AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 2004
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
QT 5, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 72-7148906
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5655 LINDERO CANYON ROAD
WESTLAKE VILLAGE, CALIFORNIA 91362
TELEPHONE: (818) 338-1500
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
STEVEN REDER, PRESIDENT
QT 5, INC.
5655 LINDERO CANYON ROAD
WESTLAKE VILLAGE, CALIFORNIA 91362
TELEPHONE: (818) 338-1500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES OF COMMUNICATIONS TO:
DARRIN M. OCASIO, ESQ.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of Americas
New York, New York 10018
Telephone: (212) 930-9700
Telecopier: (212) 930-9725
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME, AT THE DISCRETION OF THE SELLING SHAREHOLDERS AFTER THE EFFECTIVE DATE
OF THIS REGISTRATION STATEMENT
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
CALCULATION OF REGISTRATION FEE
======================================== =============== =================== ===================== =====================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------- --------------- ------------------- --------------------- ---------------------
Common Stock, $0.001 par value 1,758,528,942(3) $ 0.0047 $8,265,086.03 $1,047,19
- ---------------------------------------- --------------- ------------------- --------------------- ---------------------
Common Stock, $0.001 par value 7,500,000(4) $ 0.0047 $35,250.00 $4.47
- ---------------------------------------- --------------- ------------------- --------------------- ---------------------
TOTAL $1,051.66
======================================== =============== =================== ===================== =====================
(1) Includes shares of our common stock, par value $0.001 per share, which may
be offered pursuant to this registration statement, which shares are issuable
upon conversion of convertible notes and the exercise of warrants by the selling
stockholders. We are also registering such additional shares of common stock as
may be issued as a result of stock-splits, stock dividends and similar
transactions pursuant to Rule 416. The number of shares of common stock
registered hereunder represents a good faith estimate by us of the number of
shares of common stock issuable upon conversion of the convertible notes and
upon exercise of the warrants. For purposes of estimating the number of shares
of common stock to be included in this registration statement, we calculated
200% of the number of shares of our common stock issuable upon conversion of the
convertible notes. Should the conversion ratio result in our having insufficient
shares, we will not rely upon Rule 416, but will file a new registration
statement to cover the resale of such additional shares should that become
necessary.
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) and Rule 457(g) under the Securities Act of 1933,
using the average of the high and low price as reported on the Over-The-Counter
Bulletin Board on August 12, 2004.
(3) Includes shares underlying convertible notes.
(4) Includes shares underlying warrants.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
THE INFORMATION CONTAINED 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 IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 16, 2004
PROSPECTUS
QT 5, INC.
1,766,028,942 SHARES OF COMMON STOCK
This prospectus covers the resale by selling shareholders of up to 1,766,028,942
shares of our common stock, $0.001 par value. The selling shareholders are
offering:
o 1,758,528,942 shares of common stock underlying our convertible notes;
and
o 7,500,000 shares of common stock underlying warrants.
The selling shareholders will sell in accordance with the terms described in the
section of this prospectus titled "Plan of Distribution". We will not receive
any of the proceeds from the sale of the shares by the selling shareholders.
Our common stock is listed on the Over-The-Counter Bulletin Board. Our trading
symbol is "QTFI."
AN INVESTMENT IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
PURCHASE OUR SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR
INVESTMENT. SEE "RISK FACTORS" BEGINNING AT PAGE __.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is August __, 2004
TABLE OF CONTENTS
Where You Can Find More Information........................................ 1
Forward-Looking Statements................................................. 2
Prospectus Summary......................................................... 3
Recent Developments........................................................ 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 10
Selling Stockholder........................................................ 11
Plan of Distribution....................................................... 13
Description of Capital Stock............................................... 14
Legal Matters.............................................................. 15
Experts.................................................................... 15
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
Securities and Exchange Commission. You may read and copy any of these documents
at the SEC's public reference rooms in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public at the SEC' s website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is considered to
be an important part of this prospectus. Any information that we incorporate by
reference is automatically updated and superseded if information contained in
this prospectus modifies or replaces that information. You must look at all of
our SEC filings that we have incorporated by reference to determine if any of
the statements in a document incorporated by reference have been modified or
superseded.
We incorporate by reference the documents listed below:
o Our transition report on Form 10-KSB for the year ended June 30,
2003
o Our quarterly report on Form 10-QSB for the period ended March 31,
2004
A copy of our above-mentioned reports are being delivered with this prospectus.
You may request additional copies of these filings at no cost, by writing or
telephoning us at the following address or phone number:
QT 5, Inc.
5655 Lindero Canyon Road
Westlake Village, California 91362
Telephone: (818) 338-1500
You should rely only on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may only be used where it is
legal to sell these securities. The information in this prospectus may only be
accurate on the date of this prospectus.
1
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement and the documents incorporated by
reference in this prospectus contain forward-looking statements. We have based
these forward-looking statements on our current expectations and projections
about future events.
In some cases, you can identify forward-looking statements by words such as
"may," "should," "expect," "plan," "could," "anticipate," "intend," "believe,"
"estimate," "predict," "potential," "goal," or "continue" or similar
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks outlined under "Risk
Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
such forward-looking statements.
Unless we are required to do so under U.S. federal securities laws or other
applicable laws, we do not intend to update or revise any forward-looking
statements.
PROSPECTUS SUMMARY
We are currently the licensee of various quick test devices and quantitative
testing analyzers, which we are preparing to bring to market. In October 2003,
we entered into a License Agreement of Intellectual Property with VMM, LLC.
Under the License Agreement, we licensed the exclusive right, worldwide, to sell
and distribute, under our brand name, all of the licensor's products including,
but not limited to, specific point of care quick-test devices and quantitative
testing analyzers to the retail, professional and governmental healthcare
markets. These include an FDA cleared urine specimen drug screening test and a
disease testing target system platform to identify Rubella, Herpes, Roravirus,
Strep Group A, Infectious Mononucleosis, Myoglobin, CK-MB, Cardiac Troponin and
Pregnancy. In addition, we are preparing to submit an HIV 1&2 test phase 3
application for clearance by the FDA. Future plans include the submission of
tests for Hepatitis, Prostate PSA count, West Nile Virus and SARS to the FDA for
clearance.
In addition, we market and sell our Xact Aid line of first aid products for
minor injuries. Current Xact Aid Products include wound-specific First Aid Packs
for insect bites, minor burns, burns, scrapes, cuts and sprains which provide
materials to clean, treat, dress and maintain a specific type of minor injury.
We have incurred losses and experienced negative operating cash flow since our
formation. For our fiscal years ended June 30, 2003 and 2002, we had net losses
of ($6,410,216) and ($3,775,560), respectively. We expect to continue to incur
significant expenses. Our operating expenses have been and are expected to
continue to outpace revenues and result in significant losses in the near term.
We may never be able to reduce these losses, which will require us to seek
additional debt or equity financing.
We maintain our principal offices at 5655 Lindero Canyon Road, Westlake Village,
California 91362. Our telephone number at that address is (818) 338-1500 and our
facsimile number is (818) 338-1551.
THE OFFERING
We are registering 1,758,528,942 shares of our common stock for sale by the
shareholders identified in the section of this prospectus titled "Selling
Shareholders". The shares have not yet been, but that may be, issued to
designated selling shareholders upon the conversion of our convertible notes,
and/or the exercise of warrants.
2
RECENT DEVELOPMENTS
OUR SECURITIES PURCHASE AGREEMENT
On August 12, 2004, we entered into a Securities Purchase Agreement with several
accredited institutional investors for the issuance of an aggregate of $500,000
principal amount 10% Callable Secured Convertible Notes . The 10% convertible
notes are due two years from the date of issuance. The 10% convertible notes are
convertible at the option of the holders into shares of our common stock. The
conversion price is equal to the lesser of (i) $.0056 and (ii) the average of
the lowest three (3) intra-day trading prices during the twenty (20) trading
days immediately prior to the conversion date discounted by fifty percent (50%).
In connection with the issuance of the 10% convertible notes, the noteholders
shall receive warrants to purchase shares of our common stock. Furthermore we
entered into a Registration Rights Agreement in order to register the
above-referenced securities and are required to register 200% of our common
shares underlying the 10% convertible notes and the warrants.
These securities purchase agreements contain covenants and representations and
warranties of the investors and us that are customary in transactions of this
type. In particular, we have agreed to have authorized a sufficient number of
shares of our common stock to provide for the full conversion of the notes and
exercise of the warrants then outstanding and to have reserved at all times for
issuance at least two times the number of shares that is the actually issuable
upon full conversion of the notes and full exercise of the warrants. We have
also agreed to provide the investors with a monthly list to ensure we are in
compliance with such reserve amount requirement. Furthermore, we have agreed not
to negotiate or contract, without the prior written consent of a
majority-in-interest of the investors, with any party to obtain additional
equity financing that involves the issuance of common stock at a discount to the
market price of the common stock on the date of issuance or the issuance of
convertible securities that are convertible into an indeterminable number of
shares of common stock or the issuance of warrants. Moreover, our common stock
must remain listed on the OTCBB or an equivalent exchange, and must remain
eligible to file a Form SB-2 or S-1 Registration Statement and we are prohibited
from merging or consolidating with or into another company or transferring all
or substantially all of our assets to another company.
Under the terms of the securities purchase agreements, in the event the Company
breaches one or more of its covenants or representations or warranties, the
Company may be obligated to pay to the investors liquidated damages equal to
three percent (3%) of the outstanding notes per month, prorated for partial
months, in cash or unregistered shares of common stock (issued at a price equal
to the conversion price of the notes determined as of the time of payment), at
the option of the investors, for such time that the breach remains uncured.
The representations and warranties and covenants set forth in Sections 3, 4, 5
and 8 of the Securities Purchase Agreement will survive all of the closings for
a period of two (2) years from the date that the last investment is completed.
In addition, the representations, warranties and covenants are assignable to
subsequent purchasers of the convertible notes and warrants from the original
buyers.
The secured convertible notes bear interest at 10% per annum and mature two
years from the date of issuance. The 10% notes are convertible at any time at
the option of the holder into shares of our common stock, provided at no time
may a holder of our 10% notes and its affiliates own more than 4.9% of our
outstanding common stock.
We are be obligated to pay a penalty of $2,000 per day to the investors if we
fail to deliver the shares of our common stock issuable upon a conversion of the
convertible notes within two business days following the receipt of the
investors' notice of conversion.
The number of shares of common stock issuable upon conversion of the convertible
notes is determined by dividing that portion of the principal of the convertible
notes to be converted by the conversion price. For example, assuming conversion
of $500,000 of convertible notes on August 12, 2004, a conversion price of
$0.0056 per share, the number of shares issuable, ignoring the 4.9% limitation
discussed above, upon conversion would be:
$500,000/ $0.0056 = 89,285,714 shares
The conversion price of the convertible notes are subject to equitable
adjustments if we distribute a stock dividend, subdivide or combine outstanding
3
shares of common stock into a greater or lesser number of shares, or take such
other actions as would otherwise result in dilution of the selling stockholders'
ownership. Also, the convertible notes fixed conversion price gets lowered in
the event we issue shares of our common stock or any rights, options, warrants
to purchase shares of our common stock at a price less than the market price of
our shares as quoted on the OTCBB. The fixed conversion price gets lowered upon
such issuance to the amount of the consideration per share received by us.
The convertible notes are secured by a security agreement and an intellectual
property security agreement under which we pledged substantially all of our
assets, including our goods, fixtures, equipment, inventory, contract rights,
receivables and intellectual property.
OUR COVENANTS WITH THE 10% DEBENTURE HOLDERS
We may not, without the prior written consent of our convertible notes holders,
do any of the following:
o pay, declare or set apart for payment any dividend or other distribution on
shares of our capital stock other than shares issued in the form of a stock
dividend;
o redeem, repurchase or otherwise acquire any shares of our capital stock or
any warrants, rights or options to purchase or acquire our shares of
capital stock;
o incur any indebtedness, except to trade creditors or financial institutions
incurred in the ordinary course of our business or to pay the convertible
notes;
o sell, lease or otherwise dispose of any significant portion of our assets
outside of the ordinary course of our business; and
o lend money, give credit or make advances to any person or entity except in
the ordinary course of our business (to a maximum of $500,000).
DESCRIPTION OF WARRANTS
The warrants purchased by the investors pursuant to the August 12, 2004
securities purchase agreement entitle the investors to purchase 1,500,000 shares
of our common stock at an exercise price equal to $0.0056 per share.
The warrants expire five years from the date of issuance. The warrants are
subject to exercise price adjustments upon the occurrence of certain events
including stock dividends, stock splits, mergers, reclassifications of stock or
our recapitalization. The exercise price of the warrants is also subject to
reduction if we issue shares of our common stock on any rights, options or
warrants to purchase shares of our common stock at a price less than the market
price of our shares as quoted on the OTC Bulletin Board.
4
RISK FACTORS
If you purchase shares of our common stock, you will take on a financial risk.
In deciding whether to invest, you should consider carefully the following
factors, the information contained in this prospectus and the other information
to which we have referred you. If any of the following risks actually occur, our
business, financial condition or results of operations could be materially
adversely affected. In such case, the trading price of our common stock could
decline, and you may lose all or part of your investment.
RISKS ASSOCIATED WITH OUR BUSINESS
WE HAVE LOST OUR RIGHTS TO THE NICO PATENT AND ARE NO LONGER ABLE TO SELL NICO
WATER. THE LOSS OF THESE RIGHTS HAS MATERIALLY ADVERSELY EFFECTED OUR BUSINESS,
REVENUES AND RESULTS OF OPERATIONS.
NICOWater(TM) was the only product we sold. In May 2003, we received notice from
Marshall Anlauf Thompson, the inventor of the process by which we made
NICOWater(TM) and the assignor of the rights to the NICO Patent, that he
believed that we were in breach of the agreement by which we acquired the NICO
Patent. Specifically, he alleged that we failed to meet certain performance
requirements included in that agreement and that he had a right to terminate the
agreement and obtain a return of the NICO Patent. We commenced an arbitration
proceeding, as required by the agreement, to resolve this dispute. On January 8,
2004, the arbitrators ruled against us and we lost the NICO Patent.
Because NICOWater(TM) was the only product we sold, our loss of the NICO Patent
will have a material adverse effect on our business, revenues and results of
operations.
WE ARE A RECENTLY FORMED BUSINESS WITH VERY LITTLE OPERATING HISTORY, THEREFORE
YOU HAVE NO BASIS ON WHICH TO DETERMINE IF WE CAN BE SUCCESSFUL.
In January 2003, we merged with Moneyzone.com, Inc. in a reverse acquisition. We
have a very short history of operations. At this time we have several products
that are being marketed and, even if we are successful in the introduction of
any of our products, we are not certain that they will generate significant
revenues. During the year ended June 30, 2003 and the nine months ended March
31, 2004, we incurred net losses of $6,410,216 and $6,472,968, respectively,
with revenues of only $9,042 and $191,702, respectively. Because of the loss of
the NICO Patent, we no longer have a product that currently generates revenues.
Because we have a short operating history, you will have no basis upon which to
accurately forecast our future operations, including sales, or to judge our
ability to develop our business. If you purchase our securities, you may lose
your entire investment.
BECAUSE WE HAVE EARNED VERY LITTLE IN REVENUES, THE SUCCESS OF OUR BUSINESS
REQUIRES CONTINUED FUNDING. IF WE CANNOT RAISE THE MONEY WE NEED TO SUPPORT OUR
OPERATIONS UNTIL WE EARN SIGNIFICANT REVENUES, WE MAY BE REQUIRED TO CURTAIL OR
TO CEASE OUR OPERATIONS AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.
Our ability to develop our business depends upon our receipt of money to
continue our operations while we introduce our products and a market for them
develops. If this funding is not received as needed, it is unlikely that we
could continue our business, in which case you would lose your entire
investment.
In February and March 2004 we received gross proceeds of $1,000,000 in
financing. Also, in November 2003 we completed an accounts receivable financing
facility with AeroFund Financial ("AeroFund") that will enable us to finance
approved customer invoices to a maximum of $1,500,000 at any given time.
However, on February 3, 2004, we received a letter of default and demand for
reimbursement in the sum of $26,870 from AeroFund, such default being caused by
non-payment of invoices to certain customers against which AeroFund had advanced
the $26,870 to the Company. The non-payment, in turn, was caused by the
Company's loss of the NICO Patent and the inability of that product to be sold.
5
In March 2004, the Company made a $10,000 cash payment and recorded an accrued
liability of $16,870 reflected in accounts payable and accrued expenses in our
consolidated balance sheet as of March 31, 2004. In June and July 2004, the
Company paid the remaining balance due to AeroFund. AeroFund assured the Company
that the financing agreement would remain intact. Without the ability to sell
NICOWaterTM, which was our only product, and given that we are just beginning to
bring other products to market, we are dependent upon obtaining additional
financing to fund our continued operations.
In May 2004, we entered into a Securities Purchase Agreement with several
accredited institutional investors for the issuance of an aggregate of
$1,000,000 principal amount 10% Callable Secured Convertible Notes. We received
the first tranch in the gross amount of $400,000 and also received the balance
in two additional tranches, the second in the gross amount of $300,000 upon the
filing of a registration statement registering 172,666,667 shares and the last
tranch in the gross amount of $300,000 upon the effective date of the
registration statement. The 10% Convertible Notes are due two years from the
date of issuance. The 10% Convertible Notes are convertible at the option of the
holders into shares of our common stock. The conversion price is equal to the
lesser of (i) $.08 and (ii) the average of the lowest three (3) intra-day
trading prices during the twenty (20) trading days immediately prior to the
conversion date discounted by forty percent (40%). In connection with the
issuance of the 10% Convertible Notes, the noteholders shall receive warrants to
purchase shares of our common stock.
On August 12, 2004, we entered into a Securities Purchase Agreement with several
accredited institutional investors for the issuance of an aggregate of $500,000
principal amount 10% Callable Secured Convertible Notes . The 10% convertible
notes are due two years from the date of issuance. The 10% convertible notes are
convertible at the option of the holders into shares of our common stock. The
conversion price is equal to the lesser of (i) $.0056 and (ii) the average of
the lowest three (3) intra-day trading prices during the twenty (20) trading
days immediately prior to the conversion date discounted by fifty percent (50%).
In connection with the issuance of the 10% convertible notes, the noteholders
shall receive warrants to purchase shares of our common stock. Furthermore we
entered into a Registration Rights Agreement in order to register the
above-referenced securities and are required to register 200% of our common
shares underlying the 10% convertible notes and the warrants.
To the extent that we need more funds, we cannot assure you that additional
financing will be available to us when needed, on commercially reasonable terms,
or at all. If we are unable to obtain additional financing as needed, we may be
required to cease our operations.
WE ARE SUBJECT TO THE RISKS AND UNCERTAINTIES INHERENT IN NEW BUSINESSES. IF WE
FAIL TO ACCURATELY FORECAST OUR CAPITAL NEEDS OR IF OUR PRODUCT DOES NOT EARN
SIGNIFICANT REVENUES OUR BUSINESS COULD FAIL AND YOU COULD LOSE YOUR ENTIRE
INVESTMENT.
We are subject to the risks and uncertainties inherent in new businesses,
including the following:
o Our projected capital needs may be inaccurate, and we may not have enough
money to develop our business and bring our products to market as we
planned;
o We may experience unanticipated development or marketing expenses, which
may make it more difficult to develop our business and bring our products
to market;
o Even if we are able to develop our products and bring them to market, we
may not earn enough revenues from the sales of our products to cover the
costs of operating our business.
If we are unsuccessful in our efforts to develop our business and if the product
we provide does not produce revenues as we project, we are not likely to ever
become profitable and we may be required to curtail some or all of our
operations. If that happened you could lose your entire investment.
WE ARE DEPENDENT FOR OUR SUCCESS ON A FEW EMPLOYEES. THE LOSS OF ONE OR MORE OF
THESE EMPLOYEES COULD HAVE AN ADVERSE EFFECT ON OUR OPERATIONS.
Our future success will depend, to a significant degree, on the continued
services of our Chief Executive Officer, Timothy J. Owens and our President and
Acting Chief Financial Officer Steven Reder. Loss of the services of Messrs.
Owens and Reder would have a material adverse effect on our business and
operations.
6
WE CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN COMMERCIALIZING OUR PRODUCTS.
IF WE DO NOT DEVELOP AND COMMERCIALIZE OUR PRODUCTS, YOU MAY LOSE YOUR ENTIRE
INVESTMENT.
Our ability to successfully commercialize any of the products we have acquired
is uncertain. Although some of the products we are currently licensed to sell
need no further regulatory clearance, some will require additional research,
development, testing, regulatory clearance or investment prior to their
commercialization. We cannot assure you that we can develop commercially
successful products. If we do not develop commercially successful products, you
could lose your entire investment.
WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS. OUR INSURANCE MAY NOT BE
ADEQUATE TO PAY SUCH CLAIMS. IF WE WERE REQUIRED TO PAY A CLAIM, OUR BUSINESS
AND FINANCIAL CONDITION COULD BE ADVERSELY EFFECTED AND YOUR INVESTMENT MAY
DECLINE IN VALUE.
We have obtained the rights to sell specific point of care quick-test devices
and quantitative testing analyzers to the retail, professional and governmental
healthcare markets. These include an FDA cleared urine specimen drug screening
test and a disease testing target system platform to identify Rubella, Herpes,
Roravirus, Strep Group A, Infectious Mononucleosis, Myoglobin, CK-MB, Cardiac
Troponin and Pregnancy. When we begin selling these products, liability might
result from claims made by consumers or professionals who purchase them. Our
product liability insurance policy was cancelled in January 2004 as a result of
our loss of the NICO Patent and our inability to sell NICOWater. We anticipate
obtaining new product liability insurance covering the sale of our new products.
We can give no assurance that such insurance will be available at a reasonable
cost or that any insurance policy would offer coverage sufficient to meet any
liability arising as a result of a claim. The obligation to pay any product
liability claim could have a material adverse effect on our business and
financial condition and could cause the value of your investment to decline.
WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR PATENTS OR OTHER INTELLECTUAL
PROPERTY OR WE COULD BECOME INVOLVED IN LITIGATION WITH OTHERS REGARDING OUR
INTELLECTUAL PROPERTY. EITHER OF THESE EVENTS COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR BUSINESS.
We rely on a combination of patent laws, nondisclosure, trade secret and other
contractual and technical measures to protect our proprietary rights in our
products. However, we cannot assure you that these provisions will be adequate
to protect our proprietary rights. In addition, the laws of certain foreign
countries do not protect intellectual property rights to the same extent as the
laws of the United States.
Although we believe that our intellectual property does not infringe upon the
proprietary rights of third parties, others may claim that we have infringed on
their products. If we were to become involved in disputes regarding the use or
ownership of intellectual property rights, we could incur substantial costs in
defending or prosecuting any such action and the defense or prosecution of the
action would likely result in a diversion of management resources. In addition,
in order to settle such an action we could be required to acquire licenses from
others or to give licenses to others on terms that are not beneficial to us. Any
dispute relating to our intellectual property could have a material adverse
effect on our business.
7
OUR PRODUCTS ARE REGULATED BY THE FDA AND, IN THE WORLDWIDE MARKET, GOVERNMENT
AGENCIES LIKE THE FDA. WE MAY BE UNSUCCESSFUL IN OBTAINING REGULATORY APPROVALS
FOR OUR PRODUCTS, EVEN THOUGH WE MAY INVEST A SIGNIFICANT AMOUNT OF TIME AND
MONEY INTO SEEKING SUCH APPROVALS. IF OUR PRODUCTS DO NOT RECEIVE THE REGULATORY
APPROVALS WE NEED TO SELL THEM, OUR REVENUES AND OPERATING RESULTS COULD BE
ADVERSELY AFFECTED AND THE VALUE OF YOUR INVESTMENT MAY DECLINE.
The manufacture, sale, promotion and marketing of some of our future products
are subject to regulation by the FDA and similar government regulatory bodies in
other countries.
As we develop or obtain new products, we will be required to determine what
regulatory requirements, if any, are required to market and sell our products in
the United States and worldwide. Although we have not yet been required to spend
significant sums of money to obtain FDA or other clearances or approvals for our
products, the expense relating to obtaining such approvals could grow.
Furthermore, we cannot predict the time frame for any clearance or approval
because all required approvals are subject to independent governmental agencies
over which we have no control. Delays in obtaining government clearances or
approvals of our products, or failure to obtain required government clearances
or approvals, will prevent us from marketing them, which, in turn, will prevent
us from recouping their acquisition costs.
We intend to work diligently to assure compliance with all applicable
regulations that impact our business. We cannot assure you, however, that we
will be able to obtain regulatory clearance or approval for all of our products
or that, in the future, additional regulations will not be enacted which might
adversely impact our operations. In either case, our revenues and operating
results could be adversely affected and the value of your investment may
decline.
RISKS RELATING TO OUR CURRENT FINANCING AGREEMENT
THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE NOTES
COULD REQUIRE US TO ISSUE A SUBSTANTIALLY GREATER NUMBER OF SHARES TO THE
SELLING STOCKHOLDER, WHICH WILL CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS.
Our obligation to issue shares upon conversion of our convertible securities is
essentially limitless.
The following is an example of the amount of shares of the Company's common
stock that are issuable, upon conversion of the Debentures, not including two
years of 10% interest, based on the market prices 25%, 50% and 75% below the
last closing price of $0.0053:
PRICE PER SHARE DISCOUNT OF 50% NUMBER OF SHARES ISSUABLE
- --------------- --------------- -------------------------
$.0040 $.0020 250,000,000
$.0027 $.0014 357,142,857
$.0013 $.0007 714,285,714
The issuance of shares upon conversion of the convertible notes and exercise of
warrants may result in substantial dilution to the interests of other
stockholders since the selling stockholder may ultimately convert and sell the
full amount issuable on conversion. Although the selling stockholder may not
convert its convertible note and/or exercise their warrants if such conversion
or exercise would cause them to own more than 4.99% of our outstanding common
stock, this restriction does not prevent the selling stockholder from converting
and/or exercising some of their holdings, selling our common stock issued in
such conversion and/or exercise, and then converting more of their holdings. In
this way, the selling stockholder could sell more than 4.99% of our outstanding
common stock while never holding more than this limit. There is no upper limit
on the number of shares that may be issued which will have the effect of further
diluting the proportionate equity interest and voting power of holders of our
common stock, including investors in this offering.
8
THE CONTINUOUSLY ADJUSTABLE CONVERSION PRICE FEATURE OF OUR CONVERTIBLE NOTES
MAY ENCOURAGE INVESTORS TO MAKE SHORT SALES IN OUR COMMON STOCK, WHICH COULD
HAVE A DEPRESSIVE EFFECT ON THE PRICE OF OUR COMMON STOCK.
The convertible notes are convertible into shares of our common stock at either
a 40% or 50% discount to the trading price of the common stock prior to the
conversion. The significant downward pressure on the price of the common stock
as the selling stockholder converts and sells material amounts of common stock
could encourage short sales by investors. This could place further downward
pressure on the price of the common stock. In addition, not only the sale of
shares issued upon conversion or exercise of notes, warrants and options, but
also the mere perception that these sales could occur, may lower the market
price of the common stock.
RISKS ASSOCIATED WITH OWNERSHIP OF OUR SECURITIES
WE HAVE NOT PAID CASH DIVIDENDS AND IT IS UNLIKELY THAT WE WILL PAY CASH
DIVIDENDS IN THE FORESEEABLE FUTURE.
We plan to use all of our earnings, to the extent we have earnings, to fund our
operations. We do not plan to pay any cash dividends in the foreseeable future.
We cannot guarantee that we will, at any time, generate sufficient surplus cash
that would be available for distribution as a dividend to the holders of our
common stock. You should not expect to receive cash dividends on our common
stock.
WE HAVE THE ABILITY TO ISSUE ADDITIONAL SHARES OF OUR COMMON STOCK WITHOUT
ASKING FOR SHAREHOLDER APPROVAL, WHICH COULD CAUSE YOUR INVESTMENT TO BE
DILUTED.
Our Certificate of Incorporation currently authorizes the Board of Directors to
issue up to 300,000,000 shares of common stock. The Board of Directors may
generally issue shares of common stock or warrants or options to purchase shares
of common stock without further approval by our shareholders. Accordingly, any
additional issuance of our common stock may have the effect of further diluting
your investment. On August 12, 2004 the Company increased its authorized common
stock to 5,000,000,000 shares.
WE MAY RAISE ADDITIONAL CAPITAL THROUGH A SECURITIES OFFERING THAT COULD DILUTE
YOUR OWNERSHIP INTEREST.
We require substantial working capital to fund our business. If we raise
additional money through the issuance of equity, equity-related or convertible
debt securities, those securities may have rights, preferences or privileges
senior to those of the holders of our common stock. The issuance of additional
common stock or securities convertible into common stock by our management will
also have the effect of further diluting the proportionate equity interest and
voting power of holders of our common stock.
OUR SECURITIES ARE THINLY TRADED, SO YOU MAY BE UNABLE TO LIQUIDATE THEM IF YOU
NEED MONEY.
Our common stock trades sporadically on the Over-The-Counter Bulletin Board. In
the past, there have been periods of several days or more when there were no
trades of our common stock. It is not likely that an active market for our
common stock will develop or be sustained in the foreseeable future. If you
needed to liquidate your common stock because you needed money, it may be
difficult or impossible to do so.
WE ARE SUBJECT TO THE PENNY STOCK RULES AND THESE RULES MAY ADVERSELY AFFECT
TRADING IN OUR COMMON STOCK.
Our common stock is considered a "low-priced" security under rules promulgated
under the Securities Exchange Act of 1934. In accordance with these rules,
broker-dealers participating in transactions in low-priced securities must first
deliver a risk disclosure document which describes the risks associated with
such stocks, the broker-dealer's duties in selling the stock, the customer's
rights and remedies and certain market and other information. Furthermore, the
broker-dealer must make a suitability determination approving the customer for
low-priced stock transactions based on the customer's financial situation,
9
investment experience and objectives. Broker-dealers must also disclose these
restrictions in writing to the customer, obtain specific written consent from
the customer, and provide monthly account statements to the customer. The effect
of these restrictions will likely be a decrease in the willingness of
broker-dealers to make a market in our common stock, decreased liquidity of our
common stock and increased transaction costs for sales and purchases of our
common stock as compared to other securities.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the selling
stockholder. All of the net proceeds from the sale of our common stock will go
to the selling stockholder.
10
SELLING STOCKHOLDERS
This prospectus relates to the offer and sale by the following selling
stockholders of the indicated number of shares, all of which are issuable
pursuant to warrants and/or convertible notes held by these selling
stockholders. The number of shares set forth in the table for the selling
stockholders represents an estimate of the number of shares of common stock to
be offered by the selling stockholders. The actual number of shares of common
stock issuable upon conversion of the notes and exercise of the related warrants
is indeterminate, is subject to adjustment and could be materially less or more
than such estimated number depending on factors which cannot be predicted by us
at this time including, among other factors, the future market price of the
common stock. The actual number of shares of common stock offered in this
prospectus, and included in the registration statement of which this prospectus
is a part, includes such additional number of shares of common stock as may be
issued or issuable upon conversion of the notes and exercise of the related
warrants by reason of any stock split, stock dividend or similar transaction
involving the common stock, in accordance with Rule 416 under the Securities Act
of 1933.
None of the following selling stockholders have held any position or office
within our company, nor has had any other material relationship with us in the
past three years, other than in connection with transactions pursuant to which
the selling stockholders acquired convertible notes and warrants.
The following table also sets forth the name of each person who is offering the
resale of shares of common stock by this prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered.
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
TOTAL
TOTAL SHARES OF PERCENTAGE
COMMON STOCK OF COMMON SHARES OF PERCENTAGE
ISSUABLE UPON STOCK, COMMON STOCK BENEFICIAL PERCENTAGE OF BENEFICIAL OF COMMON
CONVERSION OF ASSUMING INCLUDED IN OWNERSHIP COMMON STOCK OWNERSHIP STOCK OWNED
CONVERTIBLE NOTES FULL PROSPECTUS BEFORE THE OWNED BEFORE AFTER THE AFTER
NAME AND/OR WARRANTS CONVERSION PROSPECTUS(1) OFFERING OFFERING OFFERING(2) OFFERING(3)
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
AJW Qualified
Partners, LLC 242,033,874(4) 76.67% 551,375,874(1) 3,794,830 4.9% -- --
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
AJW Offshore, Ltd. 208,407,681(4) 73.89% 475,915,181(1) 3,794,830 4.9% -- --
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
AJW Partners, LLC 101,120,429(4) 57.86% 233,432,429(1) 3,794,830 4.9% -- --
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
New Millennium
Capital Partners II,
LLC 20,361,853(4) 21.66% 47,290,353(1) 3,794,830 4.9% -- --
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
Palisades Master
Fund L.P 65,462,966(5) 47.06% 75,069,449(2) 3,794,830 4.9% -- --
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
Crescent International 115,576,066(6) 61.08% 172,864,099(2) 3,794,830 4.9% -- --
Ltd.
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
Alpha Capital AG 97,875,000(7) 57.06% 146,312,500(2) 3,794,830 4.9% -- --
- ---------------------- -------------------- ------------- -------------- ------------ --------------- ------------ --------------
Bristol Investment 42,929,371(8) 36.82% 63,769,057(2) 3,794,830 4.9% -- --
Fund Ltd.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares, which the selling stockholder has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the
conversion of the convertible notes is subject to adjustment depending on, among
other factors, the future market price of the common stock, and could be
materially less or more than the number estimated in the table.
11
(1) Includes 200% of the shares issuable upon conversion of the convertible
notes and shares issuable upon exercise of warrants, based on current market
prices. Because the number of shares of common stock issuable upon conversion of
the convertible note is dependent in part upon the market price of the common
stock prior to a conversion, the actual number of shares of common stock that
will be issued upon conversion will fluctuate daily and cannot be determined at
this time. However the selling stockholders have contractually agreed to
restrict their ability to convert or exercise their warrants and receive shares
of our common stock such that the number of shares of common stock held by them
and their affiliates after such conversion or exercise does not exceed 4.99% of
the then issued and outstanding shares of common stock.
(2) Includes 150% of the shares issuable upon conversion of the convertible
notes and shares issuable upon exercise of warrants, based on current market
prices. Because the number of shares of common stock issuable upon conversion of
the convertible note is dependent in part upon the market price of the common
stock prior to a conversion, the actual number of shares of common stock that
will be issued upon conversion will fluctuate daily and cannot be determined at
this time. However the selling stockholder have contractually agreed to restrict
their ability to convert or exercise their warrants and receive shares of our
common stock such that the number of shares of common stock held by them and
their affiliates after such conversion or exercise does not exceed 4.99% of the
then issued and outstanding shares of common stock.
(3) Assumes all the registered securities are sold.
(4) AJW Partners, LLC is a private investment fund that is owned by its
investors and managed by SMS Group, LLC. SMS Group, LLC, of which Mr. Corey S.
Ribotsky is the fund manager, has voting and investment control over the shares
listed below owned by AJW Partners, LLC. New Millennium Capital Partners II, LLC
is a private investment fund that is owned by its investors and managed by First
Street Manager II, LLC. First Street Manager II, LLC, of which Corey S. Ribotsky
is the fund manager, has voting and investment control over the shares listed
below owned by New Millennium Capital Partners II, LLC. AJW Offshore, Ltd.,
formerly known as AJW/New Millennium Offshore, Ltd., is a private investment
fund that is owned by its investors and managed by First Street Manager II, LLC.
First Street Manager II, LLC, of which Corey S. Ribotsky is the fund manager,
has voting and investment control over the shares listed below owned by AJW
Offshore, Ltd. AJW Qualified Partners, LLC, formerly known as Pegasus Capital
Partners, LLC, is a private investment fund that is owned by its investors and
managed by AJW Manager, LLC, of which Corey S. Ribotsky and Lloyd A. Groveman
are the fund managers, have voting and investment control over the shares listed
below owned by AJW Qualified Partners, LLC. We have been notified by the selling
stockholders that they are not broker-dealers or affiliates of broker-dealers
and that they believe they are not required to be broker-dealers.
The number of shares of common stock being registered for AJW Qualified
Partners, LLC includes 660,000 shares of common stock underlying warrants.
The number of shares of common stock being registered for AJW Offshore, Ltd.
includes 550,000 shares of common stock underlying warrants.
The number of shares of common stock being registered for AJW Partners, LLC
includes 240,000 shares of common stock underlying warrants.
The number of shares of common stock being registered for New Millennium Capital
Partners II, LLC includes 45,000 shares of common stock underlying warrants.
(5) Includes 1,250,000 shares of common stock underlying warrants.
(6) Includes 1,000,000 shares of common stock underlying warrants.
(7) Includes 1,000,000 shares of common stock underlying warrants.
(8) Includes 1,250,000 shares of common stock underlying warrants.
12
PLAN OF DISTRIBUTION
Each Selling Stockholder (the "Selling Stockholders") of the common stock
("Common Stock") of QT 5, Inc., a Delaware corporation (the "Company") and any
of their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their shares of Common Stock on the American Stock Exchange
or any other stock exchange, market or trading facility on which the shares are
traded or in private transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the following methods
when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o settlement of short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Each Selling Stockholder does not expect these commissions and
discounts relating to its sales of shares to exceed what is customary in the
types of transactions involved.
In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Each Selling Stockholder has informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.
13
The Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each Selling
Stockholder has advised us that they have not entered into any agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares. There is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the date on
which the shares may be resold by the Selling Stockholders without registration
and without regard to any volume limitations by reason of Rule 144(e) under the
Securities Act or any other rule of similar effect or (ii) all of the shares
have been sold pursuant to the prospectus or Rule 144 under the Securities Act
or any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to our common stock for a period of two
business days prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of our common stock by the
Selling Stockholders or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale.
DESCRIPTION OF SECURITIES TO BE REGISTERED
On August 12, 2004 our authorized capital stock was increased to 5,000,000,000
shares of Common Stock, $.001 par value.
The following is a description of the material terms of our common stock.
COMMON STOCK
The holders of the issued and outstanding shares of common stock are entitled to
receive dividends when, as and if declared by our Board of Directors out of any
funds lawfully available therefore. The Board of Directors intends to retain
future earnings to finance the development and expansion of our business and
does not expect to declare any dividends in the foreseeable future. The holders
of the common stock have the right, in the event of liquidation, to receive pro
rata all assets remaining after payment of debts and expenses. The common stock
does not have any preemptive rights and does not have cumulative voting rights.
The issued and outstanding shares of common stock are fully paid and
nonassessable.
Holders of shares of common stock are entitled to vote at all meetings of such
shareholders for the election of directors and for other purposes. Such holders
have one vote for each share of common stock held by them.
TRANSFER AGENT
American Stock Transfer, Inc. has been appointed the transfer agent of our
common stock and preferred stock.
14
LEGAL MATTERS
The validity of the issuance of the shares being offered hereby will be passed
upon for us by Sichenzia Ross Friedman Ference LLP, New York, New York.
EXPERTS
Corbin & Company, LLP audited our financial statements at June 30, 2003 and June
30, 2002, as set forth in their report which includes an emphasis paragraph
relating to our ability to continue as a going concern. We have incorporated by
reference in this prospectus our financial statements in reliance on the report
of Corbin & Company, LLP, given on their authority as experts in accounting and
auditing.
15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS.
SEC registration fee..................................... $ 610.00
Legal fees and expenses.................................. $25,000.00
Accountants.............................................. $ 5,000.00
Total.................................................... $30,610.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Articles of Incorporation, as amended and restated, provide to the fullest
extent permitted by Section 145 of the General Corporation Law of the State of
Delaware, that our directors or officers shall not be personally liable to us or
our shareholders for damages for breach of such director's or officer's
fiduciary duty. The effect of this provision of our Articles of Incorporation,
as amended and restated, is to eliminate our rights and our shareholders
(through shareholders' derivative suits on behalf of our company) to recover
damages against a director or officer for breach of the fiduciary duty of care
as a director or officer (including breaches resulting from negligent or grossly
negligent behavior), except under certain situations defined by statute. We
believe that the indemnification provisions in our Articles of Incorporation, as
amended, are necessary to attract and retain qualified persons as directors and
officers.
ITEM 16. EXHIBITS.
The exhibits filed as part of this Registration Statement are as follows:
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------
5.1 Opinion of Counsel
10.1 Securities Purchase Agreement for 10% Convertible Debentures
entered into by the registrant and various holders on August 12,
2004.
10.2 Registration Rights for 10% Convertible Debentures entered into
by the registrant and various holders on August 12, 2004.
10.3 Warrants for 10% Convertible Debentures entered into by the
registrant and various holders on August 12, 2004.
10.4 Intellectual property security agreement dated as of August 12,
2004.
10.5 Security Agreement dated as of August 12, 2004.
10.6 Callable Secured Convertible Note
10.7 Guaranty and Pledge Agreement
10.8 Warrant
23.1 Consent of Accountants
16
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof), which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes on volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii)to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement,
2. That, for the purpose of determining any liability under the Securities Act
of 1933, as amended, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
4. Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant 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
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant 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 Registrant 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.
5. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14-a or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulations S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant, QT 5, Inc., certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement on Form S-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York, State of New
York on the 16th day of August 2004.
QT 5, INC.
Name: /s/ Timothy Owens
------------------------------------
Title: Chief Executive Office
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Timothy Owens
his or her true and lawful attorney in fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post effective amendments) to the Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and all post effective amendments thereto,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, each acting alone, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-2 has been signed below by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ---------------------------- ----------------------------- -------------------
By: /s/ Timothy Owens Chief Executive Officer
----------------------- and Director AUGUST 16, 2004
Timothy Owens
By: /s/ Steve Reder
-----------------------
Steve Reder President, Acting CFO AUGUST 16, 2004
And Director
18