UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
( X ) Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2005
----------------------
( ) Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to __________________
Commission file number _______________________________________
U.S. Telesis Holdings, Inc.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 62-0201385
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1165 Via Vera Cruz
San Marcos, CA 92078
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(Address of Principal Executive Offices) (Zip Code)
(805) 443-9431
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(Issuer's Telephone Number, Including Area Code)
41 Commonwealth Avenue, #4 Boston, MA 02116
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(Former Name, Former Address
and Former Fiscal Year, if Changed Since Last Report)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days:
Yes __X__ No _____
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at May 12, 2005
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Common Stock, $.001 par value per share 47,736,900
Series A Preferred Stock 733,778
Transitional Small Business Disclosure Format (check one):
Yes _____ No __X__
TABLE OF CONTENTS
PAGE
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PART I. Financial Information ................................................i
Item 1. Financial Statements
Balance Sheets - March 31, 2005 (unaudited) and December 31, 2004 .........1
Statements of Operations
For the Three Months Ended March 31, 2005 and 2004 (unaudited).......2
Statements of Cash Flows
For the Three Months Ended March 31, 2005 and 2004 (unaudited).......4
Notes to the Financial Statements
For the Three Months Ended March 31, 2005 and 2005 ...............4-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................11-12
Item 3. Controls and Procedures..............................................13
PART II.......................................................................14
Item 1. Legal Proceedings....................................................14
Item 2. Changes in Securities and Use of Proceeds............................14
Item 3. Defaults Upon Senior Securities......................................15
Item 4. Submission of Matters to a Vote of Security Holders..................15
Item 5. Other Information....................................................15
Item 6. Exhibits and Reports on Form 8-K.....................................15
SIGNATURES....................................................................16
CERTIFICATIONS AND EXHIBITS...................................................17
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
U.S. TELESIS HOLDINGS, INC.
BALANCE SHEETS
MARCH 31, 2005 AND DECEMBER 31, 2004
MARCH 31, DECEMBER 31,
2005 2004
---- ----
(Unaudited)
CURRENT ASSETS
Cash in banks $ 801 $ 59
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Total current assets $ 801 $ 59
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Total Assets $ 801 $ 59
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued professional fees 20,980 12,556
Convertible Notes Payable to Stockholders 33,000 28,000
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Total Current Liabilities $ 53,980 $ 40,556
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Commitments and Contingencies (Note 2)
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock ($.001 par value, 1,000,000 shares
authorized, none issued) $ -- $ --
Common stock ($.001 par value, 50,000,000 shares authorized,
11,280,476 shares issued and outstanding 11,281 11,281
Additional paid-in capital 1,718,563 1,713,563
Accumulated deficit (1,783,023) (1,765,341)
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Total Stockholders' Equity (Deficit) $ (53,179) $ (40,497)
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Total Liabilities and Stockholders' Equity (Deficit) $ 801 $ 59
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The accompanying notes are an integral part of these statements
-1-
U.S. TELESIS HOLDINGS, INC.
UNAUDITED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
THREE MONTHS ENDED
2005 2004
Revenues:
Sales $ 0 $ 0
Interest income 0 0
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Net revenues $ 0 $ 0
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Expenses:
Professional fees $ 10,415 $ 16,000
Other general and administrative expenses 7,267 39,807
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Total expenses $ 17,682 $ 55,807
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Net loss $ (17,682) $ (55,807)
============ ============
Net loss per common share $ (0.00) $ (0.01)
Weighted average number of basic and diluted 11,280,476 11,216,487
The accompanying notes are an integral part of these statements
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U.S. TELESIS HOLDINGS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
THREE MONTHS ENDED
2005 2004
Cash flows from operating activities:
Net loss $ (17,682) $ (55,807)
Adjustments to reconcile net loss to cash
used by operating activities
Stock issued for compensation -- 6,700
Non-cash interest expense 5,424 22,465
Increase (Decrease) in accrued expenses: 8,000 (42,232)
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Total adjustments $ 13,424 $ (13,067)
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Net cash used by operating activities $ (4,258) $ (68,874)
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Cash flows from financing activities:
Proceeds from exercise of warrants -- 12,000
Proceeds from exercise of stock option 5,010
Proceeds from issuance of convertible notes
payable to stockholders 5,000 28,000
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Net cash provided by financing activities $ 5,000 $ 45,010
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Net decrease in cash in banks $ 742 $ (23,864)
Cash in banks - beginning of period $ 59 $ 23,923
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Cash in banks - end of period $ 801 $ 59
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period for:
Interest expense $ 0 $ 0
Income taxes $ 0 $ 0
The accompanying notes are an integral part of these statements
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NOTE 1 - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) - UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited financial statements included herein have been prepared on behalf
of the Company pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted or condensed
pursuant to such rules and regulations. The Company believes, however, its
disclosures herein, when read in conjunction with the Company's audited
financial statements for the year ended December 31, 2004 as filed in Form
10K-SB, are adequate to make the information presented not misleading. The
Company's significant accounting policies are described in Note 1 of Notes to
Consolidated Financial Statements included in the Company's 10K-SB. The results
for the interim periods are not necessarily indicative of the results to be
expected for the full fiscal year.
(B) - NATURE OF BUSINESS
U.S. Telesis Holdings, Inc. (the "Company"), formerly U.S. Telesis, Inc., was
incorporated under the laws of the state of Delaware on August 25, 1998. In a
merger agreement dated May 20, 1999, U.S. Telesis, Inc. merged with and into
Woodland Communications Group, Inc. and thereafter on June 3, 1999, Woodland
Communications Group, Inc. changed its name to U.S. Telesis Holdings, Inc.
The Company was organized to provide diverse telecommunications products and
services to the small and medium business community in the southeastern United
States and to develop a niche market strategy of reselling long distance
services to the electrical cooperative community. As a result of the dramatic
decline in the telecommunications industry, the Company has abandoned its
business objective to provide such telecommunications products and services.
The Company filed a registration statement on May 29, 2003, which was amended on
Form 10-SB/A filed on July 16, 2003 to become a reporting company.
The Company's plan has been to identify and complete a merger or acquisition
primarily in consideration of the issuance of shares of the Company's capital
stock with a private entity whose business presents an opportunity for the
Company's stockholders. Consistent with that plan, effective May 4, 2005, the
Company acquired 100% of the outstanding stock of Catcher, Inc., a Delaware
corporation ("Catcher") through a series of stock purchases with the
shareholders of Catcher (the "Acquisition"), pursuant to which Catcher became a
wholly-owned subsidiary of the Company. In connection with the Acquisition, the
Company acquired (i) all of the issued and outstanding shares of common stock of
Catcher in exchange for an aggregate of 34,911,900 shares of authorized,
theretofore unissued shares of common stock, $.001 par value, of the Company
(the "Common Stock"), (ii) all of the issued and outstanding Series A Preferred
Stock of Catcher in exchange for 733,778 shares of authorized, theretofore
unissued shares of Series A Preferred Stock, $.001 par value, of the Company
(the "Series A Preferred Stock") (the terms of which Series A Preferred Stock
were designated by the Board of Directors by an
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Amended and Restated Certificate of Designation filed by the Company with the
Delaware Secretary of State on May 3, 2005 and which Series A Preferred Stock
shall have the right to vote on an as-converted basis for 42,265,613 shares of
Common Stock until the effectiveness of the reverse stock split described in
Note 8 of this 10Q). In addition, the Company assumed Catcher's obligations
under its issued and outstanding warrants to purchase Catcher's common stock to
issue an aggregate of 32,402,600 shares of Common Stock to the warrant holders.
Under a Registration Rights Agreement, the Company is required to register these
shares within 180 days of the date of the Acquisition.
Catcher is a developmental stage company which has designed a portable,
ruggedized wireless, hand-held GPS-based command control device as a result of
years of research and development efforts. Utilizing proprietary operating
software, the CATCHER(TM) device offers critical real-time wireless
communications for security and operations personnel through the convergence of
voice, video, data and biometric capabilities to enhance public safety and
security for both private and government facilities. Currently, the device is in
the final development stage with the first beta tests of the units to begin in
the fourth quarter of 2005.
(C) - NET (LOSS) PER BASIC AND DILUTED COMMON SHARE
Basic earnings per share is computed by dividing net loss for the period by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net loss by the weighted average
number of common shares plus the dilutive effect of outstanding warrants.
Approximately 1.1 million and 0 outstanding shares to be issued upon conversion
of notes payable were excluded from the calculation of diluted earnings per
share for three months ended March 31, 2005 and 2004, respectively, because they
were anti-dilutive.
(D) - INCOME TAXES
The Company accounts for income taxes on the liability method, as provided by
Statement of Financial Accounting Standards 109, Accounting for Income Taxes
(SFAS 109) which requires the recognition of different tax assets and
liabilities for the future tax consequences of temporary differences between the
financial statement and tax basis carrying amounts of assets and liabilities.
There were no differing methods of reporting income for tax purposes as compared
to financial reporting purposes.
(E) - USE OF ESTIMATES
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
-5-
(F) - STATEMENTS OF CASH FLOWS
For the purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less when
purchased to be cash equivalents.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. Subsequent to the acquisition of
Catcher, Inc., the Company will continue to develop the technology acquired
until it is ready for sale. The Company's ability to continue as a going concern
depends on a number of factors, including but not limited to, the ability to get
its product to market and the ability to raise additional capital if required.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The Company intends to continue to seek the additional
financing it needs to fund its operations. There can be no assurance that such
financing will be available on terms acceptable to the Company, or at all.
NOTE 3 - CONCENTRATION OF CREDIT RISK - CASH AND CASH EQUIVALENTS
The Company maintains its cash balances at financial institutions located in
Tennessee and Massachusetts. In the future the balance may exceed federally
insured limits of $100,000. The Company has not experienced any losses in such
accounts and believes it is not exposed to any significant credit risk on cash
on deposit. The fair market value of these financial instruments approximates
cost.
NOTE 4 - INCOME TAXES
No income taxes were provided since the Company incurred losses from its
inception. Due to the uncertainty of future taxable income, no future tax
benefits have been recognized. As of March 31, 2005 the Company has net
operating loss carry forwards totaling $1,400,000 expiring at various dates
through 2019.
NOTE 5 - INDUSTRY SEGMENT INFORMATION
As of March 31, 2005, the Company did not conduct any operations. Accordingly,
segment information is not applicable.
NOTE 6 - STOCKHOLDERS' EQUITY
(A) - CAPITAL STRUCTURE
The Company is authorized to issue 51,000,000 shares of $.001 par value stock,
of which 50,000,000 shares with a par value of $.001 is designated for common
shares. The Company's certificate of incorporation authorizes a series of
1,000,000 shares of preferred stock with a par value of $.001 and with such
rights, privileges and preferences as the board of directors may determine. The
Company has not issued any shares of preferred stock as of March 31, 2005.
-6-
By resolution, the Company separately designated 8,000 of these shares as Series
A Redeemable Convertible Preferred Stock with a stated value of $1,000 per
share. The redemption price is $1,300 per share plus accumulated dividends. The
shares are also convertible into common stock calculated on a formula based on
the trading prices of the common stock. None of these shares were ever issued by
the Company. By resolution filed with the Delaware Secretary of State on May 3,
2005, the Company amended and restated its designation to designate 800,000
shares of Series A Preferred Stock, $.001 par value. The holders of the Series A
Preferred Stock have the right to designate a member of the Board of Directors
of the Company. The Series A Preferred Stock is convertible into 57.6 shares of
the Company's common stock and, except for a single share of Series A Preferred
Stock, shall automatically convert upon the reverse stock split described in
Note 8.
(B) - WARRANTS
On July 28, 2003 three warrant holders, each significant shareholders of the
Company, exercised their unit purchase warrants at $0.03 and received 558,333
shares of common stock and an additional warrant to purchase an equivalent
number of shares at $0.05. The holders immediately exercised the additional
warrant and received 558,333 shares of common stock for a total of 1,116,666
shares. The fair value of the contingent warrants issued was determined to be
$1,539 using the Black-Scholes pricing model and the following assumptions: risk
free interest rate, 0.97%; expected divided yield, 0%; expected life, 3 months;
and expected volatility, 125%. This amount is included in administrative expense
in the accompanying statement of operations for the year ended December 31,
2004. In addition one other warrant holder exercised a warrant at $.03 and
received 5,000 shares of common stock and an additional warrant to purchase an
equivalent number of shares at $0.05. The fair value of the contingent warrants
issued was immaterial. Total proceeds of $44,816 were received in connection
with the exercises of all the warrants.
In October and November of 2003 several warrant holders exercised their unit
purchase warrants at $0.03 and received 135,000 shares of common stock and an
additional warrant to purchase an equivalent number of shares at $0.05. The
holders immediately exercised the additional warrant and received 135,000 shares
of common stock for a total of 270,000 shares. The fair value of the contingent
warrants issued was determined to be $13,507 using the Black-Scholes pricing
model and the following assumptions: Risk free interest rate, 0.97%; expected
divided yield, 0%; expected life, 1 month; and expected volatility, 125%. This
amount is included in general and administrative expense in the accompanying
statement of operations for the year ended December 31, 2003. Total proceeds of
$10,800 were received in connection with the exercise of these warrants.
In February 2004, certain investors exercised 150,000 warrants at $0.03 per
share. Pursuant to their warrant agreements, the Company issued the investors an
equivalent amount of warrants with an exercise price of $0.05. The warrants were
valued at $3,300 using the Black-Scholes pricing model and the following
assumptions: risk free interest rate, 0.89%; expected divided yield, 0%;
expected life, 1 month; and expected volatility, 125%. This amount is included
in general and administrative expense in the accompanying statement of
operations for the year ended December 31, 2004. The investors immediately
exercised the additional 150,000 warrants
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at $0.05 per share. Total proceeds of $12,000 were received in connection with
the exercise of these warrants. The remaining 856,000 warrants outstanding
expired on March 12, 2004.
In May 2005 in connection with the Acquisition, the Company assumed Catcher's
obligations under Catcher's issued and outstanding warrants to purchase
Catcher's common stock to issue an aggregate of 32,402,600 shares of Common
Stock of the Company to the warrant holders, subject to adjustment pursuant to
the reverse stock split described in Note 8.
(C) - STOCK OPTIONS
In February 2004, the Company issued an option to purchase 167,000 shares of
common stock to Nicholas Rigopulos in lieu of salary. The options vested
immediately and had an exercise price of $0.03. The Company recorded $6,700 in
connection with the issuance of the options which is included in administrative
expense in the accompanying statement of operations for the three months ended
March 31, 2004. The value of the option was determined based on a market value
of the company's stock of $0.07 per share. Mr. Rigopulos exercised options to
purchase all 167,000 shares of Common Stock on March 9, 2004 for proceeds of
$5,010.
NOTE 7 - NOTES PAYABLE TO STOCKHOLDERS
In February 2004, the Company entered into convertible promissory notes with
current investors for gross proceeds of $13,000. The notes bear interest at a
rate of 6% and mature on September 30, 2004. The notes are convertible into
common stock at a rate of $0.03 per share at any time after September 30, 2004.
The notes may only be converted at the option of the Company. As of March 31,
2005 there is $910 in accrued interest which is included in accrued expenses in
the accompanying balance sheet. In September 2004, the Company amended the notes
payable to extend the maturity date to January 31, 2005. On February 1, 2005,
the Company amended the notes payable to extend the maturity date to January 31,
2006.
In July 2004, the Company entered into two convertible promissory notes with
current investors for gross proceeds of $10,000. The notes bear interest at a
rate of 6% and mature on January 31, 2005. The notes are convertible into common
stock at a rate of $0.03 per share at any time after January 31, 2005. The notes
may only be converted at the option of the Company. As of March 31, 2005 there
is $450 in accrued interest which is included in accrued expenses in the
accompanying balance sheet. On February 1, 2005, the Company amended the notes
payable to extend the maturity date to January 31, 2006.
In October 2004, the Company entered into a convertible promissory note with a
current investor for gross proceeds of $5,000. The note bears interest at a rate
of 6% and matures on January 31, 2005. The note is convertible into common stock
at a rate of $0.03 per share at any time after January 31, 2005. The note may
only be converted at the option of the Company. As of March 31, 2005 there is
$225 in accrued interest which is included in accrued expenses in the
accompanying balance sheet. On February 1, 2005, the Company amended the notes
payable to extend the maturity date to January 31, 2006.
-8-
In January 2005, the Company entered into a convertible promissory note with a
current investor for gross proceeds of $5,000. The note bears interest at a rate
of 6% and matures on July 31, 2005. The note is convertible into common stock at
a rate of $0.03 per share at any time after January 31, 2005. The note may only
be converted at the option of the Company. As of March 31, 2005 there is $53 in
accrued interest which is included in accrued expenses in the accompanying
balance sheet. On February 1, 2005, the Company amended the notes payable to
extend the maturity date to January 31, 2006.
In April 2005, the Company entered into a convertible promissory note with a
current investor for gross proceeds of $36,000. The note bears interest at a
rate of 1% and matures on January 31, 2006. The note is convertible into common
stock at a rate of $0.10 per share at any time after August 31, 2005. The note
may only be converted at the option of the Company.
In May 2005, the Company entered into a convertible promissory note with a
current investor in exchange for payment of $2,975 of expenses. The note bears
interest at a rate of 6% and matures on January 31, 2006. The note is
convertible into common stock at a rate of $0.10 per share at any time after
August 31, 2005. The note may only be converted at the option of the Company.
In connection with the acquisition described in Note 1, each convertible
promissory note described above plus the related accrued interest was converted
into common stock resulting in the issuance of an aggregate of 1,544,524 shares
of common stock.
Each of the convertible notes payable discussed above was convertible at a price
per share which was less than the fair market value of the stock on the date the
note was issued. Therefore, in accordance with Emerging Issues Task Force (EITF)
Issue No. 98-5 and EITF Issue No. 00-27, the Company recorded a beneficial
conversion feature in the form of an additional discount to the associated notes
payable. This discount was amortized as additional interest expense over the
life of the note. The amortized aggregate discount related to the beneficial
conversion feature resulted in additional interest expense of $5,000 which is
included in general and administrative expense in the accompanying statement of
operations for the three months ended March 31, 2005.
NOTE 8 - SUBSEQUENT EVENTS
On May 4, 2005, the Company completed the acquisition of 100% of the issued and
outstanding common and preferred shares of Catcher, Inc., a Delaware corporation
("Catcher"). Immediately prior to the acquisition of Catcher, Catcher completed
a private placement to accredited investors which generated cash proceeds in the
amount of $4,500,721.
Under the terms of the transaction, the Company issued 34,911,900 shares of its
common stock and 733,778 shares of its Series "A" preferred stock which, upon
certain conditions being met, shall convert into an aggregate of 42,265,613
shares of the Company's common stock, except for one share of Series "A"
preferred stock which will be held by Ira Tabankin, a director of the Company.
In addition, the Company assumed Catcher's obligations under its issued and
outstanding warrants to purchase Catcher's common stock to issue an aggregate of
32,402,600
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shares of Common Stock to the warrant holders. The Company is currently
evaluating the accounting for the acquisition.
In addition, a majority of the Company's shareholders have approved an amendment
to the Company's certificate of incorporation to change the Company's name to
Catcher Holdings, Inc. and effectuate a 1 for 7.2 reverse split, to be effective
upon the satisfaction of applicable regulatory requirements. The Company
anticipates that this will be completed in the near term.
Immediately following the Acquisition, Jules Benge Prag IV resigned as a
director and secretary of the Company and Nicolas Rigopulos resigned as
President and Chief Executive Officer. The Board of Directors of the Company
appointed Ira Tabankin as a director to fill the vacancy created by Mr. Prag's
resignation and Charles Sander as Chief Executive Officer of the Company. In
addition, immediately following the Acquisition, by written consent of a
majority of the shareholders, the number of members of the Board of Directors
was set at five, Ira Tabankin, Charles Sander and Cathal Flynn were elected as
directors with an additional two directors to be appointed by the then existing
directors to be effective upon the satisfaction of regulatory requirements. The
names of elected officers will announced publicly upon the determination
thereof.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain information contained in this report may include "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, and is subject to the safe harbor created by that act. We caution
readers that certain important factors may affect our actual results and could
cause such results to differ materially from any forward-looking statements
which may be deemed to have been made in this report or which are otherwise made
by or on behalf of us. For this purpose, any statements contained in this report
that are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing words such as
"may", "will", "expect", "believe", "explore", "consider", "anticipate",
"intend", "could", "estimate", "annualized", "plan", or "continue" or the
negative variations of those words or comparable terminology are intended to
identify forward-looking statements. Factors that may affect our results
include, but are not limited to the risks and uncertainties associated with,
- our ability to raise capital necessary to sustain our operations and
to implement our business plan,
- our ability to obtain regulatory permits and approvals to operate in
the financial services area,
- our ability to identify and complete acquisitions and successfully
integrate the businesses we acquire, if any,
- changes in the real estate market, interest rates or the general
economy of the markets in which we may seek to acquire businesses,
- our ability to employ and retain qualified management and employees,
- changes in government regulations that may be applicable to our
businesses,
- general volatility of the capital markets and the maintenance of a
market for our shares,
- changes in the demand for services we may offer in the future,
- the degree and nature of our competition,
- our ability to generate sufficient cash to pay our creditors, and
- disruption in the economy and financial conditions primarily from the
impact of past terrorist attacks in the United States, threats of
future attacks, police and military activities overseas and other
disruptive worldwide political events.
-11-
We are also subject to other risks detailed from time to time in our Securities
and Exchange Commission filings. Any one or more of these uncertainties, risks
and other influences could materially and adversely affect our results of
operations and may affect whether forward-looking statements made by us
ultimately prove to be accurate. Our actual results, performance and
achievements could differ materially from those expressed or implied in these
forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether from new information, future
events or otherwise.
GENERAL
U.S. Telesis Holdings, Inc. (the "Company") has not had revenues from operations
in each of the last two fiscal years. The sole revenue of the Company during the
last two fiscal years was derived exclusively from interest income. There was no
interest income recorded during the three months ended March 31, 2005 and 2004.
During the three months ended March 31, 2005, expenses comprised of professional
fees totaling $10,415 and other general administrative expenses of $7,267.
On May 4, 2005, the Company acquired 100% of the outstanding stock of Catcher,
Inc., a Delaware corporation ("Catcher") through a series of stock purchases
with the shareholders of Catcher (the "Acquisition"), pursuant to which Catcher
became a wholly-owned subsidiary of the Company. In connection with the
Acquisition, the Company acquired (i) all of the issued and outstanding shares
of common stock of Catcher in exchange for an aggregate of 34,911,900 shares of
authorized, but theretofore unissued, shares of common stock, $.001 par value,
of the Company (the "Common Stock"), (ii) all of the issued and outstanding
Series A Preferred Stock of Catcher in exchange for 733,778 shares of
authorized, but theretofore unissued, Series A Preferred Stock, $.001 par value,
of the Company (the "Series A Preferred Stock") (the terms of which Series A
Preferred Stock were designated by the Board of Directors by an Amended and
Restated Certificate of Designation filed by the Company with the Delaware
Secretary of State on May 3, 2005 and which Series A Preferred Stock shall have
the right to vote on an as-converted basis for 42,265,613 shares of Common Stock
until the effectiveness of the reverse stock split described in Note 7,
Subsequent Events). In addition, the Company assumed Catcher's obligations under
its issued and outstanding warrants to purchase Catcher's common stock to issue
an aggregate of 32,402,600 shares of Common Stock to the warrant holders. Under
a Registration Rights Agreement, the Company is required to register these
shares within 180 days of the date of the Acquisition.
Immediately prior to the acquisition of Catcher, Catcher completed a private
placement of Units consisting of common stock and warrants of Catcher to
accredited investors which generated cash proceeds in the amount of $4,500,721.
Catcher is a developmental stage company which has designed a portable,
ruggedized wireless, hand-held GPS-based command control device through multiple
years of years of research and development efforts. Utilizing proprietary
operating software, the CATCHER offers critical real-time wireless
communications for security and operations personnel through the convergence of
voice, video, data and biometric capabilities to enhance public safety and
security for both private and government facilities. Currently, the device is in
the final development stage with the first beta tests of the units to begin in
the fourth quarter of 2005.
-12-
Prior to the acquisition described above, the Company was a shell corporation
seeking a merger partner. The Company's ongoing business plan is to develop and
market the CATCHER(TM) device. The CATCHER(TM) device is initially targeted to
sell into the transportation security industry. The total proceeds to Catcher
from its private offering immediately prior to the Acquisition was $4,500,721.
Of that amount, approximately $800,000 has been consumed to continue to develop
the initial CATCHER(TM) working samples and approximately $765,000 has been
consumed to retire certain liabilities of Catcher assumed from LCM Technologies,
Inc. (from which certain assets relating to Catcher's business were purchased),
legal fees incurred in connection with the Acquisition and the private offering
and other working capital requirements. The cash balance of Catcher as of May
10, 2005 is $2,936,000. These remaining funds are anticipated to be used for the
completion of product development, salaries, and other working capital needs.
The available cash resources are not sufficient alone to fund the Company's cash
requirements through the end of the calendar year, and therefore additional
funding sources are required from product sales and proceeds from exercise of
warrants in the Company. If sufficient capital cannot be obtained, we may be
forced to significantly reduce operating expenses to a point which would be
detrimental to business operations, curtail research and development activities,
sell certain business assets or discontinue some or all of our business
operations, take other actions which could be detrimental to business prospects
and result in charges which could be material to our operations and financial
position, or cease operations altogether.
ITEM 3. CONTROLS AND PROCEDURES.
As of March 31, 2005, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive and Financial Officer, of the effectiveness of the
design and operation of its disclosure controls and procedures pursuant to the
Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's
Chief Executive and Financial Officer concluded that effective March 31, 2005
the Company's disclosure controls and procedures were designed to ensure that
material information required to be disclosed in Company reports filed or
submitted under the Securities Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission's rules and forms and effective in that they provide reasonable
assurance that information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange Act is recorded,
processed, summarized and reported within the time period specified in the
Securities and Exchange Commission's rules and forms.
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PART II
ITEM 1. LEGAL PROCEEDINGS.
There is no pending or threatened litigation or other legal proceedings,
material or otherwise, nor any claims or assessments with respect to the Company
at the present time.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In February 2004, certain investors exercised 150,000 warrants at $0.03 per
share. Pursuant to their warrant agreements, the Company issued the investors an
equivalent amount of warrants with an exercise price of $0.05. The warrants were
valued at $3,300 and charged to general and administrative expense. The
investors immediately exercised the additional 150,000 warrants at $0.05 per
share. Total proceeds of $12,000 were received in connection with the exercise
of these warrants. The remaining 856,000 warrants outstanding expired on or
before March 12, 2004.
In February 2004, the Company issued an option to purchase 167,000 shares of
common stock to Nicholas Rigopulos in lieu of salary. The options have an
exercise price of $0.03. The options were valued at $6,700 and are included in
administrative expense in the accompanying statement of operations for the six
months ended June 30, 2004. The options were exercised on March 11, 2004.
In February 2004, The Company entered into convertible promissory notes to
current investors for gross proceeds of $13,000. The notes bear interest at a
rate of 6%. The notes are convertible into common stock at a rate of $0.03 per
share at any time after September 30, 2004. The notes may only be converted at
the option of the Company.
In July 2004, the Company entered into two convertible promissory notes with
current investors for gross proceeds of $10,000. The notes bear interest at a
rate of 6% and mature on January 31, 2005. The notes are convertible into common
stock at a rate of $0.03 per share at any time after January 31, 2005. The notes
may only be converted at the option of the Company.
In October 2004, the Company entered into a convertible promissory note with a
current investor for gross proceeds of $5,000. The note bears interest at a rate
of 6% and matures on January 31, 2005. The note is convertible into common stock
at a rate of $0.03 per share at any time after January 31, 2005. The note may
only be converted at the option of the Company.
In January 2005, the Company entered into a convertible promissory note with a
current investor for gross proceeds of $5,000. The note bears interest at a rate
of 6% and matures on July 31, 2005. The note is convertible into common stock at
a rate of $0.03 per share at any time after January 31, 2005. The note may only
be converted at the option of the Company.
In April 2005, the Company entered into a convertible promissory note with a
current investor for gross proceeds of $36,000. The note bears interest at a
rate of 1% and matures on January 31, 2006. The note is convertible into common
stock at a rate of $0.10 per share at any time after August 31, 2005. The note
may only be converted at the option of the Company.
In May 2005, the Company entered into a convertible promissory note with a
current investor in exchange for payment of $2,975 of expenses. The note bears
interest at a rate of 6% and matures
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on January 31, 2006. The note is convertible into common stock at a rate of
$0.10 per share at any time after August 31, 2005. The note may only be
converted at the option of the Company.
In connection with the acquisition described in Note 1, each convertible
promissory note described above plus the related accrued interest was converted
into common stock resulting in the issuance of 1,544,524 shares of common stock.
The proceeds from each of the transactions above were used to pay professional
fees while the Company continued to search for a suitable acquisition or merger
candidate.
In accordance with the terms of the Acquisition, the Company issued 34,911,900
shares of its common stock and 733,778 shares of its Series "A" preferred stock
in an offering exempt from registration under the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
*31.1 Certificate of Chief Executive/Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
*32.1 Certificate of Chief Executive/Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
- -----------------------
* Filed herewith.
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the three months ended March 31, 2005
and for the period from March 31, 2005 to the date of this filing except that:
1. a Report on Form 8-K was filed on April 25, 2005 containing responses
to Items 8.01 and 9.01
2. a Report on Form 8-K was filed on May 9, 2005 containing responses to
Items 8.01 and 9.01
3. a Report on Form 8-K was filed on May 10, 2005 containing responses to
Items 2.01, 3.02, 5.01, 5.02 and 5.03
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
U.S. Telesis Holdings, Inc.
----------------------------------------
Date: May 16, 2005 By: /s/ Nicolas Rigopulos
----------------------------------------
Name: Nicolas Rigopulos
Title: Chief Executive/Financial Officer
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CERTIFICATIONS AND EXHIBITS
EXHIBIT DESCRIPTION
- ------- -----------
31.1 Certificate of Chief Executive/Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certificate of Chief Executive/Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
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