1/50 R/S on the way.
A Letter from CEO, Charlie Guy;
As all of you must have surmised, the last 120 days have been extremely challenging for
the Company. We certainly have been aware of your deep concerns and have appreciated
not only your patience, but from some of you, your voiced strong support. We also
understand the frustration caused by our failure to communicate to you on a more regular
basis, but during a period when we found ourselves without operating funds, our ability to
communicate anything but our intent was limited by legal type restraints.
Despite our limited finances, we have been able to successfully execute the following
1. Secure financing in order to begin preparing for the deployment of our core
technologies to take advantage of existing revenue generating opportunities. We
were able to secure a financing agreement in the form of two year secured
convertible promissory notes providing the Company with $1,500,000 in
installments conditioned upon performance of covenants by the Company. The first
installment of $250,000 was received on May 11, 2004. An additional $625,000 is
payable immediately upon the Company’s filing of a registration statement for
shares of common stock to be reserved with a portion of those reserved to be
issued upon conversion of the Promissory Notes, with the final $625,000 payable on
the effective date of the registration statement. This level of funding provides us with
the fuel to generate activities that are necessary to transform the Company into a
fully operational and profitable entity.
2. Finalize an equitable agreement for all concerned with Ronald Rescigno and Ian
Rescigno in an effort to (a) stabilize our future financial position and (b) create the
necessary vacancies so that we may now recruit valuable key senior management
talent. The agreement relieves us of the obligation to pay in excess of $800,000 in
past due and future guaranteed compensation and other benefits claimed by
Ronald Rescigno and Ian Rescigno, both of whom have agreed to the termination of
their existing employment agreements and the release of outstanding warrants. The
Company issued 114,000,000 shares of its common stock as consideration for the
elimination of the bridge loan debt and the Rescigno’s claims.
3. Reduce as much as possible of prior debts. The Company has eliminated its
obligations to repay prior bridge loans in the amount of over $430,000, inclusive of
accrued interest. The company issued 119,000,000 shares of its common stock as
consideration for the elimination of the bridge loan debt.
4. Develop and execute a re-capitalization plan that would allow us to operate in the
future on a more financially secure basis in the view of the financial, education,
publishing, and governmental communities. Therefore the Board of Directors voted
unanimously to reduce the number of Company’s outstanding shares on the basis
of one share for every fifty shares outstanding, and to reduce the number of
authorized shares from 1,500,000,000 to 250,000,000.
This restructure IS
SUBJECT TO SHAREHOLDER APPROVAL AT A SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD June 16,2004 in Los Angeles, CA. A proxy
statement has been filed with and approved by the SEC and is in the process of
being sent to shareholders.
5. Complete our re-branding strategy by executing a corporate name change for the
Company. Therefore, the Board of Directors voted unanimously to change the
Company’s corporate name to “eKnowledgeXchange Corp.,” a decision that will
also be subject to shareholder approval. The Board’s decision emphasizes its
commitment to deploying the Company’s valuable technologies to the broadest
possible markets while taking a leadership position in the expanding eKnowledge
Although we are extremely pleased with the above steps, I am aware that the
concentration of our challenged financial and management resources in these activities
has resulted in some temporary conditions that must be very disconcerting to all of our
stockholders. During the above time period, we unable to complete in the required time our
SEC financial reports. This has resulted in our current inability to be traded on the OTC
We are now, however, executing a plan through which we expect that within 45 days to
have completed the year-end audited report as well as the first quarterly report for 2004.
We also expect by that time frame to have filed our Form 10K and 10Q. To assist us, we
have engaged Malone & Bailey, PLLC, of Houston, Texas, as independent auditors. The
firm’s audit practice specializes in the small to the medium sized public corporate market.
Following the filing of these reports, we will be in compliance and we are confident that we
will shortly thereafter be reinstated for trading on the OTCBB after market makers file the
necessary Form 211 with the NASD.
As an additional component of this financial re-organization, the Company will be moving
all of the daily administrative and accounting functions to our St. Petersburg, FL office
under the direct management of Jeff Miesbauer who will now function as acting Chief
Operating Officer in addition to his Chief Financial Officer duties.
With stockholder approval, we will have a re-branded and completely financially
reorganized company with internal financial controls focused on utilizing this new infusion
of funding so as to maximize our ability to take advantage of the many revenue-generating
opportunities that relate to the deployment of our core technologies.
We now have a number of near term financially attractive opportunities relating to the use
of our core technologies within the U.S. public education market that require our
participation as a member of a team of solution providers competing for grants and funding
from such organizations as the U.S. Department of Education, NASA, and the National
Science Foundation. We know from past experience that our capital structure has
significance to others in evaluating our qualifications during this process, regardless of the
value of our technologies. With our reorganized capital structure and with financing
committed, and of course with our unique core technologies, we will now be in a strong
position, both in terms of participating in the process as a member of a team of significant
providers and in dealing directly with these types of customers.
This new financial structure now allows us the opportunity to generate significant revenue
as well as receive important third party marketplace validation. We now are in the process
of refining our core technologies so as to commence deploying the applications into our
defined education and business markets. We are also now focusing our attention on
analyzing and completing those pending acquisitions that we feel appropriate, and
exploring additional potential acquisitions that will allow us to grow the company at a much
greater pace both within and outside of the education market.
Moreover, with our financing
commitment and our new capital structure, we should be better able to finalize those key
business alliances that we have been developing over the last year, each of which will
increase the viability of our position when working in the U.S. public education market.
I want to thank each of our shareholders for your patience during this trying period of the
company’s history. It is my deep personal belief, however, that the Company will in fact
emerge from these difficult times with a very bright and exciting future.
Charlie Guy, CEO