SCHEDULE
14C/A
(Rule
14c-101)
INFORMATION
REQUIRED IN INFORMATION STATEMENT
(Amendment
No. 1)
Information
Statement Pursuant to Section 14(c) of the
Securities
Exchange Act of 1934
Check the
appropriate box:
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[x]
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Preliminary
Information Statement
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[ ]
Confidential, for use of the Commission only
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Definitive
Information Statement
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Seaway
Valley Capital
Corporation. .
(Name of
Registrant as Specified In Its Charter)
Payment
of Filing Fee (Check the appropriate box):
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[ ]
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Fee
computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Price
per unit or other underlying value of transaction 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)
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Proposed
maximum aggregate value of
transaction:
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Fee
paid previously with preliminary
materials.
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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.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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SEAWAY
VALLEY CAPITAL CORPORATION
10-18
Park Street, 2
nd
Floor
Gouverneur,
N.Y. 13642
INFORMATION
STATEMENT
To the
Holders of the Voting Stock:
The purpose of this Information
Statement is to notify you that the holder of shares representing a majority of
the voting power of Seaway Valley Capital Corporation (“SVCC”) has given his
written consent to a resolution adopted by the Board of Directors of SVCC to
amend the Certificate of Incorporation so as to effect a reverse split of the
company’s common stock in a ratio of 1-for-1,000. Any shareholder who
owns less than 1,000 shares immediately prior to the reverse split will have his
shares redeemed by the Company at the then-current market price. We
anticipate that this Information Statement will be mailed on April ___, 2009 to
shareholders of record. On or after April ___, 2009, the amendment of
the Certificate of Incorporation will be filed with the Delaware Secretary of
State and it will become effective.
Delaware General Corporation Law
permits holders of a majority of the voting power to take shareholder action by
written consent. Accordingly, SVCC will not hold a meeting of its shareholders
to consider or vote upon the amendment of SVCC’s Certificate of
Incorporation.
WE
ARE NOT ASKING YOU FOR A PROXY.
YOU
ARE REQUESTED NOT TO SEND US A PROXY.
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April
___, 2009
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Thomas
Scozzafava
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Chief
Executive Officer
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VOTING
SECURITIES OUTSTANDING
We determined the shareholders of
record for purposes of this shareholder action at the close of business on
January 26, 2009 (the “Record Date”). On the Record Date, the
authorized voting stock consisted of:
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(1)
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10,000,000,000
shares of common stock, par value $0.0001, each of which is entitled to
one vote. On the Record Date, there were 2,701,825,893 shares
of common stock issued, outstanding and entitled to
vote.
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(2)
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1,600,000
shares of Series C Preferred Stock, par value $0.0001 per share, 1,405,483
of which were outstanding on the Record Date. The outstanding
shares of Series C Preferred Stock were entitled to a total of
66,140,376,471 votes on the Record Date – i.e. 47,059 votes per
share.
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(3)
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881,065
shares of Series D Preferred Stock, par value $0.0001 per share, all of
which were outstanding on the Record Date. The outstanding
shares of Series D Preferred Stock were entitled to a total of
51,827,352,941 votes on the Record Date – i.e. 58,824 votes per
share.
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(4)
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100,000
shares of Series E Preferred Stock, par value $0.0001 per share, all of
which were outstanding on the Record Date. The outstanding
shares of Series E Preferred Stock were entitled to a total of
1,002,425,168,944 votes on the Record Date – i.e. 10,024,251 votes per
share.
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There is
no individual who owns 5% or more of the outstanding common stock, and neither
of our officers or directors owns any shares of our common stock. The
following table sets forth the number of shares of voting stock beneficially
owned by each person who, as of the Record Date, owned beneficially more than 5%
of any class of SVCC’s voting stock, as well as the ownership of such shares by
each member of SVCC’s Board of Directors and the shares beneficially owned by
its officers and directors as a group.
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Name
and Address of
Beneficial
Owner
(1)
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Amount
and Nature
of Beneficial
Ownership
(2)
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Aggregate
Percent of
Class
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Percent
of
Voting
Power
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Thomas
Scozzafava
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100,000
Series E
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100.0%
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80.0%
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Christopher
Swartz
(3)
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259,914
Series D
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29.5%
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2.5%
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Current
executive officers and
directors
as a group (2 persons)
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100,000
Series E
259,914
Series D
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100.0%
29.5%
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80.0%
2.5%
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Dierdre
Scozzafava
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442,150
Series C
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31.5%
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3.4%
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Frederick
Scozzafava
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379,350
Series C
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27.0%
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3.0%
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William
Scozzafava
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138,500
Series C
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9.9%
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1.1%
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Joseph
Canouse
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82,500
Series C
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5.9%
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0.6%
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Silver
Hamilton, LLC
(4)
3109
Stirling Road, Suite 200
Ft.
Lauderdale, FL 33312
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180,290
Series C
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12.8%
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1.4%
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____________________
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(1)
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The
address of each owner, unless otherwise specified, is c/o Seaway Valley
Capital Corporation,
10-18 Park Street,
2
nd
Floor, Gouverneur,
N.Y. 13642
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(2)
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Except
as indicated in the footnotes to this table and pursuant to applicable
community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.
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(3)
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Includes
259,914 Series D shares held by organizations over which Mr. Swartz has
dispositional and voting control.
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(4)
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Walter
Hollander, Brad Ackerman and Melissa Ackerman each have voting and
disposition control over the shares owned by Silver Hamilton,
LLC.
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AMENDMENT OF THE CERTIFICATE
OF INCORPORATION TO EFFECT
A REVERSE SPLIT OF THE
COMMON STOCK
The Board
of Directors of SVCC has adopted a resolution to effect a reverse split of
SVCC’s common stock in the ratio of 1:1000 (the “Reverse Split”). The
Reverse Split will not change the number of authorized shares of common stock,
which will remain at 10,000,000,000. No fractional shares or scrip
will be issued. SVCC will purchase fractional shares at the then
current market price from any shareholder who owns less than one whole
share. All other shareholders who would otherwise be entitled to a
fractional share as a result of the Reverse Split will receive one whole share
of SVCC common stock in lieu of the fraction.
Reasons
for Approving the Reverse Split
There are
two primary reasons why the Board of Directors approved the Reverse
Split. The first reason is that the amount of common stock that we
currently have authorized is inadequate to allow all of our outstanding
derivative securities to be converted. The second reason is to enable our Board
of Directors to use for acquisitions, business expansion and other corporate
purposes the additional authorized stock that will result from the reverse
split.
Reason #1: Our
Outstanding Derivative Securities
Our
Certificate of Incorporation currently authorizes the Board of Directors to
issue 10,000,000,000 shares of Common Stock, of which 2,701,825,893 shares were
issued and outstanding on January 26, 2009. However, there are also
outstanding
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§
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Convertible
Preferred Shares of classes C, D and E, which are convertible into an
aggregate total of 1,120,392,898,356 shares of Common Stock,
based on the market price of $0.0001 at January 26,
2009;
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§
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Warrants
which, when exercised, entitle the holder to purchase 38,920,000 shares of
Common Stock; and
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§
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Convertible
Debentures which are convertible, in the aggregate, into a total of
129,897,816,931 shares of Common Stock, based on the market price of
$0.0001 at January 26, 2009.
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There is
an Appendix at the end of this Information Statement. The Appendix
sets forth additional information concerning the derivative securities listed
above, including information about the costs incurred by the Company in issuing
those derivative securities and information about the potential profits that the
holders of the derivative securities may realize.
The table
below identifies the specific securities that are convertible into shares of our
Common Stock. The column labeled “Potential Conversion” shows the
number of common shares into which the security could be converted at the market
price of $0.0001 on January 26, 2009.
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Security-Holder
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Original
Amount
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Currently
Outstanding
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Potential
Conversion
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Series
C Preferred
(1)
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1,458,236
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1,405,483
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66,140,376,471
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Series
D Preferred
(2)
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881,065
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881,065
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51,827,352,941
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Series
E Preferred
(3)
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100,000
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100,000
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1,002,425,168,944
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Total
- Preferred
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1,120,392,898,356
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Warrants
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38,920,000
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38,920,000
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38,920,000
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Debentures:
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YA
Global Investments, L.P.
(4)
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2,799,073
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2,605,273
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34,736,979,978
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Paul
Graham
(5)
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650,000
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565,000
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11,300,000,000
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JMJ
Financial
(6)
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1,525,000
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1,434,000
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19,120,000,000
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Golden
Gate Investors, Inc.
(7)
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1,500,000
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1,132,500
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14,901,315,789
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Renzi
Brothers
(8)
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205,668
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205,668
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3,164,123,076
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JE
Gaus
(9)
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100,000
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100,000
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1,538,461,538
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Goshen
Capital Partners, LLC
(9)
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100,000
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100,000
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1,538,461,538
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Hill
& Murphy Notes
(10)
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557,174
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557,174
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8,571,907,692
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Hudson
Capital Partners, LLC
(11)
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75,000
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65,000
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1,000,000,000
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Hackett’s
Investors
(12)
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944,744
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944,744
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10,497,155,555
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Hackett’s
Sellers
(13)
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2,000,000
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2,000,000
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23,529,411,765
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Total
- Debentures
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129,897,816,931
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Total
Potential Conversion
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1,250,329,635,287
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(1)
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The
Series C Preferred shares were issued in 2007 in exchange for ownership of
WiseBuys Stores, Inc. Each share has a $4.00 liquidation
preference. In the event a dividend is declared, the Series C
shares will participate in the dividend on an “as converted”
basis. The shares are convertible at any time by the holder at
85% of the market price, but may not be converted into shares that will
cause the holder to own more than 4.99% of the outstanding
shares. The Company has no redemption
right.
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(2)
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The
Series D Preferred shares were issued in 2008 in exchange for ownership of
North Country Hospitality, Inc. Each share has a $5.00
liquidation preference. In the event a dividend is declared,
the Series D shares will participate in the dividend on an “as converted”
basis. The shares are convertible at any time by the holder at
85% of the market price. The Company has no redemption
right.
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(3)
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The
Series E Preferred shares are owned by Thomas Scozzafava, our
Chairman. Each share has a $.01 liquidation
preference. In the event a dividend is declared, the Series E
shares will participate in the dividend on an “as converted”
basis. They are convertible into 80% of the fully diluted
outstanding shares.
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(4)
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The
convertible debentures held by YA Global Investments, LP bear interest at
12% per annum. Principal and interest are due in cash on
February 28, 2010. The payment obligation is secured by a
pledge of all of the Company’s assets. The holder of the
debentures is entitled, at any time, to convert the principal and accrued
interest into common stock of the Company at the lower of either 75% of
the market price or a fixed price, which is $.06 with respect to a
debenture in the amount of $375,000 and $.05 with respect to the remaining
debentures. The debentures cannot, however, be converted into
shares that will cause the holder to own more than 4.99% of the
outstanding shares. The Company may redeem the debentures by
paying a 20% premium over the principal amount at any time that the market
price is less than $.01 and there is an effective registration statement
covering the shares into which the debentures are
convertible.
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(5)
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The
convertible debentures held by Paul Graham were issued in September 2007,
May 2008 and July 2008. They bear interest at 8% per annum,
payable in shares of common stock on September 18, 2012. The
principal is payable in cash on that same date. The principal
amount is convertible into common stock at the lower of either 50% of the
market price or a fixed price, which is $.12 with respect to a $500,000
debenture, $.02 with respect to a $50,000 debenture, and $.004 with
respect to a $100,000 debenture. The debentures may not,
however, be converted into shares that will cause the holder to own more
than 4.9% of the outstanding shares. The Company has no
redemption right.
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(6)
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The
convertible debentures held by JMJ Financial were issued in December
2007. Payment in cash of $325,000 in principal and interest at
a rate of 12% per annum accrued on that amount are due on demand or, in
any case, on December 10, 2010. Payment in cash of the
remainder (including a one time 10% interest charge) is due on December
10, 2011. The holder may, at any time, convert the principal
and accrued interest into shares of the Company’s common stock at the
lower of either 75% of the market price or a fixed price, which is $.05
per share. The debentures may not be converted into shares that
will cause the holder to own more than 4.99% of the outstanding
shares. If the Company issues stock to a third party at a price
less than the stated conversion price, the conversion price will be
adjusted to equal that issue price. The holder has a two-year
option to invest an additional $1 million in the Company on the same
terms. The Company has no redemption
right.
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(7)
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The
convertible debentures held by Golden Gate Investors, Inc. were issued in
December 2007. Payment of the principal in cash is due on
December 4, 2010. Interest at 7% per annum is payable monthly,
in cash or in common stock at the option of the holder. The
holder may, at any time, convert the principal amount of the debenture
into shares of the Company’s common stock at the lower of either 76% of
the market price or a fixed price, which is $.05 per share. The
debenture may not, however, be converted into shares that will cause the
holder to own more than 4.99% of the outstanding shares. If the
VWAP for the common stock is below $.005 at the time of conversion, the
Company may prepay the amount of principal being converted by paying a 50%
premium. Otherwise the Company has no redemption
right.
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(8)
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The
convertible debenture held by Renzi Brothers was issued in June 2008 in
satisfaction of debts of North County Hospitality, Inc., a subsidiary of
the Company. The debenture is payable in cash on demand and
does not bear interest. The holder may convert the principal
into shares of the Company’s common stock at 65% of the market
price.
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(9)
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The
convertible debentures held by Jennifer Gaus and Goshen Capital Partners
were issued in September 2008 in satisfaction of an obligation of Patrick
Hackett Hardware Company, a subsidiary of the
Company. The principal and interest accrued at 10% per
annum will be payable in cash on August 31, 2011. The holder may, at any
time, convert the principal amount of the debenture into shares of the
Company’s common stock at the lower of either 65% of the market price or a
fixed price, which is $.05 per share. The debentures may not,
however, be converted into shares that will cause the holder to own more
than 4.99% of the outstanding shares. If the Company issues
stock to a third party at a price less than the stated conversion price,
the conversion price will be adjusted to equal that issue
price. The Company may redeem the debenture by paying a 20%
premium over the principal amount at any time that the market price is
less than $.001 and there is an effective registration statement covering
the shares into which the debenture is
convertible.
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(10)
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The
convertible debentures held by Brian C. Hill and Moriah Murphy were issued
in July and September 2008. They do not bear
interest. The principal is due on July 31, 2013 ($422,174 –
Hill; $35,000 – Murphy) and on September 15, 2011 ($100,000 –
Hill). The holder may, at any time, convert the principal
amount of the debenture into shares of the Company’s common stock at the
lower of either 65% of the market price or a fixed price, which is $.025
with respect to debentures in the amount of $457,174 and $.005 with
respect to a $100,000 debenture. The debentures may not,
however, be converted into shares that will cause the holder to own more
than 4.9% of the outstanding shares. The Company has no right
of redemption.
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(11)
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The
convertible debenture held by Hudson Capital Partners was issued in
October 2008 in exchange for Series C Preferred Stock with a face value of
$75,000. The principal and interest accrued at 12% per
annum will be payable in cash on September 30, 2010. The holder may, at
any time, convert the principal amount of the debenture into shares of the
Company’s common stock at the lower of either 65% of the market price or a
fixed price, which is $.0007 per share. The debenture may not,
however, be converted into shares that will cause the holder to own more
than 4.99% of the outstanding shares. If the Company issues
stock to a third party at a price less than the stated conversion price,
the conversion price will be adjusted to equal that issue
price. The Company may redeem the debenture by paying a 20%
premium over the principal amount at any time that the market price is
less than $.0007 and there is an effective registration statement covering
the shares into which the debenture is
convertible.
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(12)
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The
convertible notes held by the “Hackett’s Investors” were issued in
exchange for debt that those investors held in Patrick Hackett Hardware
Company, which was acquired by the Company in 2007. The notes
are payable in cash on demand with interest at 12% per
annum. The holder of each note can convert the principal and
interest into shares of the Company’s common stock at the lower of either
90% of the market price or a fixed price, which is $.02 per
share. The notes may not, however, be converted into shares
that will cause the holder to own more than 4.9% of the outstanding
shares.
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(13)
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The
convertible notes held by the “Hackett’s Sellers” were issued in November
2007 in partial consideration for the capital stock of Patrick Hackett
Hardware Company. Principal and interest at 8% per annum are payable in
cash on demand. The notes are personally guaranteed by Tom
Scozzafava, our Chairman, and are secured by a pledge of the capital stock
of Patrick Hackett Hardware Company. The holder of each
debenture can, at any time, convert the principal and interest into shares
of the Company’s common stock at 85% of the market price, but the note may
not be converted into shares that will cause the holder to own more than
4.99% of the outstanding shares.
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Therefore,
there is not an adequate number of authorized but unissued shares of Common
Stock available for conversion of the outstanding Preferred Shares and
Convertible Debentures and the exercise of the Warrants. The Reverse
Split will make available some of the shares needed for these
purposes. Management hopes that an increase in the stock price will
reduce the magnitude of the potential conversions and make 10 billion authorized
shares adequate for its purposes. There is no assurance, however,
that an additional Reverse Split will not be required at a later
date.
Reason #2: To Enable New
Transactions
The
second reason for the Reverse Split is that the Board of Directors wishes to
have authorized but unissued stock available for various purposes, such as
effecting acquisitions, business expansion, obtaining financing, and recruiting
management personnel, all of which will be necessary if SVCC is to undertake new
business operations.
At the
present time, the Board of Directors has not made any specific plan, commitment,
arrangement, understanding or agreement with respect to the additional shares
that will be available for issuance after the Reverse Split, other than the
issuance of common stock upon conversion of the Preferred Stock and Convertible
Debentures and exercise of the Warrants.
General
Effect of the Reverse Split
The table
below shows the effect of the Reverse Split on SVCC’s common shares outstanding
at January 26, 2009, as well as the effect of the Reverse Split on the number of
shares that will be outstanding if all of the outstanding preferred stock and
debentures are converted, based on the market price of $0.0001 at January 26,
2009. The column labeled “After Reverse Split” does not reflect
any adjustments that may result from the rounding up of fractional shares. We
cannot calculate at this time the number of whole shares that will be issued in
lieu of fractions as a result of the Reverse Split.
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Prior
to
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After
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Reverse
Split
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Reverse
Split
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Shares
of Common Stock:
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Authorized
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10,000,000,000
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10,000,000,000
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Issued
and outstanding
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2,701,825,893
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2,701,826
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Available
for issuance
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7,298,174,107
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9,997,298,174
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Issuable
upon conversion of Series C Preferred
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66,140,376,471
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66,140,376
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Issuable
upon conversion of Series D Preferred
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51,827,352,941
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51,827,353
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Issuable
upon conversion of Series E Preferred
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1,002,425,168,944
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1,002,425,169
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Issuable
upon exercise of the Warrants
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38,920,000
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38,920
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Issuable
upon conversion of Debentures
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129,897,816,931
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129,897,817
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Outstanding
if all Warrants are exercised and
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all
Preferred Shares and Debentures are converted
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1,253,031,461,180
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1,253,031,461
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Available
for issuance after exercise of Warrants
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and
conversion of all Preferred Shares and Debentures
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0
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8,746,968,539
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The
Reverse Split will increase the number of shares available for issuance by the
Board of Directors to 8,746,968,539. The Board of Directors will be
authorized to issue the additional common shares without having to obtain the
approval of the SVCC shareholders. Delaware law requires that the
Board use its reasonable business judgment to assure that SVCC obtains “fair
value” when it issues shares. Nevertheless, the issuance of the
additional shares would dilute the proportionate interest of current
shareholders in SVCC. The issuance of the additional shares could
also result in the dilution of the value of shares now outstanding, if the terms
on which the shares were issued were less favorable than the contemporaneous
market value of SVCC common stock.
The
Reverse Split, with the resulting increase in the number of shares available for
issuance, are not being done for the purpose of impeding any takeover
attempt. Nevertheless, the power of the Board of Directors to provide
for the issuance of shares of common stock without shareholder approval has
potential utility as a device to discourage or impede a takeover of
SVCC. In the event that a non-negotiated takeover were attempted, the
private placement of stock into “friendly” hands, for example, could make SVCC
unattractive to the party seeking control of SVCC. This would have a
detrimental effect on the interests of any stockholder who wanted to tender his
or her shares to the party seeking control or who would favor a change in
control.
How
the Reverse Split Will Be Effected.
The
officers of SVCC will file an amendment to the Certificate of Incorporation with
the Delaware Secretary of State effecting the Reverse Split. The
amendment will provide that each thousand shares of common stock outstanding at
the close of business on the effective date of the filing will be exchanged for
one post-Reverse Split share of SVCC common stock (“New Common
Stock”). The New Common Stock will not be different from the common
stock held by SVCC shareholders prior to the Reverse Split. The
holders of the New Common Stock will have the same relative rights following the
effective date of the Reverse Split as they had before the effective
date.
Exchange
of Stock Certificates and Liquidation of Fractional Shares.
Upon
filing of the certificate of amendment with the Delaware Secretary of State, the
outstanding certificates representing shares of SVCC common stock will be
automatically converted into certificates representing shares of New Common
Stock. Every shareholder who surrenders a certificate representing
shares of common stock to the transfer agent with the appropriate stock transfer
fee will receive a certificate representing the appropriate number of shares of
New Common Stock. The name and address of the transfer agent for SVCC
is:
Standard
Registrar & Transfer Co., Inc.
12528
South 1840 East
Draper,
Utah 84020
(801)
571-8844
If the Reverse Split results in a
shareholder owning less than one full share of SVCC common stock, then that
shareholder will not receive New Common Stock. In lieu of the
fractional share, SVCC will send the shareholder a check for the market value of
the fractional share. The market value will be based on the market
price of the common stock on the effective date of the Reverse
Split. If the Reverse Split results in a shareholder owning a whole
number of shares of New Common Stock plus a fraction of a share, then the
fraction will be rounded up to one full share.
No
Dissenters’ Rights
Under Delaware law, shareholders are
not entitled to dissenters’ rights with respect to any of the transactions
described in this Information Statement.
* * *
APPENDIX: CONCERNING
THE DERIVATIVE SECURITIES
Table I: Potential Costs to
the Company
The
following table indicates the costs that may be incurred by the Company in
connection with each of its derivative securities. The second column
sets forth the maximum possible interest accrual – i.e. the interest that would
be accrued and payable by the Company as of the Maturity Date if there were no
conversion or prepayment of principal. The third column sets forth
payments made in cash or stock in connection with the issuance of the derivative
security to the holder of the derivative security, any affiliate of the holder,
or any person with whom the holder had a contractual relationship. In each of
the two instances of “Ancillary Payments” noted, the “payment” consisted of an
amount of the purchase price for the derivative security that was retained by
the investor as a “transaction fee.”
|
Security-Holder
|
Interest
to
Maturity
Date
|
Ancillary
Payments
to
Holder
|
Total
Potential
Cost
|
|
Series
C Preferred
|
N.A.
|
0
|
0
|
|
Series
D Preferred
|
N.A.
|
0
|
0
|
|
Series
E Preferred
|
N.A.
|
0
|
0
|
|
Warrants
|
N.A.
|
0
|
0
|
|
Debentures:
|
|
|
|
|
YA
Global Investments, L.P.
|
354,388
(1)
|
385,000
|
739,388
|
|
Paul
Graham
|
283,200
(2)
|
0
|
283,200
|
|
JMJ
Financial
|
237,000
(3)
|
250,000
|
487,000
|
|
Golden
Gate Investors, Inc.
|
0
(4)
|
0
|
0
|
|
Renzi
Brothers
|
0
(5)
|
0
|
0
|
|
JE
Gaus
|
33,100
(6)
|
0
|
33,100
|
|
Goshen
Capital Partners, LLC
)
|
33,100
(6)
|
0
|
33,100
|
|
Hill
& Murphy Notes
|
0
(7)
|
0
|
0
|
|
Hudson
Capital Partners, LLC
|
19,080
(8)
|
0
|
19,080
|
|
Hackett’s
Investors
|
141,712
(9)
|
0
|
141,712
|
|
Hackett’s
Sellers
|
200,000
(10)
|
0
|
200,000
|
|
(1)
|
The
debentures held by Y.A. Global Investments, L.P. bear interest at 12% per
annum from November, 2007, January and March 2008, respectively, through
February 28, 2010.
|
|
(2)
|
The
debentures held by Paul Graham bear interest at 8% per annum from
September 2007, May and July 2008, respectively, through September 18,
2012.
|
|
(3)
|
The
debentures held by JMJ Financial bear interest at 12% per annum from
December 2007 through December
2010.
|
|
(4)
|
In
payment for the $1,500,000 7% convertible debenture issued by the Company
to Golden Gate Investors, Inc., Golden Gate Investors, Inc. paid $400,000
in cash and issued a $1,100,000 8% secured promissory note to the
Company. The interest accruing on the debenture issued to
Golden Gate Investors, Inc. is fully offset by the interest accruing on
the promissory note issued by Golden Gate Investors to the
Company.
|
|
(5)
|
The
debenture held by Renzi Brothers does not bear
interest.
|
|
(6)
|
The
debentures held by Jennifer Gaus and Goshen Capital Partners bear interest
at 10% per annum from September 2008 through August 31,
2011.
|
|
(7)
|
The
notes held by Brian C. Hill and Moriah Murphy do not bear
interest.
|
|
(8)
|
The
debenture held by Hudson Capital Partners bears interest at 12% per annum
from October 2008 through September 30,
2010.
|
|
(9)
|
The
notes issued to the Hackett’s Investors bear interest at 12% per
annum. The Company has been responsible for that interest
obligation from November 2007. The notes are payable on
demand. Therefore the interest shown in the table represents
the accrual from November 2007 through January 26, 2009, the Record
Date.
|
|
(10)
|
The
notes issued to the Hackett’s Sellers bear interest at 8% per annum from
November 2007. The notes are currently payable on
demand. Therefore the interest shown in the table represents
the accrual from November 2007 through January 26, 2009, the Record
Date.
|
Table II: Convertible
Preferred Stock and Warrants – Implicit Profit on Date of
Issuance
The following table contains
information regarding the outstanding shares of the Company’s convertible
preferred stock and outstanding common stock purchase warrants. The
columns bearing the titles listed below, contain the following
information:
|
Security:
|
|
Title
of security
|
|
Date
of Issue:
|
|
Date
of issue
|
|
Face
Value:
|
|
The
Dollar amount of the preferred stock that may be converted into common
stock. (Note: The Series E preferred stock converts
into a fixed percentage of the outstanding shares, not based on an
underlying Dollar amount.)
|
|
Market
Price:
|
|
The
market price of our common stock on the date of issue of the derivative
security
|
|
Conversion
Price:
|
|
Conversion
rate of the preferred shares or exercise price of the
warrants. (Note: The Series E preferred shares are
convertible into common shares that will represent 80% of the
fully-diluted outstanding common shares.)
|
|
Shares
Issuable:
|
|
The
number of shares of common stock issuable upon conversion of the Preferred
Stock on its date of issue, based on the Share Price.
|
|
Stock
Value:
|
|
The
market value of the Shares Issuable, based on the Share
Price.
|
|
Value
of
|
|
|
|
Consideration:
|
|
The
gross proceeds received by the Company in exchange for the preferred
stock.
|
|
Implicit
Profit:
|
|
The
difference between the Stock Value and the Value of
Consideration. (In the case of the Warrants, the Potential
Profit is the difference between the Stock Value and the exercise price of
the Warrants.)
|
|
|
DATE
OF
|
|
FACE
|
|
|
MARKET
|
|
|
CONVERSION
|
|
|
SHARES
|
|
|
STOCK
|
|
|
VALUE
OF
|
|
|
IMPLICIT
|
|
|
SECURITY
|
ISSUE
|
|
VALUE
|
|
|
PRICE
|
|
|
PRICE
|
|
|
ISSUABLE
|
|
|
VALUE
|
|
|
CONSIDERATION
|
|
|
PROFIT
|
|
|
Series
C Pref
|
10/23/2007
|
|
$
|
5,832,588
|
|
|
$
|
0.1550
|
|
|
$
|
0.1318
|
|
|
|
44,270,118
|
|
|
$
|
6,861,868
|
|
|
$
|
2,654,447
|
*
|
|
$
|
4,207,421
|
|
|
Series
D Pref
|
6/2/2008
|
|
$
|
4,405,325
|
|
|
$
|
0.0140
|
|
|
$
|
0.0119
|
|
|
|
370,195,378
|
|
|
$
|
5,182,735
|
|
|
$
|
6,851,027
|
**
|
|
$
|
-
|
|
|
Series
E Pref
|
7/2/2007
|
|
|
-
|
|
|
$
|
0.0350
|
|
|
N.A.
|
|
|
|
1,135,737,842
|
|
|
$
|
39,750,824
|
|
|
$
|
232,159
|
***
|
|
$
|
39,518,665
|
|
|
WARRANTS
|
11/30/2007
|
|
|
-
|
|
|
$
|
0.074
|
|
|
$
|
0.0500
|
|
|
|
38,920,000
|
|
|
$
|
2,880,080
|
|
|
|
-
|
|
|
$
|
910,080
|
|
|
*
|
The
Series C Preferred shares were issued in exchange for ownership of
WiseBuys Stores, Inc. The book value of WiseBuys Stores, Inc at
the time of the exchange was $2,654,447.
|
|
**
|
The
Series D Preferred shares were issued in exchange for ownership of North
Country Hospitality, Inc. The book value of North County
Hospitality, Inc. at the time of the exchange was $6,851,027.
|
|
***
|
The
Series E Preferred Stock was issued to Mr. Scozzafava in exchange for his
shares of Series B Preferred Stock. The Series B Preferred
Stock was issued to GreenShift Corporation, which subsequently transferred
it to Mr. Scozzafava, in exchange for equity in four entities, which had a
fair value of $232,159.
|
Table III: Convertible
Debentures – Implicit Profit on Date of Issuance
The
following table contains information regarding the convertible debentures issued
by the Company. The columns bearing the titles listed below, contain
the following information:
|
Investor:
|
|
The
individual, entity or group to whom the debenture was
issued.
|
|
Date:
|
|
The
date on which the debenture was issued.
|
|
Original
Face:
|
|
The
principal amount of the debenture,
|
|
Market
Price:
|
|
The
market price of our common stock on the date the debenture was
issued.
|
|
Fixed
Conv. Price:
|
|
The
fixed price at which the debenture was convertible into common stock, by
its terms.
|
|
Conversion
Discount:
|
|
The
discount to the Market Price at which the debenture was convertible into
common stock by its terms.
|
|
Variable
Conv. Price:
|
|
The
Market Price multiplied by the Conversion Discount.
|
|
Shares
Issuable:
|
|
The
number of shares of common stock issuable upon conversion of the debenture
on its date of issue, based on the lower of the Fixed Conv. Price or the
Variable Conv. Price.
|
|
Stock
Value:
|
|
The
market value of the Shares Issuable, based on the Market
Price.
|
|
Implicit
Profit:
|
|
The
difference between the Stock Value and the Original
Face.
|
|
|
|
|
ORIGINAL
|
|
|
MARKET
|
|
|
FIXED
|
|
|
CONVERSION
|
|
VARIABLE
|
|
|
SHARES
|
|
|
STOCK
|
|
|
IMPLICIT
|
|
|
INVESTOR
|
DATE
|
|
FACE
|
|
|
PRICE
|
|
|
CONV.
PRICE
|
|
|
DISCOUNT
|
|
CONV.
PRICE
|
|
|
ISSUABLE
|
(1)
|
|
VALUE
|
|
|
PROFIT
|
|
|
YA
Global
|
11/30/2007
|
|
$
|
375,000
|
|
|
$
|
0.0740
|
|
|
$
|
0.0600
|
|
|
|
25%
|
|
$
|
0.0555
|
|
|
|
6,756,757
|
|
|
$
|
500,000
|
|
|
$
|
125,000
|
|
|
|
1/3/2008
|
|
$
|
175,000
|
|
|
$
|
0.0575
|
|
|
$
|
0.0500
|
|
|
|
25%
|
|
$
|
0.0431
|
|
|
|
4,057,971
|
|
|
$
|
233,333
|
|
|
$
|
58,333
|
|
|
|
3/4/2008
|
|
$
|
2,249,073
|
|
|
$
|
0.0410
|
|
|
$
|
0.0500
|
|
|
|
25%
|
|
$
|
0.0308
|
|
|
|
73,140,585
|
|
|
$
|
2,998,764
|
|
|
$
|
749,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
Graham
|
9/18/2007
|
|
$
|
500,000
|
|
|
$
|
0.1400
|
|
|
$
|
0.1200
|
|
|
|
50%
|
|
$
|
0.0700
|
|
|
|
7,142,857
|
|
|
$
|
1,000,000
|
|
|
$
|
500,000
|
|
|
|
5/14/2008
|
|
$
|
50,000
|
|
|
$
|
0.0220
|
|
|
$
|
0.0200
|
|
|
|
50%
|
|
$
|
0.0110
|
|
|
|
4,545,455
|
|
|
$
|
100,000
|
|
|
$
|
50,000
|
|
|
|
7/10/2008
|
|
$
|
100,000
|
|
|
$
|
0.0050
|
|
|
$
|
0.0040
|
|
|
|
50%
|
|
$
|
0.0025
|
|
|
|
40,000,000
|
|
|
$
|
200,000
|
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JMJ
Financial
|
12/10/2007
|
|
$
|
1,525,000
|
|
|
$
|
0.0750
|
|
|
$
|
0.0500
|
|
|
|
25%
|
|
$
|
0.0563
|
|
|
|
30,500,000
|
|
|
$
|
2,287,500
|
|
|
$
|
762,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Golden
Gate Investors
|
12/4/2007
|
|
$
|
1,500,000
|
|
|
$
|
0.0790
|
|
|
$
|
0.0500
|
|
|
|
24%
|
|
$
|
0.0600
|
|
|
|
30,000,000
|
|
|
$
|
2,370,000
|
|
|
$
|
870,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renzi
Brothers
|
6/2/2008
|
|
$
|
205,668
|
|
|
$
|
0.0140
|
|
|
NONE
|
|
|
|
34%
|
|
$
|
0.0092
|
|
|
|
22,258,442
|
|
|
$
|
311,618
|
|
|
$
|
105,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JE
Gaus
|
9/2/2008
|
|
$
|
100,000
|
|
|
$
|
0.0025
|
|
|
$
|
0.0050
|
|
|
|
35%
|
|
$
|
0.0016
|
|
|
|
61,538,462
|
|
|
$
|
153,846
|
|
|
$
|
53,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goshen
Capital Partners, LLC
|
9/2/2008
|
|
$
|
100,000
|
|
|
$
|
0.0025
|
|
|
$
|
0.0050
|
|
|
|
35%
|
|
$
|
0.0016
|
|
|
|
61,538,462
|
|
|
$
|
153,846
|
|
|
$
|
53,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hill
& Murphy Notes
|
8/1/2008
|
|
$
|
457,174
|
|
|
$
|
0.0030
|
|
|
$
|
0.0250
|
|
|
|
35%
|
|
$
|
0.0020
|
|
|
|
234,448,205
|
|
|
$
|
703,345
|
|
|
$
|
246,171
|
|
|
|
8/15/2008
|
|
$
|
100,000
|
|
|
$
|
0.0035
|
|
|
$
|
0.0050
|
|
|
|
35%
|
|
$
|
0.0023
|
|
|
|
43,956,044
|
|
|
$
|
153,846
|
|
|
$
|
53,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hudson
Capital Partners, LLC
|
10/10/2008
|
|
$
|
75,000
|
|
|
$
|
0.0005
|
|
|
$
|
0.0007
|
|
|
|
35%
|
|
$
|
0.0003
|
|
|
|
230,769,231
|
|
|
$
|
115,385
|
|
|
$
|
40,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hackett's
Investor Notes
|
11/7/2007
|
|
$
|
944,744
|
|
|
$
|
0.1075
|
|
|
$
|
0.1000
|
|
|
|
10%
|
|
$
|
0.0968
|
|
|
|
9,764,796
|
|
|
$
|
1,049,716
|
|
|
$
|
104,972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hackett's
Seller
|
4/1/2008
|
|
$
|
2,000,000
|
|
|
$
|
0.0315
|
|
|
NONE
|
|
|
|
15%
|
|
$
|
0.0268
|
|
|
|
74,696,545
|
|
|
$
|
2,352,941
|
|
|
$
|
352,941
|
|
|
|
(1)
Please note all convertible debentures with both a fixed price and
variable prices conversion are lesser of either at the time of the
conversion
|
Table IV: Derivative Securities –
Implicit Benefit to the Company and to the Investor
The following table sets forth (a) the
gross proceeds received by the Company in exchange for the issuance of its
derivative securities; (b) the total payments that will be required of the
Company in connection with each of its derivative securities, if the securities
are not converted into common stock (
See Table I above for
details)
; (c) the net proceeds to the Company; and (d) the implicit
profit attendant to each derivative security, as of its date of issue, as a
result of the conversion discounts underlying the derivative securities (
See Table II and Table III above for
details)
.
|
Security-Holder
|
Gross
Proceeds
|
Total
Payments
by the
Company
|
Net
Proceeds
to the
Company
|
Implicit Profit to the
Investor
on the Date of
Issue
|
|
Series
C Preferred
|
$2,654,447
|
0
|
$2,654,447
|
$6,861,868
|
|
Series
D Preferred
|
6,851,027
|
0
|
6,851,027
|
0
|
|
Series
E Preferred
|
232,159
|
0
|
232,159
|
39,518,665
|
|
Warrants
|
0
|
0
|
0
|
910,080
|
|
Debentures:
|
|
|
|
|
|
YA
Global Investments, L.P.
|
2,799,073
|
739,388
|
2,059,685
|
933,024
|
|
Paul
Graham
|
650,000
|
283,200
|
366,800
|
650,000
|
|
JMJ
Financial
|
1,525,000
|
487,000
|
1,038,000
|
762,500
|
|
Golden
Gate Investors, Inc.
|
1,500,000
|
0
|
1,500,000
|
870,000
|
|
Renzi
Brothers
|
205,668
|
0
|
205,668
|
105,950
|
|
JE
Gaus
|
100,000
|
33,100
|
66,900
|
53,846
|
|
Goshen
Capital Partners, LLC
)
|
100,000
|
33,100
|
66,900
|
53,846
|
|
Hill
& Murphy Notes
|
557,174
|
0
|
557,174
|
300,107
|
|
Hudson
Capital Partners, LLC
|
75,000
|
19,080
|
55,920
|
40,385
|
|
Hackett’s
Investors
|
944,744
|
141,712
|
803,032
|
104,972
|
|
Hackett’s
Sellers
|
2,000,000
|
200,000
|
1,800,000
|
352,941
|
* * * * *