UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TECHALT, INC.
(Name of small business issuer in its charter)
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Nevada 3576 87-0533626
(Jurisdiction of Incorporation) (SIC Number) (IRS Employer ID No.)
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3311 N. Kennicott Ave., Suite A, Arlington Heights, IL 60004; (847) 870-2601
(Address and telephone number of principal executive offices)
James E. Solomon Peter Lynch
Chief Executive Officer Chief Operating Office
3311 N. Kennicott Ave., Suite A 3311 N. Kennicott Ave., Suite A
Arlington Heights, IL 60004 Arlington Heights, IL 60004
(847) 870-2601 (847) 870-2601
(Name, Address, and Telephone Number of Agent for Service)
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Copies to:
David M. Otto, Esq.
The Otto Law Group, PLLC
900 Fourth Ave., Suite 3140
Seattle, Washington 98164
(206) 262-9545
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Approximate date of proposed sale to the public: As soon as practicable 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, 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. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
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Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price per aggregate offering registration fee
registered unit(a) price
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Common Stock 34,277,028 $.50 $17,138,514 $2,171.44
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The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8 (a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(a) The proposed maximum offering price per share is based upon a recent
valuation of the Company by Sunrise Securities Corp.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. 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 _____________, 2004
PRELIMINARY PROSPECTUS
[TECHALT LOGO]
34,277,028 SHARES OF COMMON STOCK
This prospectus is part of a registration statement that we have filed with the
Securities and Exchange Commission. TechAlt, Inc., a Nevada corporation (the
"Company", "TechAlt" or the "Registrant") is registering 34,277,028 shares of
our common stock to be sold by certain stockholders of the Company (the "Selling
Stockholders"). The Selling Stockholders will offer the common stock in amounts,
at prices and on terms to be determined at the time of the offering. We will not
receive any proceeds from the sale of the common stock by the Selling
Stockholders. However we will receive the proceeds from any cash exercises of
any of the warrants by the Selling Stockholders. Shares of our common stock are
not currently quoted on any exchange or the over-the-counter bulletin board
market. We have applied for trading of our common stock on the over-the-counter
bulletin board.
You may contact us at our principal executive offices located at 3311 N.
Kennicott Ave., Suite A, Arlington Heights, IL 60004; (847) 870-2601.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This offering involves a high degree of risk. See "Risk Factors" on page 3.
The date of this prospectus is __________________, 2004
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THE
INFORMATION CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING
OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS IN WHICH OFFERS AND
SALES ARE PERMITTED.
Summary........................................................................5
Risk Factors...................................................................7
Use of Proceeds...............................................................10
Certain Relationships and Related
Transactions..................................................................12
Determination of Offering
Price.........................................................................12
Market for the Company's Common Stock and Related Stockholder
Matters.......................................................................12
Selling Security Holders......................................................12
Plan of Distribution..........................................................14
Legal Proceedings.............................................................16
Dividend Policy...............................................................17
Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................17
Business......................................................................23
Property......................................................................25
Executive Compensation........................................................29
Security Ownership of Certain Beneficial Owners and
Management....................................................................30
Description of
Securities....................................................................31
Legal Matters.................................................................34
Experts.......................................................................
Changes in
Accountants...................................................................34
Indemnification of Officers and
Directors.....................................................................36
Financial Statements..........................................................F
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PROSPECTUS SUMMARY
This Summary Is Qualified In Its Entirety By The More Detailed Information
Appearing Elsewhere In This Prospectus. The following summary highlights
material information which is presented in more detail elsewhere in this
prospectus. Before making an investment decision, you should read the entire
prospectus carefully, including the "Risk Factors" section, the financial
statements and the notes to the financial statements.
OUR COMPANY
TechAlt, Inc. was organized under the laws of the State of Nevada on December
29, 1994. The Company produces a secure wireless communications toolset to be
used by emergency first responders for interagency interoperability,
communication and collaboration. The convergence of video, voice, and data
requires larger transmission bandwidth than current radio systems could provide.
In addition, public safety officials require redundant networks to ensure
communication capability in the event the primary system is damaged or
destroyed. The Company's toolset provides multi-network capable communications
for the Police, EMS, and other Homeland Security Agencies. There are 360
agencies under the Department of Homeland Security ("DHS"), of which 17,000 US
police departments are but one grouping.
The Company, through its proprietary hardware, network, and communications
components, delivers a complete technology solution that communicates data and
mission critical imagery between remote first responders and central command and
control centers by using any and all existing public wireless networks, coupled
with secure agency networks. These existing wireless networks include the new
802.11 or Wi-Fi networks, and spread spectrum technologies, which include
licensed frequencies, for which the carriers pay a fee to the government to be
utilized in a specific location and unlicensed frequencies, which are free to
the public to use; 802.11 or Wi-Fi networks fall into this unlicensed category.
The Company solution provides a scalable, robust, secure, communications method
for first responders to provide interoperable communications and interagency
interoperability, communication and collaboration. The proposed Homeland
Security Agency ("HSA") budget to build this capability was $3.5 billion out of
the proposed $37.5 billion for the entire Fiscal Year 2003 HSA budget.
OUR MANAGEMENT
JAMES E. SOLOMON is the Chairman of our Board of Directors and has served as our
President and Chief Executive Officer since August 2004. Mr. Solomon is also the
President and Chief Executive Officer of Technology Alternatives, Inc. of
Schaumburg, Illinois. Mr. Solomon's career has been that of the technology
entrepreneur and he has been active in the technology industry for the past 32
years. Mr. Solomon's experience includes work as a developer, engineer, and
creator of businesses in the PC, CD-ROM, Relational Database, Telecommunications
and Wireless industries.
PETER LYNCH has served as our Chief Operating Officer since October of 2004. Mr.
Lynch has extensive senior executive level management experience in the
broadband communications industry including a combination of domestic and
international entrepreneurial assignments.
GEORGE LOERA has served as a member of our Board of Directors since August of
2004. For the past 18 years Mr. George Loera has been the owner and President of
Chicago United Industries. Ltd.,a multi-million dollar distribution and supply
company located in Chicago, Illinois.
C. PETE ASHI has served as a member of our Board of Directors since August of
2004. Mr. C. Pete Ashi has over 22 years of Information Systems industry
experience. Over the past five years, Mr. Ashi has served as the Vice President
of National Operations for TM Floyd & Company, a $55M Information Technology
consulting firm with major clients in the Health Insurance and Property &
Casualty industries.
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IRWIN A. WILLIAMSON has served as our Chief Financial Officer since August of
2004. Prior to joining the Company, Mr. Williamson served as Chief Financial
Officer of Technology Alternative (TAI). Prior to Technology Alternative Mr.
Williamson served as Chief Financial Officer of Recognition Source, LLC, a
producer of wireless access control devices.
BARBARA ROBERTS has served as our Vice President of Business Development since
October of 2004. Ms. Roberts has nineteen years of practical and industry
experience combining the disciplines of Executive Management, Sales/Marketing,
Finance, Operations, and Systems Integration. Prior to joining TechAlt, Inc.,
Ms. Roberts worked for Technology Alternatives, Inc., of Schaumburg, Illinois
beginning in 2002.
DAVID M. OTTO has served as our Secretary since August of 2004. David M. Otto is
a Seattle-based attorney and President of The Otto Law Group. Mr. Otto's
practice focuses on corporate finance, securities, mergers and acquisitions and
corporate law and governance. Mr. Otto is admitted to practice law in New York
and Washington.
THE OFFERING
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Securities Offered 34,277,028 shares of Selling Stockholder common stock. See "Selling
Stockholders".
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Selling Stockholders The Selling Stockholders are
identified in this prospectus with the maximum
amount of our common shares that each may sell
either outright or upon conversion of convertible
securities.
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Plan of Distribution The Selling Stockholders may sell 34,277,028 shares of common stock through
agents or brokers, acting as principal agent in transactions, which may
involve block transactions, on the over-the-counter bulletin board or on
other exchanges on which the shares are then listed, pursuant to the rules of
the applicable exchanges or in the over-the-counter bulletin board, or
otherwise at market prices prevailing at the time of sale, at negotiated
prices or at fixed prices; through brokers or agents in private sales at
negotiated prices; or by any other legally available means.
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Offering Price At prevailing market prices on the
over-the-counter bulletin board or on other
exchanges on which the shares are then listed or
at negotiated prices.
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Use of Proceeds We will not obtain any funds from the sale of the common stock sold by the
Selling Stockholders. We will receive proceeds from the cash exercise of
warrants currently outstanding (or anticipated to be outstanding at the time
of the effectiveness of this registration statement) and included in this
prospectus. We intend to use any such cash proceeds received from the exercise
of the Warrants for general corporate purposes, which may include repaying
indebtedness, making additions to our working capital, funding future
acquisitions or for further developing our products and hiring additional
personnel.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider the
following risk factors and all other information contained in this prospectus
before purchasing any shares of common stock. Any of the following risks could
materially harm our business, operating results and financial condition, and
could result in a decrease in the trading price of our shares of common stock,
common stock or public warrants, or in a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE NO HISTORY OF PROFITABLE OPERATIONS AND MAY INCUR FUTURE LOSSES.
Since our inception, we have incurred losses and we may never achieve or sustain
profitability. In addition, we expect our operating expenses to increase
significantly as we expand our sales and marketing efforts and otherwise support
our expected growth. Given these planned expenditures, we may incur additional
losses in the near future.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY IN THE EMERGENCY FIRST RESPONDERS MARKET.
Our management determined to concentrate on the emergency first responders
market in late 2002 and TechAlt did not begin to focus on secured wireless
communications until August 2004 when it was licensed certain intellectual
property by Technology Alternatives, Inc. We have a limited operating history
based upon which you can evaluate our present business and future prospects. We
face risks and uncertainties relating to our ability to implement our business
plan successfully. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by public companies that have
recently changed their business strategies. If we are unsuccessful in addressing
these risks and uncertainties, our business, results of operations, financial
condition and prospects will be materially harmed.
WE ARE MATERIALLY DEPENDENT ON ACCEPTANCE OF OUR PRODUCTS BY THE EMERGENCY FIRST
RESPONDERS MARKET, AND IF EMERGENCY FIRST RESPONDERS DO NOT PURCHASE OUR
PRODUCTS, OUR REVENUES WILL BE ADVERSELY AFFECTED AND WE MAY NOT BE ABLE TO
EXPAND INTO OTHER MARKETS.
A substantial number of emergency first responders may not purchase our toolset.
In addition, if our toolset is not widely accepted by the emergency first
responders market, we may not be able to expand sales of our products into other
markets.
IF WE ARE UNABLE TO MANAGE OUR GROWTH, OUR GROWTH PROSPECTS MAY BE LIMITED AND
OUR FUTURE PROFITABILITY MAY BE ADVERSELY AFFECTED.
We intend to expand our sales and marketing programs and our manufacturing
capability. Rapid expansion may strain our managerial, financial and other
resources. If we are unable to manage our growth, our business, operating
results and financial condition could be adversely affected. Our systems,
procedures, controls and management resources also may not be adequate to
support our future operations. We will need to continually improve our
operational, financial and other internal systems to manage our growth
effectively, and any failure to do so may lead to inefficiencies and
redundancies, and result in reduced growth prospects and profitability.
MOST OF OUR END-USERS ARE SUBJECT TO BUDGETARY AND POLITICAL CONSTRAINTS WHICH
MAY DELAY OR PREVENT SALES.
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Most of our end-user customers are government agencies. These agencies often do
not set their own budgets and therefore have little control over the amount of
money they can spend. In addition, these agencies experience political pressure
that may dictate the manner in which they spend money. As a result, even if an
agency wants to acquire our products, it may be unable to purchase them due to
budgetary or political constraints. Some government agency orders may also be
canceled or substantially delayed due to budgetary, political or other
scheduling delays which frequently occur in connection with the acquisition of
products by such agencies.
IF WE ARE UNABLE TO PROTECT OUR RIGHT TO USE CERTAIN INTELLECTUAL PROPERTY, WE
MAY LOSE A COMPETITIVE ADVANTAGE OR INCUR SUBSTANTIAL LITIGATION COSTS TO
PROTECT OUR RIGHTS.
Our future success depends in part upon our proprietary technology. We have been
licensed the right to exploit United States Patent No. 6,587,441 by Technology
Alternatives, Inc. on wireless, redundant, secure, real-time, network for a
proprietary interactive data transfer system having a remote terminal and a host
data center. Controllers for the remote terminal and the host data center
receive the proprietary language messages and packetize and encrypt the messages
for sending over the best wireless carrier among the plurality of wireless
carriers the controllers are connected to. The wireless control protocol
monitors the communications to provide for selection of the most reliable
communication carrier for any part of a transmission. Each network segment of
the signal path has at least one state-controlled gate which reports the status
of that signal path. Real time transmission and acknowledgment of securely
packetized messages on wireless communications carriers via an object oriented
coding control application provides for reliable datagram transfer independent
of the reliability of any one signal path. Technology Alternatives, Inc. has
licensed the technology covered by the patent only to us. The scope of any
patent to which we have or may obtain rights may not prevent others from
developing and selling competing products. The validity and breadth of claims
covered in technology patents involve complex legal and factual questions, and
the resolution of such claims may be highly uncertain, lengthy, and expensive.
In addition, our patents may be held invalid upon challenge, others may claim
rights in or ownership of our patents.
WE ARE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH MAY CAUSE US
TO INCUR LITIGATION COSTS AND DIVERT MANAGEMENT ATTENTION FROM OUR BUSINESS.
Any intellectual property infringement claims against us, with or without merit,
could be costly and time-consuming to defend and divert our management's
attention from our business. If our products were found to infringe a third
party's proprietary rights, we could be required to enter into royalty or
licensing agreements in order to be able to sell our products. Royalty and
licensing agreements, if required, may not be available on terms acceptable to
us or at all.
PENDING LITIGATION MAY SUBJECT US TO SIGNIFICANT LITIGATION COSTS AND DIVERT
MANAGEMENT ATTENTION FROM OUR BUSINESS.
Paul Masanek ("Masanek"), a shareholder of Technology Alternatives, Inc., the
company that licensed certain intellectual property to us, has filed a lawsuit
in the state of Illinois asserting among other things, that it was improper for
the Company to enter into an Intellectual Property License Agreement with
Technology Alternatives, Inc. pursuant to which certain of the intellectual
property of Technology Alternatives, Inc. was licensed to the Company (the
"License Agreement"). The minority shareholder also alleges that the License
Agreement was an attempt to "squeeze" him out from being permitted to make
decisions regarding Technology Alternatives, Inc., was not an acceptable
business transaction for Technology Alternatives, Inc., amounts to a transfer of
all or substantially all of the assets of Technology Alternatives, Inc.,
effectively dilutes his ownership in Technology Alternatives, Inc., and diverts
a corporate opportunity from Technology Alternatives, Inc.
We have reached an agreement in principal with Masanek relative to the full
settlement of any and all claims and disagreements (see "Legal Proceedings").
However, in the event the settlement is not consummated, or there is an outcome
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that is adverse to us, costs associated with defending the lawsuit filed by
Masanek, along with the diversion of our management's time and our resources as
a result of these claims, could harm our business or financial condition.
WE NEED ADDITIONAL FINANCING.
We could be required to cut back or stop operations if we are unable to raise or
obtain needed funding. Our ability to continue operations will depend on our
positive cash flow, if any, from future operations or our ability to raise
additional funds through equity or debt financing. Although we anticipate that
future revenues and new capital from private and institutional investors with
whom we have executed the AIRs will be sufficient to fund our current operations
and capital requirements for the current fiscal year, we could be required to
cut back or stop operations if we are unable to raise or obtain funds when
needed.
YOU COULD LOSE YOUR ENTIRE INVESTMENT.
Our common stock offered in this prospectus is highly speculative, involves a
high degree of risk and should not be purchased by any person who cannot afford
the loss of his entire investment. A purchase of our common stock in this
offering would be unsuitable for a person who cannot afford to sustain such a
loss.
IF WE WERE TO LOSE THE SERVICES OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER OUR
BUSINESS WOULD SUFFER.
We are substantially dependent upon the continued services of James E. Solomon,
our President and Chief Executive Officer. The loss of the services of Mr.
Solomon through incapacity or otherwise would have a material adverse effect
upon our business and prospects. To the extent that his services become
unavailable, we will be required to retain other qualified personnel, and there
can be no assurance that we will be able to recruit and hire qualified persons
upon acceptable terms. We do not maintain key person life insurance on the life
of Mr. Solomon.
In addition to Mr. Solomon, if we were to lose the services of one or more of
our key employees, such as Irwin Williamson, our Chief Financial Officer, or
Peter Lynch, our Chief Operating Officer, our business, operating results,
financial condition or business prospects could be materially adversely
affected.
PENNY STOCK REGULATIONS
The Securities Enforcement Penny Stock Act of 1990 requires specific disclosure
to be made available in connection with trades in the stock of companies defined
as "penny stocks". The Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. Such exceptions include any
equity security listed on NASDAQ and any equity security issued by an issuer
that has (I) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for three years; (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years; or (iii) average annual revenue of at least $6,000,000, if such issuer
has been in continuous operation for less than three years. Unless an exception
is available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith as well as the written consent of the
purchaser of such security prior to engaging in a penny stock transaction. The
regulations on penny stocks may limit the ability of the purchasers of our
securities to sell their securities in the secondary marketplace. Our common
stock is currently considered a penny stock.
THE PRICE AT WHICH THE SELLING STOCKHOLDERS RESELL THEIR STOCK OFFERED IN THIS
PROSPECTUS MAY BEAR NO RELATIONSHIP TO OUR VALUE.
The prices at which Selling Stockholders resell our common shares will be
determined by the then prevailing market prices of our common shares offered and
sold on the over-the-counter market or on any other then applicable exchange
where our Common Shares are traded, or may be at negotiated prices which, in all
likelihood, will bare no relationship to our assets, book value, net worth or
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other economic or recognized measure of value. All of the exercise and
conversion prices and rates of the Company's outstanding warrants, convertible
preferred stock and convertible note were arbitrarily determined by us and, as
well, bare no relationship to our assets, book value, net worth, or any other
economic or recognized measure of value. These exercise prices or conversion
rates should not be regarded as any indication of current or future market
prices for our common shares.
RISKS RELATED TO THIS OFFERING
THERE IS NO CURRENT MARKET FOR THE COMPANY'S COMMON STOCK
The Company's common stock does currently trade on any exchange or the
over-the-counter bulletin board. The Company has applied for listing the common
stock on the over-the-counter bulletin board. However there is no assurance that
the common stock will ever trade on any exchange or the over-the-counter
bulletin board.
THE PRICE OF OUR SECURITIES MAY BE VOLATILE, WHICH MAY LEAD TO LOSSES BY
INVESTORS.
The price of our securities may fluctuate significantly in response to a number
of factors, including:
o Our quarterly operating results;
o Changes in earnings estimates by analysts and whether our earnings meet or
exceed such estimates;
o Announcements of technological innovations by us or our competitors;
o Additions or departures of key personnel; and
o Other events or factors that may be beyond our control.
Volatility in the market price of our securities could lead to claims against
us. Defending these claims could result in significant litigation costs and a
diversion of our management's attention and resources.
WE WILL NEED TO COMPLY WITH FEDERAL AND STATE SECURITIES LAWS TO MAINTAIN THE
TRADEABILITY OF OUR SECURITIES.
We must maintain in effect the registration statement filed with the Securities
and Exchange Commission with respect to the shares of common stock and must also
comply with the securities laws of a state for the shares of common stock to be
tradable in that state. If we do not comply with federal or state securities
laws, your ability to sell the securities offered by this prospectus may be
significantly reduced.
WE DO NOT INTEND TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
Any investors who have or anticipate any need for immediate income from their
investment should not purchase any of the shares of common stock offered hereby.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the common stock by
the Selling Stockholders. The Company will receive the proceeds from the
exercise of the warrants. Any such proceeds will be used for general corporate
purposes, which may include repaying indebtedness, making additions to our
working capital, funding future acquisitions or for further developing our
products and hiring additional personnel.
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DETERMINATION OF OFFERING PRICE
The shares will be sold at prevailing market prices on the over-the-counter
bulletin board or on other exchanges on which the shares are then listed or at
negotiated prices.
CAUTIONARY WARNING REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the information we incorporate by reference, includes
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"could," "expects," "plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms and other
comparable terminology. These forward-looking statements include, without
limitation, statements about our market opportunity, our strategies,
competition, expected activities and expenditures as we pursue our business
plan, and the adequacy of our available cash resources. Although we believe that
the expectations reflected in any forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Actual results may differ materially from the predictions
discussed in these forward-looking statements. Changes in the circumstances upon
which we base our predictions and/or forward-looking statements could materially
affect our actual results. Additional factors that could materially affect these
forward-looking statements and/or predictions include, among other things: (1)
whether the prime vendor contract for secured first responder communications
between IBM and Cook County is successfully completed; (2) whether our
significant component suppliers are able to deliver their products on a timely
basis; (3) whether the investors in the Offering elect to (a) exercise their
AIRs and purchase an additional $3,330,000 shares of Series A Preferred stock,
and (b) exercise their warrants to purchase 8,000,000 shares of common stock for
$1.00 per share from us; (4) the ability of the Company to attract and retain
key personnel; (5) potential litigation with our shareholders and/or the
shareholders of Technology Alternatives, Inc.; (6) the Company's ability to
comply with federal, state and local government regulations; and (7) other
factors over which we have little or no control.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our Securities and
Exchange Commission filings are available to the public over the Internet at the
Securities and Exchange Commission's web site at http://www.sec.gov. You may
also read and copy any document we file at the Securities and Exchange
Commission's public reference room located at 450 Fifth Street, N.W.,
Washington, DC 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms and their
copy charges.
This prospectus is part of a Form SB-2 registration statement that we filed with
the SEC. This prospectus provides you with a general description of the
securities that may be offered for sale, but does not contain all of the
information that is in the registration statement. To see more detail, you
should read the entire registration statement and the exhibits filed with the
registration statement. Copies of the registration statement and the exhibits
are on file at the offices of the Commission and may be obtained upon payment of
the fees prescribed by the Commission, or examined without charge at the public
reference facilities of the Commission described above.
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information.
Neither TechAlt nor any Selling Stockholder is making an offer of the securities
covered by this prospectus in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement or in any other document incorporated by reference in this prospectus
is accurate as of any date other than the date on the front of those documents.
Upon request, we will provide without charge a copy of our Annual, Quarterly and
Current Reports we have filed electronically with the Commission as well as a
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copy of any and all of the information that has been or may be incorporated by
reference in this prospectus. Requests for such copies should be directed to:
Investor Relations; TechAlt, Inc., 3311 N. Kennicott Ave., Suite A, Arlington
Heights, IL 60004; (847) 870-2601.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Solomon and the Company entered into an Employment Agreement on or around
August 24, 2004. Per the terms of the Employment Agreement, Mr. Solomon is to be
employed by the Company as the Chief Executive Officer for an initial period of
three (3) years, which period shall be automatically renewed until terminated by
the Company. Solomon's annual salary is One Hundred and Seventy Five Thousand
Dollars ($175,000). Solomon is eligible to receive an annual cash bonus of up to
Two Hundred Fifty Thousand Dollars ($250,000) in connection with the gross
revenues of the Company and it is anticipated that Mr. Solomon will be granted
options to purchase up to one million (1,000,000) shares of the common stock of
the Company, subject to vesting.
The Company has issued 600,000 shares of common stock to Ms. Diana Loera, a
family member of George Loera and 125,000 shares of common stock to Christopher
Solomon, a family member of James E. Solomon
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
No market currently exists for our common stock. As of November 12, 2004,
approximately 1,369,500 shares of our common stock may be sold pursuant to Rule
144 of the Securities Act. As of November 12, 2004, there were approximately
12,000,000 shares issued of our common stock, 670,000 shares of Series A
Preferred stock outstanding convertible into 1,340,000 shares of our common
stock and warrants outstanding to purchase approximately 1,340,000 shares of our
common stock. We have approximately 92 shareholders of record of our common
equity.
The Company has not declared or paid, nor has it any present intention to pay,
cash dividends on its Common stock.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) of the Securities Act of 1933 (the "Exemption"),
on August 24, 2004, in exchange for Five Hundred Thousand Dollars ($500,000) the
Company sold 500,000 shares of the Company's Series A Convertible Preferred
Stock (purchase price of One Dollar ($1.00) per share) (the "Series A
Preferred"), warrants to purchase 1,000,000 shares of the Company's common stock
(exercise price of One Dollar ($1.00) per share) (the "Warrants") and AIRs to
purchase 3,500,000 additional shares of Series A Preferred (purchase price of
One Dollar ($1.00) per share), which exercise of the AIRs in the aggregate
entitle the investors to Additional Warrants (exercise price of One Dollar
($1.00) per share) to purchase 7,000,000 shares of common stock of the Company,
in the aggregate (the "Additional Warrants") (collectively, the "Offering").
Each share of the Series A Preferred converts into two (2) shares of the common
stock of the Company.
SELLING SECURITY HOLDERS
The shares of common stock being offered by the Selling Stockholders are
issuable (i) upon conversion of the Series A Preferred shares issued or Series A
Preferred shares which may be issued by us in the near future (ii) upon
conversion of the Series A Preferred shares issued upon exercise of the
Additional Investment Rights, (ii) upon exercise of the Warrants and Additional
Warrants received pursuant to the AIRs, (iii) upon conversion of a Secured
Convertible Promissory Note which we expect to issue to Paul Masanek, (iv) upon
exercise of the Warrant we expect to issue to Paul Masanek, and (v) upon
consummation of the contemplated Agreement and Plan of Merger between the
Company and Technology Alternatives, Inc.
12
We are registering the shares of common stock in order to permit the Selling
Stockholders to offer the shares for resale from time to time. With the
exception of Paul Masanek, except for the ownership of the Series A Preferred
Shares, AIRs and the Warrants, the Selling Stockholders have not had any
material relationship with us within the past three years.
The table below lists the Selling Stockholders and other information regarding
the beneficial ownership of the shares of common stock by each of the Selling
Stockholders, or which the Company believes the Selling Stockholder will own
within the next sixty (60) days. The second column lists the number of shares of
common stock beneficially owned by each Selling Stockholder, based on its
ownership, or anticipated ownership within the next sixty (60) days, of Common
Stock of the Company, the Series A Preferred Shares, AIRs and the Warrants, as
of November 12, 2004, assuming conversion of all the Series A Preferred Shares
and AIR shares and exercise of all AIRs and Warrants held by the Selling
Stockholders on that date, without regard to any limitations on conversions or
exercise. The third column lists the shares of common stock being offered by
this prospectus by the Selling Stockholders.
In accordance with the terms of registration rights agreements with the holders
of the Series A Preferred Shares and the Warrants, this prospectus generally
covers the resale of at least the sum of (i) 130% of the maximum number of
shares of common stock issuable upon conversion of the Series A Preferred Shares
and AIR shares (assuming that the Series A Preferred Shares are convertible at
their initial Conversion Price and without taking into account any limitations
on the conversion of the Series A Preferred Shares set forth in the Certificate
for the Series A Preferred Shares) and (ii) 130% of the maximum number of shares
of common stock issuable upon exercise of the related Warrants (without taking
into account any limitations on the exercise of the Warrants set forth in the
Warrants), in each case as of the trading day immediately preceding the date
this registration statement was initially filed with the Securities and Exchange
Commission. Because the conversion price of the Series A Preferred Shares and
the exercise price of the Warrants may be adjusted, the number of shares that
will actually be issued may be more or less than the number of shares being
offered by this prospectus. If all shares being registered are sold, none of the
Selling Stockholders will own any shares of common stock of the Company.
Under the terms of the Series A Preferred Shares, the AIRs and the Warrants,
certain of the Selling Stockholders may not convert the Series A Preferred
Shares or AIR shares, or exercise the Warrants, to the extent such conversion or
exercise would cause such Selling Stockholder, together with its affiliates, to
beneficially own a number of shares of common stock which would exceed 9.99% of
our then outstanding shares of common stock following such conversion or
exercise, excluding for purposes of such determination shares of common stock
issuable upon conversion of the Series A Preferred Shares or AIR shares which
have not been converted and upon exercise of the Warrants which have not been
exercised. The number of shares in the second column does not reflect this
limitation. The Selling Stockholders may sell all, some or none of their shares
in this offering. See "Plan of Distribution."
- ------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES OF COMMON SHARES OF COMMON STOCK BEING
STOCK BENEFICIALLY REGISTERED BY THIS PROSPECTUS FOR
OWNED THE SELLING STOCKHOLDERS
- -------------------------------------------------------------------------------------------------------
Paul Masanek 6,551,560 8,517,028
- -------------------------------------------------------------------------------------------------------
Derek Caldwell 400,000 520,000
- -------------------------------------------------------------------------------------------------------
Cherokee Holdings II, LLC 1,800,000 2,340,000
- -------------------------------------------------------------------------------------------------------
Cranshire Capital, LP 1,000,000 1,300,000
- -------------------------------------------------------------------------------------------------------
Crestview Capital Master, LLC 6,800,000 8,840,000
- -------------------------------------------------------------------------------------------------------
DKR SoundShore Oasis Holding Fund, 1,000,000 1,300,000
Ltd.
- -------------------------------------------------------------------------------------------------------
13
- -------------------------------------------------------------------------------------------------------
Iroquois Capital, LP 1,000,000 1,300,000
- -------------------------------------------------------------------------------------------------------
Smithfield Fiduciary, LLC 4,000,000 5,200,000
- -------------------------------------------------------------------------------------------------------
David Matthews 200,000 260,000
- -------------------------------------------------------------------------------------------------------
Craig and Elizabeth Snider 400,000 520,000
- -------------------------------------------------------------------------------------------------------
Chahram Pahlavi 600,000 780,000
- -------------------------------------------------------------------------------------------------------
Andrew Escoll and Tina Snider 200,000 260,000
- -------------------------------------------------------------------------------------------------------
Edward Snider 200,000 260,000
- -------------------------------------------------------------------------------------------------------
Sunrise Securities Corp. 2,880,000 2,880,000
- -------------------------------------------------------------------------------------------------------
TOTAL 27,031,560 34,277,028
- -------------------------------------------------------------------------------------------------------
PLAN OF DISTRIBUTION
We are registering the shares of common stock issuable (i) upon conversion of
the Series A Preferred shares and AIR shares issuable upon exercise of AIRs,
(ii) upon exercise of the Warrants, (iii) upon conversion of the Secured
Convertible Promissory Note anticipated to be issued to Paul Masanek, (iv) upon
exercise of the Warrant anticipated to be issued to Paul Masanek, and (v) upon
consummation of the Agreement and Plan of Merger between the Company and
Technology Alternatives, Inc. anticipated to be consummated upon settlement of
certain litigation with Paul Masanek. We will not receive any of the proceeds
from the sale by the Selling Stockholders of the shares of common stock. We will
bear all fees and expenses incident to our obligation to register the shares of
common stock.
The Selling Stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the Selling
Stockholders will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
o through the writing of options, whether such options are listed on an options
exchange or otherwise;
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;
14
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o pursuant to Rule 144 under the Securities Act;
o broker-dealers may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the Selling Stockholders effect such transactions by selling shares of common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the Selling Stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the Selling Stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume.
The Selling Stockholders may also sell shares of common stock short and deliver
shares of common stock covered by this prospectus to close out short positions.
The Selling Stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares. The Selling Stockholders may
pledge or grant a security interest in some or all of the preferred shares,
warrants or shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of Selling Stockholders to include the pledgee, transferee
or other successors in interest as Selling Stockholders under this prospectus.
The Selling Stockholders also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus. The Selling Stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At
the time a particular offering of the shares of common stock is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount of shares of common stock being offered and the terms of the
offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with. There can
be no assurance that any Selling Stockholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
15
The Selling Stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the Selling
Stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market- making
activities with respect to the shares of common stock.
We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that a Selling
Stockholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the Selling Stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the Selling Stockholders will be entitled to contribution. We may
be indemnified by the Selling Stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the Selling Stockholder specifically for use in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this prospectus forms
a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
LEGAL PROCEEDINGS
Paul Masanek ("Masanek"), and a company controlled by him, Services By
Designwise, Ltd. ("SBD"), filed a lawsuit in the State of Illinois against us
asserting among other things, that it was improper for the Company to enter into
an Intellectual Property License Agreement with Technology Alternatives, Inc.
pursuant to which certain of the intellectual property of Technology
Alternatives, Inc. was licensed to the Company. Masanek also alleges that the
License Agreement was an attempt to "squeeze" him out from being permitted to
make decisions regarding Technology Alternatives, Inc., was not an acceptable
business transaction for Technology Alternatives, Inc., amounts to a transfer of
all or substantially all of the assets of Technology Alternatives, Inc.,
effectively dilutes his ownership in Technology Alternatives, Inc., and diverts
a corporate opportunity from Technology Alternatives, Inc.
The Company has reached an agreement in principal with Masanek and SBD to
dismiss the lawsuit against the Company. The settlement agreements anticipated
to be executed by the parties consist of the following agreements: (i)
Settlement Agreement, (ii) Sales Agreement, (iii) Consulting Agreement, (iv)
Secured Convertible Promissory Note convertible into 1,125,000 shares of our
common stock at $1.00 per share, (v) a Warrant to purchase 750,000 shares of our
common stock, exercise price of $1.00 per share, (vi) Registration Rights
Agreement, (vii) Right of First Refusal Agreement, (viii) Security Agreement,
and (ix) Agreement and Plan of Merger by and among the Company, Technology
Alternatives, Inc., TechAlt Acquisitions, Inc., James E. Solomon and Masanek
("Merger Agreement") (collectively, the "Settlement Documents")
The Company is registering 130% of the shares issuable to Masanek upon
consummation of the Agreement and Plan of Merger, upon conversion of the Secured
Convertible Promissory Note and upon exercise of the Warrant in anticipation of
the execution and effectiveness of the Settlement Documents. The Settlement
Documents will not become effective until the satisfaction of certain conditions
of an Escrow Agreement. As of the date of this Registration Statement, the
material terms of the Escrow Agreement were still being negotiated among the
parties.
The material terms of the Settlement Documents are as follows:
Settlement Agreement
16
Pursuant to the terms of the Settlement Agreement between the Company and
Masanek, Masanek and the Company agree to release each other from any and all
liabilities in connection with or arising from their relationship prior thereto
and Masanek will (i) vote his shares of Technology Alternatives, Inc., in favor
of the Merger Agreement, pursuant to which all of the issued and outstanding
shares held by Masanek and James Solomon will be exchanged for approximately
9,544,000 shares of our common stock, and (ii) transfer certain of the
intellectual property of SBD to us. The obligations of the Company pursuant to
the Settlement Agreement will be to (i) rescind the License Agreement
immediately prior to the Merger Agreement, (ii) pay Masanek $650,000 in cash,
(iii) enter into Sales, Consulting, Registration Rights and Right of First
Refusal Agreements, (iv) issue to Masanek the Warrant, (v) provide Masanek with
all the information a member of the Board of Directors is entitled to receive,
(vi) provide Masanek a 10% finder's fee in the event Masanek introduces to us a
company that purchase all or substantially all of our assets or stock, and (vii)
pay the attorneys' fees of Masanek in an amount of $115,000.
Sales Agreement
Pursuant to the Sales Agreement, for a period of three years SBD shall be
entitled to manufacture and supply to us certain equipment and systems with an
aggregate purchase price of $1,125,000 and receive a "broker's fee" of 6.25% for
the first year of the Agreement, 6.50% for the second year of the Agreement, and
6.75% for the third year of the Agreement on all manufactured goods purchased
from third parties.
Consulting Agreement
Pursuant to the Consulting Agreement, for a period of three years, SBD shall
provide to us certain technical and sales support services as follows (i) during
the first four (4) months of the Agreement, SBD shall devote no less than ninety
(90) hours per month to certain primary consulting services as directed by the
Company, and (ii) during the remaining thirty two (32) months of the Agreement,
SBD shall devote no less than twenty two and a half (22.5) hours per month to
the certain primary consulting services and the general consulting services as
directed by the Company. Pursuant to the Agreement, the Company shall pay to the
Consultant $100,000.00 per year resulting in gross monthly installments of
$8,333.33/month.
In addition to the foregoing, during the term of the Agreement, the Company
shall provide the following benefits for SBD at no cost to SBD: (i) use of an
automobile of Masanek's choice, with optional equipment of his selection, (ii)
reimbursement for all reasonable business expense(s) actually incurred by the
SBD on behalf of the Company, (iii) use of a cellular phone with a cellular
phone calling plan with unlimited minutes, and any other electronic
communication devices the Company deems reasonably necessary in connection with
the services to be rendered to the Company hereunder by SBD, (iv) use of full
country club and health club memberships to one (1) country club and one (1)
health club acceptable to both SBD and the Company, (v) professional assistance,
including but not limited to legal and tax counsel, and (vi) a bonus of ten
percent (10%) of gross sales on all First Responder Systems upon any order or
contract between the Company and the referred customer.
Secured Convertible Promissory Note
Pursuant to the Secured Convertible Promissory Note for $1,125,000, Masanek
shall be paid $625,000 within twelve months from the date of the Note (signed at
closing of the Settlement Documents), and the entire unpaid principal balance
plus interest twenty four months from the date of the Note. Interest payments of
5% on the outstanding balance shall be paid quarterly beginning December 1,
2004. Payments on the Note may accelerate at Masanek's request in the event the
Company receives cash pursuant to the exercise of certain of its warrants or
from the sale of its securities. The entire balance of the Note may be converted
by Masanek into the common stock of the Company on the basis of $1.00 per share.
Warrant
Pursuant to the Warrant to be issued by the Company to Masanek, Masanek shall
have the right for five years to purchase 750,000 shares of common stock of the
Company for $1.00 per share.
17
Registration Rights Agreement
Pursuant to the Registration Rights Agreement, Masanek shall be entitled to have
his shares of common stock issuable upon consummation of the Merger Agreement,
upon conversion of the Note and upon exercise of the Warrant registered by the
Company for resale.
Right of First Refusal Agreement
Pursuant to the Right of First Refusal Agreement, Masanek shall have a right of
first refusal to purchase the shares of stock of the Company owned by James
Solomon prior to any sale, and the Company shall have the right of first refusal
to purchase the shares of stock of the Company owned by Masanek prior to any
sale by him.
Security Agreement
Pursuant to the Security Agreement, Masanek shall have a first security interest
on the Company's accounts, accounts receivable, goods, equipment, inventory,
machinery, fixtures, cash, securities, all intellectual property including
trademarks, service marks, trade names, copyrights, patents, licenses, including
patent licenses, contracts, and other tangible and intangible property together
with all the additions, substitutions, increments, proceeds and products,
whether now owned or later acquired, to secure the Company's payment obligations
under the Note, Settlement, Sales and Consulting Agreement. The security
interest granted pursuant to the Security Agreement will be subordinate to a
$2,000,000 line of credit for general corporate purposes and to purchase
inventory and equipment for signed contracts or purchase orders with the
Company's customers.
Agreement and Plan of Merger
Pursuant to the Merger Agreement, all of the shares of common stock of
Technology Alternatives, Inc., will be exchanged for 9,544,000 shares of the
common stock of the Company. Technology Alternatives, Inc., will be merged with
a wholly-owned subsidiary of the Company, with Technology Alternatives, Inc.,
being the surviving corporation.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our shares of common stock
and do not anticipate paying any cash dividends in the foreseeable future.
Currently, we intend to retain any future earnings for use in the operation and
expansion of our business. Any future decision to pay cash dividends will be at
the discretion of our board of directors and will depend upon our financial
condition, results of operations, capital requirements and other factors our
board of directors may deem relevant.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes to
the financial statements included elsewhere in this prospectus. This discussion
contains forward-looking statements that relate to future events or our future
financial performance. These statements involve known and unknown risks,
uncertainties and other factors that may cause our 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
these forward-looking statements. These risks and other factors include, among
others, those listed under "Risk Factors" and those included elsewhere in this
prospectus.
When used in this prospectus, the words or phrases "would be", "will allow",
"intends to", "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform act of 1995. The Company cautions readers not to
place undue reliance on any forward-looking statements, which speak only as of
the date made, and advises readers that forward-looking statements involve
various risks and uncertainties. The Company does not undertake, and
specifically disclaims any obligation to update any forward-looking statements
to reflect occurrences or unanticipated events or circumstances after the date
of such statement.
YEARS ENDED DECEMBER 31, 2003 AND 2002
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operation and financial condition as of December 31, 2003 and 2002 and for
the years then ended. The discussion should be read in conjunction with the
financial statements and notes thereto.
PLAN OF OPERATION - At December 31, 2003, the Company has no business
operations, and very limited assets or capital resources. The Company's business
plan is to seek one or more potential business ventures that, in the opinion of
management, may warrant involvement by the Company. The Company recognizes that
because of its limited financial, managerial and other resources, the type of
suitable potential business ventures which may be available to it will be
extremely limited. The Company's principal business objective will be to seek
long-term growth potential in the business venture in which it participates
rather than to seek immediate, short-term earnings. In seeking to attain the
Company's business objective, it will not restrict its search to any particular
business or industry, but may participate in business ventures of essentially
any kind or nature. It is emphasized that the business objectives discussed are
extremely general and are not intended to be restrictive upon the discretion of
management.
The Company will not restrict its search for any specific kind of firms, but may
participate in a venture in its preliminary or development stage, may
participate in a business that is already in operation or in a business in
various stages of its corporate existence. It is impossible to predict at this
stage the status of any venture in which the Company may participate, in that
the venture may need additional capital, may merely desire to have its shares
publicly traded, or may seek other perceived advantages which the company may
offer. In some instances, the business endeavors may involve the acquisition of
or merger with a corporation which does not need substantial additional cash but
which desires to establish a public trading market for its common stock.
The Company does not have sufficient funding to meet its long-term cash needs.
The Company believes that its cash at December 31, 2003 will be sufficient to
support the company's planned operations for the next twelve months. The sole
officer and director has express intent that to the extent necessary the Company
will seek to raise additional funds through the sale of equity securities or by
borrowing funds until a suitable business venture can be completed. As of
December 31, 2003, Management does not anticipate raising funds during the next
twelve months. There is no assurance that the Company will be able to
successfully identify and/or negotiate a suitable potential business venture or
raise additional funds if and when needed.
18
The Company has experienced net losses during the development stage (1994 to
present) and has had no significant revenues during such period. During the past
two fiscal years the Company has had no business operations. In light of these
circumstances, the ability of the Company to continue as a going concern is
significantly in doubt. The accompanying financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Off-Balance sheet arrangements - The Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on its financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
During the nine months ended September 30, 2004, the Company's net loss was
$834,000 as compared to a net loss of $5,000 during the comparative prior year
period. Prior to August 24, 2004, the Company had no business operations, and
very limited assets or capital resources, and its business plan was to seek one
or more potential business ventures that, in the opinion of management, may
warrant involvement by the Company. As a result of transactions occurring in
August 2004, as described below, and which include, but not limited to the
License Agreement, sale of Series A Convertible Preferred Stock, the
Compensation Agreement, the financial consulting arrangement and the Agreement
with IBM, the Company's operations now relate to sales of wireless,
multi-network communications hardware and software solutions to be used by
emergency first responders such as Police, EMS and other Homeland Security
Agencies.
The Company's net loss of $834,000 for the nine months ended September 30, 2004,
all of which for the exception of $18,000 related to the period August 24
through September 30, 2003, included $173,000 of compensation agreement expense
representing amounts owed the Company's Chief Executive Officer upon execution
of the Compensation Agreement, which such amounts have not been paid as of
September 30, 2004, and $150,000 of financial consulting services expense
representing the value of 300,000 shares of Company common stock issued to a
financial consultant for services provided. In connection with the License
Agreement, the Company paid certain TAI liabilities of approximately $238,000,
which were subsequently paid to TAI and others. The amount of paid liabilities
has been allocated to "In-process Research and Development" costs pertaining to
the intellectual property rights licensed in connection with the License
Agreement and were immediately expense as of the license date as a result of the
licensed Intellectual Property not having yet attained technological
feasibility.
Selling, general and administrative expenses of $222,000 included approximately
$135,000 of legal and accounting fees, $101,000 of which are accrued at
September 30, 2004. The remaining $87,000 of selling, general and administrative
and the $51,000 of research and development expenses are comprised primarily of
compensation and related expenses.
LIQUIDITY AND CAPITAL RESOURCES
During the nine-months ended September 30, 2004, cash used by operating
activities was approximately $137,000 as compared to cash used of $8,000 during
the comparative prior year period. Cash provided by financing activities for the
nine-months ended September 30, 2004 was $158,000, resulting primarily from net
proceeds received from sale of Series A Convertible Preferred Stock during
August 2004 of $460,000 and net proceeds of $15,000 received from the sale of 15
million shares of Company common stock in March 2004, reduced by $238,000 of
payments to TAI and others in connection with the License Agreement, and by
$77,000 of payments to two of the Company's former majority shareholders in
connection with cancellation of approximately 27.2 million shares of Company
common stock pursuant to terms of the License Agreement, and by $10,000 for
repayment of notes payable to related parties. Cash provided by financing
activities during the comparative prior year period, was $10,000 resulting from
proceeds pursuant to borrowings from related parties.
19
RECENT DEVELOPMENTS -
LICENSE AGREEMENT - On August 20, 2004, the Company and its then majority (52%)
shareholder and sole member of its board of directors (the "Warranting
Shareholder") entered into an Intellectual Property License Agreement with
Technology Alternatives, Inc. ("TAI"), which agreement (the "License Agreement")
was consummated on August 24, 2004 ("Closing"). Pursuant to the License
Agreement, in exchange for the issuance of 10,044,000 shares of Company common
stock ("Common Stock"), the Company licensed certain intellectual property owned
by TAI. The initial term of the License is 6 months, which 6 month term is
automatically extended for additional 6 month terms until terminated by mutual
agreement of the Company and TAI. As partial consideration for entering into the
License Agreement, the Company will also receive $100,000 cash to satisfy
certain liabilities. In connection with the License Agreement, 27,219,000 shares
of Common Stock were cancelled.
The License Agreement provides for the Company to raise equity funding (cash) of
at least $500,000 within 5 days following Closing (the "Initial Funding"), and
of at least an additional $3.5 million within 90 days following Closing (the
"Final Funding"). In the event the fundings are not timely completed or if the
"Historical Stockholders" own less than 8% of the outstanding common stock upon
consummation of the Final Funding, then the Warranting Shareholder shall have
the option for 14 calendar days to terminate the Agreement, subject to certain
remedy provisions.
After issuance of shares and cancellation of shares in connection with the
License Agreement, TAI owns 4 million shares of the 12 million total outstanding
and James E. Solomon ("Solomon"), the majority shareholder of TAI, directly or
beneficially owns an additional approximately 4.5 million shares. In certain
circumstances, Solomon, voting shares directly or beneficially owned, along with
voting shares beneficially owned by TAI, has control to vote approximately 71%
of the Company's outstanding common shares.
In connection with the License Agreement, Solomon was appointed to the Board of
Directors of the Company and appointed President and Chief Executive Officer of
the Company, and the Warranting Shareholder resigned from all positions as an
officer and director of the Company.
SALE OF SERIES A CONVERTIBLE PREFERRED STOCK, WARRANTS AND ADDITIONAL INVESTMENT
RIGHTS - On August 24, 2004, pursuant to the private offering exemption provided
in Rule 506 of Regulation D of the Securities Act of 1933, in exchange for
$500,000, before of offering costs of approximately $40,000, the Company sold
500,000 shares of its Series A Convertible Preferred Stock (purchase price of
$1.00 per share) (the "Series A Preferred"), warrants to purchase 1 million
shares of the Company's common stock at an exercise price of $1.00 per share
(the "Warrants") and Additional Investment Rights to purchase 3.5 million
additional shares of Series A Preferred and warrants to purchase 7,000,000
shares of common stock at a purchase price of $1.00 per share (the "Series A
Preferred Rights") (the "Offering"). Each share of Series A Preferred is
convertible under certain circumstances into two shares of the Company's common
stock. In October 2004, pursuant to the Additional Investment Rights, the
Company issued an additional 170,000 shares of Series A Convertible Preferred
Stock and Warrants to purchase 340,000 shares of common stock, each security
having the same terms as those in the Offering, and received cash proceeds of
$170,000.
Terms of Series A Preferred provides for, among other things, cumulative
dividends to be paid to holders at a rate of 5% per annum, which accumulate
daily from issuance date and payable quarterly, in certain circumstances payable
in the Company's common stock, each preferred share to be convertible into 2
shares of Company common stock, subject to anti-dilution conversion rate
adjustments, a $2.00 per share liquidation preference amount, payment of
dividends and distributions to holders of common stock to the same extent as if
such holders of preferred stock had converted into common shares, voting rights
on an as-converted basis and limits payment of dividends on common stock until
certain financial targets are met.
COMPENSATION AGREEMENT - In August 2004, the Company entered into an Employment
Agreement with Solomon, pursuant to which Solomon is to be employed by the
Company as Chief Executive Officer for an initial period of 3 years, which
period shall be automatically renewed until terminated by the Company. The
Employment Agreement provides for annual compensation of $175,000, an
opportunity for Solomon to earn additional annual bonuses upon the Company
attaining certain financial targets, and for the
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Company to grant Solomon options to purchase 1 million shares of Company common
stock at an exercise price being fair value at date of grant, subject to
vesting. During the three months ended September 30, 2004, the Company recorded
approximately $130,000 of compensation expense incurred upon execution of the
Employment Agreement for compensation due upon signing and approximately $43,000
of expense relating to reimbursement to Solomon for costs and expenses incurred
in connection with development and support of Intellectual Property acquired
pursuant to the License Agreement. The Employment Agreement also provides for
the Company to pay Solomon for certain executive officer benefits throughout the
term.
LITIGATION AND SETTLEMENT AGREEMENT - Paul Masanek ("Masanek"), and a company
controlled by him, Services By Designwise, Ltd. ("SBD"), filed a lawsuit in the
State of Illinois against us asserting among other things, that it was improper
for the Company to enter into an Intellectual Property License Agreement with
Technology Alternatives, Inc. pursuant to which certain of the intellectual
property of Technology Alternatives, Inc. was licensed to the Company. Masanek
also alleges that the License Agreement was an attempt to "squeeze" him out from
being permitted to make decisions regarding Technology Alternatives, Inc., was
not an acceptable business transaction for Technology Alternatives, Inc.,
amounts to a transfer of all or substantially all of the assets of Technology
Alternatives, Inc., effectively dilutes his ownership in Technology
Alternatives, Inc., and diverts a corporate opportunity from Technology
Alternatives, Inc.
The Company has reached an agreement in principal with Masanek and SBD to
dismiss the lawsuit against the Company. The settlement agreements anticipated
to be executed by the parties consist of the following agreements: (i)
Settlement Agreement, (ii) Sales Agreement, (iii) Consulting Agreement, (iv)
Secured Convertible Promissory Note convertible into 1,125,000 shares of our
common stock at $1.00 per share, (v) a Warrant to purchase 750,000 shares of our
common stock, exercise price of $1.00 per share, (vi) Registration Rights
Agreement, (vii) Right of First Refusal Agreement, (viii) Security Agreement,
and (ix) Agreement and Plan of Merger by and among the Company, Technology
Alternatives, Inc., TechAlt Acquisitions, Inc., James E. Solomon and Masanek
("Merger Agreement") (collectively, the "Settlement Documents"). The Settlement
Documents will not become effective until the satisfaction of certain conditions
of an Escrow Agreement. As of the date of this Registration Statement, the
material terms of the Escrow Agreement were still being negotiated among the
parties.
FINANCIAL CONSULTING ARRANGEMENT - Pursuant to terms of an arrangement with a
financial consultant, in August 2004, the Company issued 300,000 shares of its
common stock for services provided. The Company has accounted for this as
financial consulting expense of $150,000, the estimated fair value of common
stock issued, and as an increase in common stock and paid-in capital.
AGREEMENT WITH IBM - On October 11, 2004, the Company entered into a Statement
of Work ("SOW") with International Business Machines Corporation ("IBM") for the
Phase 1 Implementation of the Company's wireless communications product line in
connection with Cook County's mobile wireless video and data network project.
The SOW serves as the Company's official notice and authorization to begin
implementation of and billing for the project. Pursuant to terms of the SOW, the
Company will be providing hardware and software, and maintenance services
through 2009, under Phase 1 for which it will receive payments of approximately
$2.9 million.
In Phase 1 of the project, 15 radio towers and 32 municipal and county buildings
will be configured as wireless hotspots. The Company's multi-network capable
communications modules will be used to transmit video and data to police, fire,
and emergency services vehicles. This live streaming video will help first
responders orchestrate a coordinated response to emergencies. The wireless
network will provide first responders in remote locations with information
already shared on the county's wired network. Police, fire and emergency
services personnel will have real-time access to law enforcement databases, GIS
information, hazmat information and other data on the Cook County network.
FACILITIES LEASE - In September 2004, the Company entered into a lease agreement
for corporate office facilities having a term ending August 2006 and providing
for minimum rental payments of approximately $40,000, $123,000 and $83,000 in
2004, 2005 and 2006, respectively.
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EMPLOYEES - As of November 2004, the Company has 17 full-time employees,
approximately 12 of which work at the Company's corporate office facilities in
Arlington Heights, Illinois, a suburb of Chicago. Monthly compensation expense
approximates $150,000 .
PROMISSORY NOTE - In October 2004, the Company entered into a $13,000 Promissory
Note payable to a bank, due April 2007, bearing interest at an annual rate of
5.75%, and payable at $467 per month for 30 months. The Promissory Note is
collateralized by an automobile owned by the Company and is guaranteed by
Solomon.
REGISTRATION STATEMENT ON FORM SB-2 - The Company is in the process of filing a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
regarding the registration of approximately 34 million shares of the Company's
common stock to be sold by certain stockholders of the Company. The selling
stockholders will offer the common stock in amounts, at prices and on terms to
be determined at the time of the offering. The Company will not receive any
proceeds from the sales of the common stock by the selling stockholders. Shares
of the Company's common stock are not currently quoted on any exchange or the
over-the-counter bulletin board market. The Company has applied for trading of
its common stock on the over-the-counter bulletin board.
BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES - Since inception, the
Company has incurred losses and may never achieve or sustain profitability.
Operating expenses are expected to increase significantly as the Company expands
its sales and marketing efforts and otherwise supports its expected growth.
Given these planned expenditures, the Company may incur additional losses in the
near future. The Company needs additional financing and could be required to cut
back or stop operations if sufficient funding is not raised. The Company's
ability to continue operations will depend on positive cash flow, if any, from
future operations and its ability to raise additional funds through equity or
debt financing. While, Company management anticipates that cash to be received
in the future resulting from the Agreement with IBM, and additional cash to be
received from private and institutional investors will be sufficient to fund our
current operations and capital requirements for the next 12 months, there can be
no assurance that such amounts will be realized.
As disclosed in report of Independent Registered Public Accounting Firm on the
Company's financial statements for the years ended December 31, 2003 and 2002,
these matters raise substantial doubt about the Company's ability to continue as
a going concern. The accompanying financial statements have been prepared on the
basis that the Company will continue as a going concern and do not include any
adjustments to reflect the possible future effects on the recoverability of
assets and liquidation of liabilities that may result from these uncertainties.
CRITICAL ACCOUNTING POLICIES
The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which among other
things, requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of financial statements and reported amounts of
revenues and expenses during reporting periods. These estimates and assumptions
are affected by management's application of accounting policies. Critical
accounting policies applied in September 30, 2004 financial statements include
accounting for research and development costs, accounting for issuance and
cancellation of common shares in connection with the License Agreement, as well
as preparation of financial statements on a going concern basis.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs, which are
comprised primarily of compensation and related costs, are expensed as incurred.
The value of acquired In-process Research and Development is charged to expense
on the date of acquisition.
ACCOUNTING FOR THE LICENSE AGREEMENT - Inasmuch as Solomon has a majority
ownership interest in the Company after the issuance of common shares in
connection with the License Agreement, the Intellectual Properties rights
acquired by the Company have been recorded in the amount of Solomon's net book
value of such assets, and that same value assigned to shares issued. As a result
of previously expensing costs
22
incurred in connection with developing such assets, the net book value was $0,
which is the value recorded by the Company for this transaction accounted for in
a manner similar to that ascribed for transactions with entities under common
control.
INCOME TAXES - The Company continues to record a valuation allowance for the
full amount of deferred income taxes, which would otherwise be recorded for tax
benefits relating to operating loss carryforwards, as realization of such
deferred tax assets cannot be determined to be more likely than not.
BUSINESS
THE COMPANY
The Company was incorporated in Nevada on December 29, 1994. The Company,
through its proprietary hardware, network, and communications components,
delivers a complete technology solution that communicates data and mission
critical imagery between remote first responders and central command and control
centers by using any and all existing public wireless networks, coupled with
secure agency networks. These existing wireless networks include the new 802.11
or Wi-Fi networks, and spread spectrum technologies, which include licensed
frequencies, for which the carriers pay a fee to the government to be utilized
in a specific location and unlicensed frequencies, which are free to the public
to use; 802.11 or Wi-Fi networks fall into this unlicensed category.
The Company solution provides a scalable, robust, secure, communications method
for first responders to provide interoperable communications and interagency
interoperability, communication and collaboration. The proposed Homeland
Security Agency ("HSA") budget to build this capability was $3.5 billion out of
the proposed $37.5 billion for the entire Fiscal Year 2003 HSA budget.
The Company currently offers an integrated line of products and services. The
current product offerings include: Police In-Car Video Recording Systems;
Portable Surveillance-Cam Video Recording Systems; Wireless Communications
Module; and Ruggedized Enclosure for Cisco 3200 Mobile Wireless Router
Police In-Car Video Recording Systems. The Company's principal product consists
of a ruggedized, climate- controlled "vault", which houses either VCR, DVD or
Hard Drive and control electronics, an overhead console providing a video
monitor and user interface, a forward facing 176X Zoom camera and an infra-red
rear seat camera/microphone. Enhanced versions of the systems, with a universal
laptop computer interface product, have been completed and have resulted in
relationships with, ruggedized tablet PC makers focused in the law enforcement
and emergency response industries.
Portable Surveillance-Cam Video Recording Systems. Utilizing a Pan-Tilt-Zoom
camera packaged with custom controls, tripod mount, and wireless transmission
system, these cameras are ideal for temporary surveillance situations such as
monitoring drug, gang, vandalism, and other activities.
Wireless Communications Module. Available in multi-network capable Mobile or
Fixed Location versions, this product creates a secure incident scene virtual
private network that allows first responders to maintain communications even if
major infrastructure is destroyed. The Communications Module also provides
wireless connectivity among in-building camera systems, emergency response
vehicles and dismounted first responders. Designed to be the common interface
solution in a bank robbery or school security situation, the ruggedized
enclosure allows it to withstand harsh environmental conditions such as weather
and temperature extremes in vehicles or remote placement scenarios.
Current Services Offerings: The Company has developed a series of value added
enhanced offerings and capabilities that provide a potential ongoing revenue and
relationship opportunities with both customers and solution partners. These
enhanced capabilities represent the critical differences in the Company's
ability to deliver a true "turnkey solution" for secure mobile wireless first
responder systems and differentiate the Company from most other integrators in
this space. These offerings include:
o Grant Writing
o Integration Services
o Project Implementation Services
o Maintenance and Support Services
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Grant Writing. In the Fiscal Year 2004 budget, the Department of Homeland
Security has made $3.5 billion available to first responders nationwide for
equipment purchases. The Company has an on-staff grant writer to assist our
customers in obtaining these federal funds.
Integration Services. The Company's standards-based products are
open-architectured, allowing for integration with peripheral devices. The
Company has established strategic alliances with companies providing
infrastructure design and installation, peripheral device manufacturers, and
software vendors. The Company believes these relationships will generate
additional revenues for the Company when sold as part of a turnkey solution
package.
Maintenance and Support Services. In addition to the revenue stream generated by
the implementation, there are continuing revenues associated with on going
service, support, and expansion of these networks.
MARKETS
TechAlt is intensely focused on attractive market opportunities. The market for
communications and emergency services has been experiencing tremendous growth.
TechAlt intends to leverage the installed base of 600 local and state law
enforcement agencies with close to 2,600 units of its basic in-car VHS-based
recording systems, to develop a structured market for state-of-the-art Homeland
Security Solutions. These solutions for local, state, and federal police, fire
and EMT agencies represent a 490,000-vehicle opportunity nationwide. Assuming a
conservative 4 building to 1 police car ratio, TechAlt sees a 1,960,000
in-building camera opportunity. This in combination with TechAlt's reseller
partner's contract opportunities, positions the Company very well for accessing
the $3.5 billion interagency interoperability, communication and collaboration
Homeland Security market.
In addition, the interest being expressed by education, corporate and commercial
organizations in providing a better level of image-based security for 802.11 or
WiFi applications, as well as secure mobile wireless services continues to grow
at a 58% annual growth rate.
In the United States and internationally, emergency services markets are
experiencing a fundamental shift from wired to wireless communications. This
shift is being driven by the compelling economic and practical advantage of
migrating from a wired to a wireless infrastructure can improve an
organization's financial performance through increased productivity and reduced
costs. With TechAlt's systems, productivity can be increased through greater
functionality and flexibility in remote access locations, vehicles, portable
handheld computers and cell phones. Costs can be reduced through lower
communications expenses, as well as fewer man-hours, less paperwork and reduced
court time, and by improved community support. The result is vastly improved
community and officer safety. TechAlt is now positioned to become the dominant
market leader in providing cost-effective, reliable, and secure wireless data
communications for law enforcement and emergency services.
The solutions developed by TechAlt for this mission, critical wired and wireless
data and image delivery capability, provide an equally advantageous sales
opportunity in multiple commercial markets. Most notably these markets include
transportation, logistics, banking, insurance, vending and technical support
verticals. While TechAlt has targeted its initial marketing efforts to the first
responder communications and in-car video market, this niche represents only a
small portion of TechAlt's potential market.
Current examples of public-safety customers include the Cook County Sheriff's
Department, the Illinois State Police and the Las Vegas Metro Police. Over 600
public-safety agencies are using TechAlt's legacy equipment. The company will
also focus on private companies in industries, such as banking, casino and
retail, which have security concerns.
24
SALES/GROWTH STRATEGY
TechAlt will build an integrated sales team consisting of both direct and
indirect resources. Specifically, it will develop an in-house direct sales force
that will identify, train and support a network of channel partners and Value
Added Resellers ("VARS"). These partners currently include: IBM, Cisco Systems ,
Anixter International, Nextel Communications, Symbol Technologies, Verizon,
Unisys, Panasonic, cMedia, SAIC and GTSI.
One of TechAlts stronger channel partners is Cisco, which has produced a new
line of wireless routers for the law enforcement and Department of Defense
markets for multi-network mobile communications support. TechAlt has been
certified by Cisco as a producer of a "ruggedized" enclosure for deployment in
police and emergency services vehicles. The TechAlt video solutions provide an
ideal application to demonstrate the capabilities of the Cisco Mobile Access
Router (MAR). As a result of this demonstrated capability, Cisco chose to
feature TechAlt at its International Partner Summit April 18th, 2003.
COMPETITIVE ADVANTAGES
TechAlt has a technology and marketing strategy that positions it to benefit
from the convergence of two rapidly growing markets: wireless communications and
applications to support the objectives of Homeland Security. As more and more
security threats move into the electronic world, the demand for flexible,
cost-effective communications alternatives has exploded.
TechAlt uses the mobile imaging applications and secure wireless data
communications as its entry point into this expanding marketplace. By proving
its wireless communications technology in this demanding environment, TechAlt is
well positioned to expand into other industries, including community-wide
wireless network management, banking, retail, health care, insurance, and
transportation. TechAlt believes that its technology and operational model
position it as an effective provider of secure wireless communications and
imagery to any market that uses applications that:
Serve significant numbers of remote users,
Have time-critical communications, and
Require market-proven technology
TechAlt is currently working to extend itself into the areas of community-wide
wireless "Hot Spot" networks, security monitoring for banks, wireless
advertising, and wireless credit card authorizations. In addition, TechAlt is
working to expand the flexibility of the TechAlt solution to provide wireless
data communications technology for a wide variety of industries and
municipalities.
EMPLOYEES
As of November 12, 2004, we had 18 full-time employees. Our employees are not
covered by any collective bargaining agreement, and we have never experienced a
work stoppage. We believe that our relations with our employees are good.
PROPERTY
The Company currently leases office space for its corporate office for $8,448
per month plus additional rent for real property taxes. The term of the lease is
two years.
25
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
NAME AGE POSITION
James E. Solomon 56 President & Chief Executive Officer;
Chairman of the Board of Directors
Peter Lynch 57 Chief Operating Officer
Irwin Williamson 53 Chief Financial Officer
George Loera 53 Director
C. Pete Ashi 44 Director
Barbara Roberts 41 Vice President of Business Development
David M. Otto 45 Secretary
JAMES E. SOLOMON is the Chairman of our Board of Directors and has served as our
President and Chief Executive Officer since August 2004. Mr. Solomon is also the
President and Chief Executive Officer of Technology Alternatives, Inc. of
Schaumburg, Illinois. Mr. Solomon's career has been that of the technology
entrepreneur and he has been active in the technology industry for the past 32
years. Mr. Solomon's experience includes work as a developer, engineer, and
creator of businesses in the PC, CD-ROM, Relational Database, Telecommunications
and Wireless industries.
After many years of participation in the AeA (American Electronics Association),
Mr. Solomon became the chairman for the Midwest Council, member of the national
board of directors, International and Technology committees. Through the AeA, he
has become an advisor on wireless technologies to World Business Chicago,
Chicago Software Association - Wireless Roundtable, Chicagoland Chamber of
Commerce, Metropolitan Planning Commission, Chicagoland Workforce Boards, the
Mayor's Council of Technology Advisors (Chicago) and currently is a Member of
the Governor's Broadband Task Force (Illinois).
Mr. Solomon has successfully raised over $15,000,000 through venture funds in
multiple rounds for several of his companies. He developed relationships with
every major telecommunications carrier and several minor carriers in the U.S.,
Canada, Ecuador, Colombia, Peru, Australia, New Zealand, and China markets. Mr.
Solomon developed partner relationships with NCR, Diebold, Fujitsu, and created
strategic relationships with Chase, Citicorp, First Union, Nations, Bank of
America and Wells-Fargo Banks.
Mr. Solomon's companies developed the technology for the electronic image
capture, store and forward of "mug shots" for law enforcement for the Chicago
police department. Other clients have included AT&T, Hyatt Hotels, Wal-Mart,
Kmart, J.C. Penney's, and Sears for development of mission critical on-line
transaction processing applications. Mr. Solomon's company was one of the first
licensees of CD-ROM technology in the U.S. and developed strong international
relationships in the Netherlands and Japan. As a result he became one of the
industry leaders in tools for image digitization, storage, retrieval and
transmission for the insurance, banking and intelligence markets.
Mr. Solomon has held a series of positions with ever increasing responsibilities
for both domestic and international companies including GOOItech, Sayers
Advanced Systems, Informix, MicroTRENDS, Digital Research, Wang Laboratories and
Tandem Computer. These organizations gave him the opportunity to develop
relationship and management skills with customers in the Telecommunications,
Insurance, Financial, Banking, Distribution and Pharmaceutical industries.
26
Mr. Solomon's educational background includes the University of Missouri at
Columbia, Civil Engineering, University of Missouri at Kansas City, Business
Administration, and the Stanford University Executive MBA Program. In addition
to Mr. Solomon's AeA duties his professional memberships have included the Chief
Information Officer Organization, Strategic Account Management Association
(SAMA), Wireless Data Forum, Cellular Telephone Industry Association (CTIA),
American Banking Association, Banking Industry Association, and the
International Association of Home Financing.
PETER LYNCH has served as our Chief Operating Officer since October of 2004. Mr.
Lynch has extensive senior executive level management experience in the
broadband communications industry including a combination of domestic and
international entrepreneurial assignments. Mr. Lynch's radio frequency
experiences originate from building and growing cable television operations
initially. Mr. Lynch jointly founded a British competitive communications
carrier that provided cable TV and voice communication services over an
integrated network. Mr. Lynch's wireless communication industry experience
started with a publicly traded, MMDS television services provider where he led
their evolution into a wireless ISP business model as the company's Chief
Operating Officer. Internetworking and data communications remained at the
center of Mr. Lynch's activities when he became the President of a competitive
local exchange carrier (CLEC) that pioneered the integration of packet telephony
and high-speed Internet using ATM circuits. Mr. Lynch returned to the wireless
arena when he became Chairman of a leading provider of antennas to the LMR,
Wi-Fi, and WLAN markets.
GEORGE LOERA has served as a member of our Board of Directors since August of
2004. For the past 18 years Mr. George Loera has been the owner and President of
Chicago United Industries. Ltd., a multi-million dollar distribution and supply
company located in Chicago, Illinois. Mr. Loera is active in local civic and
business affairs, being Co-Founder and Past President of the Mexican-American
Chamber of Commerce of Illinois from 1992 to 1995. Mr. Loera also served as
Chairman of the Board of that organization. Mr. Loera is also the Founder and
Co-Chair of Paths to Achievement, a mentoring organization for Chicagoland
middle school children.
Mr. Loera also previously served as a director for 6 years and as Vice President
for the Hispanic American Construction Industry Association, an association
focusing on promoting opportunities for Hispanic construction, engineering and
supply companies. He has been a member of the Hispanic American Construction
Industry Association for the past 18 years.
Mr. Loera was the Co-Chair of the Latino Coalition in Defense of Affirmative
Action from 1987 to 1989. Mr. Loera is currently a Director for the Latino
Technology Association, an association focusing on promoting opportunities for
Latino technology businesses.
Mr. Loera earned his BBA in Organizational Management from the University of
Iowa in 1977, and was enrolled in the Electrical Engineering Curriculum at the
University of Illinois, Champaign, Illinois from 1969 to 1970. Mr. Loera also
served as a Sergeant in the United States Marine Corps, 1st Force Reconnaissance
Company, Fleet Marine Force, Pacific from 1971 to 1973.
C. PETE ASHI has served as a member of our Board of Directors since August of
2004. Mr. C. Pete Ashi has over 22 years of Information Systems industry
experience. Over the past five years, Mr. Ashi has served as the Vice President
of National Operations for TM Floyd & Company, a $55,000,000 Information
Technology consulting firm with major clients in the Health Insurance and
Property & Casualty industries. His career has evolved from computer programming
and support, to recruiting, sales and marketing, and management.
Mr. Ashi formed Ashi & Associates, a Dallas based search firm, in 1984 and
served as President from 1984 to 1987. Mr. Ashi relocated to Chicago in 1988 to
lead a start-up branch for IMI Systems, Inc., an Information Technology
consulting firm. Mr. Ashi worked for IMI Systems, Inc. from 1987 to 1989.
In March, 1989 Mr. Ashi was recruited to Keane, Inc, a billion dollar publicly
traded Information Technology consulting firm, to develop a sales territory. Mr.
Ashi worked for Keane, Inc. until 1993. Following his work with Keane, Inc., Mr.
Ashi joined TM Floyd & Company in 1993 as Director of Business Development and
27
was subsequently promoted to Vice President of Operations in 1994, followed by a
promotion to Vice President of National Operations in 1999.
Mr. Ashi is also the co-founder of the Friends of Drummond, a charitable
organization chartered with promoting education in his community, and sits on
the board of Ant Systems, Inc. Aside from his responsibilities to TM Floyd &
Company, he is the Chairman of the Illinois Century Network Policy Committee.
Mr. Ashi attended the University of Pennsylvania from 1978 to 1980 and graduated
from the University of Pittsburgh's School of Computer Technology with a BS in
1981.
IRWIN A. WILLIAMSON has served as our Chief Financial Officer since August of
2004. Prior to joining the Company, Mr. Williamson served as Chief Financial
Officer of Technology Alternative (TAI). Prior to TAI Mr. Williamson served as
Chief Financial Officer of Recognition Source, LLC, a producer of wireless
access control devices. From 1996 to 2002, Mr. Williamson served as Chief
Financial Officer and Vice President of Globe Building Materials, Inc., a
manufacturer of residential roofing materials. From 1988 to 1996, Mr. Williamson
served as the Chief Financial Officer of International Imaging Electronics, a
manufacturer of medical imaging devices. From 1984 to 1988 Mr. Williamson served
as Corporate Controller to the Seatt Corporation, a manufacturer of consumer
electronics. From 1981 to 1984 Mr. Williamson was a senior financial planning
analyst with ARCO Metals, a division of Atlantic Richfield Company. From 1978 to
1981 Mr. Williamson held various operations and financial management positions
with the Essex Group, a division of United Technologies. Mr. Williamson holds a
degree in accounting from Indiana University.
BARBARA ROBERTS has served as our Vice President of Business Development since
October of 2004. Ms. Roberts has nineteen years of practical and industry
experience combining the disciplines of Executive Management, Sales/Marketing,
Finance, Operations, and Systems Integration. During her twelve years with
Electronic Data Systems, Inc. ("EDS"), Ms. Roberts was responsible for systems
and management duties across the markets of federal, state and local government,
HealthCare, social services, transportation, and communications. Ms. Roberts was
responsible for the EDS market deployment and replication of the U.S. operations
for "Red Light Enforcement" traffic camera systems. From 1998 until 2001, as
President of Redflex Traffic Systems, Inc, Ms. Roberts was instrumental in
developing the first digital traffic camera programs in the world for ticketing
red light running and speeding offenders. Ms. Roberts' strong entrepreneurial
track record and global business experience helped grow Redflex from a startup
company to an internationally recognized multi-million dollar firm, handling
camera manufacturing, application development, court integration, and on-going
citation processing. Prior to joining TechAlt, Inc., Ms. Roberts worked for
Technology Alternatives, Inc., of Schaumburg, Illinois beginning in 2002.
Ms. Roberts graduated from Humboldt State University located in Arcata, CA in
1985 with her B.A in Business Administration/Finance and double minors in
Computer Information Systems and Speech Communications.
DAVID M. OTTO has served as our Secretary since August of 2004. David M. Otto is
a Seattle-based attorney and President of The Otto Law Group. Mr. Otto's
practice focuses on corporate finance, securities, mergers and acquisitions and
corporate law and governance. Mr. Otto began his law practice on Wall Street in
New York City in 1987, where he concentrated on significant corporate leveraged
buyout and takeover transactions and equity and debt offerings for investment
banks, venture capital firms and Fortune 1000 companies. In 1991, Mr. Otto moved
to Seattle in order to dedicate his extensive experience in corporate law and
finance, mergers and acquisitions, corporate governance, public and private
securities offerings and venture capital financing to entrepreneurs, technology
innovators, start-up, emerging growth and middle-market businesses. In July of
1999, Mr. Otto founded his own firm, The Otto Law Group, PLLC, in Seattle,
Washington, to better serve technology-based start-up, emerging growth and
middle-market companies with respect to corporate finance, securities, strategic
development, corporate governance, mergers, acquisitions and venture capital and
private equity matters. Recent transactions completed by The Otto Law Group
28
include an initial public offering for a digital technology company, acquisition
and financing of an education services and products public company, private
financing for the national expansion of a window coverings manufacturer, the
Securities Exchange Act of 1934 Act compliance work for several technology and
service businesses, a share exchange and proxy for a publicly held company,
rendering opinions regarding various cross-border financings and acquisitions
and private placements for electronic component, digital music, e-commerce and
wireless broadband companies.
Mr. Otto has authored "Venture Capital Financing" and "Taking Your Company
Public" and lectured to businessmen, accountants, lawyers, and graduate students
at the University of Washington Business School on venture capital financing and
going public. He is currently a member of the Board of Directors of Dtomi, Inc.,
Uniphyd Corporation, SinoFresh Healthcare, Inc., Excalibur USA Custom Window
Fashions, Inc. and Saratoga Capital Partners, Inc. He is also a member of the
American Bar Association Committee on the Federal Regulation of Securities,
Subcommittee on the 1933 Act and Chairman of the Legislation Subcommittee of the
ABA's Venture Capital and Private Equity Committee. Mr. Otto is admitted to
practice law in New York and Washington.
Mr. Otto graduated from Harvard University in 1981 with his A.B. in Government
and Fordham University School of Law in 1987 where he earned his Juris Doctorate
and served as a Commentary Editor on the Fordham International Law Journal.
There are no family relationships among the Company's officers and directors.
All Directors of the Company hold office until the next annual meeting of the
shareholders and until successors have been elected and qualified. Executive
Officers of the Company are appointed by the Board of Directors at meetings of
the Company 's Directors and hold office until they resign or are removed from
office.
None of the Directors or Officers has been involved in any bankruptcy or
criminal proceeding during the past five years.
EXECUTIVE COMPENSATION
None of our executive officers earned in excess of $100,000 during the fiscal
years ended December 31, 2003 and 2002.
EMPLOYMENT AGREEMENTS
Mr. Solomon and the Company entered into an Employment Agreement effective as of
January 1, 2004. Per the terms of the Employment Agreement, Mr. Solomon is to be
employed by the Company as the Chief Executive Officer for an initial period of
three (3) years, which period shall be automatically renewed for one year terms
until terminated by the Company. Mr. Solomon's annual salary is One Hundred and
Seventy Five Thousand Dollars ($175,000). He is eligible to receive an annual
cash bonus of up to Two Hundred Fifty Thousand Dollars ($250,000) in connection
with the gross revenues of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any options to any of our officers during the year ended
December 31, 2003.
STOCK OPTION PLANS
The Company does not currently have a Stock Option Plan but is in discussions to
adopt a Stock Option Plan for its employees.
29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of November 12, 2004:
- --------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner Amount and Nature of Percentage of
Beneficial Ownership Class(1)
- --------------------------------------------------------------------------------------------------
James E. Solomon, President and CEO, Director
3311 N. Kennicott Ave., Suite A, 8,544,000 71.%(2)
Arlington Heights, IL 60004
- --------------------------------------------------------------------------------------------------
Technology Alternatives, Inc.
3311 N. Kennicott Ave., Suite A 4,000,000 33%
Arlington Heights, IL 60004
- --------------------------------------------------------------------------------------------------
C. Pete Ashi, Director
3311 N. Kennicott Ave., Suite A, 75,000 .006%
Arlington Heights, IL 60004
- --------------------------------------------------------------------------------------------------
Diane Marie Loera
3311 N. Kennicott Ave., Suite A, 600,000(3) 5%
Arlington Heights, IL 60004
- --------------------------------------------------------------------------------------------------
Peter Lynch
3311 N. Kennicott Ave., Suite A none
Arlington Heights, IL 60004
- --------------------------------------------------------------------------------------------------
Irwin A. Williamson
3311 N. Kennicott Ave., Suite A none
Arlington Heights, IL 60004
- --------------------------------------------------------------------------------------------------
David M. Otto
900 4th Avenue, Suite 314 none
Seattle, WA 98164
- --------------------------------------------------------------------------------------------------
Directors and Executive Officers as a Group 8,619,000(4) 72%
- --------------------------------------------------------------------------------------------------
(1) Does not include the 670,000 shares of Series A Preferred stock currently
issued and outstanding which may be converted into 1,340,000 shares of common
stock, in the aggregate, subject to certain adjustments. None of the shares of
Series A Preferred stock are held by the above shareholders.
(2) Mr. Solomon is the President, Chief Executive Officer and majority
shareholder of Technology Alternatives, Inc. and, as such, has the power to vote
the shares of common stock beneficially owned by Technology Alternatives, Inc.
Accordingly, in certain circumstances, Solomon, voting shares beneficially owned
by him, along with voting the shares beneficially owned by Technology
Alternatives, Inc., has the power to vote approximately seventy one percent
(71%) of the shares of the Company.
(3) Family member of George Loera, a member of the board of directors of the
Company.
(4) Based on 12,000,000 shares of common stock issued and outstanding as of
November 12, 2004. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as otherwise indicated, we
30
believe that the beneficial owners of the common stock listed above, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
DISCLOSURE OF SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our articles of incorporation allows and our bylaws require that we indemnify
our directors and officers who are or were a party to, or are threatened to be
made a party to, any proceeding (including a derivative action if the director
or officer is not found liable to us), against all expenses reasonably incurred
by a director or officer in connection with such a proceeding (including
expenses, judgments, fines and amounts paid in settlement), if the director or
officer acted in good faith, in a manner he or she believed was not opposed to
our best interests, and, with respect to a criminal proceeding, had no reason to
believe that his or her conduct was unlawful.
Our bylaws generally require that we advance to our directors and officers
expenses incurred by them in defending a proceeding in advance of its final
disposition, provided that the director or officer agrees to reimburse us for
such advances if it is ultimately found that the director or officer is not
entitled to indemnification. In addition, our bylaws permit us to purchase
insurance on behalf of our directors and officers against any liability asserted
against them in such capacity. We intend to obtain such insurance.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of us 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, we will, unless in the opinion
of our 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 Securities Act and will be
governed by the final adjudication of such issue.
DESCRIPTION OF SECURITIES
COMMON STOCK
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote and may not cumulate their votes.
Holders of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of our liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock.
Holders of our common stock have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to our common stock.
The rights of the holders of common stock are subject to any rights that may be
fixed for holders of preferred stock. All outstanding shares of common stock
are, and the shares underlying all options and public warrants will be, duly
authorized, validly issued, fully paid and non-assessable upon our issuance of
these shares.
PREFERRED STOCK
Our certificate of incorporation provides for the issuance of up to 100,000,000
shares of preferred stock. As of the date of this prospectus, there are 670,000
outstanding shares of Series A Preferred stock. There are currently outstanding
AIRs to purchase an additional 3,330,000 shares of Series A Preferred.
31
Effective August 23, 2004, the Company filed a Certificate of Designations with
the Nevada Secretary of State designating the preferences and rights of the
Series A Preferred. Each share of Series A Preferred converts into two (2)
shares of common stock, subject to certain adjustments, and votes on an as
converted basis with the common stock shareholders of the company.
The holders of the Series A Preferred are be entitled to receive cumulative
dividends ("Dividends") at a rate of 5.0% per annum (the "Dividend Rate"), which
shall be cumulative, accumulate daily from the Issuance Date and be due and
payable beginning on October 1, 2004 (the "First Dividend Date") and on the
first day of each Calendar Quarter after the First Dividend Date (each,
including the First Dividend Date, a "Dividend Date"). Any accumulated and
unpaid cash Dividend Payments which are not paid within five (5) Business Days
of such accumulated and unpaid Dividends' Dividend Date shall bear interest at
the rate of 15.0% per annum from such Dividend Date until the same is paid in
full (the "Default Interest"). No Dividends will be paid by the Company
subsequent to the first fiscal quarter in which the Company has EBITDA of One
Million Dollars ($1,000,000) or more.
In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of the Series A Preferred are entitled to receive
in cash out of the assets of the Company, whether from capital or from earnings
available for distribution to its stockholders (the "Liquidation Funds"), before
any amount shall be paid to the holders of any of the capital stock of the
Company of any class junior in rank to the Series A Preferred in respect of the
preferences as to distributions and payments on the liquidation, dissolution and
winding up of the Company, an amount per Series A Preferred share equal to Two
Dollars ($2.00).
The common stock of the Company is junior in rank to all issued shares of Series
A Preferred with respect to the preferences as to distributions and payments
upon the liquidation, dissolution and winding up of the Company. Further,
without the prior express written consent of certain of the shareholders of the
Series A Preferred, the Company may not authorize or make any amendment to the
Company's Articles of Incorporation or bylaws, or file any resolution of the
board of directors of the Company with the Secretary of State of the State of
Nevada or enter into any agreement containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority of the
holders of the Series A Preferred relative to the holders of the common stock or
the holders of any other class of capital stock.
If at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of common stock (the "Purchase
Rights"), then the holders of Series A Preferred will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of common stock acquirable upon complete conversion of the Series A
Preferred (without taking into account any limitations or restrictions on the
convertibility of the Series A Preferred) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of common stock
are to be determined for the grant, issue or sale of such Purchase Rights.
If at any time from and after the Issuance Date, (i) EBITDA equals or exceeds
$1,000,000 (the "EBITDA Requirement") and (ii) the Equity Conditions shall have
been satisfied or waived in writing by the Required Holders from and including
the Mandatory Conversion Notice Date through and including the Mandatory
Conversion Date (each, as defined below), the Company shall have the right to
require each holder of the Series A Preferred to convert all or any portion of
the Series A Preferred then outstanding as designated in the Mandatory
Conversion Notice into fully paid, validly issued and nonassessable shares of
common stock.
On any matter presented to the stockholders of the Company for their action or
consideration at any meeting of stockholders of the Company (or by written
action of stockholders in lieu of meeting), each holder of outstanding Series A
Preferred shall be entitled to the number of votes equal to the number of whole
shares of common stock into which the Series A Preferred held by such holder are
32
convertible (subject to the limitations of Section 4(a) above) as of the record
date for determining stockholders entitled to vote on such matter. Except as
provided by law, holders of Series A Preferred shall vote together with the
holders of common stock, and with the holders of any other series of preferred
stock the terms of which so provide, as a single class.
Subject to certain limitations prescribed by law and the rights and preferences
of the preferred stock, our board of directors is authorized, without further
stockholder approval, from time-to-time to issue up to an aggregate of
100,000,000 shares of our preferred stock, in one or more additional series.
Each new series of preferred stock may have different rights and preferences
that may be established by our board of directors. A majority of our
disinterested, independent directors must approve any issuance by us of our
preferred stock.
The rights and preferences of future series of preferred stock may include:
o number of shares to be issued;
o dividend rights and dividend rates;
o right to convert the preferred stock into a different type of
security;
o Voting rights attributable to the preferred stock;
o right to receive preferential payments upon a liquidation of the
company;
o right to set aside a certain amount of assets for payments relating
to the preferred stock; and
o prices to be paid upon redemption of the preferred stock.
Each share of Series A Preferred Stock is convertible into 2 shares of common
stock. There are 4 million shares of Series A Preferred Stock authorized.
WARRANTS
General
Each Warrant entitles the holder to purchase one share of our common stock at an
exercise price per share of $1.00 per share of common stock. The exercise price
is subject to adjustment upon the occurrence of certain events as provided in
the Warrant. Our Warrants may be exercised at any time prior to the fifth
anniversary date of the closing of this offering, which is the expiration date.
Those of our warrants which have not previously been exercised will expire on
the expiration date. A Warrant holder will not be deemed to be a holder of the
underlying common stock for any purpose until the Warrant has been properly
exercised.
Adjustments of exercise price
The exercise price is subject to adjustment if we declare any stock dividend to
stockholders, effect any split or reverse split with respect to our common
stock, or sell securities at a price below the exercise price of the Warrant.
Therefore, if we effect any stock split or reverse split with respect to our
common stock, the exercise price in effect immediately prior to such stock split
or reverse split will be proportionately reduced or increased, respectively. Any
adjustment of the exercise price will also result in an adjustment of the number
of shares purchasable upon exercise of a Warrant or, if we elect, an adjustment
of the number of Warrants outstanding.
ADDITIONAL INVESTMENT RIGHTS
The Company has issued AIRs to purchase 3,500,000 shares of Series A Preferred
Stock and Warrants to purchase 7,000,000 shares of common stock. For each share
of Series A Preferred Stock purchased pursuant to the Additional Investment
33
Right, the investor exercising the Additional Investment Right receives one (1)
Additional Warrant to purchase two (2) shares of common stock, exercise price of
$1.00 per share.
OPTIONS
The Company intends to issue option to Sunrise Securities Corp., to purchase (i)
500,000 shares of the common stock of the Company, exercisable for $.50 per
share, and (ii) 500,000 shares of the common stock of the Company, exercisable
for $1.00 per share (the "Options") in connection with the Public Relations
Retainer Agreement and public relations services pursuant thereto. The Options
shall be exercisable upon the earlier of either (a) the Company's shareholder
equity exceeding $10 million, or (ii) four (4) years from the date of issuance.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon on our
behalf by The Otto Law Group, PLLC, of Seattle, Washington.
EXPERTS
The financial statements as of and for the years ended December 31, 2002 and
2003 included in this prospectus have been audited by Pritchet, Siler & Hardy,
PC, independent registered public accounting firm, as indicated in their reports
with respect thereto, and are included herein in reliance upon the authority of
said firm as experts in auditing and accounting and in giving said reports.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 20, 2004 (the "Dismissal Date"), Pritchett, Siler & Hardy, PC
("PS&H"), was dismissed as independent auditor of TechAlt, in connection with
the engagement of Salberg & Company, P.A., as the independent registered public
accounting firm for the Company ("Salberg"). PS&H's reports on the Company's
10-KSB and 10-KSB for each of the years ended December 31, 2003 and 2002,
respectively, and all subsequent interim periods up and until the Dismissal
Date, did not contain an adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles,
other than reflecting an uncertainty as to the Company's ability to continue as
a going concern.
During each of the two (2) years ended December 31, 2003 and 2002, and all
subsequent interim periods up and until the Dismissal Date, there were no
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to PS&H's satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement.
The Company requested PS&H to furnish a letter addressed to the United States
Securities and Exchange Commission, stating whether they agree with the
statements made by the Company in the Current Report on Form 8-K, and, if not,
stating the respects in which it does not agree. A copy of this letter, dated as
of October 20, 2004, is filed as Exhibit 16.1 to the Current Report on Form 8-K.
On October 20, 2004, the Company engaged Salberg as its independent registered
public accounting firm to audit the Company's financial statements. During each
of the two (2) years ended December 31, 2003 and 2002, and all subsequent
interim periods up and until the Dismissal Date, the Company did not consult
Salberg on any matters described in Item 304(a)(2)(i) of Regulation S-B. During
each of the two (2) years ended December 31, 2003 and 2002, and all subsequent
interim periods up and until the Dismissal Date, the Company did not consult
Salberg on any matters described in Item 304(a)(2)(ii) of Regulation S-B.
The decision to change accountants was recommended and approved by the Board of
Directors of the Company on October 20, 2004.
34
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm F - 2
Balance Sheets F - 3
Statements of Operations F - 4
Statements of Cash Flows F - 5
Statement of changes in stockholders' deficit F - 6
Notes to financial statements F - 7 -1x
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Dendo Global Corp
We have audited the accompanying balance sheet of Dendo Global Corp. (a
development stage company) at December 31, 2003, and the related statements of
operations, changes in stockholders' deficit, and cash flows for the years ended
December 31, 2003 and 2002 and for the period from inception on December 29,
1994 through December 31, 2003. 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 audits.
We conducted our audits in accordance with the standards of the Public
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Dendo Global Corp. as of December
31, 2003, and the results of its operations and its cash flows for the years
ended December 31, 2003 and 2002 and for the period from inception on December
29, 1994 through December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company has incurred losses since its inception, has current
liabilities in excess of current assets and has no on-going operations. These
factors raise substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 5. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
PRITCHETT, SILER & HARDY, P.C.
February 16, 2004
Salt Lake City, Utah
F-2
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(dollars in thousands except per share data)
December 31,
-------------- September 30,
2003 2004
-------------- -----------------
(unaudited)
Current assets
Cash and cash equivalents $ -- $ 1
----- -----
Total current assets -- 1
Deposit -- 20
----- -----
Total $ -- $ 21
===== =====
Current liabilities
Accounts payable $ 4 $ 42
Excess of checks issued over bank balance -- 8
Compensation and other amounts payable to officer -- 172
Accrued professional fees -- 101
Notes payable and other amounts due to related parties 12 --
Accrued preferred stock dividends -- 3
----- -----
----- -----
Total current liabilities 16 326
----- -----
Commitments (Notes 5 and 7)
Stockholders' Deficit
Series A Convertible Voting Preferred stock, $0.001 par value,
4 million shares authorized in 2004, 500,000 shares issued and
outstanding at September 30, 2004, liquidation preference of -- 460
$1 million
Preferred stock, $0.001 par value, 100 million shares authorized at
October 15, 2004, of which 4 million were designated as Series A
Convertible Preferred stock in 2004, none of the remaining 96
million shares authorized have been designated, issued or outstanding -- --
Common stock and additional paid-in capital. $0.001 par value,
500 million shares authorized at October 15, 2004,
shares issued and outstanding of 13,875,000
and 12,000,000, respectively at December 31, 2003 and September 30, 2004 73 261
Receivable from principal stockholder (100)
Deficit accumulated to August 23, 2004 (89) (107)
Deficit accumulated August 24, 2004 to September 30, 2004 -- (819)
----- -----
Total stockholders' deficit (16) (305)
Total $ -- $ 21
===== =====
See accompanying notes to financial statements.
F-3
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
From the
Development
From Inception Stage Period
on December 29, August, 24,
1994 Through 2004 Through
Year ended December 31 December 31, Nine months ended September 30 September 30,
--------------------------- ---------------------------
2002 2003 2003 2003 2004 2004
------------ ------------ ----------- ------------ ------------ -----------
(unaudited) (unaudited) (unaudited)
Revenue $ -- $ -- $ -- $ -- -- $ --
Cost of goods sold -- -- -- -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Gross profit -- -- -- -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Operating expenses
Selling, general and administrative 6 7 43 5 222 204
Compensation agreement expense -- -- -- -- 173 173
Financial consulting expenses -- -- -- -- 150 150
Acquired in-process research
and development -- -- -- -- 238 238
Research and development -- -- -- -- 51 51
------------ ------------ ----------- ------------ ------------ -----------
Total operating expenses 6 7 43 5 834 816
------------ ------------ ----------- ------------ ------------ -----------
Loss from continuing operations before
interest (6) (7) (43) (5) (834) (816)
Interest expense -- (1) (1) -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Loss from continuing operations (6) (8) (44) (5) (834) (816)
Loss from discontinued operations -- -- (45) -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Net loss (6) (8) (89) (5) (834) (816)
Preferred stock dividends -- -- -- -- (3) (3)
------------ ------------ ----------- ------------ ------------ -----------
Net loss attributable to common
shareholders $ (6) $ (8) $ (89) $ (5) $ (837) $ (819)
============ ============ =========== ============ ============ ===========
Basic and diluted loss attributable to
common Shareholders per share:
Loss from continuing operations $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.03) $ (0.09)
Loss from discontinued operations -- -- (0.01) -- -- (0.00)
------------ ------------ ----------- ------------ ------------ -----------
Net loss attributable to common
shareholders per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ (0.03) $ (0.09)
============ ============ =========== ============ ============ ===========
Weighted average shares used
in computing loss per share 13,875,000 13,875,000 8,837,413 13,875,000 26,596,259 9,574,582
============ ============ =========== ============ ============ ===========
See accompanying notes to financial statements.
F-4
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
From the
Development
From Inception Stage Period
on December 29, August 24,
1994 Through 2004 through
Year ended December 31 December 31, Nine months ended September 30 September 30,
---------------------- ------------------------------
2002 2003 2003 2003 2004 2004
----- ----- ---- ---- ----- -----
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (6) $ (8) $(89) $ (5) $(834) $(816)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization expense -- -- 10 -- -- --
Non-cash expense -- -- 9 -- -- --
Financial consulting expense paid in stock -- -- -- -- 150 150
Acquired in-process research and development -- -- -- -- 238 238
Changes in operating assets and liabilities:
Accounts payable 5 (3) 4 (3) 46 1
Accrued compensation and related liabilities -- -- -- -- 173 173
Accrued professional fees -- -- -- -- 101 101
Accrued preferred stock dividends -- -- -- -- 3 3
Other -- -- 1 -- (14) (6)
----- ----- ---- ---- ----- -----
Net cash used by operating activities (1) (11) (65) (8) (137) (156)
----- ----- ---- ---- ----- -----
Cash flows from investing activities:
Purchase of property, plant & equipment -- -- (6) -- -- --
Payments for other assets -- -- (13) -- (20) --
----- ----- ---- ---- ----- -----
Net cash used by investing activities -- -- (19) -- (20) --
----- ----- ---- ---- ----- -----
Cash flows from financing activities:
Proceeds from sale of common stock -- -- 77 -- 15 --
Excess checks issued over bank balance -- -- -- -- 8 8
Payment of stock issue costs -- -- (4) -- -- --
Payment for cancellation of shares -- -- -- -- (77) (77)
Proceeds from notes payable to related parties 1 10 11 10 -- --
Payments on notes payable to related parties -- -- -- -- (10) --
Proceeds from sale of preferred stock, net -- -- -- -- 460 460
of issue costs
Payments to stockholder for liabilities
paid in connection with the Intellectual
Property License Agreement -- -- -- -- (238) (238)
Proceeds from capital lease -- -- 8 -- -- --
Payments on capital lease -- -- (8) -- -- --
----- ----- ---- ---- ----- -----
Net cash provided (used) by
financing activities 1 10 84 10 158 153
----- ----- ---- ---- ----- -----
Net increase (decrease) in
cash and cash equivalents -- -- -- 2 1 (3)
Cash and cash equivalents, beginning of period -- -- -- -- -- 4
----- ----- ---- ---- ----- -----
Cash and cash equivalents, end of period $ -- $ -- $ -- $ 2 $ 1 $ 1
===== ===== ==== ==== ===== =====
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ -- $ -- $ -- $ --
===== ===== ==== ==== ===== =====
Non-cash investing and financing activities
Transfer of assets to former president $ -- $ -- $ 9 $ -- $ -- $ --
===== ===== ==== ==== ===== =====
Receivable from stockholder obtained
in connection with the Intellectual
Property License Agreement and
issuance of common stock $ -- $ -- $ -- $ -- $ 100 $ 100
===== ===== ==== ==== ===== =====
Liabilities assumed in connection with
the Intellectual Property License Agreement $ -- $ -- $ -- $ -- $ 238 $ 238
===== ===== ==== ==== ===== =====
See accompanying notes to financial statements.
F-5
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
Common stock and
Series A Convertible additional Receivable
Preferred Stock paid-in capital from
------------------- ------------------ Principal Accumulated
Shares Amount Shares Amount Shareholder Deficit Total
------- ------ ---------- ------ ----------- ----------- -----
Balance at December 29, 1994 (inception)
Issuance of common stock for cash
at $0.008 per share $ -- 62,500 $ -- $ -- $ -- $ --
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1994 -- -- 62,500 -- -- -- --
Issuance of common stock for cash at
$0.002 to $0.008 per
share in January to February 1995 812,500 2 2
Issuance of common stock for cash at
$0.010 per share in
September to December 1995, net of
stock issue costs of $4 500,000 46 46
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1995 -- -- 1,375,000 48 -- (6) 42
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1996 -- -- 1,375,000 48 -- (13) 35
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1997 -- -- 1,375,000 48 -- (29) 19
Issuance of common stock for cash
at $0.002 per share 12,500,000 25 25
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1998 -- -- 13,875,000 73 -- (36) 37
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1999 -- -- 13,875,000 73 -- (61) 12
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2000 -- -- 13,875,000 73 -- (68) 5
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2001 -- -- 13,875,000 73 -- (75) (2)
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2002 -- -- 13,875,000 73 -- (81) (8)
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2003 -- -- 13,875,000 73 -- (89) (16)
Net loss for the period January 1, 2004
through August 24, 2004 (unaudited) (18) (18)
------- ------ ---------- ----- ----------- ----------- -----
Balance at August 23, 2004 (unaudited) -- -- 13,875,000 73 -- (107) (34)
Issuance of common stock for cash at $0.001
per share in March (unaudited) 15,000,000 15 15
Cancellation of shares in August for cash
at $0.0028 per share (unaudited) (27,219,000) (77) (77)
Issuance of common stock in connection
with Intellectual Property License
Agreement (unaudited) 10,044,000 100 (100) --
Issuance of common stock in consideration
for financial consulting services provided
at $0.50 per share in in August,
2004 (unaudited) 300,000 150 150
Issuance of Series A Convertible Preferred
stock in August (unaudited) 500,000 460 -- -- -- -- 460
Preferred stock dividends (unaudited) -- -- -- -- -- (3) (3)
Net loss for the period August 24, 2004 through
September 30, 2004 (unaudited) -- -- -- -- -- (816) (816)
------- ------ ---------- ----- ----------- ----------- -----
Balance at September 30, 2004 (unaudited) 500,000 460 12,000,000 261 (100) (926) (305)
======= ====== ========== ===== =========== =========== =====
See accompanying notes to financial statements.
F-6
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NAME CHANGE - See Note 7 - Events (Unaudited) subsequent to date of Report of
Independent Registered Public Accounting Firm regarding the Company's name
change to TechAlt, Inc. and other related matters.
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Dendo Global Corp. (the "Company") was organized under the laws
of the State of Nevada on December 29, 1994 as Top Flight Software, Inc. The
Company subsequently changed its name to Dendo Global Corp. The Company had been
developing and marketing management software, however, the business proved to be
unsuccessful and, during January 1999, the Company discontinued its operations
and commenced exploring various other business opportunities. The Company is
considered to have entered a new development stage on August 24, 2004
(unaudited) as defined in Statement of Financial Accounting Standards No. 7. The
Company has not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors. Activities during the new development stage include raising
capital, developing the corporate infrastructure and research and development.
CASH AND CASH EQUIVALENTS-- The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" [See Note 4].
LOSS PER SHARE - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in accordance
with Statement of Financial Accounting Standards No. 128 "Earnings Per Share".
Dilutive loss per share is not presented as the effects of including common
stock equivalent shares, which there were none of prior to 2004, would be
anti-dilutive for all periods presented. The unaudited computations of loss per
share for period ended September 30, 2004, exclude 1 million shares potentially
issuable pursuant to terms of outstanding Series A Convertible Preferred Stock
and 1 million common shares issuable upon exercise of outstanding Warrants.
USE OF ESTIMATES--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's financial instruments consist
of cash, accounts payable, amounts payable to related parties and Series A
Convertible Preferred Stock, and their carrying amounts approximate fair value
due to their short maturities and recent occurrences.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The accompanying balance sheet as of
September 30, 2004, the statements of operations and the statements of cash
flows for the nine months ended September 30, 2003 and 2004 and from inception
on August 24, 2004 through September 30, 2004, and the statement of changes in
stockholders' deficit for the nine months ended September 30, 2004, are
unaudited. The unaudited interim financial statements have been prepared on the
same basis as the annual financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the nine months ended September 30, 2003 and 2004.
The financial data and other information disclosed in these notes to financial
statements related to the nine months ended September 30, 2003 and 2004 are
unaudited. The results for the nine months ended September 30, 2004 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2004 or for any other interim period or for any future year.
RESEARCH AND DEVELOPMENT--Research and development costs, which are comprised
primarily of supplies, materials and related costs, are expensed as incurred.
The value of acquired In-process Research and Development is charged to expense
on the date of acquisition.
F-7
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS - Statement of Financial Accounting Standards
("SFAS") No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities", SFAS No. 147, "Acquisitions of Certain Financial Institutions - an
Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of FASB Statement No. 123", SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities", and SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity", were recently issued. SFAS No. 146,147,148,149 and 150
had no applicability to the Company or their effect on the financial statements
would not have been significant.
NOTE 2 - CAPITAL STOCK TRANSACTIONS
PREFERRED STOCK - At December 31, 2003 the Company had authorized 5,000,000
shares of preferred stock, $.001 par value, with such rights, preferences and
designations and to be issued in such series as determined by the Board of
Directors. No shares were issued and outstanding at December 31, 2003. See Note
7 - Events (Unaudited) subsequent to Date of report of the independent
registered public accounting firm.
COMMON STOCK - At December 31, 2003 the Company had authorized 50,000,000 shares
of common stock at $.001 par value. At December 31, 2003 there were 13,875,000
common shares issued and outstanding. See Note 7 - Events (Unaudited) subsequent
to Date of report of the independent registered public accounting firm.
CHANGE IN CONTROL - In August 1998, an individual purchased 12.5 million shares
of common stock of the Company representing a 90% controlling interest in the
Company. Total proceeds from the sale of stock were $25,000 (or $0.002 per
share). The former officer and director resigned and the individual was elected
as the new president and director.
STOCK SPLIT - In March 2003, the Company effected a 5-for-1 forward stock split.
The financial statements for all periods presented have been restated to reflect
the stock split.
NOTE 3 - RELATED PARTY TRANSACTIONS
ADVANCE - An officer of the Company had advanced $250 to the Company on a
non-interest bearing basis. In March 2003, this advance was extended into a new
note payable. During December 2003, an officer advanced $125 to the company on a
non-interest bearing basis.
NOTE PAYABLE - In March 2003, the Company signed a $10,250 note payable to an
officer of the Company. The Company received proceeds of $10,000 and extended a
$250 related party advance. The note accrues interest at 10% per annum and is
due on demand. At December 31, 2003, accrued interest payable on the note
amounted to $665.
NOTE PAYABLE - In September 2002, the Company signed a $1,000 note payable to an
entity controlled by a shareholder of the Company. The note accrues interest at
10% per annum and is due on demand. At December 31, 2003, accrued interest
payable on the note amounted to $130.
MANAGEMENT COMPENSATION - The Company did not pay any compensation to its
officers and directors during the years ended December 31, 2003 and 2002.
RENT - The Company has not had a need to rent office space during the years
ended December 31, 2003 and 2002. An officer of the Company allowed the Company
to use the officer's address, as needed, at no expense to the Company.
Also see Note 7 - Events (Unaudited) subsequent to date of report of the
independent registered public accounting firm for additional related party
transactions.
F-8
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 4 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". SFAS 109 requires
the Company to provide a net deferred tax asset/liability equal to the expected
future tax benefit/expense of temporary reporting differences between book and
tax and any available operating loss or tax credit carryforwards. At December
31, 2003, the Company has available unused operating loss carryforwards of
approximately $87,500, which may be applied against future taxable income and
which expire in various years through 2023. Due to substantial changes in the
Company's ownership, there will be an annual limitation on the amount of net
operating loss carryforwards which can be utilized. The amount of and ultimate
realization of the benefits from the operating loss carryforwards for income tax
purposes is dependent, in part, upon the tax laws in effect, the future earnings
of the Company, and other future events, the effects of which cannot be
determined. Because of the uncertainty surrounding the realization of the loss
carryforwards, the Company has established a valuation allowance equal to the
tax effect of the loss carryforwards and, therefore, no deferred tax asset has
been recognized for the loss carryforwards. Net deferred tax assets are
approximately $29,800 and $27,400 at December 31, 2003 and 2002, respectively,
with an offsetting valuation allowance of the same amount resulting in a change
in the valuation allowance of approximately $2,400 during the year ended
December 31, 2003.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. However, the Company
has incurred losses since its inception, has current liabilities in excess of
current assets and had no on-going operations. These factors raise substantial
doubt about the ability of the Company to continue as a going concern. In this
regard, management is proposing to raise any necessary additional funds not
provided by operations through loans or through additional sales of its common
stock. There is no assurance that the Company will be successful in raising this
additional capital or in achieving profitable operations. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. See Note 7 - Events (Unaudited) subsequent to Date of
report of the independent registered public accounting firm.
NOTE 6 - SUBSEQUENT EVENT
CHANGE IN CONTROL - In March 2004, the Company issued 15 million shares of its
common stock to an individual representing 52% controlling interest in the
Company. Total proceeds from the sale of stock amounted to $15,000 (or $0.001
per share). The former officer and director resigned and the individual was
elected as the sole officer and director of the Company.
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM.
Prior to August 24, 2004, the Company had no business operations, and very
limited assets or capital resources, and its business plan was to seek one or
more potential business ventures that, in the opinion of management, may warrant
involvement by the Company. As a result of transactions occurring in August
2004, as described below, and which include, but not limited to the License
Agreement, sale of Series A Convertible Preferred Stock, the Compensation
Agreement, the financial consulting arrangement and the Agreement with IBM, the
Company's operations now relate to sales of wireless, multi-network
communications hardware and software solutions to be used by emergency first
responders such as Police, EMS and other Homeland Security Agencies.
F-9
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
LICENSE AGREEMENT - On August 20, 2004, the Company and its then majority (52%)
shareholder and sole member of its board of directors (the "Warranting
Shareholder") entered into an Intellectual Property License Agreement with
Technology Alternatives, Inc. ("TAI"), which agreement (the "License Agreement")
was consummated on August 24, 2004 ("Closing"). Pursuant to the License
Agreement, in exchange for the issuance of 10,044,000 shares of Company common
stock ("Common Stock"), the Company licensed certain intellectual property owned
by TAI. The initial term of the License is 6 months, which 6 month term is
automatically extended for additional 6 month terms until terminated by mutual
agreement of the Company and TAI. Pursuant to terms of the License Agreement,
the Company is to receive $100,000 from TAI to satisfy certain liabilities and
27,219,000 shares of Common Stock were cancelled. The receivable from TAI is due
on demand and is presented as a component of Stockholders' Deficit in the
accompanying balance sheet at September 30, 2004.
In connection with the License Agreement the Company made payments to former
shareholders of approximately $77,000 for the cancellation of stock, which such
amounts have been recorded as a decrease in common stock and additional paid-in
capital in a manner similar to accounting for the acquisition of Treasury Stock.
Additionally, the Company paid certain TAI liabilities of approximately
$238,000, which were subsequently paid to TAI and others. The amount of paid
liabilities has been allocated to "In-process Research and Development" costs
pertaining to the intellectual property rights licensed in connection with the
License Agreement and were immediately expense as of the license date as a
result of the licensed Intellectual Property not having yet attained
technological feasibility.
The License Agreement provides for the Company to raise equity funding (cash) of
at least $500,000 within 5 days following Closing (the "Initial Funding"), and
of at least an additional $3.5 million within 90 days following Closing (the
"Final Funding"). In the event the fundings are not timely completed or if the
"Historical Stockholders" own less than 8% of the outstanding common stock upon
consummation of the Final Funding, then the Warranting Shareholder shall have
the option for 14 calendar days to terminate the Agreement, subject to certain
remedy provisions.
After issuance of shares and cancellation of shares in connection with the
License Agreement, TAI owns 4 million shares of the 12 million total outstanding
and James E. Solomon ("Solomon"), the majority shareholder of TAI, directly or
beneficially owns an additional approximately 4.5 million shares. In certain
circumstances, Solomon, voting shares directly or beneficially owned, along with
voting shares beneficially owned by TAI, has control to vote approximately 71%
of the Company's outstanding common shares. Inasmuch as Solomon has a majority
ownership interest in the Company after the issuance of common shares in
connection with the License Agreement, the Intellectual Properties rights
acquired by the Company have been recorded in the amount of Solomon's net book
value of such assets, and that same value assigned to shares issued. As a result
of previously expensing costs incurred in connection with developing such
assets, the net book value was $0, which is the value recorded by the Company
for this transaction accounted for in a manner similar to that ascribed for
transactions with entities under common control.
In connection with the License Agreement, Solomon was appointed to the Board of
Directors of the Company and appointed President and Chief Executive Officer of
the Company, and the Warranting Shareholder resigned from all positions as an
officer and director of the Company.
SALE OF SERIES A CONVERTIBLE PREFERRED STOCK, WARRANTS AND ADDITIONAL INVESTMENT
RIGHTS - On August 24, 2004, pursuant to the private offering exemption provided
in Rule 506 of Regulation D of the Securities Act of 1933, in exchange for
$500,000, before offering costs of approximately $40,000, the Company sold
500,000 shares of its Series A Convertible Preferred Voting Stock (purchase
price of $1.00 per share) (the "Series A Preferred"), warrants to purchase 1
million shares of the Company's common stock at an exercise price of $1.00 per
share for the period ending five years from issuance (the "Warrants") and
Additional Investment Rights to purchase 3.5 million additional shares of Series
A Preferred with 7 million warrants at a purchase price of $1.00 per share (the
"Series A Preferred Rights") (the "Offering"). Each share of Series A Preferred
is convertible under certain circumstances into two shares of the Company's
common stock, at a conversion price of $0.50 per common share, the price
determined by Company management to represent the fair value of such stock at
the issuance date. The Series A Preferred holders have voting rights on an as
converted basis.
F-10
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM. (CONTINUED)
Terms of Series A Preferred provides for, among other things, cumulative
dividends to be paid to holders at a rate of 5% per annum, which accumulate
daily from issuance date and payable quarterly, in certain circumstances payable
in the Company's common stock, each preferred share to be convertible into 2
shares of Company common stock, subject to anti-dilution conversion rate
adjustments, at a $2.00 per share liquidation preference amount, payment of
dividends and distributions to holders of common stock to the same extent as if
such holders of preferred stock had converted into common shares, voting rights
on an as converted basis, and limits payment of dividends on common stock until
certain financial targets are met.
The use of proceeds from the Offering were designated for the Company's general
corporate and working capital purposes, and prohibited certain other uses,
including payments to TAI. The aforementioned payments of $238,000 to TAI and
others were otherwise prohibited, but have been orally consented to by Series A
Preferred shareholders. Pursuant to terms of a Securities Purchase Agreement
with respect to the Offering, under certain circumstances, the Company may be
required to redeem the Series A Preferred.
COMPENSATION AGREEMENT - In August 2004, the Company entered into an Employment
Agreement with Solomon, pursuant to which Solomon is to be employed by the
Company as Chief Executive Officer for an initial period of 3 years, which
period shall be automatically renewed until terminated by the Company. The
Employment Agreement provides for annual compensation of $175,000, an
opportunity for Solomon to earn additional annual bonuses upon the Company
attaining certain financial targets, and for the Company to grant Solomon
options to purchase 1 million shares of Company common stock at an exercise
price being fair value at date of grant, subject to vesting. During the three
months ended September 30, 2004, the Company recorded approximately $130,000 of
compensation expense incurred upon execution of the Employment Agreement for
compensation due upon signing and approximately $43,000 of expense relating to
reimbursement to Solomon for costs and expenses incurred in connection with
development and support of Intellectual Property acquired pursuant to the
License Agreement. The Employment Agreement also provides for the Company to pay
Solomon for certain executive officer benefits throughout the term.
LITIGATION AND SETTLEMENT AGREEMENT - In August 2004, Paul Masanek ("Masanek"),
a 45% shareholder of TAI, and Services By Designwise, Ltd., a company owned by
Masanek ("SBD") (SBD and Masanek, collectively "Masanek"), filed a lawsuit in
the Circuit Court of Cook County, Illinois (the "court"), against Solomon and
TAI (the "Lawsuit"). The Lawsuit is comprised of (i) a Verified Complaint for
Declaratory, Injunctive and Other Relief (the "Complaint"), (ii) a Motion for
Temporary Restraining Order (the "Restraining Order"), and (iii) a Motion for
Preliminary Injunction (the "Injunction"). The Lawsuit alleges Solomon and TAI,
among other things, engaged in ultra vires acts, breached their fiduciary duty
and were oppressive of Masanek in connection with certain contemplated
financials (the "Financing") and potential transaction involving TAI (the
"Transaction") and in the removal of Masanek as an executive officer and member
of the board of TAI. The Complaint also claims that Masanek owns 49% of TAI, not
45%. Masanek seeks, among other things, a declaratory judgment that Masanek's
removal from the board of TAI is invalid and that certain actions taken by
Solomon and TAI in connection with the Financing and the Transaction are
invalid. Masanek seeks injunctive relief reinstating his position on the board
and preventing the approval or implementation of the Financing between TAI and
Sunrise Securities Corp. an investment advisor, and the Transaction and ordering
TAI and Solomon to consider other financing and business combination
alternatives. Masanek seeks to have Solomon removed as a director and claims
Solomon breached an alleged "Directors Agreement: pursuant to which the parties
allegedly agreed that the board of TAI would be comprised of 2 persons, Solomon
and Masanek. Masanek also alleges that Solomon and TAI tortuously inferred with
SBD's relationship with its employees, that TAI owes Masanek approximately
$700,000 for services rendered and that TAI owes Masanek approximately $400,000
in connection with a loan.
In October 2004, the Company entered an Agreed Order along with TAI, Solomon,
Masanek (collectively, the "Parties"), in connection with the Lawsuit. Pursuant
to the Order and continuation of the pending standstill agreement, the Court
found that the Parties had agreed in principal to the full resolution of all
claims in the Lawsuit, subject to the execution of definitive Settlement
Agreements. The parties are still negotiating the final terms of the settlement
documents.
F-11
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
NAME CHANGE - Effective October 15, 2004, the Company changed its name from
Dendo Global, Corp. to TechAlt, Inc.
CHANGE IN AUTHORIZED SHARES - In October 2004, the authorized shares were
increased to 500 million common and 100 million preferred.
ISSUED ADDITIONAL SERIES A PREFERRED - In October 2004, pursuant to the
Additional Investment Right, the company received $170,000 proceeds from the
sales of 170,000 shares of Series A Preferred stock and warrants to purchase
340,000 shares of common sock.
FINANCIAL ADVISOR ARRANGEMENT - Pursuant to terms of an arrangement with a
financial consultant, in August 2004, the Company issued 300,000 shares of its
common stock for services provided. The Company has accounted for this as
financial consulting expense of $150,000, the estimated fair value of common
stock issued, and as an increase in common stock and paid-in capital.
AGREEMENT WITH IBM - On October 11, 2004, the Company entered into a Statement
of Work ("SOW") with International Business Machines Corporation ("IBM") for the
Phase 1 Implementation of the Company's wireless communications product line in
connection with Cook County's mobile wireless video and data network project.
The SOW serves as the Company's official notice and authorization to begin
implementation of and billing for the project. Pursuant to terms of the SOW, the
Company will be providing hardware and software, and maintenance services
through 2009, under Phase 1 for which it is to receive payments of approximately
$2.9 million.
In Phase 1 of the project, 15 radio towers and 32 municipal and county buildings
will be configured as wireless hotspots. The Company's multi-network capable
communications modules will be used to transmit video and data to police, fire,
and emergency services vehicles. This live streaming video will help first
responders orchestrate a coordinated response to emergencies. The wireless
network will provide first responders in remote locations with information
already shared on the county's wired network. Police, fire and emergency
services personnel will have real-time access to law enforcement databases, GIS
information, hazmat information and other data on the Cook County network.
FACILITIES LEASE - In September 2004, the Company entered into a lease agreement
for corporate office facilities having a term ending August 2006 and providing
for minimum rental payments of approximately $40,000, $123,000 and $83,000 in
2004, 2005 and 2006, respectively.
EMPLOYEES - As of November 2004, the Company has 17 full-time employees,
approximately 12 of which work at the Company's corporate office facilities in
Arlington Heights, Illinois, a suburb of Chicago. Monthly gross wages
approximates $150,000.
PROMISSORY NOTE - In October 2004, the Company entered into a $13,000 Promissory
Note payable to a bank, due April 2007, bearing interest at an annual rate of
5.75%, and payable at $467 per month for 30 months. The Promissory Note is
collateralized by an automobile owned by the Company and is guaranteed by
Solomon.
REGISTRATION STATEMENT ON FORM SB-2 - The Company is in the process of filing a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
regarding the registration of approximately 34 million shares of the Company's
common stock to be sold by certain stockholders of the Company. The selling
stockholders will offer the common stock in amounts, at prices and on terms to
be determined at the time of the offering. The Company will not receive any
proceeds from the sales of the common stock by the selling stockholders. Shares
of the Company's common stock are not currently quoted on any exchange or the
over-the-counter bulletin board market. The Company has applied for trading of
its common stock on the over-the-counter bulletin board.
F-12
34,277,028 SHARES OF COMMON STOCK
[TECHALT LOGO]
-----------------
PROSPECTUS
-----------------
NOVEMBER ___, 2004
35
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation allows and our bylaws require that we indemnify
our directors and officers who are or were a party to, or are threatened to be
made a party to, any proceeding (including a derivative action if the director
or officer is not found liable to us), against all expenses reasonably incurred
by a director or officer in connection with such a proceeding (including
expenses, judgments, fines and amounts paid in settlement), if the director or
officer acted in good faith, in a manner he or she believed was not opposed to
our best interests, and, with respect to a criminal proceeding, had no reason to
believe that his or her conduct was unlawful.
We have entered into separate indemnification agreements with each of our
directors and officers. The agreements provide for mandatory indemnification for
and limit the liability of our directors and officers in serving us to the
fullest extent permitted by the Nevada Corporation Law. Specifically, under the
agreements, our directors and officers will not be personally liable for
monetary damages for their errors or omissions, except for liability for the
breach of a director's or officer's duty of loyalty to us or our stockholders,
for intentional misconduct or acts not in good faith, for making any unlawful
distribution, for any transaction from which the director or officer derived an
improper benefit, or for violating section 16(b) of the Securities Exchange Act
of 1934, as amended, or similar laws.
Our bylaws and indemnification agreements generally require that we advance to
our directors and officers expenses incurred by them in defending a proceeding
in advance of its final disposition, provided that the director or officer
agrees to reimburse us for such advances if it is ultimately found that the
director or officer is not entitled to indemnification. In addition, our bylaws
permit us to purchase insurance on behalf of our directors and officers against
any liability asserted against them in such capacity. We intend to obtain such
insurance.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of SEC Registration and all other
estimated expenses, all of which we will pay, in connection with the issuance
and distribution of the securities being registered:
Nature of Expense Amount
SEC Registration fee $ 2,300.37
Accounting fees and expenses $ 10,000
Legal fees and expenses $ 25,000
Printing and related expenses $ 15,000
Blue sky legal fees and expenses $ 5,000
Transfer agent fees and expenses $ 5,000
Miscellaneous expenses $ 5,000
Total $67,300.37
===========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
We have issued the following securities within the last three years.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) and of the Securities Act of 1933, in March,
2004, the Company approved and closed on the sale of 15,000,000 shares of newly
issued and restricted shares of common stock of the Company to Mr. Lindsay Hedin
36
for an aggregate purchase price of $15,000 in a private offering. The Shares
represented approximately fifty-two percent (52%) of the total issued and
outstanding shares of common stock of the Company immediately after the sale.
After the sale of the Shares, Mr. Cornelius A. Hofman resigned as an officer and
director of the Company. Prior to Mr. Hofman's resignation, Mr. Lindsay Hedin
was appointed as a director of the Company and as the chief executive officer,
president, chief financial officer, secretary and treasurer of the Company.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under the section 4(2) of the Securities Act of 1933. On August
2004 the company issued 300,000 shares of common stock to a financial advisor in
exchange for services in connection with the introduction of TechAlt to TAI
(defined below).
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) and of the Securities Act of 1933, in August,
2004, TechAlt entered into an Intellectual Property License Agreement (the
"License Agreement") with Technology Alternatives, Inc., an Illinois corporation
("TAI"). Pursuant to the License Agreement, in exchange for the issuance of ten
million forty four thousand (10,044,000) shares of common stock to TAI and
certain other individuals and entities, TAI Licensed certain intellectual
property to the Company.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) of the Securities Act of 1933, in August, 2004,
in exchange for Five Hundred Thousand Dollars ($500,000) the Company sold
500,000 shares of the Company's Series A Convertible Preferred Stock (purchase
price of One Dollar ($1.00) per share) (the "Series A Preferred"), warrants to
purchase 1,000,000 shares of the Company's common stock (exercise price of One
Dollar ($1.00) per share) (the "Warrants") and AIRs to purchase 3,500,000
additional shares of Series A Preferred (purchase price of One Dollar ($1.00)
per share), which exercise of the AIRs in the aggregate entitle the investors to
Additional Warrants (exercise price of One Dollar ($1.00) per share) to purchase
7,000,000 shares of common stock of the Company, in the aggregate (the
"Offering"). Each share of the Series A Preferred converts into two (2) shares
of the common stock of the Company.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) and of the Securities Act of 1933, in October,
2004, the Company issued 170,000 shares of Series A Preferred and Warrants to
purchase 340,000 shares of common stock pursuant to the partial exercise on by
an investor in the Offering of its Additional Investment Right.
ITEM 27. EXHIBITS.
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
3.1(i) Articles of Incorporation Incorporated by reference to Exhibit
3.1 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.2(i) Certificate of Amendment to the Articles of Incorporated by reference to Exhibit
Incorporation 3.2 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.3(i) Certificate of Amendment to the Articles of Attached
Incorporation
- -------------------------------------------------------------------------------------------------------------
3.4(ii) Bylaws Incorporated by reference to Exhibit
3.3 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.5(ii) Amended Bylaws Incorporated by reference to Exhibit
3.2 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.1 Certificate of Designation Incorporated by reference to Exhibit
4.1 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.2 Form of Securities Purchase Agreement Incorporated by reference to Exhibit
10.3 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.3 Form of Registration Rights Agreement Incorporated by reference to Exhibit
10.4 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.4 Form of Warrant Incorporated by reference to Exhibit
10.5 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.5 Form of Additional Warrant Incorporated by reference to Exhibit
10.6 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
37
- -------------------------------------------------------------------------------------------------------------
4.6 Form of Additional Investment Right Incorporated by reference to Exhibit
10.8 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.7 Form of Lock-Up Agreement Incorporated by reference to Exhibit
10.7 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
5.1 Form of Opinion of The Otto Law Group, PLLC Attached
- -------------------------------------------------------------------------------------------------------------
10.1 Employment Agreement with James E. Solomon Incorporated by reference to Exhibit
10.2 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.2 Intellectual Property License Agreement Incorporated by reference to Exhibit
10.1 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.3 Financial Advisory and Investment Banking Agreement Attached
with Sunrise Securities Corp.
- -------------------------------------------------------------------------------------------------------------
10.4 Public Relations Retainer Agreement with Sunrise Attached
Securities Corp.
- -------------------------------------------------------------------------------------------------------------
10.5 Base Agreement with International Business Machines Attached
Corporation
- -------------------------------------------------------------------------------------------------------------
10.6 IBM Solutions Engagement Agreement Statement of Work Attached
- -------------------------------------------------------------------------------------------------------------
10.7 Arias Technology Corporation, Inc., Agreement for Attached
Consulting Services
- -------------------------------------------------------------------------------------------------------------
10.8 TechAlt/Arias Statement of Work Attached
- -------------------------------------------------------------------------------------------------------------
23.1 Form of Consent of The Otto Law Group, PLLC (Exhibit 5.1)
- -------------------------------------------------------------------------------------------------------------
23.2 Consent of Pritchett, Siler & Hardy, PC, independent Attached
registered public accountants
- -------------------------------------------------------------------------------------------------------------
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of us 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, we will, unless in the opinion
of our 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 Securities Act and will be
governed by the final adjudication of such issue.
We hereby undertake to:
(1) File, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered
38
(if the dollar value of the 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) under
the Securities Act if, in the aggregate, the changes in 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) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time it was declared effective.
(5) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
In addition, we hereby undertake to provide to the underwriters at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
39
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, in the City of Arlington Heights, Illinois on
November 12, 2004.
TECHALT, INC.
By: /s/ James E. Solomon
--------------------------------------
Name: James E. Solomon
Its: 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
- -------------------------------------------------------------------------------------------------------------
/s/ James E. Solomon President and Chief Executive Officer November 12, 2004
- ----------------------------- (Principal Executive Officer) and Director
James E. Solomon
- -------------------------------------------------------------------------------------------------------------
/s/ Irwin Williamson Chief Financial Officer (Principal Financial November 12, 2004
- ----------------------------- Officer)
Irwin Williamson
- -------------------------------------------------------------------------------------------------------------
/s/ George Loera Director November 12, 2004
- -----------------------------
George Loera
- -------------------------------------------------------------------------------------------------------------
/s/ C. Pete Ashi Director November 12, 2004
- -----------------------------
C. Pete Ashi
- -------------------------------------------------------------------------------------------------------------
40
EXHIBIT INDEX
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
3.1(i) Articles of Incorporation Incorporated by reference to Exhibit
3.1 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.2(i) Certificate of Amendment to the Articles of Incorporated by reference to Exhibit
Incorporation 3.2 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.3(i) Certificate of Amendment to the Articles of Attached
Incorporation
- -------------------------------------------------------------------------------------------------------------
3.4(ii) Bylaws Incorporated by reference to Exhibit
3.3 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.5(ii) Amended Bylaws Incorporated by reference to Exhibit
3.2 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.1 Certificate of Designation Incorporated by reference to Exhibit
4.1 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.2 Form of Securities Purchase Agreement Incorporated by reference to Exhibit
10.3 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.3 Form of Registration Rights Agreement Incorporated by reference to Exhibit
10.4 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.4 Form of Warrant Incorporated by reference to Exhibit
10.5 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.5 Form of Additional Warrant Incorporated by reference to Exhibit
10.6 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.6 Form of Additional Investment Right Incorporated by reference to Exhibit
10.8 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.7 Form of Lock-Up Agreement Incorporated by reference to Exhibit
10.7 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
5.1 Form of Opinion of The Otto Law Group, PLLC Attached
- -------------------------------------------------------------------------------------------------------------
10.1 Employment Agreement with James E. Solomon Incorporated by reference to Exhibit
10.2 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.2 Intellectual Property License Agreement Incorporated by reference to Exhibit
10.1 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.3 Financial Advisory and Investment Banking Agreement Attached
with Sunrise Securities Corp.
- -------------------------------------------------------------------------------------------------------------
10.4 Public Relations Retainer Agreement with Sunrise Attached
Securities Corp.
- -------------------------------------------------------------------------------------------------------------
10.5 Base Agreement with International Business Machines Attached
Corporation
- -------------------------------------------------------------------------------------------------------------
10.6 IBM Solutions Engagement Agreement Statement of Work Attached
- -------------------------------------------------------------------------------------------------------------
10.7 Arias Technology Corporation, Inc., Agreement for Attached
Consulting Services
- -------------------------------------------------------------------------------------------------------------
10.8 TechAlt/Arias Statement of Work Attached
- -------------------------------------------------------------------------------------------------------------
23.1 Form of Consent of The Otto Law Group, PLLC (Exhibit 5.1)
- -------------------------------------------------------------------------------------------------------------
23.2 Consent of Pritchett, Siler & Hardy, PC, independent Attached
registered public accountants
- -------------------------------------------------------------------------------------------------------------
41