UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 20, 2004
TECHALT, INC.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation)
000-27867
(Commission File Number)
87-0533626
(IRS Employer Identification No.)
3311 N. Kennicott Ave., Suite A
Arlington Heights, IL 60004
(Address of principal executive offices)(Zip Code)
(847) 870-2601
Company's telephone number, including area code
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[___] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[___] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[___] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[___] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1. Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement
On November 20, 2004, TechAlt, Inc., a Nevada corporation ("TechAlt" or the
"Company"), entered into an Escrow Agreement (the "Escrow Agreement") among Paul
Masanek ("Masanek"), Services By Designwise, Ltd. ("SBD", and collectively with
Masanek, the "Plaintiffs"), James E. Solomon ("Solomon"), and Technology
Alternatives, Inc., an Illinois corporation ("Technology") (TechAlt collectively
with Solomon and Technology, the "Defendants"), The Otto Law Group, PLLC ("OLG")
and Piccione, Keeley & Associates, Ltd. ("PKA", and collectively with OLG, the
"Escrow Agents"), along with entering into the Settlement Documents (defined
below), in connection with the settlement of certain claims made by Plaintiffs
against the Defendants in a lawsuit filed in the Circuit Court of Cook County,
Illinois, Paul Masanek and Services By Designwise, Ltd. v. James Solomon, et al.
Case No. 04 CH 14001 (the "Litigation"). The Settlement Documents have been
placed in escrow and shall become effective upon release of the Settlement
Documents from escrow pursuant to the terms of the Escrow Agreement.
The Escrow Agreement provides that the Settlement Documents shall become
effective upon receipt by PKA prior to December 15, 2004 of payment to Masanek
of $650,000, payment of Masanek's attorneys' fees and receipt of an executed
waiver by certain of the Company's investors (the "Closing Items"). In the event
the Closing Items are not received by PKA prior to December 15, 2004, the
parties have agreed to enter an Agreed Order rescinding the Intellectual
Property License Agreement between Technology and TechAlt (the "License
Agreement") and reinstating the parties to their respective positions
immediately prior to the License Agreement.
Once the Closing Payments are received (the "Closing"), the Settlement Documents
become effective, Technology shall merge with TechAlt and TechAlt shall raise no
less than $1,500,000 through the exercise of its Additional Investment Rights
issued to certain investors in August 2004 and/or through other committed
investors pursuant to the terms of its recent Series A Preferred stock and
Warrant financing. Pursuant to the Settlement Agreement, in the event the
Company is unable to raise the $1,500,000 by January 15, 2004, the Company has
agreed that Masanek shall be entitled to present financing alternatives to the
Company to raise the $1,500,000 on the same or better terms as the Company's
recent Series A Preferred stock and Warrant financing.
The Settlement Documents executed by the parties and placed into escrow consist
of the following agreements: (i) Settlement Agreement, (ii) Sales Agreement,
(iii) Consulting Agreement, (iv) Secured Convertible Promissory Note convertible
into 1,150,000 shares of our common stock at $1.00 per share (the "Note"), (v) a
Warrant to purchase 750,000 shares of our common stock, exercise price of $1.00
per share (the "Warrant"), (vi) Registration Rights Agreement, (vii) Right of
First Refusal Agreement, (viii) Security Agreement, (ix) Agreement and Plan of
Merger by and among the Company, Technology Alternatives, Inc., TechAlt
Acquisitions, Inc., Solomon and Masanek ("Merger Agreement"), (x) an Agreed
Order which shall govern the parties only in the event the Closing Items are not
received, (xi) an Assignment and Bill of Sale, and (xii) certain board of
director and shareholder resolutions approving the actions set forth in the
Settlement Documents (collectively, the "Settlement Documents")
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The material terms of the Settlement Documents are as follows:
Agreement and Plan of Merger
Pursuant to the Merger Agreement, all of the shares of common stock of
Technology (currently held by Solomon and Masanek) will be exchanged for
9,544,000 shares of the common stock of the Company. TechAlt Acquisitions, Inc.,
a wholly-owned subsidiary of the Company, will merge with and into Technology,
with Technology becoming a wholly-owned subsidiary of the Company. 500,000
shares of the common stock of the Company will be issued pursuant to the Merger
Agreement to Hudson Investment Advisors, LLC, consisting of (i) 400,000 shares
of common stock as consideration for business development services provided to
the Company and Technology in connection with the License Agreement and the
Merger Agreement and (ii) 100,000 shares of common stock as consideration for a
$50,000 investment prior to the License Agreement.
Settlement Agreement
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 and Masanek
will (i) vote his shares of Technology 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 consummation of the
Merger Agreement (which rescission shall including canceling the 10,044,000
shares of common stock issued pursuant to the License Agreement), (ii) pay
Masanek $650,000 in cash, (iii) enter into Sales, Consulting, Registration
Rights, Right of First Refusal and Escrow Agreements, (iv) issue to Masanek the
Warrant and to SBD the Note, (v) provide Masanek with all the information a
member of the Board of Directors is entitled to receive (upon his request), (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, (vii)
provide Masanek with the ability to present the Company with financing
alternatives in the event the Company desires to raise additional capital during
the two (2) year period subsequent to the Closing of the Merger, and (viii) pay
the attorneys' fees of Masanek.
Sales Agreement
Pursuant to the Sales Agreement, for a period of three years SBD shall (i)
manufacture and supply to us certain equipment and systems with an aggregate
purchase price of $1,125,000 and (ii) receive a "broker's fee" on manufactured
goods purchased by us from third parties of 6.25% for the first year of the
Sales Agreement, 6.50% for the second year of the Sales Agreement, and 6.75% for
the third year of the Sales Agreement.
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 Consulting Agreement, SBD shall devote ninety
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(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 Consulting
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. The Company shall pay to the Consultant (i)
$25,000 per month for the first four (4) months of the Consulting Agreement and
(ii) $6,250 per month for the remaining thirty-two (32) months.
In addition to the foregoing, during the term of the Consulting 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 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 $1,150,000, SBD shall be
paid $650,000 twelve months from the date of the Closing, and the entire unpaid
principal balance plus interest twenty four months from the date of the Closing.
Interest payments of 5% on the outstanding balance will be paid quarterly
beginning November 1, 2004. Payments on the Note may accelerate in certain
circumstances at SBD'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 SBD 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.
Registration Rights Agreement
Pursuant to the Registration Rights Agreement, Masanek shall be entitled to have
registered by the Company for resale those shares of common stock issuable to
him upon consummation of the Merger Agreement, upon conversion of the Note and
upon exercise of the Warrant.
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.
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Security Agreement
Pursuant to the Security Agreement, until all obligations of the Company
pursuant to the Settlement Documents as they relate to Masanek and SBD have been
satisfied, 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. 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.
Agreed Order
In the event the payment to Masanek of $650,000, payment of Masanek's attorneys'
fees and receipt of an executed waiver by certain of the Company's investors are
not received by PKA prior to December 15, 2004, the parties have agreed to enter
an Agreed Order rescinding the License Agreement and reinstating the parties to
their respective positions immediately prior to the License Agreement.
Assignment and Bill of Sale
Pursuant to the Assignment and Bill of Sale, SBD shall assign to TechAlt all
right, title and interest to certain intellectual property and inventory of SBD
relating to In-Car Based Communications, Data Capture and Video Systems.
Section 5. Corporate Governance and Management
Item 5.02 Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers
On November 22, 2004, the Company's Chief Financial Officer, Irwin Williamson,
resigned from the Company for personal reasons. In connection with Mr.
Williamson's resignation, the Board of Directors of the Company appointed James
Hurley on November 23, 2004 as its new Chief Financial Officer, effective
immediately.
Prior to joining TechAlt, Mr. Hurley was a financial consultant for several
small to mid-size start-up companies. From 2000 through 2002, Mr. Hurley was the
Chief Financial Officer of Tallgrass Communications, Inc., a competitive local
exchange carrier providing broadband access for voice and data communication.
Mr. Hurley was also a member of the Board of Directors of Tallgrass. Prior to
his joining Tallgrass, Mr. Hurley was President of the Midwest region of MPower
Communications, Inc., from 1998 to 2000. MPower is also a local exchange carrier
providing broadband access for voice and data communication.
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From 1976 until 1992, Mr. Hurley served in various operational and financial
roles for Centel Communications Company. Prior to joining Centel, Mr. Hurley was
a Certified Public Accountant for Arthur Anderson from 1970 to 1976.
Mr. Hurley received his Bachelor of Science from Marquette University, in
Milwuakee, Wisconsin in 1970.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TECHALT, INC.
(Name of Registrant)
Date: November 24, 2004 By: /s/ David M. Otto
----------------------------
Name: David M. Otto
Its: Secretary
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