SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
SECURED DIVERSIFIED INVESTMENT, LTD.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee Computed on Table Below Per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of Each Class of Securities to Which Transaction Applies: None
(2) Aggregate Number of Securities to Which Transaction Applies: None
(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.):
(4) Proposed Maximum Aggregate Value of Transaction: $-0-
(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: n/a
(2) Form, Schedule, or Registration Statement No: n/a
(3) Filing Party: n/a
(4) Date Filed: n/a
SECURED DIVERSIFIED INVESTMENT, LTD.
Notice of Annual Meeting of Shareholders
To be Held on November 13, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Secured Diversified Investment, Ltd. (the "Company"), will be held at held at
6:00 p.m. (PDST), on November 13, 2003, at The Holiday Inn, 25205 La Paz Road,
Laguna Hills, California 92653 to consider and act upon the following matters:
1. To elect six (6) members to the Board of Directors to serve for a
one-year term or until a successor is elected and qualified;
2. To adopt and approve the 2003 Employee Stock Incentive Plan and the
2003 Non-Employee Director Stock Incentive Plan;
3. To approve the appointment of Cacciamatta Accountancy Corporation. as
independent auditors of the Company; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only Shareholders of record on the books of the Company at the close of
business on September 30, 2003 will be entitled to notice of and to vote at the
meeting or any adjournment thereof.
October 21, 2003
By Order of the Board of Directors
Clifford L. Strand, President
1
SECURED DIVERSIFIED INVESTMENT, LTD.
INFORMATION STATEMENT
For the Annual Meeting of Shareholders
To be Held November 13, 2003
This Information Statement is furnished in connection with matters to
be voted on at the Annual Meeting of Shareholders (the "Annual Meeting") of
SECURED DIVERSIFIED INVESTMENT, LTD. (the "Company") to be held at 6:00 p.m.
(PDST), on November 13, 2003, at The Holiday Inn, 25205 La Paz Road, Laguna
Hills, California 92653 and at any and all adjournments thereof with respect to
the matters referred to in the accompanying notice. This Information Statement
is first being mailed to Shareholders on or about October 22, 2003.
Management of the Company, including the current members of the Board
of Directors, is the direct or indirect record or beneficial owner of
approximately 6,643,576 shares of capital stock (representing approximately
39.5% of the outstanding capital stock). It is management's intention to vote
all of its shares in favor of each matter to be considered by the Shareholders.
Additionally, officers of the Company are also the executive officers of
Seashore Diversified Investment Company which beneficially owns 2,614,607 shares
of Common Stock and 4,997,807 shares of Series A Preferred Stock, representing
in the aggregate approximately 45.4% of the outstanding shares of capital stock.
Seashore has indicated its intention to vote in favor of each Proposal. As a
result, the Company anticipates that each of the Proposals will be approved and
adopted at the meeting. The Company is required by applicable law to submit each
of the matters to be considered to the vote of all Shareholders. There are no
dissenter's rights applicable with respect to any matter to be considered by the
Shareholders.
The Company has determined September 30, 2003 as the record date with
respect to the determination of Shareholders entitled to vote at the Annual
Meeting of Shareholders.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
MATTERS TO BE CONSIDERED AND VOTED UPON AT
THE ANNUAL MEETING OF SHAREHOLDERS
ELECTION OF DIRECTORS
At the Annual Meeting, Shareholders will be asked to consider and to
take action on the election of six (6) members to the Board of Directors to
serve for one-year terms or until their respective successors are elected and
qualified (see "Election of Directors").
ADOPTION AND APPROVAL OF 2003 STOCK INCENTIVE PLANS
The Board of Directors has adopted and approved two stock incentive
plans, The 2003 Employee Stock Incentive Plan (the "2003 Employee Plan"), in
which all employees are eligible to participate, and the 2003 Non-Employee
Director Stock Incentive Plan, in which non-employee directors and consultants
are eligible to participate.
APPROVAL OF INDEPENDENT AUDITORS
At the Annual Meeting, Shareholders will be asked to approve the
appointment of Cacciamatta Accountancy Corporation as independent auditors to
the Company.
OTHER BUSINESS
To transact such other business as may properly come before the Annual
Meeting or any postponements or adjournments thereof. Management does not know
of any other matters that are likely to be brought before the Annual Meeting of
Shareholders. However, in the event any other matters properly come before the
Annual Meeting of Shareholders, such matters will be acted upon accordingly.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Company has three (3) classes of voting securities entitled to vote
at the Annual Meeting, Common Stock, Series A Preferred Stock and Series B
Preferred Stock. Although Series C Preferred Stock has been created, no shares
are outstanding. At the record date for the Annual Meeting there were 6,531,147
shares of Common Stock outstanding held by approximately 248 shareholders of
record. Each share of Common Stock is entitled to one vote on each matter to be
considered. There were also outstanding at the record date 7,677,807 shares of
Series A Preferred Stock held of record by two shareholders. Each share of
Series A Preferred Stock is entitled to one vote on each matter to be
considered. There were 2,641,480 shares of Series B Preferred Stock held of
record by approximately 15 shareholders. Each share of Series B Preferred Stock
is entitled to one vote on each matter to be considered.
The presence in person of the holders of a majority of the outstanding
voting shares is necessary to constitute a quorum at the Annual Meeting.
2
The Company has determined September 30, 2003, as the record date with
respect to the determination of Shareholders entitled to vote at the Annual
Meeting of Shareholders.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information about the beneficial
ownership of the Company's capital stock at September 30, 2003 by:
o each person or entity who is known by us to own beneficially
more than 5.0% of our outstanding stock;
o each of the persons named in the Summary Compensation Table;
o each of our directors; and
o all directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Unless otherwise indicated, the principal
address of each of the shareholders below is c/o Secured Diversified Investment,
Ltd., 5030 Campus Drive, Newport Beach, California 92660. Except as described in
the footnotes to this table, and subject to applicable community property laws,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock and Preferred Stock held by them.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER TITLE OF CLASS BENEFICIAL OWNER CLASS
- ---------------- -------------- ---------------- -----
Seashore Diversified Common Stock 2,641,607 40.44%
Investment Company (1) Series A Preferred Stock 4,997,807 65.09%
Wayne Sutterfield (2) Common Stock 1,034,900 15.31%
Series A Preferred Stock 882,767 11.50%
Series B Preferred Stock 1,000,000 38.24%
Clifford L. Strand (3) Common Stock 1,302,159 17.94%
Series A Preferred Stock 427,294 5.57%
Series B Preferred Stock 50,000 1.91%
Sumiye Onodera Leonard (4) Common Stock 1,019,842 15.10%
Series A Preferred Stock 492,494 6.41%
Robert J. Leonard (5) Common Stock 902,016 13.81%
P.O. Box 2089 Series A Preferred Stock 715,204 9.32%
Huntington Beach, CA 92647
William S. Biddle (6) Common Stock 778,082 11.27%
Series A Preferred Stock 140,256 1.83%
Series B Preferred Stock 376,800 14.41%
Gernot Trolf (7) Common Stock 443,529 6.56%
Series A Preferred Stock 443,679 5.78%
Munjit Johal (8) Common Stock 375,000 5.43%
Pamela Padgett (9) Common Stock 235,542 3.49%
Series A Preferred Stock 21,402 *
Jay Kister (10) Common Stock 229,894 3.40%
Series A Preferred Stock 9,936 *
Series B Preferred Stock 5,000 *
All Officer and Directors as a Common Stock 5,648,842 61.69%
group (eight persons) Series A Preferred Stock 2,417,828 31.49%
Series B Preferred Stock 1,453,202 55.58%
* Less than one percent.
3
(1) The shares of Common Stock and Series A Preferred Stock beneficially owned
by Seashore Diversified Investment Company ("Seashore") will be voted by Gernot
Trolf, the President of Seashore, under the direction of the Seashore Board of
Directors. Mr. Trolf is the Chief Operating Officer of the Company, and has
indicated his intention to vote the Seashore shares in favor of each proposal.
Many of the executive officer and Directors of the Company are beneficial owners
of Seashore capital stock. As a result, their individual ownership set forth
below reflects and incorporates their pro rata portion of the Seashore shares.
(2) Includes (i) 191,400 shares of Common Stock and 388,600 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company, (ii) 286,500 shares of Common Stock and 494,167 shares of Series B
Preferred Stock held owned through Seacrest Partners, L.P. and (iii) 332,000
shares of Common Stock held through REIT, LLC. Includes 100,000 shares of
restricted stock agreed to be issued upon approval of the 2003 Non-Employee
Director Stock Incentive Plan. Includes options to purchase 125,000 shares
immediately exercisable or exercisable within sixty days.
(3) Includes (i) 175,164 shares of Common Stock and 355,636 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company, (ii) 42,995 shares of Common Stock and 71,658 shares of Series B
Preferred Stock held owned through Seacrest Partners, L.P. and (iii) 334,000
shares of Common Stock held through REIT, LLC. Includes 500,000 shares of
restricted stock agreed to be issued upon approval of the 2003 Employee Stock
Incentive Plan. Includes options to purchase 250,000 shares immediately
exercisable or exercisable within sixty days.
(4) Ms. Leonard is the spouse of Robert J. Leonard, an owner of more than 5% of
the outstanding capital stock of the Company. Includes (i) 3,000 shares of
Common Stock and 6,091 shares of Series A Preferred Stock held owned indirectly
through Seashore Diversified Investment Company, (ii) 291,842 shares of Common
Stock and 486,403 shares of Series B Preferred Stock held owned through Seacrest
Partners, L.P. and (iii) 500,000 shares of Common Stock held through REIT, LLC.
Includes 100,000 shares of restricted stock agreed to be issued upon approval of
the 2003 Non-Employee Director Stock Incentive Plan. Includes options to
purchase 125,000 shares immediately exercisable or exercisable within sixty
days.
(5) Includes (i) 124,233 shares of Common Stock and 252,230 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company, (ii) 277,783 shares of Common Stock and 462,974 shares of Series B
Preferred Stock held owned through Seacrest Partners, L.P. and (iii) 500,000
shares of Common Stock held through REIT, LLC.
(6) Includes (i) 69,082 shares of Common Stock and 140,256 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company and (ii) 334,000 shares of Common Stock held through REIT, LLC. Includes
250,000 shares of restricted stock agreed to be issued upon approval of the 2003
Employee Stock Incentive Plan. Includes options to purchase 125,000 shares
immediately exercisable or exercisable within sixty days.
(7) Includes 218,529 shares of Common Stock and 443,679 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company. Includes 100,000 shares of restricted stock agreed to be issued upon
approval of the 2003 Employee Stock Incentive Plan. Includes options to purchase
125,000 shares immediately exercisable or exercisable within sixty days.
(8) Includes 250,000 shares of restricted stock agreed to be issued upon
approval of the 2003 Employee Stock Incentive Plan. Includes options to purchase
125,000 shares immediately exercisable or exercisable within sixty days.
(9) Includes 10,542 shares of Common Stock and 21,402 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company. Includes 100,000 shares of restricted stock agreed to be issued upon
approval of the 2003 Non-Employee Director Stock Incentive Plan. Includes
options to purchase 125,000 shares immediately exercisable or exercisable within
sixty days.
(10) Includes 4,894 shares of Common Stock and 9,936 shares of Series A
Preferred Stock held owned indirectly through Seashore Diversified Investment
Company. Includes 100,000 shares of restricted stock agreed to be issued upon
approval of the 2003 Non-Employee Director Stock Incentive Plan. Includes
options to purchase 125,000 shares immediately exercisable or exercisable within
sixty days.
4
PROPOSAL NO. 1 --ELECTION OF DIRECTORS
At the Annual Meeting, Shareholders will be asked to consider and to
take action on the election of five persons to the Board of Directors. Each of
the six persons named below is a nominee for election as a director for a term
of one year or until his or her successor is elected and qualified. All nominees
are currently serving as directors of the Company. If any such nominee cannot be
a candidate for election at the Annual Meeting, then it is management's
intention to vote its shares voted either for a substitute nominee designated by
the Board of Directors or for the election only of the remaining nominees.
VOTE REQUIRED
The election of the director nominees will require the affirmative vote of a
plurality of the votes cast by the stockholders entitled to vote. "Plurality"
means that the individuals who receive the largest number of votes cast are
elected as Directors up to the maximum number of Directors to be chosen at the
meeting. Consequently, any shares not voted (whether by abstentions, broker
nonvotes or otherwise) have no impact in the election of Directors, except to
the extent the failure to vote for an individual results in another individual
receiving a larger number of votes. The election of Directors will be
accomplished by determining the six nominees receiving the highest total votes.
INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding director nominees of the
Company. A summary of the background and experience of each of these individuals
is set forth after the table.
DIRECTOR NOMINEES
NAME AGE POSITION DATES OF SERVICE
- ---- --- -------- ----------------
Clifford L. Strand 57 Chairman Of The Board, Since September 2002
Chief Executive Officer And
President
William S. Biddle 73 Vice President and Director Since September 2002
Sumyie Onodera-Leonard 74 Director Since September 2002
Wayne Sutterfield 66 Director Since January 2003
Pamela Padgett 47 Director Since September 2002
Jay Kister 28 Director Since September 2002
CLIFFORD L. STRAND. Chairman of the Board of Directors, President and
Chief Executive Officer. Mr. Strand has 35 years experience in the real estate
industry as a broker, investor and strategist. Since January 2001, Mr. Strand
has served as Senior Vice President, Interim President and President of Seashore
Diversified Investment Company, a Maryland real estate investment trust, where
he has been primarily responsible for managing and directing the affairs of the
Company. Seashore specialized in the acquisition, disposition and management of
real estate and investment properties. From 1984 to 2001, Mr. Strand was
self-employed as an independent real estate broker. During that t1 ime, Mr.
Strand represented a diverse clientele consisting of banks, savings and loan
institutions, universities, celebrities and corporations. From 1979 to 1984, Mr.
Strand served as president of Capital Newport Mortgage Company, which became
part of the Capital Companies. Mr. Strand has a Certificate in Real Estate from
East Los Angeles Community College.
5
WILLIAM S. BIDDLE. Director and Vice President, Marketing. Mr. Biddle
has over 37 years experience in the real estate industry, he is a member of the
Society of Exchange Counselors. Mr. Biddle is a past recipient of the Clifford
P. Weaver Memorial Award a national award for the most creative exchange. He is
also a past president of National Exchange Counselors. In 1979, he received the
designation of Certified Commercial Investment Member from the National
Association of Realtors. Mr. Biddle previously owned two brokerages. He
purchased Commercial Brokers, a commercial real estate brokerage firm in Las
Vegas, Nevada, in 1993. He founded Friendly Hills Realty, a brokerage
specializing in high end residential real estate in 1987. Friendly Hills
Realty's principal office was located in Whittier, California.
SUMYIE ONODERA-LEONARD. Director. From 1967 to 1986, Mrs.
Onodera-Leonard served as a professor at California State University, Los
Angeles, specializing in the areas in family finance and home management. She
has a BA in Business Administration and a Masters degree in Secondary Education
in 1957 and 1967 respectively from California State University, Los Angeles.
Mrs. Onodera-Leonard also earned a Masters degree in Home Management from
Michigan State University in East Lansing, Michigan in 1961. She is also a
senior gold medalist, U.S. National Champion and world-record holder in her age
group in the 800-meter run.
WAYNE SUTTERFIELD. Director. For the past 35 years Mr. Sutterfield has
been self employed in the real estate industry as a manager, property owner and
contractor. Mr. Sutterfield has owned and managed properties in Arizona,
California and North Dakota. Mr. Sutterfield is a member of the Contractors
Association of America and the Plumbing, Heating and Cooling Contractors
Association. Mr. Sutterfield is a graduate of California L.A. Technical
College-Mechanical Engineering, Construction.
PAMELA PADGETT. Director. Since 1994, Ms. Padgett has worked as a real
estate broker. Since March 2002, Ms. Padgett has been affiliated with The
Phoenix Group Realtors as an independent real estate agent. From 2000 through
March 2002, she was affiliated as Keller Williams Realty. Ms. Padgett also works
as an independent agent for Uncommon Sense Enterprises a company she founded in
1994 and continues to own.
JAY KISTER. Director. Since June 2001, Mr. Kister has been employed
with Blossom Valley Mortgage, Inc. Mr. Kister currently serves as a Loan Broker.
From April 1999 to June 2001, Mr. Kister was a Personal Banker for San Diego
National Bank. He was primarily responsible opening and servicing commercial
accounts and commercial loans. From May 1998 to April 1999, Mr. Kister worked
for Bank of America performing essentially the same functions as he performed
for San Diego National Bank. Mr. Kister earned a Bachelor of Arts degree in
Spanish from Weber State University in Ogden, Utah in August 1997.
EXECUTIVE OFFICERS
- ------------------
NAME AGE POSITION DATE OF SERVICE
---- --- -------- ---------------
Munjit Johal 48 Chief Financial Officer Since September 2002
Gernot Trolf 60 Chief Operating Officer Since September 2002
MUNJIT JOHAL. Chief Financial Officer and Secretary. Mr. Johal has
broad experience in accounting, finance and management in the public sector.
Since 1998, Mr. Johal has served as the Chief Financial Officer for Diffy Foods,
Inc. Mr. Johal held the same position with Bengal Recycling from 1996 to 1997.
As the Chief Financial Officer for these companies, Mr. Johal was primarily
responsible for overseeing the financial affairs of these entities and ensuring
that their financial statements of these were accurate and complete and complied
with all applicable reporting requirements. From 1990 to 1995, Mr. Johal serves
as the Executive VP for Pacific Heritage Bank in Torrance, California. Mr. Johal
earned his MBA degree from the University of San Francisco in 1980. He received
his BS degree in History from the University of California in Los Angeles in
1978.
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GERNOT TROLF. Vice President and Chief Operating Officer. Since 1996,
Mr Trolf has served as the Chief Operating Officer of Seashore Diversified
Investment Company, a real estate investment trust. As the Chief Operating
Officer, Mr. Trolf was primarily responsible for overseeing the day-to-day
operations of the company. In 1993, he founded and continues to own AATIC a
private commodity brokerage. From 1994 to 1997, Mr. Trolf owned The Stagecoach
Restaurant a continental restaurant specializing in Austrian, German and
continental fare in Alpine, California. From 1994 to 1996, Mr. Trolf was the
Director of Food and Beverage for the Algonquin Hotel in New York and held to
same position at the Regency Hotel in New York from 1991 to 1994. Mr. Trolf was
the General Manager of the Nova Park Hotel in New York from 1979 to 1982. Mr.
Trolf is a former vice president of the Food & Beverage Association of America
and a member of the Board of Directors of The 400,000 Committee for Austrians
living abroad. Mr. Trolf speaks German, French, English, Spanish and Norwegian.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended October 31, 2002, and during the
transition period from November 1, 2002 until December 31, 2002, the Board of
Directors of the Company met eight times, in person or by telephonic conference.
Each incumbent Director attended at least 75% of the meetings.
The Company's Board of Directors has appointed an Audit Committee to
oversee the financial reporting and auditing matters of the Company. The Audit
Committee is responsible for reviewing and making recommendations concerning the
selection of outside auditors, reviewing the scope, results and effectiveness of
the annual audit of the Company's financial statements and other services
provided by the Company's independent public accountants. The Audit Committee
also reviews the Company's internal accounting controls, practices and policies.
The members of the Audit Committee are Jay Kister, Sumiye Onodera Leonard and
Pamela Padgett. The Company does not currently have a written audit committee
charter. Mr. Kister and Ms. Padgett are deemed to be independent directors is
that term is defined in Rule 4200(a)(14) of the NASD's listing standards.
The Audit Committee did not meet during the fiscal year ended October
31, 2002, but has not met from the period November 1, 2002 until September 30,
2003. No written charter of the Audit Committee has been adopted.
The Company's Board of Directors does not maintain a standing
nominating committee or other committees performing similar functions.
In lieu of a Compensation Committee, the Board of Directors is
responsible for decisions regarding compensation of the Company's executive
officers.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has never issued a report on the compensation
policies of the Company during the preceding two fiscal years. Management
anticipates that one of the primary matters to be addressed by the new Board of
Directors to be elected at the Annual Meeting on November 13, 2003 will be the
compensation of executive officers and directors.
DIRECTOR COMPENSATION
Non-Employee Directors of the Company receive $500 per each meeting attended,
whether in person or by telephone and are reimbursed all out-of-pocket travel,
food and entertainment expenses related to attendance. The non-employee
Directors have each been granted 100,000 shares of Common Stock and options to
purchase 500,000 shares of Common Stock pursuant to the 2003 Non-Employee
Director Stock Incentive Plan. Such shares vest immediately and the options vest
as described below under "2003 Non-Employee Stock Incentive Plan."
EXECUTIVE COMPENSATION
None of our current Chief Executive Officer, Vice President, Chief
Operating Officer and Chief Financial Officer received any compensation for
services rendered to the Company during the fiscal year ended October 31, 2002
or during the transition period ended December 31, 2002. The following chart
sets forth the salary and other compensation agreed to be paid in 2003. The
actual compensation paid in 2003 may be substantially less than agreed, as the
executive officers have deferred payment of some compensation. The Company has
no other executive officer whose total annual salary and bonus paid to them
exceeded $100,000 for the most recent fiscal year.
7
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
FISCAL RESTRICTED SECURITIES
YEAR SALARY($) BONUS OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION ENDED (1) ($) COMPENSATION AWARDS OPTIONS
- --------------------------- ----- --------- ----- ------------ ------ -------
Clifford L. Strand, CEO 2003 180,000 0 0 500,000 1,000,000
William Biddle, Vice President 2003 120,000 0 0 250,000 500,000
Gernot Trolf, Chief Operating Officer 2003 100,000 0 0 100,000 500,000
Munjit Johal, Chief Financial Officer 2003 80,000 0 0 250,000 500,000
(1) The amount of salary set forth in this chart is the annual compensation
required to be paid pursuant to the employment agreements with each executive
officer. The actual amounts paid to date are substantially less and less than
the amounts required to date under the agreements.
EMPLOYMENT AGREEMENTS
The Company has entered into the following employment agreements.
CLIFFORD STRAND. The employment agreement has a term of three years
with annual salaries of $180,000, $360,000 and $510,000 for the three years,
respectively. Mr. Strand may elect to receive all or any portion of his annual
salary in shares of common stock at the then current fair market value, less the
amount required to pay withholding and other taxes. Additionally, Mr. Strand has
been awarded (i) 500,000 shares of restricted common stock vested immediately,
(ii) an additional 100,000 shares of common stock for each year the company
increases net assets by at least 20% and (iii) granted an option to purchase
1,000,000 shares of common stock at an exercise price of $0.15 per share that
will also vest 25% immediately and the remainder annually over the term of the
agreement. The agreement also provides for customary vacation pay, health
insurance and expense reimbursement.
WILLIAM S. BIDDLE. The employment agreement has a term of three years
with annual salaries of $120,000, $240,000 and $360,000 for the three years,
respectively. Mr. Biddle may elect to receive all or any portion of his annual
salary in shares of common stock at the then current fair market value, less the
amount required to pay withholding and other taxes. Additionally, Mr. Biddle has
been awarded (i) 250,000 shares of restricted common stock vested immediately,
(ii) an additional 50,000 shares of common stock for each year the company
increases net assets by at least 20% and (iii) granted an option to purchase
500,000 shares of common stock at an exercise price of $0.15 per share that will
vest 25% immediately and the remainder over the term of the agreement. The
agreement also provides for customary vacation pay, health insurance and expense
reimbursement.
GERNOT TROLF. The employment agreement has a term of three years with
annual salaries of $100,000, $120,000 and $140,000 for the three years,
respectively. Mr. Trolf may elect to receive all or any portion of his annual
salary in shares of common stock at the then current fair market value, less the
amount required to pay withholding and other taxes. Additionally, Mr. Trolf has
been awarded (i) 250,000 shares of restricted common stock vested immediately,
(ii) an additional 50,000 shares of common stock for each year the company
increases net assets by at least 20% and (iii) granted an option to purchase
500,000 shares of common stock at an exercise price of $0.15 per share that will
vest 25% immediately and the remainder over the term of the agreement. The
agreement also provides for customary vacation pay, health insurance and expense
reimbursement.
MUNJIT JOHAL. The Company has delivered, but Mr. Johal has not yet
signed, the employment agreement. The employment agreement is proposed to have a
term of three years with annual salaries of $80,000, $120,000 and $250,000 for
the three years, respectively. Mr. Johal may elect to receive all or any portion
of his annual salary in shares of common stock at the then current fair market
value, less the amount required to pay withholding and other taxes.
Additionally, Mr. Johal will be awarded (i) 250,000 shares of restricted common
stock vested immediately and (ii) granted an option to purchase 500,000 shares
of common stock at an exercise price of $0.15 per share that will also vest over
the term of the agreement. The agreement will also provide for customary
vacation pay, health insurance and expense reimbursement.
8
The employment contracts provide certain payments to the employee because of his
resignation, retirement, or other termination of such person's employment with
our company or its subsidiaries, or any change in control of our company, or a
change in the person's responsibilities following a change in control of our
company. Such provisions may have the effect of discouraging any acquisition of
our company or result in a lower purchase price.
OPTION GRANTS AND EXERCISES IN LAST FISCAL YEAR
During the fiscal year ended October 31, 2002 and during the transition
period ended December 31, 2002, the Company did not grant any options to
executive officers or directors. Since December 31, 2002, options and restricted
stock have been granted in accordance with the employment agreements with the
executive officers and pursuant to the 2003 Non-Employee Directors Stock
Incentive Plan, as described below. No executive officers or directors exercised
any options during the last fiscal year or the transition period ended December
31, 2003.
COMPLIANCE WITH SECTIONS 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and Directors and persons who
own more than ten percent (10%) of the Company's Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and greater than ten percent (10%) owners are also required
by the Securities and Exchange Commission regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms
received by it, the Company believes that, during the fiscal year ended March
31, 2003, Directors failed to file or filed on an untimely basis two Form 4s
required under Section 16(a) in connection with stock received in one or more
acquisitions by the Company.
FAMILY RELATIONSHIPS
There are no family relationships between or among the directors,
executive officers or persons nominated to become directors.
LEGAL PROCEEDINGS
No person listed above has been convicted in a criminal proceeding
during the past five years (excluding traffic violations or similar
misdemeanors). As of the date hereof, it is the opinion of management that there
is no material proceeding to which any director, officer or affiliate of the
registrant, any owner of record or beneficially of more than five percent of any
class of voting securities of the registrant, or any associate of any such
director, officer, affiliate of the registrant, or security holder is a party
adverse to the registrant or any of its subsidiaries or has a material interest
adverse to the registrant or any of its subsidiaries.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the transition period from November 1, 2002 to December 31,
2002, our company used one-half of a 600 square foot office condominium located
at 1000 Quail Street, Suite 190, in Newport Beach, California for its corporate
offices. We paid no rent for this space pursuant to a verbal agreement with our
chief executive officer, Clifford L. Strand, who held the lease on the office
condominium. This free rent was of nominal value. We have since moved our
offices and entered into a lease agreement with Diversified Commercial Brokers,
LLC, of which our company is a 19% managing member.
Subsequent to the end of the transition period, our company paid
$25,000 in commission to Clifford L. Strand, its CEO, President and director for
services rendered in connection with the land sale and ground lease back of the
6.66 acres underlying the T-Rex Mall acquired by our company on March 31, 2003.
Our company agreed to pay such commission prior to the date on which Mr. Strand
became an officer and director of our company.
We also paid a commission of 25,000 and 30,000 shares of Series B
Preferred Stock to Clifford Strand and William Biddle, respectively, in
connection with the sale of the Decatur Square property.
9
The Company completed an Asset Purchase Agreement with Seashore
Diversified Investment Company ("Seashore"). As consideration for the assets
acquired, Seashore was issued 2,461,607 shares of restricted Common Stock and
4,997,807 shares of restricted Series A Preferred Stock. Seashore may be deemed
to a related party to the Company through common management and control.
Officers and directors of our company own approximately 22.1% of the limited
partnership interests in Seashore, and as a result have an indirect beneficial
ownership interest in and to shares of common stock and Series A Preferred
Stock. There was no independent appraisal received by our company with respect
to the assets of Seashore, and there can be no assurance that the number of
shares of our company paid for the assets of Seashore was fair and reasonable.
The Company also acquired the Hospitality Inn of Dickinson, North
Dakota from Seacrest Partners, L.P. in August 2003. Seacrest Partners, L.P. is a
limited partnership, the majority of which is owned by officers and directors of
the Company. The purchase price for the Hospitality Inn was an aggregate of
4,000,000 shares of Common Stock and Series A Preferred Stock.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR each nominee to the Board
of Directors.
PROPOSAL NO. 2. - ADOPTION OF 2003 STOCK INCENTIVE PLANS
GENERAL
On August 16, 2003, our Board of Directors adopted the 2003 Employee
Stock Incentive Plan and the 2003 Non-Employee Director Stock Incentive Plan.
The 2003 Employee Stock Incentive Plan and the 2003 Non-Employee Directors Stock
Incentive Plan are collectively referred to as the "2003 Plans." The Board
adopted the 2003 Plans contingent upon the adoption of Proposal 2 and subject to
ratification by our shareholders. Its purpose is to enable us to retain and
attract key employees, consultants, members of our Board of Directors who will
contribute to our success by their ability, ingenuity and industry, and to
enable such individuals to participate in our long-term success and growth by
giving them a proprietary interest in us.
The 2003 Plans authorizes the grant of stock options, restricted stock
awards, stock in lieu of cash compensation and stock purchase rights covering up
to a total of 15,000,000 shares of common stock to key employees, consultants,
and members of our Board of Directors and also provides for ongoing automatic
grants of stock options to non-employee directors. The last reported bid price
of our common stock on the OTC Bulletin Board on October 20, 2003 was $0.08.
Other than the automatic annual grants to non-employee directors (as described
in more detail below) and the grants and awards agreed to in the employment
agreements with our executive officers, the number and type of awards that will
be granted under the 2003 Plans are not determinable as our Board (as described
below) will make such determinations in its discretion.
SUMMARY OF THE PLANS
2003 EMPLOYEE STOCK INCENTIVE PLAN. The principal features of the 2003
Employee Stock Incentive Plan are summarized below.
SHARES AVAILABLE UNDER 2003 EMPLOYEE STOCK INCENTIVE PLAN. The maximum
number of shares that are reserved and available under the 2003 Employee Stock
Incentive Plan for awards is 10,000,000 shares of common stock (subject to
possible adjustment in the event of stock splits or other similar changes in
outstanding common stock). Shares covered by expired or terminated stock options
or forfeited shares issued under the Stock Issuance Program may be used for
subsequent awards under the 2003 Employee Stock Incentive Plan.
ELIGIBILITY AND ADMINISTRATION. Our officers and other key employees,
who are responsible for or contribute to our management, growth and/or
profitability of our business, as well as consultants, are eligible to be
granted awards under the 2003 Employee Stock Incentive Plan. The 2003 Employee
Stock Incentive Plan is administered by the Board or, in its discretion, by a
committee of not less than three disinterested persons who are defined in the
2003 Employee Stock Incentive Plan (the "Committee") appointed by the Board of
Directors. The term "Board" as used in this section refers to our Board of
Directors or if our Board has delegated its authority, the Committee. The Board
has the power to make awards, determine the number of shares covered by each
award and other terms and conditions of such awards, interpret the 2003 Employee
Stock Incentive Plan, and adopt rules, regulations and procedures with respect
to the administration of the 2003 Employee Stock Incentive Plan. As of September
30, 2003, there were approximately ten persons who were eligible as a class to
be selected by the Board to receive awards under the 2003 Employee Stock
Incentive Plan.
10
DISCRETIONARY OPTIONS GRANTS. The Board may grant stock options that
either qualify as "incentive stock options" under the Internal Revenue Code of
1986, as amended ("Code") or are "non-qualified stock options" in such form and
upon such terms as the Board may approve from time to time. Stock options
granted under the 2003 Employee Stock Incentive Plan may be exercised during
their respective terms as determined by the Board. The purchase price may be
paid by tendering cash or, in the Board's discretion, by tendering promissory
notes or previously acquired common stock. The optionee may elect to pay all or
part of the option exercise price by contracting with a broker for the broker to
advance the exercise price and then to sell sufficient shares after the date of
issue to satisfy the exercise price advanced by the broker, and by having us
withhold upon exercise of the option a number of shares with a fair market value
equal to the minimum income tax withholding, if any, upon the exercise of the
option. No incentive stock option shall be transferable by the optionee or
exercised by anyone else during the optionee's lifetime, but non-qualified stock
options may be transferred to an immediate family member or a trust or limited
partnership established for the sole benefit of such immediate family members,
or incident to a divorce order.
Stock options may be exercised during varying periods of time after a
participant's termination of employment, dependent upon the terms established by
the Board at the time of the grant, but in no event is an option exercisable
after the expiration of the term. Following a participant's death, the
participant's stock options may be exercised to the extent they were exercisable
at the time of death by the legal representative of the estate or the optionee's
legatee for such period as the Committee shall specify at or after the date of
grant or until the expiration of the stated term of the option, whichever is
less. The same time applies if the participant is terminated by reason of
disability. If the participant's employment is terminated for Misconduct (as
defined in the Plan), the participant's stock options immediately terminate. The
Board for particular options may reduce or more extend these exercise periods.
The Board may, in its discretion, accelerate the exercisability of stock options
that would not otherwise be exercisable upon death, disability or other
termination of employment.
No incentive stock options shall be granted under the 2003 Employee
Stock Incentive Plan after August 16, 2013. The term of an incentive stock
option may not exceed 10 years (or 5 years if issued to a participant who owns
or is deemed to own more than 10% of the combined voting power of all classes of
our stock). The aggregate fair market value of the common stock with respect to
which an incentive stock option is exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000 (based on the exercise price
at the time of grant). The exercise price under an incentive stock option may
not be less than 100% of the fair market value of the stock (common or
preferred) on the date the option is granted (or, in the event the participant
owns more than 10% of the combined voting power of all classes of our stock, the
option price shall be not less than 110% of the fair market value of the stock
on the date the option is granted). The exercise price for non-qualified options
granted under the 2003 Employee Stock Incentive Plan may not be less than 50% of
the fair market value of the stock (common or preferred) on the date of grant.
Pursuant to a limitation in the 2003 Employee Stock Incentive Plan, no
eligible person may be granted any stock options, stock appreciation rights,
restricted stock and deferred stock for more than 2,000,000 shares of common
stock in the aggregate during any calendar year. This limitation is included
pursuant to Section 162(m) of the Internal Revenue Code, which provides a $1
million limitation on the compensation of certain executive officers that is
deductible by us for federal income tax purposes. The limitation on stock
options granted to an individual during any fiscal year is intended to preserve
our federal tax deduction for compensation expense related to stock options that
may be granted to executive officers under the 2003 Employee Stock Incentive
Plan. Restricted stock and deferred stock will also qualify for exclusion from
the $1 million limitation to the extent that the grant or vesting of the stock
is conditioned on us achieving certain financial or business goals established
in advance and administered by the Board or the Committee consisting of outside
directors.
STOCK ISSUANCE PROGRAM. The Board may issue shares of Common Stock
under the Plan. Such issuances may be performed as stock purchase rights, bonus
stock, deferred compensation stock and other outright awards or purchase rights.
The Board may condition the grant of restricted stock upon the attainment of
specified performance goals or service requirements. The provisions of issuance
need not be the same with respect to each recipient. If an issuance is
conditioned upon the fulfillments of certain restrictions, we will hold the
restricted stock in custody until the restrictions thereon have lapsed. During
the period of the restrictions, a participant has the right to vote the shares
of restricted stock and to receive dividends and distributions unless the Board
requires such dividends and distributions to be held by us subject to the same
restrictions as the restricted stock.
11
CHANGE IN CONTROL. In the event of a change in control of us, stock
options shall immediately vest and become exercisable, and all repurchase rights
on stock issuances shall immediately lapse, unless the successor corporation
assumes the options or the repurchase rights are assigned to the successor
corporation. A change in control of us includes the sale of stock or the sale of
assets if, following such transaction, our shareholders do not control at least
50% of the acquiring entity, or there is a change in the composition of the
Board in which more than a majority of members elected were not nominated by the
then current directors. In the event of a change in control, or a merger,
consolidation, liquidation or dissolution, the Board may require that any
outstanding awards be paid in cash in cancellation of the participant's rights,
which may include that portion of the award that has not yet vested, or may
provide for substitute awards under a plan of the acquiring entity, if any, or
for the immediate exercise of any options and the cancellation of any
unexercised options at the time of the transaction.
2003 NON-EMPLOYEE DIRECTORS STOCK INCENTIVE PLAN. The principal
features of the 2003 Non-Employee Directors Stock Incentive Plan are summarized
below.
SHARES AVAILABLE UNDER 2003 NON-EMPLOYEE DIRECTORS STOCK INCENTIVE
PLAN. The maximum number of shares that are reserved and available under the
2003 Non-Employee Directors Stock Incentive Plan for awards is 5,000,000 shares
of common stock (subject to possible adjustment in the event of stock splits or
other similar changes in outstanding common stock). Shares covered by expired or
terminated stock options and stock appreciation rights, and forfeited shares of
restricted stock or deferred stock may be used for subsequent awards under the
2003 Non-Employee Directors Stock Incentive Plan.
ELIGIBILITY AND ADMINISTRATION. Only non-employee Directors and
consultants are eligible to be granted awards under the 2003 Non-Employee
Directors Stock Incentive Plan. The 2003 Non-Employee Directors Stock Incentive
Plan is administered by the Board or, in its discretion, by a committee of not
less than two persons (the "Committee") appointed by the Board of Directors. The
term "Board" as used in this section refers to our Board of Directors or if our
Board has delegated its authority, the Committee. The Board has the power to
interpret the 2003 Non-Employee Directors Stock Incentive Plan, and adopt rules,
regulations and procedures with respect to the administration of the 2003
Non-Employee Directors Stock Incentive Plan, but does not determine the number
of shares in any award or the timing thereof. As of September 30, 2003, there
were approximately six persons who were eligible as a class to be selected by
the Board to receive awards under the 2003 Non-Employee Directors Stock
Incentive Plan.
INITIAL GRANT AND SUCCEEDING GRANTS. The 2003 Non-Employee Directors
Stock Incentive Plan provides that each non-employee director will be granted
(i) an initial grant of 100,000 shares of Common Stock upon his or her start
date and (ii) a non-qualified stock option to purchase 500,000 shares of our
common stock, of which options to purchase 125,000 shares shall vest immediately
and 125,000 shall vest on each annual anniversary of the start date so long as
the recipient remains a Director or consultant to the Company. In the event any
person serves on the Board of Directors for more than three consecutive years,
then commencing in the fourth each year the Director will receive a succeeding
grant of options to purchase 125,000 shares that shall vest at the next
anniversary of the start date. The first stock options to be granted to
non-employee directors under the 2003 Non-Employee Directors Stock Incentive
Plan as of the effective date of the 2003 Non-Employee Directors Stock Incentive
Plan will have an exercise price of $0.15 per share.
Stock options may be exercised during varying periods of time after a
participant's termination as a member of the Board or as a consultant, dependent
upon the reason for the termination. Following a participant's death, the
participant's stock options may be exercised to the extent they were exercisable
at the time of death by the legal representative of the estate or the optionee's
legatee for a period of one year or until the expiration of the stated term of
the option, whichever is less. The same time periods apply if the participant is
terminated by reason of disability. If we involuntarily terminate the
participant without cause (including the participant's retirement) the
participant's options may be exercised to the extent they were exercisable at
the time of termination for the lesser of six months or the balance of the
stated term of the option.
Upon the occurrence of certain corporate transaction, including a
merger or consolidation, reorganization or sale of all or substantially all of
the assets, all stock options issued under the 2003 Non-Employee Director Stock
Incentive Plan immediately vest and become exercisable for a period of six
months after the date of the event.
12
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS. An optionee will not realize taxable compensation income
upon the grant of an incentive stock option. In addition, an optionee generally
will not realize taxable compensation income upon the exercise of an incentive
stock option if he or she exercises it as an employee or within three months
after termination of employment (or within one year after termination if the
termination results from a permanent and total disability). The amount by which
the fair market value of the shares purchased exceeds the aggregate option price
at the time of exercise will be alternative minimum taxable income for purposes
of applying the alternative minimum tax. If stock acquired pursuant to an
incentive stock option is not disposed of prior to the date two years from the
option grant date or prior to one year from the option exercise date (the
"Applicable Holding Periods"), any gain or loss realized upon the sale of such
shares will be characterized as capital gain or loss. If the Applicable Holding
Periods are not satisfied, then any gain realized in connection with the
disposition of such stock will generally be taxable as ordinary compensation
income in the year in which the disposition occurred, to the extent of the
difference between the fair market value of such stock on the date of exercise
and the option exercise price. We are entitled to a tax deduction to the extent,
and at the time, the participant realizes compensation income. The balance of
any gain will be characterized as a capital gain. Under current law, net capital
gains are taxed at a maximum federal rate of 15% while compensation income may
be taxed at higher federal rates.
An optionee generally will not realize taxable compensation income upon
the grant of a non-qualified stock option. As a general matter, when an optionee
exercises a non-qualified stock option, he or she will realize taxable
compensation income at that time equal to the difference between the aggregate
option price and the fair market value of the stock on the date of exercise. We
are entitled to a tax deduction to the extent, and at the time, the participant
realizes compensation income.
RESTRICTED STOCK. The grant of restricted stock should not result in
immediate income for the participant or in a deduction for us for federal income
tax purposes, assuming the shares are nontransferable and subject to
restrictions which would result in a "substantial risk of forfeiture" as
intended by us and as defined in applicable Treasury regulations. If the shares
are transferable or there are no such restrictions, the participant will realize
compensation income upon receipt of the award. Otherwise, a participant
generally will realize taxable compensation when any such restrictions lapses.
The amount of such income will be the value of the common stock on that date
less any amount paid for the shares. In the case of stock appreciation rights
and deferred shares, the participant generally will realize taxable compensation
at the time the shares are actually issued in satisfaction of the stock
appreciation rights or the obligation to issue deferred shares. Dividends paid
on the common stock and received by the participant during the restricted period
also will be taxable compensation income to the participant. In any event, we
will be entitled to a tax deduction to the extent, and at the time, the
participant realizes compensation income. A participant may elect, under Section
83(b) of the Code, to be taxed on the value of the stock at the time of award.
If the election is made, the fair market value of the stock at the time of the
award is taxable to the participant as compensation income and we are entitled
to a corresponding deduction.
WITHHOLDING. The 2003 Plans requires each participant, no later than
the date as of which any part of the value of an award first becomes includible
as compensation in the gross income of the participant, to pay to us any
federal, state or local taxes required by law to be withheld with respect to the
award. We shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment otherwise due to the participant. With respect to
any award under the 2003 Plans, if the terms of the award so permit, a
participant may elect to satisfy part or all of the withholding tax requirements
associated with the award by (i) authorizing us to retain from the number of
shares of our stock which would otherwise be deliverable to the participant, or
(ii) delivering to us from shares of our stock already owned by the participant
that number of shares having an aggregate fair market value equal to part or all
of the tax payable by the participant. In that case, we would pay the tax
liability from our own funds.
13
NEW PLAN BENEFITS
The following table sets forth the benefits or amounts from the 2003
Employee Stock Incentive Plan and the 2003 Non-Employee Directors Plan that will
be allocated or received by each of the following persons:
o Each executive officer and Director of the Company;
o All current executive officers, as a group;
o All current directors who are not executive officers, as a
group
o All employees, including officers that are not executive
officers, as a group.
NEW PLAN BENEFITS
2003 NON-EMPLOYEE DIRECTOR
2003 EMPLOYEE STOCK INCENTIVE PLAN STOCK INCENTIVE PLAN
---------------------------------- --------------------
DOLLAR VALUE NUMBER OF UNITS (1) DOLLAR VALUE NUMBER OF UNITS
------------ ------------------- ------------ ---------------
Clifford L. Strand $165,000 1,100,000 n/a n/a
William S. Biddle $112,500 750,000 n/a n/a
Munjit Johal $112,500 750,000 n/a n/a
Gernot Trolf $112,500 750,000 n/a n/a
Executive Group $502,500 3,350,000 n/a n/a
Non-Executive
Director Group 0 0 $360,000 2,400,000
Non-Executive
Officer Group 0 0 n/a n/a
(1) Does not include options to purchase shares to be issued to the
executive officers conditioned upon the Company's growth in net asset
value of at least 20% per annum; Clifford L. Strand (100,000 per
annum), William S. Biddle (50,000 per annum) and Gernot Trolf (50,000
per annum).
FURTHER INFORMATION
A copy of both the 2003 Employee Stock Incentive Plan and the 2003
Non-Employee Director Stock Incentive Plan can be obtained by writing to our
Chief Financial Officer at the address indicated on this Information Statement.
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR adoption of the 2003
Employee Stock Inventive Plan and the 2003 Non-Employee Director Stock Incentive
Plan.
PROPOSAL NO. 3 -- APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Cacciamatta Accountancy
Corporation as independent public accountants to audit the consolidated
financial statements of the Company for the fiscal years ending December 31,
2003, and to perform other accounting services as requested by the Company. The
Company has not determined when such audit will be performed because the Company
currently does not have sufficient operating capital to pay the related audit
fees. Timing of the audit will depend upon when funds become available from
operations or investment.
Although not required to do so, the Board of Directors is submitting
the appointment of that firm for ratification at the Annual Meeting. A
representative of Cacciamatta Accountancy Corporation is expected to be present
at the Annual Meeting, will have the opportunity to make a statement if he or
she desires to do so, and is expected to be available to respond to appropriate
questions.
The former auditor was Bierwolf Nielsen and Associates, Salt Lake City,
Utah.
14
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock is
required to approve the proposed ratification of the appointment of Cacciamatta
Accountancy Corporation as the Company's independent accountants for the fiscal
year ending December 31, 2003.
AUDIT FEES
The Company did not engage Cacciamatta Accountancy Corporation to
perform an audit on the financial statements for the period ended October 31,
2002 or the transition period ended December 31, 2002. The Company paid its
former auditors, Bierwolf Nielsen & Associates, a total of $7,850 for the audit
and review fees for fiscal year 2002 and the transition report for the period
ended December 31, 2002. Since December 31, 2002, for 2003 fiscal year the
Company has prepared and filed Quarterly Reports of Form 10-QSB and has had such
quarterly financial statements reviewed by Cacciamatta Accountancy Corporation
and has paid $40,000 for audit fees for services rendered for the review for the
financial statements.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
During the fiscal year ended October 31, 2002 or during the transition
period ended December 31, 2002, the Company did not engage its independent
public accountants to perform financial information systems design and
implementation.
ALL OTHER FEES OF INDEPENDENT PUBLIC ACCOUNTS
During the fiscal year ended October 31, 2002 and the transition period
ended December 31, 2002, no other fees were paid to the Company's independent
public accountants. While there were no non-audit related fees during such
period, the Audit Committee has considered whether non-audit services are
consistent with maintaining the auditor's independence.
FINANCIAL AND OTHER INFORMATION
The Company has prepared and filed the Annual Report on Form 10-KSB for
the fiscal year ended October 31, 2002, and the Transition Annual Report for the
fiscal year ended December 31, 2002. The Company is sending to shareholders the
Annual Report for the most recent fiscal year and for the transition period
ended December 31, 2002.
SHAREHOLDER PROPOSALS
Proposals by Shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Secretary of the Company on or
before August 15, 2004, in order to be included in the information statement for
that meeting. Proposals should be directed to Clifford L. Strand, President.
Secured Diversified Investment, Ltd.
By Order of the Board of Directors
/s/ Clifford L. Strand
- ----------------------------------------
Clifford L. Strand, President October 21, 2003.