SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004
Commission File Number: 000-27867
TECHALT, INC.
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
87-0533626
(IRS Employer Identification Number)
3311 N. Kennicott Ave., Suite A
Arlington Heights, IL 60004
(Address of principal executive offices)(Zip Code)
(847) 870-2601
(Registrant's telephone no., including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares of the Company's common stock outstanding on September 30,
2004: 12,000,000
TECHALT, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Item 2 Management's Discussion and Analysis or Plan of Operation
Item 3 Controls and Procedures
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits
SIGNATURES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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 and contingencies (Note 2)
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, 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, shares issued and outstanding of
12,000,000 and 13,875,000, respectively at September 30, 2004 and
December 31, 2003 73 261
Receivable from principal stockholder (100)
Deficit accumulated to August 23, 2004 (89) (107)
Deficit accumulated during the development stage period --
August 24, 2004 to September 30, 2004 -- (819)
----- -----
(16) (765)
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)
(UNAUDITED)
From the
Development
Stage Period
August 24, 2004
Through
Three months ended September 30, Nine months ended September 30, September 30,
2004 2003 2004 2003 2004
------------ ------------ ------------ ------------ ------------
Revenue $ -- $ -- $ -- $ -- $ --
Cost of goods sold --
------------ ------------ ------------ ------------ ------------
Gross profit -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Operating expenses
Selling, general and administrative 218 2 222 5 204
Compensation agreement expense 173 -- 173 -- 173
Financial consulting expenses 150 -- 150 -- 150
Acquired in-process research and development 238 -- 238 -- 238
Research and development 51 -- 51 -- 51
------------ ------------ ------------ ------------ ------------
Total operating expenses 830 2 834 5 816
------------ ------------ ------------ ------------ ------------
Loss from continuing operations before interest (830) (2) (834) (5) (816)
Interest expense -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss (830) (2) (834) (5) (816)
Preferred stock dividends (3) -- (3) -- (3)
------------ ------------ ------------ ------------ ------------
Net loss attributable to common shareholders $ (833) $ (2) $ (837) $ (5) $ (819)
============ ============ ============ ============ ============
Basic and diluted net loss attributable to common
Shareholders per share $ (0.04) $ (0.00) $ (0.03) $ (0.00) $ (0.09)
============ ============ ============ ============ ============
Weighted average shares outstanding during period
used in computing loss per share 22,088,315 13,875,000 26,596,259 13,875,000 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)
(Unaudited)
From the
Development
Stage Period
August 24, 2004
Through
Nine months ended September 30, September 30,
2004 2003 2004
-------- -------- --------
Cash flows from operating activities:
Net loss $ (834) $ (5) $ (816)
Adjustments to reconcile net loss to net cash
used in operating activities:
Financial consulting expense paid in stock 150 -- 150
Acquired in-process research and development 238 -- 238
Changes in operating assets and liabilities:
Accounts payable 46 (3) 1
Accrued compensation and related liabilities 173 -- 173
Accrued professional fees 101 -- 101
Accrued preferred stock dividends 3 -- 3
Other (14) -- (6)
-------- -------- --------
Net cash used in operating activities (137) (8) (156)
-------- -------- --------
Payments for other assets (20) -- --
-------- -------- --------
Net cash used in investing activities (20) -- --
-------- -------- --------
Cash flows from financing activities:
Proceeds from sale of common stock 15 -- --
Excess checks issued over bank balance 8 -- 8
Payment for cancellation of shares (77) -- (77)
Proceeds from notes payable to related parties -- 10 --
Payments on notes payable to related parties (10) -- --
Proceeds from sale of preferred stock, net of issue costs 460 -- 460
Payments to stockholder for liabilities paid in
connection with the license agreement (238) -- (238)
-------- -------- --------
Net cash provided by financing activities 158 10 153
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 1 2 (3)
Cash and cash equivalents, beginning of period -- -- 4
Cash and cash equivalents, end of period $ 1 $ 2 $ 1
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ --
======== ======== ========
Receivable from stockholder obtained in connection
with the Intellectual Property License Agreement and
issuance of common stock $ 100 $ -- $ 100
======== ======== ========
Liabilities paid in connection with the Intellectual
Property License Agreement $ 238 $ -- $ 238
======== ======== ========
See accompanying notes to financial statements
F-5
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - 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 advisory 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 is considered to have entered a new development stage on August 24,
2004 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.
BASIS OF PRESENTATION AND 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. As noted in the report of Independent Registered Public
Accounting Firm of the Company's December 31, 2003 financial statements, 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.
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 interim periods ended September 30, 2003 and 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 interim periods ended
September 30, 2003 and 2004. In accordance with financial reporting requirements
for interim financial statements, certain disclosures included in annual
financial statements have been condensed or omitted, and accordingly, these
financial statements should be read in conjunction with the Company's audited
annual financial statements included in the Company's December 31, 2003 Annual
Report on Form 10-KSB. The results of operations and cash flows for the interim
periods 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.
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.
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.
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 common shares
potentially issuable pursuant to terms of outstanding Series A Convertible
Preferred Stock and 1 million common shares issuable upon exercise of
outstanding Warrants.
F-6
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for 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.
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.
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.
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 - RECENT DEVELOPMENTS AND SIGNIFICANT AGREEMENTS
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.
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.
F-7
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 2 - RECENT DEVELOPMENTS AND SIGNIFICANT AGREEMENTS (CONTINUED)
LICENSE AGREEMENT - 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 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. In October 2004,
pursuant to the Additional Investment Rights, the Company issued an additional
170,000 shares of Series A Preferred 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, 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.
F-8
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 2 - RECENT DEVELOPMENTS AND SIGNIFICANT AGREEMENTS (CONTINUED)
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, which definitive agreements are still being negotiated.
NAME CHANGE - Effective October 15, 2004, the Company's name changed 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.
FINANCIAL ADVISOR ARRANGEMENT - Pursuant to terms of an arrangement with a
financial advisor, 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.
F-9
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NOTE 2 - RECENT DEVELOPMENTS AND SIGNIFICANT AGREEMENTS (CONTINUED)
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 proceeds from the note
was used to purchase an automobile. 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-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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
Quarterly Report on Form 10-QSB.
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.
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 September 30, 2004 and for the
interim periods then ended. The discussion should be read in conjunction with
the financial statements and notes thereto.
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 advisory 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
is considered to be a development stage company for purposes of financial
statement presentation and reporting, and has determined August 24, 2004 to be
the inception of its development stage.
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 received $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 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, 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 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 ADVISOR ARRANGEMENT - Pursuant to terms of an arrangement with a
financial advisor, in August 2004, the Company issued 300,000 shares of its
common stock for services provided. The Company has accounted for this as
financial advising 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.
EMPLOYEES - As of November 2004, the Company has 18 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.
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. 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 advisory services expense
representing the value of 300,000 shares of Company common stock issued to a
financial advisor 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.
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 the Report of Independent Registered Public Accounting Firm on
the Company's financial statements for the years ended December 31, 2003 and
December 31, 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.
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.
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 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.
ITEM 3. CONTROLS AND PROCEDURES
The Company has evaluated, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, the effectiveness of the design
and operation of the Company's disclosure controls and procedures as of
September 30, 2004 pursuant to Exchange Act Rule 15d-15. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company required to be
included in the Company's periodic SEC filings. There have been no significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 7, 2004, TechAlt, Inc., a Nevada corporation (the "Company") entered
an Agreed Order (the "Order") along with Technology Alternatives, Inc., an
Illinois corporation ("TAI"), James E. Solomon ("Solomon"), Paul Masanek
("Masanek") and Services By Designwise, Ltd., an Illinois corporation ("SBD")
(collectively, the "Parties"), in connection with a lawsuit filed against the
Company in the Circuit Court of Cook County, Illinois, County Department,
Chancery Division, No. 04 CH 14001, titled "Paul Masanek, and Services By
Designwise, LTD., an Illinois corporation, Plaintiffs, v. James Solomon,
Technology Alternatives, Inc., an Illinois corporation, and Dendo Global Corp.,
a/k/a TechAlt, Inc., a Nevada corporation, Defendants" (the "Amended 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 Amended Lawsuit subject to the execution of definitive
agreements, which definitive agreements the Parties anticipated would be
completed on or before November 5, 2004.
On November 5, 2004, the Parties were still in discussions regarding completion
of the definitive agreements in connection with the settlement and resolution of
all claims pertaining to the Amended Lawsuit. Accordingly, the Parties entered
an Agreed Order continuing the pending standstill agreement until the earlier of
the closing of the settlement documents and entry of an order of dismissal of
the Amended Lawsuit or until the time set by the Court for hearing on the
plaintiffs' Second Amended Motion for Temporary Restraining Order.
On November 12, 2004, the Parties entered an Agreed Order continuing the pending
standstill agreement until the earlier of the closing of the settlement
documents and entry of an order of dismissal of the Amended Lawsuit or until the
time set by the Court for hearing on the plaintiffs' Second Amended Motion for
Temporary Restraining Order. The November 12, 2004 Agreed Order also provided
that in the event the parties fail to finalize all of the relevant settlement
documents, either party may petition the Court before December 16, 2004 to have
the Court set the hearing on Plaintiffs' Second Amended Motion For Temporary
Restraining Order.
The Parties anticipate completion of the settlement documents on or before
November 24, 2004.
ITEM 2. UNREGISTERED SALES OF SECURITIES
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, the Company issued 300,000 shares of common stock to a financial advisor
in exchange for services rendered in connection with the introduction of the
Company and 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) and 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 Additional
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 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On October 15, 2004, pursuant to the written consent of a majority of the
shareholders of the Company, the Company (i) changed of the Company's legal name
to "TechAlt, Inc." and (ii) increased the authorized shares of Common Stock of
the Company from 50,000,000 to 500,000,000 shares and increased the authorized
shares of Preferred Stock of the Company from 5,000,000 to 100,000,000 shares
(collectively, the "Corporate Actions"). Additional information regarding the
Corporate Actions may be found in the Definitive 14C Information Statement filed
by the Company with the United States Securities and Exchange Commission on
September 24, 2004.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
See Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.
TECHALT, INC.
November 15, 2004 /s/ James E. Solomon
-----------------------------------------
James E. Solomon
President & Chief Executive Officer
(Principal Executive Officer)
November 15, 2004 /s/ Irwin Williamson
-----------------------------------------
Irwin Williamson
Chief Financial Officer
(Principal Financial Officer)
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 3.2 of the
Incorporation Company's Form 10-SB filed October 29,1999
- ------------------------------------------------------------------------------------------------------------------------------
3.3(i) Certificate of Amendment to the Articles of Incorporated by reference to Exhibit 3..3(i) of the
Incorporation Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------
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 Incorporated by reference to Exhibit 10.3 of the
with Sunrise Securities Corp. Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
10.4 Public Relations Retainer Agreement with Sunrise Incorporated by reference to Exhibit 10.4 of the
Securities Corp. Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
10.5 Base Agreement with International Business Machines Incorporated by reference to Exhibit 10.5 of the
Corporation Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
10.6 IBM Solutions Engagement Agreement Statement of Work Incorporated by reference to Exhibit 10.6 of the
Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
10.7 Arias Technology Corporation, Inc., Agreement for Incorporated by reference to Exhibit 10.7 of the
Consulting Services Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
10.8 TechAlt/Arias Statement of Work Incorporated by reference to Exhibit 10.8 of the
Company's Form SB-2 Registration Statement filed
November 15, 2004
- ------------------------------------------------------------------------------------------------------------------------------
31.1 Certification of Chief Executive Officer pursuant to Attached
Section 302 of the Sarbanes-Oxley Act of 2002.
- ------------------------------------------------------------------------------------------------------------------------------
31.2 Certification of Chief Financial Officer pursuant to Attached
Section 302 of the Sarbanes-Oxley Act of 2002.
- ------------------------------------------------------------------------------------------------------------------------------
32.1 Certification of Chief Executive Officer pursuant to Attached
Section 906 of the Sarbanes-Oxley Act of 2002.
- ------------------------------------------------------------------------------------------------------------------------------
32.2 Certification of Chief Financial Officer pursuant to Attached
Section 906 of the Sarbanes-Oxley Act of 2002.
- -------------------------------------------------------------------------------------------------------------------------------