177,529
Common stock, $.01 par value; authorized 100,000,000
shares; 12,682,931 and 12,307,792 shares issued and
12,024,597 and 11,649,458 outstanding 126,829 123,078
Paid-in-capital preferred stock 1,568,320 1,568,320
Paid-in-capital common stock 27,429,323 27,086,071
Deficit (29,436,782) (28,674,221)
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(134,781) 280,777
Less: Treasury stock, (658,334 common shares) - at cost (901,729) (901,729)
------------ ------------
Total stockholders' deficit (1,036,510) (620,952)
============ ============
Total liabilities and deficit $ 2,360,777 $ 2,823,736
============ ============
-3-
Consolidated Statements of Operations
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Three Months Ended Years ended
March 31, December 31,
2005 2004 2004 2003
---- ---- ---- ----
Net revenues $2,058,264 $1,883,410 $12,168,133 $10,230,081
Expenses:
Editorial 449,144 475,627 2,055,657 1,915,575
Production and distribution 564,568 548,600 3,634,043 2,976,681
Selling 676,560 589,034 3,477,260 2,804,661
General and administrative 1,074,189 912,384 3,772,449 3,680,151
Depreciation and amortization 34,464 46,441 189,280 191,671
---------- ----------- ----------- -----------
Total expenses 2,798,925 2,572,086 13,128,689 11,568,739
Loss from operations, before gain on sale of
publication (740,661) (688,676) (960,556) (1,338,658)
Gain on sale of publication - - - 67,575
---------- ----------- ----------- -----------
Loss from operations (740,661) (688,676) (960,556) (1,271,083)
Interest expense, net (15,618) (15,992) (56,746) (38,657)
---------- ----------- ----------- -----------
Loss before provision for income taxes (756,279) (704,668) (1,017,302) (1,309,740)
Provision for income taxes 6,000 - 44,506 23,176
---------- ----------- ----------- -----------
Net loss $(762,279) $ (704,668) $(1,061,808) $(1,332,916)
========== =========== ============ ============
Less: preferred dividends 282 282 39,438 1,128
---------- ----------- ------------ ------------
Net loss available for common stockholders $ (762,561) $ (704,950) $ (1,101,246) $ (1,334,044)
Loss per common share:
Basic and diluted $(0.06) $(0.06) $(0.09) $(0.13)
---------- ------------ ------------ ------------
Weighted-average number of common shares
outstanding:
Basic and diluted 11,736,990 11,628,691 11,643,103 10,479,689
---------- ----------- ------------ ------------
Deficiency of earnings to fixed charges $ (740,661) $ (688,676) $ (960,556) $ (1,271,083)
Book value per share $(0.10) $(0.04) $0.07 $0.03
-4-
Consolidated Statements of Stockholders' Equity (Deficit)
Years ended December 31, 2004 and 2003
Preferred stock Common stock
------------------------------------------------ --------------------------------------------
Shares Amount Paid-in capital Shares Amount Paid-in capital
------------------------------------------------ --------------------------------------------
Balance,
December 31, 2002 192,534 $192,534 $1,703,345 10,844,744 $108,447 $25,550,672
Conversion of 10,005
shares of preferred
stock into 3,000 shares
of common stock (10,005) (10,005) (90,025) 42,281 423 99,607
Issuance of
1,400,000 shares
of common stock 1,400,000 14,000 1,386,000
Dividends on
preferred stock - - - - - -
Net loss - - - - - -
------- -------- ---------- ---------- -------- -----------
Balance,
December 31, 2003 182,529 $182,529 $1,613,320 12,287,025 $122,870 $27,036,279
------- -------- ---------- ---------- -------- -----------
Conversion of 5,000
shares of $10 preferred
stock into 20,767 shares
of common stock (5,000) (5,000) (45,000) 20,767 208 49,792
Dividends on
preferred stock - - - - - -
Net loss - - - - - -
Balance,
December 31, 2004 177,529 $177,529 $1,568,320 12,307,792 $123,078 $27,086,071
======= ======== ========== ========== ======== ===========
Total
Treasury stockholders'
Deficit Stock equity (deficit)
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Balance,
December 31, 2002 $(26,238,931) $(901,729) $414,338
Conversion of 10,005
shares of preferred stock
into 3,000 shares of
common stock - - -
Issuance of
1,400,000 shares
of common stock - - 1,400,000
Dividends on
preferred stock (1,128) (1,128)
Net loss (1,332,916) (1,332,916)
------------ --------- ----------
Balance,
December 31, 2003 $(27,572,975) $(901,729) $480,294
------------ --------- ----------
Conversion of 5,000
shares of $10 preferred
stock into 20,767 shares
of common stock - - -
Dividends on
preferred stock (39,438) (39,438)
Net loss (1,061,808) (1,061,808)
Balance,
December 31, 2004 $(28,674,221) $(901,729) $(620,952)
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-5-
Consolidated Statements of Cash Flows
Three Months Ended Years Ended
March 31, December 31,
2005 2004 2004 2003
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Cash flows from operating activities:
Net loss ................................................... $ (762,279) $ (704,668) $(1,061,808) $(1,332,916)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ......................... 34,464 46,441 189,280 191,671
Provision for doubtful accounts ....................... 8,200 16,000 39,100 103,800
Debt conversion expense related party debt ............ 84,406 -- -- --
Gain on sale of publication ........................... -- -- -- (67,575)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable ................................ 33,538 179,166 (101,236) (585,225)
Other current assets ............................... 66,295 (34,059) (17,556) (1,368)
Other assets ....................................... (16,253) (9,696) (7,380) 6,201
Increase (decrease) in:
Accounts payable and accrued expenses .............. (61,388) (283,745) (144,165) 716,323
Income taxes payable ............................... 6,000 -- 10,077 (17,235)
Other liabilities .................................. 247,458 (18,750) 366,853 83,198
Related party payable .............................. 10,864 (654,938) 47,396 83,867
----------- ----------- ----------- -----------
Net cash used in operating activities ...................... $ (348,695) $(1,464,249) $ (679,439) $ (819,259)
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Cash flows from investing activities:
Capital expenditures .................................. (10,334) (21,313) (53,508) (53,108)
Proceeds from sale of publication ..................... -- -- -- 25,000
Collection of notes receivable ........................ -- 661,000 846,000 205,200
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Net cash provided by (used in) investing activities ........ $ (10,334) $ 639,687 $ 792,492 $ 177,092
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock ................ -- -- -- 1,400,000
Proceeds from related party notes payable ............. 350,000 -- -- --
Payment of related party notes payable ................ (331,418) -- (786,370) (112,461)
Dividends on preferred stock .......................... (282) (282) (39,438) (1,128)
Payments of notes payable and capital lease obligations (6,320) (9,720) (32,885) (29,825)
----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities ........ $ 11,980 $ (10,002) $ (858,693) $ 1,256,586
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Net increase (decrease) in cash ............................ (347,049) (834,564) (745,640) 614,419
Cash, beginning of period .................................. 421,255 1,166,895 1,166,895 552,476
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Cash, end of period ........................................ $ 74,206 $ 332,331 $ 421,255 $ 1,166,895
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................... $ 36,648 $ 76,018 $ 100,432 $ 13,819
Income taxes ....................................... -- 8,462 28,524 27,311
Non-cash activities:
Conversion of related party notes payable to common
stock .............................................. 261,150 -- -- --
Conversion of preferred stock into common stock .... -- -- 50,000 100,030
Purchases of equipment under capital leases ........ -- -- -- 34,309
Purchase of automobile - debt incurred ............. -- -- -- 22,454
Disposition of assets - notes received ............. -- -- -- 100,000
-6-
Historical Market Prices
The high and low prices for the common stock for each quarter during
the past two years are as following:
High Low
Year ended December 31, 2003
First Quarter $0.85 $0.80
Second Quarter $0.88 $0.80
Third Quarter $0.86 $0.79
Fourth Quarter $0.81 $0.66
Year ended December 31, 2004
First Quarter $0.91 $0.70
Second Quarter $0.85 $0.79
Third Quarter $1.00 $0.84
Fourth Quarter $0.86 $0.65
Year ended December 31, 2005
First Quarter $0.75 $0.70
Second Quarter $0.70 $0.52
Third Quarter (through July 12, 2005) $0.70 $0.52
We have never paid cash dividends on our common stock and do not
expect to pay such dividends in the foreseeable future.
The last reported sale price per share of our common stock as
reported on the pink sheets on July 12, 2005, the last full trading day prior to
the public announcement of this transaction was $0.70
-7-
CAUTIONARY STATEMENT REGARDING
FORWARD LOOKING STATEMENTS
This document contains certain statements that are forward-looking
statements. Those statements may include statements regarding our intent, belief
or current expectations of our officers with respect to (i) our strategic plans
and ability to benefit from this transaction, (ii) our policies regarding
capital expenditures, dividends, financing and other matters, (iii) industry
trends affecting our financial condition or results of operations, (iv) the
expenses associated with this transaction, and (v) the number of stockholders
following the transaction. Readers of this document are cautioned that reliance
on any forward-looking statement involves risks and uncertainties. Although we
believe that the assumptions on which the forward-looking statements contained
herein are based are reasonable, any of those assumptions could prove to be
inaccurate given the inherent uncertainties as to the occurrence or
nonoccurrence of future events. There can be no assurance that the forward
looking statements contained in this document will prove to be accurate. The
inclusion of a forward-looking statement herein should not be regarded as a
representation by us that our objectives will be achieved.
-8-
SPECIAL FACTORS
Background
We have given thorough consideration to whether or not we should engage in
a going private transaction and our board of directors considered the issue on a
variety of occasions. In a meeting of the board on January 12, 2005, members of
the board determined that management should investigate the feasibility and cost
of engaging in a going private transaction.
Between January 12, 2005 and May 4, 2005, members of management and the
board continued to discuss the potential benefits and costs of engaging in a
going private transaction. Those discussions consistently focused on the cost of
being a public filer and the potential savings to us if it were to go private.
On May 4, 2005, the board met with attorneys from Katten Muchin Rosenman
LLP, our SEC counsel, to further discuss our various strategic alternatives. At
this meeting, the board reviewed a presentation prepared by members of
management and Katten Muchin Rosenman LLP which explained the mechanics of the
transaction which would result in our being able to de-register the common
stock. After the presentation, members of the board asked a variety of questions
about the cost and mechanics of the transaction, as well as the positive and
negative effects of the transaction. Following such conversations, the board
unanimously determined that it would be in our best interests and the best
interests of our stockholders to take steps to eliminate the expenses that we
currently incur as an SEC reporting company. Martin Mendelsohn, who is our one
board member that neither has, nor is not associated with someone who has, a
substantial interest in our company and would directly benefit as a result of
the reduction of the outstanding number of shares, agreed to review the terms of
the reverse stock split. In addition to reviewing the terms of the reverse stock
split, Mr. Mendelsohn agreed to recommend a fair price to be paid to
stockholders that will own fractional shares following the transaction by
reviewing the current market price of our common stock, the historic market
price of our common stock and the purchase price paid in prior transactions.
Following his review, he recommended a fair price. Also, the board requested
that management prepare an analysis of the cost of the reverse-split.
On June 30, 2005, at a meeting of the board, members of management and
representatives of Katten Muchin Rosenman LLP explained the transaction and the
members of the board, after due consideration, unanimously determined that the
reverse stock split will provide for the conversion and reclassification of each
100 outstanding shares of common stock into one share of common stock;
stockholders that own fractional shares after the reverse stock split will
receive a cash payment equal to $1.10 for every pre-split share that they owned;
the transaction is fair to our stockholders, including those stockholders that
will receive a cash payment in lieu of fractional shares; our officers are
authorized to file and distribute the documents necessary to effectuate the
transaction, including any filings required by the SEC under applicable federal
securities laws and the Certificate of Amendment to such Articles of
Incorporation of News Communications, Inc. (after giving effect to any
restrictions on such filings set forth in applicable federal securities laws),
in Nevada, and any distributions of documents to our stockholders.
Purposes of the Transaction
The primary purpose of the reverse stock split is to eliminate the expense,
as well as the effort, of our management, which is required in order to comply
with our disclosure and reporting requirements under the federal securities laws
as well as the related stockholder servicing expense associated with being an
SEC reporting company. The reverse stock split will eliminate the expenses we
incur as an SEC reporting company. The reverse stock split also will enable our
management and employees to devote more time and effort to improving our
operations by eliminating the time spent by them in preparing periodic reports
and managing stockholder relations.
Our common stock is registered under Section 12 of the Exchange Act,
therefore, we are required to comply with the disclosure and reporting
requirements under the Exchange Act and the new requirements of the
Sarbanes-Oxley Act of 2002. The cost of complying with these requirements is
substantial, representing an estimated annual cost to us in the future of
approximately $380,000 per year, including legal and accounting fees, printing,
postage, data entry, stock transfer and other administrative expenses. In going
private, we expect to save most of those costs. In addition to the direct costs
we incur, our management and employees are required to devote substantial time
and energy to completing the periodic reports required of us under the Exchange
Act. We believe these obligations have become more burdensome on small SEC
reporting companies like ours as a result of the recent enactment of the
Sarbanes-Oxley Act of 2002. In going private, we can eliminate many of those
costs. Thus, in addition to the approximately $380,000 in annual future direct
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savings we expect to realize following the reverse stock split, our officers and
employees will be able to focus more of their time and effort on improving
revenues and efficiencies.
The cost savings figures set forth above are only estimates. The actual
savings we realize from going private may be higher or lower than such
estimates. Estimates of the annual savings to be realized if the reverse stock
split is consummated are based upon the actual costs to us of the services and
disbursements in each of the categories listed above that were reflected in our
recent financial statements, and the allocation to each category of management's
estimates of the portion of the expenses and disbursements in such category
believed to be solely or primarily attributable to our status as a public
reporting company.
It is important to note that in addition to the annual estimated cost
savings referenced above, the consummation of the reverse stock split and
subsequent deregistration of our common stock would result in a significant
one-time cost savings due to our not being subject to the new internal control
audit requirements imposed by Section 404 of the Sarbanes-Oxley Act of 2002.
Preparing ourselves to be able to comply with Section 404 of the Sarbanes-Oxley
Act of 2002 would require significant expenditures during the next fiscal year,
including costs related to computer software and hardware and fees to third
parties for compliance planning, assessment, documentation and testing. Such
costs are expected to exceed $365,000.
We expect the actual cost savings of being a non-reporting private company
to be much greater than simply eliminating the estimated historical
out-of-pocket costs. Moreover, new legislation, such as the Sarbanes-Oxley Act
of 2002, will likely continue to have the effect of increasing the compliance
burdens and potential liabilities of being an SEC reporting company. Any new
legislation will likely continue to increase audit fees and other costs of
compliance, such as securities counsel fees, increase outside director fees,
increase in our director and officer insurance premiums and increase potential
liability faced by our officers and directors.
In some instances, management's cost savings expectations were based on
information provided or upon verifiable assumptions. For example, our auditors
have informed us, informally, that there will be a reduction in auditing fees if
we cease to be an SEC reporting company. In addition, the costs associated with
retaining legal counsel to assist with complying with the Exchange Act reporting
requirements will be eliminated if we no longer file reports with the SEC and
are otherwise not required to comply with the disclosure requirements that apply
to publicly reporting companies.
As a result of the reverse stock split, we will no longer be required to
publicly disclose or reveal sensitive financial information which we believe can
assist our competitors in approaching and soliciting our advertisers and
customers.
In addition to the expenses mentioned above, our board believes that we
receive little, if any, relative benefit from having our common stock registered
under the Exchange Act. Such benefits include:
o The ability to use our stock to raise capital. Most capital has been
raised through private placements and from existing stockholders, thus
minimizing the benefits of having our stock registered pursuant to the
Exchange Act. In addition, we anticipate that the common stock will
continue to trade on the pink sheets after the transaction is
completed, as it currently does.
o Public companies often endeavor to use company stock to attract,
retain and provide incentives to employees. Due to the limited
liquidity of our common stock, we have found limited success in using
common stock in such a manner.
o An enhanced company image often accompanies publicly reporting company
status. We have determined that due to our size and other factors, we
have not enjoyed an appreciable enhancement in company image as a
result of our publicly reporting company status.
We had approximately 1,052 stockholders of record as of June 30, 2005. Of
the record holders, approximately 920 owned less than 100 shares.
Alternatives Considered
In making its determination to proceed with the reverse stock split, the
board considered other going private alternatives as well as remaining an SEC
reporting company. As discussed below, the board rejected the other alternatives
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to the reverse stock split as well as simply remaining an SEC reporting company.
For the reasons discussed below, the board determined that providing liquidity
to some unaffiliated stockholders was fair to all the stockholders considering
the benefits to us of eliminating the expenses incurred through being an SEC
reporting company and relieving management of the time necessary to meet
regulatory responsibilities under federal securities laws. The alternatives the
board considered were:
o Issuer Tender Offer. The board considered an issuer tender offer to
repurchase shares of our outstanding common stock. An issuer tender
offer is an expensive undertaking and the results of an issuer tender
offer would be unpredictable due to its voluntary nature; thus, the
board was uncertain as to whether this alternative would result in a
sufficient number of shares being tendered. Moreover, federal
regulations impose rules regarding the treatment of stockholders in a
tender offer, including pro-rata acceptance of offers from
stockholders, which make it difficult to ensure that we would be able
to significantly reduce the number of stockholders of record. As a
result, the board rejected this alternative.
o Open Market Purchase Program. The board considered going private by
means of an open market purchasing program. The board rejected an open
market purchasing program because it would be highly unlikely that our
shares could be acquired from a sufficient number of holders to
accomplish the going private objective in light of the fact that there
is no active trading market for our common stock.
o Maintaining the Status Quo. The board considered maintaining the
status quo. In that case, we would continue to incur the expenses of
being an SEC reporting company without, in the opinion of the board,
the commensurate benefits. Thus, the board considered maintaining the
status quo not to be in the best interests of either us or our
stockholders and rejected this alternative.
In light of the foregoing, the board and management believe the benefits
associated with maintaining our status as an SEC reporting company are
substantially outweighed by the costs, both financial and operational. The board
believes that it is in our best interests to eliminate the administrative burden
and costs associated with maintaining our status as an SEC reporting company.
Reasons for the Structure and Timing of the Transaction
The primary purpose of the reverse stock split is to reduce the number of
holders of record of the common stock to less than 300 to enable us to elect to
terminate the registration of our common stock pursuant to Section 12(g) of the
Exchange Act and become a private company. The board believes that a reverse
stock split provides the most certainty for us to achieve this purpose.
We are currently required to comply with the disclosure and reporting
requirements under the Exchange Act, as well as new requirements of the
Sarbanes-Oxley Act of 2002. The cost of complying with these requirements is
substantial. We believe these obligations have become more burdensome on small
SEC reporting companies like ours as a result of the recent enactment of the
Sarbanes-Oxley Act of 2002. Timely consummation of the transaction would result
in a significant one-time cost savings due to our not being subject to the new
internal control audit requirements imposed by Section 404 of the Sarbanes-Oxley
Act of 2002.
Going Private Transaction; Effects
We intend to engage in a going private transaction which will reduce the
number of holders of record of our common stock to less than 300 and enable us
to elect to terminate the registration of our common stock pursuant to Section
12(g) of the Exchange Act. As of June 30, 2005, there were 12,024,597 shares of
common stock outstanding, held by approximately 1,052 holders of record.
Shares of our common stock are currently traded on the pink sheets under
the trading symbol "NCOM.PK." After completing the transaction, we anticipate
that our common stock will continue to trade on the pink sheets. It also is
possible that trading in the common stock may only occur in privately negotiated
transactions. After the transaction, we anticipate that we will have fewer than
300 stockholders of record, in which event we intend to file a Form 15 with the
SEC to terminate registration of the common stock under the Exchange Act.
Following the termination of the registration of our common stock, we will no
longer be subject to certain provisions of the Exchange Act. In particular, our
obligations to publicly file annual and quarterly reports will cease. The rights
of the stockholders under Nevada law to inspect, copy and audit the corporate
books and records will be unaffected by the transaction.
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In order to accomplish the going private transaction, and to reduce the
number of holders of record to less than 300, there will be a 1-for-100 reverse
stock split of our common stock. Those stockholders who, immediately following
the reverse stock split, would hold only a fraction of a share of common stock
will be paid an amount, in cash, equal to $1.10 for each pre-split share and
will no longer be our stockholders.
The amendment to the Articles of Incorporation will decrease the authorized
common stock proportionately from 100,000,000 shares to 1,000,000 shares. The
shares of common stock acquired by us as a result of the reverse stock split
will be retired, which will reduce the number of outstanding shares.
Our officers and directors at the effective time of the amendment to the
Articles of Incorporation effecting the reverse stock split will continue to
serve as our officers and directors immediately after the transaction is
complete.
Because the price to be paid in lieu of fractional shares to holders of
fewer than 100 shares of common stock will be $1.10 per share, and because
approximately 920 stockholders of record own less than 100 shares, the total
cost to us, including expenses, of effecting the reverse stock split is expected
to be approximately $155,000. At May 31, 2005, our aggregate stockholders'
deficit was approximately $(740,331), or $(0.08) per share, we expect that, as a
result of the reverse stock split, the stockholders deficit per share of common
stock will be increased to approximately $(7.66) per share on a pro forma basis.
However, it is important to note that book value is an accounting methodology
based on the historical cost of our assets, and therefore does not necessarily
reflect our current value.
Fairness of the Transaction
The board believes that the transaction is fair from a financial point of
view to the unaffiliated stockholders of the company. The board is comprised of
seven (7) members. Six of our seven board members have, or are associated with
someone who has, substantial interests in our company and will indirectly
benefit as a result of the reduction in the number of outstanding shares. Our
one board member who is not so associated, Martin Mendelsohn, was asked to
advise on the price that we would pay for our fractional interests. Due to the
fact that the costs of retaining a financial advisor to assist Mr. Mendelsohn in
determining the value of our shares would be so large compared with the total
value of the fractional interests to be cashed out, it was determined that a
financial advisor not be retained. Rather, it was determined that we will pay an
amount, $1.10 per share, which represents a price that is higher than the
highest price at which we have sold shares for the past five years and
represents a premium above the $0.70 price at which we last sold shares to raise
working capital. Mr. Mendelsohn's determination was unanimously approved by the
board at a meeting held on June 30, 2005.
The board considered a number of factors in determining the fairness of the
transaction prior to its approval of the transaction, including the following:
o Fairness of Price
The board believes that the price which will be received by the
stockholders in lieu of fractional shares of common stock is fair from a
financial point of view to our unaffiliated stockholders. The board
considered a number of factors in reaching this determination. In
particular, the board considered current market price, historical market
price and the purchase prices paid in prior purchases.
o Fairness of Process to Determine Price
The board believes that the process that it employed to determine the
price which will be received by the stockholders in lieu of fractional
shares of common stock was fair because the sole independent board member
recommended the price because it represented the highest price at which we
have sold shares for the past five years, and represented a substantial
premium above the $0.70 price at which we recently sold shares to raise
capital.
o Significant Savings Will Benefit Us and Remaining Unaffiliated
Stockholders
Following the transaction, the board believes that we and our
remaining unaffiliated stockholders will benefit from the savings in direct
and indirect operating costs to us resulting from our no longer being a
public company.
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o Determination of Reverse Split Ratio
The board selected the ratio of 1 for 100 for the reverse stock split
by calculating a ratio that could be used to reliably reduce the
stockholders of record to less than 300, but still maintain some level of
liquidity in the remaining shares of common stock outstanding. The board
believes that in order to maximize the cost savings value of the
transaction, the ratio should be as high as possible, while still ensuring
that we would be able to maintain some potential liquidity for our
remaining stockholders and achieve the stated purposes of the transaction.
Based upon the information presented to the board by our management, the
board determined that a ratio of 1 for 100 is the optimum ratio which
allows us to both reasonably believe that the reverse stock split will
result in our having fewer than 300 stockholders of record and achieve all
the benefits of a reverse split and maintain some potential liquidity for
our remaining stockholders.
o Liquidity for Remaining Unaffiliated Stockholders
The board recognizes that the transaction will result in a decrease in
liquidity and a readily available market for its common stock and these
factors are one of its greatest concerns in approving the going private
transaction. However, there has not been an active market for our shares in
more than three years and the board believes that the decreased liquidity
is offset by the gain to us in decreasing our legal compliance costs and
the other benefits of the transaction described herein. We currently
anticipate the common stock will continue to trade on the pink sheets.
o Cashed Out Stockholders
One negative aspect of the transaction is the inability of those
stockholders who are cashed out to maintain an interest in our future
growth and progress with current holdings. The board believes that this
factor is outweighed by the ability of any stockholder who wishes to remain
a stockholder to increase its holdings to at least 100 shares of our common
stock prior to the transaction by purchasing shares on the open market or
otherwise acquiring additional shares of common stock prior to the
effective date of the reverse stock split.
o No Stockholder Vote
Under Section 78.207 of Nevada Revised Statutes, the board may effect
the reverse stock split and the corresponding reduction in authorized
shares of common stock without the approval of the stockholders. Due to
such specific authorization in Nevada law, the board does not believe that
the lack of a vote affects the fairness of the transaction to either the
stockholders who receive cash in lieu of fractional shares or who remain as
unaffiliated stockholders. Accordingly, we have not asked the stockholders
to vote on the transaction. Furthermore, any stockholder who wishes to
remain a stockholder following the reverse stock split may increase their
holdings of our common stock to at least 100 shares prior to the effective
time of the reverse stock split. Alternatively, any stockholder who wishes
not to remain a stockholder following the reverse stock split may decrease
their holdings of common stock to less than 100 shares prior to the
effective time of the reverse stock split.
o No Impact on Net Operating Losses
The board, members of management and our legal advisors and
accountants reviewed the status of our net operating losses ("NOLs"), in
the context of the transaction. Following such review, each of the parties
concluded that we would preserve our NOLs following consummation of the
transaction and that there would not be a negative impact on the NOLs as a
result of the transaction.
o No Unaffiliated Representative
No unaffiliated representative was retained to act solely on behalf of
the unaffiliated stockholders.
After considering all of these factors, the board believed that overall,
the potential benefit of the transaction to us and our unaffiliated stockholders
outweighed the detriments and determined that the transaction and the process by
which the transaction was approved were fair to those stockholders receiving the
cash consideration as well as the
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remaining unaffiliated stockholders. The board did not receive any report,
opinion or appraisal from any outside party in connection with the transaction.
In reviewing the transaction and determining whether the transaction is
fair to and in the best interest of our stockholders, the board analyzed the
factors set forth above, consulted with certain members of our management and
consulted with legal counsel. The board did not believe it was necessary to seek
a fairness opinion or retain an independent financial advisor because the costs
of retaining a financial advisor to assist Mr. Mendelsohn in determining the
value of our shares was far greater than the relative benefits of such advisor
due to the relatively low total value of the fractional interests to be cashed
out.
The discussion of the information and factors considered by the board in
making its decision is not intended to be exhaustive, but includes all material
factors considered by the board. In view of the wide variety of factors
considered in connection with the evaluation of the transaction, the board did
not find it useful to, and did not attempt to, quantify, rank or otherwise
assign relative weight to these factors. In addition, individual members of the
board may have given different weight to different factors.
Potential Conflicts of Interest
Our executive officers and directors may have interests in the transaction
that are different from the interests of the stockholders, or relationships that
may present conflicts of interest, including the following:
o as a result of the transaction, those stockholders who own 100 or more
shares of our common stock at the effective time of the amendment to
the Articles of Incorporation effecting the reverse stock split,
including our directors and executive officers, will increase their
percentage ownership interest as a result of the transaction. For
example, the ownership percentage of the directors and executive
officers as a group will be approximately 45.71% of the outstanding
shares of our common stock, which represents an increase of 0.13% from
the approximately 45.58% which they held immediately prior to the
transaction as a result of the reduction of the number of shares of
common stock outstanding by an estimated 11.9 million shares;
o each of our directors and certain executive officers hold options to
purchase our common stock, which will, if unexercised, continue to be
outstanding following the transaction, subject to adjustment;
o if, following the reverse stock split, our directors and executive
officers were to exercise all of their currently outstanding options
to acquire the common stock, they would hold approximately 46.19% of
the then outstanding common stock compared with 46.06% of our common
stock if exercised immediately before the transaction;
o certain directors and executive officers own warrants that are
exercisable for shares of common stock, which will, if not exercised,
continue to be outstanding following the transaction, subject to
adjustment;
o if, following the reverse stock split, our directors and executive
officers were to exercise all of their currently outstanding warrants
that are exercisable into shares of common stock, our directors and
executive officers would hold approximately 57.01% of the then
outstanding common stock compared with 56.88% of our common stock if
exercised immediately before the transaction;
o certain directors own shares of our $10 Convertible Preferred Stock
that are convertible into shares of common stock, which will, if not
converted, continue to be outstanding following the transaction,
subject to adjustment;
o if, following the reverse stock split, our directors and executive
officers were to convert all of their currently outstanding shares of
our $10 Convertible Preferred Stock that are convertible into shares
of common stock, our directors and executive officers would hold
approximately 46.58% of the then outstanding common stock compared
with 46.45% of our common stock if converted immediately before the
transaction; and
o the board considered the fact that each director either was a
stockholder, option holder, warrant holder and/or holder of shares of
our $10 Convertible Preferred Stock and concluded that such facts
alone did
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not cause any one or more directors not to be a "disinterested
director," as that term is defined under Nevada law, and thereby
unable to consider and act upon the transaction in the best interests
of us and our stockholders.
Employee and Director Stock Options
The outstanding options to acquire shares of common stock held by our
employees and directors will continue to be outstanding after the transaction.
As of June 30, 2005, there were options outstanding to purchase 219,821 shares
of our common stock. The options were granted to our directors and employees as
incentive compensation for services to us. All of the options are and will
continue to be vested and exercisable as of the date of the transaction. Holders
of options not exercised prior to the effective time of the amendment to the
Articles of Incorporation effecting the reverse stock split will hold stock
options with limited liquidity. When existing options are exercised, the
exercise will cover underlying fractional shares of common stock resulting from
the reverse stock split, but we will not issue fractional shares upon exercise
of an option. No options to purchase fractional shares will be outstanding after
the transaction. Options which would result in the issuance of fractional shares
after the reverse stock split will be cancelled. Any person whose options are
exercisable at a price which is less than $1.10 per share will receive a cash
payment, if any, equal to the product of (i) the number of pre-split options
which are being cancelled and (ii) the excess of $1.10 per share over the
exercise price. Because any whole shares issued upon the exercise of options
will not be registered under the Securities Act of 1933, optionees will be
required to acquire such shares for investment purposes. They will benefit from
any future appreciation in the value after the transaction and will assume the
risk of any future downturns in our business after the transaction.
Warrants to Purchase Shares of Common Stock
The outstanding warrants to acquire shares of common stock will continue to
be outstanding after the transaction. As of June 30, 2005, there were warrants
outstanding to purchase 3,817,320 shares of our common stock. When existing
warrants are exercised, the exercise will cover underlying fractional shares of
common stock resulting from the reverse stock split, but we will not issue
fractional shares upon exercise of a warrant. Warrants which would result in the
issuance of fractional shares after the reverse stock split will be cancelled.
Any person whose warrants are exercisable at a price which is less than $1.10
per share will receive a cash payment, if any, equal to the product of (i) the
number of pre-split warrants which are being cancelled and (ii) the excess of
$1.10 per share over the exercise price. Because any whole shares issued upon
the exercise of warrants will not be registered under the Securities Act,
holders of warrants will be required to acquire such shares for investment
purposes.
Certain Impact of the Transaction
Impact on the company
Following the transaction we will have less than 300 stockholders of record
and will terminate the registration of our common stock and become a private
company. We will no longer be public, and will no longer be subject to the
reporting requirements of the Exchange Act. Going private will significantly
change our public disclosures pursuant to the Exchange Act. We anticipate that
following the transaction we will continue to operate as we did prior to the
transaction. The same officers and directors will continue in their roles as
officers and directors, and we do not anticipate any significant corporate
events in the near future. We anticipate that we will realize significant direct
and indirect cost savings as a result of going private.
Prior to the transaction, we had 12,024,597 shares of common stock
outstanding and as a result of the transaction we will have approximately
119,880 shares of common stock outstanding. Approximately 920 stockholders of
record own less than 100 shares and will receive $1.10 per share, therefore we
estimate that the total cost of the transaction to us will be approximately
$155,000, including expenses. Our stockholders' equity and cash balance will be
reduced accordingly.
Impact on Stockholders
Stockholders holding less than 100 shares of common stock immediately prior
to the effective time of the reverse stock split will cease to be stockholders.
They will lose all rights associated with being a stockholder of the company,
such as the rights to attend and vote at stockholder meetings and receive
dividends and distributions. These stockholders will be paid, in cash, an amount
equal to $1.10 for each pre-split share resulting in a fractional share. Such
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stockholders will be liable for any applicable taxes, but will not be required
to pay brokerage fees. Following the Effective Date, we will provide you with a
Letter of Transmittal explaining how you can surrender your share certificates
in exchange for cash payment and/or, if applicable, shares of common stock.
Stockholders holding 100 or more shares of common stock immediately prior
to the effective time of the reverse stock split will continue to be
stockholders, but will receive cash in lieu of any fractional shares they may
otherwise be entitled to receive.
Stockholders who continue to be stockholders after the transaction will:
o experience reduced liquidity of their shares. We anticipate the common
stock will continue to trade on the pink sheets. However, the
reduction in public information concerning us as a result of our no
longer being required to file reports under the Exchange Act may
further reduce the trading of the common stock; and
o not receive or have access to our financial and other business
information as they would if we were a public reporting company,
although such stockholders will continue to have rights to inspect,
copy and audit certain of our records, financial and other information
under Nevada law.
Effect on Market for Shares
Our common stock is currently traded on the pink sheets and we anticipate
that following the transaction our common stock will continue to trade on the
pink sheets. However, the reduction in public information concerning us as a
result of our no longer being required to file reports under the Exchange Act
will further reduce the liquidity of our common stock. It is possible that any
trading in our common stock after the transaction may only occur in privately
negotiated sales.
Conduct of Business Following Transaction
The primary purpose of the transaction is to reduce the number of
stockholders of record to less than 300 to enable us to elect to terminate the
registration of our common stock pursuant to Section 12(g) of the Exchange Act
and become a private company. Following the deregistration, we expect that our
common stock will continue to trade on the pink sheets. Furthermore, the
transaction and deregistration would result in our no longer filing reports
pursuant to Section 13 or 15(d) of the Exchange Act. We anticipate no other
material changes in our management or corporate structure.
We continue to explore strategic acquisitions and divestitures, however we
cannot assure you that we will enter into or consummate such a transaction or
buy or sell assets. Other than as described in this document, neither we nor our
management have any plans or proposals to effect any extraordinary corporate
transaction, such as a merger, reorganization or liquidation; to sell or
transfer any material amount of its assets; to change its board or management;
to change materially its indebtedness or capitalization; or otherwise to effect
any material change in its corporate structure or business.
Stockholder Approval
Pursuant to Section 78.207 of Nevada Revised Statutes, we may effect one or
more reverse stock splits and a corresponding decrease in authorized shares of
our common stock without stockholder approval and no vote of the stockholders is
being sought.
Dissenters' Rights
Pursuant to Section 78.207 of Nevada Revised Statutes, stockholders are not
entitled to dissenters' rights in connection with the transaction. No provisions
have been made to grant stockholders access to counsel or appraisal services at
the expense of the company.
Exchange Of Stock Certificates
We have appointed Continental Stock Transfer and Trust Company, our
transfer agent, to act as exchange agent to carry out the exchange of existing
share certificates for cash payments in lieu of issuing fractional shares or, if
applicable, new share certificates. On the Effective Date, all share
certificates evidencing ownership of common stock held by our stockholders who
will have fractional shares repurchased will be deemed cancelled without further
action by the
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stockholders or us. Thereafter, such certificates will represent either the
right to receive cash in the amount of $1.10 per pre-split share of common stock
for repurchased fractional shares or if applicable, either the right to receive
a new certificate for shares of common stock or the right to receive a new
certificate for shares of common stock and the right to receive cash in the
amount of $1.10 per pre-split share of common stock for repurchased fractional
shares. The shares of common stock acquired by us in connection with the
transaction will be cancelled. We will not pay interest on cash sums due to any
stockholder in connection with the transaction.
If, as a result of the transaction, you are entitled to receive either a
new certificate for shares of common stock or a new certificate for shares of
common stock and cash for repurchased fractional shares, and do not exercise
such rights, you will continue to be a stockholder of the Company, however your
ownership position will be revised on our books and records, as of the Effective
Date, to give effect to this transaction. As a stockholder, you will be entitled
to ratably participate in dividends and distributions and vote on matters
submitted to our stockholders. Also, you will have all rights granted to
stockholders under Nevada law and set forth and designated in our Articles of
Incorporation and By-laws.
The exchange agent will furnish you with the necessary materials and
instructions to surrender your common stock certificate(s) promptly following
the Effective Date. A Letter of Transmittal will explain how the certificates
are to be surrendered. You must complete and sign the Letter of Transmittal and
return it with your certificate(s) to the transfer agent as instructed before
you can receive any cash payment (and/or, if applicable, new certificate(s)) to
which you are entitled. Do not send your certificates to us, and do not send
them to the exchange agent until you have received a Letter of Transmittal and
followed the instructions therein.
Stock Certificates that contain a restrictive legend will be exchanged for
new certificates with the same restrictive legend. As applicable, the time
period during which the common stock has been held will be included in the time
period during which such stockholder actually holds the new common stock
certificate received in exchange for such stock certificate for the purposes of
determining the term of the restrictive period.
No service charges will be payable by you in connection with the exchange
of certificate or the payment of cash in lieu of issuing fractional shares. We
will pay for all expenses for the issuance of the new certificates.
If you hold your shares in "street name" your broker, bank or other nominee
is considered a stockholder of record with respect to those shares. Although we
intend to treat stockholders holding shares in street name in substantially the
same manner as stockholders whose shares are registered in their names and to
instruct nominees to effect the transaction for beneficial holders, your nominee
may have different procedures and is not legally obligated to treat the
transaction as affecting beneficial holders' shares, if such shares would be
cashed out by the transaction. To determine the transaction's effect on any
shares you hold in street name (and possible payment of the cash consideration),
you should contact your broker, bank or other nominee.
Federal Tax Consequences
The following is a discussion of certain of the material United States
federal income tax consequences of the transaction to our stockholders who are
citizens or residents of the United States or that are domestic corporations.
The discussion below is for general information only and does not address all
aspects of federal income taxation that may affect particular stockholders in
light of their particular circumstances, that are generally assumed to be known
by investors or that may affect stockholders subject to special treatment under
federal income tax laws. The following discussion assumes that shares of our
common stock are held as capital assets. In addition, no information is provided
in this document with respect to the tax consequences of the transaction under
foreign, state or local laws.
We believe that there will be no material federal tax consequences for
those stockholders who continue to be stockholders following the consummation of
the transaction except for amounts received for fractional shares. Their basis
in their current shares (except for post-split fractional shares) should carry
forward as their basis in the new shares they will be deemed to own after the
reverse stock split.
We believe that, for those stockholders who receive cash in exchange for
fractions of shares of common stock following the reverse stock split (including
stockholders who are cashed out pursuant to the reverse stock split), the
transaction will be treated as a taxable transaction for federal income tax
purposes. Generally, stockholders receiving cash in the transaction will
recognize a gain or loss for federal income tax purposes based on the difference
between the amount of cash received and the portion of the stockholder's current
tax basis in our shares of common stock that is allocated to the fractional
shares (as if such shares were issued to the stockholder and then immediately
redeemed by us), such gain or loss
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generally will be capital gain or loss, and will be long-term capital gain or
loss if the stockholder's holding period for the shares of our common stock
exceeds twelve months. Under present law, long-term capital gains recognized by
an individual stockholder generally will be taxed at a maximum marginal federal
tax rate of 15%, and long-term capital gains recognized by a corporate
stockholder will be taxed at a maximum marginal federal tax rate of 35%. In
addition, under present law, the ability to use capital losses to offset
ordinary income is generally limited for stockholders that are individuals to
the amount of capital gains recognized during a tax year plus $3,000.
Tax matters are complicated and the tax consequences of the transaction to
each stockholder will depend on the facts of that stockholder's situation. You
are urged to consult your tax advisor for a full understanding of the tax
consequences of the transaction to you. The foregoing summary of material
federal income tax consequences of the transaction to our stockholders is based
upon the Internal Revenue Code, applicable Treasury Regulations thereunder,
rulings and pronouncements of the Internal Revenue Service and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect such stockholders and
could affect the continuing validity of this summary. This summary does not
purport to discuss all aspects of United States federal income taxation that may
be relevant to each stockholder in light of their specific circumstances, or to
certain types of stockholders subject to special treatment under United States
federal income tax laws (for example, foreign persons, dealers in securities,
banks and other financial institutions and tax-exempt organizations). No ruling
from the IRS has been obtained (or will be sought) as to the United States
federal income tax consequences of the transaction.
Fees and Expenses
Management estimates approximately $55,000 will be required to pay for the
fractional shares of the common stock exchanged for cash in the transaction. It
is expected that the actual amount paid to acquire the fractional shares will
differ from this estimated amount due to possible changes in the number of our
stockholders who hold less than 100 shares of common stock. In addition,
expenses are projected to amount to $100,000 as follows:
Expenses Estimated Amount
-------- ----------------
Legal Fees $66,200
Accounting Fees 15,000
Exchange Agent/Transfer Agent fees 7,600
Filing 1,500
Printing 2,500
Mailing 7,200
The approximately $155,000 necessary to pay for all of the fractional
shares exchanged for cash in the transaction and the expenses relating to the
transaction will come from cash from operations.
Reservation
We reserve the right to abandon the transaction at any time before the
filing of the necessary amendments to the Articles of Incorporation effecting
the reverse stock split in Nevada if the board determines that such action is
in our best interests. We may, for example, abandon or delay the transaction
if there is a material change in our condition or if the board perceives that
there has been a material change in the benefits or risks associated with
the transaction.
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PAST CONTRACT, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
Pursuant to the terms of a Stockholders' Agreement dated May 8, 2001 by
and among Jerry Finkelstein, The Finkelstein Foundation Inc., Shirley
Finkelstein, Melvyn I. Weiss, Wilbur L. Ross, Jr., M&B Weiss Family Partnership,
J. Morton Davis, D.H. Blair Investment Banking Corp., Rivkalex Corporation,
Rosalind Davidowitz and James A. Finkelstein, each of these stockholders have
agreed, for so long as James A. Finkelstein is employed by us, to vote their
shares to elect as directors: Four persons designated by James Finkelstein; one
person designated by J. Morton Davis, D.H. Blair Investment Banking Corp.,
Rivkalex Corporation and Rosalind Davidowitz; one person designated by Wilbur L.
Ross, Jr.; and one person designated by Melvyn I. Weiss and M&B Weiss Family
Partnership; two persons designated by mutual agreement of J. Morton Davis,
Melvyn I. Weiss, and Wilbur L. Ross, Jr.
Further, under the Stockholders' Agreement, Mr. Davis, D.H. Blair
Investment Banking Corp., Rivkalex Corporation and Rosalind Davidowitz have
granted James A. Finkelstein an irrevocable proxy to vote all of the shares
owned by them in favor of the proposals presented to the stockholders of NCI at
the annual meeting.
On June 19, 2003, pursuant to a Subscription Agreement, Kinder
Investments LP purchased 250,000 shares of the Company's common stock at a
purchase price of $1.00 per share.
In January 2005, we issued 8% convertible notes in the face amounts of
$224,000 and $126,000 to Kinder Investments LP and Rosalind Davidowitz. The
notes are convertible into common stock at a conversion price of $0.70 per
share.
On February 3, 2005, pursuant to a Subscription Agreement with, D.H.
Blair Investment Banking Corp., we satisfied $200,000 of our 8% convertible note
plus accrued interest thereon of $62,597 by issuing 375,139 shares of common
stock at a price of $0.70 per share.
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our common stock, as of June 30, 2005, by each person known to us
to beneficially own more than 5% of our outstanding common stock, by each person
who is a director, by each person who is an executive officer, and by all of our
directors and officers as a group.
The information contained in the table was furnished by the persons
listed therein. The calculations of the percent of shares beneficially owned are
based on 12,024,597 shares of common stock outstanding as of June 30, 2005 plus,
with respect to each such person, the number of additional shares that will be
outstanding upon the conversion by such person of outstanding shares of our $10
Convertible Preferred Stock or upon the exercise of the warrants and options
exercisable within sixty (60) days set forth herein.
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Name and Address Pre Reverse Split Pre Reverse Split Post Reverse Post Reverse
of Beneficial Owners and Number of Shares Approximate Split Split
Management of common stock Percentage Number of Shares Approximate
Beneficially Owned of Class of common stock Percentage
Beneficially of Class
Owned
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
James A. Finkelstein 8,240,653(1) 54.17% 82,401(2) 54.30%
----------------------------------------------------------------------------------------------------------------------
Hollinger NCI Holdings LLC 4,168,445(3) 27.47% 41,684(4) 27.54%
----------------------------------------------------------------------------------------------------------------------
Martin A. Bell 16,665(5)(15) * 166(6)(16) *
----------------------------------------------------------------------------------------------------------------------
J. Morton Davis 4,080,832(9)(13) 32.95% 40,805(10)(14) 33.04%
----------------------------------------------------------------------------------------------------------------------
Jerry Finkelstein 280,666(5)(7) 2.33% 2,804(6)(8) 2.34%
----------------------------------------------------------------------------------------------------------------------
Martin Mendelsohn 16,665(5) * 166(6) *
----------------------------------------------------------------------------------------------------------------------
Wilbur L. Ross, Jr. 614,964(5)(9) 5.04% 6,148(6)(10) 5.05%
----------------------------------------------------------------------------------------------------------------------
Gary Weiss 16,665(5) * 166(6) *
----------------------------------------------------------------------------------------------------------------------
Melvyn I. Weiss 1,610,654(9)(11) 13.30% 16,106(10)(12) 13.34%
----------------------------------------------------------------------------------------------------------------------
Rosalind Davidowitz 946,066(17) 7.75% 9,459(18) 7.77%
----------------------------------------------------------------------------------------------------------------------
David Selengut 1,103,667(19) 9.18% 11,036(20) 9.21%
----------------------------------------------------------------------------------------------------------------------
Dov Perlysky 1,183,313(21) 9.58% 11,832(22) 9.60%
----------------------------------------------------------------------------------------------------------------------
Matthew Doull 9,999(5) * 99(6) *
----------------------------------------------------------------------------------------------------------------------
All Directors and Executive 8,932,276(23) 57.72% 89,312(24) 57.85%
Officers as a Group (7 persons)
----------------------------------------------------------------------------------------------------------------------
--------------------
* Less than one percent.
(1) Includes (i) 50,000 shares of common stock directly owned by Mr.
Finkelstein, (ii) 1,018,445 shares of common stock and 3,150,000 shares of
common stock issuable upon the exercise of warrants owned by JAF-HLR, LLC
("JAF-HLR"), in which Mr. Finkelstein owns a 50% interest; (iii) options to
purchase 13,332 shares of common stock; (iv) 3,983,816 shares of common stock
owned by J. Morton Davis and his affiliates (the "Davis Group") and Jerry
Finkelstein and his affiliates (the "Finkelstein Group") and 25,060 shares of
common stock currently issuable upon conversion of 5,900 shares of $10
Convertible Preferred Stock owned by the Davis Group, the voting rights of which
have been given to Mr. Finkelstein. Beneficial ownership of one half of the
shares and warrants set forth in clause (ii) above and all of the shares and
warrants referenced in clauses (iv) above is disclaimed.
(2) Includes (i) 500 shares of common stock directly owned by Mr. Finkelstein,
(ii) 10,184 shares of common stock and 31,500 shares of common stock issuable
upon the exercise of warrants owned by JAF-HLR, LLC ("JAF-HLR"), in which Mr.
Finkelstein owns a 50% interest; (iii) options to purchase 133 shares of common
stock; (iv) 39,834 shares of common stock owned by J. Morton Davis and his
affiliates (the "Davis Group") and Jerry Finkelstein and his affiliates (the
"Finkelstein Group") and 250 shares of common stock currently issuable upon
conversion of 5,900 shares of $10
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Convertible Preferred Stock owned by the Davis Group, the voting rights of which
have been given to Mr. Finkelstein. Beneficial ownership of one half of the
shares and warrants set forth in clause (ii) above and all of the shares and
warrants referenced in clauses (iv) above is disclaimed.
(3) Includes 1,018,445 shares of common stock and 3,150,000 shares of common
stock issuable upon the exercise of options and warrants owned by JAF-HLR, in
which Hollinger-NCI Holdings LLC owns a 50% interest. Beneficial ownership of
one half of the shares and warrants held by JAF-HLR is disclaimed.
(4) Includes 10,184 shares of common stock and 31,500 shares of common stock
issuable upon the exercise of options and warrants owned by JAF-HLR, in which
Hollinger-NCI Holdings LLC owns a 50% interest. Beneficial ownership of one half
of the shares and warrants held by JAF-HLR is disclaimed.
(5) Includes the following numbers of shares purchasable upon the exercise of
presently exercisable options : Mr. Bell--16,665; Mr. Jerry Finkelstein--16,665;
Mr. Mendelsohn--16,665; Mr. Ross--16,665; Mr. G. Weiss--16,665; Mr.
Doull--9,999.
(6) Includes the following numbers of shares purchasable upon the exercise of
presently exercisable options : Mr. Bell--166; Mr. Jerry Finkelstein--166; Mr.
Mendelsohn--166; Mr. Ross--166; Mr. G. Weiss--166; Mr. Doull--99.
(7) Includes:
(a) 9,945 shares owned by The Jerry Finkelstein Foundation, Inc., of which
Jerry Finkelstein is President, and
(b) 66,667 shares owned by The Estate of Shirley Finkelstein, of which
Jerry Finkelstein is executor.
(8) Includes:
(a) 99 shares owned by The Jerry Finkelstein Foundation, Inc., of which
Jerry Finkelstein is President, and
(b) 666 shares owned by The Estate of Shirley Finkelstein, of which Jerry
Finkelstein is executor.
(9) Includes the following numbers of shares issuable upon conversion of shares
of $10 Convertible Preferred Stock: Davis Group--25,060; Mr. Ross--169,900; Mr.
M. Weiss--84,950.
(10) Includes the following numbers of shares issuable upon conversion of shares
of $10 Convertible Preferred Stock: Davis Group--250; Mr. Ross--1,699; Mr. M.
Weiss--849.
(11) Includes 457,304 shares owned by the M&B Weiss Family Limited Partnership.
(12) Includes 4,573 shares owned by the M&B Weiss Family Limited Partnership.
(13) Includes:
(a) 2,830,139 shares of common stock owned by D.H. Blair Investment Banking
Corp., of which J. Morton Davis is a Director and the sole stockholder;
(b) 150,000 shares of common stock issuable upon the exercise of warrants
owned by D.H. Blair Investment Banking Corp., of which J. Morton Davis is a
Director and the sole stockholder;
(c) 129,567 shares owned directly by Mr. Davis;
(d) 25,060 shares of common stock issuable upon exercise of 5,900 shares of
$10 Convertible Preferred Stock;
(e) 48,476 shares owned by Rivkalex Corporation ("Rivkalex"), a private
corporation owned by Rosalind Davidowitz, Mr. Davis's wife;
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(f) 711,633 shares of common stock owned by Rosalind Davidowitz. Mr. Davis
and D.H. Blair Investment Banking Corp. expressly disclaim beneficial ownership
of all securities held by Rivkalex and Rosalind Davidowitz; and
(g) 185,957 shares of common stock to be issued upon conversion of 8%
Convertible Notes owned by Rosalind Davidowitz.
(14) Includes:
(a) 28,301 shares of common stock owned by D.H. Blair Investment Banking
Corp., of which J. Morton Davis is a Director and the sole stockholder;
(b) 1,500 shares of common stock issuable upon the exercise of warrants
owned by D.H. Blair Investment Banking Corp., of which J. Morton Davis is a
Director and the sole stockholder;
(c) 1,295 shares owned directly by Mr. Davis;
(d) 250 shares of common stock issuable upon exercise of 5,900 shares of
$10 Convertible Preferred Stock;
(e) 484 shares owned by Rivkalex Corporation ("Rivkalex"), a private
corporation owned by Rosalind Davidowitz, Mr. Davis's wife;
(f) 7,116 shares of common stock owned by Rosalind Davidowitz. Mr. Davis
and D.H. Blair Investment Banking Corp. expressly disclaim beneficial ownership
of all securities held by Rivkalex and Rosalind Davidowitz; and
(g) 1,859 shares of common stock to be issued upon conversion of 8%
Convertible Notes owned by Rosalind Davidowitz.
(15) Does not include 2,830,139 shares of common stock, warrants to purchase
150,000 shares of common stock or 25,060 shares of common stock issuable upon
conversion of $10 Convertible Preferred Stock owned by D.H. Blair Investment
Banking Corp., of which Martin A. Bell is Vice Chairman. Mr. Bell expressly
disclaims beneficial ownership of all securities held by D.H. Blair Investment
Banking Corp.
(16) Does not include 28,301 shares of common stock, warrants to purchase 1,500
shares of common stock or 250 shares of common stock issuable upon conversion of
$10 Convertible Preferred Stock owned by D.H. Blair Investment Banking Corp., of
which Martin A. Bell is Vice Chairman. Mr. Bell expressly disclaims beneficial
ownership of all securities held by D.H. Blair Investment Banking Corp.
(17) Includes 711,633 shares of common stock owned by Ms. Davidowitz, 48,476
shares owned by Rivkalex and 185,957 shares of common stock to be issued upon
conversion of an 8% Convertible Note owned by Ms. Davidowitz.
Does not include:
(a) 2,830,139 shares of common stock owned by D.H. Blair Investment Banking
Corp., of which J. Morton Davis is a Director and the sole stockholder;
(b) 150,000 shares of common stock issuable upon the exercise of warrants
owned by D.H. Blair Investment Banking Corp., of which J. Morton Davis is a
Director and the sole stockholder;
(c) 129,567 shares owned directly by Mr. Davis; and
(d) 25,060 shares of common stock issuable upon conversion of 5,900 shares
of $10 Convertible Preferred Stock.
(18) Includes 7,116 shares of common stock owned by Ms. Davidowitz, 484 shares
owned by Rivkalex and 1,859 shares of common stock to be issued upon conversion
of an 8% Convertible Note owned by Ms. Davidowitz.
Does not include:
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(a) 28,301 shares of common stock owned by D.H. Blair Investment Banking
Corp., of which J. Morton Davis is a Director and the sole stockholder;
(b) 1,500 shares of common stock issuable upon the exercise of warrants
owned by D.H. Blair Investment Banking Corp., of which J. Morton Davis is a
Director and the sole stockholder;
(c) 1,295 shares owned directly by Mr. Davis; and
(d) 250 shares of common stock issuable upon conversion of 5,900 shares of
$10 Convertible Preferred Stock.
(19) Consists of 1,103,667 shares of common stock owned by Venturetek LP in
which Mr. Selengut is the beneficial owner.
(20) Consists of 11,036 shares of common stock owned by Venturetek LP in which
Mr. Selengut is the beneficial owner.
(21) Includes:
(a) 581,950 shares of common stock;
(b) 270,000 shares of common stock owned by Kinder Investments LP
("Kinder"), of which Mr. Perlysky is the sole member of the general partner of
Kinder; and
(c) 331,363 shares of common stock to be issued upon conversion of 8%
Convertible Notes owned by Dov Perlysky.
(22) Includes:
(a) 5,819 shares of common stock;
(b) 2,700 shares of common stock owned by Kinder, of which Mr. Perlysky is
the sole member of the general partner of Kinder; and
(c) 3,313 shares of common stock to be issued upon conversion of 8%
Convertible Notes owned by Dov Perlysky.
(23) Includes shares of common stock issuable upon exercise of the options
referenced in (1), (3) and (5) above, shares issuable upon the conversion of the
$10 Convertible Preferred Stock referenced in (9) above and shares issuable upon
the exercise of the warrants in (1) above.
(24) Includes shares of common stock issuable upon exercise of the options
referenced in (2), (4) and (6) above, shares issuable upon the conversion of the
$10 Convertible Preferred Stock referenced in (10) above and shares issuable
upon the exercise of the warrants in (2) above.
On February 3, 2005, pursuant to a Subscription Agreement with, D.H.
Blair Investment Banking Corp., we satisfied $200,000 of our 8% convertible note
plus accrued interest thereon of $62,597 by issuing 375,139 shares of common
stock at a price of $0.70 per share.
On January 20 and 31, 2005, we borrowed an aggregate of $350,000 and
issued 8% convertible notes in the principal amounts of $224,000 and $126,000,
respectively, due July 20, 2006, to Kinder Investments LP and Rosalind
Davidowitz, respectively. The notes are convertible into common stock at a
conversion price of $0.70 per share.
-23-
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Schedule 13E-3 with the SEC regarding this
transaction. In addition, we file reports, proxy statements and other
information with the SEC under the Exchange Act. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. You may
read and copy this information at the Public Reference Room of the SEC, 450
Fifth Street, N.W., Room 1024, Washington, D.C., 20549.
You may also obtain copies of this information by mail from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains an Internet
World Wide Web site that contains reports, Information Statements and other
information about issuers, including us, who file electronically with the SEC.
The address of that site is http://www.sec.gov.
We have not authorized anyone to give any information or make any
representation about the transaction that differs from, or adds to, the
information in this disclosure document or our documents that are publicly filed
with the SEC. Therefore, if anyone gives you different or additional
information, you should not rely on it.
The information contained in this disclosure document speaks only as
of its date, unless the information specifically indicates that another date
applies.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information in this
document. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this document, except
for any information that is superseded by information that is included directly
in this document or in any other subsequently filed document.
This document incorporates by reference the documents listed below
that we have filed with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act.
Commissions Filings (File No. 0-18299):
Quarterly Report on Form 10-QSB Quarter ended March 31, 2005
Annual Report on Form 10-KSB Year ended December 31, 2004
Current Report on 8-K February 3, 2005
January 26, 2005
We will amend this Information Statement and our Schedule 13E-3 to
include or incorporate by reference any additional documents that we may file
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this document to the extent required to fulfill our disclosure
obligations under the Exchange Act.
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