PROPOSAL
1
AUTHORIZE
THE SPIN-OFF DISTRIBUTION OF THE SHARES OF THE COMPANY’S MAJORITY OWNED
SUBSIDIARY, COIL TUBING TECHNOLOGY HOLDINGS, INC. SOMETIME IN THE FUTURE, BASED
ON A RECORD DATE TO BE SET IN THE SOLE DETERMINATION OF THE BOARD OF
DIRECTORS.
WHAT
IS THE MAJORITY SHAREHOLDER APPROVING?
Our
Majority Shareholder will approve the authorization for the Company to
distribute to Company common stockholders an aggregate of 20,000,000 shares
(the
“Holdings Shares”, representing 95.2% of the total outstanding shares) of our
majority owned Nevada subsidiary, Coil Tubing Technology Holdings, Inc.
(“Holdings”) common stock (the “Distribution”). Holdings has filed a
Registration Statement on Form SB-2 with the Commission to register the
distribution of the Holdings Shares to the Company’s shareholders (the
“Registration Statement”). The Registration Statement has not been
declared effective to date, and the Company will not set a record date (“Record
Date”) for shareholders of the Company who will receive shares of Holdings in
connection with the Distribution until a later date. Additionally,
the Company will not ask for shareholder approval to set the Record Date for
the
distribution in the future. As a result, the Company cannot determine
the exact number of shares of Holdings which shareholders of the Company will
receive in connection with the Distribution; however, assuming the total number
of outstanding shares of the Company remains the same (i.e., that the Company
does not issue any more shares of common stock) each shareholder of the Company
will receive approximately 13 shares of Coil Tubing for each 100 shares of
the
Company which they hold, based on 149,655,338 shares of the Company currently
outstanding. No fractional shares of Holdings will be distributed in connection
with the Distribution. However, and any fractional shares left as a result
of
the Distribution will be rounded up to the nearest whole share.
Holdings
will bear all costs incurred in connection with the Distribution, and neither
Holdings nor the Company will receive any proceeds from the
offering.
The
20,000,000 shares of common stock will constitute 95.2% of Holdings’ then
outstanding shares of common stock after the Distribution (the remaining
1,000,000 shares of common stock are held by Jerry Swinford, Holdings’ and the
Company’s sole officer and Director). Immediately following the
Distribution, the Company will not own any of Holdings’ shares and Holdings will
be an independent company. Mr. Swinford also holds 1,000,000 shares
of Holdings’ Series A Preferred Stock, which gives him the right to vote 51% of
the vote on any shareholder matter, and as such, Mr. Swinford currently controls
and will continue to control after the Distribution, approximately 53.3% of
Holdings’ voting stock.
Shareholders
are encouraged to view Holdings’ Registration Statement filing on the Securities
and Exchange Commission’s EDGAR website at
www.sec.gov
,
for more information on the Company, Holdings, and the Distribution in
general.
CORPORATE
HISTORY OF HOLDINGS:
Coil
Tubing Technology Holdings, Inc. was formed as a Texas corporation (“Holdings”)
on July 2, 1999. On March 20, 2005, Holdings’ then sole shareholder, Jerry
Swinford, who is currently both the Company’s and Holdings’ sole officer and
Director, entered into a Definitive Acquisition Purchase Agreement (the
“Purchase Agreement”) with Grifco International, Inc. [GFCI.PK] (“Grifco”),
pursuant to which he sold 100% of Holdings’ outstanding common stock, 51,000 pre
Forward Split (defined below) shares of common stock (20,000,000 shares post
Forward Split) to Grifco for an aggregate price of $510,000, payable
as $50,000 in cash and $460,000 worth of Grifco common stock (totaling
1,482,871shares of common stock, based on the trading price of Grifco’s common
stock on the Pink Sheets trading market on the day of closing of the Purchase
Agreement), of which $200,000 in stock (645,161 shares) was paid to settle
an
$800,000 debt owed by Holdings to a third party, HyCoTec Investments, B.V.,
a
Netherlands limited liability company (“HyCoTec”), and $260,000 in stock
(837,710 shares ) was paid directly to Mr. Swinford. The 837,710
shares of Grifco common stock which Mr. Swinford received represented less
than
5% of Grifco’s common stock. As such, Mr. Swinford did not have any
control over the operations of
Grifco
prior to or following the parties entry into the March 2005 Purchase
Agreement. Further, Mr. Swinford has never served as an officer or
director of Grifco. Grifco held our common shares in its own name and
as such, Holdings was a wholly owned subsidiary of Grifco following the Purchase
Agreement.
HyCoTec
had been an investor in Holdings prior to the date of the exchange and
previously converted its equity interest in Holdings into debt secured by
Holdings’ assets. Neither Mr. Swinford nor Holdings had any
relationship with HyCoTec other than in relation to the debt owed to HyCoTec
by
Holdings.
In
November 2005, IPMC Holdings Corp., a Florida corporation (our predecessor
company), Holdings and Grifco entered into an Agreement For Exchange of Common
Stock (the “Exchange Agreement”), whereby IPMC Holdings Corp. agreed to
exchange 75,000,000 newly issued shares of its common stock (representing
approximately 89% of its then outstanding stock, based on 14,200,894 shares
of
outstanding common stock prior to the exchange) to Grifco for the 51,000 pre
Forward Split shares of stock (20,000,000 shares post Forward Split),
representing 100% of IPMC Holdings Corp. outstanding shares, which Grifco held
subsequent to the Purchase Agreement (described above). As a result of the
Exchange Agreement, Holdings became a wholly owned subsidiary of IPMC Holdings
Corp. and IPMC Holdings Corp. became a majority owned subsidiary of
Grifco.
A
new
company, Coil Tubing Technologies, Inc. was formed in Nevada on November 30,
2005. On December 8, 2005, IPMC Holdings Corp., entered into a
Plan and Agreement of Merger and Reorganization (the “Merger”) with Coil Tubing
Technologies, Inc., pursuant to which each outstanding share of IPMC Holdings
Corp. was exchanged for one share of Coil Tubing Technologies,
Inc. The Company was the entity which resulted from the Merger and
took the name Coil Tubing Technology, Inc. As a result of the Merger,
the Company became the sole surviving corporate entity of the merger of IPMC
Holdings Corp. and Coil Tubing Technologies, Inc., and Holdings became a wholly
owned subsidiary of the Company. The Company had no business or
operations immediately prior to the Merger
Subsequent
to the Exchange Agreement, Grifco continued to provide financial assistance
to
the Company in the form of cash contributions to Holdings’ wholly owned
subsidiary, Coil Tubing Technology, Inc., a Texas corporation
(“CTT”). Such contributions benefited the Company, as Holdings,
through its subsidiary, CTT, represented all of the Company’s
operations. Such cash contributions totaled approximately $500,000
from the date of the Exchange until March 2007, and a portion ($75,000) of
the
contributions were treated as loans. These loans were repaid in
full in the second quarter of 2007. No additional contributions have been
made by Grifco since March 2007. The contributions provided by Grifco were
used
by Holdings for working capital and to pay certain expenses including legal
and
accounting expenses. The contributions were also used to rebuild
Holdings’ machine shop, and to repair and replace certain coil tubing machinery,
including Holdings’ computer numerical control (“CNC”) equipment, which was
damaged while under the control of Grifco.
Summary
of Recent Material
Corporate Events
In
May
2007, the Company determined it was in Holdings best interest to redomicile
from
the State of Texas to the State of Nevada, and on May 24, 2007, Holdings entered
into a Plan of Conversion and filed Articles of Conversion with the Secretary
of
State of Texas and Nevada, shortly thereafter, to affect a conversion to a
Nevada corporation (the “Conversion”). Concurrently with the Conversion,
Holdings increased its authorized shares of common stock to 500,000,000 shares,
$0.001 par value per share, and authorized 10,000,000 shares of blank check
preferred stock, $0.001 par value per share.
On
June
19, 2007, Holdings Board of Directors, and the Company approved a 392.1568627
for one forward stock split of Holdings issued and outstanding stock, for all
shareholders of record as of June 19, 2007 (the “Forward Split”). As a result,
Holdings issued and outstanding shares increased from 51,000 prior to the
forward stock split to 20,000,000 shares subsequent to the forward stock
split.
The
effects of the Conversion and Forward Split have been reflected throughout
this
Information Statement.
In
May
2007, we and Holdings entered into an 1) Agreement and Release and 2) a Novation
of Agreement For Exchange of Common Stock (collectively the “Release and
Restatement”) with Grifco International, Inc. (“Grifco”), our Chief Executive
Officer and Director, Jerry Swinford and James Dial, the Chief Executive Officer
of Grifco. Pursuant to the Release and Restatement, the parties agreed that
Grifco would distribute 75,000,000 shares of the Company’s common stock which it
held (which shares were received in connection with the Exchange Agreement,
described above, which shares have been distributed to date) to its shareholders
and we would issue Grifco 1,000,000 shares of Series B Preferred Stock, which
will have no voting rights, but will be convertible into 20,000,000 shares
of
our common stock, if Grifco exercises its option to purchase the Series A
Preferred Stock of the Company. The “Option Period” which allows Grifco the
right to purchase the Company’s Series A Preferred Stock currently held by Mr.
Swinford for aggregate consideration of $100 lasts two (2) years from the date
Mr. Swinford no longer desires to hold the Series A Preferred Stock of the
Company. The Company anticipates that Mr. Swinford will no longer
desire to hold the Series A Preferred Stock of the Company at such time as
Holdings has conducted its distribution.
On
June
19, 2007, subsequent to the Forward Split, Holdings issued 1,000,000 shares
of
Series A Preferred Stock to Jerry Swinford, its sole officer and
Director. The Series A Preferred Stock has the right to vote, in
aggregate, on all shareholder matters equal to 51% of the total
vote. The Series A Preferred Stock will be entitled to this 51%
voting right no matter how many shares of common stock or other voting stock
of
Holdings are issued or outstanding in the future (the “Super Majority Voting
Rights”). Holdings designated the shares of Series A Preferred
stock with the Super Majority Voting Rights, so that Mr. Swinford would retain
control over Holdings for as long as he held the Series A Preferred Stock,
regardless of the number of shares of common stock of Holdings which were
outstanding. Mr. Swinford also holds 1,000,000 shares of Series A
Preferred Stock the Company, which shares were issued to Mr. Swinford in May
2007.
SUBSIDIARIES
OF HOLDINGS:
Holdings
currently has two wholly owned Texas subsidiaries, Precision Machining
Resources, Inc. (“PMR”) and Coil Tubing Technology, Inc. The majority of
Holdings’ tool rental and tool production operations are run through Coil Tubing
Technology, Inc. (“CTT”). PMR owns the manufacturing equipment used to produce
tools used in the work-over segment of Holdings’ rental
business.. PMR also stocks coil tubing tool parts which it sells
directly to other service companies, making PMR a supply and sales arm for
non-proprietary tools and equipment of Holdings.
WHAT
IS THE PURPOSE OF THE DISTRIBUTION?
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Afford
Holdings the opportunity to obtain audited financial statements and
to
eventually trade its common stock on the Over-The-Counter Bulletin
Board,
instead of the Pink Sheets, where the Company currently
trades. The Company has been unable to obtain audited financial
statements to date, and by distributing shares of Holdings’ stock to its
shareholders, Holdings will be able to become a fully reporting company
and the Company hopes will be able to trade its common stock on the
Over-The-Counter Bulletin Board in the future;
and
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To
enable the Company’s stockholders to increase or decrease their level of
participation in Holdings’ business by varying their level of investment
in Holdings separate from the
Company.
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HOW
WILL THE DISTRIBUTION AFFECT MY RIGHTS?
The
completion of the Distribution will not have a significant affect on any
stockholder's proportionate equity interest in our Company. For example,
a
stockholder who owns a number of shares that prior to the Distribution
represented one percent of the outstanding shares of the Company would receive
one percent of the distributed shares of Holdings. The Holdings’ shares received
by such stockholder would constitute approximately 0.95% of Holdings then
common
stock based on 21,000,000 shares then outstanding, taking into account the
1,000,000 shares held by Holdings’ sole officer and Director, Jerry
Swinford.
Additionally,
as a result of the Distribution, the trading price of the Company’s common stock
may decline. Following the Distribution, the Company expects that its common
stock will continue to be listed and traded on the Pink Sheets under the
symbol
“CTGB.”
Although
we hope that that a trading market will continue for the shares of the Company’s
common stock and for Holdings’ shares, we cannot make any assurances that either
event will occur. As a result of the Distribution, the trading price
of the Company’s common stock may be substantially lower following the
Distribution than the trading price of the Company’s common stock immediately
prior to the Distribution. Further, while the Company hopes that any
decline in the trading price of its common stock would be recouped by its
shareholders from the trading value of shares received in Holdings, it is
possible that the combined trading prices of the Company’s common stock and
Holdings’ common stock after the Distribution may be less than the trading price
of the Company’s common stock immediately prior to the
Distribution.
WHAT
ARE SOME OF THE RISKS ASSOCIATED WITH THE DISTRIBUTION?
Holdings
may be
unable to achieve some or all of the benefits that we expect to achieve from
separation from the Company.
Holdings may not be able to
achieve the full strategic and financial benefits that we expect will result
from its separation from the Company or such benefits may be delayed or may
not
occur at all. For example, there can be no assurance that analysts and investors
will regard its corporate structure as clearer and simpler than the current
Company corporate structure or place a greater value on Holdings as a
stand-alone company than on its businesses being a part of the Company. As
a
result, in the future the aggregate market price of the Company’s common stock
and Holdings’ common stock as separate companies may be less than the market
price per share of the Company’s common stock had the separation and
distribution not occurred.
Holdings
is being
separated from the Company and therefore, it will have a limited operating
history as a separate company and no history as a separate reporting company
prior to the registration statement filing.
The historical and
financial information of the Company and Holdings (as described in the
Registration Statement) do not necessarily reflect the financial condition,
results of operations or cash flows that Holdings would have achieved as a
separate publicly-traded company or those that we will achieve in the future
primarily as a result of the following factors:
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Since
November 2005, Holdings’ business has in part been operated by the Company
as part of its broader corporate organization, rather than as a separate,
publicly-traded company;
and
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Other
significant changes may occur in Holdings’ cost structure, management,
financing and business operations as a result of its operating as
a
company separate from the Company.
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The
Distribution
may result in tax liability.
You may be required to pay income
tax on the value of your shares of common stock received in connection with
the
spin-off Distribution. This Distribution may be taxable to you as a dividend
and/or as a capital gain, depending upon the extent of your basis in Company
stock which you hold. You are advised to consult your own tax advisor as to
the
specific tax consequences of the Distribution. Shareholders are also
encouraged to read “Federal Income Tax Consequences of the Distribution” below,
which contains important tax disclosures relating to the
Distribution.
The
Distribution
may cause the trading price of the Company’s common stock to decline.
Following the Distribution, the Company expects that its common stock
will continue to be listed and traded on the Pink Sheets under the symbol
“CTGB.” A trading market may not continue for the shares of the Company’s common
stock or even develop for the Distribution shares. As a result of the
Distribution, the trading price
of
the
Company’s common stock may be substantially lower following the Distribution
than the trading price of the Company’s common stock immediately prior to the
Distribution. Further, the combined trading prices of the Company’s
common stock and Holdings’ common stock after the Distribution may be less than
the trading price of the Company’s common stock immediately prior to the
Distribution.
The
lack of a
broker or dealer to create or maintain a market in Holdings’ stock could
adversely impact the price and liquidity of the Distribution
securities.
We have no agreement with any broker or dealer to
act as a market maker for Holdings’ securities and there is no assurance that we
will be successful in obtaining any market makers. Thus, no broker or dealer
will have an incentive to make a market for our stock. The lack of a market
maker for Holdings’ securities could adversely influence the market for and
price of its securities, as well as your ability to dispose of, or to obtain
accurate information about, and/or quotations as to the price of, the
securities.
WILL
FRACTIONAL SHARES BE ISSUED IN CONNECTION WITH THE DISTRIBUTION?
No. In
the event a stockholder would have received a fractional share of common stock
following the Distribution, the Company will round up fractional shares to
the
nearest whole share.
WHAT
ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION?
The
federal income tax consequences of the Distribution to our stockholders and
to
us are based on the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury Regulations promulgated under the Code, judicial authority
and current administrative rulings and practices of the United States Internal
Revenue Service (the "Service"). Changes to the laws could alter the tax
consequences, possibly with a retroactive effect. We have not sought and will
not seek an opinion of counsel or a ruling from the Service regarding the
federal income tax consequences of the proposed Distribution.
WE
URGE STOCKHOLDERS TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR CONSEQUENCES TO
THEM.
VOTING
STRUCTURE OF HOLDINGS:
The
following table sets forth certain information regarding the beneficial
ownership of the shares of Holdings stock
following
the
Distribution, based on the number of the Company’s common stock currently
outstanding (which number is subject to change prior to the Distribution) (i)
by
each person known to be the beneficial owner of 5% or more of the outstanding
shares of common stock, (ii) the Chief Executive Officer and each named
executive officer, (iii) Holdings’ director and (iv) all executive officers and
directors of Holdings as a group.
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Name
and Address
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Number
of Shares of Common
Stock
Beneficially
Owned
Following the Distribution(1)
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Percentage
of Common Stock Owned
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Shares
of Common Stock the Holder of our Series A Preferred Stock is able
to
Vote
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Percentage
of Voting Stock Owned
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Jerry
Swinford
CEO,
CFO, Treasurer, Secretary and Director
19511
Wied Rd. Suite E
Spring,
Texas 77388
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1,000,000
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4.8%(3)
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21,857,143(1)
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53.3%(2)
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Bert
Pohlmann
1290
North Ocean Blvd.
Palm
Beach, Florida 33480
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6,074,564*
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28.9%(3)*
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-
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14.2%(2)*
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All
of the officers and Directors as a group (1 person)
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1,000,000
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4.8%
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21,857,143(1)
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53.3%(2)
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*
Approximate number of shares of common stock following the
Distribution.
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(1)
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Represents
51% of Holdings’ voting shares based on 21,000,000 shares of common stock
outstanding following the
Distribution.
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(2)
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Based
on 42,857,143 voting shares based on 21,000,000 shares outstanding
and
21,857,143 shares which the 1,000,000 shares of Series A Preferred
Stock
held by Mr. Swinford are eligible to vote, representing 51% of Holdings’
voting shares.
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(3)
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Based
on 21,000,000 shares of common stock outstanding following the
Distribution, which number includes 20,000,000 shares to be distributed
in
connection with the Distribution and 1,000,000 shares held by Mr.
Swinford
prior to the Distribution.
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WHAT
VOTE IS REQUIRED FOR APPROVAL?
Our
Majority Shareholder will approve the authorization for a distribution to
Company stockholders of an aggregate of 20,000,000 shares of Holdings’ common
stock and will authorize the Board of Directors to set a Record Date for the
Distribution sometime in the future, without further shareholder
approval. Shareholders of the Company will receive shares of Coil
Tubing Technology Holdings, Inc. based on the shares of the Company which they
hold on a pro rata basis, based on the number of the Company’s shares
outstanding on the yet to be determined Record Date for the
Distribution. Any fractional shares left as a result of the
Distribution will be rounded up to the nearest whole share. No
fractional shares of common stock will be issued. The Distribution
and the setting of the Record Date will take place at any time after the
Meeting, and before December 31, 2009,
without further
stockholder
approval or notice
. Therefore, no further stockholder approval is
required or sought.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE TO AUTHORIZE THE SPIN-OFF
DISTRIBUTION TO THE COMPANY’S SHAREHOLDERS OF THE SHARES OF COMMON STOCK OF OUR
MAJORITY OWNED SUBSIDIARY, COIL TUBING TECHNOLOGY HOLDINGS, INC., AND THE
SETTING OF A RECORD DATE FOR SUCH DISTRIBUTION WITHOUT FURTHER STOCKHOLDER
APPROVAL.