-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SE6FENAcAX90hXauRc1z79/xz6BxAOrVnqUTHmT9uN+KOaUI2ledv/4UAZ/bhF6G rDopo47b8qUK9uewCyPHlg== 0000891554-99-001931.txt : 19991018 0000891554-99-001931.hdr.sgml : 19991018 ACCESSION NUMBER: 0000891554-99-001931 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991105 FILED AS OF DATE: 19991013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WCM CAPITAL INC CENTRAL INDEX KEY: 0000215913 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 132879202 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-09416 FILM NUMBER: 99727709 BUSINESS ADDRESS: STREET 1: 76 BEAVER ST STREET 2: SUITE 500 CITY: NEW YORK STATE: NY ZIP: 10005 BUSINESS PHONE: 2123442828 MAIL ADDRESS: STREET 1: 76 BEAVER ST STREET 2: SUITE 500 CITY: NEW YORK STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN CONSOLIDATED MINING CO INC DATE OF NAME CHANGE: 19920703 DEF 14A 1 SCHEDULE 14A SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [_] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Solicitation Material Pursuant to Rule 14a-11(c) or rule 14a-12 WCM CAPITAL, INC. (Name of Registrant as Specified in its Charter) (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): [_] No fee required. [x] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: Common 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): $ per share* 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act 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: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: WCM CAPITAL, INC. 76 Beaver Street Suite 500 New York, NY 10005-3402 Telephone (212) 344-2828 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held Friday, November 5, 1999 An Annual Meeting of Stockholders of WCM Capital, Inc., a Delaware corporation (the "Company") will be held at the Holiday Inn, 304 Rte. 22 West, Springfield, N.J. 07081 on November 5, 1999 at 5:30 p.m., for the following purposes: (1) To elect five directors for a term expiring at the 2000 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified; (2) To approve the appointment of Lazar Levine & Felix LLP as independent auditors for the Company for fiscal year ended December 31, 1999; and (3) To transact such other business as may properly come before the meeting or any adjournment thereof. Only holders of the Company's common stock, par value $0.01 per share (the "Common Stock"), of record on September 15, 1999 are entitled to notice of, and to vote at, the meeting or any adjournment thereof. At September 15, 1999, the record date for determination of stockholders entitled to vote at the meeting or any adjournments thereof, 3,991,107 shares of Common Stock were issued and outstanding. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROXIES FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER COMMUNICATION. By Order of the Board of Directors, /s/ Richard Brannon New York, New York October 8th, 1999 /s/ Richard Brannon Richard Brannon, Secretary 2 WCM CAPITAL, INC. (Formerly, Franklin Consolidated Mining Co., Inc.) ----------------------- ANNUAL MEETING OF STOCKHOLDERS Friday, November 5, 1999 ------------------------ PROXY STATEMENT ------------------------ GENERAL INFORMATION This Proxy Statement (the "Proxy Statement") is furnished in connection with the solicitation of proxies by the Board of Directors of WCM Capital, Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting of Stockholders of the Company to be held on Friday, November 5, 1999, or any and all adjournments thereof, with respect to the following matters: (1) To elect five directors for a term expiring at the 2000 Annual Meeting of Stockholders or until their respective successors have been duly elected and qualified (the "Election of Directors"); (2) To approve the appointment of Lazar Levine & Felix LLP as independent auditors for the Company for fiscal year ended December 31, 1999; and (3) To transact such other business as may properly come before the meeting or any adjournment thereof. The Annual Meeting (the "Meeting") will be held on November 5, 1999 at 5:30 p.m. at the Holiday Inn, 304 Rte. 22 West, Springfield, N.J. 07081. The Notice of Annual Meeting, Proxy Statement, Proxy Card, and the Annual Report will be mailed on or about October 8, 1999 to stockholders of record of the Company as of September 15, 1999. If the enclosed proxy card is properly executed and returned in time to be voted at the meeting, the shares of Common Stock represented will be voted in accordance with the instructions contained therein. Executed proxies that contain no instructions will be voted in favor of all of the proposals set forth above. If the Annual Meeting is postponed or adjourned for any reason, at any subsequent reconvening of the Annual Meeting all proxies will be voted in the same manner as such proxies would have been voted at the original convening of the Annual Meeting (except for proxies which have theretofore effectively been revoked or withdrawn), notwithstanding that they may have been effectively voted on the same or any other matter at a previous meeting. VOTE REQUIRED FOR APPROVAL; SHARES ENTITLED TO VOTE; RECORD DATE The presence at the Annual Meeting, whether in person or by proxy, of the holders of at least a majority of the outstanding shares of Voting Stock entitled to vote thereat constitutes a quorum for the transaction of business. For purposes of the quorum and the discussion below regarding the votes necessary to take stockholder action, Stockholders of record who are present at the meeting in person or by proxy and who abstain, including brokers holding customers' shares of record who cause abstentions to be recorded at the meeting, are considered Stockholders who are present and entitled to vote and they count toward the quorum. Brokers holding shares of record for customers generally are not entitled to vote on certain matters unless they receive voting instructions from their customers. As used herein, "uninstructed shares" means shares held by a broker who has not received instructions from its customers on such matters and the broker has so notified the Company on a proxy form in accordance with industry practice or has otherwise advised 3 the Company that it lacks voting authority. As used herein, "broker non-votes," means the votes that could have been cast on the matter in question by brokers with respect to uninstructed shares if the brokers had received their customers' instructions. Election of Directors. Directors are elected by a plurality vote and the five nominees who receive the most votes will be elected. In the election of Directors, votes may be cast in favor of or withheld with respect to each nominee. Abstentions and broker non-votes will not be taken into account in determining the outcome of the election. Approval of Auditor. To be approved, this matter must receive the affirmative vote of the majority of the shares present or by proxy at the Annual Meeting and entitled to vote. Uninstructed shares are entitled to vote on this matter. Therefore, abstentions and broker non-votes have the effect of negative votes. On September 15, 1999 (the "Record Date"), there were outstanding 3,991,107 shares of Common Stock. Only holders of record of Common Stock at the close of business on the Record Date will be entitled to notice of, and to vote at, the Annual Meeting. Each share of Common Stock is entitled to one vote for each director to be elected and upon all other matters to be brought to a vote by the Stockholders at the forthcoming Annual Meeting. Commencing 11 days prior to the date of the Annual Meeting, a complete record of the stockholders entitled to vote at the Annual Meeting, or any adjournment thereof, shall be available for inspection at the Company's executive office during normal business hours by any stockholder for any purpose germane to the Annual Meeting. This record will also be available to stockholders for such purposes at the place of and during the Annual Meeting The Company's executive offices are currently located at 76 Beaver Street, Suite 500, New York, New York 10005. REVOCABILITY OF PROXIES Stockholders who execute proxies for the Annual Meeting may revoke their proxies at any time prior to their exercise, by delivering written notice of revocation to the Company at the address on the Notice of Annual Meeting, by delivering a duly executed proxy bearing a later date, or by attending the Annual Meeting and voting in person. BOARD OF DIRECTORS PROXY SOLICITATION The costs of soliciting the proxies and of the meeting, including the costs of preparing and mailing this Proxy Statement and other material, will be borne by the Company. In addition to solicitation by mail, certain directors, officers, and regular employees of the Company may, without additional compensation, solicit proxies by telephone, personal interview, or facsimile transmission to encourage stockholder participation in the voting process. The Company also will request banks, brokers and others who hold shares in the Company in nominee names to distribute proxy soliciting material to beneficial owners, and will reimburse such banks and brokers for reasonable out-of-pocket expenses which they may incur in so doing. 4 ELECTION OF DIRECTORS Item 1 on Proxy Card The Board of Directors has fixed the number of directors constituting the whole Board as five and has selected the following nominees for election to a term expiring at the 2000 Annual Meeting or until their successors have been elected and qualified: William C. Martucci Robert Waligunda William H. Wishinsky Casey Myhre John R. Bruno Unless authority to vote for directors is withheld in the proxy, the persons named in the accompanying proxy intend to vote for the election of the five nominees listed above. All nominees have indicated a willingness to serve as directors, but if any of them should decline or be unable to act as a director, the persons named in the proxy will vote for the election of another person or persons as the Board of Directors recommends. Of all of the nominees for director, only Messrs. Waligunda and Martucci previously were elected by the stockholders at the last Annual Meeting of Stockholders held in October 1998. There are no family relationships between the nominees for the Board of Directors. The following biographical information is furnished with respect to each of the five nominees for election at the Annual Meeting. WILLIAM C. MARTUCCI, Director, age 57. Mr. Martucci has been a Director of the Company since October 28, 1998. From 1974 to the present, Mr. Martucci has served as president and chairman of United Grocers Clearing House, Inc., a privately held company he founded to serve the coupon redemption, fulfillment and promotional needs of manufacturers and retailers. Additionally, Mr. Martucci is the sole shareholder, director, and president of US Mining, Inc., the Company's principal creditor. Mr. Martucci received a Bachelor of Science in Philosophy from Florida International University in 1973. ROBERT L. WALIGUNDA, Director, President and Treasurer, age 52. Mr. Waligunda has served as a Director of the Company since 1985 and Treasurer of the Company since August 1995. He is a member of the Audit Committee of the Board of Directors. He was Secretary from August 1995 to October 1998 From 1965 to the present, Mr. Waligunda has served as founder, President and principal stockholder of Sky Promotions, Inc., a Pittstown, New Jersey marketing and management company involved in sales, advertising and marketing of hot air balloons and inflatable products. He is the founder and director of International Professional Balloon Pilots Racing Association, a member of the advisory board of Aerostar International, Inc., the world's oldest and largest balloon manufacturing company, and a member of the National Aeronautic Association, the Experimental Aircraft Association, and the Airplane Owner and Pilots Association. Mr. Waligunda received a Masters of Science degree in guidance and psychological services from Springfield College in 1968. WILLIAM H. WISHINSKY, Director, age 35. Mr. Wishinsky has been a Director of the Company and a member of the Audit Committee of the Board of Directors since October 4, 1999. Since 1990, Mr. Wishinsky has been the owner of William H. Wishinsky, CPA, P.C., an accounting firm. From 1988 until 1990, he was an accountant at Friedman, Alpren & Green, CPA's in New York City. Mr. Wishinsky graduated from Pace University in New York and received a B.B.A. in Accounting in June 1986. He became a certified public accountant in 1990. CASEY MYHRE, Director, age 34. Mr. Myhre has been a Director of the Company and a member of 5 the Audit Committee of the Board of Directors since October 4, 1999. Since early 1999, Mr. Myhre has been manager of Kimball International, a furniture manufacturing company. For the four years prior to his being promoted to management he worked for Kimball International as a salesman. Mr. Myhre attended Minnesota School of Business and graduated in 1987. JOHN R. BRUNO, age 73. Mr. Bruno has been a Director of the Company since September 30, 1999. Since 1996, Mr. Bruno has been the president and founder of The Bruno Group, a division of the Keyes Martin Company, New Jersey public relations, and funding consultant. In October 1996, Bruno Associates merged with The Keyes Martin Company, a New Jersey advertising and marketing/public relations firm. The merger resulted in Keyes Martin, The Bruno Group, creating one of the largest multi-talented groups of funding and marketing/public relations specialists in the State of New Jersey. From 1967 to 1997, John R. Bruno was President and Chief Executive Officer of Bruno Associates Inc. a public relations and funding company. The Board of Directors met by phone five times during 1998. None of the directors attended less than 75% of the meetings of the Board. The Board of Directors established an Audit Committee that currently is comprised of Messrs Waligunda, Wishinsky, and Myhre. Messrs. Wishinsky and Myhre were appointed to the Committee in September 1999 and replace Ronald Ginsberg (who resigned on May 27, 1999) and Robert W. Singer (who resigned on October 4, 1999). The Audit Committee did not meet during 1998. The Board of Directors will appoint new members to the Audit Committee at its annual meeting, immediately following the Annual Meeting of Stockholders. The Audit Committee's function includes recommending annually to the Board of Directors a firm of independent auditors to audit and review the Company's books, records and the scope of such firm's audit, reviewing reports and recommendations of the Company's independent auditors, reviewing the scope of all internal audits and reports and recommendations in connection therewith and review non-audit services provided by the Company's principal independent auditors. EXECUTIVE OFFICERS The executive officers of the Company are appointed annually by the Board of Directors and, to date, have served an indefinite term. The current officers serve on a part-time basis. No family relationship exists between any of the executive officers of the Company. Name Age Position Robert L. Waligunda 53 President, Treasurer and Director Richard Brannon 49 Vice President - West Coast Operations and Secretary Mr. Waligunda's biographical information is set forth above. RICHARD BRANNON has served as the Vice President-West Coast Operations since February 1996 and Secretary of the Company since October 1998. Mr. Brannon is a California licensed real estate broker and 100% owner of A Reel Mortgage, Inc., a mortgage and loan servicing company organized in 1991. Mr. Brannon is a founding director of the California Trustee Mortgage Broker Association, a not-for-profit corporation. BENEFICIAL OWNERSHIP OF COMMON STOCK Directors, Executive Officers and Principal Stockholders The following table lists the beneficial ownership of shares of the Company's Common Stock as of September 15, 1999 for (a) each director, (b) each nominee for director (c) each executive officer, (d) each person who is known by the Company to be the beneficial owner of five percent or more of the outstanding shares of Common Stock and (e) all directors and executive officers as a group. 6 Name and Amount and Address of Nature of Beneficial Beneficial Percentage Owner Ownership of Class - ---------- ---------- ---------- J. Terry Anderson (1) 29,661(2) * Robert L. Waligunda (3)(4) 7,700(5) * George E. Otten(1)(3) -0- -0- William C. Martucci (3) -0-(6) -0- Steven R. Schurman(1) -0- -0- Richard Brannon (3) -0- -0- Ronald Ginsberg (1) -0- -0- Robert W. Singer (1) 120,000 3.0% William H. Wishinsky (4) -0- -0- Casey Myhre (4) -0- -0- John R. Bruno (4) -0- -0- All Directors and Executive Officers as a Group (11 persons, including the above-listed former officers and directors) % --------- --------- 157,361 3.0% - --------------------------------- * Less than 1% (1) Former officer and/or director of the Company. (2) Includes 10,000 shares owned by Bruce E. Anderson Trust under which Mr. Anderson acts as Trustee and 19,661 owned by Anderson Chemical Company for which Mr. Anderson serves as a director and president. Mr. Anderson disclaims any beneficial ownership with respect to shares of the Company owned by his brothers. (3) Executive officer and/or director of the Company (4) Director or director nominee. (5) Includes 1,200 shares pledged as collateral to a non-affiliate individual. (6) Although Mr. Martucci does not own any shares of the Company's common stock, he is, through his affiliates, the principal creditor of the Company and the principal source of funding for the Company. Accordingly, he has the ability to exert significant influence on the management of the Company. See "Certain Transactions with Executive Officers and Directors" below. To the Company's knowledge and based solely on a review of such materials as are required by the Securities and Exchange Commission, no officer, director or beneficial holder of more than ten percent of the Company's issued and outstanding shares of Common Stock ("Beneficial Owner") has filed any forms and reports required to be filed pursuant to Section 16(a) of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), during the fiscal year ended December 31, 1998; and no officer, director or Beneficial Holder has submitted any representation letter to the Company stating that they are not subject to the filing requirements under Section 16 of the Exchange Act for fiscal year 1998. 7 EXECUTIVE COMPENSATION The Company's two executive officers, Messrs. Waligunda and Brannon, received no significant compensation in fiscal year 1998. The Company granted no options to any of the Company's Executive Officers in 1998. None of the Company's executive officers owns any options of the Company and there were no exercises of any option in 1998 by any such persons. The Company has not adopted any stock option plans, medical insurance plans, or retirement, pension, profit sharing or insurance plans for the benefit of its directors, officers or employees. No officer or director of the Company receives any cash compensation for services rendered as a director and/or office. None of the Company officers have entered into written employment agreements with the Company. CERTAIN TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS During fiscal year 1998, J. Terry Anderson, former director and officer of the Company, loaned the Company approximately $23,000 and Anderson Chemical Company, a company for which Mr. Anderson serves as director and president, loaned the Company approximately $85,000 for working capital and other expenses. Additionally, in July 1996, Anderson Chemical Company loaned the Company $20,000 evidenced by a Promissory Note bearing interest at a rate of 12% per annum. As of the Record Date, these loans remain outstanding. On December 25, 1976, the Company leased 28 patented mining claims from Audrey and David Hayden ("Hayden") and Dorothy Kennec pursuant to a mining lease and option to purchase dated November 12, 1976 (the "Hayden/Kennec Lease"). The leases expired. However, on November 13, 1997, US Mining, Inc. ("USM"), a New Jersey corporation wholly-owned and controlled by William C. Martucci, a Company director, entered into an agreement with Hayden to purchase her interest in the Hayden/Kennec Lease for a purchase price of $70,000 (the "Hayden-USM Purchase Agreement"). The purchase price is evidenced by note, due on February 2, 1998. Upon the execution of the Hayden-USM Purchase Agreement, USM agreed to extend the Hayden/Kennec Leases upon the same terms and conditions then in effect through March 13, 1998. As of the date hereof, USM has not consummated the transaction contemplated by the Hayden-USM Purchase Agreement. Although the Hayden-USM Purchase Agreement has expired, USM has continued to make royalty payments to Mrs. Hayden pursuant to the terms of the Hayden-USM Purchase Agreement. No assurance can be given as to whether the Hayden-USM Purchase Agreement will be consummated. In the event that the Hayden-USM Purchase Agreement is not consummated the lease will become invalid and there is no assurance can be given that the Company will not lose its rights to the leasehold properties. The Company had outstanding an 8% promissory note (the "Note") plus additional liabilities (collectively, the "USM Indebtedness") with an aggregate balance of $ 1,576,158 at September 15, 1999. The USM Indebtedness represents monies advanced to the Company by an affiliate of USM, obligations assumed in connection with the contributions of Joint Venture interests in 1997 and additional advances by USM. The Note was payable on May 4, 1998, and is secured by all the Company's mining claims and mining properties, as well as its interests in the Hayden/Kennec Leases. The Note was subject to successive 30-day extensions throughout 1998 upon the mutual agreement of the maker and lender for no additional consideration. The Note was assigned to USM on March 5, 1998. As of September 15, 1999, the Company has not made any payments of principal and/or interest accrued on the USM Indebtedness. USM and its affiliates have verbally pledged to provide financing to the Company on an as needed basis until on or about January 1, 2000. The Company cannot assure, however, that USM will fulfill its commitment to fund the Company's operations. History of Transactions between the Company and Mr. Martucci and His Affiliated Companies In early 1997, an officer of the Company introduced Gems and Minerals Corp. ("Gems") to William C. Martucci ("Martucci"). Martucci began negotiations with Gems to enter into a possible business combination between Martucci's businesses, on the one hand, and businesses owned and/or operated by or affiliated with Gems (the "Gems Businesses"), on the other hand. The Gems Businesses included an 82.5% interest in the Zeus No. 1 Investments Zeus Joint Venture ("Zeus Joint Venture") - a 8 California general partnership between the Company and Island Investment Corp., a Nevada corporation ("Island"). By mid to late 1997, it became apparent to the Company that Gems did not possess the technical and financial resources required to bring the Franklin Mines into operation as contemplated by the Zeus Joint Venture. Also, during this period, the Company had established a relationship with Martucci independent of Gems. On September 25, 1997, the Company entered into a letter of intent (the "Martucci Letter of Intent") with Martucci to acquire (the "Transaction") all of the outstanding shares of certain entities owned by him including USM, in exchange for newly issued shares of Common Stock of the Company. Pursuant to the Martucci Letter of Intent, Martucci would receive approximately 85% of the outstanding shares of the Company, upon the closing of the completion of customary due diligence, the execution of definitive agreements and the approval of Franklin stockholders. Additionally, Martucci agreed to cover expenses incurred with respect to the Transaction in the form of loans to the Company. Management believed that the financial support to be supplied by Martucci pursuant to the Martucci Letter of Intent would be sufficient to fund the Company prior to the consummation of the Transaction. On November 25, 1997, in a step transaction, USM acquired an aggregate of 82.5% interest in the Zeus Joint Venture from Gems and Nuco in exchange for the assumption of approximately $100,000 in liabilities of Gems (the "Gems Liabilities"). USM thereafter simultaneously assigned the acquired interest to the Company in exchange for the assumption of the Gem's liabilities. Upon the acquisition of the 82.5% interest of the Zeus Joint Venture by the Company, the Zeus Joint Venture relationship with Gems was terminated and the Zeus Joint Venture was effectively dissolved. The result of the termination of the Zeus Joint Venture is that the Company has reacquired the right to received 100% of the profits generated from the Franklin Mines and Franklin Mill once these properties come into operation. On April 6, 1998, Martucci terminated the Martucci Letter of Intent. On or about August 3, 1998, the Company entered into agreements with each of USM (the "USM Agreement") and Martucci (the "Martucci Agreement"). Pursuant to the USM Agreement, USM agreed to forgive the indebtedness of the Company evidenced by the USM Note; release the security interests in the collateral of the Company securing the USM Note and assign its rights to the Hayden-USM Purchase Agreement in exchange for 42.5% of the issued and outstanding shares of the Company. Under the terms of the USM Agreement, Martucci agreed to sell to the Company 100% of the outstanding shares of USM in exchange for 42.5% of the issued and outstanding shares of the Company. The Company intended to seek stockholders' approval of these transactions at its Annual Meeting of Stockholders held in October 1998. In August 1998, the Company filed a preliminary proxy statement with the Securities and Exchange Commission (the "Commission") for its annual meeting of stockholders, which included proposals to approve each of the USM Agreement and the Martucci Agreement. Shortly after the filing of the preliminary proxy materials, the Commission informed the Company that the staff of the Commission (the "Staff") would be conducting a review of the proxy materials and the proposals. The Company informed USM of the Staff's inquiry and was thereafter notified that USM wished to terminate the agreements under the premise that the Company could not secure stockholder approval of the transactions in a timely manner. On September 21, 1998, the Company received a letter from USM concerning the monies loaned to the Company by USM, which included the monies owed to USM by the Company pursuant to the terms of the Note and an additional $144,280 loaned to the Company subsequent to the date of the Note. At a meeting of the Board of Directors of the Company on October 8, 1998, a negotiated settlement agreement was approved by the Board, whereby USM agreed to convert the USM Indebtedness into shares of common stock of the Company at a conversion price equal to 50% of the closing bid price as of the close of business October 7, 1998. The price of the Company's common stock at the close of business on October 7, 1998 was $.66 per share. Therefore, the conversion rate under the settlement agreement would be one share of common stock of the Company for each $.33 of the USM Indebtedness. It was further agreed that the settlement plan would be implemented in a two step transaction. Approximately $306,160 of loans would be paid by converting that portion into 927,757 shares of common 9 stock of the Company resulting in USM holding approximately 19% of the total issued and outstanding shares of common stock of the Company. The conversion of the remaining USM Indebtedness would be predicated upon either (i) stockholder approval of the issuance of more than 20% of the Company's common stock in the aggregate to USM at a discount to market price as required by the rules of corporate governance promulgated by the NASDAQ Small Cap Market ("NASDAQ"), or (ii) the issuance of a waiver by the NASDAQ excepting the Company for compliance with this rule. USM also agreed that it would continue to provide the Company with financing going forward as further inducement to consummate the settlement agreement set forth above. Due to the fact that the Company had already expended significant monies to conduct a proxy solicitation for its annual meeting scheduled on October 12, 1998, on October 19, 1998, the Company made a formal application to NASDAQ in accordance with Rule 4310(C)(25)(H)(ii) of the NASDAQ Stock Market for a waiver of the requirement that the Company call a meeting of its stockholders to approve the issuance of over 20% in the aggregate of its stock to USM at a price below market price. The rule allows for a waiver of this requirement when, among other things, a delay in securing stockholder approval would seriously jeopardize the financial viability of the Company. On or about October 24, 1998, the NASDAQ Stock Market contacted the Company and indicated that it was inclined to deny the Company's application unless additional information was submitted for review. The Company thereafter withdrew its application and re-opened negotiations with USM. Although the Board of Directors of the Company had approved the issuance of 927,757 shares of common stock of the Company, such shares were never issued. The Company however, continues to be in default of the USM Indebtedness and has not, as of the date hereof, repaid any of the amounts owed to USM. The Company and USM are continuing negotiations with respect to the outstanding monies owed to USM and USM is still funding the Company. In June 1999, the Company and USM mining executed a letter of intent pursuant to which the Company proposed to purchase certain assets of USM in exchange for 69% of the Company's common stock and forgiveness of the USM Indebtedness. This proposed transaction was never consummated. Appointment of Auditors Item 2 on Proxy Card The Board of Directors has appointed Lazar Levine & Felix LLP ("LLF"), to audit the financial statements of the Company for the fiscal year ended December 31, 1999. Stockholders are being asked to ratify this appointment. LLF audited the Company's financial statements for the fiscal years ended December 31, 1997 and 1998. Representatives of LLF will not be present at the meeting to answer questions or make a statement. The Company initially retained LLF as its independent auditors for fiscal year 1997 after notifying JH Cohn, LLP ("Cohn") of its decision to dismiss the firm as its independent auditors. The decision to dismiss Cohn was approved by the Board of Directors of the Company. During fiscal year 1995 and 1996 of the Company, none of the reports issued by Cohn on the financial statements of the Company contained an adverse opinion or a disclaimer of opinion or was qualified or modified as to audit scope, or account principles; however, Cohn did include in its audit reports an explanatory paragraph concerning the Company's ability to continue as a going concern. During fiscal years 1995 and 1996 and any subsequent interim periods prepared by Cohn prior to their dismissal, there were no disagreements between the Company and Cohn concerning accounting principles or practices, financial statement disclosure, or auditing scope or procedure which would have caused Cohn to make a reference to the subject matter thereof in its report had such disagreement not been resolved to the satisfaction of Cohn. The proposal will be approved if it receives the affirmative vote of a majority of the shares of Common Stock of the Company represented at the meeting. The Board of Directors recommends that you vote IN FAVOR OF the appointment of LLF. Proxies solicited by the Board of Directors will be so voted unless stockholders specify otherwise. Other Business The Board of Directors is not aware of any other matters to be presented at the meeting. If any other 10 matters would properly come before the meeting, the persons named in the enclosed proxy form will vote the proxies in accordance with their best judgment. SUBMISSION OF STOCKHOLDER PROPOSALS A Stockholder of record may present a proposal for action at the next Annual Meeting of Stockholders provided that the Company receives such proposal at its executive office no later than June 7, 2000. Upon receipt of such proposal, the Company shall set forth the proposal in its Proxy Statement for that meeting. The proponent may submit a maximum of one (1) proposal of not more than five hundred (500) words for inclusion in the Company's proxy materials for a meeting of security holders. At the next Annual Meeting, management proxies will have discretionary authority to vote on stockholder proposals that are not submitted for inclusion in the Company's proxy statement unless received by the Company before August 7, 2000. The Company files annual, quarterly, and special reports, proxy statements, and other information with the Commission. You may read and copy any reports, statements, and other information that the Company files at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the operations of the Public Reference Room. The Company's Commission filings also are available on the Commission's Internet site, which is http://www.sec.gov. The Company's Annual Report on Form 10-KSB for the year ended December 31, 1998 is delivered herewith. Date: October 8, 1999 By Order of the Board of Directors /s/ Richard Brannon Richard Brannon, Secretary -----END PRIVACY-ENHANCED MESSAGE-----