UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
COMET TECHNOLOGIES, INC.
____________________________________________________________________________
(Name of Registrant As Specified In Its Charter)
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(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):
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(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
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COMET TECHNOLOGIES, Inc.
8 EAST BROADWAY #428
Salt Lake City, UT 84111
INFORMATION STATEMENT
Dated ___________, 2006
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement of Comet Technologies, Inc., a Nevada
corporation (the "Company") is first being furnished on or about ____________,
2006, to the Company's stockholders of record as of the close of business on
February 6, 2006 (the "Record Date"), for the purpose of providing notice of
the approval of a one-for-eight reverse split of the outstanding stock (the
"Reverse Split").
On January 27, 2006, the Company's Board of Directors adopted a
resolution recommending that the shareholders approve the Reverse Split.
The above matter has been approved as of January 29, 2006, by eighteen
(18) holders of approximately 53% of the outstanding shares of the Company in
accordance with Nevada corporate law. However, under federal law these
proposals will not be effective until at least 20 days after this Information
Statement has first been sent to shareholders.
The Reverse Split will not reduce any stockholder to below one (1)
share, on a per stockholder of record basis, and all fractional shares will be
rounded up. The terms of the Reverse Split provide for each eight (8) of the
outstanding shares of our common stock on the date of the Reverse Split will
be automatically converted into one (1) share of our common stock, thereby
reducing the number of shares of common stock issued and outstanding. The
Reverse Split does not change the $0.001 par value designation of our common
stock, or the number of shares of our common stock authorized for issuance.
The Reverse Split will not have a going private effect on the Company.
The elimination of the need for a special meeting of the shareholders to
approve the Reverse Split is authorized by Section 78.320 of the Nevada
Revised Statutes. This Section provides that the written consent of the
holders of outstanding shares of voting capital stock, having not less than
the minimum number of votes which would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote on a matter were
present and voted, may be substituted for the special meeting. In order to
eliminate the costs and management time involved in holding a special meeting
and in order to effect the Reverse Split as early as possible in order to
accomplish the purposes of the Company, the Board of Directors of the Company
voted to utilize the written consent of the majority shareholders of the
Company.
On the Record Date, there were 4,058,200 shares of common stock issued
and outstanding and entitled to vote on the Reverse Split. Stockholders
holding a total of 2,149,610 shares, or 53% of the Company's outstanding
common stock, signed a written consent of stockholders approving the Reverse
Split. The signing stockholders also include the Company's
officers and directors. No further vote of the Company's stockholders is
required to effect the Reverse Split, and no dissenters' rights arise under
Nevada law from approval of the Reverse Split.
This Information Statement has been prepared by the Company's
management, and the entire cost of furnishing this Information Statements will
be borne by the Company. The Company will request brokerage houses, nominees,
custodians, fiduciaries and other like parties to forward this Information
Statement to the beneficial owners of the Company's common stock and the
Company will reimburse such persons for out-of-pocket expenses incurred in
forwarding such material.
PROPOSED REVERSE STOCK SPLIT
General
As a result of the Reverse Split, each share of Common Stock outstanding
at the effective time of the Reverse Split, will, without any action on the
part of the holder thereof, become one-eighth of a share of Common Stock. For
purposes of this description, the Common Stock, as presently constituted, is
referred to as the "Old Common Stock" and the Common Stock resulting from the
Reverse Split is referred to as the "New Common Stock." The closing bid price
of the Company's Common Stock on January 30, 2006, was $0.25.
Principal Effects of the Reverse Split
The principal effects of the Reverse Split will be as follows:
Based upon the 4,058,200 shares of Old Common Stock outstanding on the
Record Date, the Reverse Split would decrease the outstanding shares of Old
Common Stock to approximately 507,275 shares. The Reverse Split will not
decrease the authorized number of shares of Common Stock (20,000,000 shares),
or the par value per share ($0.001) of Common Stock. Upon the effectiveness
of the Reverse Split, approximately 507,275 shares of New Common Stock would
be outstanding.
The Company will obtain a new CUSIP number for the New Common Stock on
the effective date of the Reverse Split. Following the effectiveness of the
Reverse Split, each eight (8) shares of Old Common Stock, without any action
on the part of the holder, will represent one (1) share of New Common Stock.
Subject to minor differences resulting from the rounding up of fractional
shares, as described below, consummation of the Reverse Split will not result
in a material change in the relative equity position or voting power of the
holders of Old Common Stock.
Purposes of the Reverse Stock Split
The Reverse Split will decrease the number of shares of Old Common Stock
outstanding and presumably increase the per share market price for the New
Common Stock. Theoretically, the number of shares outstanding should not, by
itself, affect the marketability of the stock, the type of investor who
acquires it, or the Company's reputation in the financial community, but in
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practice this is not necessarily the case, as many investors look upon a stock
trading at or under $1.00 per share as unduly speculative in nature and, as a
matter of policy, avoid investment in such stocks.
Many leading brokerage firms are reluctant to recommend lower-priced
securities to their clients and a variety of brokerage house policies and
practices currently tend to discourage individual brokers within firms from
dealing in lower-priced stocks. Some of those policies and practices pertain
to the payment of brokers' commissions and to time-consuming procedures that
make the handling of lower priced stocks unattractive to brokers from an
economic standpoint. In addition, the structure of trading commissions also
tends to have an adverse impact upon holders of lower priced stocks because
the brokerage commission on a sale of a lower priced stock generally
represents a higher percentage of the sales price than the commission on a
relatively higher priced issue.
In addition, in the absence of the Reverse Split, management has
concluded that, at such time as it enters into a merger or reorganization
transaction, there may not be a sufficient number of authorized but unissued
shares of Common Stock to consummate the transaction. The Reverse Split will,
therefore, in all likelihood, be required to consummate any merger or
acquisition transaction. Additionally, the Reverse Split would reduce the
number of shares of its Common Stock outstanding to amounts that the Board of
Directors believes are more reasonable in light of its size and market
capitalization. Finally, a higher priced stock, which would presumably result
from the Reverse Split, may be more attractive to potential merger or
acquisition candidates, and could enhance management's ability to enter into
any such transaction. However, no assurance can be given that the Reverse
Split will result in any increase in the Common Stock price or that the
Company will be able to complete any transaction following the Reverse Split.
The Company has not entered into any specific transaction as of the date of
this Information Statement.
When the trading price of the Company's Common Stock is below $5.00 per
share, the Common Stock is considered to be "penny stocks" that are subject to
rules promulgated by the United States Securities and Exchange Commission (the
"Commission") (Rule 15-1 through 15g-9) under the Securities Exchange Act of
1934. These rules impose significant requirements on brokers under these
circumstances, including: (a) delivering to customers the Commission's
standardized risk disclosure document; (b) providing to customers current bid
and offers; (c) disclosing to customers the broker-dealer and sales
representatives compensation; and (d) providing to customers monthly account
statements.
The possibility exists that the reduced number of outstanding shares will
adversely affect the market for the Common Stock by reducing the relative
level of liquidity. In addition, the Reverse Split will increase the number
of shareholders who own odd lots, or less than 100 shares. Shareholders who
own odd lots typically find it difficult to sell their shares and frequently
find odd lot sales more expensive than round lot sales of 100 shares or more.
After the Reverse Split, the Company will have issued and outstanding
approximately 507,275 shares of its common stock, and the Company will have
the corporate authority to issue approximately 19,492,725 additional shares of
authorized but unissued common stock. These authorized and unissued shares
may be issued without shareholder approval at any time, in the sole discretion
of the Board of Directors. The authorized and unissued shares may be issued
for
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cash, to acquire property or for any other purpose that is deemed in the best
interests of the Company. Any decision to issue additional shares will reduce
the percentage of the Company's shareholders' equity held by the current
shareholders and could dilute the Company's net tangible book value.
No Exchange of Certificates and Elimination of Fractional Share Interests
On the effective date of the Reverse Split, eight (8) shares of Old
Common Stock will automatically be combined and changed into one (1) share of
New Common Stock. No additional action on the part of the Company or any
shareholder will be required in order to effect the Reverse Split.
Shareholders will not be requested to exchange their certificates representing
shares of Old Common Stock held prior to the Reverse Split for new
certificates representing shares of New Common Stock. However, shareholders
will be furnished the necessary materials and instructions to effect such
exchange upon request.
No fractional shares of New Common Stock will be issued to any
shareholder, and all fractional shares will be rounded up to the next whole
number.
No Dissenter's Rights
Under Nevada Law, dissenting shareholders are not entitled to appraisal
rights with respect to the Reverse Split, and we will not independently
provide our shareholders with any such right.
Federal Income Tax Consequences of the Reverse Split
The following discussion describes certain material federal income tax
considerations relating to the proposed Reverse Split. This discussion is
based upon the Internal Revenue Code, existing and proposed regulations
thereunder, legislative history, judicial decisions, and current
administrative rulings and practices, all as amended and in effect on the date
hereof. Any of these authorities could be repealed, overruled, or modified at
any time. Any such change could be retroactive and, accordingly, could cause
the tax consequences to vary substantially from the consequences described
herein. No ruling from the Internal Revenue Service (the "IRS") with respect
to the matters discussed herein have been requested, and there is no assurance
that the IRS would agree with the conclusions set forth in this discussion.
This discussion may not address federal income tax consequences that may
be relevant to particular shareholders in light of their personal
circumstances or to shareholders who may be subject to special treatment under
the federal income tax laws. This discussion also does not address any tax
consequences under state, local or foreign laws.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCE OF THE REVERSE SPLIT FOR THEM, INCLUDING THE APPLICABILITY OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY
PENDING OR PROPOSED LEGISLATION.
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The Reverse Split is intended to be a tax-free recapitalization to the
Company and its shareholders. Hence, shareholders will not recognize any gain
or loss for federal income tax purposes as a result of the Reverse Split. The
holding period for such shares of stock after the Reverse Split will include
the holding period of shares of stock before the Reverse Split, provided that
such shares of stock are held as a capital asset at the effective date of the
Reverse Split. The adjusted basis of the shares of common stock after the
Reverse Split will be the same as the adjusted basis of the shares of stock
before the Reverse Split excluding the basis of fractional shares.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth as of the Record Date, the number and
percentage of the 4,058,200 outstanding shares of common stock which,
according to the information supplied to the Company, were beneficially owned
by (i) each person who is currently a director of the Company, (ii) each
executive officer, (iii) all current directors and executive officers of the
Company as a group and (iv) each person who, to the knowledge of the Company,
is the beneficial owner of more than 5% of the outstanding common stock.
Except as otherwise indicated, the persons named in the table have sole voting
and dispositive power with respect to all shares beneficially owned, subject
to community property laws where applicable.
Common Percent of
Name and Address Shares Options (1) Class
------------------------------------ ------------ ----------- -----------
Richard B. Stuart (1)
PO Box 236
Edmonds, Washington 98020 331,760(2) 75,920 9.86(3)
Jack M. Gertino (1)
8 East Broadway #428
Salt Lake City, Utah 84111 395,680 0 9.75
The Harker Group Limited Partnership
1717 Monte Carlo Drive
Salt Lake City, UT 84121 415,550 0 10.24
All Executive Officers and Directors
as a Group (2 persons) 727,440 75,920 19.43(3)
(1) Messrs. Stuart and Gertino are officers and directors of the Company.
(2) This ownership includes 207,680 shares held of record by Pershing, LLC
("Pershing"), a limited liability company of which Richard B. Stuart is the
owner.
(3) These figures represent options that are vested and currently
exercisable. These figures represent the percentage of ownership of the
holder assuming he has exercised his option, and the percentage ownership of
all officers and directors of a group assuming all such option is exercised.
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ADDITIONAL INFORMATION
Additional information concerning the Company including its annual and
quarterly reports on Form 10-KSB and Form 10-QSB, may be accessed through the
U.S. Securities and Exchange Commission EDGAR archives, at www.sec.gov.
CONCLUSION
As a matter of regulatory compliance, we are sending you this Information
Statement which describes the purpose and effect of the Reverse Split. Your
consent to the Reverse Split is not required and is not being solicited in
connection with this action. This Information Statement is intended to
provide our stockholders information required by the rules and regulations of
the Securities Exchange Act of 1934.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ATTACHED MATERIAL IS FOR INFOMRATION PURPOSES ONLY.
Dated: February __, 2006 By Order of the Board of Directors of
COMET TECHNOLOGIES, INC.
/s/ Jack M. Gertino
By________________________________________
Jack M. Gertino, Chairman