AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON _______, 2000.
REGISTRATION NO.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
High-Tech Travel Services Corporation
(Name of Small Business Issuer in Its charter)
Delaware 4724 22-3686104
----------- ----------------- -----------------
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classifi- Identification Number)
Incorporation or cation Code Number)
Organization)
38 Second Avenue
Atlantic Highlands, NJ 07716
(732) 872-2703
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(Address and Telephone Number of Principal Executive Offices and Principal
Place of Business)
Benjamin Callari, President
38 Second Avenue
Atlantic Highlands, NJ 07716
(732) 872-2703
----------------------------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the Prospectus is expected to be made pursuant to Rule
434, check the following box. / /
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------
Amount Maximum Maximum Amount of
Title of each class of to be offering price aggregate registration
securities to be registered registered per share(1)(2)(3) Offering price(1)(2) fee(1)
- ----------------------------------------------------------------------------------------------------------------
Common Shares par
value $0.0001............. 2,809,402 $0.57 $1,590,562 $795.25
- ----------------------------------------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for purposes of calculating amount of registration fee.
(2) These securities are the subject of a rescission offer to be commenced
following the effectiveness of the Registration Statement, as more fully
described in the prospectus which is a part of this Registration Statement.
The shares of common stock that are subject to the rescission offer were
issued in exchange for cash at prices ranging from $0.50 to $0.70 per
share.
(3) Reflects the average price paid by shareholders receiving recission offer.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION
DATED __________, 2000
PROSPECTUS
HIGH-TECH TRAVEL SERVICES CORPORATION
--------------------------------------------------------------------
RECISSION OFFER AS TO 2,809,402 SHARES OF COMMON STOCK
...........................................................
High Tech Travel Services Corporation is offering to certain of its
shareholders the right to rescind their purchase of shares of our common stock.
The terms and conditions of the recission offer are described in this
Prospectus. The shares subject to this recission offer were purchased from us by
United States persons at prices ranging from $0.50 to $0.70 per share between
October 4, 1999 and March 31, 2000. We are making this this recission offer
because the sales of the shares were made without registration in probable
violation of the registration provisions of Federal securities laws and the
securities laws of various states.
We offer to rescind such sales by repurchasing the shares for an amount
equal to the price paid for the shares, plus accrued interest from the date of
issuance of the shares to the date of repurchase. (The applicable rates of
interest, which are provided by law for residents of various jurisdictions, are
set forth at page 24 under "Rescission Offer"). If you have already resold the
shares, we offer to pay to you the difference between the price you paid to us
for the shares, and the consideration you received on the sale, plus accrued
interest.
THE RESCISSION OFFER WILL EXPIRE AT 5:00 P.M. EASTERN STANDARD TIME ON
__________, 2000, UNLESS THAT DATE IS EXTENDED BY US, IN OUR SOLE DISCRETION,
BUT NOT BEYOND ___________, 2000.
ACCEPTANCE OR REJECTION OF THIS RECISSION OFFER AND INVESTMENT IN THE
COMPANY IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 13 FOR A DISCUSSION OF MATERIAL RISKS THAT SHOULD BE
CONSIDERED BY POTENTIAL INVESTORS. INVESTMENT IN SHARES OF HIGH-TECH TRAVEL
SERVICES CORPORATION IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL MEANS
WHO ARE ABE TO BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT.
THOSE WHO WISH TO HAVE THEIR SHARES REPURCHASED BY THE COMPANY SHOULD
COMPLETE THE RESCISSION ELECTION FORM ATTACHED HERETO AND RETURN THE RESCISSION
ELECTION FORM TO THE COMPANY ACCORDING TO THE INSTRUCTIONS DESCRIBED ON PAGES 8
AND 25 UNDER THE CAPTION "ACCEPTANCE OR REJECTION." IF YOU DO NOT COMPLETE AND
RETURN A FORM OF ACCEPTANCE OR REJECTION PRIOR TO THE EXPIRATION OF THE
RECISSION OFFER, YOU WILL BE DEEMED TO HAVE REJECTED THE RECISSION OFFER
We urge you to read this prospectus carefully before acting on this
offer. If you have any questions regarding the terms and conditions of this
recission offer, you may call one of our representatives at (732) 872-2703.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ________, 2000.
3
TABLE OF CONTENTS
TABLE OF CONTENTS
Prospectus Summary
Risk Factors
Recission Offer
State Law Notices to Certain Offerees
Use of Proceeds
Plan Of Distribution
Dividend Policy
Capitalization
Dilution
Selected Financial Information
Managements Discussion and Analysis of Financial Condition and Results of
Operations
Business
Management
Executive Compensation
Employment Agreements
Stock Option Plan
Limitation on Director's Liability; Indemnification
Certain Transactions
Principal Shareholders
Description of Capital Stock
Transfer Agent
Plan of Distribution
Experts
Shares Eligible for Future Sale
Where You Can Find More Information
Financial Statements
4
PROSPECTUS SUMMARY
This summary discusses certain information contained in this
prospectus, but is only a summary and does not contain all of the information
you should take into account when acting on our recission offer. You should read
and review the entire prospectus, including the section entitled "risk factors"
and the financial statements and the notes to the financial statements, which
appear elsewhere in this prospectus.
This prospectus contains many forward-looking statements. These forward
looking statements are based in managements current beliefs, projections,
estimates and expectations, some or all of which could prove to be in error.
Such "forward-looking statements" can be identified by the use of
forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "estimate" or "continue" or the negatives thereof or other
variations of such words or comparable terminology. Those statements appear in a
number of places in this prospectus and include statements regarding our intent,
belief or current expectations with respect to, among other things: (i) trends
affecting the company's financial condition or results of operations; and (ii)
the company's business and growth strategies.
Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and actual results may differ materially from
those projected, expressed, or implied in the forward-looking statements as a
result of various factors. The accompanying information contained in this
prospectus, including without limitation, the information set forth under the
headings "risk factors," "management's discussion and analysis of financial
condition and results of operations" and "business," identifies important
factors that could cause such differences. Unless otherwise indicated, the
information in this prospectus assumes that no offeree receiving the rescission
offer exercises his right to rescind.
THE COMPANY
High-Tech is a development stage company. It was incorporated in
Delaware on October 1, 1999, and its offices are located at 38 Second Avenue,
Atlantic Highlands, New Jersey, 07716.
We are in the process of acquiring and developing computer software
products for use in the travel industry. We are developing and plan to implement
a powerful software and an Internet strategy which will enable us to produce and
make available a technological program that will combine a variety of functions.
These will include access to the four largest airline Central Reservations
Systems ("CRS") currently in use throughout the travel industry (i.e. Sabre,
Worldspan, Apollo, and Amadeus) and to offerings by hotels, resorts, tour
operators, cruises, consolidators and others. It is believed that the services
and products of the Company will be unique, and will appeal to the
travel/lodging supplier, advertiser, consolidator, travel agent and consumer.
High-Tech intends to market and advertise all of its travel and
travel-related products in world-wide markets. We intend to license access to
our software and database to travel agencies and others, and to market our
software and information products to travel agents, consolidators, tour
operators, hotels, and other travel industry participants, as well as to
consumers.
5
DEVELOPMENT AND BUSINESS STRATEGY
Initially, we intend to continue to develop our software and acquire
the hardware necessary to conduct our travel operations, and expect to be
operational within six months after this offering is concluded. During that
development stage, we will
o Begin to enter into operating arrangements with CRS's, cruise
operators, consolidators, hotels, resorts and others.
o Begin to focus on the distribution of sale of licenses to
travel agents and others who will use our software and
services for the booking of travel and vacation arrangements.
o Once we are up and running with a base of CRS, cruise
operators consolidators hotels resorts, travel agents and
others, we will commence our international advertising
program.
o We will continue to upgrade our services and add ancillary
products.
RECISSION OFFER
Between October, 1999, when High-Tech was organized, and continuing to
March, 2000, High-Tech raised approximately $1,591,000 from investors in an
unregistered offering of our common stock. High-Tech incorrectly believed that
the stock offering were made in accordance with all applicable requirements of
law. However, after further review and as a result of numerous questions about
the offering raised by counsel, regulators and others, we have determined that
we were probably in error, and that the offer and sale of the securities may
have violated the Securities Act of 1933, as amended, and various other Federal
and state securities laws. We are therefore offering to each investor who
purchased shares in that offering, the right to rescind their purchases. We have
entered into a consent order and agreement with the Bureau of Securities of the
State of Oregon to such effect.
You should read and review this prospectus carefully and thoroughly
before deciding whether to accept or reject the recission offer. If you have any
questions regarding the terms and conditions of this recission offer, you may
call one of our representatives at (732) 872-2703.
ACCEPTANCE OR REJECTION OF THE RECISSION OFFER
All offerees are requested to complete the form of election set forth
on Exhibit A to this prospectus and return it to High-Tech Travel Services
Corporation, Attention: Benjamin Callari, President, 38 Second Avenue, Atlantic
Highlands, NJ 07716 as soon as practicable, but in no event should the election
be delivered to the Company later than 2000, the expiration date. The election
should be completed to indicate whether you accept or reject the rescission
offer. If you have not delivered a completed election by the expiration date,
you will be conclusively deemed to have rejected the rescission offer, except to
the extent applicable state laws provide otherwise. The completed election form
may be delivered by hand or courier service, or by mail. The method of delivery
of is at your election and risk. If you desire to make use of the mails to
deliver a completed election form to High-Tech, delivery will be deemed to have
occurred on the date the election is postmarked.
EFFECT OF REJECTION OF RECISSION OFFER
For purposes of applicable federal and state securities laws, if you
reject the Rescission Offer you will be deemed to hold registered shares that
are freely tradeable. No public market currently exists for any class of our
stock, and there can be no assurance that there will be a public market in the
future.
6
Rejection of the rescission offer will not necessarily bar you from
rescission or other rights which you may have under federal or state securities
laws if we in fact violated such laws. However, federal law does provide that
you may, under certain circumstances, lose any rescission rights under federal
securities laws one year from the date of purchase of such shares. In addition,
most state securities laws provide that you may lose any rescission rights by
rejecting or failing to respond to a valid rescission offer.
We do not know if any, or how many, of the investors will accept the
recission offer. Each accepted recission will, of course, reduce the amount of
capital available to High-Tech, and the recission process, as well as any
related legal proceedings will continue to cause substantial additional expense
as well as distraction of management's time and attention from the business of
High-Tech. If all offerees reject the recission offer, and without taking into
account any new issuances of shares, High-Tech will have 16,401,362 shares of
common stock outstanding.
CONSENT ORDER
On September 13, 2000, we entered into a Consent Order with the
Securities Section of the Oregon Department of Consumer and Business Services,
Division of Finance and Corporate Securities (DFCS). Under the Consent Order,
the Director of the DFCS found that High-Tech, as well as its officers and
directors Benjamin Callari, Dennis Weathers and Donald Myatt (the "Respondents")
had sold unregistered securities, made sales of securities without a license,
and omitted to state material information necessary to make statements not
misleading, all in violation of Oregon law. Under the Consent Order,
o The respondents are prohibited from transacting securities
business in violation of Oregon Revised Statutes 59.055
(unregistered sale of securities), Oregon Revised
Statutes 59.165 (sale of securities without a license), and
Oregon Revised Statutes 59.135 (omitting to state material
information necessary to make statements not misleading) or
otherwise violating any provisions of the Oregon Securities
Laws.
o The respondents may not use the registration exemptions
provided by Oregon Revised Statutes 59.025 or 59.035 unless
they notify the Director of their intention at least 15 days
in advance and provide an opinion of Oregon counsel that the
exemption is available under the circumstances. They may then
offer and sell the securities under the exemption unless the
Director denies them the use of the exemption within that 15
day period.
o The Consent Order expressly provides that it does not serve to
trigger the disqualifications provisions of OAR 441-054-0130.
o The Respondents will complete a full refund or make a
recission offer to all remaining investors in High-Tech who
have purchased unregistered securities from High-Tech in the
United States, except for shares purchased by Benjamin Callari
and Donald Myatt.
o High-Tech will apply for registration of the recission offer
o High-Tech is required to deposit funds into an escrow account
in an amount sufficient to complete refunds to all investors,
or to repay in full investors who accept the recission offer,
plus provide $25,000 to compensate any unknown investors. That
account has been established at U.S. Bank National Association
(See -"Escrow Agreement").
7
o There will be a 35 day period after the date this recission
offer is mailed to investors for acceptance or rejection of
the recission offer. At the end of that period, High-Tech will
prepare disbursement instructions which must be reviewed and
approved by the DFCS before disbursement.
o The Consent order established a time table for registration of
the recission offer, provides that it will be mailed to
investors as soon as practicable after it becomes effective,
and provides that if any state does not declare it effective ,
High-Tech will refund all investments made by investors
residing in that state.
o Within 30 days after completion of the recission offer or
refund, High-Tech will file a report identifying the investors
repaid, the amount of the repayment and the date of the
repayment.
o High-Tech is required to pay a civil penalty of $20,000 and
make a $5,000 contribution to the Oregon Investor Information
Program. The penalty and contribution are payable $2,500 on
signing of the Consent Order, $2,500 30 days later, and $5,000
each 30 days thereafter until the full $25,000 is paid.
ESCROW AGREEMENT
On May 17, 2000, High-Tech and U.S. Bank National Association (U.S.
Bank), located at 555 S.W. Oak Street, Plaza 6, Portland, OR 97204 entered into
an escrow agreement captioned "Recission Escrow Agreement". The form of the
escrow agreement was reviewed and approved by the Director of the Securities
Section of the Oregon Department of Consumer and Business Services.
Pursuant to the escrow agreement,
o High-Tech deposited $1,643,463 into an escrow account created
at US Bank. under the agreement. All funds will be invested by
U. S. Bank in the triple "A" rated First American Prime
Obligations Money Fund (Class D). The fund's investment
advisor and custodian are subsidiaries of U. S. Bank. As of
August 31, 2000, the principal of such account, after adding
earnings and subtracting payments, was $1,653,502.
o High-Tech gave the Director of DFCS and U. S. Bank a list of
all investors who are to receive this recission offer.
o Upon receipt of investor notices accepting the recission
offer, and corresponding instruction from High-Tech and the
Director, U.S. Bank will disburse the funds to the accepting
investors.
o Any funds not so disbursed will be returned to High-Tech.
o U. S. Bank may resign as escrow agent on thirty days notice,
in which case High- Tech will appoint, with the consent of the
Director, a new escrow agent.
For a more detailed description of the Escrow Agreement, see "Escrow
Agreement" at page 50 of this Prospectus.
8
FUNDING THE RECISSION OFFER
2,809,402 shares of Common Stock are subject to the recission offer,
and the aggregate purchase price of all of the shares subject to the recission
offer is approximately $1,591,000. When interest is added through December 31,
2000, our potential liablity, if all investors accept the recission offer, is
estimated to be about $ 1,718,000.
In order to fund our potential obligations under the rescission offer,
and as required by the Consent Order and the Escrow Agreement, we have deposited
$1,643,463 into an interest- bearing escrow account with U. S. Bank (See "Escrow
Agreement"). Those sums, together with the interest earned thereon, will be
used, as needed, to purchase shares from those investors who accept the
rescission offer. As of September 25, 2000, approximately $15,000 has been paid
out to those investors who have requested the return of their investments.
While we believe that the amount deposited into the escrow account will
be more than sufficient to repurchase all of the shares of those who are
expected to accept the rescission offer, if additional funds are needed, we have
the right, before the recission offer expires, to either (1) obtain additional
financing through the issuance of equity securities or otherwise in amounts
sufficient to complete the rescission offer, or (2) declare the entire
rescission offer ineffective. In that case it is our intention to return to the
recission offerees the amount they paid for their shares.
Any proceeds in the escrow account which are not to be returned to the
offerees will be returned to us used for the development and acquisition of
software and for general corporate purposes. See "Risk Factors -- Possible Lack
of Sufficient Capital to Fund Rescission Offer; and "Use of Proceeds."
AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND THE ACCEPTANCE OR
REJECTION OF THE RECISSION OFFER INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS." BEGINNING ON PAGE
9
SUMMARY OF SELECTED FINANCIAL DATA
The following table presents summary historical data of the Company on
a consolidated basis (i) from the audited financial statements of the Company
for the period from inception (October 1, 1999 to June 30, 2000 . The summary
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 0
Net Loss from Operations.......................... ($276,232)
Net loss applicable to common shareholders........ ($249,912)
Net loss per common share......................... ($ 0.02)
Weighted average number of common shares
outstanding..................................... 13,191,991
BALANCE SHEET DATA: June 30, 2000
Total assets (includes sums subject to recission offer) $ 1,691,424
Liabilities $ 47,808
Stock subject to rescission $ 1,590,562
Capital deficit ($ 249,912)
On a pro-forma basis, if the Recission Offer were accepted by all
offerees, the June 30, 200 balance sheet of High-Tech would be substantially as
follows:
Total assets $ 45,836
Liabilities $ 47,808
Capital deficit ($ 1,972)
10
RISK FACTORS
AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. OFFEREES AND OTHER PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING
FACTORS, IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS.
1. DEVELOPMENT STAGE; NO HISTORY OF OPERATIONS
o Development Stage.
High-Tech is a development stage company that first commenced raising
capital and began development activities in October 1999. It will continue to be
in the development stage for the foreseeable future, at least until its software
programs are developed, installed and tested, which is not expected to occur
until Winter 2000 at the earliest.
o Absence of Revenues or Income
We have had no operating revenues or income, and none is expected until
the development activities are completed and operations begin. Receipts from
sales of securities are expected to be our sole source of cash flow during most
of 2000 and into Spring 2001. Although High-Tech expects to obtain significant
numbers of licensees, clients, accounts and revenues beginning in the winter of
2000-2001, we don't expect to be able to generate revenues sufficient to
generate positive cash flow before Spring 2001, and there can be no assurance
that we will ever be able to generate such cash flows.
o Possibility of Losses
In addition, there can be no assurance that we will not experience
operating losses for an extended period as we develop our software and begins
operating activities.
2. ACCOUNTANTS' EXPLANATORY PARAGRAPH
High-Tech's independent certified public accountants included an
explanatory paragraph in their opinion with respect to our financial statements.
The accountant's paragraph reflect that recurring losses from operations and the
rescission offer have raised substantial doubt about our ability to continue as
a going concern. The financial statements do not include any adjustments that
might result from the outcome of such uncertainty.
3. CASH FLOW DEFICIENCY
o Development
From inception we have engaged in development activities and have had
no operating revenues or income. As at June 30, 2000, We had capital of $53,054,
which is expected to be reduced to a growing capital deficit as we proceed to
develop our software and grow our business. Until we can obtain monthly sales
levels of approximately $1,200,000, which is expected to be necessary to fund
current working capital needs, there is uncertainty as to our ability to develop
our business and continue as a going concern.
11
o Negative Cash Flows
Our current cash forecast indicates that there will be negative cash
flows into the second or third quarters of 2001, at which time our operating
revenues are expected to be sufficient to cover operating costs and provide
positive cash flow. There can be no assurance that we will be able to generate
revenues as projected sufficient to service the cost of operations and fund our
expected growth. Also, failure to reach the projected sales growth could shorten
the period that the current cash balance will be sufficient to meet working
capital needs. If that occurs, we may be required to raise additional funds
through equity sales or loans, but these is no assurance that such additional
funds would be available to us. As a result, there can be no assurance that we
will be successful in funding our working capital and capacity needs.
4. POTENTIAL RESCISSION LIABILITY; POSSIBLE ADDITIONAL FUNDS REQUIRED.
o Potential Recission Liability
The rescission offer is being made to all United States persons who
acquired our shares of common stock during the period October 1, 1999 to March
31, 2000, other than our insiders. If all of the Offerees accept the rescission
offer, we will be required to make payments totaling $1,590,562 plus interest at
statutory rates from the date of issuance to date of repurchase As of December
31, 2000, the total accrued interest on the total possible liability will be
$127,674 and will continue to accrue at the rate of approximately $350 per day.
o Possible Need for Additional Funds
We have placed $1,643,463 in escrow with U.S. Bank National Association
pursuant to a written escrow agreement, in order to provide for our potential
recission liabilities (See- "Escrow Agreement"). Although we expect that such
sums will be more than adequate to cover our recission liabilities, if funds in
excess of $1,632,462 are needed, we will be required to seek additional capital
through equity financing, loans or the sale of assets, and there can be no
assurance that sufficient financing can be obtained on acceptable terms.
If we cannot obtain adequate financing to complete the rescission
offer, we may declare the entire rescission offer ineffective. In that case, we
will continue to be subject to claims from the Offerees for possible violations
of applicable state and federal securities laws.
o Possible Survival of Recission Liabilities
The staff of the Securities and Exchange Commission (the "Commission")
takes the position that a person's right of rescission under federal securities
law may, under certain circumstances, survive a rescission offer. It is possible
that claims asserting violations of state or federal securities laws will be
made even though the rescission offer has been made. Also, there is no assurance
that Offerees will not assert or prevail in claims against us for rescission or
damages under Federal or state securities laws. Although we believe we would be
successful in defending any securities law claims, the assertion of such claims
against the Company would result in costly litigation and significant diversions
of effort by our management.
o Possible Enforcement Action
In addition, the rescission offer will not prevent the Commission or
any state securities commission from pursuing enforcement action or imposing
penalties and fines against High- Tech with respect to any alleged violations of
federal or state securities laws.
The occurrence of any of the foregoing could have a material adverse
effect on our business, financial condition and results of operations. See
"Rescission Offer -- Effect of Rescission Offer" and Note of the Notes to
Consolidated Financial Statements.
12
5. NEED FOR ADDITIONAL CAPITAL AND CAPITAL REQUIREMENTS
o Funding Development Costs
Our efforts to develop and introduce our proposed software and travel
services have required, and will continue to require us to invest in
infrastructure and systems development. In addition, High-Tech has incurred
substantial cash flow deficits since inception and expects to continue to incur
cash flow deficits and losses through at least the third quarter of fiscal year
2001. During the remainder of 2001, we expect that our operating revenues will
not be sufficient to cover operating costs and provide positive cash flow, and
that our cash needs will be met by the proceeds of this offering and with the
proceeds of sales of additional shares of common stock. There can be no
assurance that we will meet our expectations and generate positive cash flow in
the foreseeable future. If the Company's operating strategy fails to produce
anticipated revenue growth and cash flows or if additional working capital is
required for any other reason, we will be required to obtain additional sources
of capital earlier than currently anticipated.
o Effect of Acceptance of Recission Offer
The timing of the need for additional capital also will be affected by
the extent to which the rescission offer is accepted. See "Rescission Offer" and
"--Lack of Sufficient Capital to Fund Rescission Offer; Potential Rescission
Liability." There can be no assurance that we will be able to obtain equity
financing when needed or on terms that we find acceptable. Any additional equity
financing may cause immediate and substantial dilution to the Company's
shareholders.
o Possible Effect of Inability to Obtain Funds
If we are unable to obtain sufficient funds to satisfy our capital
requirements, we Tech will be forced to reduce the scope of our expansion plans,
curtail operations, dispose of assets or seek extended payment terms from its
vendors, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
6. OREGON BUREAU OF SECURITIES; CONSENT ORDER
In March 2000, the Company received a subpoena letter from the Oregon
Bureau of Securities, regarding an inquiry into our offering of common stock. We
met with officials of the Oregon Bureau of Securities in May 2000 to respond to
the Bureaus concerns and inquiries and resolve the concerns regarding potential
violations of securities laws. We believe that we have complied with all
requests for information requests from the Bureau. As a result of the meetings,
we entered into a Consent Order with the Oregon Bureau of Securities. See
"Consent Order" and "Escrow Agreement", at pages 49-53.
We believe that the Rescission Offer addresses substantially all of the
concerns raised by the Oregon Bureau of Securities. While there can be no
assurance that such concerns or other issues will not be raised by the
Securities and Exchange Commission or by other agencies, we anticipate that upon
the completion of the Rescission Offer, the Oregon Bureau of Securities
currently intends to close its inquiry. See Consent Order; Escrow Agreement.
7. RISK OF MANAGING GROWTH
High-Tech's management resources are limited to a few key executive
employees. Anticipated growth is expected to place a significant strain on the
our management, administrative, operational, financial and technical resources
and on our systems and controls. We have only recently been organized and our
senior management personnel have not yet worked together.
13
We will need, both in the short term and the long term, to hire
additional qualified administrative and management personnel in all functional
areas. Failure to locate, hire and retain such qualified personnel or failure to
manage growth properly could have a material adverse effect on our business,
financial condition or results of operations. See "-- Dependence on Key
Personnel; Need to Hire Additional Qualified Personnel," "Business,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," and "Management."
8. POSSIBLE CHANGES IN MARKET GROWTH OF TRAVEL BUSINESS
The market and demand for travel services and our proposed software
applications is growing rapidly. While we believe the market and demand for such
services will continue to grow, there can be no assurance as to the extent of
any such growth. Even if there is continued growth in the use of such services,
there can be no assurance that travel agents, consolidators, customers and
others will elect to use software providers such as High-Tech to fulfill their
travel and reservation needs. Even if the use of such software and services does
continue to grow, there can be no assurance that we will be able to attract
these new users as customers.
See "Business--Competition."
9. COMPETITION
We face a high degree of competition in each of its service areas. Our
existing and potential competitors fall into the categories of travel agents,
airlines, hotels and other providers, packagers, and Internet travel service
providers such as Expedia.com, Travelocity, Priceline.com ByeByeNow.com and
Getthere.com, each of which are well financed and substantially more experienced
than we are.
While we believe that no other entity combines internet travel software
and services in a unified service offering as we will, because of the high rate
at which other established and new companies are entering the various business
segments, there can be no assurance that additional competitors will not enter
markets we propose to serve. Many of these competitors may possess significantly
greater financial, marketing, technical and other resources than we do. We can
anticipate that additional competitors will enter markets we propose to serve,
and there can be no assurance that we will be able to compete effectively. In
addition, there can be no assurance that potential customers will not elect to
use their own equipment or software to fulfill their needs for such services or
that they will not elect to use alternatives to our services. See "Business --
Competition."
10. POSSIBLE COMPANY SYSTEM FAILURE
High-Tech's potential for success is largely dependent upon the
efficient and uninterrupted development and eventual operation of its proposed
computer network, software and telecommunications system infrastructure. We plan
to include one or more redundant network switching centers. However, our systems
and operations will be vulnerable to damage or interruption from fire,
earthquake or other natural disaster and from power loss, telecommunications
failure, break-ins, unauthorized entry, computer viruses, and similar events
beyond our control. Furthermore, the software and network systems being
developed by and for us are relatively new and are not operational, and
therefore have not withstood initial testing or the demands of the anticipated
volume associated with our revenue projections. There can be no assurance that
these systems will be adequate to operate at the volume levels projected or
operate efficiently enough to produce the required gross margin for High-Tech to
be profitable. The occurrence of any of the foregoing risks could have a
material adverse effect on our business, financial condition and results of
operations.
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11. NO EXPECTATION OF LONG-TERM CUSTOMER CONTRACTS
It is anticipated that much of High-Tech's income will be derived from
license fees and other license income. However, these licensee's will be free to
deal with our competitors, and substantially all of our services will be
performed pursuant to specific one-at-a-time purchase transactions. As a result,
there can be no assurance that the majority of those who become our customers
will continue to use or purchase our services in the future. See "Business --
Customers."
12. THE PRICING FOR OUR SERVICES IS UNCERTAIN
Prices for travel and Internet assisted services are hotly competitive
and are expected to continue to fall with increasing competition, and proposed
prices for our proposed services may fall correspondingly. Accordingly, there
can be no assurance that our current pricing schedule will prove to be viable,
or that demand for our services will materialize at the prices we would like to
charge, or that we will be able to sustain adequate future pricing levels as
competitors introduce competing services.
13. DEPENDENCE ON KEY PERSONNEL; NEED TO HIRE ADDITIONAL
QUALIFIED PERSONNEL
We are and will continue to be highly dependent on the technical and
management skills of our existing key employees, including technical, sales,
marketing, financial and executive personnel, and on the ability to identify,
hire and retain additional skilled personnel. Competition for such personnel is
intense and there can be no assurance that we will be able to hire or retain
existing personnel or identify or hire additional personnel. The failure to
attract and retain the necessary technical, managerial, financial, marketing and
customer service personnel could have a material adverse effect on our proposed
business, financial condition and results of operations.
Our performance will also depend on our ability to retain and motivate
our executive officers and key employees, none of whom have worked together. We
have entered into employment agreements with Benjamin Callari and Dick Brace,
two of our senior officers. The inability to hire or keep key personnel could
have a material adverse effect on our business, financial condition and results
of operations. See "-- Risk of Managing Growth; Recent Management Changes and
New Information Systems" and "Management - Directors and Officers" and
"Management -- Employment Agreements."
14. TECHNOLOGICAL CHANGE
The computer software industry and the related travel service industry
are characterized by rapid and continuous technological change, evolving
industry standards, emerging competition and frequent new service and other
product introductions. Future technological advances in software, travel
services or the Internet may result in the availability of new services that
could compete with the services expected to be provided by us or decreases in
the cost of existing services that could enable our customers to fulfill their
own needs more cost effectively. There can be no assurance that we can
successfully identify new service opportunities and develop and bring new
products and services to market in a timely and cost- effective manner, or that
products, services or technologies developed by others will not render our
products, services or technologies noncompetitive or obsolete.
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15. SOFTWARE AND HARDWARE DEFECTS; POSSIBILITY OF DEVELOPMENT DELAYS
Software-based services and equipment may contain undetected errors or
failures when introduced or when new versions are released. The systems we are
in the process of developing are relatively new and have not been tested in
operation and, of course, have not had the opportunity to withstand the demands
of the large volume associated with the our revenue projections. There can be no
assurance that these systems will be adequate to operate at the volume levels
projected or operate efficiently enough to produce the required gross margin we
need to be profitable.
Also, there can be no assurance that, despite thorough testing, errors
will not be found in our systems after we begin operations, or that we will not
experience development delays, resulting in delays in market acceptance. Any of
these circumstances could have a material adverse effect on our Company's
business, prospects, financial condition and results of operations.
16. THE INTERNET AS AN INFORMATION TRANSMISSION MEDIUM
Our future success will depend, among other things, on our ability to
route customers' traffic through the Internet and through dedicated and/or
partially dedicated data network bandwidth. We will be required to depend on the
viability of the Internet and other bandwidth as a medium for the transmission
of information in various forms. To date, we have transmitted only a limited
amount of traffic as compared to its growth projections. There can be no
assurance that these will prove to be viable communications media or that
information transmission will be reliable. There also can be no assurance
against the development of capacity constraints that might inhibit efficient
information transmission.
17. CONTINUED GROWTH IN THE USE OF THE INTERNET
Our future success will depend, among other things, on continued growth
in the use of the Internet in order to support the sale and use of our services
and products. There can be no assurance that the number of Internet users will
continue to grow. As is typical in the case of a new and rapidly evolving
industry, demand and market acceptance for recently introduced products and
services are subject to a high level of uncertainty. The Internet may not prove
to be a viable avenue to transmit communications for a number of reasons. These
reasons include (i) lack of acceptable security technologies, (ii) lack of
access and ease of use, (iii) traffic congestion, (iv) inconsistent quality or
speed of service, (v) potentially inadequate development of the necessary
infrastructure, (vi) excessive governmental regulation, (vii) uncertainty
regarding intellectual property ownership, or (viii) lack of timely development
and commercialization of performance improvements, including high-speed modems.
18. RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
High-Tech plans to provide services to foreign locations and for
foreign customers. We may also consider opportunities for acquiring businesses
with significant international operations and customers. However, any
international business or expansion will subject us to the wide range of general
business risks associated with international operations, including (i)
unexpected changes in legal and regulatory requirements, (ii) changes in
tariffs, exchange rates and other barriers, (iii) political and economic
instability, (iv) inability to repatriate net income from foreign markets, (v)
long accounts receivable payment cycles in certain countries, (vi) potentially
adverse tax consequences and (vii) the regulation by foreign regulatory
authorities. There can be no assurance that such factors will not have a
material adverse effect on our future operations and on our business, financial
condition and results of operations.
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19. LACK OF PATENTS AND COPYRIGHTS
We have developed and acquired much of our own operating system and
user software and expect to continue to improve existing applications and
develop new applications in the future, both internally and externally . As of
the date of this Prospectus, we have not copyrighted or patented any of our
software and we rely on non-disclosure agreements and common law rights of
protection. Other companies may hold or obtain patents on inventions or may
otherwise claim proprietary rights to technology useful or necessary to our
business. We may pursue any available patent, copyright, trademark and service
mark protection for our business processes, software, and Internet content. The
extent to which we may be required to seek licenses under such patents or other
proprietary rights of third parties, and the cost or availability of such
licenses, cannot now be predicted. We rely to a significant extent on
proprietary know-how. There can be no assurance, however, that others will not
independently develop superior know-how or obtain access to know-how that we
consider proprietary. See "Business -- Intellectual Property."
21. GOVERNMENTAL REGULATION
The travel industry and the business of franchising is subject to
regulation by and registration with the Federal Trade Commission (the "FTC"),
and by various state and international regulatory authorities. We intend to
license many travel agencies to make use of the our services, and it possible
that these will be treated under certain state and Federal laws and by various
governmental authorities, as franchises. For the purpose of protecting
franchisees, extensive Federal regulations govern the information required to be
provided to franchisees , and both state and Federal regulations govern the
relationship between a franchisor and franchisee. We intend to comply, to the
extent required, with all applicable laws. There can be no assurance that the
regulations governing us will not be changed, or interpreted to subject us to
more burdensome regulatory requirements that would have a material adverse
effect on our business, financial condition and results of operations.
Our operations may be subject to federal and state laws regulating the
unsolicited transmission of fax and e-mail transmissions for advertisement
purposes. Our policy will be to refrain from transmitting fax and e-mail
advertisements except to our own customers and other recipients who have
expressed an interest in receiving the transmitted information or otherwise have
given their permission to receive such transmissions. We will encourages our
customers, licensees and others who use our services to familiarize themselves
with the relevant laws and to conduct their businesses in accordance with
applicable laws.
In connection with its anticipated international operations, High-Tech
will be required to satisfy a variety of foreign regulatory requirements. We
intend to explore and to seek to comply with these requirements on a
country-by-country basis. There can be no assurance that we will be able to
satisfy the regulatory requirements in foreign countries, and the failure to
satisfy such requirements may prevent us from operating in such countries. The
failure to comply with foreign regulatory requirements could have a material
adverse effect on our business, financial condition and results of operations.
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22. LACK OF PUBLIC MARKET
There has been no public trading market for High-Tech's common stock
and there can be no assurance that one will develop. Management may attempt to
develop a public market in the common stock immediately after the closing of
this offering by means of the OTC Bulletin Board ("OTCBB") by engaging market
makers in the shares in such a manner that will permit trading. However, there
can be no assurance that a market for High-Tech's common stock will ever develop
on the OTCBB or elsewhere. If any market is developed it should be assumed that
such market will be highly illiquid, sporadic and volatile.
23. PENNY STOCK REGULATION
The Commission has adopted rules that regulate broker-dealer practices
in connection with transactions in "penny stocks." Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASD's
National Market System, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange system).
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with bid and offer quotations for
the penny stock, the compensation of the broker- dealer and its salesperson in
the transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
such rules, the broker-dealer must make a special written determination that a
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in any secondary
market for a stock that becomes subject to the penny stock rules. Our common
stock may be subject to the penny stock rules, and accordingly, investors
rejecting this rescission offer may find it difficult to sell their shares, if
at all.
24. CONTINUED CONTROL BY CERTAIN SHAREHOLDERS
Assuming 100% rejection of the Rescission Offer, Management will own
approximately 79% of the High-Tech's common stock. As a result, Management will
be able to control High-Tech's the business and affairs, including election of
directors and the authorization of other corporate actions requiring shareholder
approval. See "Principal Shareholders."
25. AUTHORIZED STOCK
Our Board of Directors of the Company has the authority to issue up to
50,000,000 shares of Common Stock, See "Description of Capital Stock." Assuming
100% rejection of the Rescission Offer, there are currently 33,598,638 shares of
common stock remaining unissued, all of which could be issued at prices deemed
reasonable and appropriate by the Board of Directors.
26. DETERMINATION OF PRICE OF OFFERINGS
The offering prices and assigned values relating to the issuances of
the shares which are the subject of this offering were arbitrarily determined by
High-Tech and bore no relationship to its earnings, assets, book value or any
other generally accepted criterion of value. There can be no assurance that if
an offeree rejects the rescission offer he will be able to sell his shares in
the future, if at all, for a price higher than the original offering price.
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27. FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK
This Prospectus contains many forward-looking statements, including
statements regarding, among other items, our future plans and growth strategies
and anticipated trends in the industry in which we propose to operate. These
forward-looking statements are based on our expectations and are subject to a
number of risks and uncertainties, many of which are beyond our control. Actual
results could (and are reasonably expected to ) differ materially from these
forward-looking statements as a result of the factors described herein,
including, among others, regulatory or economic influences. In light of these
risks and uncertainties, there can be no assurance that our objectives and plans
will be achieved.
28. YEAR 2000 RISK
We reviewed for Year 2000 compliance the computer hardware and software
systems used and expected to be used in the delivery and support of its products
and services and brought all systems into compliance and readiness. However, the
ability of third parties with whom we will transact business to adequately
address their Year 2000 issues is outside our control. There can be no assurance
that the failure of such third parties to adequately address their respective
Year 2000 issues will not have an adverse effect on the our business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Year 2000 Compliance."
RESCISSION OFFER
BACKGROUND
From October 1999 through March 2000, the Company raised $1,590,562 of
capital through the issuance or sale of the shares which are the subject of this
Recission Offer ("Recission Securities). The following table sets forth
information regarding (i) the states in which the Offerees reside, (ii) the
statutory interest rates applicable in such states, (iii) the aggregate amount
of Recission Securities issued by the Company, (iv) the aggregate amount of
accrued interest calculated through December 31, 2000, (v) the aggregate amount
of liability calculated through December 31, 2000.
Amount Total
Subject to Interest Recission
State Recission Rate Interest Liability
- ----- --------- ----- ---------- ------------
Alaska $ 16,800.00 8% $ 1272.72 $ 18,144
Arizona 9,600.00 10 910.03 10,560
Arkansas 6,000.00 6 340.27 6,360
California 59,802.75 10 6068.88 65,783
Colorado 5,000.00 8 390.14 5,400
Ohio 5,000.00 6 327.12 5,300
Oregon 1,461,984.25 8 115,608.20 1,577,592
Washington 23,375.00 8 2,035.72 28,411
-------------- ---------- ------------
Total $ 1,590,562.00 127,673.10 $ 1,717,515
The Recission Securities were not registered under the federal or state
securities laws, but were issued on the basis of management's belief that the
sales were exempt from the registration requirements of the Securities Act of
1933, on the basis of the exemptions provided by Sections 3(b) and 4(2) of the
Act and by various state limited offering exemptions. However, the Company now
believes that because of the frequency and number of sales of the Recission
Securities, including the number of persons who received offers and who
purchased the Company's securities, the issuances were not eligible for such
exemptions from registration. In addition, certain of the Recission Securities
may have been issued to persons who did not receive adequate information
regarding the Company and its financial condition. The Company also believes
that The Recission Securities may have been issued in violation of state
securities laws.
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The failure to provide adequate disclosure to purchasers of the
Recission Securities may result in potential liabilities under the Exchange Act
and the regulations thereunder. The Company may have incurred a liability to the
holders of the Recission Securities of $1,590,562 plus interest from the date of
issuance. See "Risk Factors -- Lack of Sufficient Capital to Fund Rescission
Offer; Potential Rescission Liability" and Note 8 of the Notes to the
Consolidated Financial Statements.
The Company has elected to offer to all of the Offerees the right to
rescind their acquisitions of the Recission Securities and to receive in
exchange therefor, a payment in an amount equal to the aggregate consideration
paid for the issuance of the Recission Securities, plus interest at the
applicable statutory rate in the state in which they reside (the "Statutory
Rate") from the date of issuance or, if the Recission Securities have been
disposed of at a loss, the difference between the purchase price of such
Recission Securities and the price received upon disposition plus interest at
the Statutory Rate from the date of disposition.
The Rescission Offer is being made in order to limit, so far as may be
permitted under applicable federal and state securities laws, the potential
liability of the Company with respect to the issuances of the Recission
Securities. Neither the Recission Offer nor the Company's entry into the Consent
Order is an admission that the Company did not comply with the registration
provisions of applicable federal and state laws nor is it a waiver of any
applicable statutes of limitations. Notwithstanding the Rescission Offer, or the
provisions of the Consent Order, there can be no assurance that the Company will
not be subject to additional penalties or fines relating to past securities
issuances or that other holders of the Company's securities will not assert or
prevail in claims against the Company for rescission or damages under state or
federal securities laws. See "Risk Factors -- Lack of Sufficient Capital to Fund
Rescission Offer; Potential Rescission Liability" and Note 8 of the Notes to the
Consolidated Financial Statements.
ACCEPTANCE OR REJECTION
Any Offeree may accept or reject the Rescission Offer, in whole but not
in part, by completing the pertinent part of, and signing, the Election
accompanying this Prospectus (a form of which is attached hereto as EXHIBIT A)
and returning it to the Company (Attention: Benjamin Callari, President), 38
Second Avenue, Atlantic Highlands, NJ 07716 as soon as practicable, but in no
event should it be delivered to the Company later than the Expiration Date. The
Election should be completed to indicate whether the Offeree accepts or rejects
the Rescission Offer. All acceptances of the Rescission Offer will be deemed to
be effective on the Expiration Date and, unless the offer is accepted on or
before such date, the right to accept the Rescission Offer shall terminate.
Nevertheless, in the event the aggregate amount necessary to fund the Rescission
Offer exceeds $1,643,463, the Company shall have the right (but not the
obligation) to declare the Rescission Offer ineffective and return the
certificates or other instruments representing the Recission Securities to the
Offerees who have accepted the Rescission Offer. Acceptances or rejections may
be revoked in a written notice received by the Company prior to the Expiration
Date. Payment for Recission Securities as to which the Rescission Offer has been
accepted is expected to be made by the Escrow Agent within five business days
after the Expiration Date.
Any Offeree who has not delivered a completed Election by the
Expiration Date shall be conclusively deemed to have rejected the Rescission
Offer, except to the extent applicable state laws provide otherwise. See "--
State Law Notices To Certain Offerees" and "EXHIBIT B" attached to this
Prospectus.
The Election may be delivered by hand or courier service, or by mail.
The method of delivery of all documents is at the election and risk of the
Offeree. If delivery is by mail, delivery will be deemed to have occurred on the
date the Election is postmarked.
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FUNDING THE RESCISSION OFFER
The Company has entered into an Escrow Deposit Agreement with U.S. Bank
National Association (U.S.Bank), located at 555 S.W. Oak Street, Plaza 6,
Portland, OR 97204. Pursuant to the escrow agreement High-Tech deposited
$1,643,463 into an escrow account created at US Bank. under the agreement. See
"Escrow Account". The funds in the account plus the interest earned thereon,
will be used to fund the Rescission Offer. In the event that funds in excess of
that amount are needed to fund the Rescission Offer, the Company shall have the
right, on or before the Expiration Date, to either (i) secure additional
financing by the issuance of equity securities or the sale of assetsin amounts
sufficient to satisfy the Company's rescission liabilities and complete the
Rescission Offer, or (ii) declare the entire Rescission Offer ineffective and
return all completed Elections, together with the certificates or other
instruments representing the Recission Securities, to the Offerees who accepted
the Rescission Offer. Subject to the foregoing, any unused proceeds of the
Rescission Financing remaining after the funding of the Rescission Offer will be
used by the Company for general corporate purposes. See "Risk Factors -- Lack of
Sufficient Capital to Fund Rescission Offer; Potential Rescission Liability,"
"Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
In the event the Company is required to pay more than $1,643,463 plus
the interest earned thereon to fund the Rescission Offer, but nevertheless
elects to complete the Rescission Offer, there can be no assurance that
sufficient financing can be obtained. See "Risk Factors - Need for Additional
Capital and Capital Requirements and -- Lack of Sufficient Capital to Fund
Rescission Offer; Potential Rescission Liability."
OTHER TERMS AND CONDITIONS
The funds in the Escrow Account will be used to fund the Rescission
Offer. The Company will cancel all of the Recission Securities as to which the
Rescission Offer has been properly accepted.
The Company has not retained, nor does it intend to retain, any person
to make solicitations or recommendations to the Offerees in connection with the
Rescission Offer. If a fully completed and executed Election is not delivered by
the Expiration Date by each person actually receiving notice of the Rescission
Offer through this Prospectus, the Rescission Offer will be deemed to have been
rejected by such person, except to the extent applicable state laws provide
otherwise.
Neither the Company, nor its officers and directors, may make any
recommendations to any holders of the Recission Securities with respect to the
Rescission Offer contained herein. Each person is urged to read this Prospectus
carefully and to make an independent evaluation with respect to the Rescission
Offer.
All questions as to the validity, form, eligibility (including time of
delivery) and proper completion of the Election will be determined by the
Company, which determination will be final and binding. The Company reserves the
absolute right to reject any Election not properly completed or if the completed
Election, in the opinion of counsel to the Company, would be unlawful. The
Company reserves the right to waive any irregularity in the Election. The
Company's interpretation of the terms and conditions of the Rescission Offer
will be final and binding. The Company will not be under any duty to give
notification of defects in connection with Elections or incur any liability for
failure to give such information.
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EFFECT OF RESCISSION OFFER
The Company has been advised by its counsel that it is unclear whether
the Rescission Offer will terminate the Company's liability, if any, for failure
to register the issuances of the Recission Securities under the Securities Act
or applicable state and foreign securities laws. The staff of the Commission
takes the position that a person's right of rescission under federal securities
law may, under certain circumstances, survive a rescission offer, while most
state securities laws provide that a person may lose any rescission rights by
rejecting or failing to respond to a valid rescission offer. Generally, the
statute of limitations for noncompliance with the requirement to register
securities under the Securities Act is one year, while under the various state
securities laws, the statute of limitations ranges from one to seven years from
the date of the transaction. The Company is also subject to the anti-fraud
provisions of applicable securities law or rights under common law or equity in
respect of the issuance of the Recission Securities. Recission Securities held
by Offerees who choose not to accept the Rescission Offer will, for purposes of
applicable federal and state securities laws, be registered securities as of the
Expiration Date and, unless held by persons who may be deemed to be "affiliates"
of the Company, will be freely tradeable in the public market, if such a market
develops. Recission Securities held by affiliates of the Company will be subject
to certain restrictions on resale contained in Rule 144 under the Securities
Act. See "Shares Eligible for Future Sale" for a discussion of Rule 144.
Specific provisions of the laws of certain states in which the Offerees
now reside or resided at the time they were issued the Subject Securities are
set forth in EXHIBIT B attached hereto.
TAX CONSIDERATIONS OF THE RESCISSION OFFER
The following discussion is a general summary of certain United States
Federal income tax consequences associated with the Rescission Offer. No attempt
has been made to comment on all United States federal tax matters relevant to
the Rescission Offer. The summary is based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Department
regulations promulgated thereunder, published revenue rulings and revenue
procedures of the Internal Revenue Service ("IRS"), applicable legislative
history, and judicial decisions. All such authorities are subject to change at
any time, either prospectively or retroactively, and any such change could
adversely affect the federal income tax consequences associated with the
Rescission Offer. No ruling has been requested from the IRS regarding any of the
matters discussed in this summary.
This summary represents the judgment of the Company and its advisors
regarding the United States federal income tax consequences of the Rescission
Offer. However, there is no assurance that the tax consequences discussed in
this summary will be accepted by the IRS or the courts if the Rescission Offer
becomes the subject of administrative or judicial proceedings. Realization of
the tax consequences discussed in this summary with respect to the Rescission
Offer is subject to the risk that the IRS may challenge the tax treatment and
that a court could sustain such challenge. In such case, the federal income tax
consequences of the Rescission Offer could be materially and adversely affected.
This summary does not attempt to specifically address the United States
federal income tax consequences of each Offeree who accepts the Rescission
Offer. Additionally, this summary does not discuss all of the tax consequences,
including state, local, and foreign tax consequences, that may be significant to
particular Offerees, such as dealers in securities, foreign persons, Offerees
who are not individuals, and Offerees who are subject to the alternative minimum
tax.
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ACCORDINGLY, ALL OFFEREES WHO ACCEPT THE RESCISSION OFFER ARE STRONGLY
URGED TO CONSULT, AND MUST RELY UPON, THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM WITH RESPECT TO AN ACCEPTANCE OF THE RESCISSION OFFER,
INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, AND FOREIGN TAX LAWS.
The transaction resulting from an acceptance of the Rescission Offer
should be analyzed as a taxable redemption of the shares of Company stock
involved in the transaction. In such case, the redemption will be treated as a
sale or exchange of the shares only if the redemption satisfies the requirements
of one or more of the provisions of Section 302(b) of the Code. This
determination is made separately for each Offeree who accepts the Rescission
Offer. Assuming that a redemption satisfies the requirements of one or more of
the provisions of Section 302(b) of the Code, the Offeree recognizes gain or
loss on the redemption in an amount equal to the difference between the
Offeree's adjusted basis in the shares immediately prior to the redemption and
the proceeds that the Offeree receives in connection with the redemption
(including the portion of the proceeds measured by applying an interest factor
to the Offeree's original purchase price for the shares). The character of any
such gain or loss will depend on whether the shares constitute a capital asset
in the hands of the Offeree.
If a redemption does not satisfy the requirements of one or more of the
provisions of Section 302(b) of the Code, it will be treated as a distribution
by the Company that is subject to Section 301 of the Code. In such case, the
proceeds will be treated first as a dividend (taxed as ordinary income) to the
extent of the Company's current and accumulated earnings and profits, if any, at
the time of the redemption (on a pro rata basis taking into account other
Section 301 distributions made by the Company during the year, including other
redemptions resulting from the Rescission Offer that are treated as Section 301
distributions), next as a non- taxable return of the Offeree's adjusted basis in
the shares immediately prior to the redemption, and finally as amounts received
from the sale or exchange of the shares. The Company should not have either
current or accumulated earnings and profits for these purposes.
Under Section 302(b) of the Code, a redemption will be treated as a
sale or exchange of the shares if it either: (i) results in a "complete
redemption" of the Offeree's interest in the Company; (ii) is "substantially
disproportionate" with respect to the Offeree; or (iii) is "not essentially
equivalent to a dividend" with respect to the Offeree. These three tests, which
are more fully described below, are collectively referred to as the "Redemption
Tests" for purposes of this summary. The Redemption Tests are applied on an
Offeree-by-Offeree basis. As a result, it is possible that some redemptions will
satisfy the requirements of one or more of the Redemption Tests, while other
redemptions do not satisfy the requirements of one or more of the Redemption
Tests. Accordingly, it is possible that some persons will receive sale or
exchange treatment under Section 302(b) with respect to their redemptions while
other persons will be subject to Section 301 with respect to their redemptions.
In determining whether the requirements of any of the Redemption Tests
are satisfied, an Offeree must take into account not only shares of Company
stock that are actually owned by the Offeree but also shares of Company stock
that the Offeree is deemed to own within the meaning of the constructive
ownership rules under Section 318 of the Code. Under Section 318, an Offeree may
constructively own shares of Company stock actually owned (and, in some cases,
constructively owned) by certain individuals or entities that are considered
related to the Offeree for this purpose, as well as shares of Company stock that
the Offeree has the right to acquire by exercise of an option, warrant or a
conversion right. Additionally, contemporaneous or related transactions
involving the stock, or rights to acquire the stock, of the Company may affect
an Offeree's ability to satisfy one or more of the Redemption Tests.
23
A redemption will constitute a "complete redemption" of all shares of
Company stock owned by an Offeree for purposes of the first Redemption Test
specified above if all shares of Company stock owned by such Offeree are sold
pursuant to the Rescission Offer. For this purpose, an individual Offeree can
disregard shares of Company stock that he or she constructively owns by
attribution from family members if certain requirements specified in Section
302(c) of the Code are satisfied. A redemption will be considered "substantially
disproportionate" with respect to an Offeree if the following requirements are
satisfied: (i) the percentage of the voting stock of the Company owned by the
Offeree immediately after the redemption (taking into account all transactions
consummated pursuant to the Rescission Offer) equals less than 80 percent of the
percentage of the voting stock of the Company owned by such Offeree immediately
before the redemption; (ii) the percentage of the common stock of the Company
(whether voting or nonvoting) owned by the Offeree immediately after the
redemption (taking into account all transactions consummated pursuant to the
Rescission Offer) equals less than 80 percent of the percentage of the common
stock of the Company owned by such Offeree immediately before the redemption;
and (iii) the Offeree owns, immediately after the redemption (taking into
account all transactions consummated pursuant to the Rescission Offer), less
than 50% of the total combined voting power of all classes of stock of the
Company entitled to vote. A redemption will satisfy the "not essentially
equivalent to a dividend" test with respect to an Offeree if, in light of the
particular facts and circumstances surrounding the Offeree's ownership of
Company stock, the redemption results in a "meaningful reduction" of the
Offeree's interest in the Company (taking into account all transactions
consummated pursuant to the Rescission Offer)
THE FOREGOING SUMMARY IS FOR GENERAL INFORMATION ONLY, AND IS NOT INTENDED TO
CONSTITUTE, AND SHALL NOT BE CONSTRUED TO ANY EXTENT AS, LEGAL, TAX, OR
FINANCIAL ADVICE. EACH OFFEREE IS STRONGLY URGED TO CONSULT THE OFFEREE'S OWN
TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THE OFFEREE FROM THE
RESCISSION OFFER IN LIGHT OF THE OFFEREE'S SPECIFIC CIRCUMSTANCES, INCLUDING THE
TRANSACTION(S) IN WHICH THE OFFEREE ACQUIRED OWNERSHIP OF SHARES OF THE
COMPANY'S STOCK.
TRANSACTIONS NOT SUBJECT TO RESCISSION
Since its inception, the Company has raised capital through the
issuance of its securities pursuant to certain transactions which are not
subject to the Rescission Offer. The Company believes the issuance or sale of
its securities in these transactions was in accordance with applicable federal
and state securities laws as transactions not involving a public offering and
exempt from registration pursuant to Sections 3(b) or 4(2) of the Securities
Act, or pursuant to Regulation S adopted by the Securities and Exchange
Commission under such Act. The following summary of the transactions not subject
to the Rescission Offer is qualified in its entirety by reference to the
descriptions contained in Part II of the Registration Statement of which this
Prospectus is a part under the caption, "Transactions Not Subject to Rescission
Offer."
1. In October 1999 the Company issued an aggregate of 13,000,000 shares
of Common Stock to its founding shareholders. See "Management -- Certain
Transactions." At the time of the offering, the Company believed such founding
shareholders were sophisticated investors and received adequate information
concerning an investment in the Company. As a result, the Company believes the
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act as a transaction by an issuer not involving a public offering.
2. From March 15, 2000 to May 31, 2000, the Company sold 592,690 shares
of its common stock to non U.S., persons under the exemption from registration
provided by Regulation S adopted by the Securities and Exchange Commission, for
an aggregate price of $567,115.
24
STATE LAW NOTICES TO CERTAIN OFFEREES
NOTICE TO ALASKA RESIDENTS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES ADMINISTRATOR OF THE STATE OF ALASKA NOR HAS THE ACCURACY NOR
ADEQUACY OF THIS PROSPECTUS BEEN PASSED UPON. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Under Section 45.55.930 of the Alaska Securities Act, an Offeree's
right to sue under Section 45.55.930 may be lost unless (i) the Offeree accepts
the Rescission Offer within 30 days after receipt thereof or (ii) the Offeree no
longer owns the securities and failed to reject to offer within 30 days.
The complete text of the foregoing sections of the Alaska Securities
Law is set forth in EXHIBIT B attached hereto.
NOTICE TO ARIZONA RESIDENTS
THESE ARE SPECULATIVE SECURITIES.
THESE SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT OF ARIZONA, BUT THE
FACT OF THE REGISTRATION IS NOT TO BE DEEMED A FINDING BY THE ARIZONA
CORPORATION COMMISSION OR THE DIRECTOR OF THE SECURITIES DIVISION THAT THIS
PROSPECTUS IS TRUE OR ACCURATE, NOR DOES THE REGISTRATION MEAN THAT THE
COMMISSION OR THE DIRECTOR HAS PASSED ON THE MERITS OF OR OTHERWISE APPROVED THE
SECURITIES DESCRIBED IN THIS PROSPECTUS.
NOTICE TO ARKANSAS RESIDENTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES ADMINISTRATOR OF THE STATE OF ARKANSAS NOR HAS THE ACCURACY NOR
ADEQUACY OF THIS PROSPECTUS BEEN PASSED UPON. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Under Section 23.42.106 of the Arkansas Securities Act, an Offeree's
right to sue under Section 23.42.106 may be lost unless (i) the Offeree accepts
the Rescission Offer within 30 days after receipt thereof or (ii) the Offeree no
longer owns the securities and failed to reject to offer within 30 days.
The complete text of the foregoing sections of the Arkansas Securities
Law is set forth in EXHIBIT B attached hereto.
NOTICE TO CALIFORNIA RESIDENTS
THIS OFFER OF REPURCHASE HAS BEEN APPROVED BY THE CALIFORNIA
COMMISSIONER OF CORPORATIONS IN ACCORDANCE WITH SECTION 25507(B) OF THE
CORPORATE SECURITIES LAW OF 1968 ONLY AS TO ITS FORM. SUCH APPROVAL DOES NOT
IMPLY A FINDING BY THE COMMISSIONER THAT ANY STATEMENTS MADE HEREIN OR IN ANY
ACCOMPANYING DOCUMENTS ARE TRUE OR COMPLETE NOR DOES IT IMPLY A FINDING THAT THE
AMOUNT OFFERED BY THE SELLER IS EQUAL TO THE AMOUNT RECOVERABLE BY THE BUYER OF
THE SECURITY IN ACCORDANCE WITH SECTION 25503 IN A SUIT AGAINST THE SELLER, AND
THE COMMISSIONER DOES NOT ENDORSE THE OFFER AND MAKES NO RECOMMENDATION AS TO
ITS ACCEPTANCE OR REJECTION.
The Company may have incurred liability under Section 25503 by failing
to qualify the Subject Securities under Section 25110. If the Company violated
Section 25110, it is liable to the purchasers of such securities for an amount
equal to the consideration paid with interest thereon at the legal rate, less
the amount of any income received therefrom, upon tender of such security. The
Company's liability, if any, may be terminated by this Rescission Offer under
Section 25507(b).
25
An Offeree's right of action, if any, under Sections 25500, 25501 and
25502 and under common law, is not necessarily foreclosed by acceptance or
rejection of the Rescission Offer.
Under Section 25534, if the Commissioner determines that the Subject
Securities were offered or sold in violation of Section 25110, the Commissioner
may, by written order to the Company and the holders of such securities, require
certificates evidencing such securities to have stamped or printed prominently
on their face a legend, in the form prescribed by rule of the Commissioner,
restricting the transfer of such securities.
The complete text of the foregoing sections of the Corporate Securities
Law of 1968 is set forth in EXHIBIT B attached hereto.
NOTICE TO OREGON RESIDENTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES ADMINISTRATOR OF THE STATE OF OREGON NOR HAS THE ACCURACY NOR
ADEQUACY OF THIS PROSPECTUS BEEN PASSED UPON. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Under Section 59.125 of the Oregon Securities Law, an Offeree's right
to sue under Section 59.115 may be lost unless (i) the Offeree accepts the
Rescission Offer within 30 days after receipt thereof and has not been paid the
full amount offered or (ii) the Offeree no longer owns the Subject Securities
and gives the Company written notice of the inability to tender such securities
to the Company.
The complete text of the foregoing sections of the Oregon Securities
Law is set forth in EXHIBIT B attached hereto.
NOTICE TO WASHINGTON RESIDENTS
Under Section 21.20.430 of the Washington Securities Law, an Offeree's
right to sue under Section 21.20.430 may be lost if the Offeree receives a
Rescission Offer.
The complete text of the foregoing sections of the Washington
Securities Law is set forth in EXHIBIT B attached hereto.
USE OF PROCEEDS
The rescission offer will not result in any proceeds to us, except to
the extent that Offerees reject the recission offer and elect to continue to own
their shares of Common Stock. In that case, the escrowed funds will be released
to us, and there will be proceeds to High -Tech of up to a maximum amount of
$1,643,463 plus interest earned thereon. We estimate that during fiscal year
2001, approximately $1 million of the proceeds will be used for development of
our technological infrastructure in order to support growth. The balance of the
proceeds will be used for general corporate purposes, including working capital,
and to fund a portion of our marketing and brand development expenditures and
technological infrastructure. We may apply an undetermined portion of the
proceeds towards strategic investments or the acquisitions of complementary
businesses. Pending such uses, the net proceeds will be invested in short-term,
investment grade, interest bearing securities.
26
PLAN OF DISTRIBUTION
This recission offer is being made directly by High-Tech on a best
efforts basis. We do not intend to engage any underwriter or dealers to assist
with the recission offer We will not pay any selling or other commissions in
connection with the recission offer
DIVIDEND POLICY
The Company has not declared or paid cash dividends on its Common Stock
to date. The current policy of the Board of Directors is to retain earnings, if
any, to provide funds for operating and expansion of the Company's business.
Such policy is expected to continue for the foreseeable future, but will be
reviewed by the Board of Directors of the Company from time to time in light of,
among other things, the Company's earnings and financial position.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the
Company as of June 30, 2000, and as adjusted to reflect total rejection of the
rescission offer:
Common Stock $.0001 par value, 50,000,000
shares authorized, 16,401,362 issued and
outstanding $ 1,639
Additional paid in capital 1,891,889
Accumulated deficit (249,912)
--------------
Total stockholder's equity $ 1,646,616
The following table sets forth the unaudited capitalization of the
Company as of June 30, 2000, and as adjusted to reflect total acceptance of the
rescission offer:
Common Stock $.0001 par value, 25,000,000
shares authorized ,13,591,960 issued and
outstanding $ 1,359
Additional paid in capital 301,607
Accumulated deficit (249,912)
--------------
Total stockholder's equity $ 53,054
(2) See Note 6 in the Notes to the Financial Statements for a discussion
regarding the Rescission Offer.
27
DILUTION
As of June 30, 2000, our net tangible book value was $53,054, or
approximately $.004 per share of common stock. Net tangible book value per share
represents total tangible assets less total liabilities divided by 13,591,960
shares of common stock, which assumes that the recission offer will be accepted
by all offerees. Based on an average price of $0.57 The recission offer If the
recission offer is rejected by all offerees, the number of outstanding shares
would be 16,401,362 (purchased at prices between $0.50 and $0.70 per share) and
our net tangible book value per share as of June 30, 2000 would have been
$1,643,616, and the net tangible value per share would be $0.10. Thus, if the
recission offer is rejected there will be an immediate increase in net tangible
book value of approximately $0.10 per share to our remaining shareholders and an
immediate dilution of an average of 0.57 per share to the offerees who reject
the recission offer. The following table illustrates this per share dilution:
Net tangible book value per share if recission is rejected $ .34 (Based
on average price of $0.57 per share).
Average dilution per share to rejecting offerees $ 0.57*
* Actual dilution varies from approximately $0.70 to $0.50 Depending
upon actual purchase price of shares.
SELECTED FINANCIAL INFORMATION
The following table presents summary historical data of the Company
from the audited financial statements of the Company for the year ended June 30,
2000 The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this Prospectus.
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the 9 month period ended year ended June 30, 2000.
It should be read in conjunction with "Selected Financial Information" and the
financial statements and the notes thereto included elsewhere in this
Prospectus. The following information contains forward- looking statements. For
a discussion of certain limitations inherent in such statements, see "Risk
Factors -- Forward-Looking Statements."
Overview
The Company has not engaged in any activity except for the raising of
capital and the committed significant resources in developing and enhancing its
travel software and technologies. From the Company's inception in October 1999,
the Company obtained approximately $2 million of start-up capital to develop its
business and programs develop new products and services, begin its marketing and
sales efforts, invest in capital expenditures and satisfy its working capital
requirements. Approximately $1.6 million of such funds resulted from the sale of
the Recission Securities. The sale of the Recission Securities created potential
securities law liabilities which resulted in the Company's need to make the
Rescission Offer. When the Company realized that a potential securities law
problem existed, it ceased expending funds raised from the sale of the Recission
Securities, and it still had approximately $1.3 million of such funds available
and unexpended. Additional capital of $567,115 was raised through a series of
offerings to non-US persons, in transactions which the Company believes were
exempt transactions under the provisions of Regulation S adopted by the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
A total of $1,643,463 of such funds was deposited into an escrow account to fund
the Company's potential cost of the purchase of the Recission Securities. See
"Recission Offer"; "Escrow Agreement"
Recission offer
The discovery of the possible securities law problem and the resulting
need to conduct the Recission Offer occurred while the Company was beginning to
undergo rapid development and internal expansion. That combination of events
caused the Company to experience weak and deteriorating financial performance,
and to halt development of its proposed software, planning and business
operations. The Company continues to be a development stage company and derives
no operating revenues or profits, and none are expected for the foreseeable
future.
Funding Activities
We have funded our activities to date primarily from equity financing
in the amount of $567,115, not including approximately $1.6 million which has
been placed in escrow pursuant to a consent order from the state of Oregon. We
will continue to require substantial funding to continue development of
activities and to commence marketing efforts. Our capital requirements will
depend on many factors, including the problems, delays, expenses and
complications frequently encountered by development stage companies; the
progress and costs associated with our development of our computer software,
future research, marketing or other funding arrangements; the availability of
qualified personnel; the success of our sales and marketing programs, and
changes in economic, regulatory or competitive conditions of our planned
business.
29
Increasing Expenses
As we grow, our operating expenses will increase as a result of
increased sales and marketing efforts, and the increased general and
administrative staff needed to support growth.
Expected Deficit
As of June 30, 2000, we had remaining capital of $53,054. However, we
anticipate that we will incur net losses in the near term, and that we will
accumulate a substantial deficit before we can expect to earn any profits. The
extent of these losses will be contingent, in part, on the amount and rates of
growth from our retail travel agent memberships and our on line consumer and
business clients. We expect our operating expenses to increase especially in the
areas of marketing and brand promotion. To the extent that net revenue does not
grow at anticipated rates or that increases in our operating expenses precede or
are not subsequently followed by commensurate increases in revenue, or that we
are unable to adjust operating expense levels accordingly, our business, results
of operations and financial condition will be materially and adversely affected.
Revenues and profits
Revenues and profits are expected to be derived from commissions,
license fees and other charges to travel agents, licensees, airlines, hotels and
travel destinations, auto rental agencies, tour packagers, consolidators,
consumers and others.
Certain Accounting Policies
Revenues from services will be recognized as services are performed.
Expenditures for travel systems and software, web site maintenance and repairs,
which includes research and development, will be charged to expense as incurred.
For the years 2000 and 2001, research and development expenditures are expected
to be $1.1 million and $5.2 million, respectively.
Deferred taxes result from temporary differences between the financial
statement and income tax bases of assets and liabilities. The Company adjusts
the deferred tax asset valuation allowance based on judgments as to future
realization of the deferred tax benefits supported by demonstrated trends in the
Company's operating results.
Accounting Pronouncements
Effective for all fiscal years beginning after December 31, 1998, SOP
98-5, "Reporting on the Costs of Start-up Activities," requires all start-up and
organizational costs to be expensed as incurred. It also requires all remaining
historically capitalized amounts of these costs existing at the date of adoption
to be expensed and reported as the cumulative effect of a change in accounting
principles. The Company adopted SOP 98-5 in the last quarter of 1999 and it did
not have a material effect on its financial statements.
Liquidity and Capital Resources
As of June 30, 2000 our principal commitments consisted of general and
administrative expenses. We have entered into a computer software development
contract with an initial payment of $100,000 and web site maintenance fees of
$40,000 per month. We anticipate a substantial increase in our capital
expenditures and lease commitments consistent with anticipated growth in
operations, infrastructure and personnel. Proceeds from this public offering
will be used to fund operations.
30
From its inception, the Company has financed its operations and
expansion primarily through funds raised from investors through several private
offerings (approximately $2 million). At June 30, 2000, the Company had a cash
position of $39,888 and a working capital position of $39,888. In addition, the
company has deposited $1,643,463 in and escrow account with a bank in order to
fund potential Recission liabilities.
Net cash used in investment activities was $7,435 for the year ended
December 31, 1999. These amounts were due primarily to capital expenditures for
operating equipment, including computer equipment and software, and furniture
and fixtures.
Net cash provided by financing activities was $567,056
We have not generated any cash flows from operations and they are
expected to continue to be insufficient for our cash needs. As of June 30, 2000,
the Company's sources of external and internal financing were limited. The
Company does not expect that internal sources of liquidity will improve until
additional operating revenues are generated and, until such time, the Company
will continue to rely on external sources for liquidity. Until the Company can
obtain monthly gross revenues of approximately $1,200,000, which the Company
believes would be sufficient to fund working capital needs, there is uncertainty
as to the ability of the Company to expand its business and continue as a going
concern. There is no assurance that the current working capital will be
sufficient to cover cash requirements during that period or to bring the Company
to a positive cash flow position. In addition, lower than expected earnings
resulting from adverse economic conditions or otherwise, could restrict the
Company's ability to expand its business as planned, and, if severe enough, may
shorten the period in which the current working capital may be expected to
satisfy the Company's requirements, force curtailed operations, or cause the
Company to sell assets.
The Company currently does not have sufficient capital to meet its cash
flow requirements over the next 12 months. As a result, the Company expects to
satisfy cash flow shortages with (i) the sale of additional shares of Common
Stock in private offerings, and (ii) the remaining proceeds of the Rescission
Offer if the aggregate amount required to fund the Rescission Offer is less than
$1,643,463.
Results of Operations
Since inception, the Company has had no revenues or income
From inception, operations have been in the early stages of
development. We had no revenues for the period ended June 30, 2000. We incurred
expenses of $276,232, consisting of compensation expense and other general and
administrative expenses since inception. We had a net loss of $ for the period
ended June 30, 2000. Losses at the rate of $ are expected to continue through at
least 2001.
As of June 30, 2000, we had a U.S. net operating loss carry forwards
for federal income tax purposes of approximately $248,000. There can be no
assurance that we will realize the benefit of the net operating loss
carryforwards. The federal net operating loss carryforwards will expire in the
fiscal year 2007.
31
We expect operating results to fluctuate in the future as a result of a
variety of factors, many of which are out of our control. These factors include
demand for our services we provide on our website, acceptance of electronic
commerce and, in particular, booking travel arrangements on the Internet, the
amount and timing of capital expenditures and other costs associated with the
expansion of our operations, the timing and number of new hires, changes in our
pricing model or those of our competitors, engineering or development fees that
may be paid for adding a new web site, incurrence of costs relating to general
economic conditions, and economic conditions specific to the Internet or all or
a portion of the technology market. As a strategic response to changes in the
competitive marketplace, we may from time to time make certain pricing, service
or marketing decisions or business combinations that could have a material
adverse effect on our business, results of operations and financial condition.
In order to accelerate the promotion of our website and software, we intend to
significantly increase our marketing budget, which could materially and
adversely affect our business, results of operations and financial condition.
Although we do not expect seasonality to affect our business in the near future
travel bookings typically increase during the calendar year's first and second
quarter in anticipation of summer travel and typically decline during the
calendar year's fourth quarter.
Year 2000 Compliance
We have conducted a review of the computer systems we are developing,
to identify any systems that could be affected by the "Year 2000" issue. The
Year 2000 issue is the result of computer programs being written using two
digits (rather than four) to define the applicable year and equipment with
time-sensitive embedded components. Any of the Company's programs that have
time-sensitive software or equipment that has time-sensitive embedded components
may recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a major system failure or miscalculations. We do not expect to
encounter any Year 2000 problems that would have a material effect on our
operations or financial condition.
We have instituted a Year 2000 compliance plan to ensure all of our
software, hardware, information systems, products and services will be Year 2000
compatible.
BUSINESS
THE COMPANY
We are currently in the development stage. We were incorporated on
October 1, 1999, and our offices are located at 38 Second Avenue, Atlantic
Highlands, New Jersey, 07716. We are in the process of acquiring and developing
a high-speed database capable of accessing computer software products for the
travel industry. We intend to license and market our computer software and
related travel information products to travel agents, consolidators, tour
operators, hotels, and other travel industry participants, as well as to
consumers.
We plan to develop and implement software and an Internet strategy that
will enable us to produce for our licensees and clients a computer software
database program that will combine a variety of functions including accessing
one or more of the four Central Reservations Systems (CRSs), Sabre, Worldspan,
Apollo, and Amadeus, currently in use throughout the travel industry. We believe
that our services and products will be unique, and will appeal to the
travel/lodging supplier, the advertiser, travel agent and consumer. We intend to
specialize in the marketing and advertising of all travel and travel-related
products in worldwide markets.
32
Although there are many travel agencies, cruise lines, hotels and tour
operators, there does not exist today in the industry a single computer system
that combines all aspects of the retail travel industry. We intend to fill this
void by providing proprietary software packages, and proprietary Internet
marketing techniques and solutions. We believe that our proprietary software
will make available to all clients and consumers substantially more content than
any existing Internet web-based travel business.
We intend to be able to provide to a retail travel agency a high-tech
web-based Internet e- commerce operating software package that will suit each
particular agency and its customers. We are currently considering charging the
travel agents a fee of $100 per year for membership into our system while use of
our web site will be free for both consumer and business clients. The retail
travel agent, wholesaler, or tour operator would receive consumer leads from our
web site, enabling the retail travel agent to enjoy a larger share of
commissions and leads than they do in today's existing market structure. We
expect to be able to contract with as much as 15 percent of U.S. retail travel
agents the first twelve months of operations.
Most airlines have dramatically reduced commissions over the last
twelve months. Today, travel agents, wholesalers and tour operators wrestle with
those reduced commissions and the competitive threat of the Internet. Instead of
fretting that the web will replace them, many travel agencies are turning to the
Internet as a way to enhance their service. As more and more travelers use their
personal computers to point and click their way to travel plans, the agencies
are easing their way onto the Internet Superhighway to compete. In 1998, 61
percent of the American Society of Travel Agents' member agencies had access to
the Internet. In a recently completed survey by the trade group, that number
rose to 76 percent. About 49 percent have developed their own web sites, as
compared with 37 percent in their last survey.
This trend will serve to create business for us because the software
packages that we intend to be able to offer the travel agency easier access to
the airline reservations systems that they now have to pay for, and to many
thousands of other travel-related entities. We expect to provide consumer leads
to our retail travel agent clients and advertise for them throughout a worldwide
system, for both business and leisure travel. Instead of having their own web
sites, agencies could have the advantage of expected thousands of hits on our
web site, which would be given to the agencies based a fair distribution system.
Our proposed business represents a response to the rapid growth and
popularity of e-mail and the Internet as a business medium, and to the
increasing ease of its use. Our software package, when completed, is expected to
appeal to all travel-related service providers, at a lower cost, with a far
wider reach than any single agency web site. Through constant software upgrades
and the addition of long-term contractual relationships with major travel
suppliers, we intend to be able to withstand the threat of competition.
We expect our future revenues to be generated from processing travel
related transactions, such as booking and ticketing reservations. These revenues
will be from retail travel agents booking reservations for their clients through
our proprietary computer software and from consumers and business customers
utilizing that same proprietary computer software on our web site. Our increase
in revenue will be primarily from the addition of travel agent memberships to
access our computer software program and additional consumer and business
clients utilizing our web site. We are currently considering charging the travel
agents a fee of $100 per year for membership into our system while use of our
web site will be free for both consumer and business clients. Commission
revenues from travel reservations will be recognized when received. Membership
fees will be recognized when invoiced.
33
In order to increase membership access to our travel reservation
system, we intend to seek additional strategic relationships with vacation and
cruise package providers, air consolidators, lodging providers, hotel
consolidators, and rental car providers. No assurances can be given as to our
ability to integrate any business, product, technologies or personnel that may
be acquired in the future, and the failure to do so may have an adverse material
effect on our business, results of operations, and financial condition. In
addition, there can be no assurance that we will be successful in identifying
potential strategic partner candidates.
We have funded our activities to date primarily from equity financing
in the amount of $567,056, not including approximately $1.6 million which has
been placed in escrow pursuant to a consent order from the state of Oregon. We
will continue to require substantial funding to continue development of
activities and to commence marketing efforts. Our capital requirements will
depend on many factors, including the problems, delays, expenses and
complications frequently encountered by development stage companies; the
progress and costs associated with our development of our computer software,
future research, marketing or other funding arrangements; the availability of
qualified personnel; the success of our sales and marketing programs, and
changes in economic, regulatory or competitive conditions of our planned
business.
As we grow, our operating expenses will increase as a result of
increased sales and marketing efforts, and the increased general and
administrative staff needed to support growth.
As of June 30, 2000, we had an accumulated deficit of $249,912.
Moreover we anticipate that we will incur net losses in the near term. The
extent of these losses will be contingent, in part, on the amount and rates of
growth from our retail travel agent memberships and our on line consumer and
business clients. We expect our operating expenses to increase especially in the
areas of marketing and brand promotion. To the extent that net revenue does not
grow at anticipated rates or that increases in our operating expenses precede or
are not subsequently followed by commensurate increases in revenue, or that we
are unable to adjust operating expense levels accordingly, our business, results
of operations and financial condition will be materially and adversely affected.
INDUSTRY BACKGROUND
Growth of the Internet
The Internet has emerged as a global medium, enabling millions of
people worldwide to share information, communicate and conduct business
electronically. International Data Corporation (IDC) estimates the number of
Internet users worldwide exceeded 100 million in 1998 and will grow to
approximately 600 million by the end of 2003. IDC additionally estimates annual
worldwide commerce over the Internet will reach approximately $1.6 trillion by
2003. The Internet's broadly distributed and easily accessible environment
creates the ideal foundation for new online marketplaces, which provide
increased search efficiency, comprehensive information and competitive pricing.
In an online environment, consumers have access to information and software
tools that enable them to evaluate and compare product and service offerings,
community forums within which to discuss relevant experiences and preferences
and tools to complete e-commerce transactions. In addition, suppliers can extend
their online marketing reach to a larger base of potential customers and can
efficiently target those customers who are most likely to buy their products and
services. The Internet brings efficiencies to markets characterized by the
presence of large numbers of geographically dispersed buyers and sellers and
purchase decisions involving large amounts of information from multiple sources.
We believe the travel industry, which demonstrates these characteristics, is
especially well suited to benefit from increased Internet and e-commerce
adoption.
34
The Travel Industry
The travel industry is very large in terms of both dollars spent and
number of participants. According to the United States Department of
Transportation, air travelers could reach the 1 billion mark by 2010. The World
Travel and Tourism Council estimates that spending on travel and tourism
worldwide will reach $3.5 trillion in 1999, growing to $7.1 trillion in 2010.
According to the World Travel and Tourism Council, approximately 60% of the
revenues in this market are attributable to personal travel and tourism. Travel
related expenses by United States residents and international travelers within
the United States are estimated to reach $541 billion in 1999, according to the
Travel Industry Association of America. Overall, travel and tourism business are
expected to continue to climb with total tourist spending this year growing by
about 5 percent, and a little higher for the year 2001. The number of visitors
continues to increase. Foreign visitors now spend about $100 billion in the U.S.
- - nearly a fifth of U.S. tourism revenues. On average, overseas visitors spend
10 times more when traveling in the U.S. than vacationing Americans do.
Last year, vacationers spent about $3.1 billion through millions of
travel-related Web sites for everything from tiny bed-and-breakfast inns to
international airlines and hotel chains. By comparison, spending through travel
agents in 1997 was about $120 billion -- a number which might have been much
higher if not for airline commission cuts. Most airlines capped commissions at
$50 for domestic flights in 1995 and cut agent commission from 10 percent to 8
percent in 1997. Similar restrictions were put on international flights last
year, capping at $100.
From July 1998 to July of this year, the number of travel agencies fell
from 33,074 to 32,307, or 2.3 percent. Industry analysts and agents agree that
specialization and modernization, combined with personal service and attention
to clients, are the only way for travel agents to survive. Thus, we believe that
agencies will be looking for Internet access to the sites that offer them the
most assistance.
Additionally, some people book on the Internet for individual travel,
but still use agents for more complicated group trips and package vacations.
Many travelers look for travel information on line, but are reluctant to book
their own reservations. Customers say there is too much information available,
making it difficult to be certain they're getting the best deal. This is why
travel agents are still widely used by the consumer. We estimate that one out of
25 travelers books directly over the Internet, while the other 24 prefer to book
through a travel agent.
Retail travel agents, wholesalers and major tour operators will be the
main target of the Company's marketing program - a target some 32,000 agencies
in the U.S. alone, with another 30,000 plus worldwide.
Our Solution
We believe that, when completed, our software and an our Internet
strategy will enable us to produce, for our licensees and clients, a
technological program that combines a variety of functions incorporating the
four largest CRS' currently in use throughout the travel industry i.e. Sabre,
Worldspan, Apollo and Amadeus. Our planned twenty-four hours a day/seven days a
week manned travel reservation and booking solutions system is expected to
enable travelers and travel agents to reduce current inefficiencies in the
travel procurement and supply processes. It is believed that our services and
products will be unique, and will appeal to the travel/lodging supplier, the
advertiser, travel agent and consumer. We intend to specialize in the marketing
and advertising of all travel and travel-related products in worldwide markets.
35
STRATEGY
We plan to implement new proprietary software and an Internet strategy
which is expected to enable us to produce for our clients a computer software
program that will combine a variety of functions including the four CRSs
currently in use throughout the travel industry.
Our web site, EXTUS.com has been developing into an infrastructure for
our computer software program, and thus establishing the architecture for the
promotion, distribution, sales and operations of leisure travel products.
EXTUS.com's software is based on the Internet as the business medium. Powered by
a computer database and Graphical User Interface technology (GUI), Microsoft's
SQL 7 and VisualStudio, EXTUS.com will be a browser driven travel reservation
system. This is expected to be a comprehensive reservation system. We expect the
computer system to be able to generate on the fly tour packages enabling
effective Internet travel sales.
TECHNOLOGY
Using state of the art technology from Microsoft, we have created a
custom solution that is based on speed, reliability and scalability. Our systems
use Intel workstations running the Microsoft Windows NT operating system. It is
100% browser driven; that is, all system applications are available via the
latest Microsoft or Netscape browsers. It incorporates an innovative
spreadsheet-like data entry scheme and a data-driven rate validation system to
handle complex hotel and airline contracts quickly and efficiently and provide
on-the-fly tour packaging and pricing at the point of sale.
We have placed an emphasis on scalability of our system in order to
support a rapidly expanding user base. This is accomplished by having a modular
software architecture that is easily expanded by just adding additional
hardware. Our data center is supplied access to the Internet by multiple
Internet Service Providers giving us an added level of connectivity redundancy.
Additionally, the application databases are stored on high-reliability devices
that will continue even if there are hardware failures.
A high degree of automation is employed to assure quality of service,
speed in application creation, as well as cost-efficient functioning of all our
systems. We will continue to monitor and upgrade system components with the goal
of providing a positive experience to our customers.
COMPETITION
There is expected to be severe competition in the travel industry, both
on and off the Internet. Many Companies have vaulted into this new and not-yet
established area of the travel business, spending a lot of time and money on
their Web sites, and in doing so, they are demonstrating that booking travel via
Internet e-commerce can be a viable business. Consolidation in the travel
industry is occurring at a rapid pace, on a national level. Mergers and
acquisitions are taking place in the travel industry because many of the
participants have the same objectives. However, these merged competitors
currently can only offer the traveler a larger travel agency, instead of an
agency that can offer more to the traveler and make a higher profit from doing
so. The Company's proprietary Internet software package, when completed, will
offer any consumer the opportunity of free access to any travel consultant
worldwide, who, in turn, will be able to connect immediately to our "preferred
travel suppliers" with online booking capabilities, providing profitability,
speed and ease of making reservations for both travel agent and consumer.
36
Many travel agents are members of one of the four major CRS systems,
Sabre, Worldspan, Apollo or Amadeus, and have been so fr many years. In order
for us to be successful, we will need to be able to demonstrate to these and
other agencies that they will receive better customer service and more content
from us that they will using other systems, and that our system is easier and
more convenient to use. We intend to be connected to and provide our agents with
prompt access to all four CRS systems with access to and capability of booking
many travel choices with greater variety of choices and in a much shorter period
of time than is now possible.
We intend to offer a similar system to travel consumers using our
Internet "Extus.Com" travel web site. Some of the major competitors within the
Internet travel industry are the following:
o Travelocity.com
Internet information is primarily accessed from the Sabre CRS (central
reservation system). All flights and vacation packages are universally available
at the same prices to all agency members who use Sabre information.
o Expedia.com
Allows Internet based consumers and travel suppliers to research, buy and sell
travel related services.
o Priceline.com
Allows flyers to designate a price they are willing to pay for a
flight. Priceline.com then searches the various airline carriers, who sell cheap
seats that otherwise might have been left empty, or unlikely to sell at regular
prices.
o ByeByeNOW.com
On every page of the ByeByeNOW.com site, there is a button labeled
"Talk to a Travel Expert, click here." When users click on the button, a
drop-down box lets them choose between a live telephone conversation or an
electronic chat. Using the would be customer's ZIP code, the system routes the
call to the nearest 318 travel agencies owned by ByeByeNOW.com. Callers with a
particular interest, such as golf or honeymoon, may be routed to an agent
slightly farther away who specializes in that area. If the call comes in after
business hours, it is routed to the call center, which is staffed 24 hours a
day.
All of these web sites have major financial backers, and very large
customer bases. We expect that our web site will access the same data base, and,
will provide access to all four CRS systems and many other vacation packages and
other resources, thus providing a much larger choice to travel agents and
consumers. Since we plan that our web site will be free of banner ads and time
consuming membership forms and applications, thus allowing prompt access, ready
availability of travel offerings and information and quick reservations.
MARKETING
The Company believes that simplicity and the old fashioned philosophy
will rule. The Company plans to assign geographical areas with managers and
marketing teams. These managers will be responsible for selling and licensing
travel agencies and assisting these agents on an ongoing basis. We will also
develop and make available within our Web site, an area where an Agency may
register and pay the annual fee by credit card in order to receive a customized
software package. A hands-on philosophy with direct contact between the Company
managers and the travel agents will be mandatory.
37
GOALS
The Company has set it sights on becoming one of the most powerful
portal and Internet e-commerce sites in the world-wide travel industry, with
initial focus on the U.S. Europe, Asia and Central and South American markets
will be targeted after achieving a major share of the U.S. market.
The Company expects to reach $ 15,000,000 in gross profit after one
full year of operations. To achieve that goal, the Company intends to "sign up"
approximately 5,000 of the 32,000 U.S. Travel Agencies in the first year, along
with a similar proportion of selected tour operators. Upon reaching these goals,
the Company will consider taking the Company public.
The Company's goals and projections are, of course, based on
assumptions made by management. These assumptions include. but are not limited
to, managements estimate of the time and cost required to complete its software
development, the success of its development efforts, the number of customers it
will attract and the expected income therefrom, the corresponding efforts of
competitors and the expenses of operation. By their very nature, assumptions and
projections are uncertain of attainment. Although the Company believes that its
assumptions and the resulting projections are reasonable and attainable, there
can be no assurance of their accuracy, or that the actual results will equal or
better those assumptions.
RECISSION
The Company has recently completed an offering of its common stock to
United States persons in which it raised approximately $1,590,562 from
investors. The offering was intended to be a private offering in compliance with
all applicable requirements of law. However, as a result of questions raised
from counsel, investors and regulators about the Company's compliance with the
Securities Act of 1933, as amended, and with various other Federal and state
securities laws, the Company has offered to each of the investors in that
offering the right to rescind their purchases, and has entered into a consent
order and agreement with the Bureau of Securities of the State of Oregon to such
effect. Although none of the investors have accepted that offer, and the Company
does not know whether any of them will, or if so how many will do so, recission
will, of course, reduce the amount of capital available to the Company, and the
recission process as well as any related legal proceedings may cause added and
substantial expense as well as distraction of management's time and attention
from the business of the Company.
Consent Order
On September 13, 2000, we entered into a Consent Order with the
Securities Section of the Oregon Department of Consumer and Business Services,
Division of Finance and Corporate Securities (DFCS). Under the Consent Order,
the Director of the DFCS found that High-Tech, as well Dennis Weathers and
High-Tech's officers and directors Benjamin Callari, and Donald Myatt (the
"Respondents") had sold unregistered securities, made sales of securities
without a license, and omitted to state material information necessary to make
statements not misleading, all in violation of Oregon law. Under the Consent
Order,
o The respondents are prohibited from transacting securities
business in violation of Oregon Revised Statutes 59.055
(unregistered sale of securities), Oregon Revised
Statutes 59.165 (sale of securities without a license), and
Oregon Revised Statutes 59.135 (omitting to state material
information necessary to make statements not misleading) or
otherwise violating any provisions of the Oregon Securities
Laws.
38
o The respondents may not use the registration exemptions
provided by Oregon Revised Statutes 59.025 or 59.035 unless
they notify the Director of their intention at least 15 days
in advance and provide an opinion of Oregon counsel that the
exemption is available under the circumstances. They may then
offer and sell the securities under the exemption unless the
Director denies them the use of the exemption within that 15
day period.
o The Consent Order expressly provides that it does not serve to
trigger the disqualifications provisions of OAR 441-054-0130.
o The Respondents will complete a full refund or make a
recission offer to all remaining investors in High-Tech who
have purchased unregistered securities from High-Tech in the
United States, except for shares purchased by Benjamin
Callari, Donald Myatt and Dennis Weathers (with respect to
85,200 shares he purchased after he became a director of
High-Tech.
o High-Tech will apply for registration of the recission offer
o High-Tech is required to deposit funds into an escrow account
in an amount sufficient to complete refunds to all investors,
or to repay in full investors who accept the recission offer,
plus provide $25,000 to compensate any unknown investors. That
account has been established at U.S. Bank National Association
(See -"Escrow Agreement").
o There will be a 35 day period after the date this recission
offer is mailed to investors for acceptance or rejection of
the recission offer. At the end of that period, High-Tech will
prepare disbursement instructions which must be reviewed and
approved by the DFCS before disbursement.
o The Consent order established a time table for registration of
the recission offer, provides that it will be mailed to
investors as soon as practicable after it becomes effective,
and provides that if any state does not declare it effective ,
High-Tech will refund all investments made by investors
residing in that state.
o Within 30 days after completion of the recission offer or
refund, High-Tech will file a report identifying the investors
repaid, the amount of the repayment and the date of the
repayment.
o High-Tech is required to pay a civil penalty of $20,000 and
make a $5,000 contribution to the Oregon Investor Information
Program. The penalty and contribution are payable $2,500 on
signing of the Consent Order, $2,500 30 days later, and $5,000
each 30 days thereafter until the full $25,000 is paid.
39
Escrow Agreement
On May 17, 2000, High-Tech and U.S. Bank National Association (U.S.
Bank), located at 555 S.W. Oak Street, Plaza 6, Portland, OR 97204 entered into
an escrow agreement captioned "Recission Escrow Agreement". The form of the
escrow agreement was reviewed and approved by the Director of the Securities
Section of the Oregon Department of Consumer and Business Services.
Pursuant to the escrow agreement,
o High-Tech deposited $1,643,463 into an escrow account created
at US Bank. under the agreement. All funds will be invested by
U. S. Bank in the triple "A" rated First American Prime
Obligations Money Fund (Class D). The funds investment advisor
and custodian are subsidiaries of U. S. Bank. As of September
30, 2000, the earnings on such escrow account totaled $
o High-Tech gave the Director and U. S. Bank a list of all
investors who are to receive this recission offer.
o High-Tech will deliver to the Director and U.S. Bank copies of
the recission notices, proof of mailing to the investors, and
copies of investor responses.
o U.S. Bank's only obligation is to hold and disburse the funds
under the escrow agreement, and it will not be liable for any
action or inaction under the escrow agreement if taken in good
faith and in the exercise of its best judgement. U.S. Bank may
rely on any notice or other document which, in good faith, it
believes to be genuine. High-Tech will pay for all fees and
expense incurred by U. S. Bank, including any litigation
expenses and extraordinary legal fees.
o High-Tech will indemnify and hold U.S. Bank harmless from all
liabilities, costs and expenses, including but not limited to
legal fees and court costs, arising under the escrow
agreement.
o High-Tech may determine to refund all investments, in which
case High-Tech and the Director will so instruct U.S. Bank,
which will then release the funds as so instructed.
o Upon receipt of investor notices accepting the recission
offer, and corresponding instruction from High-Tech and the
Director, U.S. Bank will disburse the funds to the accepting
investors.
o Any funds not so disbursed will be returned to High-Tech.
o Unless notified to the contrary, U.S. bank will consider the
addresses of the investors to be the ones contained in the
investor list supplied by the Company. If recission notices
are returned to High-Tech, it will use reasonable efforts to
locate and the investor through other contacts and means.
o The Director and High-Tech will instruct U. S. Bank to
disburse funds to investors who have accepted the recission
offer within 5 business days after the end of the recission
period, and U. S. Band will provide satisfactory proof of
disbursement and mailing.
40
o High-Tech will pay the fees of U. S. Bank, as well as the cost
of mailing and disbursement.
o The escrow agreement will terminate at the earlier to occur of
(1) 15 business days after the end of the recission period,
unless extended by the parties or (2) full refund of all
investor investments
o U. S. Bank's fee will be $3,000, unless the escrow agreement
is in effect for more than one year, in which case the fee
will increase by $1,500 for each year or part of a year it
remains in effect.
o U. S. Bank may resign as escrow agent on thirty days notice,
in which case High- Tech will appoint, with the consent of the
Director, a new escrow agent.
Funding the Recission Offer
2,809,402 shares of Common Stock are subject to the recission offer,
and the aggregate purchase price of all of the shares subject to the recission
offer is $1,590,562. When interest is added, our potential liability, if all
investors accept the recission offer, is estimated to be about $1,717,515.
In order to fund our potential obligations under the rescission offer,
and as required by the Consent Order and the escrow agreement, we have deposited
$1,643,463 into an interest-bearing escrow account with U. S. Bank (See "Escrow
Agreement"). Those sums will be used, as needed, to purchase shares from those
investors who accept the rescission offer. While we believe that the amount
deposited into the escrow account will be more than sufficient to repurchase all
of the shares of the offerees who accept the rescission offer, if additional
funds are needed, we have the right, before the recission offer expires, to
either (1) obtain additional financing through the issuance of equity securities
or otherwise in amounts sufficient to complete the rescission offer, or (2)
declare the entire rescission offer ineffective. In that case it is our
intention to would simply return to the recission offerees the amount they paid
for their shares.
Any proceeds in the escrow account which are not to be returned to the
offerees will be returned to us used for the development and acquisition of
software and for general corporate purposes. See "Risk Factors -- Possible Lack
of Sufficient Capital to Fund Rescission Offer; and "Use of Proceeds."
No new proceeds will be received by the us from the rescission offer,
except to the extent that funds are released to us from the escrow account to
the extent offerees reject the recission offer. Those investors who reject the
rescission offer will own freely tradeable shares under the Securities Act. No
public market currently exists for any class of our stock, and there is no
assurance that there will be a market in the future. See "Shares Eligible for
Future Sale."
Assuming 100% rejection of the rescission offer, we will have
16,401,362 shares of Common Stock outstanding.
The funds in the escrow account will be disbursed as needed to satisfy
the Company's rescission liability to those investors who accept the rescission
offer. See (the "Escrow Agreement") While we believe the amount in escrow will
be more than sufficient to repurchase shares from Offerees who accept the
rescission offer, in the event that funds in excess of $1 are needed, we have
the right, on or before the expiration date of the recission offer, to (i)
secure additional financing through the issuance of equity securities in amounts
sufficient to satisfy our rescission liabilities and complete the rescission
offer, or (ii) declare the entire rescission offer ineffective and return all
completed elections to the Offerees who accepted the rescission offer.
41
Any unused proceeds in the escrow account remaining after the funding
of the recission offer which are not returned to investors will be used by us
for general corporate purposes. See "Risk Factors -- Lack of Sufficient Capital
to Fund Rescission Offer; Potential Rescission Liability" and "Use of Proceeds."
GOVERNMENT REGULATIONS
Government Regulation
The laws and regulations applicable to the travel industry affect us
and our travel agency customers and other suppliers. We must comply with all
laws and regulations relating to the sale of travel services, including those
prohibiting unfair and deceptive practices and requiring us to register as a
seller of travel, to comply with disclosure requirements and to participate in
state restitution funds. In addition, many of our travel agency customers and
other suppliers, as well as the computer reservation systems providers with
which we will be connected are heavily regulated by the United States and other
governments. Our services are indirectly affected by regulatory and legal
uncertainties affecting the businesses of our travel agencies, other suppliers
and computer reservation systems.
We must also comply with laws and regulations applicable to businesses
generally and online commerce specifically. Currently, few laws and regulations
apply directly to the Internet and commercial online services. Moreover, there
is currently great uncertainty whether or how existing laws governing issues
such as property ownership, sales and other taxes, libel and personal privacy
apply to the Internet and commercial online services. It is possible that laws
and regulations may be adopted to address these and other issues. Further, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws. New laws or different applications of
existing laws would likely impose additional burdens on companies conducting
business online and may decrease the growth of the Internet or commercial online
services. In turn, this could decrease the demand for our products and services
or increase our cost of doing business.
Federal legislation imposing limitations on the ability of states to impose
taxes on Internet- based sales was enacted in 1998. The Internet Tax Freedom
Act, as this legislation is known, exempts certain types of sales transactions
conducted over the Internet from multiple or discriminatory state and local
taxation through October 21, 2001. It is possible this legislation will not be
renewed when it terminates in October 2001. Failure to renew this legislation
could allow state and local governments to impose taxes on Internet-based sales,
and these taxes could decrease the demand for our products and services or
increase our cost of operations.
EMPLOYEES
As of June 30, 2000, we employed only two salaried persons, Benjamin
Callari, our President and Chief Executive Officer, and Donald Myatt, Jr., our
Vice President and Secretary. As our business grows, we expect to employ
executive, sales, marketing, technical and sales personnel to meet out business
needs. Our ability to attract and retain highly qualified employees will be
important to our success at all levels. We expect to have a policy of using
equity-based compensation programs to reward and motivate significant
contributors among our employees. Competition for qualified personnel in our
industry is expected to be intense.
42
INTELLECTUAL PROPERTY
The Company currently holds no United States or foreign patents. The
Company regards certain of its computer software as proprietary and seeks to
protect such software with common law copyrights, trade secret laws,
non-disclosure agreements and other safeguards. There can be no assurance,
however, that the steps taken by the Company to protect its proprietary rights
will be adequate or that others will not independently develop technologies
similar or superior to the Company, or obtain access to the Company's know-how
or software codes, concepts, ideas or documentation. Further, there can be no
assurance that the Company's non-disclosure agreements with its employees will
adequately protect the Company's trade secrets.
PROPERTIES
The Company does not own any real property. The Company's headquarters
facility, is located in approximately 400 square feet of leased space in
Atlantic Highlands, New Jersey. The lease on the Atlantic Highlands facility is
on a month to month basis. The Company believes its existing facilities are
adequate to meet current requirements but that additional space will be required
in the near future to house the Company's growing headquarters. The Company
believes that suitable additional space in close proximity to its headquarters
will be available as needed to accommodate growth of its operations. It is
anticipated that approximately 2,500 square feet of space will be required to
house the Company's internet access facilities and equipment. The Company
expects to locate its main computer facilities in New York City, with a backup
facility located in the Seattle, Washington area, and that space will be readily
available for those purposes.
INSURANCE
The Company maintains insurance covering risks incurred in the ordinary
course of business, including general liability, special and business property
coverage (including coverage of electronic data processing equipment and media),
and business interruption insurance. The Company believes its insurance coverage
is adequate.
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings which the Company
believes could have a material adverse effect on the Company, except for the
discussions between the Company and the Securities Section of the Oregon
Department of Consumer and Business Services, Division of Finance and Corporate
Securities, which resulted in the Consent Order and the recission offer
contemplated by this prospectus. As a result, we may have rescission liability
in connection with the sales of the Recission Securities. See "Consent Order";
"Rescission Offer."
43
MANAGEMENT
DIRECTORS AND OFFICERS
DIRECTORS AND MANAGEMENT
The following table sets forth, as of the date of this Offering Circular,
certain information with regard to the Executive Officers and Directors of the
Company and their respective ages and positions (ages as of June 30, 2000):
DIRECTORS
- ---------
Name Position Age
- ---- -------- ---
Donald R. Myatt, Jr. Chairman, Exec. Vice Pres., Secretary 43
Benjamin Callari Vice Chairman, President and 54
Chief Executive Officer
Richard D. Brace Director, Treasurer 57
Adrien Smet Director, Vice Pres. 38
Michael Estill Director, Vice Pres. 37
MANAGEMENT
- ----------
Donald R. Myatt, Jr. - Executive Vice President, Secretary
Benjamin Callari - President and Chief Executive Officer
Michael Estill - Vice President
Richard D. Brace - Treasurer
Adrien Smet - Vice President
The following information is supplied concerning the Company's executive
officers and directors:
DIRECTORS AND OFFICERS
- ----------------------
DONALD R. MYATT, JR. 43
- ------------------------
As Vice President of operations, Mr. Myatt had the responsibility of
international promotion for a new island resort in the Caribbean near the
country of Belize. Mr. Myatt established and set up marketing of the resort
throughout the world. Mr. Myatt developed public and charter airline co-op
programs to bring visitors to the new property. He designed and implemented an
international advertising program, including creation of advertisements and
collateral materials, the purchase of media space, as well as promotional and
public relations activities to both travel agencies and wholesale tour
operators. From 1993 to 1997 he served as president and CEO of International
Commodities Exchange, Inc., where he was responsible for obtaining international
business loans and then financing various projects. His previous business
background includes founding several proprietary processing firms in the
precious metals industry, nationwide. Mr. Myatt founded a custom designed
boat-manufacturing firm. This firm then expanded into spa manufacturing and
other fiberglass-related products on a national basis. Additionally, he expanded
operations and, with his associate, designed the first known recreational water
slide.
44
BENJAMIN CALLARI 54
- --------------------
In 1979 Mr. Callari founded Retail Wine & Spirits Company in New Jersey. The
business grew to become the largest co-op in the State of New Jersey. As
president he was responsible for all phases of the business. Eight years later
he was asked to become CEO and equity partner of Buy-Rite Retail Merchants of
New York City where he managed day-to-day operations for a group of 300 retail
stores in New York, New Jersey, Connecticut and Delaware. He built annual sales
volume to $250 million; sold licenses and arranged financing. He developed a
computerized publishing system for the business that was one of the first. He
left to establish an import business for gourmet pastas and a micro-brewery.
With his background in finance, he was selected to join one of Canada's foremost
investment firms, Burness, LTD., where he specialized in business loans and
financing. Mr. Callari received his bachelor Degree in Liberal Arts from St.
Peter's College and studied engineering at the New York Institute of technology.
RICHARD D. BRACE 57
- --------------------
For the past 25 years, Mr. Brace has been in the securities industry as a
registered principal, vice president and branch manager, as well as a wholesale
producer of sales of stocks, bonds and mutual funds. At the Putnam Funds, he was
responsible for all transfer agency operations and marketing support at the
company's Boston office. As an account executive at Merrill Lynch brokerage, he
earned top recognition for production. He joined Dean Witter as Regional Vice
President of its Intercapital Division, responsible for wholesaling activities
at 55 offices in a six-state southern territory. He increased the region's
standing from number eight to number two in the nation in less than two years.
Mr. Brace served as president of Creative Investment Strategies, Inc., an
Orlando securities firm specializing in meeting the investment needs of both
individuals and institutions. He is currently an investment consultant
specializing in private offerings. He is a Graduate of Atlantic Union College
with a Bachelor of Science degree, and a 1967 graduate of Andrews University
with an MBA in Accounting and Finance.
ADRIEN SMET 38
- ---------------
With a varied background in finance, Mr. Smet has experience in international
trading and investments. In addition to private banking and investments, he has
represented several firms in public investments, including the Royal Bank of
Scotland, A.D.I. International of Israel, and N.F.I. of Belgium for high-yield
investment programs. Other assignments were for Diamark of Antwerp and Delta
Mining Projects of Switzerland. He was born and educated in Belgium with a
degree in accounting, specializing in tax and insurance counseling. He was also
trained by the Belgium National Bank as a bond trader, stock broker and
investment advisor.
MICHAEL H. ESTILL 37
- ---------------------
Mr. Estill has been in the travel business for more than 15 years, starting in
his family's international travel agency. He also has served as a consultant to
other travel firms, assisting in upgrading and organizing front and back-office
procedures. His experience also includes serving as chapter treasurer and
chairman of a variety of committees in travel agency associations, including
ASTA (the American Association of Travel Agents) and WESTA (the Western
Association of Travel Agencies), a West coast travel distribution association.
Mr. Estill majored in mechanical engineering during his four years at the
University of California at San Luis Obispo.
45
DIRECTORS AND DIRECTOR COMPENSATION
Our Bylaws currently provide for a Board of Directors consisting of at
least 3 and no more than 11 members. All directors hold office until the next
annual meeting of our stockholders and until their successors have been elected
and qualified. Our officers are appointed annually and serve at the discretion
of the Board of Directors.
Board of Directors Committees
We have had no Board committees. However, once this offering is
complete we intend to appoint an Audit Committee and a Compensation Committee.
Our Audit Committee, will review the results and scope of the audits and other
services provided by our independent accountants, and our Compensation
Committee, will review and approve the compensation and benefits for our
executive officers, administers our stock purchase and stock option plans and
makes recommendations to the Board of Directors regarding such matters. Our
audit Committee will consist of Donald Myatt, Jr. Adrian Smet and Richard Brace
and our Compensation Committee will consist of Benjamin Callari, Adrian Smet and
Richard Brace.
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings our directors are not compensated for their
services as directors. Directors who are also our employees are eligible to
participate in our 2000 Stock Option Plan, but no options have been granted
thereunder to the date hereof. After the completion of this offering, we propose
to pay to each of our directors $500 for each director or committee meeting
attended by them.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to all forms of
compensation paid by the Company to the named individuals for the year ended
June 30, 2000.
Long Term
Securities
Name and Compensation
Principal Fiscal Other annual underlying All Other
Position year Salary Bonus compensation options(1) Compensation
- ----------------- ------ --------- ----- ------------- ---------- ------------
Benjamin Callari 2000 $56,000 -0- -0- -0- -0-
Pres, CEO
Don Myatt, Jr. 2000 $56,000 -0- -0- -0- -0-
V.Pres., Secy
No other director or executive officer received or earned salary and
bonus which exceeded $100,000 during the fiscal year ended June 30, 2000. See
"-- Employment Agreements" below for information regarding the current
compensation of certain of the Company's directors and officers.
(1) No incentive stock options to purchase shares of Common Stock have
been granted under the 2000 Stock Option Plan.
46
EMPLOYMENT AGREEMENTS
We have entered into three year employment agreements with our
President and Chief Executive Officer, Benjamin Callari, and our Vice President
and Secretary, Donald R. Myatt, Jr. Each agreement calls for a salary of
$125,000 per year, beginning July 1, 2000 and provides for a 4 week vacation
period. The agreements provide that the employees are entitled to participate in
the Company's benefit plans, and provides for the reimbursement of reasonable
expenses incurred in out behalf.
STOCK OPTION PLAN
On June 30, 2000, the Board of Directors and a majority of the holders
of the Common Stock adopted the Company's 2000 Stock Option Plan(the "2000
Plan").
The 2000 Plan provides for the granting of stock options ("Options") to
key employees of the Company. Within certain limitations provided by the 2000
Plan, such Options may include provisions regarding vesting, exercise price, the
amount of each grant and other terms as shall be approved by the Board of
Directors or by a committee designated by the Board of Directors. Options
granted under the 2000 Plan may be either options that qualify as "incentive
stock options," within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended ("Incentive Options"), or those that do not qualify as such
"incentive stock options" ("Non-qualified Options"). The 2000 Plan, which
permits up to 1,000,000 shares of the Company's Common Stock to be issued,
terminates on June 30, 2010. The 2000 Plan is administered by the Board or by a
Compensation Committee of the Board of Directors, which committee, to the extent
required to qualify for certain exemptions under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, to satisfy the
requirements of Section 162(m) of the Code, will at all times consist of at
least two non-employee directors. Subject to the terms of the 2000 Plan, the
Board of Directors or a Compensation Committee determines the persons to whom
Options are granted and the terms and the number of shares covered by each
Option. The term of each Option may not exceed ten years from the date the
option is granted, or five years in the case of an Incentive Option granted to a
holder of more than 10% of the fully-diluted capital stock of the Company.
Non-qualified Options and Incentive Options may become exercisable six months
after the date of grant and may continue to be exercisable, in whole or in part,
up to ten years after the date of grant, as determined by the Board of Directors
or the Compensation Committee.
The 2000 Plan provides that all Incentive Options and Non-qualified
Options which are not exercisable on the date of termination of an option
holder's employment generally expire three months after the optionee ceases to
be employed by the Company; however, the Board of Directors or the Compensation
Committee may, in its discretion, permit the holder to exercise unvested options
upon such termination. Options may not be transferred other than by will or the
laws of descent and distribution, and during the lifetime of an optionee may be
exercised only by the optionee.
The 1997 Plan contains a provision accelerating the exerciseablity of
Options upon the occurrence of specified events, including a merger,
consolidation, dissolution or liquidation of the Company. The acceleration of
vesting of the Options in the event of a merger or other similar event may have
the effect of discouraging a proposal for merger, a takeover attempt or other
efforts to gain control of the Company.
No Incentive Options to purchase shares of the Common Stock have been
granted to under the 2000 Plan.
47
CONSULTING SERVICES
LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION
New Jersey law authorizes corporations to limit or eliminate the
personal liability of directors to corporations and their shareholders for
monetary damages under certain conditions and circumstances. The Articles of
Incorporation of the Company limit the liability of directors of the Company to
the Company or its shareholders to the fullest extent permitted by New Jersey
law. Specifically, no director of the Company will be personally liable to the
Company or its shareholders for monetary damages for any act or omission in such
director's capacity as a director, except for (i) a breach of the director's
duty of loyalty to the Company or its shareholders, (ii) acts or omissions not
in good faith which involve intentional misconduct or a knowing violation of the
law, (iii) an act or omission for which the liability of a director is expressly
provided for by an applicable statute or (iv) any transaction from which the
director derived an improper personal benefit, whether or not the benefit
resulted from an action taken in the person's official capacity.
The inclusion of this provision in the Company's Articles of
Incorporation may have the effect of reducing the likelihood of derivative
litigation against directors, and may discourage or deter shareholders or
management from bringing a lawsuit against directors for breach of their duty of
care, even though such an action, if successful, might otherwise have benefitted
the Company and its shareholders. However, such limitation on liabilities does
not affect the standard of conduct with which directors must comply, the
availability of equitable relief or any causes of action based on federal law.
The Company's Articles of Incorporation provide for the indemnification
of its current and former officers and directors to the fullest extent permitted
by applicable law.
CERTAIN TRANSACTIONS
EXECUTIVE EMPLOYMENT AGREEMENTS. In 2000 the Company entered into
employment agreements with each of Benjamin Callari and Donald Myatt, Jr.. See
"-- Employment Agreements."
COMPANY POLICY
Any future transactions with directors, officers, employees or
affiliates of the Company are anticipated to be minimal and will be made or
entered into on terms that are no less favorable to the Company than those that
could be obtained from an unaffiliated third party. Any such transactions will
be approved in advance by a majority of the disinterested members of the Board
of Directors.
48
PRINCIPAL SHAREHOLDERS
Assuming 100% rejection of the Rescission Offer and the successful
completion of the Rescission Financing, the following table sets forth, as of
June 30, 2000, the number of outstanding shares of Common Stock (the Company's
only class of voting securities) owned by (i) each person known by the Company
to beneficially own more than 5% of its outstanding Class A Common Stock, (ii)
each director, (iii) each named executive officer and (iv) all officers and
directors as a group.
Name of Beneficial Shares of common Stock
Owner Beneficially Owned Percent of Class(1)
- ------------------------- ---------------------- -------------------
Benjamin Callari 6,500,000 39.5%
Donald R. Myatt, Jr. 6,500,000 39.5%
- --------------
(1) Percentages shown are based upon rejection of the Recission Offer.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock. The following summary description of certain terms of the capital
stock of the Company is qualified in its entirety by reference to the Company's
Articles of Incorporation, which is included as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Company has authorized 50,000,000 shares of Common Stock, no par
value. As of the date of this Prospectus, assuming complete rejection of the
Rescission Offer, 16,401,362 shares of Common Stock will be outstanding. No
warrants or options to purchase shares of Common Stock will be outstanding. The
holders of Common Stock are entitled to receive such dividends, if any, as may
be declared by the Board of Directors from time to time out of legally available
funds. Upon liquidation or dissolution of the Company, the holders of Common
Stock are entitled to share ratably in all assets of the Company that are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding. Holders of Common Stock have no preemptive rights to acquire
new securities issued by the Company and have no rights to convert their Common
Stock into any other securities of the Company.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock Olde Monmouth
Stock Transfer Co., Inc., located at 77 Memorial Parkway, Atlantic Highlands, NJ
07716.
PLAN OF DISTRIBUTION
No underwriters, brokers or agents will be retained by us in connection
with the making of this offering, and no commissions or fees will be paid to any
person or entity in connection therewith, except for the customary fees of our
accountants, counsel, transfer agent and other advisors with respect thereto. We
will notify each shareholder entitled to receive such recission offer by
ordinary mail, except to the extent such mail is returned as undeliverable, in
which case we will attempt to locate and may communicate with such shareholders
by other means reasonably designed to bring the recission offer to their
attention.
49
EXPERTS
Our financial statements contained in this prospectus and elsewhere in
this registration statement, to the extent and for the period s indicated in
their reports, have been audited by Amper, Politziner and Mattia, P.A. and are
included herein in reliance on its authority as an expert in accounting and
auditing in giving said reports.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse could
adversely affect the prevailing market price and impair our ability to raise
equity capital in the future.
Upon completion of this offering, (assuming rejection of the Recission
Offer), we will have outstanding 16,401,362 shares of common stock. Of these
shares, the 2,809,402 shares sold in this offering will be freely tradable
without restriction under the Securities Act, unless purchased by our
"affiliates," as that term is defined in Rule 144 under the Securities Act. In
general, affiliates include officers, directors or 10% stockholders.
The remaining 13,591,960 shares outstanding are "restricted securities"
within the meaning of Rule 144. These restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which are summarized below. Sales of the restricted securities in the
public market, or the availability of these shares for sale, could adversely
affect the market price of the common stock.
In general, under Rule 144 as currently in effect a person who has
beneficially owned restricted securities for at least one year would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of:
o one percent of the number of shares of common stock then
outstanding, which (assuming rejection of the Recission Offer)
will equal approximately 164,000 shares immediately after this
offering
o the average weekly trading volume of the common stock during
the four calendar weeks preceding the sale
Sales under Rule 144, including sales by affiliates, must comply with
the requirements with respect to manner of sale, notice, and the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been our affiliate at any time during the three months preceding
a sale, and who has beneficially owned the shares proposed to be sold for at
least two years, is entitled to sell these shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
50
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchase shares under a written compensatory plan
or contract, if any, to resell these shares in reliance upon Rule 144 but
without compliance with specific restrictions. Commencing 90 days after the date
of this offering, Rule 701 permits affiliates to sell their Rule 701 shares
under Rule 144 without complying with the holding period requirement and permits
non-affiliates to sell these shares in reliance on Rule 144 without complying
with the holding period, public information, volume limitation or notice
provisions of Rule 144.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act with respect to the
common stock offered in this offering. This prospectus does not contain all of
the information set forth in the registration statement. For further information
with respect to us and the common stock offered in this offering, we refer you
to the registration statement and to the attached exhibits and schedules.
Statements made in this prospectus concerning the content of any document
referred to in this prospectus are not necessarily complete. With respect to
each such document filed as an exhibit to the registration statement, we refer
you to the exhibit for a more complete description of the matter involved.
You may inspect our registration statement and the attached exhibits
and schedules without charge at the public reference facilities maintained by
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, NY 10048, and the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, IL 60661. You may obtain copies of all or
any part of our registration statement from the Securities and Exchange
Commission upon payment of prescribed fees. You may also inspect reports, proxy
and information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission without charge at a
website maintained by the Securities and Exchange Commission at www.sec.gov.
51
INDEX TO FINANCIAL STATEMENTS
HIGH-TECH TRAVEL SERVICES CORPORATION
(A Development Stage Company)
For the Period from October 1, 1999
(Date of Inception) to June 30, 2000
Page
----
Independent Auditors' Report F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7-10
F-1
Independent
Auditors' Report
To the Board of
Directors and Stockholders of
High-Tech Travel Services Corporation
We have audited the accompanying balance sheet of High-Tech Travel Services
Corporation (a Development Stage Company) as of June 30, 2000, and the related
statement of operations, stockholders' equity and cash flows, for the period
from October 1, 1999 (date of inception) to June 30, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 High-Tech Travel Services
Corporation (a Development Stage Company) at June 30, 2000 and the results of
its operations and its cash flows for the period from October 1, 1999 (date of
inception) to June 30, 2000, then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has losses from operations and has an
accumulated deficit, which raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
August 1, 2000
Edison, New Jersey
F-2
HIGH-TECH TRAVEL SERVICES CORPORATION
(A Development Stage Company)
Balance Sheet
June 30, 2000
Assets
Current asset
Cash and cash equivalents $ 39,888
Property and equipment, net 5,948
Restricted cash held subject to recission 1,645,588
------------
$ 1,691,424
============
Liabilities and Stockholders' Equity
Current liability
Accrued expenses $ 47,808
Common stock subject to recission 1,590,562
Stockholders' equity
Common stock, $.0001 par value, 25,000,000 shares
authorized, 13,591,960 issued and outstanding 1,359
Additional paid-in capital 301,607
Deficit accumulated during the development stage (249,912)
------------
Total stockholders' equity 53,054
------------
$ 1,691,424
============
See accompanying notes to financial statements.
F-3
HIGH-TECH TRAVEL SERVICES CORPORATION
(A Development Stage Company)
Statement of Operations
October 1, 1999 (Date of Inception) to June 30, 2000
Revenues $ -
-------------
Operating expenses
General and administrative 274,745
Depreciation expense 1,487
-------------
276,232
Other (income) expense
Interest income (26,815)
Other expense 495
-------------
(26,320)
Net loss $ 249,912
=============
Basic and diluted net loss per share $ (.02)
=============
Shares used in computing basic and diluted net loss per share 13,191,991
=============
See accompanying notes to financial statements.
F-4
HIGH-TECH TRAVEL SERVICES CORPORATION
(A Development Stage Company)
Statement of Changes in Stockholders' Equity Period from
October 1, 1999 (Date of Inception) to June 30, 2000
Common Stock Additional
Number Par Paid-in Retained
of Shares Value Capital Earnings Total
------------- ----------- ----------- ----------- -----------
Balance at October 1, 1999 $ - $ - $ - $ - $ -
Stock issued
Initial issuance for cash 13,000,000 1,300 - - 1,300
Sale of common stock for cash 591,960 59 567,056 - 567,115
Issuance costs of recission stock - - (265,449) - (265,449)
Net loss - - - (249,912) (249,912)
------------- ----------- ----------- ----------- -----------
Balance at June 30, 2000 13,591,960 $ 1,359 $ 301,607 $ (249,912) $ 53,054
============= =========== =========== =========== ===========
See accompanying notes to financial statements.
F-5
HIGH-TECH TRAVEL SERVICES CORPORATION
(A Development Stage Company)
Statement of Cash Flows
Period from October 1, 1999 (Date of Inception) to June 30, 2000
Cash flows used from operating activities
Net loss $ (249,912)
------------
Adjustments to reconcile net income to net
cash provided by operations
Depreciation 1,487
Increase in
Accrued expenses 47,808
------------
Total adjustments 49,295
------------
(200,617)
Cash flows used for investing activities
Purchase of computer equipment (7,435)
------------
Cash flows from financing activities
Net proceeds from the sale of common stock 302,966
Net proceeds from the sale of common stock subject to recission 1,590,562
Restricted cash held subject to recission (1,645,588)
------------
247,940
Net increase in cash for the period 39,888
Cash - beginning -
------------
Cash - ending $ 39,888
============
Supplemental disclosure of cash paid
Interest $ -
Income taxes -
See accompanying notes to financial statements.
F-6
Note 1 - Business and Liquidity
----------------------
High-Tech Travel Services Corporation (the "Company") was incorporated
on October 1, 1999, in Delaware. The Company was formed to acquire and
develop computer software products for use in the travel industry. To
date the Company has devoted the majority of its efforts in raising
capital and developing the technology. The Company is in the
development stage and, accordingly, the financial statements are
presented in a format prescribed for a development stage company.
The Company has incurred losses in the current period and has a
accumulated deficit at June 30, 2000. The Company's sole source of
funds to date has been through the sale of securities. Management
intends to continue to pursue additional financing through sale of
securities and devoting resources to research and development of its
technology. Management believes that additional capital will be raised
through the sale of its securities, and that the recission offer (see
Note 6) will be executed and funds in escrow will be released. However
there can be no assurance that the above will be completed. Without
additional capital and resolution of the recission offer, there may be
a material adverse effect on the Company's ability to continue as a
going concern.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern and do not include any
adjustments that might result from the outcome of this uncertainty.
Note 2 - Summary of Significant Accounting Policies
------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results may differ from those
estimates.
Cash Equivalents
----------------
The Company considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
Property and Equipment
----------------------
Property and equipment are stated at cost, less accumulated
depreciation. Property and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets, which is five
years.
Financial Instruments
---------------------
The carrying amounts of financial instruments, including cash and cash
equivalents approximated fair value at June 30, 2000, because of the
relative short maturity of these instruments.
F-7
Note 2 - Summary of Significant Accounting Policies - (continued)
------------------------------------------
Income Taxes
------------
The Company uses the liability method of accounting for income taxes.
The liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences
between the tax basis of assets and liabilities and their reported
amounts in the financial statements. The resulting deferred tax asset
or liability is adjusted to reflect changes in tax laws as they occur.
Note 3 - Restricted Cash
---------------
At June 30, 2000, cash in the amount of $1,645,588 was restricted as to
use. This cash with a bank has been escrowed in connection with a
consent order and agreement (see Note 6). The Company believes it is
not exposed to any significant credit risk.
Note 4 - Property and Equipment
----------------------
Computer equipment $ 7,435
Less accumulated depreciation 1,487
------------
$ 5,948
============
Note 5 - Income Taxes
------------
Deferred tax attributes resulting from differences between financial
accounting amounts and tax basis of assets and liabilities at June 30,
2000, follow:
Net operating loss carryforward $ 99,000
Valuation allowance (99,000)
------------
Net deferred tax asset $ -
============
The Company's income tax expense differs from income tax (benefit)
computed at the U.S. federal statutory rate due to the valuation
allowance on deferred tax assets. The Company's net operating loss
carryforwards could be limited in circumstances involving a significant
change in equity ownership.
At June 30, 2000, the Company has net operating loss carryforwards for
both federal and state income tax purposes of approximately $248,000.
The net operating loss carryforwards will expire beginning in 2007, if
not utilized.
F-8
Note 6 - Stockholders' Equity
--------------------
The Company was initially capitalized in October 1999, with the
issuance of 13,000,000 shares of common stock for a total of $1,300.
During the period March 2000 through June 2000, the Company sold
591,960 shares of common stock for $567,115.
Between October 1, 1999, the date of the Company's inception to March
2000, the Company raised $1,590,652 through the issuance of 2,809,402
shares in an offering of common stock. The Company incorrectly believed
that the stock offering was made in accordance with all applicable
requirements of law, including the Securities Act of 1933, as amended,
and with various other federal and state securities laws. The Company
has entered into a consent order and agreement with the Bureau of
Securities of the State of Oregon, which states that the Company will
apply for registration of a recission offer.
The recission offer requires $1,643,463 in an escrow account to
repurchase the stock of any investor who accepts the offer. The stock
will be repurchased for an amount equal to the price paid for the stock
plus accrued interest from the date of issuance to the date of
repurchase. No accrual has been made for any interest which may be
paid. There will be a 35 day period after the date the recission offer
is mailed to investors for acceptance or rejection of the recission
offer. Within 30 days after completion of the recission offer or
refund, the Company will file a report to the State of Oregon
identifying the investors repaid, the amount of the repayment, and the
date of the repayment.
The Company is required to pay a civil penalty of $20,000 and make a
$5,000 contribution to the Oregon Investor Information Program. These
amounts have been accrued by the Company since there is a payment
schedule starting on the signing of the consent order, which has not
been signed as of June 30, 2000.
During February 2000, the Company entered into a consulting agreement
with an unrelated third party, for services in connection with the
Company's public relations dealings with NASD broker/dealers and
investing public. Amounts paid for above service for the period June
30, 2000 were approximately $166,000 and are reflected as a reduction
of additional paid in capital.
Note 7 - Year 2000
---------
The Company does not currently expect any Year 2000 problems to be
encountered that would have a material effect on the financial
condition of the Company.
F-9
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ss. 145 of the Delaware General Corporation Law authorizes a
corporation to indemnify its directors, officers, employees, or agents under
specific circumstances for liabilities, including provisions permitting advances
for expenses incurred. In general, ss. 145 authorizes a corporation to indemnify
an agent, including but not limited to an officer, director or employee, against
expenses and liabilities incurred by reason of his having been such an agent, if
the agent acted in good faith and in a manner deemed to be in or not opposed to
the best interests of the corporation and, with regard to a criminal matter, if
the agent had no reasonable cause to believe his conduct was unlawful.
Article 7 of the Certificate of Incorporation provides that no director
will be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director except for liability (i) for any breach
of the director's duty of loyalty to the corporation or to its shareholders (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law (iii) under Section 174 of the Delaware General
Corporation Law or (iv) from any transaction in which the director derived
personal benefit.
In addition, we intend to purchase officers' liability insurance under
which our directors and officers will be insured against loss, as defined in the
policy, as a result of claims brought against them for their wrongful acts in
such capacities.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by High-Tech in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee.
Amount
To Be
Paid
------
SEC Registration Fee..................................... $ 20,850
Printing Fees and Expenses............................... 4,000
Legal Fees and Expenses.................................. 30,000
Accounting Fees and Expenses............................. 50,000
Blue Sky Fees and Expenses............................... 5,000
Transfer Agent and Registrar Fees........................ 1,000
Miscellaneous............................................ 10,000
------
Total................................................... $120,850
==========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
1. In October 1999 the Company issued an aggregate of 13,000,000 shares
of Common Stock to its founding shareholders. At the time of the offering, the
Company believed such founding shareholders were sophisticated investors and
received adequate information concerning an investment in the Company. As a
result, the Company believes the transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act as a transaction by an issuer not
involving a public offering.
2. From March 15, 2000 to May 31, 2000, the Company sold 592,690 shares
of its common stock to non- U.S. persons under the exemption from registration
provided by Regulation S adopted by the Securities and Exchange Commission, for
an aggregate price of $567,115.
The issuances described above were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof and
under Regulation S as transactions by an issuer not involving any public
offering. The recipients of securities in each such transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends where affixed to the securities issued in such transactions. All
recipients had adequate access to information about High-Tech.
3. From October 1999 through March 2000, the Company raised $1,574,562
of capital through the issuance or sale of the shares which are the subject of
this Recission Offer. The sale of these securities were not registered under the
federal or state securities laws, but were issued on the basis of management's
belief that the sales were exempt from the registration requirements of the
Securities Act of 1933, on the basis of the exemptions provided by Sections 3(b)
and 4(2) of the Act and by various state limited offering exemptions. The
Company now believes that the issuances were not eligible for such exemptions
from registration. This Registration Statement relates to a recission offer with
regard to such transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
Exhibit
Number Description
------- -----------
1. Not applicable
3.(i) Articles of Incorporation of the Registrant
3.(i)(a) Amendment to Articles of Incorporation dated
3.(ii) Bylaws of the Registrant
4. Form of the Registrant's Common Stock Certificate
5. Opinion of Deutch & Falk, p.c. dated (to be supplied)
10.1 Agreement with Tournet, Inc dated
10.2 2000 Stock Option Plan
10.3 Employment Agreement between High-Tech and Benjamin Callari dated
10.4 Employment Agreement between High-Tech and Benjamin Callari dated
10.5 Consent Order with the Securities Section of the Oregon Department of
Consumer and Business Services, Division of Finance and Corporate
Securities dated September 13, 2000.
11. Statement re: computation of earnings per share
15. Not applicable
16. Not applicable
21. Not applicable
23.1 Consent of Amper Politziner & Mattea, Independent Auditors (to be
supplied)
23.2 Consent of Counsel (included in Exhibit 5)
24. Not applicable
25. Not Applicable
26. Not applicable
99.1 Consent of Person About to Become Director for
(b) Financial Statement Schedules
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to each
purchaser at the closing certificates in such denominations and registered in
such names as required by each such purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4), or 497(h)
under the Act shall be deemed to be a part of this Registration Statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of , State
of New Jersey, on the th day of October ,2000.
High-Tech Travel Services Corporation.
By: /s/ Benjamin Callari, President
---------------------------------------------
Benjamin Callari
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
EXHIBIT INDEX
3.(i) Articles of Incorporation of the Registrant
3.(i)(a) Amendment to Articles of Incorporation dated
3.(ii) Bylaws of the Registrant
4. Form of the Registrant's Common Stock Certificate
5. Opinion of Deutch & Falk, p.c. dated
10.1 Agreement with Tournet, Inc. dated
10.2 2000 Stock Option Plan
10.3 Employment Agreement between High-Tech and Benjamin Callari dated
10.4 Employment Agreement between High-Tech and Benjamin Callari dated
10.5 Consent Agreement with Oregon dated
11. Statement re: computation of earnings per share
23.1 Consent of Amper Politziner & Mattea, Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5)
99.1 Consent of Person About to Become Director for