AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 2005.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CATCHER HOLDINGS, INC.
(NAME OF SMALL BUSINESS ISSUER IN OUR CHARTER)
DELAWARE 7373 62-0201385
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
CATCHER HOLDINGS, INC.
39526 CHARLESTOWN PIKE
HAMILTON, VA 20158-3322
(540) 882-3087
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL PLACE OF BUSINESS)
---------------------------
MR. CHARLES SANDER
CATCHER HOLDINGS, INC.
39526 CHARLESTOWN PIKE
HAMILTON, VA 20158-3322
(540) 882-3087
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S AGENT FOR SERVICE)
---------------------------
COPIES TO:
ERIC M. KOGAN, ESQ.
PILIERO GOLDSTEIN KOGAN & MILLER, LLP
10 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 478-8500 / (212) 478-8584 (TELECOPY)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. From
time to time after this Registration Statement becomes effective.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, check the following box: |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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(d) under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 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: |_|
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE (2) PRICE (2) REGISTRATION FEE
--------------------------- --------------- --------- --------- ----------------
common stock par value $0.001 per share(3) 10,905,018 $4.50 $49,072,581 $5,775.85
common stock par value $0.001 per share(4) 4,585,386 $4.50 $20,634,237 $2,428.65
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 SECTION8(A) MAY
DETERMINE.
(1) In accordance with Rule 416(a), the Registrant is also registering
hereunder an indeterminate number of shares that may be issued and resold
to prevent dilution resulting from stock splits, stock dividends or
similar transactions as well as anti-dilution provisions applicable to
shares underlying the warrants.
(2) Estimated pursuant to Rule 457(c) of the Securities Act of 1933 solely for
the purpose of computing the amount of the registration fee.
(3) Represents shares of the Registrant's common stock being registered for
resale that have been issued to the selling stockholders named in the
prospectus or a prospectus supplement.
(4) Represents shares of the Registrant's common stock being registered for
resale that have been or may be acquired upon the exercise of warrants
issued to the selling stockholders named in the prospectus or a prospectus
supplement.
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The information in this prospectus is not complete and may be changed without
notice. The selling stockholders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities, and it is
not soliciting offers to buy these securities, in any state where the offer or
sale of these securities is not permitted
- --------------------------------------------------------------------------------
Subject to completion
Dated August 1, 2005
PRELIMINARY PROSPECTUS
15,490,404 SHARES
CATCHER HOLDINGS INC.
COMMON STOCK
This prospectus relates to the resale of up to 10,905,018 shares of common
stock and 4,585,386 shares of common stock underlying warrants of Catcher
Holdings, Inc. by certain selling stockholders identified in this prospectus.
All of the shares, when sold will be sold by these selling stockholders. The
selling stockholders may sell their common stock from time to time at prevailing
market prices. We will not receive any proceeds from the sales by the Selling
Stockholders, but we will receive funds from the exercise of warrants held by
selling stockholders, if exercised and if payment is made by means other than
cashless exercise
Our common stock is quoted on the Over The Counter Bulletin Board, which
is commonly referred to as the "OTC Bulletin Board" maintained by various broker
dealers under the symbol "CTHH." The most recent sale price for our common stock
was $4.50 on July 29, 2005.
No underwriter or person has been engaged to facilitate the sale of shares
of common stock in this offering. None of the proceeds from the sale of common
stock by the selling stockholders will be placed in escrow, trust or any similar
account. There are no underwriting commissions involved in this offering. We
have agreed to pay all the costs of this offering other than customary brokerage
and sales commission. Selling stockholders will pay no offering expenses other
than those expressly identified in this prospectus.
THIS OFFERING IS HIGHLY SPECULATIVE AND THESE SECURITIES INVOLVE A HIGH DEGREE
OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE
"RISK FACTORS" BEGINNING ON PAGE 5.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is __________, 2005.
TABLE OF CONTENTS
ITEM DESCRIPTION PAGE NO.
PROSPECTUS SUMMARY.............................................................1
THE OFFERING...................................................................4
RISK FACTORS...................................................................5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................15
USE OF PROCEEDS...............................................................16
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS.......................16
DIVIDEND POLICY...............................................................16
DILUTION......................................................................16
CAPITALIZATION................................................................17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATIONS.............................19
BUSINESS......................................................................25
LEGAL PROCEEDINGS.............................................................33
MANAGEMENT....................................................................34
PRINCIPAL AND MANAGEMENT STOCKHOLDERS.........................................44
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS..........................46
SELLING STOCKHOLDERS..........................................................49
DESCRIPTION OF OUR CAPITAL STOCK..............................................60
SHARES OF THE COMPANY ELIGIBLE FOR FUTURE SALE................................62
LEGAL MATTERS.................................................................65
EXPERTS.......................................................................65
ADDITIONAL INFORMATION........................................................65
ii
Please read this prospectus carefully. It describes our business, our
financial condition and results of operations. We have prepared this prospectus
so that you will have the information necessary to make an informed investment
decision.
You should rely on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling stockholders are offering to sell
shares of our common stock and seeking offers to buy shares of our common stock
only in jurisdictions where offers and sales are pemitted. The information
contained in this prospectus is accurate only as of the date of the prospectus,
regardless of the time the prospectus is delivered or the common stock is sold.
iii
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus, and it
may not contain all of the information that is important to you. You should read
the following summary together with the more detailed information regarding our
company and the common stock being sold in this offering, including "Risk
Factors" and our consolidated financial statements and related notes, included
elsewhere in this prospectus.
GENERAL
We are a development stage company focusing on the development of
specialized wireless communications devices for the emergency and military
marketplace. Our initial project, the CATCHER(TM) device, is a portable,
ruggedized, wireless, hand-held command control device built to military
specifications. Utilizing proprietary software, the Catcher(TM) device offers
security, military and operations personnel critical real-time wireless data and
communications through an integrated platform incorporating voice, video, data,
GPS and biometric capabilities in one small, self-contained unit. We believe
that our CATCHER(TM) device provides "feet on the street" security, military and
operations professionals with access to all information pertinent to the
security and operations environment within and around a facility. Moreover, our
CATCHER(TM) device is designed to permit critical, real-time wireless and wired
communications by security and operations personnel using voice, data, video
images, or any combination of the three, from the site of a security-breach
event. In addition, we believe that our CATCHER(TM) device will permit "first
responders" (those charged with being first to an emergency situation)
unparalleled access to needed information while communicating with command and
control personnel. We believe that command and control access can dramatically
increase first responders' efficiency, reducing costs and, most importantly,
saving lives.
STRATEGY
We intend to follow a three-tiered production plan. In phase one
"alpha" prototypes will be produced to seed the market. In phase two, "beta"
versions will be used for market testing, and in phase three, Catcher will
contract for the manufacture of production units.
The initial market for the CATCHER(TM) device exists under what we term
the "security market". This is the broad market where those responsible for
protecting people, places or things have a need to access critical security and
operations information. We believe that the security market potential for the
CATCHER(TM) device is significant, encompassing both the public/governmental and
private sectors. Phase 1 of our strategy is to exploit the narrower airport
security and operations submarket, focusing specifically on the air
transportation segment, including government agencies, commercial and general
aviation airports and airlines. Phase 2 of our strategy is to focus on security
facilities such as maritime ports, international borders and buildings. Phase 3
markets will include the first responder industry (e.g., Federal Emergency
response teams such as FEMA, Civil Defense, EPA, state and local police, fire
and EMS) and Phase 4 markets will include the United States and other friendly
military customers.
We intend to develop our sales channels by entering into original
equipment manufacturer agreements and value added reseller agreements with
companies with significant customer bases in our target market.
1
HISTORY OF THE COMPANY
We were incorporated under the laws of the State of Delaware on August
25, 1998 under the name U.S. Telesis, Inc. In a merger agreement dated May 20,
1999, we merged with and into Woodland Communications Group, Inc. and thereafter
on June 3, 1999, we changed our name to U.S. Telesis Holdings, Inc.
We were organized to provide diverse telecommunications products and
services to the small and medium sized 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, we abandoned our business objective
to provide such telecommunications products and services.
On March 1, 2001, the State of Delaware revoked our charter for failure
to file our annual report with the State of Delaware for the years 1999 and 2000
and to pay our franchise tax for those years. On May 29, 2003, we filed a Form
10SB with the SEC to become a reporting company under the Securities Exchange
Act of 1934 (the "Exchange Act"). We amended the Form 10SB in July, 2003. Our
charter in the State of Delaware was revived on March 31, 2005 and franchise
taxes due were paid with penalty and interest.
Our plan was to identify and complete a merger or acquisition primarily
in consideration of the issuance of shares of our capital stock with a private
entity whose business presented an opportunity for our stockholders. On May 4,
2005, we consummated the acquisition of all of the outstanding shares of common
stock and series A preferred 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 our wholly-owned
subsidiary. In connection with the Acquisition, we 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 our common stock and (ii) all of the issued
and outstanding series A preferred stock of Catcher in exchange for 733,778
shares of our Series A Preferred Stock. In addition, we 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 to the warrant holders. On June 24, 2005, upon the effectiveness of the
filing of our amended and restated certificate of incorporation, we changed our
name to Catcher Holdings, Inc. and we executed a 1 for 7.2 reverse stock split
in respect of our issued and outstanding common stock. All but one share of our
issued and outstanding Series A Preferred Stock was automatically converted to
common stock simultaneously with the reverse stock split. Our principal
executive offices are located at 39526 Charlestown Pike, Hamilton, VA 20158-3322
and our telephone number is (540) 882-3087.
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RECENT DEVELOPMENTS
Catcher was organized in Delaware on April 20, 2005 principally to
operate the business of developing, manufacturing and distributing a portable,
ruggedized, wireless handheld security device (the "CATCHER(TM) device").
Pursuant to an asset purchase agreement between the Company and LCM
Technologies, Inc. ("LCM"), Catcher purchased certain assets and assumed certain
liabilities of LCM and its founder, Ira Tabankin, relating to the CATCHER(TM)
device and the business of LCM. See "General" and later in this prospectus
"Business."
OUR WEBSITE
We maintain a website at WWW.CATCHERINC.COM which contains a
description of our technology.
2
SUMMARY CONSOLIDATED FINANCIAL DATA OF CATCHER
On May 4, 2005, we acquired Catcher, Inc., a Delaware corporation,
through a series of stock purchases. The transaction was accounted for by
application of reverse purchase accounting (reverse acquisitions). Accordingly,
the historical financial statements of Catcher will be our financial statements
for reporting purposes.
The following condensed statement of operations data for the period
from March 31, 2004 (inception) to December 31, 2004, and the three months ended
March 31, 2005 and the selected balance sheet data at December 31, 2004, and at
March 31, 2005 are derived from Catchers' financial statements and the related
notes, audited by Vitale, Caturano & Company, Ltd., Certified Public
Accountants, 80 City Square, Boston, MA 02129, Catchers' independent registered
public accounting firm. The financial statements and the related notes as of
December 31, 2004 for the period from March 31, 2004 to December 31, 2004 and
the three months ended March 31, 2005 are included elsewhere herein. The
selected unaudited statement of operations data for the three months ended March
31, 2005, and the unaudited consolidated selected balance sheet data at March
31, 2005, are derived from Catchers' unaudited financial statements, which have
been prepared on a basis consistent with Catchers' audited financial statements
and, in the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of Catchers' financial
position and results of operations. The results of operations for any interim
period are not necessarily indicative of results to be expected for the entire
year. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Plan of Operations" and our financial statements and the related notes included
elsewhere in this prospectus.
PERIOD FROM
THREE MONTHS ENDED MARCH 31, 2004
MARCH 31, 2005 (INCEPTION) TO
(UNAUDITED) DECEMBER 31, 2004
------------------ -----------------
STATEMENT OF OPERATIONS DATA:
Income ........................................ $ -- $ --
Total operating expenses ...................... $81,607 $748,366
Net loss ...................................... ($81,607) ($748,366)
--------- ---------
LOSS PER SHARE INFORMATION:
Basic and diluted net loss per share ......... ($0.01) ($0.07)
========= =========
PERIOD FROM
THREE MONTHS ENDED MARCH 31, 2004
MARCH 31, 2005 (INCEPTION) TO
(UNAUDITED) DECEMBER 31, 2004
------------------ -----------------
BALANCE SHEET DATA:
Cash and cash equivalents ..................... $160 $364
Total assets .................................. 160 364
Total liabilities ............................. 830,132 748,729
Stockholders' equity (deficit) ................ (829,972) (748,365)
Total liabilities and Stockholders' deficit ... $160 $364
3
THE OFFERING
Common stock offered by selling stockholders...... 15,490,404(1)
Common stock outstanding immediately prior
to the offering................................. 17,085,755(2)
Use of proceeds................................... We will not receive any
proceeds from the sale of the
common stock, but we will
receive funds from the
exercise of warrants by
selling stockholders, if
exercised for cash.
"OTC Bulletin Board Quote"........................ CTHH
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(1) Represents 10,905,018 shares of common stock that were issued to selling
stockholders and 4,585,386 shares of common stock underlying warrants that
were issued to selling stockholders.
(2) Includes 12,500,369 shares of common stock issued and outstanding and
4,585,386 shares of common stock underlying warrants that were issued to
selling stockholders and excludes commitments to issue stock, options or
warrants, including the 918,000 options to purchase shares of common stock
granted to Jeff Gilford, subject to shareholder approval.
ADDITIONAL INFORMATION
In this prospectus, the terms "we", "us", and "our" refer to Catcher
Holdings, Inc., a Delaware corporation, and its consolidated subsidiary, Catcher
as appropriate in the context, and, unless the context otherwise requires,
"common stock" refers to the common stock, par value $0.001 per share, of
Catcher Holdings, Inc.
4
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK IS HIGHLY SPECULATIVE, INVOLVES A
HIGH DEGREE OF RISK, AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD A
COMPLETE LOSS. YOU SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS
REFERRED TO IN THIS PROSPECTUS, THE FOLLOWING RISK FACTORS BEFORE YOU DECIDE
WHETHER TO BUY OUR COMMON STOCK.
RISKS SPECIFIC TO US
CATCHER IS NEWLY FORMED AND HAS NO OPERATING HISTORY OR PRIOR EXPERIENCE IN
IMPLEMENTING AND MANAGING ITS PLANNED BUSINESS IN AN OPERATIONAL SETTING.
THEREFORE, THERE IS NO HISTORICAL OR CURRENT OPERATING INFORMATION UPON WHICH AN
INVESTOR CAN BASE ITS INVESTMENT DECISION AND WE CAN PROVIDE NO ASSURANCE THAT
WE WILL BE SUCCESSFUL IN OUR PLANS.
Catcher has no operating history on which to base an evaluation of its
business and prospects. Catcher was formed on April 20, 2005 and was acquired by
us effective May 4, 2005, and has been funded to date only with approximately
$4,500,000. Catcher purchased its operating assets, including its intellectual
property, from LCM or affiliates of LCM, and assumed liabilities of LCM which at
the time of the acquisition totaled approximately $836,000. Proceeds from the
funding were immediately used to retire the LCM assumed liabilities. LCM was in
the product-development stage for the CATCHER(TM) device. Therefore, Catcher has
no operating history (and LCM had no operating history) upon which an evaluation
of its performance and prospects can be made. Catcher has engaged primarily in
finalizing its business plan, securing rights to essential technology,
developing products and services, and making arrangements necessary to begin
operations. Catcher has not yet initiated discussions with prospective customers
or strategic business partners other than its key vendors. Our prospects must be
considered in light of the risks frequently encountered by a start-up technology
company formed to engage in a relatively new, potentially highly competitive
industry established mainly as a result of the events of 9/11.
Moreover, as a start-up business, Catcher has no prior experience in
implementing and managing its planned business in an operational setting.
Accordingly, there can be no assurance that Catcher will be able to successfully
implement its business plans.
In addition, we are subject to the general business risk factors that
similar development stage companies experience with the responsibilities and
complexities attendant to a new organization, including (i) the ability to
attract and maintain competent and experienced management and operating
personnel, (ii) the ability to secure appropriate debt and equity capital to
finance desired growth, and (iii) the efficient management and performance of
its operations. We cannot provide any assurance that we will be successful in
addressing the risks which we may encounter, and our failure to do so could have
a material adverse effect on our business, prospects, financial condition and
results of operations.
WE ANTICIPATE THAT WE WILL INCUR LOSSES IN OUR EARLY START-UP STAGE AND THERE IS
NO CERTAINTY THAT WE WILL EVER ACHIEVE PROFITABILITY.
Catcher is a start-up company in a technology market. Moreover, while
we believe that our CATCHER(TM) device is a highly distinctive concept, its
distinctiveness adds to the speculative nature of our business as we no of no
product with which to compare market acceptability. We can provide no assurance
that we will ever achieve any revenues or profitable operations from its planned
operations.
CATCHER'S COMMERCIAL SUCCESS MAY DEPEND IN PART ON CATCHER'S ABILITY TO OBTAIN
AND MAINTAIN PATENT AND OTHER INTELLECTUAL PROPERTY OWNERSHIP RIGHTS TO THE
INTELLECTUAL PROPERTY COMPRISING CATCHER(TM) DEVICE.
On July 6, 2004, Ira Tabankin and John Sutton, the chairman and chief
technology officer and vice president of Engineering respectively of our
subsidiary filed a patent application on the
5
CATCHER(TM) device, Patent Application No. 10/885,515 (Portable Handheld
Security Device) (the "Patent"). Effective as of the closing of the Acquisition,
Catcher owns all of the right, title and interest in and to the Patent
application. If the Patent issues it will be presumed valid, but there is no
assurance that it will not be successfully challenged or circumvented by
competitors or others. Catcher has no assurance that the United States Patent
and Trademark Office will issue the Patent or that the scope of any claims
granted in an issued Patent will provide broad protection or a competitive
advantage to Catcher. If the Patent fails to issue in sufficient scope or at
all, or if the Patent issues but Catcher fails to maintain and enforce its
rights in the issued patent, or if Catcher fails to maintain and protect its
rights in its other intellectual property, including its know-how, trade secrets
and trademarks, such failures, individually and in the aggregate, could have a
material adverse effect upon our business prospects, financial condition and
results of operations. In addition, we have and we intend from time-to-time, to
file additional patent applications directed to enhancements to the CATCHER
technology. Such applications may include new applications, continuations and
continuations in part of existing applications, and foreign applications
corresponding to any or all of these. If such patents issue, they will be
presumed valid, but there is no assurance that they will not be successfully
challenged or circumvented by competitors or others.
Moreover, although it is not aware of any existing impediments, Catcher
has no assurance that it will be able to operate without infringing upon the
proprietary rights of third parties. In particular, we have become aware of a
continuing patent application published on March 17, 2005 in the name of Tony
Vera of ScanZ Communications, Inc. (the "Vera Application") that includes
various prospective claims. Should such application issue as a patent, the
claims may cover one or more aspects of the CATCHER(TM) device. We do not know
as to the likelihood that the Vera Application will ever issue as a patent, and
if so, the scope and content of any such patent.
It is also possible that the manufacture and/or sale of the CATCHER(TM)
device or its use or its constituent technologies may infringe the patents or
other intellectual property rights owned by others resulting in a material
adverse effect upon the our business, prospects, financial condition and results
of operations. Catcher may have to alter its products or processes, pay
licensing fees, defend an infringement action or challenge the validity of the
patents in court, or cease activities altogether because of patent rights or
other intellectual property rights of third parties, thereby causing additional
unexpected costs and delays to our business plans. There can be no assurance
that a license will be available to Catcher, if at all, upon terms and
conditions acceptable to us or that Catcher will prevail in any patent or other
infringement litigation. Patent and other intellectual property litigation is
costly and time consuming and there can be no assurance that Catcher will have
sufficient resources to pursue such litigation. If Catcher does not obtain a
license under such patents or other intellectual property, is found liable for
infringement or is not able to have such patents declared invalid, Catcher may
be liable for significant money damages or may encounter significant delays in
bringing products to market.
Catcher also relies upon trade secrets and other unpatented proprietary
technology. No assurance can be given that Catcher can meaningfully protect its
rights with regard to such unpatented proprietary technology or that competitors
will not duplicate or independently develop substantially equivalent technology.
Catcher will seek to protect trade secrets and proprietary knowledge in part
through confidentiality agreements with its employees and consultants and with
other advisors and collaborators where appropriate. Nevertheless, these
agreements may not effectively prevent disclosure of Catcher's confidential
information and may not provide Catcher with an adequate remedy in the event of
unauthorized disclosure of such information.
Catcher relies on third parties to help develop and to manufacture the
CATCHER(TM) device. Catcher does not own all of the know-how and other
intellectual property that it may need if it were to carry out those activities
independently. If Catcher wishes for competitive or economic reasons, including
to avoid a supply-price squeeze, to carry on those activities independently, it
may need licenses from such third parties or others to undertake such
activities. If Catcher is unable to obtain such licenses under terms and
conditions acceptable to it, Catcher may not be able to avoid the negative
impact of
6
continuing to be dependant on such activities, resulting in a material adverse
effect on our business, prospects, financial condition and results of
operations.
Messrs. Ira Tabankin and Charles Sander were former employees of Scanz
Communications, Inc. ("Scanz"), and Mr. Tabankin also served as a consultant to
Scanz, during which time Scanz had under development a handheld portable device
that might be used for security purposes as well as in a sports-event setting
which was Scanz' principal business focus and the principal focus of its product
development. The Scanz employment agreements with Messrs. Tabankin and Sander
provided that Scanz would own intellectual property conceived or first reduced
to practice during employment. The consultancy agreement between Mr. Tabankin
and Scanz provided that intellectual property rights that may be claimed by
Scanz in connection with a development by Mr. Tabankin during or before the
consultancy would be the property of Scanz. Scanz or its licensees may claim
that the CATCHER(TM) device was conceived or first reduced to practice during
the employment of Messrs. Tabankin and/or Sander or that the intellectual
property comprising the CATCHER(TM) device could be claimed by Scanz. If Scanz
or its licensee made any such claims, we believe that, as Catcher was the
assignee of the intellectual property rights in the CATCHER(TM) device, it would
have strong defenses to any such claims for numerous reasons, including that the
intellectual property constituting the CATCHER(TM) device is clearly
distinguishable from the developments made during the aforesaid employments and
consultancy. However, if Scanz or its licensee were to prevail in such a claim,
such event could have a material adverse effect upon our business prospects,
financial condition and results of operations.
CATCHER MAY BE UNABLE TO ADAPT TECHNOLOGY TRENDS OR EVOLVING INDUSTRY STANDARDS.
The CATCHER(TM) device is essentially a composite of many different,
established technologies from various industries, including the consumer
electronics and communications industries. Catcher will need to adapt to
competitively significant changes in component technology in these industries as
well as to advanced technology used by its competitors. New products based on
new technologies or new industry standards expose Catcher to risks of technical
or product obsolescence. Catcher will need to use technologies effectively,
continue to develop its technical expertise and enhance its existing product and
future iterations in a timely manner to achieve product acceptability necessary
for its success and to compete successfully. Catcher may not be successful in
using new technologies effectively, developing new product iterations or
enhancing existing products in a timely manner. If Catcher is unable to adapt to
technology trends and evolving industry standards, our financial condition,
results of operations and future prospects will be materially adversely
affected.
Our future is entirely dependent on Catcher's successful development of
its technology, products and services. The CATCHER(TM) device is still in the
development stage. There is no assurance that when we complete development of
the CATCHER(TM) device that end-users will embrace it or that the CATCHER(TM)
device will perform as expected.
WE HAVE NO MANUFACTURING, SALES, MARKETING OR DISTRIBUTION CAPABILITY AND WE
MUST RELY UPON THIRD PARTIES FOR SUCH.
We do not intend to create facilities to manufacture the CATCHER(TM)
device and therefore we will be dependent upon third parties to do so. Our
reliance on third parties for the manufacture of our products creates a
dependency that could negatively impact our sales and marketing efforts if the
sources of such supply prove to be unreliable or unavailable. If the contracted
manufacturing source is unreliable or unavailable, we may not be able to replace
such manufacturer and could not go forward and our entire business plan could
fail. Additionally if we are dependent on third parties to manufacture the
CATCHER(TM) device, we will have to enter into agreements with such third
parties which may not be at the most cost effective terms and therefore we may
incur high costs.
7
CATCHER IS DEPENDENT UPON KEY PERSONNEL, CONSULTANTS AND INDUSTRY STRATEGIC
PARTNERS. OUR MANAGEMENT TEAM HAS LIMITED EXPERIENCE IN OPERATING A BUSINESS.
Our success is heavily dependent on the continued active participation
of our current executive officers, consultants and strategic partners. Moreover,
our key management has had limited experience in operating a business. The loss
of the services of one or more of these managers, consultants or strategic
partners could have a material adverse effect upon our business, financial
condition and results of operations. Further, our success and achievement of our
growth plans depend on our ability to recruit, hire, train and retain other
highly qualified technical and managerial personnel. Competition for qualified
employees among companies with products in the security market, and those that
are potential entrants to the security market, is intense, and the loss of any
such persons, or an inability to attract, retain and motivate additional highly
skilled employees, technical and managerial personnel and consultants and
advisors required for the development and expansion of our activities, could
have a materially adverse effect on our business, financial condition and
results of operations.
Catcher has entered into agreements with its executive officers
containing non-disclosure and non-competition provisions. The non-competition
agreements are limited in duration and are not effective under certain
circumstances, such as the improper termination of the executive or the
termination by the executive for good cause. Regardless of the non-competition
agreements executed with executives, there can be no assurance that executives
will remain associated with us or that they will not compete, directly or
indirectly, with it. Moreover, the enforceability and scope of non-competition
agreements are often litigated and there is no assurance that such provisions
will be enforceable as written.
None of our or Catcher's current management team has had substantial
operational experience of running a business such as contemplated by our plans
and there is no assurance that they will be able to do so.
WE ARE CONTROLLED BY OUR OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS.
Our directors and executive officers and their affiliates will
beneficially own approximately 36% of the outstanding shares of our capital
stock. In the normal course, our executive officers and directors and their
affiliates, viewed as a group, would likely have the ability to substantially
influence all matters submitted to stockholders for approval, including: (1)
election of our board of directors; (2) removal of any director; (3) appointment
and removal of officers; and (4) amendment of our certificate of incorporation
or bylaws. However, until the end of the third year after the Reverse Split, one
stockholder, Mr. Ira Tabankin, will hold one share of our Series A Preferred
Stock giving him the right to appoint one member of our board of directors. Mr.
Tabankin may appoint himself or another person. Moreover, together, the
management stockholders will have the ability to substantially influence these
matters and will have substantial influence over our management and affairs. Our
other stockholders will likely have no practical ability to remove our
management or affect our operations or business.
ADDITIONAL CAPITAL WILL DILUTE THE INTERESTS OF OUR STOCKHOLDERS.
The ownership interests of holders of common stock will be diluted as a
result of the exercise of outstanding warrants. The holders of common stock have
no preemptive rights with respect to their holdings in us. Therefore, the
interests of the holders of the common stock will be diluted by additional
issuances of common stock in which such holders do not participate ratably. Such
additional issuances may be made to complete acquisitions of other businesses or
for other business purposes, including issuances in connection with a stock
option plan adopted by us. Moreover, if we commence a subsequent offering of
common stock, convertible debt or preferred stock, or issue securities
exercisable into common stock, or takes any of the actions that are outlined
above, then-current stockholders who do not fully participate in such issuances
will experience dilution of their equity interests.
8
THERE ARE RESTRICTIONS ON THE TRANSFERABILITY OF THE OUTSTANDING COMMON STOCK
AND THE WARRANTS TO PURCHASE SHARES OF COMMON STOCK.
Until the registrtation statement of which this prospectus forms a part
is declared by the SEC to be effective under the Securities Act, the common
stock and warrants issued in connection with the Acquisition will not have been
registered under the Securities Act or registered or qualified under the laws of
any state. Holders of such common stock and warrants have agreed that such
securities will not be sold, transferred, or otherwise disposed of except in
compliance with the registration provisions of the Securities Act (or an
exemption therefrom) and in compliance with the registration or qualifications
requirements of applicable state securities laws (or exemptions thereunder).
Accordingly, the common stock and warrants are "restricted securities"
as such term is defined under Rule 144 of the Securities Act. That is, they will
not have been registered under the Securities Act. Since the securities are
"restricted securities," an investor must hold the securities indefinitely and
may not sell, transfer, or otherwise dispose of the securities without first
registering the securities under the Securities Act or having available an
exemption from registration. Rule 144 provides an exemption from registration
requirements under the Securities Act under certain conditions but requires,
among other conditions, a one (1) year holding period prior to resale (and, with
respect to our affiliates, officers and directors, requires that resale be made
only in limited amounts) without having to satisfy the registration requirement
under the Securities Act. These restricted securities will be subject to the
exemption under Rule 144 in the second quarter of 2006 and for our affiliates,
in the second quarter of 2007. Such securities may also be subject to
restrictions on resale imposed by the securities laws of certain states. We are
obligated to register the common stock issued in connection with the Acquisition
(including the common stock underlying the warrants), but unless and until a
registration statement is declared effective by the SEC, such securities will
remain restricted.
WE DID NOT REPORT IN ANY REQUIRED FILING WITH THE SEC THAT OUR CHARTER WAS
REVOKED BY THE STATE OF DELAWARE FOR FAILING TO FILE ANNUAL REPORTS AND PAY
ANNUAL STATE FRANCHISE TAXES.
On March 1, 2001, the State of Delaware revoked our charter for failure
to file our annual report with the State of Delaware for the years 1999 and 2000
and failure to pay our franchise tax for those years. On May 29, 2003, we filed
a Form 10SB with the SEC to become a reporting company. We amended the Form 10SB
in July, 2003. Our charter in the State of Delaware was revived on March 31,
2005 and franchise taxes due were paid with penalties and interest. During the
period since becoming a reporting company until we filed our amended 8K on July
15, 2005 (the "Omission Period"), we had not reported the fact of such
revocation on any report or Form that we have filed or are required to be filed
with the SEC, including quarterly and annual reports (including the annual
report that was filed by us on March 31, 2005) and the Form S-8 filed by us in
connection with our registration of certain of our shares on May 6, 2004. We may
be subject to potential liability to shareholders who purchased securities from
us during the Omission Period. The omission may also subject us to possible
liability for violation of the regulations of the SEC under the Securities Act
and the Securities Exchange Act. While we have obtained written waivers of
liability from our shareholders who purchased our securities during the Omission
Period, we offer no opinion on the effect of such waivers or whether or not the
SEC would exercise its enforcement discretion and if it did, what action, if
any, it would take.
WE HAVE LIMITED CAPITAL AND WILL NEED ADDITIONAL CAPITAL IN THE FUTURE. WE WILL
INCUR LOSSES ONCE WE BEGIN OPERATIONS WHICH WILL CONTINUE FOR THE FORESEEABLE
FUTURE. WE MAY REQUIRE ADDITIONAL CAPITAL FINANCING IN CONNECTION WITH OUR
PLANNED EXPANSION OF OPERATIONS AND MAY HAVE DIFFICULTY OBTAINING SUCH
ADDITIONAL CAPITAL.
Our available resources will not be sufficient, without additional
financing, to achieve commercial operation. We expect to incur operating losses
until we have completed development of our products and services, negotiated a
number of customer contracts on favorable terms and successfully
9
served such customer accounts. If revenues from operations are insufficient to
support our planned expanded operations, we will need access to debt and/or
equity capital on terms acceptable to it. If public or private financing is not
available when needed or is not available on terms favorable or acceptable to
us, our growth and revenue-generating plans may be materially impaired. Such
results could have a material adverse effect on our projected profitability,
on-going business prospects and financial condition.
We have issued and outstanding warrants to purchase the common stock as
described in the "Description of Our Capital Stock." Under certain circumstances
those certain of those warrants are callable by us. There can be no assurance
that our right to call the warrants will be triggered or that the holders of
such warrants will exercise the warrants.
RISKS RELATED TO OUR INDUSTRY.
THE SECURITY MARKET IS HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE
EFFECTIVELY.
The security market is diverse and highly competitive and is
characterized by relatively low entry barriers. Moreover, it is subject to
constant technological change and intense marketing by providers who may be
capable in a short period of time to introduce similar products to the
CATCHER(TM) device. We expect that new competitors are likely to join the
security market with an initial entry into the air transportation submarket, the
same market entry strategy employed by us. Many of our potential competitors are
significantly larger and have substantially greater market presence as well as
greater financial, technical, operational, sales, marketing and other resources
and experience, including more established relationships with vendors,
distributors and partners, than Catcher has. In the event that such a competitor
expends significant sales and marketing resources in one or several of the
security market segments where we compete, we may not be able to continue to
compete successfully in such markets. We believe that there will be significant
competition in the security market for products having similar functionality to
the CATCHER(TM) device. Such competition will exert downward pressure on prices.
In addition, the pace of technological change could make it impossible for us to
keep pace with such competitors in such an environment. If our competitors were
to provide better product at better prices, our financial condition, results of
operations and future prospects will be materially adversely affected.
COMPETITION FROM A MYRIAD OF SOURCES COULD ADVERSELY AFFECT US.
Many of the aspects of our business are currently and potentially
highly competitive. We through Catcher will compete with numerous other firms in
different segments of the security market with the financial and technological
ability to compete with us. Moreover, it is possible that the Patent, if it
issues, will not provide Catcher with adequate protection from firms capable of
circumventing it. In addition, the Patent is not based on technological
innovation in any particular function of the CATCHER(TM) device, but rather on
its total functional concept. This concept could be copied or improved upon by
competitors over a period of time that may be short. Many of these potential
competitors have substantially greater capital and other resources than we do
and many are better situated to attract experienced technical and other
personnel. Our current competitive edge in large part depends upon the extensive
knowledge of Catcher's management team in creating and thus far developing the
CATCHER(TM) device and in its relationships with the Catcher's strategic
partners and potential customer base. While we believe that this is a
significant competitive advantage, it is not one that depends upon any resource
that is unique to the us. If we were to lose this competitive advantage, such
loss would have a material adverse effect on the our business prospects,
financial condition and results from operations.
10
RISKS RELATED TO THE SECURITIES MARKETS AND INVESTMENTS IN OUR COMMON STOCK
THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE.
The trading price of our common stock may fluctuate substantially. The
price of the common stock that will prevail in the market after the sale of the
shares of common stock by the selling stockholders may be higher or lower than
the price you have paid, depending on many factors, some of which are beyond our
control and may not be related to our operating performance. These fluctuations
could cause you to lose part or all of your investment in our common stock.
Those factors that could cause fluctuations include, but are not limited to, the
following:
o price and volume fluctuations in the overall stock market from time to
time;
o fluctuations in stock market prices and trading volumes of similar
companies;
o actual or anticipated changes in our earnings or fluctuations in our
operating results or in the expectations of securities analysts;
o general economic conditions and trends;
o major catastrophic events;
o sales of large blocks of our stock;
o departures of key personnel;
o events affecting any strategic partners or collaborators;
o announcements of new products or technologies, commercial relationships
or other events by us or our competitors;
o regulatory developments in the United States and other countries;
o failure of our common stock to be listed on the Nasdaq Small Cap
Market, American Stock Exchange, or other national market system; o
changes in accounting principles; and
o discussion of us or our stock price by the financial and scientific
press and in online investor communities.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been brought
against that company. Due to the potential volatility of our stock price, we may
therefore be the target of securities litigation in the future. Securities
litigation could result in substantial costs and divert management's attention
and resources from our business.
IF ADDITIONAL AUTHORIZED SHARES OF OUR COMMON STOCK AVAILABLE FOR
ISSUANCE OR SHARES ELIGIBLE FOR FUTURE SALE WERE INTRODUCED INTO THE MARKET, IT
COULD HURT OUR STOCK PRICE.
We are authorized to issue 50,000,000 shares of common stock. As of
July 15, 2005, there were an aggregate of 12,500,369 shares of our common stock
issued and outstanding. We are unable to estimate the amount, timing or nature
of future sales of outstanding common stock. Sales of substantial amounts of the
common stock in the public market by these holders or perceptions that such
sales may take place may lower the common stock's market price.
OUR COMMON STOCK IS CONSIDERED TO BE "PENNY STOCK".
Our common stock may be deemed to be "penny stock" as that term is
defined in Rule 3a51-1, promulgated under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"). Penny stocks are stocks:
o with a price of less than $5.00 per share;
o that are not traded on a "recognized" national exchange;
o whose prices are not quoted on the NASDAQ automated quotation
system; or
11
o of issuers with net tangible assets less than $2,000,000 (if the
issuer has been in continuous operation for at least three years) or
$5,000,000 (if in continuous operation for less than three years),
or with average revenue of less than $6,000,000 for the last three
years.
Section 15(g) of the Exchange Act and Rule 15g-2 promulgated thereunder
require broker-dealers dealing in penny stocks to provide potential investors
with a document disclosing the risks of penny stocks and to obtain a manually
signed and dated written receipt of the document before effecting any
transaction in a "penny stock" for the investor's account. We urge potential
investors to obtain and read this disclosure carefully before purchasing any
shares that are deemed to be "penny stock."
Rule 15g-9 promulgated under the Exchange Act requires broker-dealers
in penny stocks to approve the account of any investor for transactions in such
stocks before selling any "penny stock" to that investor. This procedure
requires the broker-dealer to:
o obtain from the investor information about his or her financial
situation, investment experience and investment objectives;
o reasonably determine, based on that information, that transactions
in penny stocks are suitable for the investor and that the investor
has enough knowledge and experience to be able to evaluate the risks
of "penny stock" transactions;
o provide the investor with a written statement setting forth the
basis on which the broker-dealer made his or her determination; and
o receive a signed and dated copy of the statement from the investor,
confirming that it accurately reflects the investor's financial
situation, investment experience and investment objectives.
Compliance with these requirements may make it harder for investors in
our common stock to resell their shares to third parties. Accordingly, our
common stock should only be purchased by investors, who understand that such
investment is a long-term and illiquid investment, and are capable of and
prepared to bear the risk of holding the common stock for an indefinite period
of time.
WE MAY INCUR INCREASED COSTS AS A RESULT OF RECENTLY ENACTED AND
PROPOSED CHANGES IN LAWS AND REGULATIONS RELATING TO CORPORATE GOVERNANCE
MATTERS.
Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the provisions of the Sarbanes-Oxley Act
of 2002 and rules adopted or proposed by the SEC and by the Nasdaq Stock Market,
will result in increased costs to us as we evaluate the implications of these
laws and regulations and respond to their requirements. These laws and
regulations could make it more difficult or more costly for us to obtain certain
types of insurance, including director and officer liability insurance, and we
may be forced to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. The impact of
these events could also make it more difficult for us to attract and retain
qualified persons to serve on our board of directors, our board committees or as
executive officers. We are presently evaluating and monitoring developments with
respect to these laws and regulations and cannot predict or estimate the amount
or timing of additional costs we may incur to respond to their requirements.
A LIMITED PUBLIC TRADING MARKET MAY CAUSE VOLATILITY IN THE PRICE OF
OUR COMMON STOCK.
Our common stock is currently quoted on the OTC Bulletin Board. The
quotation of our common stock on the OTC Bulletin Board does not assure that a
meaningful, consistent and liquid trading market currently exists, and in recent
years such market has experience extreme price and volume fluctuations that have
particularly affected the market prices of many smaller companies like us. Our
common stock is thus subject to this volatility. Sales of substantial amounts of
common stock, or the perception that such sales might occur, could adversely
affect prevailing market prices of our common stock and our stock price may
decline substantially in a short time and our shareholders could suffer losses
or be unable to liquidate their holdings.
12
THERE IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET.
A regular trading market for our common stock may not be established or
sustained in the future. The NASD has enacted recent changes that limit
quotation on the OTC Bulletin Board to securities of issuers that are current in
their reports filed with the SEC. The effect on the OTC Bulletin Board of these
rule changes and other proposed changes cannot be determined at this time. The
OTC Bulletin Board is an inter-dealer, over-the-counter market that provides
significantly less liquidity than the NASDAQ Stock Market. Quotes for stocks
included on the OTC Bulletin Board are not listed in the financial sections of
newspapers as are those for the NASDAQ Stock Market. Therefore, prices for
securities traded solely on the OTC Bulletin Board may be difficult to obtain
and holders of common stock may be unable to resell their securities at or near
their originial offering price or at any price. Market prices for our common
stock will be influenced by a number of factors, including:
o The issuance of new equity securities pursuant to a future offering;
o Changes in interest rates;
o Competitive developments, including announcements by competitors of
new products or services or significant contracts, acquisitions,
strategic partnerships, joint ventures or capital commitments;
o Variations in quarterly operating results
o Change in financial estimates by securities analysts;
o The depth and liquidity of the market for our common stock;
o Investor perceptions of our company and the technologies industires
generally; and
o General economic and other national conditions.
WE MAY NOT BE ABLE TO ACHIEVE SECONDARY TRADING OF OUR STOCK IN CERTAIN
STATES BECAUSE OUR COMMON STOCK IS NOT NATIONALLY TRADED.
Because our common stock is not approved for trading on the Nasdaq
National Market or listed for trading on a national securities exchange, our
common stock is subject to the securities laws of the various states and
jurisdictions of the United States in addition to federal securities law. This
regulation covers any primary offering we might attempt and all secondary
trading by our stockholders. While we intend to take appropriate steps to
register our common stock or qualify for exemptions for our common stock, in all
of the states and jurisdictions of the United States, if we fail to do so the
investors in those jurisdictions where we have not taken such steps may not be
allowed to purchase our stock or those who presently hold our stock may not be
able to resell their shares without substantial effort and expense. These
restrictions and potential costs could be significant burdens on our
stockholders.
SALES OF ADDITIONAL EQUITY SECURITIES MAY ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK AND YOUR RIGHTS IN US MAY BE REDUCED.
The selling stockholders hereunder have the right to register
securities for resale that they hold pursuant to registration rights agreements.
We expect to continue to incur product development and selling, general and
administrative costs, and in order to satisfy our funding requirements, we will
need to sell additional equity securities, which may be subject to similar
registration rights. The sale or the proposed sale of substantial amounts of the
common stock in the public markets may adversely affect the market price of the
common stock and our stock price may decline substantially. Our stockholders may
experience substantial dilution and a reduction in the price that they are able
to obtain upon sale of their shares. Also, any new equity securities issued may
have greater rights, preferences or privileges than our existing common stock.
13
ADDITIONAL AUTHORIZED SHARES OF COMMON STOCK AVAILABLE FOR ISSUANCE MAY
ADVERSELY AFFECT THE MARKET.
We are authorized to issue 50,000,000 shares of our common stock. As of
July 15, 2005, we had 12,500,369 shares of our common stock issued and
outstanding, excluding shares issuable upon exercise of our outstanding warrants
and options. As of July 15, 2005, we had outstanding no options to purchase
shares of our common stock and outstanding warrants to purchase 4,585,386 shares
of our common stock, with exercise prices ranging from $1.50 to $3.74 per share.
We do have a commitment to grant 918,000 options to Jeff Gilford, our chief
financial officer, upon approval of the 2005 Stock Option Plan. Pursuant to our
2005 Stock Option Plan which is subject to stockholder approval, 2,219,000
shares of common stock are reserved for issuance under such plan. Pursuant to
our 2005 Non Interested Director Stock Option Plan 100,000 shares of common
stock are reserved for issuance under such plan. To the extent the shares of
common stock are issued or options and warrants are exercised, holders of our
common stock will experience dilution. In addition, in the event of any future
financing of equity securities or securities convertible into or exchangeable
for, common stock, holders of our common stock may experience dilution.
SHARES ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET.
From time to time, certain of our stockholders may be eligible to sell
all or some of their shares of common stock by means of ordinary brokerage
transactions in the open market pursuant to Rule 144 ("Rule 144") promulgated
under the Securities Act of 1933, as amended (the "Securities Act of 1933"),
subject to certain limitations. In general, pursuant to Rule 144, a stockholder
(or stockholders whose shares are aggregated) who has satisfied a one-year
holding period may, under certain circumstances, sell within any three-month
period a number of securites which does not exceed the greater of 1% of the then
outstanding shares of common stock or the average weekly trading volume of the
class during the four calendar weeks prior to such sale. Rule 144 also permits,
under cetain circumstances, the sale of securities, without any limitations, by
a non-affiliate of our company who has satisfied a two-year holding period. Any
substantial sale of our common stock pursuat to Rule 144 or pursuant ot any
resale prospectus may have an adverse effect on the market price of our
securities.
An aggregate of 15,490,404 shares of common stock are being registered
with the SEC in the registration statement of which this prospectus forms a
part. These shares would otherwise be eligible for future sale under Rule 144
after passage of the minimum one year holding period for holders who are not
officers, directors or affilites of the Company. The registration and subsequent
sales of such shares of common stock will likely have an adverse effect on the
market price of our common stock when it commences to trade.
WE ARE ABLE TO ISSUE SHARES OF PREFERRED STOCK WITH RIGHTS SUPERIOR TO THOSE OF
HOLDERS OF OUR COMMON STOCK. SUCH ISSUANCES CAN DILUTE THE TANGIBLE NET BOOK
VALUE OF SHARES OF OUR COMMON STOCK.
Our Certificate of Incorporation provides for the authorization of
999,999 shares of "blank check" preferred stock. Pursuant to our Certificate of
Incorporation, our board of directors is authorized to issue such "blank check"
preferred stock with rights that are superior to the rights of stockholders of
our common stock, at a purchase price then approved by our board of directors,
which purchase price may be substantially lower than the market price of shares
of our common stock, without stockholder approval.
IT IS UNCERTAIN WHETHER WE WILL EVER PAY DIVIDENDS OR EVER PROVIDE AN
OPPORTUNITY FOR ANY RETURN ON INVESTMENT. OUR SECURITIES SHOULD NOT BE PURCHASED
BY PERSONS WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
It is uncertain whether we will ever pay dividends on our common stock.
Moreover, under Delaware General Corporation Law, dividends can only be paid
from surplus or, if no surplus, out of net profits for the then current or next
preceding fiscal year and there is no assurance that any such surplus or profit
will be generated. Our securities should not be purchased by persons who can not
afford the loss of their entire investment.
14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events. These statements include, but are not limited to:
o statements as to the anticipated timing of clinical studies and
other business developments;
o statements as to the development of new products;
o expectations as to the adequacy of our cash balances to support our
operations for specified periods of time and as to the nature and
level of cash expenditures; and
o expectations as to the market opportunities for our products, as
well as our ability to take advantage of those opportunities.
These statements may be found in the sections of this prospectus
entitled "Prospectus Summary," "Risk Factors", "Management's Discussion and
Analysis of Financial Condition and Results of Operations and Plan of
Operations", and "Business," as well as in this prospectus generally. Actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including all the risks discussed in
"Risk Factors" and elsewhere in this prospectus.
In addition, statements that use the terms "can," "continue," "could,"
"may," "potential," "predicts," "should," "will," "believe," "expect," "plan,"
"intend," "estimate," "anticipate," "scheduled" and similar expressions are
intended to identify forward-looking statements. All forward-looking statements
in this prospectus reflect our current views about future events and are based
on assumptions and are subject to risks and uncertainties that could cause our
actual results to differ materially from future results expressed or implied by
the forward-looking statements. Many of these factors are beyond our ability to
control or predict. Forward-looking statements do not guarantee future
performance and involve risks and uncertainties. Actual results will differ, and
may differ materially, from projected results as a result of certain risks and
uncertainties. The risks and uncertainties include, without limitation, those
described under "Risk Factors" and those detailed from time to time in our
filings with the SEC, and include, among others, the following:
o Our limited operating history and ability to continue as a going
concern;
o Our ability to successfully develop and commercialize products;
o The degree and nature of our competition;
o Our ability to employ and retain qualified employees; and
o The other factors referenced in this prospectus, including, without
limitation, under the section entitled "Risk Factors", "Management's
Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations", and Business".
These risks are not exhaustive. Other sections of this prospectus may
include additonal factors which could adversely impact our business and
financial performance. Moreover, we operate in a very competitive and rapidly
changing environment. New risk factors emerge from time to time and it is not
possible for our management to predict all risk factors, nor can we assess the
impact of all factors on our business or to the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results. These forward-looking statements
are made only as of the date of this prospectus. Except for our ongoing
obligation to disclose material information as required by federal securities
laws, we do not intend to update you concerning any future revisions to any
forward-looking statements to reflect events or circumstances occurring after
the date of this prospectus.
15
USE OF PROCEEDS
We will not receive any proceeeds from the sale of the shares of common
stock by the selling stockholders, but we will receive funds from the exercise
of warrants held by selling stockholders, if exercised for cash. These proceeds,
if any, will be used for general corporate and working capital.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our shares have traded on the OTC Bulletin Board under the symbol
"CTHH" since June 24, 2005. Commencing on October 5, 1998, our shares began
trading on the OTC Bulletin Board under the symbol "WLCGD." We were delisted
from the OTC Bulletin Board on or around May 24, 2000 for failing to remain
current with our periodic reporting obligations. We began trading again on the
OTC Bulletin Board on May 24, 2004 under the symbol "FHON." The following table
sets forth, for the periods indicated, the high and low sales prices for the
common stock since the fourth quarter 2003:
2005 2004 2003
--------------- --------------- --------------
PERIOD High Low High Low High Low
------ ----- ----- ----- ------ ---- ------
First Quarter $0.936 $0.756 $ 0.72 $0.8177 $ -- $ --
Second Quarter 6.120* 4.229* 0.504 0.456 -- --
Third Quarter -- -- 0.288 0.288 -- --
Fourth Quarter -- -- 0.72 .5076 1.26 0.8177
* Following our 1 for 7.2 reverse stock split effective as of June 23, 2005.
--------------------
The quotations reflect inter-dealer prices, without retail markups,
markdowns, or commissions and do not necessarily represent actual transactions.
The quotations were derived from Bloomberg.
We estimate that as of July 15, 2005, there were approximately 183
holders of record of our common stock.
DIVIDEND POLICY
We have not declared nor paid any cash dividend on our common stock,
and we currently intend to retain future earnings, if any, to finance the
expansion of our business, and we do not expect to pay any cash dividends in the
foreseeable future. The decision whether to pay cash dividends on our common
stock will be made by our Board of Directors, in their discretion, and will
depend on our financial condition, operating results, capital requirements and
other factors that our Board of Directors considers significant.
DILUTION
We are only registering shares of common stock already outstanding and
held by selling stockholders under this prospectus. As such, purchasers of
shares of common stock sold under this prospectus shall not experience any
immediate dilution as a result of or upon such purchase.
16
CAPITALIZATION
The following table sets forth our capitalization on an actual basis as
of March 31, 2005, and as adjusted to give effect to the following transactions
as though it had been completed on March 31, 2005:
1) Immediately prior to the Acquisition, Catcher completed a private
placement to accredited investors which generated cash proceeds in the
amount of $4,300,000 net of issuance costs of $200,000.
This table should be read in conjunction with the information contained
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations and Plan of Operations" and the consolidated financial statements and
the notes thereto included elsewhere in this prospectus.
Actual Pro Forma
(UNAUDITED) Adjustments Adjusted
--------- ----------- ---------
Long-term debt * ....................... -- -- --
Stockholders' equity (deficit):
Capital stock ....................... 802 -- 802
Additional paid-in capital ........... -- 4,300,000(1) 4,300,000
Retained earnings (deficit) .......... (829,973) (829,973)
Total stockholders equity .............. (829,111) -- 3,470,829
-------- ---------- ---------
TOTAL CAPITALIZATION ................... (829,111) 4,300,000 3,470,829
* Not including short term payables.
17
SUMMARY CONSOLIDATED FINANCIAL DATA OF CATCHER
On May 4, 2005, we acquired Catcher, Inc., a Delaware corporation,
through a series of stock purchases. The transaction was accounted for by
application of reverse purchase accounting (reverse acquisitions). Accordingly,
the historical financial statements of Catcher will be our financial statements
for reporting purposes.
The following condensed statement of operations data for the period
from March 31, 2004 (inception) to December 31, 2004, and the three months ended
March 31, 2005 and the selected balance sheet data at December 31, 2004, and at
March 31, 2005 are derived from Catchers' financial statements and the related
notes, audited by Vitale, Caturano & Company, Ltd., Certified Public
Accountants, 80 City Square, Boston, MA 02129, Catchers' independent registered
public accounting firm. The financial statements and the related notes as of
December 31, 2004 for the period from March 31, 2004 to December 31, 2004 and
the three months ended March 31, 2005 are included elsewhere herein. The
selected unaudited statement of operations data for the three months ended March
31, 2005, and the unaudited consolidated selected balance sheet data at March
31, 2005, are derived from Catchers' unaudited financial statements, which have
been prepared on a basis consistent with Catchers' audited financial statements
and, in the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of Catchers' financial
position and results of operations. The results of operations for any interim
period are not necessarily indicative of results to be expected for the entire
year. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Plan of Operations" and our financial statements and the related notes included
elsewhere in this prospectus.
PERIOD FROM
THREE MONTHS ENDED MARCH 31, 2004
MARCH 31, 2005 (INCEPTION) TO
(UNAUDITED) DECEMBER 31, 2004
------------------ -----------------
STATEMENT OF OPERATIONS DATA:
Income ................................. $ -- $ --
Total operating expenses ............... $81,607 $748,366
Net loss ............................... ($81,607) ($748,366)
--------- ---------
LOSS PER SHARE INFORMATION:
Basic and diluted net loss per share ... ($0.01) ($0.07)
========= =========
PERIOD FROM
THREE MONTHS ENDED MARCH 31, 2004
MARCH 31, 2005 (INCEPTION) TO
(UNAUDITED) DECEMBER 31, 2004
------------------ -----------------
BALANCE SHEET DATA:
Cash and cash equivalents .............. $160 $364
Total assets ........................... 160 364
Total liabilities ...................... 830,132 748,729
Stockholders' equity (deficit) ......... (829,972) (748,365)
Total liabilities and
Stockholders' deficit ................ $160 $364
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND PLAN OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS AND PLAN OF OPERATIONS AND OTHER PORTIONS OF THIS
PROSPECTUS CONTAIN FORWARD-LOOKING INFORMATION THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
BY THE FORWARD-LOOKING INFORMATION. FACTORS THAT MAY CAUSE SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, AVAILABILITY AND COST OF FINANCIAL RESOURCES,
PRODUCT DEMAND, MARKET ACCEPTANCE AND OTHER FACTORS DISCUSSED IN THIS PROSPECTUS
UNDER THE HEADING "RISK FACTORS". THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND PLAN OF OPERATIONS SHOULD BE
READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED
ELSEWHERE IN THIS PROSPECTUS.
CORPORATE BACKGROUND
CATCHER HOLDINGS, INC.
We were incorporated under the laws of the state of Delaware on August
25, 1998. In a merger agreement dated May 20, 1999, we 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.
Following the Acquisition, effective June 23, 2005, we changed our name to
Catcher Holdings, Inc.
We were originally 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, we abandoned our
business objective to provide such telecommunications products and services.
On March 1, 2001, the State of Delaware revoked our charter for failure
to file our annual report with the State of Delaware for the years 1999 and 2000
and to pay our franchise tax for those years. On May 29, 2003, we filed a Form
10SB with the SEC to become a reporting company under the Securities Exchange
Act of 1934 (the "Exchange Act"). We amended the Form 10SB in July, 2003. Our
charter in the State of Delaware was revived on March 31, 2005 and franchise
taxes due were paid with penalty and interest.
Our plan was to identify and complete a merger or acquisition primarily
in consideration of the issuance of shares of our capital stock with a private
entity whose business presents an opportunity for the our stockholders.
Consistent with that plan, effective May 4, 2005, we acquired 100% of the
outstanding stock of Catcher, Inc., a Delaware corporation ("Catcher") through a
series of stock purchases with the shareholders of Catcher pursuant to which
Catcher became our wholly-owned subsidiary. Our principal business shall be the
ownership of Catcher, which will act as our operating subsidiary.
CATCHER, INC.
ORGANIZATIONAL HISTORY
Catcher is a development stage company formed on April 20, 2005
principally to operate the business of developing, manufacturing and
distributing the CATCHER(TM) device, a portable, ruggedized, wireless handheld
security device. Pursuant to an asset purchase agreement between Catcher and LCM
Technologies, Inc. ("LCM"), Catcher purchased certain assets and assumed certain
liabilities of LCM and its founder, Ira Tabankin, relating to the CATCHER(TM)
device and the business of LCM. The transaction
19
was accounted for by application of reverse purchase accounting.
PLAN OF OPERATIONS
From inception to date, Catcher has been primarily involved in
organizational activity, negotiating vendor and personnel contracts, making
arrangements for the commercial use and deployment of the CATCHER(TM) technology
and preliminary development of its initial customer base. Catcher intends to
negotiate for long-term original equipment manufacturer ("OEM") and value added
reseller ("VAR") contracts with potential customers. Under these, Catcher
expects to deliver product for the benefit of its customers and various
end-users.
DEVELOPMENT STAGE COMPANY
We are in the early stage of operation and, as such, the relationships
between revenue, cost of revenue and operating expenses reflected in the
financial information included herein do not represent future expected financial
relationships. We expect that such expenses will increase with the escalation of
research and development, sales and marketing activities and transaction
volumes, but at a much slower rate of growth than the corresponding revenue
increase. Much of the cost of revenue and operating expenses reflected herein
are relatively fixed costs. Accordingly, at such stage of operations period to
period comparisons of results of operations are not meaningful.
We expect to incur significant expenses without generating any revenue,
at least through commencing production, which is not anticipated before early
2006. For the year to date, through July 15, 2005, we have spent approximately
$2,237,000 on research and development, general and administrative expenses, and
other working capital requirments, which includes the assumed liabilities of LCM
which at the time of the acquisition totaled approximately $836,000.
We expect to begin to generate revenues during early 2006, based solely
from the sale of CATCHER(TM) devices. Under the terms of our anticipated OEM and
VAR agreements, we anticipate sharing revenue with our customers depending on
customer and end-user requirements and the deployment model adopted by the
parties.
Under current plans, we will need approximately $3,000,000 of
additional capital to continue our development operations and other working
capital needs during the next 12 months, excluding amounts that may be necessary
to fund intial production of the Catcher units. We anticipate that funding for
these expenditures will come principally from the proceeds of exercise of
outstanding warrants. See "Managements Plan of Operations - Liquidity and
Capital Resources" below.
COST OF SALES
Cost of sales will consist primarily of direct costs of the
manufactured units, wages of operational employees and cost of training. Many
factors are anticipated to affect our gross margin including, but not limited
to, market conditions, competition, production order volumes and supplier
pricing. Management currently does not anticipate that we will operate our own
production facilities, as we intend to outsource production to a third party
manufacturer.
EXPENSES AND CAPITAL EXPENDITURES
Catcher's operating expenses for the period from April 20, 2005
(inception) June 1, 2005 were comprised of general and administrative expenses,
research and development and the assumption and payment of certain liabilities
of LCM Technologies, Inc. from which certain assets were acquired relating to
the Catcher business. Catcher expects to incur significant additional expenses
before generating any revenue, at least through the completion of the initial
production unit of the CATCHER(TM) which is not
20
anticipated before November, 2005. Operating expenses, including primarily
research and development expenses and general and administrative expenses were
approximately $1,200,000 for the quarter ended June 30, 2005. Expenses are
expected to increase significantly as Catcher adds employees to support its
research and development, marketing and business development efforts.
General and administrative expenses include all corporate and
administrative functions that serve to support Catcher's current and future
operations and provide an infrastructure to support future growth. Major items
in this category include compensation and benefits for management and staff,
travel related expenses, professional services, and other miscellaneous
expenses.
Catcher's principal expenditures have been for purposes of research
and development, general and administrative purposes, and other working capital
needs. Catcher anticipates such expenditures of approximately $1,600,00 and
$965,000 in the third and fourth quarter of 2005 respectively, and anticipates
continuing levels of ongoing research and development and other working capital
requirements in the future.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
In addition to the transitional nature of revenues and expenditures
resulting from the our status as a development stage company, we expect to
experience significant fluctuations in our future quarterly operating results
due to a variety of factors, many of which are outside of its control. Those
factors that may adversely affect our quarterly operating results include: (i)
its ability to attract new customers at a steady rate; (ii) the announcement or
introduction of products by our potential competitors; (iii) increase in the
cost of inputs from suppliers; (iv) the amount and timing of operating costs and
capital expenditures relating to expansion of our business, operations, and
infrastructure; (viii) government regulation; and (ix) general economic
conditions and economic conditions specific to the security products industry.
Due to the foregoing factors, in one or more future quarters, our
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of our common stock would likely be
materially adversely affected.
ACCOUNTING PRINCIPLES; ANTICIPATED EFFECT OF GROWTH
Below is a brief description of basic accounting principles which we
have adopted in determining our recognition of revenues and expenses, as well as
a brief description of the effects that management believes that our anticipated
growth will have on our revenues and expenses in the next twelve (12) months.
REVENUE RECOGNITION
Sales revenue will be recognized as products are delivered to Catcher's
customers. Catcher may also collect license fees for the right to sell the
CATCHER(TM) device. Rates for such licenses are yet to be established. Catcher
is in its development phase and has no existing customers.
We recognize revenue in accordance with the SEC (SEC) Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements" as updated
by SEC Staff Accounting Bulletin No. 104, "Revenue Recognition". Under these
guidelines, revenue is recognized when persuasive evidence of an arrangement
exists, shipment has occurred or services rendered, the price is fixed or
determinable and payment is reasonably assured. Under these requirements, when
the terms of sale include customer acceptance provisions, and compliance with
those provisions have not been previously demonstrated, revenues are recognized
upon acceptance.
21
LIQUIDITY AND CAPITAL RESOURCES
Our only source of liquidity is the cash generated from the private
offering of our stock immediately prior to the Acquisition. Catcher's principal
uses of cash have been for research and development and general and
administrative expenses.
We currently have outstanding Series A Warrants and Series B Warrants
to purchase an aggregate of 4,500,386 shares of our common stock (the
"Warrants"). There are 2,250,193 Series A Warrants outstanding. Each Series A
Warrant will entitle the holder to purchase one share of the common stock of the
Public Company at $1.50 per share (the "Series A Exercise Price"), exercisable
for a period of five years. Once our common stock, issuable upon exercise of the
Warrants, is registered with the SEC, the Series A Warrants may be called by us
upon notice to the warrant holder from time to time at any time that the common
stock closes at or above $2.50 per share for ten (10) consecutive trading days
at an average volume of 40,000 shares per day during the ten-day trading period,
PROVIDED THAT, within twenty (20) business days after the date of such notice,
the warrant holder will have the right to exercise, under the terms and
conditions of the Series A Warrants, all or a part (but not less than 25%) of
the Series A Warrants held at the Series A Exercise Price. From and after the
expiration of such twenty (20) business day notice, the we may repurchase all
Series A Warrants then held for a purchase price of $.01 per Series A Warrant
unless and to the extent that the Series A Warrant holder first exercises Series
A Warrants at the at the Series A Exercise Price.
There are 2,250,193 Series B Warrants outstanding. Each Series B
Warrant entitles the holder to purchase one share of common stock at $2.00 per
share (the "Series B Exercise Price"), exercisable for a period of five years.
Once our common stock, issuable upon exercise of the Series B Warrants, is
registered with the SEC, the Series B Warrants may be called by us upon notice
to the warrant holder from time to time at any time that the common stock closes
at or above $3.33 per share, for ten (10) consecutive trading days at an average
volume of 40,000 shares per day during the ten-day trading period; PROVIDED
THAT, within twenty (20) business days after the date of such notice, the
warrant holder will have the right to exercise, under the terms and conditions
of the Series B Warrants, all or a part (but not less than 25%) of the Series B
Warrants held at the Series B Exercise Price. From and after the expiration of
such twenty (20) business day notice, we may repurchase all Series B Warrants
then held for a purchase price of $.01 per Series B Warrant unless and to the
extent that the Series B Warrant holder first exercises Series B Warrants at the
at the Series B Exercise Price.
We also have outstanding a warrant to purchase 65,000 shares of our
common stock issued to Jeff Gilford, our current Chief Financial Officer, for an
exercise price of $3.74 per share and a warrant to purchase 20,000 shares of our
common stock to Stanley Blackburn for an exercise price of $3.74 per share, each
of which was issued in connection with accounting and advisory services rendered
by Blackford Partners. See "Related Party Transactions."
We may require substantial additional capital in order to complete
future development of the business and implement its business plan. Other than
as described above, we may seek to arrange other forms of financing to fulfill
these capital needs, in the event that the cash generated by our operations is
insufficient to fund the growth requirements. The other forms of business
financing obtained through third parties may include various combinations of
equity, debt and bank financing.
In light of the limited shareholders' equity as well as the lack of
our operating history , there can be no assurance that we will be able to obtain
the necessary additional capital on a timely basis or on acceptable terms, if at
all, to fund the development of our business. In any of such events, our
business growth and prospects would be materially and adversely affected. As a
result of any such financing, the holders of the common stock may experience
substantial dilution.
22
The following factors, among others, could cause actual results to
differ from those indicated in the above forward-looking statements: pricing
pressures in the industry; a downturn in the economy in general; weak demand for
its products; its ability to attract new customers; and an increase in
competition in the market for its products and services. These factors, and
additional risks and uncertainties not known to us, or that we currently deem
immaterial may impair business operations, may cause our actual results to
differ materially from any forward-looking statement.
Although we believe the expectations reflected in the forward-looking
statements are reasonable, it cannot guarantee future results, levels of
activity, performance or achievements. We are under no duty to update any of the
forward-looking statements after the date of this report to conform them to
actual results or to make changes in its expectations.
Since inception, neither us nor Catcher has generated revenue and there
can be no assurance that they will generate revenue in the future.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Increases in interest rates will affect the cost of financing and may
affect our ability to obtain favorable financing terms in order to grow as
anticipated.
OFF BALANCE SHEET FINANCING ARRANGEMENTS
We do not have any off balance sheet financing arrangements.
IMPACT OF INFLATION
We believe that our results of operations are not dependent upon
moderate changes in inflation rates as we expect we will be able to pass along
component price increases to its customers.
SEASONALITY
We do not expect any material seasonality in sales fluctuations in the
market for our products and services.
RECENTLY ISSUED ACCOUNTING STANDARDS AND CRITICAL ACCOUNTING POLICIES
In May 2005, the FASB issued FASB Statement No. 154, ACCOUNTING CHANGES
AND ERROR CORRECTIONS, A REPLACEMENT OF APB OPINION NO. 20 AND FASB STATEMENT
NO. 3 (SFAS No. 154). Previously, APB No. 20, ACCOUNTING CHANGES and SFAS No. 3,
REPORTING ACCOUNTING CHANGES IN INTERIM FINANCIAL STATEMENTS required the
inclusion of the cumulative effect of changes in accounting principle in net
income of the period of the change. SFAS No. 154 requires companies to recognize
a change in accounting principle, including a change required by a new
accounting pronouncement when the pronouncement does not include specific
transition provisions, retrospectively to prior periods' financial statements.
The Company will assess the impact of a retrospective application of a change in
accounting principle in accordance with SFAS No. 154 when such a change arises
after the effective date of January 1, 2006.
SFAS No. 123 (Revised 2004), SHARE-BASED PAYMENT (SFAS 123R) was issued
in December 2004. SFAS 123R replaces SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION (SFAS 123), and supersedes APB Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES. SFAS 123R requires companies to recognize in the financial
statements the compensation cost related to share-based payment
23
transactions with employees. The compensation cost is measured based upon the
fair value of the instrument issued. Share-based compensation transactions with
employees covered within SFAS 123R include share options, restricted share
plans, performance-based awards, share appreciation rights, and employee share
purchase plans.
SFAS 123R will be effective as of the first annual reporting period
that begins after December 15, 2005. The Company is currently evaluating which
transition method it will apply at the effective date. For unvested awards, the
compensation cost related to the remaining service period that has not been
rendered at the effective date will be determined by the compensation cost
calculated currently under SFAS 123. The Company has not yet determined the
impact the adoption of this statement will have on its operating results.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
Statement SFAS 150 establishes standards for how an issuer classifies and
measures certain financial instrument with characteristics of both liabilities
and equity. It requires that issuers classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. Some of the provisions
of this Statement with the definitions of liabilities in FASB Concepts Statement
No. 6, "Elements of Financial Statements." The remaining provisions of this
Statement are consistent with the Board's proposal to revise that definition to
encompass certain obligations that a reporting entity can or must settle by
issuing its own equity shares, depending on the nature of the relationship
established between the holder and the issuer. While the Board still plans to
revise that definition through an amendment until it has concluded its
deliberations on the next phase of this project. That next phase will deal with
certain compound financial instrument including puttable shares, convertible
bonds, and dual indexed financial instruments. This Statement is effective for
financial instruments entered into modified after June 30, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of non-public
entities. The Company does not expect adoption of this statement to have a
material impact on its financial position or of operations.
24
BUSINESS
GENERAL
CATCHER HOLDINGS, INC.
We were incorporated under the laws of the state of Delaware on August
25, 1998 under the name U.S. Telesis, Inc. In a merger agreement dated May 20,
1999, we merged with and into Woodland Communications Group, Inc. and thereafter
on June 3, 1999, we changed our name to U.S. Telesis Holdings, Inc.
We were 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, we abandoned our business objective
to provide such telecommunications products and services.
On March 1, 2001, the State of Delaware revoked our charter for failure
to file our annual report with the State of Delaware for the years 1999 and 2000
and to pay our franchise tax for those years. On May 29, 2003, we filed a Form
10SB with the SEC to become a reporting company under the Securities Exchange
Act of 1934 (the "Exchange Act"). We amended the Form 10SB in July, 2003. Our
charter in the State of Delaware was revived on March 31, 2005 and franchise
taxes due were paid with penalty and interest.
Our plan was to identify and complete a merger or acquisition primarily
in consideration of the issuance of shares of our capital stock with a private
entity whose business presented an opportunity for our stockholders. On May 4,
2005, we consummated the acquisition of all of the outstanding shares of common
stock and series A preferred 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 our wholly-owned
subsidiary. In connection with the Acquisition, we 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 our Common Stock (ii) all of the issued and
outstanding series A preferred stock of Catcher in exchange for 733,778 shares
of our Series A Preferred Stock. In addition, we 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 to the warrant
holders. On June 24, 2005, upon the effectiveness of the filing of our amended
and restated certificate of incorporation we changed our name to Catcher
Holdings, Inc. and we provided for a 1 for 7.2 reverse stock split in respect of
our issued and outstanding Common Stock. All but one share of our issued and
outstanding Series A Preferred Stock was automatically converted to common stock
simultaneously with the reverse stock split.
CATCHER, INC.
ORGANIZATIONAL HISTORY
Catcher was organized in Delaware effective April 20, 2005. Catcher was
formed principally to operate the business of developing, manufacturing and
distributing the CATCHER(TM) device, a portable, ruggedized, wireless handheld
security device. Pursuant to an asset purchase agreement between LCM and us,
Catcher purchased certain assets and assumed certain liabilities of LCM and its
founder, Ira Tabankin, our secretary and director, relating to the CATCHER(TM)
device and the business of LCM.
25
OVERVIEW OF THE BUSINESS
THE NEED FOR THE CATCHER(TM) DEVICE. Since the events of 9/11, security
agencies, those tasked with protecting their respective nation's public safety,
have implemented numerous technological improvements to public, private and
government facilities in which existing antiquated technologies risk a breech of
security or operational integrity. These facilities include municipal and
general aviation facilities, border and port facilities and a multitude of other
public and private venues. While each improvement in technology enhances
security and operational integrity, we believe that very little has been done to
grant key users with access to these improvements in the form of real-time
integrated, on-demand voice, data and video. By providing access to
"mission-critical" information, decision makers, security personnel and command
and control leadership will be able to act quickly, decisively and responsibly
in emergency and operational situations--so critical to maintaining security and
operational integrity in real time.
The CATCHER(TM) device is the culmination of years of developing a
product concept that we believe will meet the needs of security agencies for a
rugged, portable, handheld, command and control device providing security and
operations personnel with superior and uniform access to mission-critical
information in the form of secure voice, video, and text data resulting in
superior decision making.
THE CATCHER(TM) DEVICE CONCEPT. The CATCHER(TM) device, now under
development by Catcher, is a portable, ruggedized, wireless, hand-held command
control device built to military specifications. Utilizing proprietary software,
CATCHER(TM) offers security and operations personnel critical real-time wireless
data and communications through an integrated platform incorporating voice,
video, data, GPS and biometric capabilities in one small, self-contained unit.
We believe that the CATCHER(TM)device provides "feet on the street" security and
operations professionals with access to all information pertinent to the
security and operations environment within and around a facility. Moreover, the
CATCHER(TM) device is designed to permit critical, real-time wireless and wired
communications by security and operations personnel using voice, data, video
images, or any combination of the three, from the site of a security-breach
event. In addition, the Company believes that the CATCHER(TM) device will permit
"first responders" (those charged with being first to an emergency situation)
with unparallel access to needed information while communicating with command
and control personnel. We believe that command and control access can
dramatically increase first responders' efficiency, reducing costs and, most
importantly, saving lives.
THE CATCHER(TM) DEVICE
CATCHER(TM) DEVICE FEATURES AND ITS FUNCTIONALITY. The CATCHER(TM) device
is designed to be both common and distinctive. It is common in that it is a
portable X86 computer that runs Microsoft(R) XP Pro with Tablet PC capabilities.
The Catcher(TM) also comes with features found in a variety of products. We
believe that what makes CATCHER(TM) distinctive is that features found in a
variety of other single products are integrated in one device that is tested to
Military Standard 810F, yielding an entirely new class of product. Thus, the
CATCHER(TM) device is designed to converge multiple technologies and
applications into a single lightweight, rugged, hand-held device that has been
designed to be easy to use. CATCHER(TM) has also been designed with growth in
mind, allowing units in the field to be updated with new features as they become
available.
THE CATCHER(TM) DEVICE SPECIFICATIONS. The product specifications for the
CATCHER(TM) device are complete. Currently the CATCHER(TM) device is in the
final development stage. We project that the first Beta test units will be ready
for in-field testing and deployment in the fourth quarter of 2005.
DEVICE LIFE CYCLE. The CATCHER(TM) device is currently in the introductory
stage of its product life cycle. The introductory phase involves sales and
distribution of the first generation CATCHER(TM) device
26
("C1") within the global air transportation industry market. In addition to the
air transportation industry market, the C1 will be sold to a parallel market
comprised of security/transportation facility operations/first responders. We
anticipate that C1 will achieve a peak market life cycle within five (5) years,
before a second version ("C2") is projected to be released for sale to the
existing market, and/or to new customers. Each new market for a version of the
CATCHER(TM) device will add to the life cycle of the original device. (See
"Business - The Market for the CATCHER(TM) Device and Our Strategy.")
PRODUCT TECHNOLOGY
RESEARCH AND DEVELOPMENT. We intend to dedicate the majority of our
year 2005 research and development, effort to completing the development and
quality control testing of the CATCHER(TM) device beta units. Following full
production, we will continue to pursue our research and development effort
dedicated to enhancing our existing CATCHER(TM) architecture, as well as
researching the viability of new markets and developing new versions of
CATCHER(TM) device technology. We will also regularly examine market responses
to existing CATCHER(TM) devices and will work to modify devices to meet market
needs.
INTELLECTUAL PROPERTY. On July 6, 2004, Ira Tabankin and John Sutton,
also an employee of Catcher, filed with the United States Patent and Trademark
Office ("USPTO") a patent application on the CATCHER(TM) device, Patent
Application No. 10/885,515 (Portable Handheld Security Device) (the "Patent").
The Patent Application is pending. All of the right, title and interest in and
to the Patent application was assigned to Catcher. On June 11, 2004, Ira
Tabankin filed with the USPTO two Intent to Use Applications (Application
Numbers 78/433,770 and 78/433,768) for the trademarks "CATCHER" and "SECURE
CARGO VISION," respectively, both in international class 9. The trademark
applications are pending. Catcher has been assigned all of the right, title, and
interest in and to those trademark applications. We have and we intend, from
time-to-time, to file additional patent applications directed to enhancements to
the CATCHER technology. Such applications may, without limitation, include new
applications, continuations and continuations in part of existing applications,
and foreign applications corresponding to any or all of these. We believe that
Catcher owns or can license all of the intellectual property necessary to
conduct its business given the assumption that licensed technology and know-how
will be available on terms and conditions acceptable to us to manufacture the
CATCHER(TM) device to our specifications.
Messrs. Ira Tabankin and Charles Sander were former employees of Scanz
Communications, Inc. ("Scanz") and Mr. Tabankin also served as a consultant to
Scanz during which time Scanz had under development a handheld portable device
that might be used for security purposes as well as in a sports-event setting
which was Scanz' principal business focus and the principal focus of its product
development. The Scanz employment agreements with Messrs. Tabankin and Sander
provided that Scanz would own intellectual property conceived or first reduced
to practice during employment. The consultancy agreement between Mr. Tabankin
and Scanz provided that intellectual property rights that may be claimed by
Scanz in connection with a development by Mr. Tabankin during or before the
consultancy would be the property of Scanz. Scanz or its licensees may claim
that the CATCHER(TM) device was conceived or first reduced to practice during
the employment of Messrs. Tabankin and/or Sander or that the intellectual
property comprising the CATCHER(TM) device could be claimed by Scanz. If Scanz
or its licensee made any such claims, we believe that, as Catcher was the
assignee of the intellectual property rights in the CATCHER(TM) device, it would
have strong defenses to any such claims for numerous reasons, including that the
intellectual property constituting the CATCHER(TM) device is clearly
distinguishable from the developments made during the aforesaid employments and
consultancy. However, if Scanz or its licensee were to prevail in such a claim,
such event could have a material adverse effect upon our business prospects,
financial condition and results of operations
27
PRODUCTION OF THE CATCHER(TM) DEVICE
PRODUCTION AND DELIVERY. Catcher intends to follow a three-tiered
production plan. In phase one, prototypes will be produced to seed the market.
In phase two, "beta" versions will be used for market testing, and in phase
three, Catcher will make production units. A brief description of each phase
follows:
o PROTOTYPE (COMMENCING SEPTEMBER 2005)
Catcher plans to build approximately five prototype units. The
prototypes are intended as a "proof of concept," showing that the
majority of features can be built into a single small light weight
device. Catcher intends to demonstrate the prototypes to potential
system integrator marketing partners. Prototype units will not be
Federal Communications Commission (the "FCC") approved and as a
result will not be permitted to be sold to generate revenue. Catcher
plans to obtain frequent feedback from prototype users under a
"period of use" agreement.
o BETA (COMMENCING NOVEMBER 2005)
Catcher plans to build approximately 50 beta units. Catcher plans to
have the beta units assembled on an assembly line that approximates
projected assembly conditions. Catcher intends to incorporate into
the beta units appropriate improvements developed from the prototype
phase. The beta units will be used to gain approvals and feedback
from potential end-users and customers. After Catcher has obtained
FCC approval, Catcher intends to sell beta units at cost plus. As
well, Catcher intends to target beta users that may provide grant
money for development and testing of the CATCHER(TM) device. beta
units may be returned to Catcher or replaced with production units.
o PRODUCTION (COMMENCING EARLY 2006)
Initial production is intended to take place through a leading
international contract manufacturer, which is not yet under
contract. Catcher's plan is that the first two months of production
will be used to prepare for mass production. It is intended that the
third party contract manufacturer will create software for the "pick
& place" machines, and will work closely with Catcher on quality
control, testing and various standard-compliance assurances. Catcher
also envisions that third party contract manufacturer will create
for Catcher a complete manufacturing process "package" which Catcher
anticipates will enable Catcher to license production in suitable
facilities world-wide. Catcher's intent is that after the first two
months' production, the CATCHER(TM) device may be manufactured
cost-efficiently with sufficient quality assurance almost anywhere
in the industrialized world.
Limited delivery of production units of the CATCHER(TM) device is
projected to begin in mid-December 2005. Based on discussions with
and feedback from potential customers, we project initial unit
deliveries during early 2006, with anticipated average delivery
volume of approximately 12,500 units per quarter for a total of
50,000 units by year end 2006.
STRATEGIC PARTNERS FOR ENGINEERING AND PRODUCTION. Catcher is
outsourcing engineering and production services for the CATCHER(TM) device.
Catcher has entered into agreements for electronic, hardware and
software engineering and design services for the CATCHER(TM) device from D2M
Technologies, Inc. located in Round Rock, Texas. Catcher believes that D2M has a
talented group of engineers who have played critical roles in the development of
complex computer systems. Of equal importance, we believe that D2M is highly
experienced in working with contract manufacturing companies.
28
Catcher has also developed key relationships with Design Edge in
Austin, Texas. Design Edge's core expertise is in the development of hand-held
computer products, with a specific focus on tablet computing. Catcher has issued
a purchase order to Design Edge covering elements of mechanical engineering and
industrial design.
After a final production package is approved during initial production,
we intend to contract with contract manufacturing resources to proceed with
production-run manufacturing.
THE MARKET FOR THE CATCHER(TM) DEVICE AND OUR STRATEGY
MARKET OVERVIEW. The initial market for the CATCHER(TM) device exists
under what we term the "security market". This is the broad market where those
responsible for protecting people, places or things have a need to access
critical security and operations information. In addition to the security
market, we believe that the CATCHER(TM) device has broad appeal to any industry
that could benefit from a convergent device able to tie together existing
facility technology with device-specific functionality to significantly augment
security, operations, maintenance and business practices through enhanced
wireless communication and data access.
We believe that the security market potential for the CATCHER(TM)
device is significant, encompassing both the public/governmental and private
sectors. However, Phase 1 of our strategy in is to exploit the narrower airport
security and operations submarket, focusing specifically on the "air
transportation" segment. The Air Transportation market segment is comprised of
government agencies (e.g., the Transportation Security Administration ("TSA")
and the Department of Homeland Security ("DHS"), commercial and general aviation
airports such as Chicago O'Hare International, Miami International and Los
Angeles International and airlines. Phase 2 of our strategy within the global
security market banner is to focus on security facilities such as maritime
ports, international borders and buildings. Phase 3 markets will include the
first responder industry, for example the Federal Emergency response teams such
as FEMA, civil defense, EPA, state and local police, fire and EMS and Phase 4
markets will include the United States and friendly military customers.
In addition to security applications, we believe that CATCHER(TM)
technology can also be used without substantial modification to accommodate a
wide variety of industries including the medical, insurance, construction
management, research and energy industries. We foresee no immediate end to new
markets, and anticipates reselling future versions or "next generation" devices
to existing buyers and market partners.
THE AIR TRANSPORTATION MARKET. The DHS 2005 fiscal year budget includes
an estimated allocation of $5.2 billion for the air transportation market. This
amount does not include international funds made available by related
international agencies or commercial dollars from airports or air carriers.
After the events of 9/11, the relatively new homeland security marketplace began
to focus on identifying problems and developing solutions to enhancing
operational security domestically and abroad, more recently the attacks on
transportation modal's in Madrid and London. Critical to this focus is shoring
operational security at any port of entry, be it cargo or passenger, air, land
or sea. Airports and the air transportation segment are the initial "go-to"
market target for the CATCHER(TM) device. We will seek to capture a portion of
the $5.2 billion allocated to this market by DHS through distribution of the
CATCHER(TM) device by its strategic market partners to all domestic and
international commercial airports and domestic and international general
aviation airports. (See "Business - Strategic Marketing Partners.")
ESTIMATED MARKET SIZES. Within the United States alone, we estimate
that the DHS 2005 fiscal-year budget has allocated the following amounts:
29
o $5.2 billion for aviation/air transportation security, of which a
small but meaningful portion will be available for tactical command
control systems such as the CATCHERO device.
o $13.7 billion to border and maritime port security, a follow-on
market. The CATCHER(TM) device applications that will run in a
maritime port are the same types of applications that run in an
airport venue. Importantly, because the CATCHER(TM) device will be
built to Mil. STD 810F, we believe it is one of the very few devices
that can fall into the water and still function.
o $4.0 billion to immigration enforcement security. The features of
the CATCHER(TM) device, plus its multifunction video, including its
infrared ("IR") mode, should make it very attractive to the
immigration service.
o $2.6 billion to bio defense security. The CATCHER(TM) device is a
full PC with expansion ports. It can be used to collect and compute
samples taken on site and we believe that our communications
abilities and video conferencing make it ideal for any secure
facility application.
o The first responder market is comprised of what we estimate are
2,500,000 identified United States first responders. These include
fire, police, security, EMT, etc. with local, regional, state and
federal budgets to draw from. Although we have no clear estimate, we
believe that the cumulative resources available to first responders
will exceed $2.0 billion.
Moreover, we also predict that the military market may also be
significant. Our estimates do not include budget allocations for enhancing
security in education, manufacturing, commercial buildings, individual states,
and transit centers, trains/subways/bus stations. Thus, we anticipate that the
total domestic and international security market for the CATCHER(TM) device
could be quite significant. Key end users may include domestic/international
commercial airports, general aviation airports, train and subway stations,
numerous ports of entry, maritime ports, shipping hubs, and intermediate
transportation hubs.
ALLIANCES AND TEAMING AGREEMENTS. Catcher anticipates that its core
customer business will be (1) tier 1 system integrators that would purchase the
CATCHER(TM) device, add their own services and distribute the product in the
security marketplace to an established customer base, and (2) tier 1
integrator/manufactures that would incorporate the CATCHER(TM) device in their
own products and systems for the security market. We believe that established
integrators have the market reach and existing customer base to help us reach
our business goals. Of course, we believe that those companies will also reap
the associated benefit of bringing a device to market that enhances global
security. Catcher is not only forming important relationships with integrators,
it has also initiated relationships with key government agencies to further
familiarity with the CATCHER(TM) device within numerous security markets.
Relationships with key government agencies will also have a positive synergistic
effect on the our alliances with integrators.
Relationships with integrators are generally characterized by teaming
agreements. Since it is unusual for a single company to provide a "one stop
shop" for all components for a major customer project, companies often "team"
with other companies with complimentary product or service offerings. In
general, teaming agreements are molded by the parties to fit their marketing
and/or product-development needs. For example, firms may team together in order
to provide a combination of their goods and services to targeted customers.
Firms may also team by way of teaming agreements to increase their marketing
reach or their value-add to potential customers. They may make joint sales and
marketing calls. LCM enjoyed teaming agreements with several product integrators
and software providers both large and small. In connection with the Acquisition,
except for Project Performance Corporation as
30
described below, those same product integrators and software providers entered
into substantially the same agreements with Catcher. In addition, Catcher has
entered into an additional teaming agreement. Under the terms of its teaming
agreements, Catcher and its teaming agreement partner will work together to
identify potential customers and submit proposals to provide the CATCHER(TM)
device together with the teaming agreement partner's products or services to
such potential customers. If a customer is identified and the customer accepts
the proposal issued under the teaming agreement, if any, Catcher and its teaming
agreement partner will enter into a further agreement covering, among other
things, each parties responsibilities as a prime contractor or subcontractor
under the contract with the customer. While Catcher anticipates that it may
enter into definitive agreements for the sale of the CATCHER(TM) device as a
result of the teaming agreements, there can be no assurance that Catcher will do
so.
In connection with the Acquisition, Catcher requested that Project
Performance Corporation ("PPC") enter into a duplicate of its teaming agreement
with LCM for execution by Catcher which provided for cooperation on developing a
proposal for the technical support working group. PPC provided a different
agreement to Catcher which provided for PPC to have an exclusive relationship
with Catcher. Catcher executed the agreement not knowing that it was different
than the teaming agreement with LCM. Catcher is now in the process of
negotiating with PPC regarding the enforceability of the teaming agreement. PPC
has taken the position that it has an exclusive relationship with Catcher. If
PPC's position is enforceable, Catcher cannot sell directly or indirectly to a
significant part of its potential customer base without PPC's involvement. To
the extent that PPC attempts to enforce the rights it alleges it has under the
teaming agreement, Catcher will vigorously resist based on the meritorious
defenses it believes it has.
On a going forward basis, Catcher has determined to transition away from
"teaming agreements" and move forward with OEM and VAR agreements with key
partners. Catcher is in discussions with its initial partners to transition to
such agreements. We believe that the differences between these types of
agreements are as follows:
o OEM and VAR agreements generally contain volume purchasing
commitments while teaming agreements do not;
o OEM and VAR agreements generally impose sales volume commitments;
teaming agreements do not.
In light of the fact that Catcher does not anticipate maintaining a
direct sales force, OEM and VAR arrangements in which the OEM or the VAR
maintain an adequate sales staff are more appropriate. It is anticipated that an
OEM or VAR will use the CATCHER(TM) device as a "value add" to their existing
product/service portfolio and that the CATCHER(TM) device will enable the OEM
and VAR parties to increase their markets and revenues.
COMPETITION AND MARKET RISKS
At present we are not aware of any significant competitive product
based upon our own research and upon information that we developed from market
participants and government agencies. However, there are many firms within or on
the edge of the security market that have or could obtain the technological,
financial and other resources to be a significant competitor to us. The security
market is diverse and highly competitive; it has relatively low entry barriers.
Moreover, it is subject to constant technological change and intense marketing
by providers who may be capable in a short period of time to introduce similar
products to the CATCHER(TM) device. We expect that new competitors are likely to
join the security market with an initial entry into the air transportation
submarket, the same market entry strategy employed by us. Many of our potential
competitors are significantly larger and have substantially greater market
presence as well as greater financial, technical, operational, sales, marketing
and other resources and experience, including more established relationships
with vendors, distributors and partners,
31
than Catcher has. In the event that such a competitor expends significant sales
and marketing resources in one or several of the security market segments where
we compete, we may not be able to continue to compete successfully in such
markets. We believe that there will be significant competition in the security
market for products having similar functionality to the CATCHER(TM) device. See
also "Risk Factors".
GOVERNMENTAL REGULATION
The FCC has broad authority to make rules and regulations and prescribe
restrictions and conditions to carry out the provisions of the Communications
Act of 1934. The CATCHER(TM) device features a computer and utilizes wireless
communication technology and is subject to regulation by the FCC. Under those
regulations, certain computers and wireless radios must be tested and licensed
by the FCC and receive an FCC identification number to be displayed on each
CATCHER(TM) device. Catcher is seeking to ensure the CATCHER(TM) device is
compliant with FCC regulations. Our business and results could be affected by
the rules and regulations adopted by the FCC or our failure to be in compliance
with those rules and regulations.
EMPLOYEES
As of July 29, 2005, we had four full full time direct employees, none
of whom were represented by unions. We ourcource most engineering, design,
production, marketing, public relations, investor relations, human resources,
and legal functions. We believe that we have good relations with our employees.
We do not envisage a work stoppage, and none of our potential employees or
consultants is represented by collective bargaining agreements. We believe that
our future success will depend in part on our ability to attract, integrate,
retain and motivate highly qualified personnel, and upon the continued service
of our senior management and outsourced relationships. Competition for qualified
personnel in our industry and geographical location is intense. We cannot
provide any assurance that we will be successful in attracting, integrating,
retaining and motivating a sufficient number of qualified employees or engaging
oursourced relationships to conduct our business in the future.
LEGAL PROCEEDINGS
There is no past, pending or, to our knowledge, threatened litigation
or administrative action (including litigation or action involving our officers,
directors or other key personnel) which in the opinion of our management has had
or is expected to have a material effect upon our business, financial condition
or operations.
PROPERTY
Currently, our corporate offices are located at 39526 Charlestown Pike,
Hamilton, VA 20158-3322 -- the home of our President and Chief Executive
Officer. Our employees utilize technology to create a "virtual office." We
believe our facilities are adequate for our present purposes. In the event we
determine that we need to lease space for our offices, we will not be able to
obtain such office space on terms as favorable to us as we presently enjoy.
32
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS, AND KEY EMPLOYEES
The following are our executive officers and directors and their
respective ages and positions as of July 29, 2005:
NAME AGE POSITION
Ira Tabankin 55 Director and Secretary. Mr. Tabankin is also
Chief Technical Officer and Chairman of the
Board of Directors of Catcher, the Company's
subsidiary
Charles Sander 56 Director and President and Chief Executive
Officer. Mr. Sander is also President and
Chief Executive Officer of Catcher, the
Company's subsidiary.
Rear Admiral (Retired) 67 Director
Cathal Flynn
H. Clayton Foushee, Jr. 52 Director
Jeff Gilford 44 Chief Financial Officer. Mr. Gilford is also
Chief Financial Officer of Catcher, the
Company's subsidiary.
The following is a brief description of the business background of each
of the named executive officers and directors of the Company:
CHARLES SANDER, DIRECTOR AND PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr.
Sander has more than 30 years' experience in the aviation security/operations
arena. From June 2002 until joining Catcher and the Company, Mr. Sander was Vice
President and Partner at Unisys Corporation's Global Transportation Unit where
he headed Unisys' Airports business practice in the development and marketing of
aviation products and services. From September 2000 to June 2002, Mr. Sander was
Vice President for Aviation Sales at Scanz Communications, Inc. From March 1998
to September 2000, Mr. Sander was first an Executive Account Manager and, in
December of 1999, Regional Director, Aviation Sales for TYCO/ADT Security
Services, Inc. having launched Tyco's aviation security group. Mr. Sander
started his professional career as a military air traffic controller and also
held the position of BWI airport general manager. Mr. Sander will also serve as
President and Chief Executive Officer of Catcher.
IRA TABANKIN, DIRECTOR AND SECRETARY. Mr. Tabankin has more than 30
years' experience developing and launching new products for such companies as
SHARP Electronics, NovAtel Communications, Robert Bosch and Cadence Design
Services. Prior to founding Catcher in 2005, Mr. Tabankin was President and
Chief Executive Officer of LCM Technologies, Inc., a company he founded in 2004
for purposes of developing the CATCHER(TM) device. From July 2002 until founding
LCM Technologies, Inc. in 2004, Mr. Tabankin was an independent consultant for
his own company, IJT Consulting through which he provided consulting services to
various clients. From February of 1999 to July 2002, Mr. Tabankin was Chief
Strategic Officer of ScanZ Communications, Inc. Mr. Tabankin will also serve as
the sole director, Chairman and Chief Technical Officer of Catcher.
REAR ADMIRAL (RETIRED) CATHAL FLYNN, DIRECTOR. Admiral Flynn began his
naval career in 1960. In 30 years of active service, he served mainly in areas
of naval special warfare, joint special operations, measures to combat
terrorism, and international security affairs. Promoted to Rear Admiral in 1985,
he served successively as Commander, Naval Security and Investigative Command
(and
33
concurrently as Assistant Director of Naval Intelligence for Counterintelligence
and Anti-terrorism), Director of Plans and Policy, US Special Operations
Command, and Deputy Assistant Secretary of Defense for Special Operations. After
retiring in 1990, Rear Admiral Flynn joined Science Applications International
Corporation. He concurrently served on committees of the National Research
Council and the Defense Science Board. From 1993 to 2000, Rear Admiral Flynn was
the Associate Administrator for Civil Aviation Security in the Federal Aviation
Administration. Since early 2001, Admiral Flynn has acted as an independent
consultant to numerous clients, in the area of civil aviation security. From
2001 to 2002, Admiral Flynn was a consultant to Argenbright Security, Inc, and
was a non-voting member of the Board of that company. Since December 2004,
Admiral Flynn has been a member of the Advisory Board of Isonics, Inc. Since May
2005, he has been a board member and Vice President, Aviation Security, of
SecureLogic Corporation.
H. CLAYTON FOUSHEE, JR., DIRECTOR. Dr. Foushee has a wealth of
experience in the aviation, operations, legislation, safety and security fields,
including 12 years of government service at the National Aeronautics and Space
Administration (NASA) and the Federal Aviation Administration, where he was
Chief Scientific and Technical Advisor. Foushee spent a decade in senior
executive positions with Northwest Airlines, first as Managing Director, Flight
Procedures, Training and Standards from 1992 to 1993, then as Vice President,
Flight Operations from 1993 to 1998 and finally as Vice President, Regulatory
Affairs from 1998 to 2001. From 2002 until January, 2005, Dr. Foushee was Vice
President and Partner at the Unisys Corporation Global Transportation Division,
where he managed major strategic transportation projects and coordinated public
and private industry initiatives with the Congress and government agencies. Most
recently, since February, 2005, Dr. Foushee has been a Partner (non-attorney)
and Director of Governments Affairs for the Washington, D.C. law firm, Zuckert,
Scoutt and Rasenberger (ZSR), L.L.P. and President of Farragutt International,
L.L.C., the consulting division of ZSR.
JEFF GILFORD, Chief Financial Officer. Mr. Gilford has more than 20
years' experience as a finance and operations executive. Prior to joining
Catcher in 2005, Mr. Gilford was a Principal of BlackFord Partners, Inc., a
company he co-founded in 2001. BlackFord is a financial advisory firm providing
Acting Chief Financial Officer services to early stage venture backed technology
companies, focusing on areas including securing business financing, strategy
formulation, development of financial infrastructure, and direction with
operational matters. From 1998 until founding BlackFord Partners, Inc., Mr.
Gilford was the Vice-President of Finance/Chief Financial Officer of
OrderFusion, Inc. a sell-side e-commerce software provider. Mr. Gilford began
his career as a licensed California CPA with Touche Ross & Co. (currently
Deloitte & Touche USA LLP), and holds a Master's of Business Administration and
BS in Business Administration from San Diego State University.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
Currently, our board of directors has no separate audit, nominating and
corporate governance or compensation committees and acts as such as an entire
board. We intend to form an audit committee, a compensation committee and a
nominating and corporate governance committee. The members of such committee
have yet to be determined.
During the year ended December 31, 2004, and during the six months
ended June 30, 2005, our board of directors held one meeting on June 24, 2005
and took action by written consent on five occasions.
COMMITTEES OF THE BOARD OF DIRECTORS
We intend to establish an audit committee, a compensation committee,
and a nominating and corporate governance committee of our board of directors
which shall be responsible, respectively, for the matters described below.
34
AUDIT COMMITTEE
The audit committee shall be responsible for the following:
o reviewing the results of the audit engagement with the independent
auditors;
o identifying irregularities in the management of our business in
consultation with our independent accountants, and suggesting an
appropriate course of action;
o reviewing the adequacy, scope, and results of the internal
accounting controls and procedures;
o reviewing the degree of independence of the auditors, as well as the
nature and scope of our relationship with our independent auditors;
o reviewing the auditors' fees; and
o recommending the engagement of auditors to the full board of
directors.
We intend to adopt a charter to govern the audit committee in the near
future. Our board of directors is considering which of its members should be
members of the audit committee.
COMPENSATION COMMITTEE
The compensation committee will determine the salaries and incentive
compensation of our officers and provide recommendations for the salaries and
incentive compensation of our other employees and consultants.
The compensation of our executive officers is generally determined by
the compensation committee of our board of directors, subject to applicable
employment agreements. Our compensation programs are intended to enable the
attraction, motivation, reward, and retention of the management talent required
to achieve corporate objectives and thereby increase shareholder value. We
anticipate that our compensation policy will be to provide incentives to its
senior management to achieve both short-term and long-term objectives and to
reward exceptional performance and contributions to the development of our
business. To attain these objectives, the executive compensation program may
include a competitive base salary, cash incentive bonuses, and stock-based
compensation.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The functions of the nominating and governance committee will include
the following:
o identifying and recommending to our board of directors individuals
qualified to serve as the directors and on the committees of the
board of directors;
o advising the board of directors with respect to matters of board
composition, procedures and committees;
o developing and recommending to the board of directors a set of
corporate governance principles applicable to us and overseeing
corporate governance matters generally; and
o overseeing the annual evaluation of the board and our management.
35
A charter to be adopted in the near future will govern the nominating
and governance committee. The members of the nominating and governance committee
are yet to be determined, each of whom will be an independent director.
Once established, the nominating and governance committee will consider
director candidates recommended by stockholders. In considering candidates
submitted by stockholders, the nominating and governance committee will take
into consideration the needs of the board of directors and the qualifications of
the candidate. The nominating and governance committee may also take into
consideration the number of shares held by the recommending stockholder and the
length of time that such shares have been held. To have a candidate considered
by the nominating and governance committee, a stockholder must submit the
recommendation in writing and must include the following information:
o the name of the stockholder;
o evidence of the stockholder's ownership of our common stock,
including the number of shares owned and the length of time of
ownership;
o the name of the candidate;
o the candidate's resume or a listing of his or her qualifications to
be one of our directors; and
o the candidate's consent to be named as a director if selected by the
nominating and governance committee and nominated by the board of
directors.
Our directors believe that the minimum qualifications for service as
one of our directors are that a nominee possess an ability, as demonstrated by
recognized success in his or her field, to make meaningful contributions to the
Board of Director's oversight of the business and our affairs and an impeccable
reputation of integrity and competence in his or her personal or professional
activities. The nominating and governance committee's evaluation of potential
candidates shall be consistent with the board of director's criteria for
selecting new directors. Such criteria include an understanding of our business
environment and the possession of such knowledge, skills, expertise, and
diversity of experience so as to enhance the board's ability to manage and
direct our affairs and business, including when applicable, to enhance the
ability of committees of the board of directors to fulfill their duties and/or
satisfy any independence requirements imposed by law, regulation or listing
requirements.
The nominating and governance committee may receive suggestions from
current board members, company executive officers, or other sources, which may
be either unsolicited or in response to requests from the nominating and
governance committee for such candidates. The nominating and governance
committee also, from time to time, may engage firms that specialize in
identifying director candidates. As described above, the nominating and
governance committee will also consider candidates recommended by stockholders.
Once the nominating and governance committee has identified a person as
a potential candidate, the committee may collect and review publicly available
information regarding the person to assess whether the person should be
considered further. If the committee determines that the candidate warrants
further consideration, the bhairman of the board of directors or another member
of the committee may contact the person. Generally, if the person expresses a
willingness to be considered and to serve on the board of directors, the
nominating and governance committee may request information from the candidate,
review the person's accomplishments and qualifications and may conduct one or
more interviews with the candidate. The committee may consider all such
information in light of information
36
regarding any other candidates that the committee might be evaluating for
membership on the board of directors. In certain instances, committee members
may contact one or more references provided by the candidate or may contact
other members of the business community or other persons that may have greater
first-hand knowledge of the candidate's accomplishments. The nominating and
governance committee's evaluation process does not vary based on whether or not
a candidate is recommended by a stockholder, although, as stated above, the
board may take into consideration the number of shares held by the recommending
stockholder and the length of time that such shares have been held.
CODE OF ETHICS
We have adopted a code of ethics that applies to our officers,
employees and directors, including our principal executive officers, principal
financial officers and principal accounting officers. The code of ethics sets
forth written standards that are designated to deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o Full, fair, accurate, timely and understandable disclosure in
reports and documents that a we file with, or submit to, the SEC and
in other public communications made by us;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons identified in our code of ethics; and
o Accountability for adherence to our code of ethics.
COMPENSATION OF OFFICERS AND DIRECTORS
The aggregate compensation paid to our directors and executive
officers, including stock based compensation, for the years ended December 31,
2003 and December 31, 2004 was approximately $57,500 and $6,700, respectively.
We did not set aside or accrue to provide pension, severance, retirement, or
similar benefits or expenses. The above figures do not include business travel,
relocation, professional and business association dues and expenses reimbursed
to office holders and other benefits commonly reimbursed or paid by similarly
situated companies.
Following the acquistion of Catcher on May 4, 2005, our current
executive officers and directors took office. Charles Sander, a director and
President and Chief Executive Officer of the Company and Chief Executive Officer
of Catcher, Ira Tabankin, a director and Secretary of the Company and Chairman
and Chief Technology Officer of Catcher and Jeff Gilford, the Company's Chief
Financial Officer each have employment agreements with Catcher. See "Employment
Agreements" below.
None of our directors have received any compensation for his or her
services as a director other than stock options and reimbursement of expenses.
On June 24, 2005, the Board of Directors approved a a 2005 Stock Option Plan for
Independent and Non-Employee Directors with options to purchase 100,000 shares
of our common stock. See "2005 Stock Option Plan" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no interlocking relationships between us and other entities
that might affect the determination of the compensation of its directors and
executive officers.
37
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned during the years
ended December 31, 2003 and 2004 by our former and current chief executive and
of each executive whose annual compensation in the fiscal year ended December
31, 2004 exceeded $100,000:
SUMMARY COMPENSATION TABLE FOR LAST FISCAL YEAR
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------
SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS
- --------------------------- ---- --------- -------- ------------------
Charles Sander 2004 0 0 (1)
President, Chief Executive 2003 0 0
Officer, and Director (1)
Ira Tabankin 2004 0 0 (2)
Director and Secretary 2003 0 0
(2)
Jeff Gilford 2004 0 0 (3)
Chief Financial Officer 2003 0 0
(3)
John Sutton 2004 0 0 (4)
Vice President Engineering 2003 0 0
(4)
Nicholas Rigopulos 2004 0 0 167,000
(Former Chief Executive Officer 2003 0 0 1,300,000
and Chief Financial Officer) (5)
Jules Benge Prag 2004 0 0 0
(Former Secretary) 2003 (6) 0
(1) Mr. Sander's employment commenced with Catcher effective May 4, 2005. Prior
to that time, he received no compensation from us. See "Employment Agreements"
below.
(2) Mr. Tabankin's employment commenced with Catcher effective April 21, 2005.
Prior to that time, he received no compensation from us. See "Employment
Agreements" below.
(3) Mr. Gilford's employment commenced with Catcher effective June 16, 2005.
Prior to that time, he received no compensation from us in his capacity as a
consultant and principal of Blackford Partners. See "Certain Relationships and
Related Party Transactions" and "Employment Agreements" below. In addition, Mr.
Gilford was granted options to purchase a total of 918,000 shares of our common
stock, subject to shareholder approval, 227,167 of which have vested as of July
31, 2005. See "Employment Agreements."
(4) Mr. Sutton's employment commenced with Catcher effective April 21, 2005.
Prior to that time, he received no compensation from us. See "Employment
Agreements" below.
(5) On January 8, 2003, we issued 300,000 shares of common stock to Nicholas
Rigopulos, in lieu of salary. On July 28, 2003, we issued an option to purchase
1,000,000 shares of common stock in lieu of salary. On February 20, 2004, we
issued an option to purchase 167,000 shares of common stock to Nicholas
Rigopulos in lieu of salary. In addition, Nicholas Rigopulos was issued shares
of our common stock effective May 5, 2005 in connection with the conversion of
certain promissory notes. See "Related Party Transactions."
(6) We issued on July 28, 2003, 200,000 shares of common stock to Jules
Benge Prag in lieu of salary.
38
OPTION GRANTS IN RECENT FISCAL YEARS
The following table sets forth each grant of stock options during the
years ended December 31, 2003 and 2004 to our current and former executive
officers. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with rules of the SEC and do not represent our estimate or
projection of our common stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of our common stock, overall
market conditions and the option holders' continued employment through the
vesting period. Unless the market price of our common stock appreciates over the
option term, no value will be realized from the option grants made to these
executive officers. The potential realizable values shown in the table are
calculated by assuming that the estimated fair market value of our common stock
on the date of grant increases by 5% and 10%, respectively, during each year of
the option term.
INDIVIDUAL GRANTS
-------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR OPTION TERM($)
UNDERLYING GRANTED TO ---------------------
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME YEAR GRANTED FISCAL YEAR) PRICE DATE 5% 10%
---- ---- ---------- ------------ -------- ---------- -- ---
Nicholas Rigopulos 2004 167,000 100.00% $0.03 2014 $14,863 $28,843
(Former Chief Executive 2003 1,000,000 100.00% $0.004 2013 $86,000 $138,600
Officer and Chief
Financial Officer)
Jeff Gilford (1) 2004 0 0 -- -- -- --
2003
(1) Jeff Gilford, our current chief financial officer was granted options
to purchase a total of 918,000 shares of our common stock, subject to
shareholder approval, 227,167 of which have vested as of July 31, 2005.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning the options
exercised by our current and former executive officers in the years ended
December 31, 2003 and 2004 and the year-end number and value of unexercised
options with respect to each of these executive officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(2) AT FISCAL YEAR-END($)(3)
------------------------------ ---------------------------
SHARES
ACQUIRED VALUE
NAME YEAR ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---- ----------- ---------- ----------- ------------- ----------- -------------
Nicholas Rigopulos 2004 167,000 $6,700 0 0 0 0
(Former Chief Executive Officer 2003 1,000,000 $46,000 0 0 0 0
and Chief Financial Officer)
Jeff Gilford 2004 0 0 0 0 0 0
(Current Chief Financial 2003 0 0 0 0 0 0
Officer(5)
39
(1) Based on the fair market value of our common stock on the date of exercise,
less the exercise price payable for such shares.
(2) Certain the options are immediately exercisable for all the option shares
as of the date of grant but any shares purchased are subject to repurchase
by us at the original exercise price paid per share if the optionee ceases
service with us before vesting in such shares.
(3) Based on the fair market value of our common stock at fiscal year end
(4) Jeff Gilford, our current chief financial officer was granted options to
purchase a total of 918,000 shares of our common stock, subject to
shareholder approval, 227,167 of which have vested as of July 31, 2005. See
"Employment Agreements."
2005 STOCK OPTION PLAN
On June, 24, 2005, our board of directors authorized the adoption the
2005 Stock Option Plan ("Plan"). The Plan provides for the grant of options to
purchase up to 2,219,000 shares of our common stock and restricted stock awards
to employees, officers, directors and consultants. Options may be either
"incentive stock options" or non-qualified options under the Federal tax laws.
Incentive stock options may be granted only to our employees, while
non-qualified options may be issued to non-employee directors, consultants and
others, as well as to our employees. The Plan remains subject to stockholder
approval.
The Plan is administered by "disinterested members" of the board of
directors or the compensation committee, who determine, among other things, the
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, the number of shares of common stock
issuable upon the exercise of each option and the option exercise price.
Subject to a number of exceptions, the exercise price per share of
common stock subject to an incentive option may not be less than the fair market
value per share of common stock on the date the option is granted. The per share
exercise price of the common stock subject to a non-qualified option may be
established by the board of directors, but shall not, however, be less than 85%
of the fair market value per share of common stock on the date the option is
granted. The aggregate fair market value of common stock for which any person
may be granted incentive stock options which first become exercisable in any
calendar year may not exceed $100,000 on the date of grant.
No stock option may be transferred by an optionee other than by will or
the laws of descent and distribution, and, during the lifetime of an optionee,
the option will be exercisable only by the optionee. In the event of termination
of employment or engagement other than by death or disability, the optionee will
have no more than three months after such termination during which the optionee
shall be entitled to exercise the option, unless otherwise determined by the
board of directors. Upon termination of employment or engagement of an optionee
by reason of death or permanent and total disability, the optionee's options
remain exercisable for one year to the extent the options were exercisable on
the date of such termination. No similar limitation applies to non-qualified
options.
We must grant options under the Plan within ten years from the
effective date of the Plan. Subject to a number of exceptions, holders of
incentive stock options granted under the Plan cannot exercise these options
more than ten years from the date of grant. Options granted under the Plan
generally provide for the payment of the exercise price in cash and may provide
for the payment of the exercise price by delivery to us of shares of common
stock already owned by the optionee having a fair market value equal to the
exercise price of the options being exercised, or by a combination of these
methods. Therefore, if it is provided in an optionee's options, the optionee may
be able to tender shares of common stock to purchase additional shares of common
stock and may theoretically exercise all of his stock options with no additional
investment other than the purchase of his original shares.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by us become available again for issuance
under the Plan.
40
INDEPENDENT DIRECTORS' PLAN
On June 24, 2005, our board of directors approved a 2005 Stock Option
Plan for Independent and Non-Employee Directors with options to purchase 100,000
shares of our common stock (the "Independent Director's Plan"). Pursuant to the
Independent Director's Plan, upon first election or appointment to our board of
directors, an eligible director will be granted an option to purchase 10,000
shares of common stock and, immediately following each annual stockholders
meeting, commencing with the meeting following the close of fiscal year 2005
each eligible director, other than an eligible director first elected to the
Board within the 12 months immediately preceding and including such meeting,
will be granted an option to purchase 10,000 shares of common stock. The
Independent Director's Plan remains subject to stockholder approval.
EMPLOYMENT AGREEMENTS
Catcher entered into an employment agreement with Charles Sander
effective as of the closing of the Acquisition pursuant to which Mr. Sander is
employed as the Chief Executive Officer of Catcher and the Company. The current
term of the agreement expires May 4, 2008 but will be automatically renewed for
additional three-year periods until either party gives the other party written
notice of its intent not to renew at least 60 days prior but no more than 90
days prior to the end of the term. Mr. Sander's base salary is $250,000 per
annum. Mr. Sander is entitled to participate in Catcher's bonus program which
will be dependent upon the achievement of certain milestones and to participate
in any stock option plan that the Company may have in effect for executive
employees of Catcher. If his employment agreement is terminated under certain
circumstances, Mr. Sander will be entitled to severance payments equal to up to
two years of his base salary and bonus. Effective July 29, 2005, but retroactive
to the commencement of Mr. Sander's employment with us, we agreed to amend his
employment agreement to provide that retroactive to May 4, 2005, Mr. Sander will
be entitled to a $20,000 signing bonus, a car allowance of $700 per month and
reimbursement of reasonable and necessary business expenses incurred by Mr.
Sander in accordance with our reimbursement policies.
Catcher entered into an employment agreement with Ira Tabankin
effective as of the closing of the Acquisition pursuant to which Mr. Tabankin is
employed as the Chief Technology Officer and Chairman of Catcher. The current
term of the agreement expires April 21, 2008 but will be automatically renewed
for additional three-year periods until either party gives the other party
written notice of its intent not to renew at least 60 days prior but no more
than 90 days prior to the end of the term. Mr. Tabankin's base salary is
$216,000 per annum. Mr. Tabankin is entitled to participate in Catcher's bonus
program which will be dependent upon the achievement of certain milestones and
to participate in any stock option plan that the Company may have in effect for
executive employees of Catcher. If his employment agreement is terminated under
certain circumstances, Mr. Tabankin will be entitled to severance payments equal
to up to two years of his base salary and bonus and a royalty equal to 1% of
Catcher's gross income for a period of three years following the termination of
employment. Effective July 29, 2005, but retroactive to the commencement of Mr.
Tabankin's employment with us, we agreed to amend his employment agreement to
provide that retroactive to May 4, 2005, Mr. Tabankin will be entitled to a
$20,000 signing bonus, a car allowance of $700 per month and reimbursement of
reasonable and necessary business expenses incurred by Mr. Tabankin in
accordance with our reimbursement policies.
Catcher entered into an employment agreement with John Sutton effective
as of the closing of the Acquisition pursuant to which Mr. Sutton is employed as
the Vice President -- Engineering of Catcher. The current term of the agreement
expires April 21, 2006 but will be automatically renewed for additional one-year
periods until either party gives the other party written notice of its intent
not to renew at least 60 days prior but no more than 90 days prior to the end of
the term. Mr. Sutton's base salary is $150,000 per annum. Mr. Sutton is entitled
to participate in Catcher's bonus program which will be dependent upon the
achievement of certain milestones and to participate in any stock option plan
that the Company may have in effect for executive employees of Catcher. If his
employment agreement is terminated under certain
41
circumstances, Mr. Sutton will be entitled to severance payments equal to up to
six months of his base salary and bonus. Effective July 29, 2005, but
retroactive to the commencement of Mr. Sutton's employment with us, we agreed to
amend his employment agreement to provide that retroactive to May 4, 2005, Mr.
Sutton will be entitled to a car allowance of $600 per month and reimbursement
of reasonable and necessary business expenses incurred by Mr. Sutton in
accordance with our reimbursement policies.
Catcher entered into an employment agreement with Jeff Gilford
effective as of June 16, 2005 pursuant to which Mr. Gilford is employed as the
Chief Financial Officer of Catcher and the Company. The current term of the
agreement expires on June 16, 2008. Mr. Gilford will receive an annual base
salary of $200,000 and is entitled to participate in any incentive bonus program
Catcher may adopt for its executive employees, provided that, in no event will
such incentive bonus program provide for a bonus of less than 50% of Mr.
Gilford's base salary upon achievement of certain goals agreed between Catcher
and the Board of Directors. In addition, Mr. Gilford will be paid a one-time
signing bonus of $15,000 not part of any incentive bonus program or yearly bonus
within 30 days from the execution of the Employment Agreement. Mr. Gilford is
also entitled to options to purchase 918,000 shares of common stock of the
Company at an exercise price of $3.74 vesting over three years in three separate
tranches consisting of (1) a first tranche of 580,000 shares, 25% of which vests
on June 16, 2005 with the remaining 75% vesting monthly, pro rata each month,
over the three year period following June 16, 2005, (2) a second tranche of
193,000, 25% of which vests on June 16, 2006, with the remaining 75% vesting
monthly, pro rata each month, over the three year period following June 16, 2006
and (3) a third tranche of 145,000 shares, 25% of which vests on June 16, 2007
with the remaining 75% vesting monthly, pro rata each month, over the three year
period following June 16, 2007. If there is a "Change of Control" of the Company
(as that term will be defined in an agreement between the Company and Mr.
Gilford), all unvested options will immediately vest. However, if Mr. Gilford's
employment is terminated without Cause or for Good Reason (as each of those
terms are defined in the Employment Agreement), any unvested options in a
tranche that had commenced to vest shall immediately vest. The grant of options
are subject to stockholder approval of a stock option plan of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers and persons who own more than ten
percent of a registered class of our equity securities (collectively, "Reporting
Persons") to file with the SEC initial reports of ownership and reports of
changes in ownership of our common stock and our other equity securities.
Reporting Persons are required by SEC regulation to furnish us with copies of
all Section 16(a) forms that they file. To our knowledge, based solely on a
review of the copies of such reports furnished to us, we believe that during
calendar year ended December 31, 2004, all of the Reporting Persons complied
with all applicable filing requirements, except for Yale Farar, Paul T. Mannion,
Jules Benge Prag IV, Robert Prag and Nicholas Rigopulos each of whom failed to
file a Form 3 on a timely basis and each of whom filed a Form 5 on March 31,
2005.
42
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth as of July 15, 2005,
o each person who is known by us to be the owner of record or
beneficial owner of more than 5% of our outstanding common stock;
o each of our directors and each of our executive officers;
o all of our directors and executive officers as a group; and
o the number of shares of common stock beneficially owned by each such
person and such group and the percentage of the outstanding shares
owned by each such person and such group.
As used in the table below and elsewhere in this prospectus, the term
BENEFICIAL OWNERSHIP with respect to a security consists of sole or shared
voting power, including the power to vote or direct the vote and/or sole or
shared investment power, including the power to dispose or direct the
disposition, with respect to the security through any contract, arrangement,
understanding, relationship, or otherwise, including a right to acquire such
power(s) during the next 60 days following the date of this prospectus. Except
as otherwise indicated, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated.
Except as otherwise noted below, the address of each of the persons in
the table is Catcher Holdings, Inc., 39526 Charlestown Pike, Hamilton, VA
20158-3322.
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK CLASS BENEFICIALLY
NAME AND ADDRESS BENEFICIALLY OWNED OWNED(A)
- ---------------- ------------------ ------------------
Ira Tabankin(1) 2,232,341(2) 17.86%
Charles Sander(1) 2,232,341 17.86%
Cathal Flynn(1) -- --
H. Clayton Foushee(1) -- --
Jeff Gilford(1) 234,167(3) 1.84%
Agile Partners, LP 1,299,891(4) 9.88%
3500 Alameda De Las Pulgas,
Suite 20
Menlo Park , CA 94025
Sandor Advisors LLC 1,000,000(5) 7.69%
2828 Routh Street, Suite 500
Dallas, Texas, 75201
John Lemak 1,200,000(6) 9.52%
4410 Bordeaux Ave
Dallas, Texas 75205
London Family Trust 999,891(7) 7.69%
2 Aurora Drive
Montecito, CA 93108
Attractor Capital Fund I, LLC 699,889(8) 5.45%
1637 Oakwood Drive, Unit S222
Norberth, PA 19072
Robert Prag 738,749(9) 5.90
2455 El Amigo Road
Del Mar, CA 92014
All Officers and Directors as a Group 4,698,849 36.89%
43
(a) Based upon a total of 12,500,369 shares of common stock issued and
outstanding as of July 15, 2005.
(1) Current Officer or Director
(2) Reflects 2,232,333 shares of common stock and one share of Series A
Preferred Stock that is convertible to 8 shares of common stock.
(3) Mr. Gilford holds a Warrant to purchase 65,000 shares of common stock
of the Company. In addition, pursuant to the terms of his Employment
Agreement, Mr. Gilford was granted an option to purchase a total of
918,000 shares of common stock pursuant to a Stock Option Plan approved
by Board of Directors on June 24, 2005 which Stock Option Plan and
grant remain subject to shareholder approval. Of that option grant,
145,000 options vest on June 16, 2005; 435,000 pro rata monthly over
the next three years; 48,250 options vest on June 16, 2006 and 144,750
options vest pro rata monthly during the three year period following
June 16, 2006; and 36,250 options vest on June 16, 2007 and 108,750
options vest pro rata monthly during the three year period following
June 16, 2007. Accordingly, as of the date hereof and within 60 days of
the date hereof, a total of 169,167 options have vested.
(4) Based upon the ownership by Agile Partners, L.P. of 649,945 shares of
common stock and a Series A Warrant to purchase 324,973 shares of
common stock and a Series B Warrant to purchase 324,973 shares of
common stock.
(5) Based upon the ownership by Sandor Capital Master Fund, LP of 500,000
shares of common stock and a Series A Warrant to purchase 250,000
shares of common stock and a Series B Warrant to purchase 250,000
shares of common stock.
(6) Based upon (a) the ownership by Mr. Lemak of 100,000 shares of common
stock and a Series A Warrant to purchase 50,000 shares of common stock
and a Series B Warrant to purchase 50,000 shares of common stock and
(b) the ownership by Sandor Capital Master Fund, LP of 1,000,000 shares
of common stock and a Series A Warrant to purchase 500,000 shares of
common stock and a Series B Warrant to purchase 500,000 shares of
common stock.
(7) Based upon the ownership by the London Family Trust of 499,945 shares
of common stock and a Series A Warrant to purchase 249,973 shares of
common stock and a Series B Warrant to purchase 249,973 shares of
common stock.
(8) Based upon the ownership by Attractor Capital Fund I, LLC of 349,945
shares of common stock and a Series A Warrant to purchase 174,973
shares of common stock and a Series B Warrant to purchase 174,973
shares of common stock.
(9) Based upon the ownership by Robert Prag of 530,542 shares of common
stock that were automatically converted from Series A Preferred Stock
following the Reverse Split, 61,284 shares issued upon conversion of
certain convertible Promissory Notes, 27,778 issued on conversion of
warrants and 119,145 shares of common stock held directly by Mr. Prag.
44
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our policy is to enter into transactions with related parties on terms
that, on the whole, are no less favorable, than those available from
unaffiliated third parties. Based on our experience in the business sectors in
which we operate and the terms of our transactions with unaffiliated third
parties, we believe that all of the transactions described below met this policy
standard at the time they occurred.
Catcher entered into a Consulting Agreement with Hayden Communications,
Inc. dated as of May 1, 2005 for a period of twelve (12) months at a fee of
$5,000 per month plus reimbursement of certain expenses. Immediately following
the Acquisition, a fee totaling $160,000 was paid to Hayden Communications, Inc.
in respect to certain services provided in respect of capital markets
consulting, marketing material creation and production. The agreement may be
terminated by either party at the six-month anniversary. On a ongoing basis,
Hayden Communications will develop, implement, and maintain an ongoing stock
market support system us with the general objective of expanding awareness among
stockbrokers, analysts, micro-cap portfolio/fund managers, market makers, and
the appropriate financial & trade publications. Hayden Communications, Inc. was
a shareholder of Catcher whose shares were acquired by us in the Acquisition.
Catcher entered into a Consulting Agreement with The Del Mar Consulting
Group, Inc. ("DCG") for a period of twelve (12) months effective as of April 21,
2005 at a fee of $5,000 per month plus reimbursement of certain expenses. A
principal of The Del Mar Consulting Group, Inc. is Robert Prag, a shareholder.
DCG will perform the following services: (1) review business plans, strategies,
mission statements budgets, proposed transactions and other plans; (2) assist us
in preparing for press conferences and other forums involving the media; (3)
maintain an awareness of our plans, strategy and personnel, as they may evolve
during such period, and consult and assist us in ways to communicate appropriate
information regarding such plans, strategy and personnel to the media; and (4)
provides analysis to test whether business plans and strategies have a sound
foundation with assumptions that are realistic and achievable. DCG was a
shareholder of Catcher whose shares were acquired by us in the Acquisition.
Catcher entered into a Consulting Agreement with Kai Hansen for a
period of twelve (12) months effective as of April 21, 2005 at a fee of $5,000
per month plus reimbursement of certain expenses. The agreement may be
terminated by either party at the six-month anniversary. Mr. Hansen will
facilitate the our marketing, public relations and presentation requirements,
including the development of all marketing and related media materials used to
promote the CATCHER(TM) device including website, brochures, training materials,
and press releases. Mr. Hansen was a shareholder of Catcher whose shares were
acquired by us in the Acquisition.
Catcher entered into a Services Agreement with BlackFord Partners,
Inc., dated as of May 6, 2005, whereby BlackFord Partners, Inc. agreed to
provide financial and accounting advisory services to Catcher and us at a rate
of $75 to $125 per hour depending on the type of services rendered. Pursuant to
an Amendment to the Services Agreement, dated as of June 24, 2005, a warrant to
purchase 20,000 shares of our common stock at an exercise price of $3.74 was
issued to Stan Blackburn and a warrant to purchase 65,000 shares of our common
stock at an exercise price of $3.74 was issued to Jeff Gilford. Jeff Gilford,
our Chief Financial Officer is a principal of Blackford Partners, Inc.
Catcher entered into an employment agreement with Charles Sander
effective as of the closing of the Acquisition pursuant to which Mr. Sander is
employed as the Chief Executive Officer of Catcher and the Company. See
"Management -Employment Agreements" above.
Catcher entered into an employment agreement with Ira Tabankin
effective as of the closing of the Acquisition pursuant to which Mr. Tabankin is
employed as the Chief Technology Officer and Chairman of Catcher. See
"Management -Employment Agreements" above.
45
Catcher entered into an employment agreement with Jeff Gilford
effecitve as of June 16, 2005 pursuant to which Mr. Gilford is employed as the
Chief Financial Officer of Catcher. See "Management - Employment Agreements"
above.
Catcher entered into an employment agreement with John Sutton effective
as of the closing of the Acquisition pursuant to which Mr. Sutton is employed as
the Vice President -- Engineering of Catcher. See "Management - Employment
Agreements" above.
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. 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. 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. 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
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 March
12, 2004.
We granted an option to purchase 1,000,000 shares of our common stock
to Nick Rigopulos, our then chief executive officer and director, in lieu of
salary pursuant to a stock option agreement dated as of July 30, 2003. The
options vested immediately and had an exercise price of $0.004 per share. We
recorded $46,000 in connection with the issuance of the options which is
included in administrative expense in the accompanying statement of operations
for the year ended December 31, 2003. Mr. Rigopulos exercised options to
purchase all 1,000,000 shares of our common stock on July 30, 2003 for proceeds
of $4,000.
In February 2004, we issued an option to purchase 167,000 shares of our
common stock to Nicholas Rigopulos, our then Chief Executive Officer and
director, in lieu of salary. The options vested immediately and had an exercise
price of $0.03. Mr. Rigopulos exercised options to purchase all 167,000 shares
of our common stock on March 9, 2004 for proceeds of $5,010.
We issued an aggregate of 3,000,000 shares of our common stock for
services rendered, 1,000,000 shares each, to Paul Mannion, Yale Farrar and
Robert Prag, each consultants to us pursuant to consulting agreements dated July
28, 2003. The shares were valued at $150,000 based on a market value of the our
common stock at $0.05 per share.
On July 28, 2003, we issued 200,000 shares of our common stock to Jules
Benge Prag, our then secretary and director as compensation for services
rendered. The shares were valued at $10,000, based on a market value of our
common stock of $0.05 per share.
On January 8, 2003, we issued 300,000 shares of our common stock to
Nicholas Rigopulos, our then President and Chief Executive Officer and director,
in lieu of salary. The shares were valued at $1,500, based on a market value of
the our common stock at $.005 per share.
46
CONVERTIBLE NOTES
Throughout 2004 and early 2005 as described below, we entered into the following
convertible promissory notes with certain of our investors, which notes were
automatically converted effective May 4, 2005 to an aggregate of 1,544,524
shares of our common stock upon our acquisition of Catcher:
o In February 2004, we entered into convertible promissory notes with
Robert Prag, Jay Farar and Paul Mannion for gross proceeds of
$13,000. The notes had interest at a rate of 6% and matured on
September 30, 2004. The notes were convertible into our common stock
at a conversion price of $0.03 per share at any time after September
30, 2004. September 2004 we amended the notes payable to extend the
maturity date to January 31, 2005. On February 1, 2005 we amended
the notes payable to extend the maturity date to January 31, 2006.
o In July 2004, we entered into two convertible promissory notes with
Jay Farar and Paul Mannion for gross proceeds of $10,000. The notes
had interest at a rate of 6% and matured on January 31, 2005. The
notes were convertible into our common stock at a conversion price
$0.03 per share at any time after January 31, 2005. On February 1,
2005 we amended the notes payable to extend the maturity date to
January 31, 2006.
o In September 2004, we entered into a convertible promissory note
with Robert Prag for gross proceeds of $5,000. The note had interest
at a rate of 6% and matured on January 31, 2005. The note were
convertible into our common stock at a conversion price of $0.03 per
share at any time after January 31, 2005. On February 1, 2005 we
amended the notes payable to extend the maturity date to January 31,
2006.
o In January 2005, we entered into a convertible promissory note with
Nicholas Rigopulos, our then chief executive officer, chief
financial officer and director for gross proceeds of $5,000. The
note had interest at a rate of 6% and matures on July 31, 2005. The
note was convertible into our common stock at a conversion price of
$0.03 per share at any time after January 31, 2005. The note was
only to be converted at our option. On February 1, 2005 the we
amended the notes payable to extend the maturity date to January 31,
2006.
o In April 2005, we entered into four convertible promissory notes
with Nicholas Rigopulos, Paul Mannion, Robert Prag and Jay Farar for
gross proceeds of $36,000. The notes had interest at a rate of 1%
and matured on January 31, 2006. The note was convertible into our
common stock at a conversion price of $0.10 per share at any time
after August 31, 2005.
o In May 2005, we entered into a convertible promissory note with
Nicholas Rigopulos, our then chief executive officer, chief
financial officer and director in exchange for payment of $2,975 of
expenses. The note had interest at a rate of 6% and matured on
January 31, 2006. The note was convertible into our common stock at
a conversion price of $0.10 per share at any time after August 31,
2005. The note was only to be converted at our option.
47
SELLING STOCKHOLDERS
This prospectus relates to the resale from time to time of up to a
total of 15,490,404 shares of common stock by selling stockholders, comprising:
o 10,905,018 shares of our common stock that were issued to selling
stockholders pursuant to transactions exempt from registration under
the Securities Act of 1933; and
o 4,585,386 shares of common stock underlying warrants that were
issued to selling stockholders pursuant to transactions exempt from
registration under the Securities Act of 1933.
The following table set forth certain information regarding the
beneficial ownership of our common stock as to the selling stockholders and the
shares offered by them in this prospectus. Beneficial ownership is determined in
accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a selling stockholders and the percentage of ownership of
that selling stockholder, shares of common stock underlying shares of
convertible preferred stock, options or warrants held by that selling
stockholder that are convertible or exercisable, as the case may be, within 60
days of July 15, 2005 are included. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
selling stockholder. Each selling stockholder's percentage of ownership in the
following table is based upon 12,500,369 shares of common stock outstanding as
of July 15, 2005.
Except as described below, none of the selling stockholders within the
past three years has had any material relationship with us or any of our
affiliates:
Charles Sander is our current chief executive officer and a director;
Ira Tabankin is our current secretary and a director;
Jeff Gilford is our current chief financial officer and was formerly a
consultant to Catcher pursuant to a services agreement with
BlackFord Partners, Inc.;
Nicholas Rigopulos was formerly our Chief Executive Officer, Chief
Financial Officer and a Director;
John Sutton is the Vice President -- Engineering of Catcher.
Paul Manion is formerly a consultant to the Company pursuant to a
consulting agreement dated July 28, 2003 pursuant to which Mr.
Manion was issued 1,000,000 shares of our common stock that was
registered on Form S-8 dated September 15, 2003.
Robert Prag is formerly a consultant to the Company pursuant to a
consulting agreement dated July 28, 2003 pursuant to which Mr. Prag
was issued 1,000,000 shares of our common stock that was registered
on Form S-8 dated September 15, 2003. Mr. Prag currently provides
consulting services to us pursuant to a consulting agreement;
Kai Hansen currently provides consulting services to us pursuant to a
consulting agreement;
Hayden Communications, Inc. currently provides consulting services to
us pursuant to a consulting agreement;
Stan Blackburn provides consulting services to Catcher pursuant to a
services agreement with BlackFord Partners, Inc.
The term "selling stockholders" also includes any transferees, pledges,
donees, or other successors in interest to the selling stockholders named in the
table below. To our knowledge, subject to applicable community property laws,
each person named in the table has sole voting and investment power with respect
to the shares of common stock set forth opposite such person's name.
The selling stockholders named below are selling the securities. The
table assumes that all of the securities will be sold in this offering. However,
any or all of the securities listed below may be retained by any of the selling
stockholders, and therefore, no accurate forecast can be made as to the number
of securities that will be held by the selling stockholders upon termination of
this offering. These selling stockholders acquired their shares by purchase
exempt from registration under section 4(2) of the
48
Securities Act of 1933 or Regulation D under the Securities Act of 1933. The
selling stockholders acquired their shares in the ordinary course of business.
We believe that the selling stockholders listed in the table have sole voting
and investment powers with respect to the securities indicated. We will not
receive any proceeds from the sale of the securities by the selling
stockholders. The securities included in this list include securites which would
otherwise become saleable from time to time pursuant to Rule 144 as currently in
effect.
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
Greg J. Berlacher
1150 First Avenue
#600
King of Prussia, PA 19406 120,000(1) 120,000(1) .96 0
Dan Gardner -IRA
(Bear Stearns Securities Corp.
Cust. f/b/o Daniel Gardner
534 Camp Woods Circle
Villa Nova, PA 19085 36,668(2) 36,668(2) .29 0
Dan Gardner
534 Camp Woods Circle
Villa Nova, PA 19085 132,000(3) 132,000(3) 1.05 0
Richard Johnson
965 Pinehurst Drive
Chester Springs, PA 19425 33,000(4) 33,000(4) 0.26 0
Jay Seid
c/o Emerging Growth Equities
1150 First Avenue, Suite 600
King of Prussia, PA 19406 132,000(5) 132,000(5) 1.05 0
Robert A. Berlacher - IRA
Bear Stearns SEC Corp. as IRA
Cust. f/b/o Robert A. Berlacher
676 Church Road
Villa Nova, PA 19085 66,000(6) 66,000(6) 0.53 0
BallyShannon Partners, L.P.
325 Bryn Mawr Avenue
Bryn Mawr, PA 19010 290,391(7) 290,391(7) 2.3 0
49
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
BallyShannon Family Partnership
325 Bryn Mawr Avenue
Bryn Mawr, PA 19010 132,000(8) 132,000(8) 1.05 0
Peter Stanley
660 Gatehouse Lane
Philadelphia, PA 19118 132,500(9) 132,500(9) 1.05 0
Matison Euroinvest Ltd.
c/o Budin & Partners
20 Rue Senebier
PO Box 166
Channel 1211, Geneva, Switzerland 157,279(10) 157,279(10) 1.05 0
VFT Special Ventures, Ltd.
1150 First Avenue, Suite 600
King of Prussia, PA 19406 330,000(11) 330,000(11) 2.63 0
Chardonnay Partners
676 Church Road
Villa Nova, PA 19085 33,000(12) 33,000(12) 0.26 0
Cabernet Partners
676 Church Road
Villa Nova, PA 19085 99,000(13) 99,000(13) 0.73 0
Paul Berlacher
Paul D. Berlacher Rev. Trust DTD
5/27/93
7201 Forest Brook Drive
Sylvania, Ohio 33,000(14) 33,000(14) 0.26 0
Franz Berlacher
Heart Specialists of NW Ohio
Profit Sharing/401K Plan fbo
Franz Berlacher
5549 Ginger Tree Lane
Toledo, OH 43623 33,000(15) 33,000(15) 2.05 0
50
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
Northwood Capital Partners, LP
1150 First Avenue, Suite 600
King of Prussia, PA 19406 264,000(16) 264,000(16) 0.53 0
Porter Partners LP
300 Drakes Landing Road
Suite 300
Greenbrae, CA 94904 66,000(17) 66,000(17) 2.37 0
Christopher Cummings
475 Stonehaven Drive
Kettering, OH 45429 300,000(18) 300,000(18) 2.37 0
Agile Partners, L.P.
3500 Alameda De Las Pulgas
Suite 200
Menlo Park, CA 94025 1,299,891(19) 1,299,891(19) 3.88 0
Sandor Capital Master Fund, LP
2828 Routh Street, Suite 500
Dallas, Texas, 75201 1,000,000(20) 1,000,000(20) 7.69 0
John Lemak
4410 Bordeaux Ave
Dallas, Texas 75205 200,000(21) 200,000(21) 1.53 0
London Family Trust
212 Aurora Drive
Motecito, CA 93108 999,891(22) 999,891(22) 7.69 0
Carlton Meyer
1106 Ednor Road
Silver Springs, MD 20905 99,947(23) 99,947(23) 0.80 0
George King
5577 Vantage Point Road
Columbia, MD 21044 299,947(24) 299,947(24) 2.37 0
Brian Barton
19816 Meredith Drive
Derwood, MD 20855 299,947(25) 299,947(25) 2.37 0
51
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
Mark Nicosia
21809 Gaithers Meadow Lane
Brookville, MD 20833 299,947(26) 299,947(26) 2.37 0
Burlingame Equity Investors
(Offshore) Ltd.
1 Sansome Street
Suite 2900
San Francisco, CA 94104 16,779(27) 16,779(27) 0.13 0
Burlingame Equity Investors, LP
1 Sansome Street
Suite 2900
San Francisco, CA 94104 84,891(28) 84,891(28) 0.68 0
Attractor Capital Fund 1, LLC
1637 Oakwood Drive
Unit S222
Norberth, PA 19072 699,891(29) 699,891(29) 5.45 0
Raleigh Ralls
744 Spruce Street
Boulder, CO 80302 499,947(30) 499,947(30) 3.52 0
Katherine O'Leary
2819 Fourth Street
Boulder, CO 80304 149,947(31) 149,947(31) 1.19 0
Richard O'Leary
2819 Fourth Street
Boulder, CO 80304 149,947(32) 149,947(32) 1.19 0
Alon Kutai
5423 Foxhound Way
San Diego, CA 92130 200,000(33) 200,000(33) 1.59 0
Bryan Smyth
4417 Tivoli Street
San Diego, CA 92107 50,000(34) 50,000(34) 0.40 0
John & Cindy Boyle
375 Fairview Farms Road
Campo Bello, SC 29322 60,000(35) 60,000(35) 0.48 0
52
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
Michael Pruitt
11502 Stonebrier Drive
Charlotte, NC 28277 50,000(36) 50,000(36) 0.40 0
Craig Samuels
13990 Rancho Dorado
San Diego, CA 92130 100,000(37) 100,000(37) 0.80 0
Schreiber Living Trust
12220 El Camino Real
Suite 400
San Diego, CA 92130
Dan Schreiber ###-##-#### 49,947(38) 49,947(38) 0.40 0
John Sutton Vice President --
1801 Warner Ranch Drive, #1718 Engineering of
Round Rock, Texas 78664 240,625 240,625 1.92 0 Catcher, Inc.
Steven A. Moore
2250 Big Pine Road
Escondido, CA 15,542 15,542 0.12 0
Campbell Family Trust
4360 E. Burchell Drive
Hayden Lake, ID 83835 31,098 31,098 0.25 0
Aldrigde Industries, Inc.
525 Round Rock West #275
Round Rock, Texas 78681 61,250 61,250 0.43 0
Ira Tabankin is a
Director and
Secretary of the
Ira J. Tabankin Company and Chief
38881 Irish Corner Road Technology Officer of
Lovettesville, VA 20180 2,232,341 2,232,341 17.86 0 Catcher
Charles Sander is the
Charles Sander President and Chief
39526 Charlestown Pike Executive Officer of
Hamilton, VA 20158-3322 2,232,341 2,232,341 17.86 0 the Company
53
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
Robert Prag is a principal
of Del Mar Consulting Group,
which has a Consulting
Robert Prag Agreement with Catcher, Inc.
2455 El Amigo Road See "Releated Party
Del Mar, CA 92014 738,749(39) 591,826(39) 4.73 0 Transactions"
Kai Hansen is a principal
of Del Mar Consulting Group,
which has a Consulting
Kai Hansen Agreement with Catcher, Inc.
P.O. Box 12610 See "Releated Party
San Diego, CA 92112 437,500(40) 437,500(40) 3.50 0 Transactions"
Hayden Communications, Inc.
Hayden Communications, Inc. provides consulting services
1401 Hewens Drive to Catcher. See "Releated
North Myrtle Beach, SC 29582 437,500(41) 437,500(41) 3.50 0 Party Transactions"
Former Director,
Nicolas Rigopulos Chief Executive Officer and
PO Box 415 Chief Financial Officer of
Boston, MA 02117 258,462 63,166 2.06 1.53 the Company
Paul Manion is formerly a
consultant to the Company
pursuant to a Consulting
Agreement dated July 28,
2003 pursuant to which
Mr. Manion was issued
1,000,000 shares of our
Paul Mannion common stock that was
4390 Rivercross Drive registered on Form S-8
Norcross, VA 30092 231,482 61,458 1.85 1.34 dated September 15, 2003.
Jeff Gilford Jeff Gilford is the
3310 Avenida Anacap Chief Financial
Carlsbad, CA 92009 234,167(42) 65,000(42) 1.84 1.33 Officer of the Company
54
TOTAL SHARES % BEFORE % AFTER
NAME AND ADDRESS SHARES OWNED REGISTERED OFFERING OFFERING RELATIONSHIP (IF ANY)
- ----------------------------------------------------------------------------------------------------------------------------------
Stan Blackburn is a
principal of Blackford
Partners which provided
accounting advisory
Stan Blackburn services to the Company.
3310 Avenida Anacap See "Releated Party
Carlsbad, CA 92009 20,000(43) 20,000(43) 0.16 0 Transactions"
- ----------
(1) Reflects 60,000 shares of common stock, a Series A Warrant to purchase
30,000 shares of common stock and a Series B Warrant to purchase 30,000
shares of common stock
(2) Reflects 18,334 shares of common stock, a Series A Warrant to purchase
9,167 shares of common stock and a Series B Warrant to purchase 9,167
shares of common stock
(3) Reflects 66,000 shares of common stock, a Series A Warrant to purchase
33,000 shares of common stock and a Series B Warrant to purchase 33,000
shares of common stock
(4) Reflects 16,500 shares of common stock, a Series A Warrant to purchase
8,250 shares of common stock and a Series B Warrant to purchase 8,250
shares of common stock
(5) Reflects 66,000 shares of common stock, a Series A Warrant to purchase
33,000 shares of common stock and a Series B Warrant to purchase 33,000
shares of common stock
(6) Reflects 33,000 shares of common stock, a Series A Warrant to purchase
16,500 shares of common stock and a Series B Warrant to purchase 16,500
shares of common stock
(7) Reflects 145,195 shares of common stock, a Series A Warrant to purchase
72,598 shares of common stock and a Series B Warrant to purchase 72,598
shares of common stock
(8) Reflects 66,000 shares of common stock, a Series A Warrant to purchase
33,000 shares of common stock and a Series B Warrant to purchase 33,000
shares of common stock
(9) Reflects 66,250 shares of common stock, a Series A Warrant to purchase
33,125 shares of common stock and a Series B Warrant to purchase 33,125
shares of common stock
(10) Reflects 78,639 shares of common stock, a Series A Warrant to purchase
39,320 shares of common stock and a Series B Warrant to purchase 39,320
shares of common stock
(11) Reflects 165,000 shares of common stock, a Series A Warrant to purchase
82,500 shares of common stock and a Series B Warrant to purchase 82,500
shares of common stock. Gregory Berlacher exercises voting and
dispositive power with respect to the shares of common stock offered by
this entity for resale under this prospectus.
(12) Reflects 16,500 shares of common stock, a Series A Warrant to purchase
8,250 shares of common stock and a Series B Warrant to purchase 8,250
shares of common stock. Robert A. Berlacher exercises voting and
dispositive power with respect to the shares of common stock offered by
this entity for resale under this prospectus.
(13) Reflects 49,500 shares of common stock, a Series A Warrant to purchase
24,750 shares of common stock and a Series B Warrant to purchase 24,750
shares of common stock. Robert A. Berlacher exercises voting and
dispositive power with respect to the shares of common stock offered by
this entity for resale under this prospectus.
(14) Reflects 16,500 shares of common stock, a Series A Warrant to purchase
8,250 shares of common stock and a Series B Warrant to purchase 8,250
shares of common stock
(15) Reflects 16,500 shares of common stock, a Series A Warrant to purchase
8,250 shares of common stock and a Series B Warrant to purchase 8,250
shares of common stock. Franz Berlacher exercises voting and
dispositive power with respect to the shares of common stock offered by
this entity for resale under this prospectus.
(16) Reflects 132,000 shares of common stock, a Series A Warrant to purchase
66,000 shares of common stock and a Series B Warrant to purchase 66,000
shares of common stock. Robert A. Berlacher exercises voting and
dispositive power with respect to the shares of common stock offered by
this entity for resale under this prospectus.
55
(17) Reflects 33,000 shares of common stock, a Series A Warrant to purchase
16,500 shares of common stock and a Series B Warrant to purchase 16,500
shares of common stock
(18) Reflects 150,000 shares of common stock, a Series A Warrant to purchase
75,000 shares of common stock and a Series B Warrant to purchase 75,000
shares of common stock
(19) Reflects 649,945 shares of common stock, a Series A Warrant to purchase
324,973 shares of common stock and a Series B Warrant to purchase
324,973 shares of common stock
(20) Reflects 500,000 shares of common stock, a Series A Warrant to purchase
250,000 shares of common stock and a Series B Warrant to purchase
250,000 shares of common stock. John Lemack exercises voting and
dispositive power with respect to the shares of common stock offered by
this entity for resale under this prospectus.
(21) Reflects 100,000 shares of common stock, a Series A Warrant to purchase
50,000 shares of common stock and a Series B Warrant to purchase 50,000
shares of common stock
(22) Reflects 499,945 shares of common stock, a Series A Warrant to purchase
249,973 shares of common stock and a Series B Warrant to purchase
249,973 shares of common stock
(23) Reflects 49,973 shares of common stock, a Series A Warrant to purchase
24,987 shares of common stock and a Series B Warrant to purchase 24,987
shares of common stock
(24) Reflects 149,973 shares of common stock, a Series A Warrant to purchase
74,987 shares of common stock and a Series B Warrant to purchase 74,987
shares of common stock
(25) Reflects 149,973 shares of common stock, a Series A Warrant to purchase
74,987 shares of common stock and a Series B Warrant to purchase 74,987
shares of common stock
(26) Reflects 149,973 shares of common stock, a Series A Warrant to purchase
74,987 shares of common stock and a Series B Warrant to purchase 74,987
shares of common stock
(27) Reflects 8,389 shares of common stock, a Series A Warrant to purchase
4,195 shares of common stock and a Series B Warrant to purchase 4,195
shares of common stock
(28) Reflects 42,445 shares of common stock, a Series A Warrant to purchase
21,223 shares of common stock and a Series B Warrant to purchase 21,223
shares of common stock
(29) Reflects 349,945 shares of common stock, a Series A Warrant to purchase
174,973 shares of common stock and a Series B Warrant to purchase
174,973 shares of common stock
(30) Reflects 249,973 shares of common stock, a Series A Warrant to purchase
124,987 shares of common stock and a Series B Warrant to purchase
124,987 shares of common stock
(31) Reflects 74,973 shares of common stock, a Series A Warrant to purchase
37,487 shares of common stock and a Series B Warrant to purchase 37,487
shares of common stock
(32) Reflects 74,973 shares of common stock, a Series A Warrant to purchase
37,487 shares of common stock and a Series B Warrant to purchase 37,487
shares of common stock
(33) Reflects 100,000 shares of common stock, a Series A Warrant to purchase
50,000 shares of common stock and a Series B Warrant to purchase
50,0000 shares of common stock
(34) Reflects 25,000 shares of common stock, a Series A Warrant to purchase
12,500 shares of common stock and a Series B Warrant to purchase 12,500
shares of common stock
(35) Reflects 30,000 shares of common stock, a Series A Warrant to purchase
15,000 shares of common stock and a Series B Warrant to purchase 15,000
shares of common stock
(36) Reflects 25,000 shares of common stock, a Series A Warrant to purchase
12,500 shares of common stock and a Series B Warrant to purchase12,500
shares of common stock
(37) Reflects 50,000 shares of common stock, a Series A Warrant to purchase
25,000 shares of common stock and a Series B Warrant to purchase 25,000
shares of common stock
(38) Reflects 24,973 shares of common stock, a Series A Warrant to purchase
12,487 shares of common stock and a Series B Warrant to purchase 12,487
shares of common stock
(39) Based upon the ownership by Robert Prag of 530,542 shares of Common
Stock that were automatically converted from Series A Preferred Stock
following the Reverse Split, 61,284 shares issued upon conversion of
certain convertible Promissory Notes, 27,778 issued on conversion of
warrants and 119,145 shares of common stock held directly by Mr. Prag.
Robert Prag has agreed that 530,542 shares of common stock issued upon
conversion of the Series A Preferred Stock is subject to a restriction
on resale for a period of one year from the closing of the Acquisition
pursuant to a letter agreement dated July 28, 2005.
(40) Kai Hansen has agreed that his common stock is subject to a restriction
on resale for a period of one year from the closing of the Acquisition
pursuant to a letter agreement dated July 28, 2005.
(41) Hayden Communications, Inc. has agreed that his common stock is subject
to a restriction on resale for a period of one year from the closing of
the Acquisition pursuant to a letter agreement dated July 28, 2005.
56
(42) Reflects 65,000 shares of common stock issuable to Mr. Gilford upon
exercise of a Warrant issued to Mr. Gilford by the Company and 184,000
shares of common stock issuable upon exercise of options granted to Mr.
Gilford, subject to shareholder approval.
(43) Reflects 20,000 shares of common stock issuable to Mr. Blackburn upon
exercise of a Warrant issued to Mr. Blackburn by the Company
BROKER-DEALER AND OTHER AFFILIATIONS
To our knowledge, the following selling stockholders are broker-dealers or
affiliates of broker-dealers:
Peter G. Stanley and Jay Seid are selling shareholders and employees of
Emerging Growth Equities, a registered broker-dealer.
Dan Gardner is a selling shareholder, has dispositive authority with
respect to Bear Stearns Securities Corp. Cust. f/b/o Daniel Gardner and is an
affiliate of Emerging Growth Equities, a registered broker dealer.
Robert Berlacher has dispositive authority with respect to Bear Stearns
SEC Corp. as IRA Cust. f/b/o Robert A Berlacher, a selling shareholder and iss
an affiliate of Emerging Growth Equities, a registered broker dealer.
Each of Northwood Capital Partners, LP, Cabernet Partners, LP, and
Chardonnay Partners, LP is a selling shareholder. Robert A. Berlacher exercises
voting and dispositive power with respect to the shares of common stock offered
by these entities for resale under this prospectus. Mr. R. Berlacher is an
affiliate of Emerging Growth Equities, a registered broker-dealer.
VFT Special Ventures, Ltd is a selling shareholder. Greg Berlacher
exercises voting and dispositive power with respect to the shares of common
stock offered by this entity. Mr. G. Berlacher is an affiliate of Emerging
Growth Equities, a registered broker-dealer.
Sandor Capital Master Fund, L.P. is a selling shareholder. We
understand that John S. Lemak is a general partner of Sandor Capital and as such
exercises voting and dispositive power with respect to the shares of common
stock offered by Sandor Capital for resale under this prospectus. Mr. Lemak is
also an affiliate of The (Wilson) Williams Financial Group, a registered
broker-dealer.
BLUE SKY
Thirty-five states have what is commonly referred to as the "standard
manual exemption" for secondary trading of securities such as those to be resold
by selling stockholders under this registration statement. In these states, so
long as we obtain and maintain a listing in one of the commonly accepted
standard manuals e.g. Standard and Poor's Corporate Manual, and the manual sets
forth certain information: (1) the names of our officers and directors, (2) our
balance sheet, and (3) our profit and loss statement for either the fiscal year
preceding the balance sheet or for the most recent fiscal year of operations,
secondary trading can occur without any filing, review or approval by state
regulatory authorities in these states. These states are: Alaska, Arizona,
Arkansas, Colorado, Connecticut, Delaware, District of Columbia, Delaware,
Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan,
Mississippi, Missouri, Nebraska, Nevada, New Jersey, New Mexico, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah,
Washington, West Virginia, and Wyoming. We cannot secure this listing, and thus
this qualification, until after this registration statement is declared
effective. Once we secure this listing, secondary trading can occur in these
states without further action.
57
We currently do not intend to and may not be able to qualify securities
for resale in other states which require shares to be qualified before they can
be resold by our stockholders.
We are required to pay certain fees and expenses incurred by us
incident to the registration of the shares. We have agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act of 1933.
Because selling stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933, they will be subject to the
prospectus delivery requirements of the Securities Act of 1933. In addition, any
securities covered by this prospectus which qualify for sale pursuant to Rule
144 under the Securities Act of 1933 may be sold under Rule 144 rather than
under this prospectus. Each selling stockholder has advised us that they have
not entered into any agreements, understandings or arrangements with any
underwriter or broker-dealer regarding the sale of the resale shares. There is
no underwriter or coordinating broker acting in connection with the proposed
sale of the resale shares by the selling stockholders.
We agreed to keep this prospectus effective until the later of (i) May
4, 2007, or (B) two (2) years from the date that all of the warrants outstanding
as of the date hereof have been converted into common stock, or (C) such time
that all of the common stock registered for resale hereunder has been sold under
Rule 144(k). The resale shares will be sold only through registered or licensed
brokers or dealers if required under applicable state securities laws. In
addition, in certain states, the resale shares may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.
Under applicable rules and regulations under the Securities Exchange
Act of 1934, any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of the
distribution. In addition, the selling stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases and
sales of shares of our common stock by the selling stockholder or any other
person. We will make copies of this prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
58
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
At the date hereof we are authorized by our certifiicate of
incorporation to issue an aggregate of 50,000,000 shares of common stock, par
value $0.001 per share and 999,999 shares of "blank check" preferred stock, par
value $0.001 per share. As of July 15, 2005, 12,500,369 shares of common stock
are outstanding and held of record by 183 stockholders and one share of Series A
Convertible Preferred Stock is be outstanding.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. There is no
cumulative voting for the election of directors. Subject to the prior rights of
any class or series of preferred stock which may from time to time be
outstanding, if any, holders of common stock are entitled to receive ratably,
dividends when, as, and if declared by our board of directors out of funds
legally available for that purpose and, upon our liquidation, dissolution, or
winding up, are entitled to share ratably in all assets remaining after payment
of liabilities and payment of accrued dividends and liquidation preferences on
the preferred stock, if any. Holders of common stock have no preemptive rights
and have no rights to convert their common stock into any other securities. The
outstanding common stock is validly authorized and issued, fully-paid and
nonassessable.
The shares of common stock offered in this prospectus have been fully
paid and not liable for further call or assessment. Holders of the common stock
do not have cumulative voting rights, which means that the holders of more than
one half of the outstanding shares of common stock, subject to the rights of the
holders of the preferred stock, if any, can elect all of our directors, if they
choose to do so. In this event, the holders of the remaining shares of common
stock would not be able to elect any directors. Except as otherwise required by
Colorado law, and subject to the rights of the holders of preferred stock, if
any, all stockholder action is taken by the vote of a majority of the
outstanding shares of common stock voting as a single class present at a meeting
of stockholders at which a quorum consisting of a majority of the outstanding
shares of common stock is present in person or proxy.
PREFERRED STOCK
We have outstanding one share of Series A Preferred Stock held by Ira
Tabankin. The holder of the our Series A Preferred Stock have the same rights as
the holders of our common stock with respect to dividends and upon our
liquidation, dissolution or winding up of our affairs, except that the holder of
the Series A Preferred Stock has the right to appoint one director to our board
of directors. Accordingly, for so long as Mr. Tabankin holds the share of Series
A Preferred Stock and it has not been converted, Mr. Tabankin shall have the
right to appoint one member to our board of directors. The Series A Preferred
Stock shall convert to common stock on the earliest of the third anniversary of
the Acquisition or the election by Mr. Tabankin to convert.
In addition, we are authorized to issue up to 999,999 shares of "blank
check" preferred stock. Preferred stock may be issued in one or more series and
having the rights, privileges and limitations, including voting rights,
conversion privileges and redemption rights, as may, from time to time, be
determined by the board of directors. Preferred stock may be issued in the
future in connection with acquisitions, financings, or other matters as the
board of directors deems appropriate. In the event that any shares of preferred
stock are to be issued, a certificate of designation containing the rights,
privileges and limitations of such series of preferred stock shall be filed with
the Secretary of State of the State of Delaware. The effect of such preferred
stock is that, subject to Federal securities laws and Delaware law, the board of
directors alone, may be able to authorize the issuance of preferred stock which
could have the effect of delaying, deferring, or preventing our change in
control without further action by the stockholders, and may adversely affect the
voting and other rights of the holders of the common stock.
59
The issuance of preferred stock with voting and conversion rights may also
adversely affect the voting power of the holders of common stock, including the
loss of voting control to others.
STOCK SYMBOL; TRADING OF COMMON STOCK
We currently trade on the OTC Bulletin Board under the symbol "CTHH".
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is U. S. Stock
Transfer, 1745 Gardena Ave Glendale, CA 91204.
DIRECTORS' LIMITATION OF LIABILITY
Our certificate of incorporation and by-laws include provisions to
eliminate the personal liability of directors for monetary damages resulting
from breaches of their fiduciary duty, except for liability for breaches of the
duty of loyalty, acts, or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, violations under Section
174 of Delaware General Corporation Law, or for any transaction from which the
director derived an improper personal benefit. We believe that these provisions
are necessary to attract and retain qualified persons as directors and officers.
Effective June 29, 2005, our board of directors amended our bylaws to
provide that we will indemnify our officers and directors and advance expenses
to our officers and directors, to the extent permitted by the laws of the State
of Delaware. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.
We have directors and officers liability insurance in an amount of
$5,000,000.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
as stated in the foregoing provisions or otherwise, we have been advised that,
in the opinion of the SEC, this indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
60
SHARES OF THE COMPANY ELIGIBLE FOR FUTURE SALE
Prior to the date of this prospectus, there has been a limited public
market for our common stock. Sales of substantial numbers of shares of our
common stock in the public market following this offering, or the perception
that such sales may occur, could adversely affect prevailing market prices of
our shares.
Assuming no exercise of options outstanding, and assuming exercise of
4,585,386 warrants to purchase shares of our common stock, there are 17,085,755
shares of our common stock issued and outstanding as of the date of this
prospectus. These shares of common stock will be deemed to be "RESTRICTED
SECURITIES" under Rule 144. Restricted securities may only be sold in the public
market pursuant to an effective registration statement under the Act or pursuant
to an exemption from registration under Rule 144, Rule 701 or Rule 904 under the
Act. These rules are summarized below.
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
As of the date of this prospectus, we believe that up to 1,566,742
shares may be eligible for resale. 10,905,018 shares of common stock and
4,500,386 shares of common stock issuable upon exercise of warrants may become
eligible for resale under Rule 144 on May 4, 2006 subject to volume, manner of
sale and other limitations under Rule 144. 85,000 shares of common stock
issuable upon exercise of warrants may become eligible for resale under Rule 144
on June 24, 2006 subject to volume, manner of sale and other limitations under
Rule 144.
All shares of common stock of shareholders whose shares are included in
the foregoing calculations are included in the shares of common stock being
registered in the registration statement of which this prospectus forms a part
of.
RULE 144
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of common stock for at least one year is entitled to
sell within any three-month period a number of shares that does not exceed the
greater of:
o 1.0% of the number of shares of common stock outstanding, which is
approximately 125,003 shares of common stock; or
o the average weekly trading volume of the shares of common stock
during the four calendar weeks preceding the filing of a notice on
Form 144 in connection with the sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. In addition, under Rule 144(k) as currently in effect, a person:
o who is not considered to have been one of our affiliates at any time
during the 90 days preceding a sale; and
o who has beneficially owned the shares proposed to be sold for at
least two years, including the holding period of any prior owner
other than an affiliate,
is entitled to sell his shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
RULE 701
In general, under Rule 701, any of our employees, directors, officers,
consultants, or advisors (other than affiliates) who purchased shares of common
stock from us under a compensatory stock option plan or other written agreement
before the closing of the Acquisition is entitled to resell these shares. These
shares can be resold 90 days after the effective date of the Acquisiton in
reliance on Rule 144, without having to comply with restrictions, including the
holding period, contained in Rule 144.
61
However, the Plan has a lock-up provision and shares issued under it are not
eligible for resale at this time. Pursuant to such lock-up provision any common
stock or other equity securities issued or issuable upon exercise of an option
may not be sold, transferred or disposed of until the earlier of (i) the date
that the registration statement of which this prospectus forms a part of has
been filed with and declared effective by the SEC, and (ii) the date that is the
first anniversarry of the grant date.
The SEC has indicated that Rule 701 will apply to typical share options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of these options, including exercises after the date of this
prospectus. Securities issued in reliance on Rule 701 are restricted securities
and, subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold:
o by persons other than affiliates subject only to the manner of sale
provisions of Rule 144; and
o by affiliates under Rule 144 without compliance with its one year
minimum holding period requirement.
OPTIONS
We intend to file one or more registration statements on Form S-8 under
the Act to register 2,319,000 shares of common stock reserved for issuance under
our 2005 Stock Option Plan, which is subject to stockholder approval. The
registration statement on Form S-8 will become effective automatically upon
filing thereof. As of the date of this prospectus, options to purchase 918,000
shares of common stock were issued and outstanding, of which no options to
purchase shares of common stock had vested and had not been exercised. Shares of
common stock issued upon exercise of a share option and registered under the
Form S-8 registration statement will, subject to vesting provisions and Rule 144
volume limitations applicable to our affiliates and the lock-up provision
described above, be available for sale in the open market immediately.
62
PLAN OF DISTRIBUTION
The selling stockholders, and any of their pledgees, asignees and
successors-in-interest, may from time to time, sell any or all of their shares
of our common stock on any stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits Investors;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales (other than short sales established prior to the
effectiveness of the registration statement to which this prospectus
is a part);
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
Broker-dealers engaged by selling stockholders may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each selling stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the registrable securities owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell shares of common Stock from time
to time under this prospectus, or under an amendment to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
Upon us being notified in writing by a selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act of 1933, disclosing (i) the name of each such selling stockholder
and of the participating broker-dealer(s), (ii) the number of shares involved,
(iii) the price at which such the shares of common stock were sold, (iv) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out in this prospectus, and (vi)
other facts material to the transaction. In addition, upon us being notified in
writing by a selling stockholder that a donee or pledge intends to sell more
than 500 shares of common stock, a supplement to this prospectus will be filed
if then required in accordance with applicable securities law.
63
The selling stockholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933. Each selling
stockholder has represented and warranted to us that it does not have any
agreement or understanding, directly or indirectly, with any person to
distribute the common stock.
We are required to pay all fees and expenses incident to the
registration of the shares.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for us by Piliero Goldstein Kogan & Miller, LLP.
EXPERTS
The financial statements appearing in this prospectus and registration
statement have been audited by Vitale, Caturano & Company, Ltd., independent
accountants; to the extent and for the periods indicated in their report
appearing elsewhere herein, and are included in reliance upon such report and
upon the authority of such firms as experts in accounting and auditing.
ADDITIONAL INFORMATION
We filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933 for the shares of common stock in this offering. This
prospectus does not contain all of the information in the registration statement
and the exhibits and schedule that were filed with the registration statement.
For further information with respect to us and our common stock, we refer you to
the registration statement and the exhibits that were filed with the
registration statement. Statements contained in this prospectus about the
contents or any contract or any other document that is filed as an exhibit to
the registration statement are not necessarily complete, and we refer you to the
full text of the contract or other document filed as an exhibit to the
registration statement. A copy of the registration statement and the exhibits
and schedules that were filed with the registration statement may be inspected
without charge at the Public Reference Room maintained by the SEC at 450 Fifth
Street, N.W., Washington, DC 20549, and copies of all or any part of the
registration statement may be obtained from the SEC upon payment of the
prescribed fee. Information regarding the operation of the Public Reference Room
may be obtained by calling the SEC at 800-SEC-0330. The SEC maintains a web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is www.sec.gov.
We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934, and in accordance with the Securities
Exchange Act of 1934, we file annual, quarterly and special reports, and other
information with the SEC. These periodic reports, and other information are
available for inspection and copying at the regional offices, public reference
facilities and website of the SEC referred to above.
64
LCM HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
Three Months Ended March 31, 2005 and the Period from
Inception (March 31, 2004) to December 31, 2004
================================================================================
C O N T E N T S
---------------
PAGE
Independent Auditor's Report..................................... F-2
Financial Statements:
Balance Sheets.......................................... F-3
Statements of Operations................................ F-4
Statements of Cash Flows................................ F-5
Notes to Financial Statements........................... F-6 to F-7
F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
LCM Holdings
San Diego, California
We have audited the accompanying balance sheet of LCM Holdings (the Company), a
Delaware corporation in the development stage, as of December 31, 2004 and the
related statement of operations and cash flows for the period from inception
(March 31, 2004,) to December 31, 2004. These 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of LCM Holdings as of December 31,
2004 and the results of its operations and its cash flows for the period from
inception (March 31, 2004) to December 31, 2004 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Vitale, Caturano & Company, Ltd.
VITALE, CATURANO & COMPANY, LTD.
June 28, 2005
Boston, Massachusetts
F-2
LCM HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
MARCH 31,
2005 December 31,
(UNAUDITED) 2004
------------ ------------
ASSETS
Cash and cash equivalents $ 160 $ 364
------------ ------------
$ 160 $ 364
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 800,132 $ 718,729
Notes payable 30,000 30,000
------------ ------------
Total current liabilities 830,132 748,729
------------ ------------
Stockholders' deficit:
Common stock, $.001 par 1 1
Accumulated deficit (829,973) (748,366)
------------ ------------
Total stockholders' deficit (829,972) (748,365)
------------ ------------
$ 160 $ 364
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
LCM HOLDINGS
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations
THREE MONTHS Period from
ENDED Inception
MARCH 31, (March 31, 2004)
2005 to December 31,
(UNAUDITED) 2004
------------ ----------------
Revenues $ -- $ --
------------ ------------
Total revenues -- --
------------ ------------
Research and development 25,765 647,472
General and administrative 55,842 100,894
------------ ------------
Total operating expenses 81,607 748,366
------------ ------------
------------ ------------
Net loss (81,607) (748,366)
------------ ------------
Accumulated deficit, beginning of period (748,366) --
------------ ------------
Accumulated deficit, end of period $ (829,973) $ (748,366)
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
THREE MONTHS Period from
ENDED Inception
MARCH 31, (March 31, 2004)
2005 to December 31,
(UNAUDITED) 2004
----------- ---------------
Cash flows from operating activities:
Net loss $ (81,607) $ (748,366)
Adjustments to reconcile net loss to
Net cash provided by (used in) operating
activities:
Change in current assets and liabilities:
Increase in:
Accounts payable 81,403 718,729
Notes payable -- 30,000
----------- -----------
Net cash provided by (used in)
operating activities (204) 363
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock -- 1
----------- -----------
Net cash provided by financing activities -- 1
----------- -----------
Net increase (decrease) in cash and cash equivalents (204) 364
Cash and cash equivalents, beginning of period 364 --
----------- -----------
Cash and cash equivalents, end of period $ 160 $ 364
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
1. NATURE OF ORGANIZATION
On May 4, 2005, Catcher, Inc., a Delaware corporation, entered into an
agreement with LCM Technologies, Inc., a Delaware corporation, to
purchase substantially all of its assets and liabilities (such assets and
liabilities as acquired by Catcher, Inc. herein referred to as LCM
Holdings or the Company). The Company is in the development stage and was
devoting substantially all of its efforts toward technology research and
development.
Also, on May 4, 2005, Catcher, Inc. was acquired by U.S. Telesis Holdings
Inc. ("USTH") through a series of stock purchases with the shareholders
of Catcher, Inc. ("Catcher") (the "Acquisition"). In connection with the
Acquisition, USTH 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 USTH, (ii) all of the issued and outstanding Series A
Preferred Stock of Catcher Inc. in exchange for 733,778 shares of
authorized Series A Preferred Stock, $.001 par value of USTH. In
addition, USTH assumed Catcher's obligation to issue an aggregate of
32,402,600 shares of common stock to warrant holders.
Immediately prior to the acquisition of Catcher by USTH, 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.
The Company is subject to risks common to rapid growth technology-based
companies, including a limited operating history, dependence on key
personnel, the need to raise capital, rapid technological change,
competition from substitute products and larger companies, and the need
for the successful development and marketing of commercial products and
services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL DATA
The accompanying financial statements as of March 31, 2005 are unaudited.
In the opinion of management, these interim statements have been prepared
on the same basis of accounting as the audited financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the results of the interim
periods. The financial and other data disclosed in these notes to the
financial statements for these periods are not necessarily indicative of
the results to be expected for any future periods.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
F-6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...continued
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of 90 days or less to be cash equivalents.
INCOME TAXES
No income tax provision is recorded since the Company has incurred losses
since its inception. Also, due to the uncertainty of future taxable
income, no future tax benefits of incurred losses have been recognized.
Further, since the Company experienced a change in ownership control on
May 4, 2005 (see Note 1), there will be limitations with respect to the
future utilization of income tax loss carryforwards.
CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposit accounts, which at times,
may exceed federally insured limits. The Company has not exceeded the
federally insured limits as of December 31, 2004. The Company believes it
is not exposed to any significant credit risk on cash.
3. NOTES PAYABLE
At December 31, 2004, the balance in the two outstanding promissory notes
was $30,000. The notes bear an interest rate of 10% and were due by
December 31, 2004. These notes were paid in 2005.
4. COMMON STOCK
During 2004, the Company issued one share of common stock to the sole
shareholder for a nominal value.
5. RELATED PARTY TRANSACTIONS
CONTRIBUTED SERVICES
During the period ended December 31, 2004, the shareholder contributed
services to the Company. No expense was attributed to these services
during the period ended December 31, 2004 as the Company is still in the
early stage of development.
At December 31, 2004, there was $47,880 due to the shareholder. The
amount is included in accounts payable in the accompanying balance sheet.
6. SUBSEQUENT EVENTS (UNAUDITED)
On June 23, 2005 a majority of the USTH Company's shareholders approved
an amendment to the Company's certificate of incorporation to change the
Company's name to Catcher Holdings, and effectuate a 1 for 7.2 reverse
split, to be effective on a date to be determined by the Company's Board
of Directors in the near term.
Catcher entered into a Consulting Agreement with Hayden Communications,
Inc. dated as of May 1, 2005 for a period of twelve (12) months at a fee
of $5,000 per month plus reimbursement of certain expenses. Immediately
following the Acquisition, a fee totaling $160,000 was paid to Hayden
F-7
Communications, Inc. in respect to certain services provided in respect
of capital markets consulting, marketing material creation and
production. The agreement may be terminated by either party at the
six-month anniversary. Hayden Communications, Inc. was a shareholder of
Catcher whose shares were acquired by Catcher Holdings in the
Acquisition.
Catcher entered into a Consulting Agreement with The Del Mar Consulting
Group, Inc. ("DCG") for a period of twelve (12) months effective as of
April 21, 2005 at a fee of $5,000 per month plus reimbursement of certain
expenses. DCG was a shareholder of Catcher whose shares were acquired by
Catcher Holdings in the Acquisition.
Catcher entered into a Consulting Agreement with Kai Hansen for a period
of twelve (12) months effective as of April 21, 2005 at a fee of $5,000
per month plus reimbursement of certain expenses. Mr. Hansen was a
shareholder of Catcher whose shares were acquired by Catcher Holdings in
the Acquisition.
Catcher entered into a Services Agreement with BlackFord Partners, Inc.,
dated as of May 6, 2005, whereby BlackFord Partners, Inc. agreed to
provide financial and accounting advisory services to Catcher and us at a
rate of $75 to $125 per hour depending on the type of services rendered.
Pursuant to an Amendment to the Services Agreement, dated as of June 24,
2005, warrants to purchase 85,000 shares of our common stock at an
exercise price of $3.74 was issued to principals of BlackFord, Partners,
Inc., our Chief Financial Officer is a principal of Blackford Partners,
Inc.
Catcher entered into an employment agreement with its Chief Executive
Officer, Chief Technology Officer and Chairman, Chief Financial Officer
of Catcher and the Vice President -- Engineering. The employment
agreements expire at various times through 2008. In conjunction with
agreements the Company paid $35,000 in signing bonuses. The agreements
provide for aggregate salaries of $816,000 per year.
The Chief Financial Officer was granted, subject to shareholder approval,
options to purchase 918,000 shares of common stock of the Company at an
exercise price of $3.74 vesting over three years in three separate
tranches consisting of (1) a first tranche of 580,000 shares, 25% of
which vests on June 16, 2005 with the remaining 75% vesting monthly, pro
rata each month, over the three year period following June 16, 2005, (2)
a second tranche of 193,000, 25% of which vests on June 16, 2006, with
the remaining 75% vesting monthly, pro rata each month, over the three
year period following June 16, 2006 and (3) a third tranche of 145,000
shares, 25% of which vests on June 16, 2007 with the remaining 75%
vesting monthly, pro rata each month, over the three year period
following June 16, 2007. If there is a "Change of Control" of the Company
(as that term will be defined in an agreement between the Company and Mr.
Gilford), all unvested options will immediately vest. However, if Mr.
Gilford's employment is terminated without Cause or for Good Reason (as
each of those terms are defined in the Employment Agreement), any
unvested options in a tranche that had commenced to vest shall
immediately vest. The grant of options are subject to stockholder
approval of a stock option plan of the Company. 227,167 options have
vested as of July 31, 2005. The Company is in the process of determining
the value of the option and will record that value as compensation
expense in the period the option was issued.
F-8
15,490,404 SHARES
CATCHER HOLDINGS, INC.
COMMON STOCK
------------------
PROSPECTUS
[--------------]
------------------
Until [__________], 2005, all dealers that buy, sell, or trade the common stock,
may be required to deliver a prospectus, regardless of whether they are
participating in this offering. This is in addition to the dealers' obligation
to deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our certificate of incorporation includes provisions to eliminate the
personal liability of directors for monetary damages resulting from breaches of
their fiduciary duty, except for liability for breaches of the duty of loyalty,
acts, or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, violations under Section 174 of Delaware General
Corporation Law, or for any transaction from which the director derived an
improper personal benefit. We believe that these provisions are necessary to
attract and retain qualified persons as directors and officers.
We believe that these provisions are necessary to attract and retain
qualified persons as directors and officers.
Effective June 29, 2005, our board of directors amended our Bylaws to
provide that we will indemnify our officers and directors and advance expenses
to our officers and directors, to the extent permitted by the laws of the State
of Delaware. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.
We have directors and officers liability insurance in an amount not
less than $5,000,000.
Insofar as indemnification for liability arising under the Act may be
permitted to our directors, officers and controlling persons as stated in the
foregoing provisions or otherwise, we have been advised that, in the opinion of
the SEC, this indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, if any, payable by the Company relating
to the sale of common stock being registered. All amounts are estimates except
the SEC registration fee.
SEC registration fee.......................................... $8,204.50
Printing and engraving expenses............................... $10,000*
Legal fees and expenses....................................... $40,000*
Accounting fees and expenses.................................. $7,500*
Transfer agent and registrar's fees and expenses.............. $10,000*
Miscellaneous expense......................................... $4,295.50*
Total................................................ $80,000*
- ----------
* Estimates only.
RECENT SALES OF UNREGISTERED SECURITIES
During the last three years, we have issued unregistered securities to
the persons, as described below. None of these transactions involved any
underwriters, underwriting discounts or commissions, except as specified below,
or any public offering, and we believe that each transaction was exempt from the
registration requirements of the Securities Act of 1933 by virtue of Section
4(2) thereof and/or Regulation D promulgated thereunder. All recipients had
adequate access, though their relationships with us, to information about us.
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
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additional warrant and received 558,333 shares of common stock for a total of
1,116,666 shares. 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. 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. 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
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 March
12, 2004.
The Company granted an option to purchase 1,000,000 shares of its
Common Stock to Nick Rigopulos in lieu of salary pursuant to a stock option
agreement dated as of July 30, 2003. The options vested immediately and had an
exercise price of $0.004 per share. The Company recorded $46,000 in connection
with the issuance of the options which is included in administrative expense in
the accompanying statement of operations for the year ended December 31, 2003.
Mr. Rigopulos exercised options to purchase all 1,000,000 shares of Common Stock
on July 30, 2003 for proceeds of $4,000.
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. Mr. Rigopulos exercised
options to purchase all 167,000 shares of Common Stock on March 9, 2004 for
proceeds of $5,010.
The Company issued 3,000,000 shares of Common Stock for services
rendered to consultants pursuant to contracts dated July 28, 2003. The shares
were valued at $150,000 based on a market value of the Company's stock of $0.05
per share.
In July 28, 2003, the Company issued 200,000 shares of Common Stock to
the secretary/director of the Company as compensation for services rendered. The
shares were valued at $10,000, based on a market value of the Company's stock of
$0.05 per share.
On January 8, 2003, the Company issued 300,000 shares of common stock
to an officer of the Company in lieu of salary. The shares were valued at
$1,500, based on a market value of the Company's stock of $.005 per share.
CONVERTIBLE NOTES
Throughout 2004 and early 2005 as described below, we entered into the
following convertible promissory notes with certain of our investors, which
notes were automatically converted effective May 4, 2005 to an aggregate of
1,544,524 shares of common stock upon our acquisition of Catcher:
o 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 December 31, 2004
there is $715 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.
o 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
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January 31, 2005. The notes may only be converted at the option of
the Company. As of December 31, 2004 there is $300 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.
o 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 December 31, 2004 there is $150
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.
o 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. On February 1, 2005 the Company
amended the notes payable to extend the maturity date to January 31,
2006.
o 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.
o 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.
On May 4, 2004, through a series of stock purchase agreements, the
Company issued 34,911,900 shares of its common stock, 733,778 shares of its
Series A Preferred Stock, and Series A and Series B warrants to purchase an
aggregate of 32,402,600 shares of its common stock to the holders of common
stock of Catcher, Inc.
On May 4, 2005, $71,975 of aggregated principal balances of unpaid
convertible notes plus accrued interest were converted into 1,544,524 shares of
common stock.
On June 24, 2005, the Company issued to Stan Blackburn a warrant to
purchase 20,000 shares of its common stock, at an exercise price of $3.74 and
issued to Jeff Gilford a warrant purchase 65,000 shares of its common stock at
an exercise price of $3.74, in each case, in connection for providing consulting
services pursuant to the Services Agreement, dated as of May 6, 2005, by and
between the Company and BlackFord Partners, Inc.
On June 24, 2005, the Company granted to Jeff Gilford options to
purchase 918,000 shares of its common at an exercise price of $3.74 vesting over
three years in three separate tranches, pursuant to the Employment Agreement,
effective as of June 16, 2005, by and between the Company and Mr. Gilford.
II-3
EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
3.1. Certified copy of the Amended and Restated Certificate of
Incorporation of the Registrant incorporated by reference
to Exhibit 3.1 to the Form 8-K dated June 23, 2005 filed
with the SEC on June 28, 2005.
3.2 Bylaws of the Registrant incorporated by reference to
Exhibit 2.2 of the Form 10-SB filed with the SEC on May
29, 2003, as amended by Amendment No. 1 to the Bylaws of
the Registrant incorporated by reference to Exhibit 3.2
to the Form 8K dated July 29, 2005 and filed with the SEC
on August 1, 2005.
4.1 Form of Series A Warrant issued to investors incorporated
by reference to Exhibit 4.1 to the Form 8-K/A dated May
4, 2005 filed with the SEC on July 15, 2005.
4.2 Form of Series B Warrant issued to investors incorporated
by reference to Exhibit 4.2 to the Form 8-K/A dated May
4, 2005 filed with the SEC on July 15, 2005.
4.3 Form of Warrant issued to Stan Blackburn incorporated by
reference to Exhibit 4.1 to the Form 8-K dated June 23,
2005 filed with the SEC on June 28, 2005.
4.4 Form of Warrant issued to Jeff Gilford incorporated by
reference to Exhibit 4.2 to the Form8-K dated June 23,
2005 filed with the SEC on June 28, 2005.
5.1 Opinion of Piliero Goldstein Kogan & Miller, LLP.
10.1 Form of Preferred Stock Purchase Agreement, dated as of
May 4, 2005, by and among the Company, Catcher and the
preferred stockholders of Catcher incorporated by
reference to Exhibit 10.1 to the Form 8-K/A dated May 4,
2005 filed with the SEC on July 15, 2005.
10.2 Form of Stock Purchase Agreement, dated as of May 4,
2005, by and among the Company and the founders holding
common stock of Catcher incorporated by reference to
Exhibit 4.1 to the Form 8-K/A dated May 4, 2005 filed
with the SEC on July 15, 2005.
10.3 Form of Stock Purchase Agreement, dated as of May 4,
2005, by and among the Company and the private investors
in Catcher holding common stock of Catcher incorporated
by reference to Exhibit 4.1 to the Form 8-K/A dated May
4, 2005 filed with the SEC on July 15, 2005.
10.4 Form of Registration Rights Agreement, dated as of May 4,
2005, by and among the Company and the persons listed as
signatories thereto incorporated by reference to Exhibit
4.1 to the Form 8-K/A dated May 4, 2005 filed with the
SEC on July 15, 2005.
II-4
10.5 Employment Agreement, between Jeff Gilford and Catcher,
Inc., the Registrant's subsidiary incorporated by
reference to Exhibit 10.1 to the Form 8-K dated June 23,
2005 and filed with the SEC on June 28, 2005.
10.6 Services Agreement, dated as of May 6, 2005, between the
Registrant and BlackFord Partners Inc., as amended by the
Amendment dated June 24, 2005 incorporated by reference
to Exhibit 10.2 to the Form 8-K dated June 23, 2005 and
filed with the SEC on June 28, 2005.
10.7 Consulting Agreement, effective as of April 21, 2005, by
and between The Del Mar Consulting Group, Inc. and
Catcher incorporated by reference to Exhibit 4.1 to the
Form 8-K/A dated May 4, 2005 filed with the SEC on July
15, 2005.
10.8 Consulting Agreement, dated as of May 1, 2005, by and
between Hayden Communications, Inc. and Catcher
incorporated by reference to Exhibit 4.1 to the Form
8-K/A dated May 4, 2005 filed with the SEC on July 15,
2005.
10.9 Consulting Agreement, effective as of April 21, 2005, by
and between Kai Hansen and Catcher incorporated by
reference to Exhibit 4.1 to the Form 8-K/A dated May 4,
2005 filed with the SEC on July 15, 2005.
10.10 Teaming Agreement with Project Performance Corporation
dated March 29, 2005 incorporated by reference to Exhibit
4.1 to the Form 8- K/A dated May 4, 2005 filed with the
SEC on July 15, 2005.
10.10 Employment Agreement, effective as of Arpi 21, 2005, by
and between Catcher and Charles Sander.
10.11 Employment Agreement, effective as of April 21, 2005, by
and between Catcher and Ira Tabankin.
10.12 Employment Agreement, effective as of April 21, 2005 by
and between Catcher and John Sutton.
10.13 Employment Agreement Amendment Letter dated July 29, 2005
regarding Ira Tabankin incorporated by reference to
Exhibit 10.1 to the Form 8K dated July 29, 2005 and filed
with the SEC on August 1, 2005.
10.14 Employment Agreement Amendment Letter dated July 29, 2005
regarding Charles Sander incorporated by reference to
Exhibit 10.2 to the Form 8K dated July 29, 2005 and filed
with the SEC on August 1, 2005.
10.15 Employment Agreement Amendment Letter dated July 29, 2005
regarding John Sutton incorporated by reference to
Exhibit 10.3 to the Form 8K dated July 29, 2005 and filed
with the SEC on August 1, 2005.
14.1 Code of Ethics incorporated by reference to Exhibit 14.1
to the Form 8-K dated June 23, 2005 and filed with the
SEC on June 28, 2005.
21.1 Catcher, Inc., a Delaware corporation
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23.1 Consent of Vitale, Caturano & Company, Ltd.
23.2 Consent of Piliero Goldstein Kogan & Miller, LLP
(included in Exhibit 5.1 above)
24.1 Power of Attorney (Included on the signature page)
UNDERTAKINGS
The undersigned small business issuer hereby undertakes to:
(1) For determining any liability under the Securities Act of
1933, treat the information omitted from this form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule 424(b) (1), or
(4) or 497(h) under the Securities Act of 1933 as part of this registration
statement as of the time the SEC declared it effective.
(2) For determining any liability under the Securities Act of
1933, treat each post-effective amendment that contains a form of prospectus as
a new registration statement for the securities offered in this registration
statement, and that offering of the securities at that time as the initial BONA
FIDE offering of those securities.
The undersigned small business issuer hereby undertakes with respect to
the securities being offered and sold in this offering: (1) To file, during any
period in which it offers or sells securities, a post-effective amendment to
this Registration Statement to:
(a) Include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(b) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in this 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 SEC pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act of 1933,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
Insofar as indemnification by the undersigned small business issuer for
liabilities arising under the Securities Act of 1933 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 SEC such indemnification is against
public policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Hamilton, Loudon County, Virginia, on
the 29th day of July, 2005.
CATCHER HOLDINGS, INC.
By: /s/ Charles Sander
-------------------
Charles Sander,Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ CHARLES SANDER Chief Executive Officer,
- ----------------------------------- President and Director
Charles Sander (Principal Executive
Officer) July 29, 2005
/s/ JEFF GILFORD Chief Financial Officer
- ----------------------------------- (Principal Financial
Jeff Gilford and Accounting Officer) July 29, 2005
/s/ IRA TABANKIN
- -----------------------------------
Ira Tabankin Secretary and Director July 29, 2005
/s/ CATHAL FLYNN
- -----------------------------------
Rear Admiral (Retired) Cathal Flynn Director July 29, 2005
/s/ H. CLAYTON FOUSHEE, JR.
- -----------------------------------
H. Clayton Foushee, Jr. Director July 29, 2005
II-7