UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 14, 2005
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))
EXPLANATORY NOTE
On December 15, 2004, pursuant to an Agreement and Plan of Merger by and among
TechAlt, Inc., a Nevada corporation (the "Company"), TechAlt Acquisitions, Inc.,
a Nevada corporation (the "Merger Sub"), Technology Alternatives, Inc., an
Illinois corporation ("TAI"), James E. Solomon ("Solomon") and Paul Masanek
("Masanek"), the Merger Sub was merged with and into TAI, with TAI becoming a
wholly-owned subsidiary of the Company (the "Merger"). This amendment to Current
Report on Form 8-K dated December 21, 2004, is being filed to provide the
financial statements and pro forma financial information of TAI.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Report of Independent Registered Public Accounting Firm
Balance Sheets September 30, 2004 (unaudited) and December 31, 2003
Statements of Operations for the Year ended December 31, 2003 and from
January 29, 2002 (inception) to December 31, 2002, and the nine months
ended September 30, 2003 (unaudited) and September 30, 2004 (unaudited)
Statement of Cash Flows for the Year ended December 31, 2003 and from
January 29, 2002 (inception) to December 31, 2002, and the nine months
ended September 30, 2003 (unaudited) and September 30, 2004 (unaudited)
Statement of Changes in Stockholders' Deficit from January 29, 2002
(inception) to December 31, 2002, year ended December 31, 2003 and nine
months ended September 30, 2004 (unaudited).
Notes to Financial Statements
(b) Pro Forma Financial Information
Unaudited Pro Forma condensed consolidated financial information
2
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.
(Company)
/s/ David M. Otto
-----------------------------------------
By: David M. Otto
Its: Secretary
Date: February 14, 2005
3
(a) Financial statements of businesses acquired.
TECHNOLOGY ALTERNATIVES, INC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders'
Technology Alternatives, Inc.
We have audited the accompanying balance sheet at December 31, 2003, and the
related statements of operations, changes in stockholders' deficit, and cash
flows for the year ended December 31, 2003 and the period January 29, 2002
(inception) through December 31, 2002. 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 Company
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 Technology Alternatives, Inc. as of
December 31, 2003, and the results of its operations and its cash flows for the
year ended December 31, 2003 and the period January 29, 2002 (inception) through
December 31, 2002, 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 1 to the financial
statements, the Company has recurring losses including a loss in 2003 of
$686,258, cash used in operations of $608,648, has current liabilities in excess
of current assets and a stockholders' deficit of $1,201,314 at December 31,
2003. 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 1. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
January 17, 2005
TECHNOLOGY ALTERNATIVES, INC.
BALANCE SHEETS
December 31, September 30,
2003 2004
----------- -----------
(unaudited)
Current assets
Accounts receivable $ 10,125 $ 90,159
Prepaid expenses and other current assets 1,530 --
----------- -----------
Total current assets 11,655 90,159
Equipment, net of accumulated depreciation 16,987 28,140
----------- -----------
Total Assets $ 28,642 $ 118,299
=========== ===========
Current liabilities
Excess of checks issued over bank balance $ 13,136 $ 54,186
Accounts payable 88,603 138,823
Payable to TechAlt, Inc.-related party in 2004 -- 226,650
Accounts payable to affiliate of shareholder 448,359 651,711
Advances payable to affiliate of shareholder 554,518 554,518
Advances payable to officer 103,749 153,295
Convertible debentures -- 100,000
Accrued legal fees -- 211,953
Accrued liabilities 21,591 43,073
----------- -----------
Total current liabilities 1,229,956 2,134,209
----------- -----------
Commitments (Notes 5,6 and 9)
Stockholder's Deficit
Preferred Stock, $0.001 par value, 100,000,000 authorized, none
Issued and outstanding -- --
Common stock and additional paid-in capital, $0.001 par value,
500,000,000 shares authorized, 9,544,000 issued and outstanding 9,544 9,544
Additional paid in capital (8,544) (8,544)
Accumulated deficit (1,202,314) (2,016,910)
----------- -----------
Total stockholders' deficit (1,201,314) (2,015,910)
----------- -----------
Total Liabilities and Stockholder's Deficit $ 28,642 $ 118,299
=========== ===========
See accompanying notes to financial statements.
TECHNOLOGY ALTERNATIVES, INC.
STATEMENTS OF OPERATIONS
January 29, 2002
(inception) to Year Ended
December 31, December 31, Nine months ended September 30,
----------------------------- -----------------------------
2002 2003 2003 2004
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Revenue:
Product $ 26,784 $ 187,008 $ 176,739 $ 178,916
Service 9,480 5,201 5,201 --
----------- ----------- ----------- -----------
Total revenue 36,264 192,209 181,940 178,916
Cost of goods sold 18,400 128,193 119,001 89,510
----------- ----------- ----------- -----------
Gross profit 17,864 64,016 62,939 89,406
----------- ----------- ----------- -----------
Operating expenses
Selling, general and administrative 367,768 581,082 374,596 740,470
Research and development 126,208 19,665 10,627 52,390
Business development 39,944 149,527 110,686 111,142
----------- ----------- ----------- -----------
Total operating expenses 533,920 750,274 495,909 904,002
----------- ----------- ----------- -----------
Net loss $ (516,056) $ (686,258) $ (432,970) $ (814,596)
=========== =========== =========== ===========
Basic and diluted net loss per share $ (.05) $ (.07) $ (.05) $ (.09)
=========== =========== =========== ===========
Weighted average shares used
in computing net loss per share 9,544,000 9,544,000 9,544,000 9,544,000
=========== =========== =========== ===========
See accompanying notes to financial statements.
TECHNOLOGY ALTERNATIVES, INC.
STATEMENTS OF CASH FLOWS
January 29, 2002
(inception) to Year Ended
December 31, December 31 Nine months ended September 30
--------------------------- ---------------------------
2002 2003 2003 2004
----------- ----------- ----------- -----------
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (516,056) $ (686,258) $ (432,970) $ (814,596)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation expense 5,052 6,081 -- 11,638
Non-cash license agreement expense -- -- -- 100,000
Changes in operating assets and liabilities:
Accounts receivable -- (10,125) (120,100) (80,033)
Prepaid expenses and other current assets (10,901) 9,371 1,530
Accounts payable 37,911 50,692 299,703 38,720
Accrued legal fees -- -- -- 211,953
Accrued liabilities -- 21,591 6,043 21,483
----------- ----------- ----------- -----------
Net cash used by operating activities (483,994) (608,648) (247,324) (509,305)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of equipment (21,186) (15,334) (2,839) (22,792)
Disposal of auto -- 8,400 -- --
----------- ----------- ----------- -----------
Net cash used by investing activities (21,186) (6,934) (2,839) (22,792)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock 1,000 -- -- --
Excess of checks issued over bank balance 1,380 11,756 3,215 41,050
Advances payable to affiliate of shareholder 361,000 193,518 246,948 --
Advances from officer -- 103,749 -- 214,850
Amounts payable to affiliate of shareholder 141,800 306,559 -- 149,547
Advances from TechAlt -- -- -- 126,650
----------- ----------- ----------- -----------
Net cash provided by financing activities 505,180 615,582 250,163 532,097
----------- ----------- ----------- -----------
Net increase in cash and cash equivalents -- -- -- --
Cash and cash equivalents, beginning of period -- -- -- --
----------- ----------- ----------- -----------
Cash and cash equivalents, end of period $ -- $ -- $ -- $ --
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ -- $ --
=========== =========== =========== ===========
Non-cash investing and financing activities
Payable pursuant to License Agreement $ -- $ -- $ -- $ 100
=========== =========== =========== ===========
See accompanying notes to financial statements.
TECHNOLOGY ALTERNATIVES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FROM JANUARY 29, 2002 (INCEPTION) TO DECEMBER 31, 2002,
YEAR ENDED DECEMBER 31, 2003 AND
NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
Common Stock
----------------------------- Additional Accumulated
Shares Amount Paid in Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance at January 29, 2002 (inception)
Issuance of common stock to founders
for cash 9,544,000 $ 9,544 $ (8,544) -- $ 1,000
Net loss $ (516,056) (516,056)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2002 9,544,000 9,544 (8,544) (516,056) (515,056)
Net loss (686,258) (686,258)
----------- ----------- ----------- ----------- -----------
Balance at December 31, 2003 9,544,000 9,544 (8,544) (1,202,314) (1,201,314)
Net loss for the period January 1, 2004
through September 30, 2004 (unaudited) (814,596) (814,596)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 2004 (unaudited) 9,544,000 $ 9,544 $ (8,544) $(2,016,910) $(2,015,910)
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
TECHNOLOGY ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002 and September 30, 2004
(unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Technology Alternatives, Inc. (the "TAI" or the "Company") was
organized under the laws of the State of Illinois on January 29, 2002, and is
owned 55% and 45% by the Company's two founders. 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.
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. The Company has incurred losses since its inception, and has
current liabilities in excess of current assets. These factors, among others,
raise substantial doubt about the ability of the Company to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties. Management's plans are discussed
in See Note 9 - Subsequent events regarding, among other things, the December
15, 2004 merger of TAI with TechAlt, Inc. ("TechAlt"), fund-raising activities
of TechAlt prior to and subsequent to the merger, and other transactions and
related agreements. Management believes the items discussed in Note 9 provide
the Company the ability to continue as a going concern.
DESCRIPTION OF BUSINESS - The Company is engaged in the sale of portable
wireless communications solutions to be used by emergency first responders for
interagency interoperability, communication and collaboration used in Homeland
security, emergency medical and disaster response. Sales of these products are
generally made to an independent contractor hired by local, state or federal
agencies.
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.
ACCOUNTS RECEIVABLE - Accounts receivable result from the sale of the Company's
products and services and is reported at anticipated realizable value. The
Company estimates its allowance for doubtful accounts based on a specific
identification basis and additional allowances as needed based upon historical
collections experience. Accounts receivable is considered past due if payment
has not been received from the customer within thirty days and management
reviews the customer accounts on a routine basis to determine if an account
should be written off.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost. Depreciation
is computed on a straight-line basis over estimated useful lives of assets,
ranging from 3 to 5 years. Costs for repair and maintenance are expensed as
incurred.
REVENUE RECOGNITION - The Company recognizes revenue when there is persuasive
evidence of an arrangement, the product has been delivered under the delivery
terms or the services have been provided to the customer, the sales price is
fixed or determinable, and collectibility is reasonably assured. Delivery terms
are generally FOB shipping point, typically the Company's facility. The Company
does not have transactions in which the amount of revenue is variable based on
activities or events which occur after shipment. The Company reduces revenue for
estimated customer returns and other allowances when reasonably known. Amounts
billed in advance of revenue recognition are included in deferred revenue.
Revenue from hardware sales is recognized when the product is shipped to the
customer and when there are no unfulfilled obligations that affect the
customer's final acceptance. Revenue from sales of software licenses and
software maintenance subscriptions are recognized on a straight-line basis over
the subscription term.
SHIPPING AND HANDLING - Amounts billed to customers relating to shipping
handling costs are included as an offset to related freight costs, which are
included in costs of goods sold in the accompanying statements of operations.
RESEARCH AND DEVELOPMENT--Research and development costs, which are comprised
primarily of compensation, consulting costs, 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 if the acquired
intellectual property has not attained "technological feasibility as of that
date.
CONCENTRATION OF RISK - Two customers accounted for 74% and 26%, respectively,
of the Company's sales in 2002 and another two customers accounted for 57% and
27%, respectively, of the Company's sales in 2003.
One supplier, an affiliate, accounted for 100% and 93% of the Company's cost of
goods sold in 2002 and 2003, respectively. (See Note 2).
The Company's products are reliant upon the technology underlying the patent
(see Note 2).
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 credits.
LOSS PER SHARE - The computation of basic loss per share excludes dilution and
is computed by dividing net loss by the weighted average number of common shares
outstanding during the period presented. Diluted net loss per share reflects the
potential dilution that could occur if stock options or other contracts to issue
common stock were exercised or converted into common stock. At December 31,
2003, there were no common stock equivalents outstanding.
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. Significant estimates include
valuation of accounts receivable, valuation of intangible and income taxes.
Actual results could differ from those estimates.
PRODUCT WARRANTIES - The Company has a limited warranty on certain products for
a period of one year from the date of receipt of the product by the customer.
The Company will, at its option, either repair or replace with new or used parts
any of the products sold which prove to be defective.
TECHNOGY ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002 and September 30, 2004 (unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's financial instruments consist
of cash, accounts receivable, accounts payable, accounts and advances payable to
related parties, and accrued liabilities 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 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.
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 - RELATED PARTY TRANSACTIONS
During the fiscal years ended December 31, 2002 and 2003, the Company received
approximately $361,000 and $193,518, respectively, primarily for working capital
purposes from Services By Designwise, Ltd. ("SBD"), a Company owned by the
Company's 45% shareholder. Borrowings are due on demand, are unsecured and
non-interest bearing. The balance at December 31, 2003 was $554,518.
Advances payable to the Company's President and 55% founding shareholder was
$103,749 at December 31, 2003. These advances are due on demand, unsecured and
non-interest bearing.
Purchases of equipment from SBD included in cost of goods sold in 2002 and 2003
totaled $18,400 and $119,086, respectively.
At December 31, 2003 the Company had accounts payable to its affiliate, SBD, of
$448,359 primarily for equipment purchases and consulting fees (see below).
During 2002 and 2003 the Company incurred $123,400 and $294,400 of consulting
fees to its affiliate, SBD. The amounts are included in general and
administrative expenses on the accompanying financial statements.
In April 2003, the Company's 55% shareholder contributed to the Company certain
intellectual property, including a patent covering the method and apparatus for
transporting data over a managed wireless network using unique communication
protocol. The Company recorded the contributed property at the shareholder's
basis in such assets, which amount was zero.
NOTE 3 - INCOME TAXES
There was no income tax during 2003 and 2002 due to the Company's net loss.
The Company's tax expense differs from the "expected" tax expense for the period
ended December 31, (computed by applying the Federal Corporate tax rate of 34%
to loss before taxes), as follows:
2002 2003
----------- -----------
Computed "expected" tax expense (benefit) $ (180,620) $ (941,844)
Non deductible expenses 3,628 916,761
State income taxes (25,803) (34,313)
Change in valuation allowance 202,794 270,720
----------- -----------
$ -- $ --
=========== ===========
The tax effects of temporary differences that gave rise to significant portions
of deferred tax assets and liabilities at December 31, 2003 are as follows:
Deferred Tax Assets:
Non-deductible cost & expenses $ 216,243
Net operating loss carryforwards 260,731
---------
476,974
Deferred tax liabilities-fixed assets (3,460)
---------
473,514
Deferred tax asset valuation allowance (473,514)
---------
Net deferred tax asset $ --
In assessing the recoverability of deferred tax assets, management considers
whether it is more likely than not that, some portion or all of the deferred tax
assets will be realized. The valuation allowance has been increased by $202,794
for the period February 20, 2003 (Inception of development stage) through
December 31, 2002 and $270,732 for the year ended December 31, 2003 as a result
of increased net operating losses. Net operating loss carry-forwards aggregate
approximately $651,827 and expire in years through 2022.
TECHNOGY ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002 and September 30, 2004 (unaudited)
NOTE 4 - EQUIPMENT
Equipment is comprised of the following:
December 31, 2003 September 30, 2004
(unaudited)
Computer equipment and software $ 13,748 $ 17,719
Demonstration equipment 7,972 7,972
Office furniture and equipment -- 18,820
Vehicle 6,400 6,400
----------- -----------
28,120 50,911
Accumulated depreciation (11,133) (22,771)
----------- -----------
Equipment, net $ 16,987 $ 28,140
=========== ===========
Substantially all of the Company's equipment is pledged as collateral for
borrowing and other obligation agreements. Depreciation expense was $6,081 for
the year ended December 31, 2003 and $5,052 for the period January 29,
2002(inception) to December 31, 2002.
NOTE 5 - OPERATING LEASE
The Company leases its office and manufacturing facilities pursuant to terms of
a lease agreement. Prior to May 2003, the Company leased the facilities pursuant
to a series of short-term lease agreements. Rent expense for the fiscal year
ended December 31, 2002 approximated $28,000 and is included in selling, general
and administrative expense. Commencing in May 2003, the Company entered into a
three year lease, requiring monthly rents of approximately $6,700 at the
beginning of the lease and increasing to approximately $7,100 during the last
year of the lease. Rent expense for the fiscal year ended December 31, 2003
approximated $69,000 and is included in selling, general and administrative
expense. Future minimum lease obligations pursuant to the lease approximate
$82,000, $84,000 and $28,000 during 2004, 2005 and 2006, respectively. In
September 2004, the Company assigned it's rights and obligations relating to the
lease to TechAlt, Inc. See Note 9 - Subsequent events regarding, among other
things, the Company's merger with TechAlt, Inc.
NOTE 6 - ROYALTY AGREEMENT
The Company is party to a royalty agreement that requires royalty payment to a
patent holder of the technology related to mounting certain of the Company's
products in the trunk of a motor vehicle. The agreement provides for a royalty
of 5% of the net sales price, as defined, of every mobile video recording system
covered by the patent and minimum payment on every system in the amount of $150.
Amounts paid pursuant to this Royalty Agreement were approximately $1,000 and
$5,000 for the fiscal years ended December 31, 2002 and 2003, respectively and
an acquisition cost of approximately $18,000 in 2002 to allow an assignment for
the prior licensee. The acquisition cost was expensed in 2002. See Note 9 for
subsequent consulting and purchase commitments.
NOTE 7 - LICENSE AGREEMENT
On August 20, 2004, the TechAlt and its then majority (55%) shareholder and sole
member of its board of directors (the "Warranting Shareholder") entered into an
Intellectual Property License Agreement with 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 TechAlt
common stock, TechAlt licensed certain intellectual property owned by TAI. The
initial term of the License was 6 months, which 6 month term was automatically
extended for additional 6 month terms until terminated by mutual agreement of
TechAlt and TAI. Pursuant to terms of the License Agreement, TechAlt is to
receive $100,000 from TAI to satisfy certain liabilities and 27,219,000 shares
of TechAlt common stock were cancelled. The $100,000 amount due by TAI to
TechAlt has been recorded as selling, general and administrative expense during
the nine month period ended September 30, 2004. Subsequent to August 20, 2004
through September 30, 2004, TechAlt paid certain TAI liabilities of
approximately $124,000. These payments have been recorded as contributed capital
in the additional paid-in capital account in the financial statements for the
nine months ended September 30, 2004. As further described in Note 9 -
Subsequent events, in December 2004, the License Agreement was rescinded, which
rescission included rescinding the 10,044,000 shares of TechAlt common stock
issued pursuant to the License Agreement.
NOTE 8 - STOCKHOLDERS' DEFICIT
At inception, the Company issued 9,544,000 common shares to its two founders for
$1,000 cash.
As a result of the recapitalization discussed in Note 9, all share and per share
data in the accompanying financial statements has been retroactively restated
for all periods presented.
TECHNOGY ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002 and September 30, 2004 (unaudited)
NOTE 9 - SUBSEQUENT EVENTS
On December 15, 2004, TechAlt paid $650,000 to the former 45% owner of TAI
("Masanek"), which such payment then provided that certain documents and
agreements became effective pursuant to terms of an Escrow Agreement entered
into on November 20, 2004 between TechAlt, TAI, Masanek and the former 55% owner
of TAI ("Solomon"), and their respective attorneys. Material terms of the
agreements and transactions occurring subsequent to these payments are as
follows:
AGREEMENT AND PLAN OF MERGER- Pursuant to the Merger Agreement, all of the
shares of common stock of TAI (all of which were owned by Solomon and Masanek)
were exchanged for 9,544,000 shares of common stock of TechAlt. TechAlt
Acquisitions, Inc., a wholly-owned subsidiary of TechAlt, was merged with and
into TAI, with TAI becoming a wholly-owned subsidiary of TechAlt (the "Merger").
Additionally, pursuant to terms of the Merger Agreement, TechAlt issued 400,000
shares of its common stock to an investment advisor as consideration for
business development services provided and 100,000 shares of its common stock as
consideration for $50,000 cash. Upon consummation of the Merger, Solomon and
Masanek together own approximately 83% of the common stock of the merged entity
and the shareholders of TechAlt prior to the License Agreement and name change
from Dendo Global Corp. own approximately 17%. The transaction, in which TechAlt
Acquisitions, Inc. was merged with and into TAI, is accounted for as a
recapitalization of TAI and combination of entities under common control and the
Company is deemed to have issued approximately 1,956,000 common shares to the
shareholders of TechAlt, Inc.. Inasmuch as the former TAI shareholders own a
majority of TechAlt common stock after the merger, TAI is considered to be the
acquiring corporation for accounting purposes, and the predecessor entity to
TechAlt for purposes of financial reporting. The financial statements after the
transaction consist of the balance sheet of TAI and TechAlt, the operations of
TechAlt from the license date and the historical operations of TAI.
SETTLEMENT AGREEMENT - Pursuant to terms of the Settlement Agreement between the
TechAlt and Masanek, among other things, (i) the License Agreement entered into
between TechAlt and TAI in August 2004 was rescinded, which rescission included
rescinding the 10,044,000 shares of TechAlt common stock issued pursuant to the
License agreement, (ii) TechAlt paid Masanek $650,000 cash, (iii) TechAlt and
Masanek entered into Sales, Consulting, Registration Rights, Right of First
Refusal and Escrow Agreements, (iv) the TechAlt issued a Convertible Promissory
Note for $1,150,000 to Services by Designwise, Ltd. ("SBD"), a company owned by
Masanek, payable $650,000 one year from issuance and the remainder two years
from issuance subject to acceleration, as defined, based on capital raises, with
interest at 5%, and convertible into shares of TechAlt common stock on the basis
of $1.00 per share, and secured by substantially all assets of TechAlt. There is
no beneficial conversion since the conversion price exceeds the stock trading
price, (v) TechAlt issued warrants to Masanek for the right to purchase for a
period of five years 750,000 shares of TechAlt common stock for $1.00 per share
with a cashless exercise provision. The Company recorded a debt discount of
$293,700 for the valuation of the 750,000 warrants (computed using a
Black-Scholes model with an interest rate of 3.48%, volatility of 123%, zero
dividends and expected term of 5 years)., (vi) TechAlt received from SBD the
assignment of all right, title and interests in certain intellectual property
and inventory of SBD relating to In-Car Based Communications, Data Capture and
Video Systems, (vii) TechAlt paid $140,000 for the attorneys fees of Masanek,
and (viii) settlement of certain claims made by Masanek against TechAlt and
others in a lawsuit filed in the Circuit Court of Cook County, Illinois, (ix)
beginning December 15, 2004, a 3 year sales agreement with a commitment for the
Company to purchase from SBD $1,250,000 of equipment inventory per year plus pay
6.25% to 6.75% royalties on certain third party supplied goods, (x) a consulting
agreement for which the Company will pay $25,000 for the first four months and
$6,250 per month for the next 32 months plus other benefits.
RAISING ADDITIONAL FINANCING - Among other conditions satisfied with respect to
consummation of the Merger, was that TechAlt received cash of not less than
$1,500,000 from issuances of securities through the exercise of Additional
Investment Rights issued to certain investors in August 2004 pursuant to the
terms of its recent Series A Preferred stock and Warrant financing. Subsequent
to September 30, 2004 and through January 17, 2005, TechAlt received cash of
approximately $2,750,000 net of offering costs of $50,000 paid from the sale of
2,800,000 shares of Series A Preferred stock and warrants to purchase 5,600,000
shares of TechAlt common stock for $1.00 per share. Additional offering costs of
approximately $250,000 are expected to be paid from these proceeds.
TECHNOLOGY ALTERNATIVES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2003 and 2002 and September 30, 2004 (unaudited)
NOTE 8 - SUBSEQUENT EVENTS (continued)
CONTRACT TO SUPPLY EQUIPMENT TO COOK COUNTY - In July 2004, the Company was
awarded a contract to supply certain equipment, software and services to a
contractor doing business with Cook County Commissioners Office. The Commission
approved a plan to implement a county-wide wireless communications system. A
grant of approximately $13 million from the Urban Area Security Initiative of
the Department of Homeland Security has been accepted to fund the project. An
additional grant of approximately $17 million has also been approved for the
second phase of the project. The contract is anticipated to result in future
Company revenues of approximately $9 million.
AGREEMENT WITH IBM - In October 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.
REGISTRATION STATEMENT ON FORM SB-2 - TechAlt 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 TechAlt 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. TechAlt will not receive any proceeds
from the sales of the common stock by the selling stockholders. Shares of the
TechAlt common stock are not currently quoted on any exchange or the
over-the-counter bulletin board market. TechAlt has applied for trading of its
common stock on the over-the-counter bulletin board.
CONVERTIBLE DEBENTURE AND CONVERSION
On June 25, 2004 the Company entered into a 10% Secured Cumulative Convertible
Debenture in the amount of $100,000. The Company is not required to make any
payments prior to either the maturity date which is June 25, 2005 or a
merger/acquisition transaction involving the Company. The debenture is secured
by US Patent No. 6,587,441 which the Company holds. On December 30, 2004 a
conversion agreement was executed converting the principal amount into 100,000
shares of TechAlt's Series A Convertible Preferred Stock and Warrants to
purchase 200,000 shares of common stock on the terms and conditions of the
offering.
RELATED PARTY TRANSACTIONS - At September 30, 2004 advances payable to the
Company's President and 55% founding shareholder was $253,295 (unaudited).
At September 30, 2004 the Company had accounts payable to its affiliate, SBD, of
$651,711 (unaudited) and $226,650 (unaudited) to TechAlt, Inc.
(b) Pro Forma Financial Information
TechAlt, Inc.
Pro Forma Financial Information
(Unaudited)
The accompanying unaudited pro forma consolidated financial information has been
prepared to give effect to the merger of Technology Alternatives, Inc. ("TAI")
with TechAlt, Inc. ("TechAlt" or the "Company"), which occurred December 15,
2004, pursuant to terms of an Agreement and Plan of Merger ("Merger Agreement")
and related agreements and transactions, as described below.
The pro forma information included herein has been prepared in accordance with
guidelines established by regulations promulgated by the Securities and Exchange
Commission and should be read in conjunction with the financial statements of
the Company and TAI and managements' discussion and analysis of operations and
financial condition included elsewhere in this Registration Statement. Pro forma
information is presented based upon historical information and, accordingly, is
not necessarily indicative of future financial positions or results of
operations.
The Merger and related agreements and transactions
On December 15, 2004, TechAlt paid $650,000 to the former 45% owner of TAI
("Masanek"), which such payment then provided that certain documents and
agreements became effective pursuant to terms of an Escrow Agreement entered
into on November 20, 2004 between TechAlt, TAI, Masanek, Services By Designwise,
Ltd., an Illinois corporation controlled by Masanek ("SBD") and the former 55%
owner of TAI ("Solomon"), and their respective attorneys. Material terms of the
agreements and transactions occurring subsequent to these payments are as
follows:
AGREEMENT AND PLAN OF MERGER- Pursuant to the Merger Agreement, all of the
shares of common stock of TAI (all of which were owned by Solomon and Masanek)
were exchanged for 9,544,000 shares of common stock of TechAlt. TechAlt
Acquisitions, Inc., a wholly-owned subsidiary of TechAlt, was merged with and
into TAI, with TAI becoming a wholly-owned subsidiary of TechAlt (the "Merger").
Additionally, pursuant to terms of the Merger Agreement, TechAlt issued 400,000
shares of its common stock to an investment advisor company as consideration for
business development services provided and 100,000 shares of its common stock as
consideration for a $50,000 cash investment. Upon consummation of the Merger,
Solomon and Masanek together own approximately 83% of the issued and outstanding
common stock of TechAlt and the shareholders of TechAlt prior to the License
Agreement and name change from Dendo Global Corp. own approximately 17%. The
transaction, in which TechAlt Acquisitions, Inc. was merged with and into TAI,
is accounted for as a recapitalization of TAI and combination of entities under
common control and the Company is deemed to have issued approximately 1,956,000
common shares to the shareholders of TechAlt, Inc. Inasmuch as the former TAI
shareholders own a majority of TechAlt common stock after the merger, TAI is
considered to be the acquiring corporation for accounting purposes, and the
predecessor entity to TechAlt for purposes of financial reporting. The financial
statements after the transaction consist of the balance sheet of TAI and
TechAlt, the operations of TechAlt from the license date and the historical
operations of TAI.
SETTLEMENT AGREEMENT - Pursuant to terms of the Settlement Agreement between
TechAlt and Masanek, among other things, (i) TAI and TechAlt agreed to rescind
their License Agreement, which rescission included rescinding, ab initio, the
10,044,000 shares of TechAlt common stock issued pursuant to the License
agreement, (ii) TechAlt paid Masanek $650,000 cash, (iii) TechAlt and Masanek
entered into Sales, Consulting, Registration Rights, Right of First Refusal and
Escrow Agreements, (iv) the TechAlt issued a Convertible Promissory Note for
$1,150,000 to SBD, a company owned by Masanek, payable $650,000 one year from
issuance and the remainder two years from issuance subject to acceleration, as
defined, based on capital raises, with interest at 5%, and convertible into
shares of TechAlt common stock on the basis of $1.00 per share, and secured by
substantially all assets of TechAlt. There is no beneficial conversion since the
conversion price exceeds the stock trading price, (v) TechAlt issued warrants to
Masanek for the right to purchase for a period of five years 750,000 shares of
TechAlt common stock for $1.00 per share with a cashless exercise provision. The
Company recorded a debt discount of $293,700 for the valuation of the 750,000
warrants (computed using a Black-Scholes model with an interest rate of 3.48%,
volatility of 123%, zero dividends and expected term of 5 years), (vi) TechAlt
received from SBD the assignment of all rights, title and interests in certain
intellectual property and inventory of SBD relating to In-Car Based
Communications, Data Capture and Video Systems, (vii) TechAlt paid $140,000 for
the attorneys fees of Masanek, and (viii) settlement of certain claims made by
Masanek against TechAlt and others in a lawsuit filed in the Circuit Court of
Cook County, Illinois, (ix) beginning December 15, 2004, a 3 year sales
agreement with a commitment for the Company to purchase from SBD $1,250,000 of
equipment inventory per year plus pay 6.25% to 6.75% royalties on certain third
party supplied goods, (x) a consulting agreement for which the Company will pay
$25,000 for the first four months and $6,250 per month for the next 32 months
plus other benefits.
RAISING ADDITIONAL FINANCING - Among other conditions satisfied with respect to
consummation of the Merger, was that TechAlt received cash of not less than
$1,500,000 from issuances of securities through the exercise of Additional
Investment Rights issued to certain investors in August 2004 pursuant to the
terms of its recent Series A Preferred stock and Warrant financing. Subsequent
to September 30, 2004 and through January 17, 2005, TechAlt received cash of
approximately $2,750,000 from the sale of 2,800,000 shares of Series A Preferred
stock and warrants to purchase 5,600,000 shares of TechAlt common stock for
$1.00 per share.
Pro forma financial statements
The accompanying pro forma condensed consolidated balance sheet is presented as
of September 30, 2004, the date of TechAlt and TAI's third fiscal quarter, and
gives pro forma effect to the Merger and related agreements and transactions,
and raising additional financing proceeds of $790,000, as if they had occurred
on that date.
The accompanying pro forma condensed consolidated statements of operations are
presented for the year ended December 31, 2003 and nine-months ended September
30, 2004. The pro forma statements of operations include the results of TechAlt
and TAI for the respective periods presented and give effect to the Merger and
related agreements and transactions as it they had occurred at the beginning of
the respective periods.
TechAlt, Inc. and subsidiary
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2004
(dollars in thousands)
(a) (b) (c) (d) (e)
Techalt Techalt Techalt
Additional Payments to Stock issued
Techalt TAI financing Masanek with Merger
------------ ------------ ------------ ------------ ------------
Current assets
Cash and cash equivalents $ 1,139 $ 790,000 $ (790,000)
Accounts receivables
Inventories
------------ ------------ ------------ ------------ ------------
Total current assets 1,139 90,159 790,000 (790,000)
Equipment, net of accumulated depreciation 28,140
Intangible assets --
Deposit 20,190 --
------------ ------------ ------------ ------------ ------------
Total $ 21,329 $ 118,299 $ 790,000 $ (790,000)
============ ============ ============ ============ ============
Current liabilities
Excess of checks issued over bank balance $ 8,100 $ 54,186
Accounts payable and accrued liabilities $ 41,620 181,896
Payable to Techalt 226,650
Amounts payable to related parties 1,206,229 $ (650,000)
Compensation and other payable to majority shareholder $ 172,590 253,295
Accrued professional fees 101,000 211,953
Current portion of note payable to shareholder
Accrued preferred stock dividends 2,534
------------ ------------ ------------ ------------ ------------
Total current liabilities 325,844 2,134,209
Note payable to shareholder, net of current portion
------------ ------------ ------------ ------------ ------------
Total liabilities 325,844 2,134,209 (650,000)
------------ ------------ ------------ ------------ ------------
Stockholders' Deficit
Series A Convertible Preferred stock 460,500 790,000
Common stock and additional paid-in capital 261,170 1,000 $ 200,000
Receivable from TAI (100,000)
Deficit accumulated during the development stage (926,185) (2,016,910) (140,000) (200,000
------------ ------------ ------------ ------------ ------------
Total stockholders' deficit (304,515) (2,015,910) 790,000 (140,000) --
------------ ------------ ------------ ------------ ------------
Total $ 21,329 $ 118,299 $ 790,000 $ (790,000) $ --
============ ============ ============ ============ ============
(f) (g) (h)
Techalt
note
payable to
SBD & SBD
Intellectual
Property and Merger and
other assets Techalt Rescission of
acquired by Warrants Agreement Consolidated
Techalt to Masanek License Pro forma
------------ ------------ ------------ ------------
Current assets
Cash and cash equivalents $ 1,139
Accounts receivables $ 90,159 90,159
Inventories $ 210,000 210,000
------------ ------------ ------------ ------------
Total current assets 210,000 301,298
Equipment, net of accumulated depreciation 28,140
Intangible assets 386,000 386,000
Deposit 20,190
------------ ------------ ------------ ------------
Total $ 596,000 $ 735,628
============ ============ ============ ============
Current liabilities
Excess of checks issued over bank balance $ 62,286
Accounts payable and accrued liabilities 223,516
Payable to Techalt $ (100,000) 126,650
Amounts payable to related parties 556,229
Compensation and other payable to majority shareholder 425,885
Accrued professional fees 312,953
Current portion of note payable to shareholder $ 650,000 650,000
Accrued preferred stock dividends 2,534
------------ ------------ ------------ ------------
Total current liabilities (650,000) 650,000 (100,000) 2,360,053
Note payable to shareholder, net of current portion 500,000 500,000
------------ ------------ ------------ ------------
Total liabilities 1,150,000 (100,000) 2,860,053
------------ ------------ ------------ ------------
Stockholders' Deficit
Series A Convertible Preferred stock 1,250,500
Common stock and additional paid-in capital $ 293,700 755,870
Receivable from TAI 100,000 --
Deficit accumulated during the development stage (554,000) (293,700) (4,130,795)
------------ ------------ ------------ ------------
Total stockholders' deficit (554,000) -- 100,000 (2,124,425)
------------ ------------ ------------ ------------
Total $ 596,000 $ -- $ -- $ 735,628
============ ============ ============ ============
Notes regarding amounts presented in pro forma condensed consolidated balance
sheet:
(a) - Amounts represent balances in the Techalt September 30, 2004 unaudited
balance sheet as presented in this Registration Statement.
(b) - Amounts represent balances in the Technology Alternatives, Inc.
September 30, 2004 unaudited balance sheet as presented in this
Registration Statement.
(c) - Amounts represent the receipt of cash of $790,000 from the sales of
790,000 shares of Series A Preferred Stock and warrants to purchase
1,580,000 shares of common stock at an exercise price of $1.00 per share.
The entire purchase price has been allocated to the Series A Preferred
Stock, inasmuch as the estimated fair value of warrants has been
determined to be negligible.
(d) - Amounts represent the amount of cash payments made to Masanek of
$650,000 and attorneys of $140,000. The $650,000 is recorded as repayment
for TAI amounts due SBD at September 30, 2004 of $656,000. and the
$140,000 recorded as legal expense.
(e) - The issuance of 400,000 shares of Company common stock to an investment
advisor company as consideration for services provided has been recorded
as an increase in accumulated deficit relating to recording business
development expense and as an increase in common stock and additional
paid-in capital in the amount of $200,000, estimated utilizing a per share
price of $0.50 , the Series A Preferred Stock conversion price equivalent.
(f) - Amounts represent the face amount of the convertible promissory notes.
The settlement payment of $1,150,000 has been recorded (i) as inventories
in the amount of $210, 000, the estimated fair value determined as sales
price of inventories acquired, reduced by estimated costs of disposal,
(ii) as settlement expense of $554,000, determined as the amount of
amounts contributed to TAI by Masanek, and (iii) $386,000 as intangibile
assets, the estimated fair value of Intellectual Properties acquired by
TAI from SBD.
(g) - Warrants issued to purchase 750,000 shares of common stock at an
exercise price of $1.00 per share were determined by Company management to
have an estimated fair value of approximately $293,700, utiltilizing. the
Black-Scholes valuation model with assumptions of an option life of 5
years, a market price of $0.50 per share, 123% volatility and 3.48%
risk-free interest rate. The value of options issued has been determined
by Company management to represent settlement expense.
(h) - The merger is accounted for utilizing the purchase method and inasmuch
as the former TAI shareholders own a majority of the Techalt common stock
after the merger, TAI is considered to be the acquiring corporation for
purposes of purchase accounting. Inasmuch as both Techalt and TAI were
both owned more than 50% at December 15, 2004, the merger date, the
business combination has been accounted for as a combination of entities
under common control, and accordingly, the recorded value of assets and
liabilities are not adjusted. The $100,000 payable by TAI to Techalt is in
effect cancelled upon merger.
TechAlt, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2003
(in thousands, except per share data)
(a) (b) (c) (d) (e)
----------- ----------- ----------- ----------- ----------- -----------
preferred
dividends
on Additional interest on amortization of Consolidated
Techalt TAI Financing notes payable IP acquired Pro forma
----------- ----------- ----------- ----------- ----------- -----------
Revenue $ -- $ 192,209 $ 192,209
Cost of goods sold -- 128,193 128,193
----------- ----------- ----------- ----------- ----------- -----------
Gross profit -- 64,016 -- -- -- 64,016
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
General and administrative 6,926 581,082 588,008
Compensation agreement expense -- -- --
Business development expenses -- 149,527 149,527
Research and development -- 19,665 77,200 96,865
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses 6,926 750,274 -- -- 77,200 834,400
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations before interest (6,926) (686,258) -- -- (77,200) (770,384)
Interest expense (768) (57) (825)
----------- ----------- ----------- ----------- ----------- -----------
Net loss (7,694) (686,258) -- (57) (77,200) (771,209)
Preferred stock dividends -- (40) (40)
----------- ----------- ----------- ----------- ----------- -----------
Net loss attributable to common shareholders $ (7,694) $ (686,258) $ (40) $ (57) $ (77,200) $ (771,249)
=========== =========== =========== =========== =========== ===========
Basic and diluted net loss attributable to common shareholders per share #DIV/0!
===========
Weighted average shares used in computing loss per share
===========
Notes regarding amounts presented in pro forma condensed consolidated statement
of operations:
(a) - Amounts represent balances in the Techalt December 31, 2003 statement of
operations as presented in this Registration Statement.
(b) - Amounts represent balances in the Technology Alternatives, Inc. December
31, 2003 statement of operating results as presented in this Registration
Statement.
(c) - Amounts represent the 5% dividends payable on the additional 790,000
shares of Series A Preferred Stock issued in connection with the Merger
and related agreements.
(d) - Amounts represent the 5% interest payable on the $1,150,000 convertible
promissory note issued in connection with the Merger and related
agreements.
(e) - Amount represents amortization of acquired intangible assets.
TechAlt, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine months ended September 30, 2004
(in thousands, except per share data)
(a) (b) (c) (d) (e)
----------- ----------- ----------- ----------- ----------- -----------
Preferred
dividends
on Additional interest on amortization of Consolidated
Techalt TAI Financing notes payable IP acquired Pro forma
----------- ----------- ----------- ----------- ----------- -----------
Revenue $ -- $ 178,916 $ 178,916
Cost of goods sold -- 89,510 89,510
----------- ----------- ----------- ----------- ----------- -----------
Gross profit -- 89,406 -- -- -- 89,406
----------- ----------- ----------- ----------- ----------- -----------
Operating expenses
General and administrative 346,899 740,470 1,087,369
Compensation agreement expense 173,000 173,000
Business development expenses 25,269 52,390 77,659
Research and development 289,298 111,142 57,900 458,340
----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses 834,466 904,002 -- -- 57,900 1,796,368
----------- ----------- ----------- ----------- ----------- -----------
Loss from operations before interest (834,466) (814,596) -- -- (57,900) (1,706,962)
Interest expense (2,534) (43,000) (45,534)
----------- ----------- ----------- ----------- ----------- -----------
Net loss (837,000) (814,596) -- (43,000) (57,900) (1,752,496)
Preferred stock dividends -- (30,000) (30,000)
----------- ----------- ----------- ----------- ----------- -----------
Net loss attributable to common
shareholders $ (837,000) $ (814,596) $ (30,000) $ (43,000) $ (57,900) $(1,782,496)
=========== =========== =========== =========== =========== ===========
Basic and diluted net loss attributable to common shareholders per share #DIV/0!
===========
Weighted average shares used in computing loss per share
===========
Notes regarding amounts presented in pro forma condensed consolidated statement
of operations:
(a) - Amounts represent balances in the Techalt September 30, 2004 unaudited
statement of operations as presented in this Registration Statement.
(b) - Amounts represent balances in the Technology Alternatives, Inc.
September 30, 2004 unaudited statement of operating results as presented
in this Registration Statement.
(c) - Amounts represent the 5% dividends payable on the additional 790,000
shares of Series A Preferred Stock issued in connection with the Merger
and related agreements.
(d) - Amounts represent the 5% interest payable on the $1,150,000 convertible
promissory note issued in connection with the Merger and related
agreements.
(e) - Amount represents amortization of acquired intangible assets.