NOTE 4 - GAIN ON EXTINGUISHMENT OF DEBT
In 1990, the Company signed as a guarantor of a mortgage. The primary mortgager has defaulted on the loan so the Company recorded the liability on its books.
On February 18, 1999, the Company entered into negotiations with the City of Miami for a settlement agreement which would release the Company from the mortgage payable. Under the terms of the agreement, the City of Miami agreed to execute and deliver to the Company a release of lien. In return, a shareholder of the Company paid the City of Miami $10,010 and transferred to the City 25,000 shares of the Company’s common stock owned personally by the shareholder.
As a result of the settlement, the Company recorded a gain on the extinguishment of debt totaling $1,352,887 ($885,000 principal and $477,900 accrued interest minus $10,013 for cash and common stock paid) for the year ended December 31, 1999. In addition, contributed capital of $10,013 was recorded which represented the cash paid by the shareholder to the City of Miami and the value of the 25,000 shares transferred.
NOTE 5 – CHANGE IN CONTROL OF ISSUER
Pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) entered into on June 29, 2007, among Mirabella Holdings, LLC (the “Purchaser”), Duane S. Jenson, Travis T. Jenson, Thomas J. Howells, Leonard W. Burningham (collectively with Duane S. Jenson, Travis T. Jenson and Thomas J. Howells, the “Sellers”), and Leonard W. Burningham, as the representative of the Sellers (the “Sellers’ Representative”), the Purchaser acquired from the Sellers a total of 1,966,872 shares of the Company’s Common Stock (the “Acquired Shares”), representing 80% of the Company’s currently outstanding shares, for a purchase price of $525,000 in cash.
In addition, pursuant to a Share Escrow and Reset Agreement (the “Reset Agreement”) entered into among the Purchaser, the Sellers’ Representative, the Sellers, the Company and the escrow agent thereunder contemporaneously with the Stock Purchase Agreement, the Sellers placed in escrow an additional 423,928 shares of the Company’s Common Stock then owned by them (the “Escrow Shares”), which at the time represented all but 70 of the remaining shares of the Company’s Common Stock owned by the Sellers. Pursuant to the Reset Agreement, if, during the five-year period following June 29, 2007 (the “Acquisition Period”), the Company acquired one or more companies having a combined enterprise value of at least $10 million (a “Threshold Acquisition”), the Escrow Shares would reset, at that time, to a number of newly-issued shares of the Company’s Common Stock that would represent (collectively with the 70 shares previously retained by the Sellers) 5% of the Company’s then fully-diluted Common Stock. If a Threshold Acquisition did not occur during the Acquisition Period, all of the Escrow Shares would be released to the Sellers without any reissuance or adjustment in their amount.
A Threshold Acquisition by the Company did not occur during the Acquisition Period and, as a result, the Company subsequently received the required notice from the Sellers’ Representative requesting the release of the Escrow Shares to the Sellers in accordance with the terms of the Reset Agreement. Accordingly, on November 12, 2012, all of the Escrow Shares were released to the Sellers without any reissuance or adjustment in their amount.
The Stock Purchase Agreement, the Escrow Agreement and the Reset Agreement were filed as exhibits to the Company’s Form 8-K and 14F-1 Information Statement, both of which were filed with the Securities and Exchange Commission on July 3, 2007. See Part IV, Item 15.