As filed with the Securities and Exchange Commission on May 12, 2005
Registration No. 333-121483
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT 1
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ActivePoint Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 7375 20-1372381
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(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
Copies to:
ActivePoint Inc.
c/o ActivePoint Ltd.
20 Giborel Israel St. Poleg Industrial Zone
Netanya Israel - 42504
Attn: Moshe Ofer
Telephone: (011) 972-9-8852484
Telecopier: (011) 972-9-8853233
(Address and telephone number of Principal
Executive Offices and Principal Place of Business)
Steven Schuster, Esq.
McLaughlin & Stern, LLP
260 Madison Avenue, 18th Floor
New York, NY 10016
Telephone: (212) 448-1100
Telecopier: (212) 448-0066
(Name, address and telephone number of agent for service)
ActivePoint Inc.
c/o Matthews & Co.
270 Madison Avenue, 16th Floor
New York, NY 10016
Telephone: (212) 293-5100
Telecopier: (212) 293-5560
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Per Aggregate Offering Amount of
Securities to be Registered be Registered Share Price (3) Registration Fee
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Common 1,436,103(1) $.30-$.50 (2) $13,055.05 $169.02 (4)
Stock, par value $.01
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(1) Of this amount 1,174,993 shares are being distributed to the stockholders of
Mobilepro Corp. The remaining 261,110 shares may be sold in the future by
Mobilepro Corp.
(2) The registrant estimates that Mobilepro Corp. will sell the remaining
261,110 shares at a price between $.30 and $.50 per share. This price is based
on an expected valuation of the registrant between $7,800,000 and $13,000,000
depending on a number of factors, including, but not limited to the value of the
registrant's intellectual property, anticipated revenue and products.
(3) Solely as it relates to the sale of the remaining 261,100 shares to be sold
by Mobilepro Corp.
(4) Previously paid.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission (the "SEC") is effective. This prospectus is
not an offer to sell these securities and we are not soliciting offers to buy
these securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated ____________, 2005
ActivePoint Inc.
1,436,103 Shares of common stock
This prospectus relates to (i) the distribution by dividend to all of the
stockholders of Mobilepro Corp.. ("Mobilepro") of up to 1,174,993 shares of
ActivePoint Inc. ("ActivePoint" or the "company") common stock and (ii) 261,110
shares of our common stock to be sold by Mobilepro. Mobilepro will not receive
any proceeds from the distribution to its stockholders of the 1,174,993 shares
of our common stock, however, Mobilepro will receive the proceeds from the sale
of the 261,110 shares of common stock. All costs associated with this
registration will be borne by us. When used herein, the words "we," "our" and
"us" shall refer to ActivePoint.
Upon this registration statement being declared effective by the SEC, we
will be a public company.
The distribution will be pro rata to the Mobilepro stockholders based on
the number of shares owned by each.
Mobilepro's shareholders may be required to pay income tax on the value of
the shares of common stock received by you in connection with this distribution.
Currently, no public market exists for our common stock.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 7.
No underwriter or person has been engaged to facilitate the distribution
of shares of common stock in this offering.
The imputed price per share of the 1,436,103 shares issued to Mobilepro is
$0.00957 per share based on a then valuation of the business development
agreement with Mobilepro of $13,750.00. We estimate that Mobilepro will sell the
remaining 261,110 shares at a price between $.30 and $.50 per share. This price
is based on an expected valuation of our company between $7,800,000 and
$13,000,000 depending on a number of factors, including, but not limited to the
value of our intellectual property, anticipated revenue and products.
The Securities and Exchange Commission and state securities regulators
have not approved or disapproved of these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
i
TABLE OF CONTENTS
Page Number
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Prospectus Summary ............................................................1
Reasons for Furnishing this Document...........................................2
Summary of the Distribution....................................................2
Question and Answers about the Distribution and Related Matters ...............4
Summary of Consolidated Financial Information..................................6
Risk Factors...................................................................7
Cautionary Statement Regarding Forward-Looking Statements.....................12
Use of Proceeds...............................................................12
Selling Stockholder...........................................................12
The Distribution..............................................................13
Federal Income Tax Consequences of the Distribution...........................15
Relationship Between Mobilepro and ActivePoint Following the Distribution.....16
Market Price For Common Equity And Other Stockholder Matters..................16
Legal Proceedings.............................................................17
Management of ActivePoint and ActivePoint Israel..............................17
Principal Stockholders........................................................20
Description of Securities.....................................................21
Business......................................................................22
Management's Discussion and Analysis of Financial Conditions
And Results of Operations.....................................................27
Certain Relationships and Related Transactions................................30
Shares Eligible for Future Sale...............................................30
Experts.......................................................................31
Legal Matters.................................................................31
Where You Can Find More Information...........................................31
Financial Statements.........................................................F-1
ii
PROSPECTUS SUMMARY
OVERVIEW
We were incorporated in Delaware on July 14, 2004 under the name the WWAP,
Inc. and in February 2005 changed our name to ActivePoint Inc. In October 2004,
o shareholders of ActivePoint, Ltd. ("ActivePoint Israel"), an Israeli
corporation, executed an exchange agreement with us whereby certain stockholders
of ActivePoint Israel exchanged their shares of stock of Activepoint Israel for
a proportionate amount of shares of our common stock and preferred stock. As a
result, we now own approximately 94% of the outstanding capital stock of
ActivePoint Israel. In connection with the exchange agreement, ActivePoint
Israel granted us an exclusive, perpetual and worldwide right to use, produce
and distribute ActivePoint's products to conduct the research and development
efforts managed by ActivePoint Israel and obtain sales rights of new technology
and/or products as developed by ActivePoint Israel.
ActivePoint Israel, formed in 1997, has developed context orientated
Natural Language search software (the "Software") which provides improvements
for consumer sales relationship systems ("CRM"), e-commerce providers and
stand-alone computerized stations ("Kiosks") and provides insight into each
user's opinions and desires based on the user's search activity. Many users of
the Internet conduct searches using a keyword search technology, which allows
users to conduct searches by simply typing certain keywords not conjoined by
connectors such as ampersand and etc. The Software enhances the natural language
search method by allowing users to navigate through websites more efficiently to
locate the desired information. For example, if a user, while navigating within
a website that sells cables requests to search for a "cable to connect a
keyboard to a laptop", the Software will display the appropriate cable, as
opposed to the same question asked using a common search engine, which will, for
example result in many different and non-relevant results a "keyboard for a
laptop".
The Software is also intended to provide our customers with the ability to
compile a database of information relating to products that the customer's users
may look for but which are not provided by the customer. This information will
allow the customer to better evaluate what products or services to provide to
its users. For example, some merchants can only measure what was actually
ordered on its website but are unable to know what may have been requested but
not offered on the website. By employing the TX5 software (as described below),
a customer is able to see what their customers are searching for. This enables
them to better plan their product offerings since if they see that there are
frequent requests for a particular product which they do not carry, they can
then determine if these should include these products for sale.
The Software's advantage allows users of our customer's websites and
kiosks to more easily find the requested information as opposed to search
engines that cannot respond to context related questions. Our application
specific natural language engines are capable of understanding the nuances of
the language and the specific request. Since the Software will facilitate a
user's search process, it may limit the need for call-based customer service
centers which require an additional work force to service calls from customers
and which results in additional costs to the particular client.
We, through ActivePoint Israel, began commercial sales of our Software in
October 2004. ActivePoint Israel generated limited revenues commencing in 2002
from testing the software for potential customers.
PRODUCT AND SERVICES
Our TX5 Discovery Engine System (formerly known as "The Assistant For You"
system) ("TX5")encourages users interaction as they can either "converse" with
the system by telling it their needs in natural language or by answering guided
system questions. The TX5, like a trained representative, tries to find the
product or service to best match each request during the user's search. The TX5
system is designed to give customers greater flexibility than other search
engine systems which require the customer to be more specific in their requests
and are not currently context related.
The TX5 system also provides marketing information that generates tailored
reports showing users' requests even if goods were not purchased. This reporting
enables our customers to better understand the general requests asked by their
users.
DEVELOPMENT STAGE COMPANY
We are a development stage company and the report of our independent
accountants that accompanies our audited financial statements states that our
limited revenues and retained deficit raise substantial doubt about our ability
to continue as a going concern.
MOBILEPRO
This prospectus also relates to the re-sale by Mobilepro of 261,110 shares
of common stock. Our company estimates that Mobilepro will sell the remaining
shares at a price between $.30 and $.50 per share. This price is based on an
expected valuation of our company between $7,800,000 and $13,000,000 depending
on a number of factors, including, but not limited to the value of our
intellectual property and anticipated future revenue and products. Mobilepro
received the shares as consideration for certain advisory and consulting
services provided to ActivePoint. As of the date hereof, there are 26,094,762
shares of common stock issued and outstanding.
REASONS FOR FURNISHING THIS DOCUMENT
Mobilepro sent you this document because you were an owner of Mobilepro
common stock on the record date. This entitles you to receive a distribution of
shares of our common stock, based on the pro-rata amount of shares you owned on
that date. No action is required on your part to participate in the Distribution
and you do not have to pay cash or other consideration to receive your shares.
This document describes our business, the relationship between Mobilepro
and us, and how this transaction benefits Mobilepro and its stockholders, and
provides other information to assist you in evaluating the benefits and risks of
holding or disposing of the shares that you will receive in the Distribution.
You should be aware of certain risks relating to the Distribution and our
businesses, which are described in this document beginning on page 7. This
document is being furnished to provide information to Mobilepro stockholders who
will receive shares in the Distribution. Neither Mobilepro nor us will update
the information contained in this document except in the normal course of their
respective public disclosure practices. However, this document will be amended
if there is any material change in the terms of the Distribution.
SUMMARY OF THE DISTRIBUTION
DISTRIBUTING COMPANY Mobilepro Corp., a Delaware corporation.
DISTRIBUTED COMPANY ActivePoint Inc., a Delaware corporation. As
used in this prospectus, the term ActivePoint,
our company, we, our, us, and similar terms
means ActivePoint Inc., as of the relevant
date, unless the context otherwise requires.
ACTIVEPOINT SHARES TO BE
DISTRIBUTED Mobilepro will distribute to Mobilepro
stockholders an aggregate of 1,174,993 shares
of our common stock, par value $.01 per share,
of .
RECORD DATE If you own Mobilepro shares at the close of
business on _________, 2005 (the Record Date),
then you will receive ActivePoint shares in the
Distribution. The Record Date will be a date
shortly after the registration statement, of
which this prospectus is a part, is declared
effective by the SEC.
DISTRIBUTION DATE We currently anticipate that the Distribution
will occur near the effective date of the
registration statement. If you are a record
holder of Mobilepro stock, instead of physical
stock certificates you will receive from our
transfer agent shortly after the effective date
of the registration statement a statement of
your book entry account for the shares
distributed to you. If you are not a record
holder of Mobilepro stock because such shares
are held on your behalf by your stockbroker or
other nominee, your ActivePoint shares should
be credited to your account with your
stockbroker or other nominee after the
effective date of the registration statement.
Following the Distribution, you may request
physical stock certificates if you wish, and
instructions for making that request will be
furnished with your account statement.
DISTRIBUTION On the Distribution Date, the distribution
agent identified below will begin distributing
certificates representing our common stock to
Mobilepro stockholders. You will not be
required to make any payment or take any other
action to receive your shares of our common
stock. The distributed shares of our common
stock will be freely transferable unless you
are one of our affiliates or you are issued
shares in respect of restricted shares of
Mobilepro common stock.
-2-
DISTRIBUTION RATIO Mobilepro will distribute to Mobilepro
stockholders an aggregate of 1,174,993 shares
of our common stock pro-rata to the
shareholders of Mobilepro, based pro-rata on
each shareholder's ownership of Mobilepro on
the Record Date.
DISTRIBUTION AGENT Liberty Transfer Co.
274B New York Avenue
Huntington, New York 11743
TRANSFER AGENT AND REGISTRAR Liberty Transfer Co.
FOR THE ACTIVEPOINT SHARES 274B New York Avenue
Huntington, New York 11743
FRACTIONAL SHARES OF OUR
COMMON STOCK Mobilepro will not distribute any fractional
shares of our common stock. In lieu of
distributing a fraction of a share of our
common stock to any Mobilepro stockholder,
fractional shares will be rounded up or down to
the next higher or lower whole number of
shares.
TRADING MARKET We anticipate that our common stock will be
traded on the Over The Counter Bulletin Board
under the proposed ticker symbol [____]. We
expect that a market maker will apply for
quotation on the Over the Counter Bulletin
Board on our behalf prior to the Distribution.
No public trading market for our common stock
currently exists. However, a trading market for
the entitlement to receive shares of our common
stock in the distribution, referred to as a
when-issued market, may develop on or after the
record date for the distribution.
DIVIDEND POLICY Mobilepro has not paid dividends in the past,
and we anticipate that following the
Distribution, neither we nor Mobilepro will pay
cash dividends. However, no formal action has
been taken with respect to future dividends,
and the declaration and payment of dividends by
us and Mobilepro will be at the sole discretion
of their respective boards of directors.
RISK FACTORS The distribution and ownership of our common
stock involve various risks. You should read
carefully the factors discussed under Risk
Factors beginning on page 7. Several of the
most significant risks of the Distribution
include:
o The Distribution may cause the trading price
of Mobilepro common stock to decline.
o Substantial sales of our shares may have an
adverse impact on the trading price of the
common stock.
o There has not been a prior trading market
for the shares and a trading market for the
shares may not develop.
o The Distribution of the shares may result in
substantial tax liability.
FEDERAL INCOME TAX
CONSEQUENCES Mobilepro and we do not intend for the
Distribution to be tax-free for U.S. federal
income tax purposes. You may be required to
pay income tax on the value of your shares of
common stock received as a dividend. We expect
that the dividend will be taxed as ordinary
income to the extent of the value of the
shares you receive. You are advised to consult
your own tax advisor as to the specific tax
consequences of the Distribution.
-3-
OUR RELATIONSHIP WITH MOBILEPRO
BEFORE AND AFTER THE DISTRIBUTION
Prior to the Distribution, we entered into a
Business Development Agreement dated as of
August 26, 2004 with Mobilepro, a wireless
technology and broadband telecommunications
company which, among other things, focuses on
creating strategic alliances with companies who
provide similar products and services. Under
the terms of the Business Development
Agreement, Mobilepro has provided and will
continue to provide Activepoint with several
services, including assisting with marketing
approaches, introducing our company to a number
of Mobilepro's clients and assisting with the
development of our technology. On August 26,
2004, our company also entered into a business
development agreement with Lighthouse Advisors,
Inc. ("Lighthouse"), a company specializing in
providing advisory services to small private
and public companies. Mobilepro and Lighthouse
are affiliates because Mobilepro's Chief
Executive Officer, Jay Wright, and Chief
Financial Officer, Kurt Gordon are the sole
shareholders of Lighthouse. As consideration
for the services of the business development
agreements, we issued Mobilepro 1,436,103
shares or 5.5% of our issued and outstanding
common stock on a fully diluted basis and
issued Lighthouse 522,219 shares or 2% of our
issued and outstanding common stock on a fully
diluted basis. At the time of signing the
business development agreements with MobilePro
and Lighthouse in August 2004, these agreements
were valued at $13,750 or 5.5% and $5,000 or 2%
respectively, of our then valuation of
$250,000. Upon completion of the Distribution,
Mobilepro will retain the remaining 261,110
shares of our common stock which it was issued
and, Lighthouse will own 522,219 shares, thus
collectively they will own an aggregate of
783,329 shares of common stock which will
represent 3% of our issued and outstanding
common stock on a fully diluted basis. Upon
completion of the Distribution, Mobilepro and
Lighthouse will continue to provide the
services contemplated in the Business
Development Agreements.
STOCKHOLDER INQUIRIES Any persons having inquiries relating to the
distribution should contact the Shareholder
Service department of the distribution agent at
(631) 385-1616 or Mobilepro at (301) 315-9040.
QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION AND RELATED MATTERS
The following section answers various questions that you may have about
the pro rata distribution to Mobilepro stockholders of 1,174,993 shares of
ActivePoint common stock owned by Mobilepro. We refer to this distribution in
this document as the "Distribution."
Q1: What is the Distribution?
A: The Distribution is the method by which Mobilepro will distribute a
significant portion of the shares held by it in our company resulting in us
becoming a publicly-traded company. According to the terms of the Distribution,
Mobilepro will distribute to its stockholders, as of the close of business on
[______________], 2005, in a dividend, shares of our common stock pro-rata based
on the number of shares owned by each. After the distribution Mobilepro will own
261,110 shares (1%) and the shareholders of Mobilepro will own 1,174,993 (4.5%)
of our issued and outstanding common stock.
Q2: What is ActivePoint?
A: We are a company that has the exclusive rights to market software developed
by ActivePoint Israel The software provides customers with a context orientated
natural language search engine for their website or database. The software can
guide and assist on-line customers and simultaneously provides the website owner
insight into their customers' opinions about their services and their
unfulfilled requests.
Q3: Why is Mobilepro effecting the Distribution?
A: Mobilepro is effecting the Distribution because it believes that although
synergies exist between us (as evidenced by Mobilepro introducing us to its
customers and Mobilepro's involvement in the Internet), the Distribution may
provide value to Mobilepro's stockholders. They will have a direct ownership
interest in our company, which will allow them to directly receive the benefit
of being a stockholder of our company as opposed to being an indirect
stockholder simply by virtue of their ownership of Mobilepro shares.
Q4: What is the tax effect of the Distribution?
A: Dividends and distributions received are taxable as ordinary income for
federal income tax purposes pursuant to Section 311 of the Internal Revenue Code
provided that Mobilepro has current or accumulated earnings and profits. The
fair market value of our shares will be established by subsequent trading that
develops with respect to such shares. However, the Distribution is taxable even
if a trading market for the shares never develops.
-4-
The foreign, state and local tax consequences of receiving the
distribution may differ materially from the federal income tax consequences
described above. Shareholders should consult their tax advisor.
Q5: What will Mobilepro stockholders receive in the Distribution?
A: In the Distribution, Mobilepro stockholders will receive a pro-rata number of
shares of our common stock based on the number of shares owned by each they own
on [______________], 2005. Immediately after the Distribution, Mobilepro's
stockholders will still own their shares of Mobilepro common stock. Shares of
Mobilepro common stock will represent stockholders' interests in the business of
Mobilepro, and shares of ActivePoint common stock that stockholders receive in
the Distribution will represent their interests in the ActivePoint's business.
Q6: What happens to Mobilepro shares after the Distribution?
A: After the Distribution, shares of Mobilepro common stock will continue to
represent ownership of the businesses of Mobilepro and will continue to be
quoted under the ticker symbol "MOBL.OB"
Q7: What does a Mobilepro stockholder need to do now?
A: Mobilepro stockholders do not need to take any action. The approval of the
Mobilepro stockholders is not required to effect the Distribution, and Mobilepro
is not seeking a proxy from any stockholders. Mobilepro stockholders should not
send in their Mobilepro share certificates to effect the Distribution. Mobilepro
stockholders will automatically receive their shares of our common stock shortly
following the Distribution.
Q8: Where can Mobilepro stockholders get more information?
A: Mobilepro stockholders with additional questions related to the Distribution
should contact Kurt Gordon, CFO. Mobilepro's telephone number is (301) 315-9040.
-5-
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
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For the year For the year ended From Inception to
ended December 31, 2004 December 31, 2003 December 31, 2004
------------------ ------------------ -----------------
Statement of Operation Data: $ $ $
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Sales ----- 31,590 119,154
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Cost of sales ---- -- --
- -----------------------------------------------------------------------------------------------------------
Gross profit ---- 31,590 119,154
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Operating costs and expenses 1,007,107 499,018 2,755,422
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Loss from operations 1,007,107 467,428 2,636,268
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Net Loss (1,007,107) 469,575 2,645,768
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December 31, 2004 December 31, 2003
------------------- -----------------
Balance Sheet Data:
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Assets 411,674 37,921
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Liabilities 1,344,250 396,937
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Stockholders' equity (deficiency) (932,576) (359,016)
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-6-
RISK FACTORS
You should carefully consider each of the following risk factors and all
of the other information in this information statement. The following risks
relate principally to the Distribution and our business.
If any of the following risks and uncertainties develops into actual
events, our business, financial condition or results of operations could be
materially adversely affected. If that happens, the trading prices of our shares
could decline significantly.
The risk factors below contain forward-looking statements regarding the
Distribution and our company. Actual results could differ materially from those
set forth in the forward-looking statements. See Cautionary Statement Regarding
Forward-Looking Statements below.
RISKS RELATED TO OUR BUSINESS
WE WILL FACE MANY OF THE DIFFICULTIES THAT COMPANIES IN THE EARLY STAGE MAY
FACE, INLCUDING, BUT NOT LIMITED TO, LACK OF REVENUES, POOR LIQUIDITY AND
COMPETITION FROM ESTABLISHED COMPANIES.
As a result of our limited operating history, you may have difficulty
assessing our growth and earnings potential. We have faced many of the
difficulties that companies in the early stages of their development in new and
evolving markets often face. These have included, among others:
o Substantial delays and expenses related to testing and development of our
new products,
o Marketing and distribution problems encountered in connection with our new
and existing products and technologies,
o Competition from larger and more established companies,
o Delays in reaching our marketing goals,
o Difficulty recruiting qualified employees for management and other
positions;
o Lack of sufficient customers, revenues and cash flow;
o Limited financial resources;
We may continue to face these and other difficulties in the future, some
of which may be beyond our control. If we are unable to successfully address
these problems, our future growth and earnings will be negatively affected.
CONTROL BY EXISTING STOCKHOLDERS MAY RESULT IN CORPORATE ACTION BEING DECIDED BY
A SMALL AMOUNT OF STOCKHOLDERS.
Topschutter Holdings B.V. ("Topschutter") (27.94%), Michel Harvey ("Harvey")
(40.69%) and Moshe Ofer ("Ofer") (19.15%) beneficially own an aggregate of
approximately 87% of the outstanding shares of our capital stock. Although none
of these stockholders have formal voting agreements to vote their shares, a
combination of either Topschutter and Harvey or Harvey and Ofer can exercise
control over matters requiring shareholder approval, including the election of
directors, and the approval of mergers, consolidations and sales of all or
substantially all of our assets. This may prevent or discourage tender offers of
our capital stock unless the terms are approved by these shareholders.
WE HAVE A NEED FOR ADDITIONAL FINANCING AND HAVE RECEIVED A GOING CONCERN
OPINION FROM OUR ACCOUNTANTS REGARDING OUR ABILITY TO CONTINUE IN THE FUTURE.
We have not had a sufficient source of working capital and will need
additional financing to operate. Any inability to raise capital may require us
to reduce the level of our operations. Such actions would have a material
adverse effect on our business and operations and result in charges that could
be material to our business and results of operations. The report of our
independent accountants that accompanies our audited financial statements states
that as a result of our limited revenues and retained deficit raise substantial
doubt about our ability to continue as a going concern. Furthermore, there can
be no assurance that we can get additional financing based on the financing
transactions with Cornell Capital Partners, L.P. as such financing depends on
the price of our stock and certain other limitations imposed by the terms of
these transactions, including Cornell's inability to invest in us if such
investment would result in Cornell owning more than 9.9% of our common stock. If
we are unable to access funds from Cornell, our operations will suffer.
WE MAY HAVE DIFFICULTY EVALUATING OUR PROSPECTS BECAUSE WE ARE IN THE
DEVELOPMENTAL STAGE AND HAVE A LIMITED OPERATING HISTORY FOR INVESTORS TO
ANALYZE
We obtained our first customer in October 2004. We have only fairly
recently begun development of our business and the services we intend to offer.
We have a limited history of revenue or financial results upon which investors
may base an assessment of its potential. There can be no assurance that our
proposed operations will be successful or that we will succeed in meeting our
stated business objectives.
WE HAVE NO OPERATING HISTORY AS A PUBLIC COMPANY AND MAY BE UNABLE TO OPERATE
PROFITABLY.
We do not have an operating history as a public company. We may not be
able to successfully put in place the financial, administrative and managerial
structure necessary to operate as a public company, and the development of such
structure will require a significant amount of management's time and other
resources.
-7-
OUR FUTURE REVENUE AND OPERATING RESULTS ARE UNPREDICTABLE AND MAY FLUCTUATE
WHICH MAY RESULT IN OUR FINANCIAL INSTABILITY.
Our short operating history and the rapidly changing nature of the market
in which we compete make it difficult to accurately forecast our revenues and
operating results. Our operating results are unpredictable and we expect them to
fluctuate in the future due to a number of factors. These factors may include,
among others:
o the timing of sales of our products and services, including the TX5
Software,
o difficulty in keeping current with changing technologies in the technology
and internet search engine field,
o unexpected delays in introducing new products, new product features and
services,
o increased expenses, whether related to sales and marketing, product
development or administration,
o deferral of recognition of our revenue in accordance with applicable
accounting principles due to the time required to complete projects,
o the mix of product license and services revenue,
o costs related to possible acquisitions of technology or businesses.
IF WE LOSE THE SERVICES OF ANY KEY PERSONNEL, INCLUDING OUR PRESIDENT OR OUR
DIRECTORS, OUR BUSINESS MAY SUFFER
We are dependent on our key officers, directors and employees, especially
Moshe Ofer, our President and Treasurer and a member of our board of directors.
The loss of any of our key personnel could materially harm our business because
of the cost and time necessary to retain and train a replacement. Such a loss
would also divert management attention away from operational issues.
Furthermore, although most of ActivePoint Israel's employees are subject to
employment agreements containing non-competition agreements, Moshe Ofer, the
President and CEO of our company and ActivePoint Israel, is not subject to such
an agreement. As a result, Mr. Ofer could cease working for us and work with our
competitors. Furthermore, there can be no assurances that the non-competition
agreements are enforceable.
OUR INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE AND FAILURE TO ADAPT
OUR PRODUCT DEVELOPMENT TO THESE CHANGES MAY CAUSE OUR PRODUCTS TO BECOME
OBSOLETE
Computer software and particular search engine software is a highly dynamic
industry characterized by rapid change and uncertainty relating to new and
emerging technologies and markets. Future technology or market changes may cause
some of our products and services to become obsolete more quickly than expected.
OUR STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION IF FUTURE EQUITY OFFERINGS
ARE USED TO FUND OPERATIONS
If we obtain working capital by issuing equity securities, such as through
the Equity Line of Credit with Cornell Capital Partners, LP (see Certain
Relationships and Related Transactions beginning on page 27), ActivePoint
stockholders could experience significant dilution. In addition, securities
issued in connection with future financing activities may have rights and
preferences senior to the rights and preferences of the shares. Further, the
conversion of outstanding debt obligations into equity securities could have a
dilutive effect on our shareholders.
THE TREND TOWARD CONSOLIDATION IN OUR INDUSTRY MAY IMPEDE OUR ABILITY TO COMPETE
EFFECTIVELY AS OUR COMPETITORS BECOME MORE DOMINANT
As consolidation in the software industry continues, fewer companies
dominate particular markets, changing the nature of the market and potentially
providing consumers with fewer choices. Also, many of these companies offer a
broader range of products than us, ranging from desktop to enterprise solutions.
We may not be able to compete effectively against these competitors.
Furthermore, we may seek strategic acquisitions, as necessary, to acquire
technology, people and products for our overall product strategy. The trend
toward consolidation in our industry may result in increased competition in
acquiring these technologies, people or products, resulting in increased
acquisition costs or the inability to acquire the desired technologies, people
or products. If we are unable to identify strategic alliances with other
software companies which may enhance our business or such alliances are
unreasonable in cost or other factors, or if such alliances are not productive,
this may reduce revenues by limiting distribution of our products.
WE FACE INTENSE PRICE-BASED COMPETITION FOR LICENSING OF OUR PRODUCTS WHICH
COULD REDUCE PROFIT MARGINS
Price competition is often intense in the software market. Price
competition may continue to increase and become even more significant in the
future, resulting in reduced profit margins.
OUR ABILITY TO OFFER TO OPERATE OUR SOFTWARE MAY BE AFFECTED BY A VARIETY OF
U.S. AND FOREIGN LAWS WHICH MAY HAVE AN ADVERSE IMPACT ON OUR BUSINESS.
We are subject to various laws and governmental regulations relating to
our business operations. There are few laws or regulations directly applicable
to commercial activities over the Internet. However, due to increasing
popularity and use of the Internet, laws and regulations may be adopted with
respect thereto. These laws and regulations may cover issues such as user
privacy, liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy, taxation and domain name
registration. Moreover, the applicability to the Internet of existing laws
governing issues such as intellectual property ownership and infringement,
copyright, patent, trademark, trade secret and personal privacy is uncertain and
developing. Any new legislation or regulation or the application of existing
laws and regulations to the Internet could have a material and adverse effect on
our business as it may force us to modify our Software or our marketing
strategies in order to comply with such laws Furthermore, if such laws affect
our customers, it may result in them not being able to continue to do business
with us which would in turn affect our revenue stream.
-8-
WE MAY BE UNSUCCESSFUL IN DEVELOPING NEW DISTRIBUTION CHANNELS WHICH MAY RESULT
IN DECREASED REVENUES WHICH WILL ULTIMATELY IMPAIR OUR OPERATIONS.
We may not be able to effectively develop our own network of salespeople
and resellers to distribute our software products. We may also be unsuccessful
in utilizing rapidly evolving distribution and marketing technologies to develop
these distribution channels. The adoption of new channels may adversely impact
existing channels and/or product pricing, which may reduce our future revenues
and profitability.
IF WE MUST RESTRUCTURE OUR OPERATIONS VALUABLE RESOURCES WILL BE DIVERTED FROM
OTHER BUSINESS OBJECTIVES
We continually evaluate our product and corporate strategy. We have in the
past undertaken, and will in the future undertake, organizational changes and/or
product and marketing strategy modifications. These organizational changes
increase the risk that objectives will not be met due to the allocation of
valuable limited resources to implement changes. Further, due to the uncertain
nature of any of these undertakings, these efforts may not be successful and we
may not realize any benefit from these efforts.
POTENTIAL SOFTWARE DEFECTS AND PRODUCT LIABILITY COULD RESULT IN DELAYS IN
MARKET ACCEPTANCE, UNEXPECTED COSTS AND DIMINISHED OPERATING RESULTS
Software products frequently contain errors or defects, especially when
first introduced or when new versions or enhancements are released. Defects and
errors could be found in current versions of our products, future upgrades to
current products or newly developed and released products. Software defects
could result in delays in market acceptance or unexpected reprogramming costs,
which could materially adversely affect our operating results. Most of our
license agreements with customers contain provisions designed to limit our
exposure to potential product liability claims. It is possible, however, that
these provisions limiting our liability may not be valid as a result of federal,
state, local or foreign laws or ordinances or unfavorable judicial decisions. A
successful product liability claim may have a material adverse effect on our
business, operating results and financial condition.
WE RELY ON THIRD PARTY TECHNOLOGIES WHICH MAY NOT SUPPORT OURPRODUCTS
Our software products are designed to run on the Microsoft(R) Windows(R)
operating system and with industry standard hardware. Although we believe that
the operating systems and necessary hardware are and will be widely utilized by
businesses in the corporate market, businesses may not actually adopt such
technologies as anticipated or may in the future migrate to other computing
technologies that we do not support. Moreover, if our products and technology
are not compatible with new developments from industry leaders such as
Microsoft, our business, results of operations and financial condition could be
materially and adversely affected since our Software would not be compatible
with such systems and would result in reduced sales.
WE FACE COMPETITION ANDIF WE FAIL TO COMPETE EFFECTIVELY OUR PLACE IN THE MARKET
WILL DECREASE.
Many of our current and potential competitors have longer operating
histories, greater name recognition and substantially greater financial,
technical and marketing resources than we have. We may not be able to compete
effectively with these competitors. To remain competitive, we must develop new
products and periodically enhance our existing products in a timely manner. We
anticipate that we may have to adjust the prices of many of our products to stay
competitive. In addition, new competitors may emerge, and entire product lines
may be threatened by new technologies or market trends that reduce the value of
these product lines. The market in which we compete is influenced by the
strategic direction of major computer hardware manufacturers and operating
system software providers. Our competitiveness depends on our ability to enhance
existing products and to offer successful new products on a timely basis. We
have limited resources and must restrict software development efforts to a
relatively small number of projects.
QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS WHICH COULD
CAUSE OUR STOCK PRICE TO DECLINE SINCE STOCK PRICES ARE OFTEN INFLUENCED BY SUCH
QUARTERLY FINANCIAL RESULTS.
We expect that we will be subject to substantial fluctuations in quarterly
net revenues and operating results. Fluctuations may be caused by a number of
factors including, but not limited to, the following:
o the timing and volume of customers;
o the timing and amount of our expenses;
o the introduction of competitive products by existing or new competitors;
and
o reduced demand for any given product
Due to these factors, forecasts may not be achieved, either because
expected revenues do not occur or because they occur at lower prices or on terms
that are less favorable to us. In addition, these factors increase the chances
that our results could diverge from the expectations of investors and analysts.
If so, the market price of our stock would likely decline.
-9-
THROUGH ACTIVEPOINT ISRAEL WE RELY ON INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS WHICH MAY NOT REMAIN UNIQUE TO US
We regard our software as proprietary and underlying technology as
proprietary. We seek to protect our proprietary rights through a combination of
confidentiality agreements and copyright, patent, trademark and trade secret
laws. ActivePoint has three patents that have been awarded protection, and a
fourth whereby an office action has been filed and we are waiting a response
from the Patent and Trademark Office. All of these patents and proposed patents
are based in the United States and a patent application on our key patent has
been filed in the European Union.
We have patents and statutory copyrights on our proprietary technology
that we believe to be material to our future success. Our patents, however, may
be successfully challenged and may not provide us with any competitive
advantages. We may also not develop future proprietary products or technologies
that are patentable and other parties may have prior claims.
Patent, trademark and trade secret protection is important to us because
developing and marketing new technologies and products is time-consuming and
expensive. We may not obtain issued patents or other protection from any future
patent applications owned by or licensed to us.
Our competitive position is also dependent upon un-patented trade secrets.
Trade secrets are difficult to protect. Our competitors may independently
develop proprietary information and techniques that are substantially equivalent
to ours or otherwise gain access to our trade secrets, such as through
unauthorized or inadvertent disclosure of our trade secrets.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology substantially
equivalent or superseding proprietary technology. Furthermore, any
confidentiality agreements between us and our employees may not provide
meaningful protection of our proprietary information, in the event of any
unauthorized use or disclosure thereof. As a consequence, any legal action that
we may bring to protect proprietary information could be expensive and may
distract management from day-to-day operations.
WE MAY BECOME INVOLVED IN FUTURE LITIGATION, WHICH MAY RESULT IN SUBSTANTIAL
EXPENSE AND MAY DIVERT OUR ATTENTION FROM THE IMPLEMENTATION OF OUR BUSINESS
STRATEGY
We believe that the success of our business depends, in part, on obtaining
intellectual property protection for our products, defending our intellectual
property once obtained and preserving our trade secrets. Litigation may be
necessary to enforce our intellectual property rights, to protect our trade
secrets and to determine the validity and scope of our proprietary rights. Any
litigation could result in substantial expense and diversion of our attention
from our business, and may not adequately protect our intellectual property
rights.
In addition, we may be sued by third parties which claim that our products
infringe the intellectual property rights of others. This risk is exacerbated by
the fact that the validity and breadth of claims covered in technology patents
involve complex legal and factual questions for which important legal principles
are unresolved. Any litigation or claims against us, whether valid or not, could
result in substantial costs, place a significant strain on our financial
resources, divert management resources and harm our reputation. Such claims
could result in awards of substantial damages, which could have a significant
adverse impact on our results of operations. In addition, intellectual property
litigation or claims could force us to the following:
o cease licensing, incorporating or using any of our products that
incorporate the challenged intellectual property, which would adversely
effect our revenue;
o obtain a license from the holder of the infringed intellectual property
right, which license may not be available on reasonable terms, if at all;
and
o redesign our products, which would be costly and time-consuming.
IF WE DO NOT CONTINUE TO INNOVATE AND PROVIDE PRODUCTS AND SERVICES THAT ARE
USEFUL TO USERS, WE MAY NOT REMAIN COMPETITIVE, AND OUR REVENUES AND OPERATING
RESULTS COULD SUFFER.
Our success depends on providing products and services that people use for
a high quality Internet experience. Our competitors are constantly developing
innovations in web search, online advertising and providing information to
people. As a result, we must continue to invest significant resources in
research and development in order to enhance our web search technology and our
existing products and services and introduce new high-quality products and
services that people will use. If we are unable to predict user preferences or
industry changes, or if we are unable to modify our products and services on a
timely basis, we may lose users. Our operating results would also suffer if our
innovations are not responsive to the needs of our users are not appropriately
timed with market opportunity or are not effectively brought to market. We
consider ourselves to be context orientated Natural Language software. However,
given that there are those that compare this to search technology, as search
technology continues to develop, our competitors may be able to offer search
results that are, or that are perceived to be, substantially similar or better
than those generated by our services. This may force us to compete on bases in
addition to quality of search results and to expend significant resources in
order to remain competitive.
-10-
IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE
ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD. AS A RESULT,
CURRENT AND POTENTIAL STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL
REPORTING, WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE OF OUR STOCK.
Effective internal controls are necessary for us to provide reliable
financial reports and effectively prevent fraud. If we cannot provide reliable
financial reports or prevent fraud, our brand and operating results could be
harmed. In the future we may discover areas of our internal controls that need
improvement.
SYSTEM FAILURES COULD HARM OUR BUSINESS.
Our customers are vulnerable to damage or interruption from earthquakes,
terrorist attacks, floods, fires, power loss, computer viruses, Internet
failures, computer denial of service attacks or other attempts to harm our
system, and similar events. Any damage to or failure of the systems of our
clients could result in interruptions in our service. Interruptions in our
service could reduce our revenues and profits, and our brand could be damaged if
people believe our system is unreliable.
MORE INDIVIDUALS ARE USING MOBILE DEVICES TO ACCESS THE INTERNET, AND VERSIONS
OF OUR WEB SEARCH TECHNOLOGY DEVELOPED FOR THESE DEVICES MAY NOT BE WIDELY
ADOPTED BY USERS OF THESE DEVICES WHICH WOULD RESULT IN FEWER SALES OF OUR
SOFTWARE.
The number of people who access the Internet through devices other than
personal computers, including mobile telephones, hand-held calendaring and email
assistants, and television set-top devices, has increased dramatically in the
past few years. The lower resolution, functionality and memory associated with
alternative devices make the use of our products and services through such
devices difficult. If we are unable to attract and retain a substantial number
of alternative device users to our web search services or if we are slow to
develop products and technologies that are more compatible with non-PC
communications devices, we will fail to capture a significant share of an
increasingly important portion of the market for online services.
OUR DAILY OPERATIONS ARE DONE OVERSEAS, THUS WE MAY BE SUBJECT TO ADDITIONAL
ECONOMIC AND TECHNICAL RISKS
Our daily operations are done in Israel and we transact business
throughout Europe. As a result, we may need to tailor our Software so that it is
compatible for use in these countries. In particular, our Software may need to
be produced in different languages and if the Software isn't able to translate
properly, then it may not work as effectively. Furthermore, due to currency
exchange rates, we may not be able to receive the full amounts which will result
in lower revenues.
RISKS RELATING TO THE DISTRIBUTION
THE DISTRIBUTION OF OUR SHARES MAY RESULT IN SUBSTANTIAL TAX LIABILITY
You may be required to pay income tax on the value of your shares of the
common stock received as a dividend. The dividend will be taxed as ordinary
income to the extent of the value of the shares you receive. In addition, you
may have to pay taxes on any shares that you receive as a result of the rounding
up of fractional shares. You are advised to consult your own tax advisor as to
the specific tax consequences of the Distribution.
THE DISTRIBUTION MAY CAUSE THE TRADING PRICE OF MOBILEPRO COMMON STOCK TO
DECLINE
Following the Distribution, Mobilepro expects that its common stock will
continue to be listed and traded on the Over The Counter Bulletin Board under
the symbol MOBL.OB. A trading market may not develop for the company Shares. As
a result of the Distribution, the trading price of Mobilepro common stock
immediately following the Distribution may be lower than the trading price of
Mobilepro common stock immediately prior to the Distribution.
Further, the combined trading prices of Mobilepro common stock and the
ActivePoint shares after the Distribution may be less than the trading price of
Mobilepro common stock immediately prior to the Distribution.
SUBSTANTIAL SALES OF THE ACTIVEPOINT SHARES MAY HAVE AN ADVERSE IMPACT ON THE
TRADING PRICE OF THE COMPANY'S COMMON STOCK
Based on the number of shares of Mobilepro common stock anticipated to be
outstanding on the record date, Mobilepro will distribute to Mobilepro
stockholders a total of 1,174,993 shares. Under the United States federal
securities laws, substantially all of these shares may be resold immediately in
the public market, except for (1) our shares held by our affiliates or (2)
shares which are issued in respect of restricted shares of Mobilepro common
stock. We cannot predict whether stockholders will resell large numbers of our
shares in the public market following the Distribution or how quickly they
mare-sell these shares. In addition, we anticipate issuing significant numbers
of shares of common stock to Cornell Capital Partners, L.P. under the terms of
three convertible debentures in the aggregate principal amount of $890,000.00
and a standby equity distribution agreement for a maximum of $10,000,000, which
shares we will be required to register under the United States federal
securities laws. If the ActivePoint stockholders sell large numbers of shares
over a short period of time, or if investors anticipate large sales of our
shares over a short period of time, this could adversely affect the trading
price of the shares.
-11-
THERE HAS NOT BEEN ANY PRIOR TRADING MARKET FOR OUR SHARES AND A TRADING MARKET
FOR OUR SHARES MAY NOT DEVELOP WHICH WOULD RESULT IN A LACK OF LIQUDITY OF OUR
SHARES.
There is no current trading market for our shares, although a when-issued
trading market may develop prior to completion of the Distribution. We
anticipate that the ActivePoint shares will be listed on the Over The Counter
Bulletin Board. However, there can be no assurances that a market for the shares
will develop which will result in your inability to sell your shares even if the
shares are listed on the Over The Counter Bulletin Board.
The shares may not be actively traded or the prices at which the shares
will trade may be low. Until the shares are fully distributed and an orderly
market develops, the prices at which the shares trade may fluctuate
significantly and may be lower than the price that would be expected for a fully
distributed issue. Prices for our shares will be determined in the marketplace
and may be influenced by many factors, including the depth and liquidity of the
market for the shares, our results of operations, what investors think of us and
general economic and market conditions. Market fluctuations could have a
material adverse impact on the trading price of the shares.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Information included in this prospectus may contain forward-looking
statements. This information may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, performance or
achievements to be materially different from the future results, performance or
achievements expressed or implied by any forward-looking statements.
Forward-looking statements, which involve assumptions and describe our future
plans, strategies and expectations, are generally identifiable by use of the
words "may," "should," "expect," "anticipate," "estimate," "believe," "intend"
or "project" or the negative of these words or other variations on these words
or comparable terminology.
This prospectus contains forward-looking statements, including statements
regarding, among other things, (a) our projected sales and profitability, (b)
our growth strategies, (c) anticipated trends in our industry, (d) our future
financing plans, and (e) our anticipated needs for working capital. These
statements may be found under "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and "Our Business," as well as in this
prospectus generally. Actual events or results may differ materially from those
discussed in forward-looking statements as a result of various factors,
including, without limitation, the risks outlined under "Risk Factors" and
matters described in this prospectus generally. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this prospectus will in fact occur.
USE OF PROCEEDS
Mobilepro will receive no proceeds from the distribution of securities in
this Distribution, however, may receive proceeds from the sale of the 261,110
shares after the Distribution.
SELLING STOCKHOLDER
This prospectus also relates to the resale of 261,110 shares of our common
stock not being distributed by the selling stockholder, Mobilepro. We estimate
that Mobilepro will sell the remaining shares at a price between $.30 and $.50
per share. This price is based on an expected valuation of our company between
$7,800,000 and $13,000,000 depending on a number of factors, including, but not
limited to the value of our intellectual property, future revenue and products.
The following table provides certain information concerning the resale of
shares of common stock by the selling stockholder and assumes that all shares
offered by the selling stockholder will be sold. We will not receive any
proceeds from the resale of the common stock by the selling stockholders.
Common Stock
-------------------------------------------------------
Beneficially Number Beneficially
Owned Before Offering Owned After Offering
---------------------- --------------------
Selling Stockholder Number % Number %
- ------------------- ------ - ------ --
Mobilepro 1,436,103 5.5% 783,329 (1) 3%
(1) Upon completion of the Distribution. Includes the 522,219 shares (2%) of
common stock held by Lighthouse not being registered pursuant to this offering.
The selling stockholder may from time to time offer any or all of its
shares in one or more of the following transactions (which may include block
transactions):
-12-
o in the over-the-counter market;
o in negotiated transactions other than in such markets;
o by pledge to secure debts and other obligations;
o in any combination of any of the above transactions.
The selling stockholder may sell its shares at market prices prevailing at
the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The selling stockholder may sell its
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. The selling stockholder may compensate broker-dealers in
the form of commissions, discounts or selling concessions. The broker-dealers
may also receive compensation from any purchaser of the shares for whom the
broker-dealers acts as agent or to whom it sells as a principal.
The selling stockholder may also resell all or a portion of its shares in
open market transactions in reliance on Rule 144 under the Securities Act, as
long as they meet the criteria and comply with the requirements of that rule.
The selling stockholder has advised us that it has not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of its shares, and we do not intend to enter
into any arrangement with any underwriter or coordinating broker-dealer with
respect to sales of the shares by the selling stockholder.
The selling stockholder and any broker-dealers that participate in the
distribution of their shares may be deemed to be "underwriters" within the
meaning of section 2(11) of the Securities Act. Any commissions received by such
broker-dealers and any profits realized on the resale of shares by them may be
considered underwriting discounts and commissions under the Securities Act. The
selling stockholder may agree to indemnify any agent, dealer or broker-dealer
that participates in sales of the shares against certain liabilities, including
liabilities arising under the Securities Act.
The selling shareholder will be required to comply with the prospectus
delivery requirements of the Securities Act and applicable provisions of and
regulations under the Exchange Act that may limit the timing of sales of shares.
We are required to pay all costs, expenses and fees incident to the
registration of the shares, excluding fees and disbursements of counsel to the
selling stockholders, and the selling stockholders are required to pay any
brokerage commissions or similar selling expenses incurred by them in connection
with the sales of their shares.
As used in this prospectus, "selling stockholder" includes donees,
pledgees, transferees or other successors-in-interest who are selling shares
they received after the date of this prospectus from a selling stockholder named
in this prospectus as a gift, pledge, partnership distribution or other
nonsale-related transfer.
Upon being notified by a selling stockholder that the selling stockholder
has entered into a material arrangement with a broker-dealer for the sale of the
selling stockholder's shares through a block trade, special offering, exchange
distribution or secondary distribution or a purchase by a broker or dealer, we
will file a supplement to this prospectus, if required by Rule 424(b) under the
Securities Act, disclosing certain information about the arrangement and the
sale of the shares involved. In addition, upon being notified by a selling
stockholder that a donee, pledgee, transferee or other successor-in-interest
intends to sell more than 500 shares, we will file an appropriate supplement to
this prospectus.
THE DISTRIBUTION
INTRODUCTION
On _________, 2005, Mobilepro's Board of Directors declared a distribution
payable to the holders of record of outstanding Mobilepro common stock at the
close of business on the Record Date. Mobilepro will distribute to Mobilepro
stockholders an aggregate of 1,174,993 ActivePoint shares. Accordingly, the
Distribution be made pro-rata to Mobilepro shareholders on the Record Date. We
currently anticipate that the Distribution will be effected near the effective
date of the registration statement.
Mobilepro and Lighthouse currently own an aggregate of 7.5% of the issued
and outstanding common stock of our common stock, on a fully diluted basis. As a
result of the Distribution, 4.5% of the issued and outstanding shares of common
stock will be distributed to Mobilepro stockholders. Immediately following the
effectiveness of this registration statement by the SEC, we will be a public
company and upon completion of the Distribution, Mobilepro and Lighthouse will
continue to own an aggregate of 3% of our common stock on a fully diluted basis.
The shares will be distributed by book entry. Instead of stock certificates,
each Mobilepro stockholder that is a record holder of Mobilepro shares will
receive a statement of such stockholder's book entry account for the our shares
distributed to such stockholder. Account statements reflecting ownership of our
shares will be mailed shortly after the Distribution Date. Our shares should be
credited to accounts with stockbrokers, banks or nominees of Mobilepro
stockholders that are not record holders after the effective date of the
distribution.
-13-
We estimate that Mobilepro will sell the remaining 261,110 shares at a
price between $.30 and $.50 per share. This price is based on an expected
valuation of our company between $7,800,000 and $13,000,000 depending on a
number of factors, including, but not limited to the value of our intellectual
property, future revenue and products.
REASONS FOR THE DISTRIBUTION
The board of directors and management of Mobilepro believe that the
Distribution is in the best interests of Mobilepro and Mobilepro stockholders.
Mobilepro believes that the Distribution will enhance value for Mobilepro
stockholders and give us the financial and operational flexibility to take
advantage of potential growth opportunities.
Mobilepro's board of directors and management believe that the
Distribution will enhance the ability of each of us and Mobilepro to focus on
strategic initiatives and new business opportunities.
MANNER OF EFFECTING THE DISTRIBUTION
The Distribution will be made pro-rata to the Mobilepro shareholders. An
aggregate of 1,174,993 shares will be distributed to Mobilepro stockholders
regardless of the number of shares of Mobilepro common stock outstanding as of
the Record Date. Immediately following the Distribution, Mobilepro (and through
Lighthouse) will own 3% of our issued and outstanding shares.
The shares will be fully paid and non-assessable and the holders thereof
will not be entitled to preemptive rights. See Description of Securities
beginning on page 20.
Mobilepro will use a book entry system to distribute the shares in the
Distribution. Following the Distribution, each record holder of Mobilepro stock
on the Record Date will receive from the Distribution Agent a statement of the
shares credited to the stockholder's account. If you are not a record holder
ofMobilepro stock because your shares are held on your behalf by your
stockbroker or other nominee, your shares should be credited to your account
with your stockbroker or nominee after the effective date of the registration
statement. After the Distribution, stockholders may request stock certificates
from our transfer agent instead of participating in the book entry system.
No fractional shares will be issued. If you own a fractional share of
Mobilepro common stock as of the Record Date you will receive the next higher or
lower whole number of shares in the Distribution.
No Mobilepro stockholder will be required to pay any cash or other
consideration for the shares received in the Distribution, or to surrender or
exchange Mobilepro shares in order to receive shares. The Distribution will not
affect the number of, or the rights attaching to, outstanding Mobilepro shares.
No vote of Mobilepro stockholders is required or sought in connection with the
Distribution, and Mobilepro stockholders will have no appraisal rights in
connection with the Distribution.
In order to receive the shares in the Distribution, Mobilepro stockholders
must be stockholders at the close of business on the Record Date.
RESULTS OF THE DISTRIBUTION
Upon this registration statement being declared effective by the SEC, we
will be a public company. Upon completion of the Distribution, we expect to have
approximately 5,400 holders of record of our Shares, and 26,110,970 shares
outstanding, regardless of the number of stockholders of record and outstanding
Mobilepro shares as of the Record Date. The Distribution will not affect the
number of outstanding Mobilepro shares or any rights of Mobilepro stockholders.
LISTING AND TRADING OF OUR SHARES
Neither we nor Mobilepro makes recommendations on the purchase, retention
or sale of shares of Mobilepro common stock or our shares. You should consult
with your own financial advisors, such as your stockbroker, bank or tax advisor.
If you do decide to purchase or sell any Mobilepro or ActivePoint shares,
you should make sure your stockbroker, bank or other nominee understands whether
you want to purchase or sell Mobilepro common stock or ActivePoint shares, or
both. The following information may be helpful in discussions with your
stockbroker, bank or other nominee.
There is not currently a public market for our shares, although a
when-issued market may develop prior to completion of the Distribution.
When-issued trading refers to a transaction made conditionally because the
security has been authorized but is not yet issued or available. Even though
when-issued trading may develop, none of these trades would settle prior to the
effective date of the Distribution, and if the Distribution does not occur, all
when-issued trading will be null and void. On the first trading day following
the date of the Distribution, when-issued trading in respect of our shares will
end and regular-way trading will begin. Regular-way trading refers to trading
after a security has been issued and typically involves a transaction that
settles on the third full business day following the date of a transaction. We
anticipate that the ActivePoint shares will trade on the Over the Counter
Bulletin Board.
-14-
The shares distributed to Mobilepro stockholders will be freely
transferable, except for (1) Shares received by persons who may be deemed to be
our affiliates under the Securities Act of 1933, as amended (the Securities
Act), and (2) shares received by persons who hold restricted shares of Mobilepro
common stock. Persons who may be deemed to be our affiliates after the
Distribution generally include individuals or entities that control, are
controlled by, or are under common control with ActivePoint and may include
certain of our directors, officers and significant stockholders. Persons who are
our affiliates will be permitted to sell their shares only pursuant to an
effective registration statement under the Securities Act or an exemption from
the registration requirements of the Securities Act, such as the exemptions
afforded by Section 4(1) of the Securities Act and the provisions of Rule 144
thereunder.
There can be no assurance as to whether the shares will be actively traded
or as to the prices at which the shares will trade. Until the ActivePoint Shares
are fully distributed and an orderly market develops, the prices at which the
shares trade may fluctuate significantly and may be lower than the price that
would be expected for a fully distributed issue. Prices for the shares will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for the shares, our results of operations,
what investors think of us and general economic and market conditions.
Following the Distribution, Mobilepro expects that its common stock will
continue to be listed and traded on the Over The Counter Bulletin Board. As a
result of the Distribution, the trading price of Mobilepro common stock
immediately following the Distribution may be lower than the trading price of
Mobilepro common stock immediately prior to the Distribution.
Even though Mobilepro is currently a publicly held company, there can be
no assurance as to whether an active trading market for Mobilepro common stock
will be maintained after the Distribution or as to the prices at which the
Mobilepro common stock will trade. Mobilepro stockholders may sell their
Mobilepro common stock following the Distribution. These and other factors may
delay or hinder the return to an orderly trading market in the Mobilepro common
stock following the Distribution. Whether an active trading market for Mobilepro
common stock will be maintained after the Distribution and the prices for
Mobilepro common stock will be determined in the marketplace and may be
influenced by many factors, including the depth and liquidity of the market for
the shares, Mobilepro's results of operations, what investors think of Mobilepro
and its industries, changes in economic conditions in its industries and general
economic and market conditions.
In addition, the stock market often experiences significant price
fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. Market fluctuations could have a material
adverse impact on the trading price of the shares and/or Mobilepro common stock.
EXPENSES OF THE DISTRIBUTION
We anticipate that the total amount of expenses of the Distribution will
be $135,000 of which printing and engraving expenses will be approximately
$20,000.00, accounting fees and expenses approximately $35,000.00 and legal fees
and expenses $80,000.00. We expect to pay these expenses partly out of the funds
we have already received from Cornell Capital Partners, L.P. and partly from
drawing upon the Standby Equity Distribution Agreement with Cornell Capital
Partners, L.P.
REGULATION M
Regulation M of the Securities Act of 1933 is designed to prevent
potential market price manipulation by prohibiting certain purchases of and bids
for a company's stock involved in a particular offering during a "restricted
period". For purposes of the Distribution, Mobilepro would be prohibited from
bidding for, purchasing or attempting to induce any person to bid for or
purchase shares of our common stock during the period of the Distribution.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following discussion summarizes the material U.S. federal income tax
consequences resulting from the Distribution. This discussion is based upon the
U.S. federal income tax laws and regulations now in effect and as currently
interpreted by courts or the Internal Revenue Service and does not take into
account possible changes in such tax laws or such interpretations, any of which
may be applied retroactively.
The following summary is for general information only and may not be
applicable to stockholders who received their shares of Mobilepro stock pursuant
to an employee benefit plan or who are not citizens or residents of the United
States or who are otherwise subject to special treatment under the Code. Each
stockholder's individual circumstances may affect the tax consequences of the
Distribution to such stockholder. In addition, no information is provided with
respect to tax consequences under any applicable foreign, state or local laws.
Consequently, each Mobilepro stockholder is advised to consult his own tax
advisor as to the specific tax consequences of the Distribution and the affect
of possible changes in tax laws.
-15-
This Distribution does not qualify as a tax-free distribution under
Section 355 of the Code. The corporate-level tax would be based upon the excess
of the fair market value of the shares on the Distribution Date, over
Mobilepro's adjusted tax basis for such shares on such date. Each Mobilepro
stockholder who receives shares in the Distribution would generally be treated
as receiving a taxable distribution in an amount equal to the fair market value
of such shares on the Distribution Date. Stockholders which are corporations may
be subject to additional special provisions dealing with taxable distributions,
such as the dividends received deduction and the extraordinary dividend rules.
YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE
DISTRIBUTION TO YOU, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX
LAWS.
RELATIONSHIP BETWEEN MOBILEPRO AND ACTIVEPOINT FOLLOWING THE DISTRIBUTION
For purposes of governing certain of the ongoing relationships between
Mobilepro and ActivePoint after the Distribution and to provide for an orderly
transition to the status of two independent companies, Mobilepro and we have
entered into the Business Development Agreement described in this section.
Prior to the Distribution, on August 26, 2004 we entered into two business
development agreements with Mobilepro and Lighthouse (the "BDA's"). Under the
BDAs, Mobilepro and Lighthouse have been providing us with services in such
areas as product and service development, customer growth and other areas where
we need transitional assistance and support. The agreement is for a period of
eighteen (18) month and may be renewed on a month-to-month basis, but may be
terminated earlier upon thirty (30) days notice. Upon completion of the
Distribution, Mobilepro will still be obligated to carry out it services
pursuant to the business development agreement.
The aggregate value of the BDAs at the time of their signing in August
2004 was $18,750 (7.5% of our then valuation of $250,000). Activepoint Israel
was lacking working capital at the time and MobilePro and Lighthouse were
willing to accept as compensation shares of common stock. The services that
MobilePro has been providing us and will continue to provide us over the life of
the BDAs include:
A. Marketing in the United States
1. Approach - Advise on the proper sales and marketing techniques to
U.S. customers. Until now our only experience has been with
customers in Europe.
2. Types of Companies - Advise on the types of companies we should be
targeting based on their annual revenues.
3. Strategic Alliances - Advise on setting up and profiting from
strategic alliances.
4. Government - Use Mobilepro's experience working as a government
contractor to advise on the methods for obtaining government
contracts.
5. Database - Allow us to gain access to MobilePro's database of web
sites so that we can approach these companies to increase our
business.
6. Advising us on the design of our website.
7. Advising us on the proper use of investor relations in order to keep
our stockholders adequately informed of development.
B. Technology
1. Standards Groups - assistance in compliance with industry and
government standards groups
2. ISP and Voice Division Subsidiaries - explore software solutions
using Activepoint software with their ISP and voice subsidiaries.
3. Commercialization of Patents- specifically the Internet Credit Card
Security patent.
C. Introduction to Clients
1. Mobilepro has introduced us to a number of their clients, including
access to their websites.
During the course of the BDA, Lighthouse has been providing us with
general consulting services with respect to the development of our business.
MARKET PRICE FOR COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
Upon completion of the Distribution, we expect that our common stock will
be listed and traded on the Over The Counter Bulletin Board. There is no current
market price for our common stock. As of May 12, 2005, there were 11 record
holders of our common stock. As of the date hereof, we have not declared, nor do
we intend to declare, any dividends to the holders of its common stock. In
November 2004, we adopted a long-term equity incentive plan. As of the date
hereof, no options have been granted under the plan.
-16-
LEGAL PROCEEDINGS
ActivePoint Israel is involved in litigation with Onn Tavor, ActivePoint
Israel's former chief executive officer. In March 2004, Mr. Tavor filed a
lawsuit in the Regional Labor Court of Tel-Aviv against ActivePoint for damages
in the amount of approximately U.S. $225,000 alleging that ActivePoint Israel
owed him unpaid salary, severance pay and social benefits. Mr. Tavor was granted
a temporary attachment over ActivePoint Israel's bank accounts, real property
and software programs, but not over funds owed to ActivePoint Israel from its
customers. In June 2004, ActivePoint filed a counter-claim against Mr. Tavor
alleging negligence which resulted in a loss of approximately U.S. $900,000.00.
Subsequent settlement proposals between Mr. Tavor and our company were rejected
by Mr. Tavor and in July 2004, the attachment was expanded to include
ActivePoint's intellectual property. On November 1, 2004, after further
settlement proposals were rejected, Mr. Tavor filed a claim in the Tel Aviv
District Court to liquidate ActivePoint on the grounds that ActivePoint was
insolvent and could not pay Mr. Tavor's claim. On December 29, 2004, Mr. Tavor
withdrew his motion to liquidate our company, however, in a court decision, the
District Court judge ruled that had she been required to rule on the merits of
the motion, she would have determined that the motion was unfounded and would
have also required that Mr. Tavor pay significant legal fees in connection with
the motion. On April 11, 2005, ActivePoint Israel filed a motion to clarify the
decision regarding the attachment and on April 28, 2005 Mr. Tavor responded to
this motion alleging that ActivePoint Israel violated the temporary attachment.
No hearing date has been set for this motion. Furthermore, on April 12, 2005,
ActivePoint Israel also received an injunction against Mr. Tavor which prohibits
him from contacting any suppliers, customer, and officers/directors of
ActivePoint Israel so long as this action is pending. Although we and
ActivePoint believe our defenses to the actions by Mr. Tavor in the Labor Court
are meritorious, there can be no assurances as to the outcome of this lawsuit.
Furthermore, an adverse judgment or settlement may have a material adverse
affect on ActivePoint Israel and us.
ACTIVEPOINT AND ACTIVEPOINT ISRAEL'S MANAGEMENT
We initially intend to have a board of directors that will consist of two
directors listed below is certain information concerning individuals who are
expected to serve as our directors and executive officers and ActivePoint Israel
following the Distribution.
ACTIVEPOINT
NAME AGE POSITION
Ofer Moshe 52 President & Treasurer & Director
Stephen Dumbrell 57 Director
ACTIVEPOINT ISRAEL
NAME AGE POSITION
Ofer Moshe 52 CEO & Director
Stephen Dumbrell 57 Director
Rhona Morris 40 Operations and Business Development Manager
Vadim Shevchenko 40 Chief Architect & Project Manager
Evgeniy Zusmanov 42 Chief Scientist
Raz Zaibert 37 Design Expert
Alexey Pavlovitz 25 Internet Expert
Kristina Abramov 24 Application & Logic Programmer
Moshe Ofer. Mr. Ofer became President and Treasurer of ActivePoint in July 2004
and has been CEO of Activepoint Israel since November 2003. Mr. Ofer was
appointed to the Boards of Directors by Michel Harvey pursuant to the terms of
the Stockholder's Agreement (see "Certain Relationships and Related
Transactions"). Prior to joining ActivePoint, Mr. Ofer was Manager of the
Banking Division at Getronics Ltd from 2001 to 2004. Getronics is a provider of
information and communications technology and is listed on the Dutch stock
exchange. From 1999 to 2001 Mr. Ofer was the Vice President of sales and
Marketing at Deltasys, a now defunct Israeli company which provided surveillance
software for Microsoft operating systems. Mr. Ofer is the cousin of Mr. Harvey,
our company's largest stockholder.
-17-
Stephen Dumbrell. Mr. Dumbrell was appointed to our Board of Directors in July
2004 and ActivePoint Israel in December 2001. Mr. Dumbrell was appointed to the
Boards of Directors by Topschutter Holdings B.V., a holding company, pursuant to
the terms of the Stockholder's Agreement (see "Certain Relationships and Related
Transactions"). He is employed full time by Pearlglobe Limited, a company which
he formed in 1993 to provide management and business consultancy and project
management services designed to provide small companies with the establishment
and implementation of effective corporate management controls. In this capacity,
he is frequently required to serve on the Board of Directors of client companies
and/or their associates and is currently a director of a number of European and
United States based companies, all of which are privately owned and registered
in the UK. In addition to directorships arising from his services provided by
Pearlglobe Limited, Stephen is the owner and Managing Director of Petersfield
Instruments Limited, a UK company established in the early 1980s to source and
supply specialized electronic and other industrial components. He is also
Director of a small UK contracting company in which he has an interest and which
supplies contract labor to the electronics and engineering sector.
Rhona Morris, Operations and Application Manager. Ms. Morris has over 14 years
experience in Business Development in Canada, the US and Israel. She has been
with ActivePoint Israel since June 2000 and leads its customer knowledge
analysis and the linguistic application design.
Vadim Shevchenko, Chief Architect & Project Manager. Mr Shevchenko has 14 years
of experience in Internet and communication technologies as well as real time
programming. Mr. Shevchenko has been employed with ActivePoint since January
1998.
Dr. Evgeniy Zusmanov, Chief Scientist. Dr. Zuzmanov has 13 years of programming
experienceDr. Zusmanov has worked for ActivePoint since October 1998. Prior to
joining ActivePoint, Evgeniy worked as a Researcher for the Institute of
Semiconductor Physics at the Ukraine Academy of Sciences where he was
responsible for developing algorithms for the analysis and computer simulation
of magnetic resonance spectra.
Raz Zaibert, Design Expert. Mr. Zaibert is experienced with advanced web graphic
design and commercial design. Mr. Zaibert has been working with ActivePoint
Israel since September 2000 and is part of the development team dealing with the
fast loading YourRep graphics. Prior to joining ActivePoint, he worked at Print
Express, a publishing house.
Alexey Pavlovitz, Internet Expert. Mr. Pavlovitz has been with ActivePoint
Israel since February 2000 and has provided work and research in the areas of
web protocols and programming, as well as the latest browsers technology. Prior
to this, he worked at Daronnet, an Internet company.
Kristina Abramov, Application & Logic programmer. Ms. Abramov is the technical
liaison of the Application Department of ActivePoint. Kristina has been with
ActivePoint Israel since April 2001. Prior to this, she worked at Liat Eden
Advocates, LLB as an information systems expert.
DIRECTOR'S COMPENSATION
Neither ActivePoint nor ActivePoint Israel have paid any cash compensation
to our directors for their service on the Board of Directors; nor have either
made any commitments with respect to the payment of future cash compensation for
such services.
ADVISORY BOARD
We have established an advisory board designed to help with all aspects of
its business, including decisions regarding product development, marketing and
overall financial strategies. The initial members of the Advisory Board will be
a designee of Lighthouse and our company hopes to appoint additional members. No
decision has been made as of yet on how the members of the advisory board will
be compensated.
EXECUTIVE COMPENSATION
The following table and discussion sets forth information with respect to
all compensation earned by or paid by us to our President and Chief Executive
Officer, Moshe Ofer, and our most highly compensated executive officers other
than the CEO, for all services rendered in all capacities to us for each of the
last two (2) fiscal years. No disclosure has been named for any executive
officer, other than Mr. Ofer, whose total annual salary and bonus does not
exceed $100,000.
-18-
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted All
Annual Stock Other
Name and Principal Compen- Award(s) LTIP Compen-
Position Salary Bonus sation ($) Options/ Payouts sation
Year ($) ($) ($) SARs ($) ($)
Moshe Ofer,
President/CEO 2002 -0- -0- -0- -0- -0- -0- -0-
2003 $ 1,500 -0- -0- -0- -0- -0- -0-
2004 $38,577 -0- -0- -0- -0- -0- -0-
Onn Tavor 2002 $52,332 -0- -0- -0- -0- -0- -0-
2003 -0- -0- -0- -0- -0- -0- $66,390
2004 -0- -0- -0- -0- -0- -0- -0-
SALARY TO MR. OFER
Our Board of Directors has approved a salary to Mr. Ofer of $125,000 per
year, together with an annual bonus of up to $115,000 based on our company's
performance. Payment of the salary shall commence upon the first of the
following events to occur: (1) our registering the shares to be issued to
Cornell Capital Partners, L.P. pursuant to that certain Standby Equity
Distribution Agreement or (2) the sale of a majority of our capital stock or
substantially all of its assets for an aggregate purchase price of no less than
$5,000,000. In October 2004 Mr. Ofer also received 500,000 shares of common
stock. We have not obtained any key man life insurance on any of our executive
officers.
EMPLOYMENT AGREEMENTS
All of our employees and employees of and ActivePoint Israel, with the
exception of Mr. Ofer, have written employment agreements. These agreements
provide that the employee shall not, for a period of twenty four (24) months
from the date of termination of employment, will not engage in any other work or
own any business that competes with ActivePoint. The agreements further provide
that the employees will not cause any employee of ActivePoint Israel to leave
ActivePoint Israel.
2004 LONG-TERM EQUITY COMPENSATION PLAN
In November, 2004, our board of directors adopted and our shareholders
have approved a long-term incentive plan (the "2004 Long-Term Equity
Compensation Plan") in order to optimize our profitability and growth through
incentives which are consistent with our goals and which link the interests of
select employees, directors and consultants with those of our shareholders. We
believe the plan also promotes teamwork and provides employees, directors and
consultants with an incentive to strive for excellence.
The plan provides for the granting of non-qualified stock options,
incentive stock options (within the meaning of Section 422 of the Code), stock
appreciation rights ("SARs"), restricted stock and restricted stock unit awards,
performance shares and other cash or share-based awards. The maximum number of
shares of common stock that may be issued in connection with awards under the
plan is 2,000,000. In the event of any merger, reorganization, recapitalization,
stock split, stock dividend, or other change in corporate structure that affects
our common stock, an adjustment may be made to the (a) maximum number of shares
available for grants under the plan and/or kind of shares that may be delivered
under the plan, (b) the individual award limits under the plan and (c) number,
kind and/or price of shares subject to outstanding awards granted under the
plan, by our board of directors of, to prevent dilution or enlargement of
rights. Shares of stock covered by an award under the plan that is cancelled,
expired, forfeited or settled in cash will again be available for issuance in
connection with future grants of awards under the plan. As of the date of this
prospectus, no awards have been made under the plan.
Our board of directors has broad authority to administer the plan,
including the authority to determine when and to whom awards will be made,
determine the type and size of awards, determine the terms and conditions of
awards, construe and interpret the plan and award agreements, establish rates
and resolutions for the plan's administration, and amend outstanding awards.
Generally, the plan is open to directors, employees and consultants who are
selected by the board of directors.
STOCK OPTIONS. Options granted under the plan may be "incentive stock
options," as defined in Section 422 of the Code, or "nonqualified stock options"
which are stock options that do not qualify as incentive stock options. An
incentive stock option must expire within ten years from the date it is granted
(five years in the case of options granted to holders of more than 10% of the
total combined voting power of all classes of our stock and the stock of our
subsidiaries). The exercise price of an incentive stock option must be at least
equal to the fair market value on the date such incentive stock option is
granted (110% of fair market value in the case of options granted to holders of
more than 10% of the total combined voting power of all classes of our stock).
The exercise price of a non-qualified stock option must be at least equal to the
fair market value of the shares on the date such option is granted. Subject to
such restrictions as the Compensation Committee may impose, the exercise price
of options granted under the plan may be paid (i) in cash or its equivalent,
(ii) by delivery, or attesting to the ownership, of previously-acquired shares
of our common stock, (iii) pursuant to a cashless exercise program, (iv) by such
other methods as the compensation committee may permit or (v) by any combination
of (i), (ii), (iii) and (iv). As of the date of this prospectus, no
non-qualified stock options had been granted under the plan.
SARS. The board of directors may grant a SAR in connection with all or any
portion of an option grant as well as independent of any option grant. A SAR
entitles the participant to receive the amount by which the fair market value of
a specified number of shares on the exercise dates exceeds an exercise price
established by the committee. The excess amount will be payable in common stock,
in cash, or in a combination of shares and cash.
-19-
RESTRICTED STOCK. Restricted Stock Units and Performance Shares. These
awards may be granted in such amounts and subject to such terms and conditions
as determined by the board of directors. Holders of restricted stock may
generally exercise full voting rights and may be credited with regular dividends
paid with respect to the underlying shares while they are so held; however,
stock dividends or other non-cash distributions made with respect to restricted
stock awards generally will be subject to the same restrictions as the
restricted stock award. Generally, after the last day of the applicable period
of restriction, the shares become freely transferable.
Restricted stock units and performance shares are conditional grants of a
right to receive a specified number of shares of common stock or an equivalent
amount of cash (or a combination of shares and cash) if certain conditions are
met. Each restricted stock unit and performance share must have an initial value
equal to the fair market value of a share on the date of grant. Restricted stock
units may have conditions relating to continued service or employment only or
continued employment or service and attainment of performance goals, as
determined by the Compensation Committee. Performance shares may be granted
based on a performance period of one or more years or other periods, as
determined by the Compensation Committee.
The board of directors must determine the performance objectives for
grants of performance shares and the range of the number of shares to be paid to
an employee if the relevant measure of performance is met within the performance
period. Recipients of restricted stock units and performance shares may receive
dividend equivalents with respect to their awards.
OTHER AWARDS. Subject to the terms of the plan, the board of directors may
grant other awards such as deferred share, share or cash awards based on
attainment of performance or other goals or shares in lieu of cash under other
incentive or bonus programs. Payment under such awards may be made in such
manner and at such times as the board of directors may determine.
Except as otherwise provided in a participant's award agreement, upon the
occurrence of a change in control of our company, all outstanding stock options
and SARs become immediately exercisable, any restriction imposed on restricted
stock, restricted stock units, performance shares or other awards will lapse,
and any performance shares or other awards with performance-related vesting
conditions will be deemed earned at the target level (or if no target level is
specified, the maximum level). Unless a participant's award agreement provides
otherwise, if a participant's employment or service terminates following a
change in control, any of the participant's stock options or SARs that were
outstanding on the date of the change in control and that were vested as of the
date of termination of employment or service will remain exercisable for a
period ending not before the earlier of the first anniversary of the termination
of the participant's employment or service or the expiration of the stated term
of the award.
The 2004 Long-Term Equity Compensation Plan may be amended, suspended or
terminated at any time by our board of directors, provided that no amendment
that requires shareholder approval in order for the plan to comply with any
applicable stock exchange listing standards or securities laws will be effective
unless the requisite shareholder approval is obtained, and no amendment or
termination may be made without approval of a participant to the extent the
amendment or termination materially adversely affects the participant's
outstanding awards.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of May 12, 2005, information with
respect to the beneficial ownership of our common stock by (i) persons known by
us to beneficially own more than five percent of the outstanding shares and
their affiliates, (ii) the directors, (iii) the executive officers and (iv) all
directors and executive officers as a group.
- --------------------------------------------------------------------------------------------
Common Stock Common Stock
Beneficially Beneficially
Owned Before Percentage Owned After Percentage
Name Distribution Ownership Distribution (5) Ownership
---- ------------ --------- ------------ ---------
- --------------------------------------------------------------------------------------------
Ofer Moshe 5,000,000(1) 19.15% 5,000,000 19.15%
- --------------------------------------------------------------------------------------------
Stephen Dumbrell (2) -0- -0- -0- -0-
- --------------------------------------------------------------------------------------------
Topschutter Holdings B.V 7,294,658(3) 27.94% 7,294,658(3) 27.94%
- --------------------------------------------------------------------------------------------
Michel Harvey(4) 10,625,560(4) 40.69% 10,625,560(4) 40.69%%
- --------------------------------------------------------------------------------------------
Mobilepro Corp. (6) 1,436,103 5.5% 261,110 1%
- --------------------------------------------------------------------------------------------
Lighthouse Advisors, Inc. (6) 522,219 2.0% 522,219 2.0%
- --------------------------------------------------------------------------------------------
All directors and
executive officers as 5,000,000 19.15% 5,000,000 19.15%
a group (2 persons)
- --------------------------------------------------------------------------------------------
-20-
(1) Includes 4,500,000 shares of common stock issuable upon conversion of
450,000 shares of Class A Convertible Preferred Stock which Harry Farnesby Ltd
has agreed to transfer to Ofer Moshe or a trust designated by him. Mr. Ofer's
principal address is 2 Schmuel Hanagid Street, apt. 22, Ramat Hasharon, 47295,
Israel
(2) Mr. Dumbrell's address is 59 Cookham Road Maidenhead Berkshire SL6 7EP
United Kingdom
(3) Consisting of 61, 308 shares of common stock and an additional 7,233,345
shares of common stock issuable upon conversion of the 723,334 shares of Class A
Convertible Preferred Stock held by Topschutter. The principal address for
Topschutter is 61 Rue de Rhone 1204 Geneve, Switzerland
(4) Consisting of 10,625,557 shares of common stock issuable upon conversion of
the 1,062,555 shares of Class A Convertible Preferred Stock. Although Harry
Farnesby is the record owner of the shares, Michel Harvey claims beneficial
ownership of such shares as the sole shareholder of Harry Farnesby. Michel
Harvey disclaims ownership of 4,500,000 shares of common stock issuable upon
conversion of 450,000 shares of Class A Convertible Preferred Stock which he has
agreed to transfer to Ofer Moshe. Mr. Harvey's principal address is c/o Matthews
& Co., 270 Madison Avenue, 16th Floor, New York, NY 10016
(5) Pursuant to the financing transactions with Cornell Capital Partners, L.P.
as described in "Certain Relationships and Related Transactions", Cornell has
the right to convert any amounts due to it pursuant to the Debentures into
shares of common stock. Cornell will also be issued additional shares under the
Standby Equity Distribution Agreement. Since the conversion ratio and pricing
for the shares to be issued under the Debentures and the Standby Equity
Distribution Agreement are based on the market price of the common stock, and
since our company's stock has yet to be traded, our company is unable to
estimate the number of shares that Cornell beneficially owns. In the event that
Cornell was to convert all amounts due under the Debentures and our company was
to drawn down on the full $10,000,000 pursuant to the Standby Equity
Distribution Agreement (see "Certain Relationships and Transactions"), and
assuming the shares to be issued are based on a conversion price of $.30 per
share (the lowest price by which Mobilepro intends to sell its remaining 261,110
shares), then Cornell would be issued approximately 63,000,000 shares of our
company's common stock or approximately 70% of the issued and outstanding common
stock of our company. Notwithstanding the foregoing, Cornell is not permitted to
convert the Debentures nor is our company permitted to draw down under the
Standby Equity Distribution Agreement if as result, it would own more than 9.9%
of the issued and outstanding shares of our company's common stock on a fully
diluted basis. The sale of Shares pursuant to the Standby Equity Distribution
Agreement will also have a dilutive impact on our stockholders. As a result, our
net income per share could decrease in future periods, and the market price of
our Shares could decline. In addition, the lower our stock price, the more
Shares we will have to issue under the Standby Equity Distribution Agreement to
draw down an equivalent amount of funds. If our stock price is lower, then our
existing stockholders would experience greater dilution.
(6) Mobilepro and Lighthouse are affiliates of each other based on the following
relationship: Mr. Jay Wright and Mr. Kurt Gordon, the only two (2) shareholders
of Lighthouse and are also the President/Chief Executive Officer and Chief
Financial Officer of Mobilepro respectively. Messrs. Wright and Gordon own 4.6%
of the issued and outstanding common stock of Mobilepro. Mobilepro's principal
address is 6701 Democracy Blvd., Suite 300 Bethesda, MD 20817 and Lighthouse's
principal address is 12900 Crouch Drive, Fairfax, VA 22030.
DESCRIPTION OF SECURITIES
Pursuant to our certificate of incorporation, as amended, we are
authorized to issue 100,000,000,000 shares of common stock, par value $0.01 per
share and 10,000,000 shares of Preferred Stock of which 3,000,000 shares have
been designated as Class A Convertible Preferred Stock (the "Class A Preferred
Stock"). Below is a description of our outstanding securities, including our
common stock and Class A Preferred Stock.
COMMON STOCK
Each holder of our common stock is entitled to one vote for each share
held of record. Holders of our common stock have no preemptive, subscription,
conversion, cumulative voting or redemption rights. Upon liquidation,
dissolution or winding-up, the holders of common stock are entitled to receive
our net assets pro rata. Each holder of common stock is entitled to receive
ratably any dividends declared by our board of directors out of funds legally
available for the payment of dividends. We have not paid any dividends on our
common stock and do not contemplate doing so in the foreseeable future. We
anticipate that any earnings generated from operations will be used to finance
our growth. As of May 12, 2005, there are 11 record holders of common stock and
our company had 26,110,970 shares of common stock outstanding, on a fully
diluted basis after converting the 2,337,500 issued and outstanding shares of
Class A Preferred Stock. If the holders of the Class A Preferred Stock do not
convert their shares into shares of common stock there would be 2,719,762 shares
of common stock issued and outstanding.
-21-
CLASS A PREFERRED STOCK
The Class A Preferred Stock has a liquidation preference over the holders
of the common stock, the amount equal to the greater of (i) the issue price of
the Class A Preferred Stock plus accrued and unpaid interest on the issue price
at a rate of 3% commencing on the date of payment of the Class A Preferred Stock
issue price or (ii) the pro-rata distribution on the common stock had a holder
of the Class A Preferred Stock converted his/her/its Class A Preferred Stock
prior to a liquidation, dissolution or winding up of the Company (appropriately
adjusted for any stock split or stock combination of the Class A Preferred
Stock) for each share of Class A Preferred Stock then held by them and, in
addition, in each case an amount equal to all cumulated and unpaid dividends on
the Class A Preferred. Each share of Class A Preferred Stock is convertible into
ten (10) shares of common stock and the holder of each share of Class A
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of common stock into which such share of Class A Preferred could be
converted. Each share of Class A Preferred Stock shall automatically be
converted into shares of common stock at the then effective conversion rate upon
(i) this registration statement being declared effective by the SEC and (ii) the
quotation of our securities on the Over-the-Counter Bulletin Board or the
listing of the Corporation's securities on a securities exchange. Holders of
Class A Preferred Stock are entitled to protective provisions, including the
right to approve the creation of any class of stock that ranks superior to the
Class A Preferred Stock.
TRANSFER AGENT
Our transfer agent is Liberty Transfer Co. whose offices are at 274B New
York Avenue, Huntington, New York 11743.
OUR BUSINESS
OVERVIEW/BACKGROUND
We were incorporated in Delaware on July 14, 2004 under the name WWAP,
Inc. and in February 2005 changed our name to ActivePoint Inc. In October 2004,
shareholders of ActivePoint Israel, an Israeli corporation formed in 1997,
executed an exchange agreement with us whereby certain stockholders of
ActivePoint Israel exchanged their shares of stock of Activepoint Israel for a
proportionate amount of shares of our common stock and preferred stock. As a
result, we now owns approximately 94% of the outstanding capital stock of
ActivePoint Israel. Our controlling stockholders are set forth in Principal
Stockholders table in this prospectus.
Our business is the development and sale of the TX5 software that (i)
enhances the natural language search method used by many search engines by
allowing users to navigate through websites more efficiently in order to locate
the desired information and (ii) provides our customers with the ability to
compile a database of information relating to products that the customer's users
may look for but which are not provided by the customer. This information will
allow the customer to better evaluate what products or services to provide to
its users. The user reports afford the retailer/service provider with the
ability to immediately be aware of changing demand and/or customer preferences.
Unlike many search engines, the TX5 natural language capability can understand
the context of a sentence and will not provide answers based on unrelated words.
Our management believes that the Software can also provide a solution that
will reduce the number and length of calls to a customer service representative
should reduce the cost of operating service centers.
The TX5 system can be used for many different businesses and is not
limited to any specific industry. Our company's first customer for the "TX5"
product was a furniture manufacturer and retail operator in the United Kingdom.
The services will be provided within specific departments found on the website.
The agreement shall terminate on September 30, 2007 but it may be terminated by
either party on six (6) months notice. We also provide the TX5 system to Maplin
Electronics, an electronic retailer in Europe. Maplin uses the TX5 system in its
cable division where it offers upwards of 500-600 different cables for sale and
the TX5 system allows Maplin to more efficiently assist its customers with
easier search capabilities for specific cables.
OUR VISION
We intend to become a leader in advanced tools for easy interaction (e.g.,
Virtual Sales/Service representative) with computer systems such as Customer
Sales Relationship Management (CRM - Sales) systems, Internet web sites, kiosks
and other networks.
OUR MISSION:
To bridge between the on-line customer and the system owner (website and
kiosk) by enabling the system owner to receive a detailed view of their
customers' needs, while providing these customers with improved search results,
better service and a richer on-line experience.
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o To increase the service level and consequently the revenues and
productivity of our customers by improving CEM (Customer Experience
Management). We provide enhanced software solutions that create smart,
friendly and simple to use shopping advisers / service representatives and
CRM (help desk) systems.
o Provide our Internet, Kiosks and CRM customers with enhanced, real-time,
natural language based information reports that are reflective of the
needs and requests of their users from the web site / kiosk / network
users.
o Produce our products at the highest possible quality and technical
sophistication.
o Provide the best possible service for our customers.
o Provide a system that is highly advanced in several dimensions: technical,
application and business wise as a marketing differentiator to our
customers.
THE PRODUCT
The TX5 encourages users to interact with the system as they have the
ability to either "communicate" with the system by telling it their needs in
natural language text or by answering guided system questions. The TX5 will,
like a trained representative, try to find the best possible product or service
to match each request. The system will then present the product(s) using
different techniques such as product comparisons in order to help the customer
make the best personal decision. We also have the right to market and sell the
TX5 chat system which connects users via a chat system to a live operator. This
is a stand-alone product which connects to the TX5 Virtual Sales Advisor
solution.
Due to its interactive functionality, our TX5 system is able to provide
detailed marketing information and statistics by generating custom reports based
on users' demands, requests and choices. This detailed and interesting
information allows operators to understand their customers' needs and requests
in real-time, thereby enabling them to provide products and services that match
the demand. As Precision Marketing has indicated, customer data is being
catapulted to the top of the boardroom agenda, according to a report by data
accuracy group QAS.
We recognize that there are industries where users have specific knowledge
of what they need, such as books or computer components and therefore our
products may not provide added value to a user. The TX5 is especially beneficial
in assisting where users who aren't quite sure what they are looking for or are
unsure about the information/questions that they must ask so as to make the
correct decisions on the products/services that will best suit their needs.
PATENTS
ActivePoint has obtained three (3) patents with respect to its products,
and has applied for a fourth patent. The patents are all based in the United
States. ActivePoint has also applied for patent protection in Europe.
Furthermore, since ActivePoint did receive funds from the office of the Israel
Chief Scientist, ActivePoint is obligated to keep the IT development in Israel
until these funds are repaid. The following patents protect the Software:
1. TITLE: Virtual Sales Representative PATENT NUMBER: 09/109,726 ABSTRACT:
A method for enabling users of the Internet to interact with an interactive
sales representative system for providing sales guidance. The system offers
the user products, services, or ideas based on parameters collected from
the user. The system guides the customer to retrieve the desired products.
If the system does not have a product matched to the customer requests, it
will generate a alternatives, which such alternatives are the closest to
the customer requests. The system will execute various sales tools and
techniques to help and assist the customer to purchase a product. By
guiding the customer to the target product, the system will shorten the
search cycle for the customer as well as find products better-matched to
what the customer is looking for. The system will provide market advisory
services and suggestions and recommendations. The system adds graphics,
animation, 3D, movie clips, voice and other effects to make the session
enjoyable for the customer. The system is capable of executing various
tools and techniques to improve its sales capabilities and bring better
sales results.
2. TITLE: Internet Credit Card Security PATENT NUMBER: 09/200,719 ABSTRACT:
A method for transmitting credit card numbers in a secure manner through an
electronic medium such as the Internet. Credit card numbers typically
consist of a string of 10-20 digits, with the exact number of digits
depending upon the provider of the credit card. The security is provided by
transmitting the credit card number in a plurality of different
transmissions, each transmission containing at least one digit of the
credit card number, but fewer than all of the digits of the credit card
number. Preferably, the user selects the number of digits from the credit
card number to send with each transmission. Thus, the entire credit card
number can only be determined by receiving all of the transmissions from
the user, thereby significantly increasing the difficulty of intercepting
the credit card number.
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3. TITLE: Automatic Virtual Negotiations PATENT NUMBER: 09/317,956 ABSTRACT:
A method for conducting "one to one" commercial negotiations through an
electronic medium such as the Internet. The negotiation process consists of
sending persuasive texts to the user through the system, including
discounts given by the system and responses to price offers of the user.
The user can send a natural language query to the system which can (i)
express the user's desire to purchase or not purchase a product or (ii)
offer a suggested price or an opinion about the product. The system will
then offer the product for a specific price which may be decreased as
negotiations continue. Based on the user's input and the negotiations, the
system may accept the offer or, after one or more unacceptably low inputs
from the user, may alternatively end the process of negotiation. The system
will negotiate on many more parameters than simply the price itself.
4. TITLE: Comparison in natural language PATENT NUMBER: Not assigned yet PARTS
OF ABSTRACT:
A method and apparatus for performing a concise and meaningful comparison
between an unlimited amount of products while presenting the user with a
natural language response. The apparatus is encapsulated as a stand-alone
web server application and does not require the use of an external third
party tools and can be used by any web site with no need for a significant
change in the structure or the backbone technology deployed by said web
site. Many shoppers may find themselves facing great difficulty when it
comes to making a decision between two or more products of the same kind,
with nearly identical features and this program will offer customers
different facts to facilitate in making a decision. An office action
response has been filed against this application and we now waiting for a
response.
COLLABORATION AGREEMENT
Pursuant to the Collaboration Agreement between us and ActivePoint Israel,
ActivePoint Israel granted an exclusive, worldwide and perpetual license to us
to use its patents, however, the laws of Israel put certain restrictions on such
use. These restrictions require that the Office of the Chief Scientist must
first be repaid all monies loaned to ActivePoint under the initial funding for
the development of its technology. In consideration for the license granted
under the Collaboration Agreement, we will pay to ActivePoint Israel a royalty
of 65% out of all proceeds received by us from all licensed products sold,
licensed, leased or otherwise disposed of, and of all services performed with
respect to the products licensed under this agreement.
INDUSTRY ANALYSIS
We desire to benefit from opportunities presented by the expansion of
e-commerce, CRM and Kiosks and specifically the inter-connectivity that defines
these markets. We believe that e-commerce, Kiosk and CRM providers can use and
benefit from our system and services. Our initial focus will be e-commerce.
E-COMMERCE AND COMMERCIAL WEB SITES, KIOSKS AND CRM ON THE RISE
Due to the intangible nature of the Internet, a precise estimate is not
available for the amounts being spent online. However, market study research
reports posted on e-commerceinfocenter.com show that revenues in 2005 in the
United States and worldwide from business to consumer e-commerce are likely to
surpass USD $133 billion.
Until recently, the programs for most Internet, Kiosks and CRM systems
have generally been menu driven operations where the user is guided to the
perceived information by having to make choices from long lists of data. While
operators of websites may know where and for what their online users have been
searching, they have very little knowledge of what their users are looking for
but not finding unless purchases are made because no convenient tool exists that
can provide this information. The TX5 system encourages the user to ask
questions in natural language and the TX5 reporting tool gathers these queries
and presents them to the client.
CRM/CEM INDUSTRY
According to a report by DataMonitor, the market for CRM software in the
United States and major European countries is expected to increase by 9% per
year over the next six (6) years through 2011.
The mid-market for CRM, which is our intended focus, extends from
companies with about 30 employees to companies with approximately 2000-3000
employees. The mid-market also includes some departments or divisions of large
companies. The demands of those businesses for IT infrastructure and
applications will vary greatly according to size, sector and geography.
Hewson Group believes that a major challenge is for businesses to better
understand their customer's behaviors and expectations. Hewson Group contends
that CEM is a large obstacle of CRM, and that while companies have focused on
CRM, they have largely overlooked the area of maximum leverage on the customer's
experience. As a result, companies often fail to understand the customer
perspective. Our reporting capabilities can help with this need.
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OPEN COMPETITIVE ENVIRONMENT
One characteristic of our market is that despite some of the larger search
engines, such as Google and Yahoo, no company dominates our target market.
Furthermore, due to the nature of the Internet and e-commerce, geographical
borders are not important
Some examples of companies with the closest technical and/or business
solutions to our niches are: Atomz, Rightnow Technologies, EasyAsk, Iphrase,
Mercado, Endecan, ATG (Art Technology Group), Broadvision Inc, Net
Perceptions,Inc., Kana,Inc., Verity, Inc., 2004 Egain Communications, Siebel
Systems,Inc., VirtuOz and 2003 Celebros. The CRM Market is defined, for example,
by companies or their products such as Blexel Virtual Assistant by Blexel,ltd.,
Absolute Live Support by 2004 Xigla Software Ltd., Banter Solutions from Banter,
eGain Live from 2004 Egain Communications, Live2support, and Amdocs' ClarifyCRM.
Most of these companies are not direct competitors of us. Our most direct
competitors are Iphrase, Endeca, Verity, Inc., 2003 Celebros and VituOz (a
French company). We believe that no single competitor provides our services. We
envision cooperation with some competitors because we can provide added value to
their existing product range. The companies that provide sales/service adviser
solutions generally provide only passive natural language solutions, while our
system includes many other elements to improve search quality. Additionally, our
setup tools help provide for a relatively quicker system setup.
Our application specific natural language context engine capabilities are
extremely advanced compared to many other currently available search engines.
Our advantages include:
ADVANTAGES OVER COMPETITION:
o Product: A superior technology that helps customers to easily find
the required information. As opposed to today's search engines that
cannot respond to context related questions, our application
specific natural language engines are capable of understanding the
nuances of the language and the specific request. For example,
searching for a cable to connect a keyboard to a laptop via common
known search engines will result in laptops, keyboards or laptop
keyboards. Our systems can understand the request and will provide
the cable that can connect the keyboard to the laptop.
o Patent: Patent protected.
o Know-how: Accumulated knowledge on the industry.
o Statistics: Customers' requests produce statistical data and reports
that provide in-depth information about Users. This type and depth
of information cannot be acquired from traditional
surfing/interactions on systems because current-day reporting
derived from classical tracking only allows our customers to see
where their customers have been but not what they want. Our natural
language interface provides an ability to better measure what users
are looking for.
MARKET
MARKET DESCRIPTION - TARGET MARKET
Our initial target market was commercial Internet activity. We believe
that our product can be utilized in its present format for other market
segments, such as CRM providers and Kiosks.
Research by Jupiter Research dated February 25, 2004 has shown that even
when items are not actually purchased online, the Internet plays a valuable role
in assisting in making a purchase. According to Jupiter Research, the influence
of online research assisting in offline purchases (i.e. purchases made in retail
stores) continues to grow, so that by 2008 nearly 30 percent of all offline
purchases will have been influenced by research done online.
We envision global growth of commercial web sites and online services.
Site operators want users to undergo a positive experience in which the required
services and products can be easily found. We anticipate that our typical
customer is either an e-commerce operation or a conventional business with a web
site (a web site used to provide information and not direct sales). Both
operations need to know who are the people that surf through their web site. Our
customers and potential customers have advised us that they want more
information about their users.
Our enhanced TX5 natural language contextual engines is designed to be
useful and cost efficient to our customers. A call center is a central place
where customer and other telephone calls are handled by an organization, usually
with some amount of computer automation. Assisted service involves making
company representatives available to customers real-time as they visit a web
site. However, assisted service, although reducing the need for phone calls and
long email discussions, still involves labor cost. The TX5 system, being an
online, automatic system, should reduce the number of users transferred over to
online assistance and therefore should reduce associated labor costs. The system
is also available twenty-four hours a day.
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According to Gartner, Inc., a research and analysis company, more than 5
million small to midsize enterprises are in Europe and the majority of those
have yet to deploy a CRM solution. Increasingly, sales and customer service
professionals at these organizations, as well as those in divisions of larger
companies or those with geographically distributed operations, must support
global operations or do business with customers in diverse local markets.
Integrated CRM support is useful regardless of where or how they conduct
business.
LIMITATIONS OF TODAY'S SELF-SERVICE APPLICATIONS
Self-service applications are those Internet-based ERM applications, which
allow customers to find information and execute the self service/purchase
process by themselves via the Internet. Some self-service applications include
e-commerce solutions, automated email response systems, search engines, and
personalization tools. These solutions may hinder the sales/self-service process
by interacting poorly with customers, consuming customers' valuable time, and
providing non real-time responses.
E-COMMERCE SOLUTIONS
E-commerce solutions are designed to provide customers with the means to
order and pay for products via the web, without the intervention of a sales
representative. A sample of companies offering these solutions include
Broadvision Inc., CommerceOne Operations, Inc., Intershop Communications,
Microsoft, Netscape, Kana Inc. and 2003 Celebros.
E-commerce solutions are more convenient and effective when customers know
exactly what they are looking for. However, they were not designed to perform
functions that typify a salesperson such as to help a customer identify products
that would best suit their needs and consequently, they are less effective at
selling when customers are uncertain about what to buy. According to Forrester
Research, only 3.2% of online shopping browsers ultimately make any purchases.
PERSONALIZATION APPLICATIONS
Some Internet commerce ERM/CEM solutions have begun to focus on
personalized service to improve customer satisfaction. Examples of these
solutions are personalized marketing, marketing automation and customer
profiling. Companies active in providing personalization solutions include Art
Technology Group, Inc., Broadvision Inc., NetPerceptions, Kana Inc., and
Vignette Corporation. According to their websites, they are providing these
solutions
Personalized solutions can be effective in reducing the amount of time
that the customer spends searching for items. Today's personalized service
applications are inherently static and consequently, they cannot take advantage
of customers' varied interests and changing needs to increase sales.
PHONE-BASED WEB-ENABLED CALL CENTERS
These applications allow customers to access a company representative via
a push-to-talk button on the Internet site. Some of the key vendors offering
these applications are Acuity, Business Evolution, eFusion, Silknet, SMART, and
Webline. These applications are labor intensive as they must utilize
well-informed personnel, who may not be available at all hours of the day.
CHAT-BASED WEB-ENABLED CALL CENTERS
These applications allow customers to access a company representative via
text-based chat. Some vendors that do offer these applications (e.g. Boldchat,
Live2Support, Liveperson). These applications are also labor intensive as they
must utilize a large number of well-informed personnel, who may not be available
at all hours of the day.
PRODUCT DEVELOPMENT
In order to limit the work required by us for each application prepared
for each customer, we intend to compile "industry application databases" for
each major market segment. The set up time for each company specific application
will be reduced as we draw upon existing, market pertinent and readily available
natural language wording, and abbreviations. An example of this would be the
Cable Finder system that and electronics distributor is testing. The base
knowledge incorporated within the system can be transferred to other
applications within the same field. We intend that the next industry to be
incorporated will be mobile phones.
The product for CEM interaction is intended to be one a series of products
designed for commercial users. Another product under consideration is would be
statistical data analysis based on the huge amount of data that can be collected
from our systems.
MARKETING
We plan to market the Software in the United Kingdom through a wholly
owned subsidiary, ActivePoint UK, to be formed, and to market the software
directly in the United States. We intend to hire sales people in the United
States and the United Kingdom. We have hired Lewis Global Public Relations, a
public relations agency based in the United Kingdom, to promote our product. The
monthly cost for this public relations agency is $5,400. We also envision that
these public relations efforts will help us find strategic partners to assist in
marketing the Software.
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BUSINESS DEVELOPMENT AGREEMENTS
As stated previously, pursuant to the financing agreements with Cornell
Capital Partners, L.P., we entered into Business Development Agreements with
Mobilepro and Lighthouse. Pursuant to the agreements, Mobilepro and Lighthouse
are providing and will continue to provide us with business consulting services,
including, but not limited to assisting us with identifying customers, product
development and overall services designed to improve our business. As
consideration for the services provided by these agreements, we issued Mobilepro
its 1,436,103 shares and Lighthouse its 522,219. We intend to register the
shares issued to Lighthouse at the same time we register the shares to be issued
to Cornell pursuant to the financing agreements.
RESEARCH AND DEVELOPMENT
Over the past two (2) years, we have spent approximately $350,000_on
research and development of the Software.
EMPLOYEES
As of May 12, 2005, we had 1 employee, Mr. Moshe Ofer, our President and
Treasurer. ActivePoint Israel has 7 full time employees in Israel, including Mr.
Ofer. These consist of 5 technical employees and 2 administrative employees.
PROPERTIES
Our principal office at 270 Madison Avenue in New York is being occupied
on a month to month basis at no charge. Our principal operations are conducted
in Israel at 20 Gibroei Israel, Poleg Industrial Area, Netanya Our monthly rent
in Israel is US$900 per month plus a tax of approximately $150 per month. We
lease this property on a month-to-month basis.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our audited
financial statements and related notes included elsewhere in this information
statement. Our fiscal year currently ends on December 31, and each of our fiscal
quarters ends on the final day of a calendar quarter (each March 31, June 30 and
September 30). The following discussion contains forward-looking statements.
(See Risk Factors and Forward-Looking Statements for a discussion of
uncertainties, risks and assumptions associated with these statements)
BACKGROUND OF INCORPORATION OF THE COMPANY/BUSINESS PLAN
We were incorporated in July 2004 to market the technology of ActivePoint
Israel. ActivePoint Israel was incorporated in Israel in 1997 and received loans
under an incubator program sponsored by the office of the Chief Scientist of
Israel to encourage research and development. As of December 31, 2004,
ActivePoint Israel had an obligation to repay approximately $258,000 thru
royalties from the net sales of software developed under the incubator program.
Since its participation in the incubator program ended, ActivPoint Israel has
been principally financed by its two principal shareholders - Topschutter
Holdings B.V. and Mr. Michel Harvey.
ActivePoint Israel's initial concept was to develop a web based virtual
sales advisor that would provide its customers' users the same type of guidance
and service that is received when a customer enters an actual store. ActivePoint
spent 5 years developing the technology, which includes the ability to build
systems utilizing neural network programming, a negotiation engine offering
alternative choices engines, fast and easy download with no plug ins and context
related natural language ability.
ActivePoint Israel has tried marketing its technology only since 2002.
Prospective customers were presented with technology to serve as a web based
virtual sales agent to increase sales over the web. The technology, fixed cost
and high monthly fees discouraged sales.
After hiring Moshe Ofer in November 2003, management concluded that
internet e-commerce had been steadily increasing despite the lack of virtual
salespersons and that the TX5 software would have to be re-defined to provide
additional added value to our customers such as (i) allowing customers to see
what their customers are looking for but not finding so that they will provide
these products in the future and (ii) to assist the customers of our customers
by making their search process for products much simpler and efficient, which
would hopefully result in customer satisfaction leading to additional revenues
to our customers. Management concluded that investment in internet technology
for websites had subsided and thus many companies were reluctant to undertake
additional purchases of unproven software or applications programs.
Management reached several conclusions regarding its products. First, the
TX5 software encourages users to interact with the system via its highly
developed context orientated natural language engines that respond in dialogue
fashion. Therefore the TX5 solution not only directs users to products that best
suit their needs but can also provide website operators with the ability to see
what their customers would like to see but are unable to find on the website.
Market research could be provided for which customers would generally have to
pay to outside market research companies. Second, the TX5 solutions could reduce
a customer's need for live operators and reduce fixed costs.
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We have several approaches generate revenue. Our goal is to approach
second and third tier companies (based on annual revenues) throughout Europe and
the United States in an attempt to sell our Software. By approaching smaller
companies, we hope to get increased exposure by building a favorable reputation
in our industry. Initially, we intend to increase sales by utilizing a direct
selling campaign, which means that we will approach a limited number of
customers directly. While we recognize that this approach is time consuming and
expensive, our ultimate objective is to identify appropriate sales channels or
existing structures within the market and utilize them in order to obtain
customers. This will enable us to penetrate new markets and reach more customers
in a quicker fashion as opposed to direct sales. While we are in the process of
searching for a partner to assist us in marketing the Software, we will continue
with our direct sales approach.
Our revenue model is based on a revenue sharing model. Our customers may
be charged a small installation fee, but, thereafter, are charged according to
either (i) "a per user session fee" which is defined as a single interaction
with a system, regardless of its length, and which such fee is $.02 and (ii) "a
success fee" whereby a customer only pays for use of the system if the search
has been accomplished (i.e. the product is found and is delivered to the online
"shopping basket"). The success fee charge can be anywhere from $.20 to $1.00
depending on the customer.
Our focus on research and development has been and will continue to be to
improve our technology in order to ensure that we continue to be responsive to
market needs and trends. We have already decreased the time it takes to install
our Software and we are working to enhance our Software to provide the ability
to create a chat system with a live operator which may assist in the search
process.
We have set several milestones for 2005, which include:
(i) Having our securities registered for public trading which, among other
things, will enable us to increase our ability to obtain financing and increase
our exposure which in turn may increase our sales.
(ii) To develop faster installation procedure. Although we have made
significant inroads in shortening the time it takes to install our Software, we
believe that through careful analysis we will be able to make additional
improvements which will reduce the time and costs of installing the Software
which will reduce costs.
(iii) Increase our overall marketing efforts in Europe and the United
States.
(iv) Developing "strategic relationships" with broadband Internet
companies, namely MobilePro, in order to increase our market penetration in
order to increase our revenues.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2004 AS COMPARED WITH THE
YEAR ENDED DECEMBER 31, 2003
The revenues generated for the twelve months ended December 31, 2004 and
December 31, 2003 were $0 and $31,590 respectively, a decrease of 100%. The
decrease in sales for the twelve-month period is attributable to the
re-organization of our company. Total operating expenses increased, from
$499,018 for the twelve months ended December 31, 2003 to $1,007,107 for the
twelve months ended December 31, 2004, an increase of $508,089, or 102%.
Specific line items that reflect the increase in total operating expenses for
the twelve months ended December 31, 2004, include an increase in general and
administrative expenses from US$178,918 to $375,363 which stemmed from the
increased legal and accounting fees due to the registration process, the
proceedings against Mr. Tavor and due to the fact that Mr. Ofer joined the
company on a full time basis. Despite this increase, in Managements' opinion,
upon considering what is required to set up a selling and marketing channel,
only minimal resources were available for the sales and marketing of the TX5
system. There was also an increase in research and development costs of $11,454
from $168,714 to $180,168.
The loss from operations for the twelve months ended December 31, 2004 was
$1,007,107 compared to $467,428 for the twelve months ended December 31, 2003,
an increase of approximately 115%.
Specific line items within the consolidated statements of cash flows show
that in 2003 operating activities of $385,385 were financed by a private
investment of $320,000 from shareholders while in 2004, operating activities of
$583,156 were financed from a private investment from existing shareholders of
$434,206 and a loan from Cornell Capital in the aggregate principal amount of
$500,000. Fees paid to Cornell capital amounted to $110,000. Due to a court
order stemming from the legal proceedings with Mr. Tavor, funds amounting to
$5,329 are attached with a lien that will only be released upon completion of
the litigation.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred substantial losses, and will require financing for
working capital to meet our operating obligations. We anticipate that we will
require financing on an ongoing basis for the foreseeable future. The report of
our independent accountants that accompanies our audited financial statements
states that as a result of our limited revenues and retained deficit,
substantial doubt about our ability to continue as a going concern exists.
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We intend to sell shares of our common stock immediately following the
completion of the distribution, through our equity line of credit agreement with
Cornell Capital Partners, L.P. ("Cornell") in order to generate capital
necessary to sustain and grow our operations. Our plan is to utilize these funds
to concentrate on marketing and sales activities and to find appropriate sales
channels that will distribute our product. In 2005, we plan to hire 3-5
employees for our research and development department and our application work.
We also plan on initiating quality assurance activities
During the past year, research and development has focused on reducing the
time to market of each application. Significant inroads have been made and the
installation process has been shortened. Until recently, each application had to
be inputted manually. The initial part of the process is not done automatically.
However, management does believe that more investment will have to be made in
this area, particularly in market segmentation for the natural language search
engines.
In August 2004, we entered into a financing arrangement with Cornell. As
part of this transaction, in October 2004 ActivePoint issued two convertible
debentures to Cornell for USD$390,000 and USD$75,000 respectively (the
"Debentures"). In December 2004 Cornell issued us an additional $425,000 which
was evidenced by a third convertible debenture.
The Debentures for the aggregate of USD$500,000 are convertible into
shares of common stock any time after our shares of common stock are publicly
traded at a price equal to either the lesser of (1) an amount equal to one
hundred twenty percent (120%) of the opening bid price of the common stock on
the first day of trading (the Fixed Price) or (b) an amount equal to eighty
percent (80%) of the lowest daily Volume Weighted Average Price (as reported by
Bloomberg)("VWAP") of the common stock for the five (5) trading days immediately
preceding the Conversion Date, Redemption Date or the Conversion Redemption
Date, at the investor's option. This convertible debenture has a term of two
years, and bears interest at a rate of 5% per year with all accrued interest due
at the expiration of the term. At our option these debentures may be paid in
cash or redeemed at a redemption price that shall be set at 120% of the face
value of the convertible plus accrued interest. (See Certain Relationships and
Related Transactions).
The Debenture for USD$390,000 is convertible into shares of common stock
any time after our common stock is publicly traded at a price equal to one
hundred percent (100%) of the lowest VWAP of the common stock for the five days
immediately preceding the Conversion Date. This Debenture has a term of two
years, and bears interest at a rate of 5% per year with all accrued interest due
at the expiration of the Debenture term. At our option, this debenture may be
redeemed as follows: We have the right to redeem this Convertible Debenture at
100% of face value within one week of the first trading day at a price equal to
the lowest VWAP of the first five trading days. We have the right to redeem all
or part of the convertible debenture in cash at 100% of the face value until the
90th day after the first day of trading. After the 90th day after the first day
of trading of our common stock we shall have the right to redeem the Convertible
with (30) thirty business days advance notice, any or all-outstanding
Convertible remaining in its sole discretion. The redemption price shall be 120%
of the face amount redeemed plus accrued interest. (See Certain Relationships
and Related Transactions)
In August 2004, we also entered into an Equity Line of Credit Agreement
with Cornell. Under this agreement, we may issue and sell to Cornell common
stock for a total purchase price of up to US$10.0 million for a twenty-four (24)
month period after an effective registration of the shares. We will be able to
commence drawing down on the Equity Line of Credit when the sale of the common
stock is registered with the Securities and Exchange Commission and the
authorization for quotation on the National Association of Securities Dealers
Over the Counter Bulletin Board. (See Certain Relationships and Related
Transactions). The funds received from the transactions with Cornell will be
used for general working capital and improve the software and increase market
awareness of the TX5 software.
On August 26, 2004, we entered into a Placement Agent Agreement with
Newbridge Securities Corporation ("Newbridge"). Newbridge shall act as the
exclusive placement agent with respect to the securities issued pursuant to the
Standby Equity Distribution Agreement. As compensation for its services as
placement agent, we are obligated to pay Newbridge a fee of Ten Thousand Dollars
($10,000), to be payable by the issuance of shares of our common stock based on
the market price of our common stock after the commencement of trading.
Newbridge shall be entitled to "piggy-back" registration rights, which shall be
triggered upon the registration of any shares issued to Cornell.
Other than the financing agreements with Cornell, owe have no other
significant sources of working capital or cash commitments, However, no
assurance can be given that we will raise sufficient funds from the Cornell
financing arrangements or that we will ever produce sufficient revenues to
sustain its operations, or that a market will develop for its common stock for
which most of our financing is dependent on.
We have received loans under an incubator program sponsored by the office
of the Chief Scientist of Israel to encourage research and development. As of
December 31, 2004, ActivePoint Israel had an obligation to repay approximately
$258,000 thru royalties from the net sales of software developed under the
incubator program. We are obligated to pay back the loans in an amount equal to
3-5% of the proceeds received from sales, once sales begin to occur.
As of May 5, 2005, we had approximately $112,000 in a bank account in New
York; and in a bank account in Israel, approximately US$113,971.80.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
-29-
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 4, 2004, pursuant to the terms of an exchange agreement,
approximately 94% of the stockholders of ActivePoint Israel exchanged their
shares of stock of Activepoint Israel for a proportionate amount of shares of
our common stock. As a result, Activepoint Israel is now an approximately 94%
subsidiary of our company. Furthermore, pursuant to the exchange agreement, we
also agreed to assume certain loans made by principal shareholders of
Activepoint Israel to Activepoint Israel.
On August 26, 2004, we entered into a Standby Equity Distribution
Agreement with Cornell. Under this agreement, we may issue and sell to Cornell
Capital Partners common stock for a total purchase price of up to $10.0 million.
The purchase price for the shares will be equal to 97% of the market price,
which is defined as the lowest closing bid price of the common stock during the
five trading days following the notice date. A cash fee equal to four percent
(4%) of the cash proceeds of the draw down is also payable at the time of
funding. To date, we have not drawn down on the Standby Equity Distribution
Agreement. Other than the Standby Equity Distribution Agreement, no other
financing agreement is currently available to us.
On August 26, 2004, we entered into a Securities Purchase Agreement with
Cornell. Under this agreement, Cornell has purchased from us $500,000 of secured
convertible debentures. The Debentures are convertible into shares of common
stock and Cornell has been given registration rights with respect to the shares
issuable upon conversion of the Debentures. The Debentures are due (2) years
from the date of issuance and accrue interest at a rate of 5% per annum. Cornell
is entitled, at its option, to convert, and sell on the same day, at any time
and from time to time subject to certain restrictions, until payment in full of
the Debentures, all or any part of the principal amount of the Debenture, plus
accrued interest, into shares of our common stock.
On August 26, 2004, and pursuant to the financing agreements with Cornell,
we entered into the Business Development Agreements with Mobilepro and
Lighthouse. Mobilepro and Lighthouse are obligated to provide certain business
consulting services, including, but not limited to assisting us with identifying
customers, product development and overall services designed to improve our
business of. As consideration for the services provided by these agreements, we
issued Mobilepro 1,436,103 shares of our common stock of which 1,174,993 shares
are being distributed pursuant to this Registration Statement and we issued
522,219 shares to Lighthouse. At the time of signing the business development
agreements with MobilePro and Lighthouse, these agreements were valued at
$13,750 or 5.5% and $5,000 or 2% respectively, of our then valuation of
$250,000.The value of the Business Development Agreements were based on the
potential services that both Mobilepro and Lighthouse will provide to develop
our business. The relationship between us and Mobilepro and Lighthouse is
primarily that of a business advisor, whereas our relationship with Cornell is
that of a source of continuing access to working capital. We intend to register
the shares issued to Lighthouse at the same time it registers the shares to be
issued to Cornell.
Pursuant to the Exchange Agreement, we assumed the obligations of
ActivePoint under certain loans made to ActivePoint by its principal
stockholders. The aggregate principal amount of these loans is $255,000.
Certain of our stockholders of are parties to a Stockholders' Agreement
with our company. This agreement imposes certain restrictions on the
stockholders, including restrictions on transferability. Pursuant to the
Stockholders' Agreement, TopSchutter Holdings B.V. and/or Harry Farnesby,
provided that each owns at least 5% of our outstanding common stock on a
fully-diluted basis, shall have the right to designate a member to our board of
directors.
Since it's existence, we have not engaged in any transactions with any
promoters.
SHARES ELIGIBLE FOR FUTURE SALE
All of the shares issued in the Distribution will be freely tradable
without restriction or further registration under the Securities Act by persons
other than our "affiliates."
The remaining shares of common stock outstanding held by our shareholders
will be "restricted securities" within the meaning of Rule 144 under the
Securities Act and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including the
exemptions contained in Rule 144. In general, under Rule 144 a person (or
persons whose shares are aggregated), including any person who may be deemed our
affiliate, is entitled to sell within any three-month period a number of
restricted securities that does not exceed the greater of 1% of the then
outstanding shares of common stock and the average weekly trading volume in the
over-the-counter market during the four calendar weeks preceding each such sale,
provided that at least one year has elapsed since such shares were acquired from
us or any affiliate of ours and certain manner of sale, notice requirements and
requirements as to availability of current public information about us are
satisfied. Any person who is deemed to be our affiliate must comply with the
provisions of Rule 144 (other than the one year holding period requirement) in
order to sell shares of common stock which are not restricted securities (such
as shares acquired by affiliates either in the offering or through purchases in
the open market following the offering). In addition, under Rule 144(k) a person
who is not our affiliate and who has not been our affiliate at any time during
the 90 days preceding any sale is entitled to sell such shares without regard to
the foregoing limitations, provided that at least two years have elapsed since
the shares were acquired from us or any affiliate of ours.
-30-
Following the completion of this offering, we intend to file one or more
registration statements relating to the shares of common stock that will be
issued in connection with the financing transactions with Cornell and additional
shares of common stock held by current shareholders, the amount of which is not
known at this time. We also may file one or more registration statements on Form
S-8 under the Securities Act to register common stock issued or reserved for
issuance under the 2004 Long Term Equity Compensation Plan. Any such Form S-8
registration statement will automatically become effective upon filing.
Accordingly, shares registered under such registration statement will be
available for sale in the open market, unless such shares are subject to vesting
restrictions with us or the lock-up restrictions described above. We expect that
the Registration Statement on Form S-8 will cover 2,000,000 shares and options.
No prediction can be made as to the effect, if any, future sales of
shares, or the availability of shares for future sales, will have on the market
price of our common stock prevailing from time to time. The sale of substantial
amounts of our common stock in the public market, or the perception that such
sales could occur, could harm the prevailing market price of our common stock.
EXPERTS
The financial statements appearing in this Prospectus and Registration
Statement have been audited by Reuveni Hartuv, Tepper & Co., an independent
registered public accounting firm, to the extent and for the periods indicated
in their report appearing elsewhere herein, which report expresses an
unqualified opinion and includes an explanatory paragraph relating to our
ability to continue as a going concern and are included in reliance upon such
report and upon the authority of such Firm as experts in accounting and
auditing.
LEGAL MATTERS
McLaughlin & Stern, LLP, 260 Madison Avenue, New York, NY 100016, our
legal counsel, will, by amendment to this registration statement, render an
opinion that the common stock to be distributed to the stockholders of Mobilepro
is legally issued, fully paid and nonassessable under Delaware law.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission the Registration
Statement under the Exchange Act, with respect to the our common stock. This
document does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Statements made in this document as to the contents of any contract,
agreement or other document referred to herein are not necessarily complete. The
Registration Statement and the exhibits thereto filed by us with the Commission
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such
information can be obtained by mail from the Public Reference Branch of the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's website is http://www.sec.gov. We are required to comply with the
reporting requirements of the Exchange Act and to file with the Commission
reports, proxy statements and other information as required by the Exchange Act.
Additionally, we are required to provide annual reports containing audited
financial statements to its stockholders in connection with its annual meetings
of stockholders. These reports, proxy statements and other information will be
available to be inspected and copied at the public reference facilities of the
Commission or obtained by mail or over the Internet from the Commission, as
described above.
-31-
ACTIVEPOINT INC AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 2004 and 2003. F-3
Consolidated Statements of Operations for the year ended
December 31, 2004 and 2003. and for the period from
December 8, 1997 (inception) to December 31, 2004. F-4
Statement of Shareholders' Equity (deficit) from
December 8, 1997 (inception) to December 31, 2004. F-5
Consolidated Statements of Cash Flows for the year
ended December 31, 2004 and 2003. and for the period
from December 8, 1997 (inception) to F-7
December 31, 2004.
Notes to the Consolidated Financial Statements F8-F16
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS OF
ACTIVEPOINT INC.
We have audited the accompanying consolidated balance sheets of ACTIVEPOINT Inc.
(a development stage company) ("the Company") and its subsidiary as of December
31, 2004 and 2003 and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for the years ended December 31,
2004, and 2003 and the cumulative period from December 8, 1997 (inception) to
December 31, 2004. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by the Company's management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company and its subsidiary as of December 31, 2004 and 2003 and the consolidated
results of its operations and cash flows for the years ended December 31, 2004,
and 2003, and the cumulative period from December 8, 1997 (inception) to
December 31, 2004. , in conformity with accounting principles generally accepted
in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As described in note 1A(2), at
December 31, 2004 the company has produced a limited amount of revenue since
inception and had an accumulated deficit during the development stage of US$
2,645,768 . These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Reuveni, Hartuv, Tepper & Co.
Certified Public Accountants
Tel Aviv, Israel April 7, 2005.
F-2
ACTIVEPOINT INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(U.S DOLLARS)
DECEMBER 31,
NOTE 2 0 0 4 2 0 0 3
---- ------- -------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $270,165 $27,732
Restricted cash 5,329 -
Other current assets 3 23,663 3,333
-------- -------
Total current assets 299,157 31,065
EQUIPMENT 4
---------
Cost 31,775 31,775
Less - accumulated depreciation (27,284) (24,919)
-------- -------
Equipment, net 4,491 6,856
OTHER ASSETS
Debt issuance fee 6 110,000 --
--
Less - accumulated depreciation
(1,974) --
-------- -------
Other assets, net 108,026 --
$411,674 $37,921
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Short-term bank debt $ 6,712 $ --
Trade accounts payable
557 842
Other current liabilities 5 149,188 100,950
Total current liabilities 156,457 101,792
LONG-TERM LIABILITIES
Convertible debentures 6 890,000 -
Subordinated long-term loan from shareholders 7
276,400 276,400
Liability for severance pay 8 21,393 18,745
--------- --------
Total long term liabilities 1,187,793 295,145
COMMITMENTS AND CONTINGENT LIABILITIES 9
- --------------------------------------
SHAREHOLDERS' EQUITY (DEFICIT) 10
- ------------------------------
Preferred shares, $0.01 par value; 10,000,000
shares authorized; 2,337,500 issued and outstanding 23,375 23,375
Ordinary shares, $0.01 par value; 100,000,000 shares authorized;
277,647 issued and outstanding 2,776 2,776
Additional paid-in capital 1,687,041 1,252,835
Deficit accumulated during the development stage (2,645,768) (1,638,002)
---------- ---------
Total shareholders' equity (deficit) ( 932,576) ( 359,016)
---------- ---------
$411,674 $37,921
========== =========
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
ACTIVEPOINT INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S DOLLARS)
CUMULATIVE FROM
DECEMBER 8, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
NOTE 2 0 0 4 2 0 0 3 2 0 0 4
---- ------- ------- -------
Revenues: $ -- $ 31,590 $ 119,154
Operating costs and expenses:
Research and Development expenses 11 180,168 168,714 1,293,243
Grants from the OCS -- -- (257,718)
Marketing expenses 12 61,576 154,780 357,675
Grant from the Marketing fund -- (3,394) (47,692)
General and Administrative expenses 13 375,363 178,918 1,019,914
Consulting fees 6 390,000 -- 390,000
------------ ---------- ------------
Total expenses 1,007,107 499,018 2,755,422
Loss from Operations 467,428 2,636,268
1,007,107
Financing expenses 659 2,147 9,500
Taxation 14 -- -- --
------------ ---------- ------------
Net loss $ (1,007,766) $ (469,575) $ (2,645,768)
============ ========== ============
Basic net ( loss) per share: $ (0.39) $ (0.18) $ (1.01)
============ ========== ============
Weighted average number of shares 15
outstanding 2,615,147 2,615,147 2,615,147
============ ========== ============
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
ACTIVEPOINT INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (U.S DOLLARS)
NUMBER OF SHARES
---------------- DEFICIT
SERIES A ACCUMULATED
ORDINARY PREFERRED ADDITIONAL DURING THE
SHARES SHARES SHARE PAID-IN DEVELOPMENT
CAPITAL CAPITAL STAGE TOTAL
------- ------- ----- -----
Shares issuance in 1998 277,647 2,337,500 $ 26,151 $ 8,053 $ -- $ 34,204
Net loss for the year (42,706) (42,706)
------- ---------- ----------- ----------- ----------- -----------
Balance - December 31, 1998 277,647 2,337,500 26,151 8,053 (42,706) (8,502)
Capital issuance in 1999 22,142 22,142
Net loss for the year (68,468) (68,468)
------- ---------- ----------- ----------- ----------- -----------
Balance - December 31, 1999 277,647 2,337,500 26,151 30,195 (111,174) (54,828)
Capital issuance in 2000 545,980 545,980
Net loss for the year (455,639) (455,639)
------- ---------- ----------- ----------- ----------- -----------
Balance - December 31, 2000 277,647 2,337,500 26,151 576,175 (566,813) 35,513
Capital issuance in 2001 225,000 225,000
Net loss for the year -- -- (306,025) (306,025)
------- ---------- ----------- ----------- ----------- -----------
277,647 2,337,500 26,151 801,175 (872,838) (45,512)
Balance - December 31, 2001
Capital issuance in 2002 -- 131,660 -- 131,660
Net loss for the year -- -- (295,589) (295,589)
------- ---------- ----------- ----------- ----------- -----------
277,647 2,337,500 26,151 932,835 (1,168,427) (209,441)
Balance - December 31, 2002
Capital issuance in 2003 -- 320,000 -- 320,000
Net loss for the year -- -- (469,575) (469,575)
------- ---------- ----------- ----------- ----------- -----------
277,647 2,337,500 26,151 1,252,835 (1,638,002) (359,016)
Balance - December 31, 2003
Capital issuance in 2004 -- 434,206 -- 434,206
Net loss for the year -- -- (1,007,766) (1,007,766)
------- ---------- ----------- ----------- ----------- -----------
Balance - December 31, 2004 277,647 2,337,500 $ 26,151 $ 1,687,041 $(2,645,768) $ (932,576)
================================================================================================================================
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
ACTIVEPOINT INC. AND SUBSIDIARY.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S DOLLARS)
CUMULATIVE FROM
DECEMBER 8, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
------------ ------------
2 0 0 4 2 0 0 3 2 0 0 4
------- ------- -------
CASH FLOWS - OPERATING ACTIVITIES
Net loss for the period $(1,007,766) $ (469,575) $(2,645,768)
Adjustments to reconcile net loss to net cash used in
operating activities:
Consulting fees 390,000 -- 390,000
Items not involving cash flows:
Depreciation and amortization 4,339 4,136 29,258
Increase (decrease) in liability for severance
pay, net 2,648 14,276 21,393
Provision for litigation -- 77,000 77,000
Changes in operating assets and liabilities:
Decrease (increase) in other current assets (20,330) 2,253 (23,663)
Increase (decrease) in trade accounts payable (285) (2,302) 557
Increase (decrease) in other current liabilities 48,238 (11,173) 72,188
Net cash used in operating activities (583,156) (385,385) (2,079,035)
CASH FLOWS - INVESTING ACTIVITIES
Purchase of equipment -- -- (31,775)
Net cash used in investing activities -- -- (31,775)
CASH FLOWS - FINANCING ACTIVITIES
Increase in Restricted cash (5,329) -- (5,329)
Increase in short-term bank debt, net 6,712 -- 6,712
Proceeds from. long-term loan from shareholders -- -- 276,400
debt issuance costs (110,000) -- (110,000)
Proceeds from issuance of Convertible debentures 500,000 -- 500,000
Issuance of shares and capital 434,206 320,000 1,713,192
Net cash provided by financing activities 825,589 320,000 2,380,975
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
-- (65,385)
242,433 270,165
CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD 27,732 93,117 --
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 270,165 $ 27,732 $ 270,165
SUPPLEMENT INFORMATION ON ACTIVITY NOT INVOLVING CASH FLOWS
============================================================
At December 31, 2004 convertible debentures and include $ 390,000 in respect of
for consulting fees
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
NOTE 1 - DESCRIPTION OF BUSINESS AND GENERAL
A. DESCRIPTION OF BUSINESS
(1) On July 22, 2004, ACTIVEPOINT Inc. ("the Company" or "ACTIVEPOINT")
a Delaware corporation acquired 94.6% of the issued and outstanding
common stock of Activepoint Ltd ("Activepoint Israel") in exchange
for 2,615,147 common shares of ACTIVEPOINT Inc. At the time of the
2004 acquisition, ACTIVEPOINT Inc had no significant assets or
operation.
ACTIVEPOINT Inc was formed under the name WWAP Inc, and in February
2005 changed it's name to ACTIVEPOINT Inc.
Activepoint Israel is accounted for as the acquiring party and the
surviving accounting entity because the former stockholders of
Activepoint Israel received an amount of voting shares which
constitutes an effective controlling interest in the combined
corporation. The shares issued by ACTIVEPOINT Inc pursuant to the
2004 acquisition have been accounted for as if those shares had been
issued upon the organization of Activepoint Israel. The outstanding
capital stock of ACTIVEPOINT Inc immediately prior to the 2004
acquisition has been accounted for as shares issued by ACTIVEPOINT
Israel to effect the reverse acquisition.
Because ACTIVEPOINT Israel is the accounting survivor, the financial
statements presented for all periods are those of Activepoint
Israel. All inter -company accounts and transactions are eliminated
on consolidation. All financial statements are in the currency of
the United States Dollar.
The outstanding common and preferred shares of stock at the time of
the 2004 acquisition amounted to 2,65,147 and was held principally
by officers of the combined corporation .
(2) The financial statements have prepared on a going concern basis,
which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business. As shown in the
accompanying financial Statements. The company has a stockholders'
deficit of $932,576 at December 31, 2004. And has funded operations
since inception through equity and debt financing As a result
substantial doubt exists about the company's ability to continue to
fund future operations using its existing resources.
(3) The Company is engaged in research and development, marketing and
selling of software that enables network sales.
(4) The Company established a subsidiary, Activepoint Israel. ("The
Subsidiary") to provide the Company with services relating to the
Company's product. The minority interest (5.4%) was not reflected in
the accounts since the subsidiary had a shareholders' deficit and
the minority had no guarantee for the shareholders deficit.
B. RISK FACTORS
The Company has a limited operating history and faces a number of
risks, including uncertainties regarding demand and market
acceptance of the Company's products, dependence on a single product
line, the effects of technological change, competition and the
development of new products. Additionally, other risk factors exist
such as the ability to manage growth, loss of key personnel and the
effect of planned expansion of operations on the future results of
the Company.
F-7
The Company has funded operating losses and negative cash flows
since inception through the issuance of equity and debt
financing.
The Company anticipates that it will continue to incur
significant operating costs and losses in connection with the
development of its product and with increased marketing efforts.
In addition, the Company has limited revenues from its operations
and is therefore dependent on outside financing and on the
continuing support of its investors.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of
the financial statements, are as follows:
A. FINANCIAL STATEMENTS IN U.S. DOLLARS
The currency of the primary economic environment and
financing in which the operations of the Company are
conducted is the U.S. dollar ("dollar"). Therefore, the
Company uses the dollar as its functional and reporting
currency. Certain of the dollar amounts in the financial
statements may represent the dollar equivalent of other
currencies, including the New Israeli Shekels ("NIS"), and
may not necessarily be exchangeable for dollars.
Transactions and balances denominated in dollars are
presented at their dollar amounts. Non-dollar transactions
and balances are remeasured into dollars in accordance with
the principles set forth in Statement No. 52, "Foreign
currency Translation", of the Financial Accounting
Standards Board of the United States ("FASB"). The effect
of the Translation is not material.
B. USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with
Accounting Principles Generally Accepted in the United
States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements, and
the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
C. DEVELOPMENT-STAGE COMPANY
Since its inception, the Company's efforts have been
devoted to research and development. The financial
statements are therefore presented in accordance with the
principles of Statement of Financial Accounting Standards
("SFAS") No. 7 - "Accounting and Reporting by
Development-Stage Enterprises." The company's income for
the years ended December 31, 2003 and 2002, are from paid
Beta sites, witch are actually a system test for a limited
period of time by potential customers.
D. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the financial
statements of the Company and its majority owed Subsidiary.
Inter-company transactions and balances between the Company
and its Subsidiary have been eliminated in the consolidated
financial statements.
F-8
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and demand
deposits in banks, and other short-term, highly liquid
investments with original maturities of less than three
months.
F. EQUIPMENT
Equipment is presented at cost, less accumulated
depreciation. Depreciation IS calculated based on the
straight-line method over the estimated useful lives of the
assets, as follows:
Computers and software 3 Years
Furniture and office equipment 14 Years
G. RESEARCH AND DEVELOPMENT COSTS
Research and Development costs are charged to operations as
incurred.
H. FAIR VALUE OF FINANCIAL INSTRUMENTS
The financial instruments of the Company consist mainly of
cash and cash equivalents, other current assets; trade
accounts payable and other current liabilities. In view of
their nature, the fair value of the financial instruments
included in working capital of the Company is usually
identical or substantially similar to their carrying
amounts.
I. CONCENTRATIONS OF CREDIT RISK
As of December 31, 2004 and 2003 the Company had cash and
cash equivalents totaling $270,165 and $27,732,
respectively, most of which are deposited in a major
Israeli financial institution. Management believes that the
financial institutions holding the Company's cash and cash
equivalents are financially sound.
J. INCOME TAXES
The Company accounts for income taxes under the provisions
of SFAS No. 109, "Accounting for Income Taxes". SFAS No.
109 requires an asset and liability approach for financial
reporting for income taxes. Valuation allowances are
established when necessary, to reduce deferred tax assets,
if it is more likely than not that all, or a portion of it
will not be realized.
F-9
K. REVENUE RECOGNITION
The Company plans to recognize revenue when persuasive
evidence of an arrangement exists, delivery has occurred,
the sales price is fixed or determinable and collectibles
is probable. Generally, these criteria are met at the time
product is shipped. There are no customer acceptance
requirements and there are no remaining significant
obligations.
Revenues from services will be recognized ratably over the
life of the service contract.
The Company's revenue in 2003 and Cumulative from December
8, 1997 (inception) to December 31, 2004 are from paid beta
sites.
NOTE 3 - OTHER CURRENT ASSETS
DECEMBER 31,
------------
2 0 0 4 2 0 0 3
------- -------
Government of Israel (VAT refundable and other) $ 14,378 $ 3,333
Prepaid expenses 9,285 --
-------------------
$ 23,663 $ 3,333
===================
NOTE 4 -- EQUIPMENT
DECEMBER 31,
------------
2 0 0 4 2 0 0 3
-------- --------
COST:
Computers and software $ 22,232 $ 22,232
Furniture and office equipment 9,543 9,543
-------------------
$ 31,775 $ 31,775
ACCUMULATED DEPRECIATION:
Computers and software $ 21,614 $ 20,446
Furniture and office equipment 5,670 4,473
-------------------
27,284 24,919
-------------------
$ 4,491 $ 6,856
===================
NOTE 5 -- OTHER CURRENT LIABILITIES
DECEMBER 31,
---- --------
2 0 0 4 2 0 0 3
-------- --------
Employees and related institutions $ 8,733 $ 17,304
Accrual for vacation 15,240 5,047
Accrued expenses 125,215 78,599
-------------------
$149,188 $100,950
===================
F-10
NOTE 6 - CONVERTIBLE DEBENTURE
On August 26, 2004, ACTIVEPOINT Inc entered into a Securities
Purchase Agreement with Cornell Capital Partners, LLP ("Cornell").
Under this agreement, Cornell purchased from ACTIVEPOINT $500,000 and
received $390,000 as a commission, in the form of a secured
convertible debentures (the "Debentures").
ACTIVEPOINT paid $ 110,000 as a debenture issuance fees.
The Debentures are convertible into shares of Common Stock pursuant
to the terms of the Debenture and Cornell has been given registration
rights with respect to the shares issuable upon conversion of the
Debentures. As of the date hereof, Cornell has $890,000 worth of
Debentures.
On October 20, 2004, and pursuant to the financing transactions,
ACTIVEPOINT has issued three (3) Debentures to Cornell in the
principal amounts of $75,000, $ 425,000 and $390,000 respectively.
The Debentures are due (2) years from the date of issuance and accrue
interest at a rate of 5% per annum. The Debentures are convertible
into shares of common stock subject to certain conditions and based
on a conversion rate set forth in the Debentures. Cornell is
entitled, at its option, to convert, and sell on the same day, at any
time and from time to time subject to certain restrictions, until
payment in full of the Debentures, all or any part of the principal
amount of the Debenture, plus accrued interest, into shares of
ACTIVEPOINT's Common Stock. The shares of Common Stock issuable upon
conversion of the Debentures are entitled to registration rights.
NOTE 7 - SUBORDINATED LONG-TERM LOAN FROM SHAREHOLDERS
The Company signed loan agreements with its shareholders, as a result
of which as of December 31, 2004, $276,400 were received by the
Company. The loans have no maturity date and will serve to finance
the Company's activity. The loan is denominated in US dollars and is
non-interest bearing, 25% of the Company's income after a cash
surplus of $100,000 in the Company's account from sales, will be used
to repay the loans. As of April 7, 2005 the Company has not started
repaying the loans.
NOTE 8 - LIABILITY FOR SEVERANCE PAY
The Company's liability for severance pay is calculated in accordance
with Israeli law based on the most recent salary paid to employees
and the length of employment in the Company. Part of the liability is
funded through individual insurance policies purchased from outside
insurance companies, which are not under the Company's control. The
balance presented as a liability for severance pay, net, represents
the unfunded portion.
Severance pay expenses for the year ended December 31, 2004 and 2003
were $ 24,256 and $ 21,365, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
A. The Company partially finances its research and development
expenditures under a program sponsored by the Office of the Chief
Scientist ("OCS") of Israel for the support of research and
development activities conducted in Israel.
In exchange for participation in the program by the OCS, the
Company agreed to pay 3%-5% of total net sales of software developed
within the framework of these programs. The royalties will be paid up
to a maximum amount equivalent to 100% of the grants provided by the
OCS, linked to the dollar. Repayment of such grants is not required
in the event that there are no sales of products developed within the
framework of such funded program.
During 2004,2003,2002 total royalties accrued amounted to $ 0, $
1,106 and $775 respectively.
As of December 31, 2004, the Company had a contingent liability to pay
royalties of approximately $ 258,000.
F-11
B. Activepoint Israel. is currently involved in litigation with Onn
Tavor, ACTIVEPOINT's former chief executive officer. In March
2004, Mr. Tavor filed a lawsuit in the Regional Labor Court of
Tel-Aviv against ACTIVEPOINT for damages in the amount of
approximately U.S. $225,000 alleging that ACTIVEPOINT owed him
unpaid salary, severance pay and social benefits. Mr. Tavor was
granted a temporary attachment over ACTIVEPOINT's bank accounts,
real property and software programs, but not over funds owed to
ACTIVEPOINT by its customers.
In June 2004, ACTIVEPOINT filed a counter-claim against Mr. Tavor
alleging negligence which resulted in a loss of approximately U.S.
$900,000. Legal opinion received by the company indicates that the
maximum exposure of the company to this claim is an amount of
$77,000, which has been reflected as a liability in the
consolidated balance sheet.
C. On August 26, 2004, ACTIVEPOINT entered into a Standby Equity
Distribution Agreement with Cornell Capital Partners, LP
("Cornell"). Under this agreement, ACTIVEPOINT may issue and sell
to Cornell Common Stock for a total purchase price of up to $10.0
million. Subject to certain conditions, ACTIVEPOINT will be
entitled to commence drawing down on the Equity Line of Credit when
the sale of the Common Stock under the Equity Line of Credit is
registered with the Securities and Exchange Commission and for two
years thereafter. The purchase price for the shares will be equal
to 97% of the market price, which is defined as the lowest closing
bid price of the Common Stock during the five trading days
following the notice date. A cash fee equal to four percent (4%) of
the cash proceeds of the draw down is also payable at the time of
funding. To date, ACTIVEPOINT has not drawn down on the Standby
Equity Distribution Agreement. Other than the Standby Equity
Distribution Agreement, no other financing agreement is currently
available to ACTIVEPOINT.
D. On November 2, 2004 the board of directors of the Company had
resolved that, the Company is authorized to issue to the Company
CEO 500,000 shares of common stock of the Company. In addition, in
2005, he shall receive an annual compensation of $ 125,000 and a
bonus of up to $ 115,000 based upon the performance criterions to
be determined by the Board of Directors.
In term of resolution of the directors dated November 16, 2004, The
following performance criterions were decided upon, In order for
the above bonus to come into effect:
(1) Success in achieving and equity line of at least $ 500,000 for
the COMPANY, or
(2) The sale of the Company or part thereof for a minimum of $ 5
million. Whichever shall occur first.
On October 15, 2004 the Corporation resolved an Employment compensation
agreement with all the employees. The plan provides for the granting of
non-qualified stock options, incentive stock options (within the meaning of
Section 422 of the Code), stock appreciation rights ("SARs"), restricted stock
and restricted stock unit awards, performance shares and other cash or
share-based awards. The maximum number of shares of common stock that may be
issued in connection with awards under the plan is 2,000,000. In the event of
any merger, reorganization, recapitalization, stock split, stock dividend, or
other change in corporate structure that affects our common stock, an adjustment
may be made to the (a) maximum number of shares available for grants under the
plan and/or kind of shares that may be delivered under the plan, (b) the
individual award limits under the plan and (c) number, kind and/or price of
shares subject to outstanding awards granted under the plan, by the board of
directors of ACTIVEPOINT, to prevent dilution or enlargement of rights. Shares
of stock covered by an award under the plan that is cancelled, expired,
forfeited or settled in cash will again be available for issuance in connection
with future grants of awards under the plan. As of December 31, 2004 this
prospectus, no awards have been made under the plan.
F-12
NOTE 10 - SHAREHOLDERS' EQUITY
A. GENERAL
Ordinary shares confer to holders the right to receive notice to
participate and vote at general meetings of the Company and the
right to receive dividends, if declared. Ordinary shares and
preferred shares are identical in all respects except for some
preferential rights granted to holders of preferred shares upon
liquidation.
Preferred shares confer to holders the right to receive 10
Ordinary shares for 1 preferred share.
B. ISSUANCE OF SHARE CAPITAL
In July 2004 The Company signed an agreement with its founders
according to which the Company issued such founders with 277,647
ordinary shares and 2,337,500 preferred shares of, $0.01 par
value each, of the Company. (See note 1A1).
C. PREFERRED STOCK
The Preferred Stock has a liquidation preference over the holders
of the common stock, the amount equal to the greater of (i) the
issue price of the Preferred Stock plus accrued and unpaid
interest on the Issue Price at a rate of 3% commencing on the
date of payment of the Preferred Stock issue price or (ii) the
pro-rata distribution on the Common Stock had a holder of the
Preferred Stock converted his/her/its Preferred Stock prior to a
liquidation, dissolution or winding up of the COMPANY
(appropriately adjusted for any stock split or stock combination
of the Preferred Stock) for each share of Preferred Stock then
held by them and, in addition, in each case an amount equal to
all cumulated and unpaid dividends on the Preferred. Each share
of Preferred Stock is convertible into ten (10) shares of Common
Stock and the holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of
Common Stock into which such share of Preferred could be
converted. Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the then effective
conversion rate upon (i) this registration statement under the
Securities Act being declared effective by the Securities and
Exchange Commission covering the offer and sale of securities and
(ii) the quotation of the COMPANY'S securities on the
Over-the-Counter Bulletin Board (OTCBB) or the listing of the
COMPANY'S securities on a securities exchange. Holders of
Preferred Stock are entitled to protective provisions, including
the right to approve the creation of any class of stock that
ranks superior to the Preferred Stock upon the effectiveness of
this registration statement and the quotation of the OTCBB, the
preferred shares will convert into 23,375,000 common shares.
NOTE 11 -RESEARCH AND DEVELOPMENT EXPENSES
CUMULATIVE FROM
DECEMBER 8, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
------------ ------------
2 0 0 4 2 0 0 3 2 0 0 4
------- ------- -------
Salaries and related expenses $ 178,958 $ 167,505 $1,216,903
Other 1,210 1,209 76,340
---------- ----------- ----------
$ 180,168 $ 168,714 $1,293,243
========== =========== ==========
F-13
NOTE 12 -MARKETING EXPENSES
CUMULATIVE FROM
DECEMBER 8, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
------------ ------------
2 0 0 4 2 0 0 3 2 0 0 4
------- ------- -------
Consultants $ 54,203 $ 120,022 $ 308,037
Travel expenses 7,373 34,758 49,638
---------- --------- ---------
$61,576 $ 154,780 $ 357,675
======= ========= =========
NOTE 13 -GENERAL AND ADMINISTRATIVE EXPENSES
CUMULATIVE FROM
DECEMBER 8, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
------------ ------------
2 0 0 4 2 0 0 3 2 0 0 4
------- ------- -------
Salaries and related expenses $ 70,721 $ 102,664 $ 338,717
Professional fees 252,920 22,488 353,014
Depreciation and amortization 4,339 4,136 29,258
Rent and office maintenance 47,383 49,630 298,925
--------- --------- -----------
$ 375,363 $ 178,918 $ 1,019,914
========= ========= ===========
NOTE 14 -INCOME TAXES
A. DEFERRED TAXES
As of December 31, 2004, the Company and its Subsidiary had
a net operating loss carry forwards for tax purposes
respectively of approximately $1.4 million.
Due to the uncertainty of realizing the benefit of the
Company's tax loss carry forwards, a valuation allowance
for the entire amount of the related deferred tax asset has
been recorded.
B. The Company and its Subsidiary have not received tax
assessments since their incorporation.
F-14
NOTE 15 - EARNINGS PER SHARE
Basic earnings (loss) per share are computed based on the
weighted average number of ordinary and preferred shares
outstanding during each year:
CUMULATIVE FROM
DECEMBER 8, 1997
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
------------ ------------
2 0 0 4 2 0 0 3 2 0 0 4
------- ------- -------
Ordinary shares 277,647 277,647 277,647
Preferred shares 2,337,500 2,337,500 2,337,500
--------- --------- ---------
2,615,147 2,615,147 2,615,147
========= ========= =========
The amount of the assumed conversion of the 2,337,500
preferred shares to 23,375,000 ordinary shares (see note 9)
and the conversion of the Convertible debentures was not
included since it have an anti-dilutive effect.
F-15
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO PROVIDE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS ABOUT TRUST NATURAL GAS CORP. EXCEPT THE
INFORMATION OR REPRESENTATIONS CONTAINED IN THIS PROSPECTUS. YOU SHOULD NOT RELY
ON ANY ADDITIONAL INFORMATION OR REPRESENTATIONS IF MADE
This prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy any securities:
[ ] except the common stock offered by this
prospectus;
[ ] in any jurisdiction in which the offer or
solicitation is not authorized;
[ ] in any jurisdiction where the dealer or
other salesperson is not qualified to make
the offer or solicitation;
[ ] to any person to whom it is unlawful to make
the offer or solicitation; or
[ ] to any person who is not a United States
resident or who is outside the jurisdiction
of the United States.
The delivery of this prospectus or any accompanying sale does not imply that:
[ ] there have been no changes in the affairs of
Trust Natural Gas Corp. after the date of this
prospectus; or
[ ] the information contained in this prospectus is
correct after the date of this prospectus.
Until ______, 2005, all dealers Effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters.
---------------------
PROSPECTUS
---------------------
1,436,103 SHARES OF
COMMON STOCK
ACTIVEPOINT INC.
May _, 2005
-----------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation and by-laws include an indemnification
provision under which we have agreed to indemnify directors of our company to
the fullest extent possible from and against any and all claims of any type
arising from or related to future acts or omissions as a director of our
company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
our company pursuant to the foregoing, or otherwise, our company has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered. Our company will pay all expenses in connection with this
offering.
Securities and Exchange Commission Registration Fee $ 169.02
Printing and Engraving Expenses $20,000.00
Accounting Fees and Expenses $35,000.00
Legal Fees and Expenses $80,000.00
SALE OF UNREGISTERED SECURITIES
There have been no recent sales of unregistered securities except as
follows: i) 1,436,103 shares issued to Mobilepro and 522,219 shares issued to
Lighthouse on August 26, 2004 pursuant to the Business Development Agreements
pursuant to an exemption from registration pursuant to Rule 504 under Regulation
D promulgated under the Securities Act of 1933and (ii) a private placement in
October 2004 to the principal stockholders of ActivePoint, Israel for an
aggregate of 748,314 shares of common stock of Activepoint Israel, for aggregate
proceeds of $500,000.00, and which such shares were converted into shares of
Class A Preferred Stock of our company pursuant to the Exchange Agreement. The
proceeds of this offering will be used for general working capital. This private
placement was exempt from registration based on Regulation S of the Securities
Act of 1933.
EXHIBITS
No. Description
- ---------- ------------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of WWAP, Inc.
n/k/a ActivePoint Inc.*
3.2 Certificate of Designation of Class A Convertible Preferred Stock *
3.3 By-laws of ActivePoint Inc. *
4.1 Addendum #4 to Investment Agreement dated December 10, 2001
4.2 Addendum #5 to Investment Agreement dated June 13, 2002
4.3 Addendum #6 to Investment Agreement dated August 21, 2002
5.1 Opinion of McLaughlin & Stern, LLP **
10.1 Exchange Agreement between WWAP, Inc. and Activepoint, Ltd. dated as
of October 2004 *
10.2 Collaboration Agreement between the company and Activepoint, Ltd.
dated as of August 2004 *
10.3 Securities Purchase Agreement, dated August 26, 2004, between
Cornell and the company *
10.4 Secured Convertible Debenture in the principal amount of $75,000 *
10.5 Security Agreement, dated August 26, 2004, between Cornell and the
company *
10.6 Pledge Agreement, dated October, 2004, between Cornell and the
company *
II-1
10.7 Standby Equity Distribution Agreement, dated August 26, 2004,
between Cornell and the company *
10.8 Escrow Agreement, dated August 26, 2004, between the company,
Cornell and Butler Gonzalez LLP * (Securities Purchase Agreement)
10.9 Escrow Agreement, dated August 26, 2004, between the company,
Cornell and Butler Gonzalez LLP (Standby Equity Distribution
Agreement) *
10.10 Registration Rights Agreement (SEDA), dated August 26, 2004, between
the company and Cornell *
10.11 Investor Registration Rights Agreement, dated August 26, 2004,
between the company and Cornell *
10.12 Business Development Agreement, dated August 26, 2004, between the
company and Mobilepro Corp. *
10.13 Business Development Agreement, dated August 26, 2004, between the
company and Lighthouse Advisors, Inc. *
10.14 Convertible Debenture in the principal amount of $390,0000 *
10.15 2004 Long Term Equity Incentive Plan. *
10.16 Form of employment agreements for employees of ActivePoint Israel
21.1 Subsidiaries of ActivePoint *
23.1 Consent of Reuveni, Hartuv, Tepper & Co.
- --------------
* Previously filed
** To be filed by amendment
UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3) of the Securities
Act of 1933 (the "Act");
(ii) Reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) Include any additional or changed material information on the plan
of distribution;
(2) That, for the purpose of determining any liability under the Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
II-2
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, on December 16, 2004.
ACTIVEPOINT INC.
By: /s/ Moshe Ofer
----------------------------------
Name: Moshe Ofer
Title: President, Principal Accounting Officer
and Principal Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates stated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Stephen Dumbrell Director May 12, 2005
- -------------------------
Stephen Dumbrell
/s/ Mosher ofer Director May 12, 2005
- -------------------------
Moshe Ofer
II-3