UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
AMENDMENT NO. 2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TECHALT, INC.
(Name of small business issuer in its charter)
Nevada 3576 87-0533626
(Jurisdiction of Incorporation) (SIC Number) (IRS Employer ID No.)
3311 N. Kennicott Ave., Suite A, Arlington Heights, IL 60004; (847) 870-2601
(Address and telephone number of principal executive offices)
James E. Solomon Peter Lynch
Chairman & Chief Executive Officer President & Chief Operating Officer
3311 N. Kennicott Ave., Suite A 3311 N. Kennicott Ave., Suite A
Arlington Heights, IL 60004 Arlington Heights, IL 60004
(847) 870-2601 (847) 870-2601
(Name, Address, and Telephone Number of Agent for Service)
----------------------------------------------------------
COPIES TO:
David M. Otto, Esq.
The Otto Law Group, PLLC
900 Fourth Ave., Suite 3140
Seattle, Washington 98164
(206) 262-9545
Approximate date of proposed sale to the public: As soon
as practicable after the effective date of
this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
- ---------------------------------------------------------------------------------------------------------
Title of each class Amount to be Proposed maximum Proposed maximum Amount of
of securities to be registered offering price per aggregate offering registration fee
registered unit(a) price(1)
- ---------------------------------------------------------------------------------------------------------
Common Stock:
$.001 par value 4,000,000(2) $ .75 $ 3,000,000 $ 353.10
$.001 par value 6,079,528(3) $ .50 $ 3,039,764 $ 357.78
$.001 par value 12,210,276(4) $ .50 $ 6,105,138 $ 718.57
$.001 par value 12,210,276(5) $1.00 $ 6,105,138 $ 718.57
$.001 par value 975,000(6) $1.00 $ 975,000 $ 114.75
$.001 par value 1,495,000(7) $1.00 $ 1,495,000 $ 175.00
$.001 par value 1,040,000(8) $ .50 $ 520,000 $ 61.20
$.001 par value 925,000(9) $ .50 $ 462,500 $ 54.43
$.001 par value 240,000(10) $ .50 $ 120,000 $ 14.12
$.001 par value 500,000(11) $ .50 $ 250,000 $ 29.42
$.001 par value 500,000(12) $1.00 $ 500,000 $ 58.85
$.001 par value 600,000(13) $1.00 $ 600,000 $ 70.62
Total: 40,775,080 $23,172,540 $2,727.40
- ---------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee payable
pursuant to Rule 457 promulgated under the Securities Act of 1933, as amended.
(2) Represents shares being registered for TechAlt, Inc.
(3) Represents shares 130% of the shares issued to Paul Masanek in connection
with the Agreement and Plan of Merger
(4) Represents 130% of the shares of common stock issuable upon conversion of
our Series A Convertible Preferred Stock
(5) Represents 130% of the shares issuable upon exercise of warrants to purchase
common stock at $1.00 per share issued to investors of our Series A Convertible
Preferred Stock
(6) Represents 130% of the shares issuable upon exercise of warrants to purchase
common stock at $1.00 per share issued to Paul Masanek
(7) Represents 130% of the shares issuable upon conversion of a Secured
Convertible Promissory Note at $1.00 per share issued to Services By Designwise,
Ltd.
(8) Represents shares earned by Sunrise Securities Corp., for investment banking
services
(9) Represents shares issuable upon exercise of warrants to purchase common
stock at $.50 per share earned by Sunrise Securities Corp., for investment
banking services
(10) Represents shares earned by Sunrise Financial Group, Inc., for public
relations services
(11) Represents shares issuable upon exercise of options to purchase common
stock at $.50 per share earned by Sunrise Financial Group, Inc., for public
relations services
(12) Represents shares issuable upon exercise of options to purchase common
stock at $1.00 per share issuable to Sunrise Financial Group, Inc., for public
relations services
(13) Represents 500,000 shares issued and 100,000 shares issuable to Excipio
Group, S.A., in connection with business development services
2
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8 (a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(a) The proposed maximum offering price per share is based upon a recent
valuation of the Company by Sunrise Securities Corp.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION; DATED _____________, 2005
3
PRELIMINARY PROSPECTUS
[TECHALT LOGO]
40,775,080 SHARES OF COMMON STOCK
This prospectus is part of a registration statement that we have filed with the
Securities and Exchange Commission. TechAlt, Inc., a Nevada corporation (the
"Company", "TechAlt" or the "Registrant") is registering 36,775,080 shares of
our common stock to be sold by certain stockholders of the Company (the "Selling
Stockholders") and 4,000,000 shares of common stock which may be sold by TechAlt
from time to time. The Selling Stockholders and TechAlt will offer the common
stock in amounts, at prices and on terms to be determined at the time of the
offering. We will not receive any proceeds from the sale of the common stock by
the Selling Stockholders, but will receive proceeds from sales of the 4,000,000
shares being registered for TechAlt. We will receive the proceeds from any cash
exercises of any of the warrants by the Selling Stockholders. Shares of our
common stock are not currently quoted on any exchange or the over-the-counter
bulletin board market. We have applied for trading of our common stock on the
over-the-counter bulletin board.
You may contact us at our principal executive offices located at 3311 N.
Kennicott Ave., Suite A, Arlington Heights, IL 60004; (847) 870-2601.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This offering involves a high degree of risk. See "Risk Factors" on page 3.
The date of this prospectus is __________________, 2005
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THE
INFORMATION CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING
OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS IN WHICH OFFERS AND
SALES ARE PERMITTED.
4
Summary....................................................................... 6
Risk Factors.................................................................. 8
Use of Proceeds...............................................................10
Certain Relationships and Related
Transactions..................................................................11
Market for the Company's Common Stock and Related Stockholder Matters.........11
Selling Security Holders......................................................11
Plan of Distribution..........................................................14
Legal Proceedings.............................................................16
Dividend Policy...............................................................18
Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................18
Business......................................................................24
Property......................................................................26
Executive Compensation........................................................28
Security Ownership of Certain Beneficial Owners and Management................29
Description of
Securities....................................................................30
Legal Matters.................................................................32
Experts.......................................................................32
Changes in Accountants........................................................32
Indemnification of Officers and Directors.....................................32
Financial Statements.........................................................F-1
5
PROSPECTUS SUMMARY
This Summary Is Qualified In Its Entirety By The More Detailed Information
Appearing Elsewhere In This Prospectus. The following summary highlights
material information which is presented in more detail elsewhere in this
prospectus. Before making an investment decision, you should read the entire
prospectus carefully, including the "Risk Factors" section, the financial
statements and the notes to the financial statements.
OUR COMPANY
The Company produces a secure wireless communications toolset to be used by
emergency first responders for interagency interoperability, communication and
collaboration. The convergence of video, voice, and data requires larger
transmission bandwidth than current radio systems could provide. In addition,
public safety officials require redundant networks to ensure communication
capability in the event the primary system is damaged or destroyed. The
Company's toolset provides multi-network capable communications for the Police,
EMS, and other Homeland Security Agencies. There are 360 agencies under the
Department of Homeland Security ("DHS"), of which 17,000 US police departments
are but one grouping.
The Company, through its proprietary hardware, network, and communications
components, delivers a complete technology solution that communicates data and
mission critical imagery between remote first responders and central command and
control centers by using any and all existing public wireless networks, coupled
with secure agency networks. These existing wireless networks include the new
802.11 or Wi-Fi networks, and spread spectrum technologies, which include
licensed frequencies, for which the carriers pay a fee to the government to be
utilized in a specific location and unlicensed frequencies, which are free to
the public to use; 802.11 or Wi-Fi networks fall into this unlicensed category.
The Company solution provides a scalable, robust, secure, communications method
for first responders to provide interoperable communications and interagency
interoperability, communication and collaboration. The proposed Homeland
Security Agency ("HSA") budget to build this capability was $3.5 billion out of
the proposed $37.5 billion for the entire Fiscal Year 2003 HSA budget.
OUR MANAGEMENT
JAMES E. SOLOMON is the Chairman of our Board of Directors and has served as our
Chief Executive Officer since August 2004. Mr. Solomon is also the President and
Chief Executive Officer of Technology Alternatives, Inc. of Schaumburg,
Illinois. Mr. Solomon's career has been that of the technology entrepreneur and
he has been active in the technology industry for the past 32 years. Mr.
Solomon's experience includes work as a developer, engineer, and creator of
businesses in the PC, CD-ROM, Relational Database, Telecommunications and
Wireless industries.
PETER LYNCH has served as our Chief Operating Officer since October of 2004 and
as our President since February 2005. Mr. Lynch has extensive senior executive
level management experience in the broadband communications industry including a
combination of domestic and international entrepreneurial assignments.
GEORGE LOERA has served as a member of our Board of Directors since August of
2004. For the past 18 years Mr. George Loera has been the owner and President of
Chicago United Industries. Ltd., a multi-million dollar distribution and supply
company located in Chicago, Illinois.
C. PETE ASHI has served as a member of our Board of Directors since August of
2004. Mr. C. Pete Ashi has over 22 years of Information Systems industry
experience. Over the past five years, Mr. Ashi has served as the Vice President
of National Operations for TM Floyd & Company, a $55M Information Technology
consulting firm with major clients in the Health Insurance and Property &
Casualty industries.
JAMES HURLEY has served as our Chief Financial Officer since November 23, 2004.
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. 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.
6
BARBARA ROBERTS has served as our Vice President of Sales and Business
Development since October of 2004. Ms. Roberts has nineteen years of practical
and industry experience combining the disciplines of Executive Management,
Sales/Marketing, Finance, Operations, and Systems Integration. Prior to joining
TechAlt, Inc., Ms. Roberts worked for Technology Alternatives, Inc., of
Schaumburg, Illinois beginning in 2002.
DAVID M. OTTO has served as our Secretary since August of 2004. David M. Otto is
a Seattle-based attorney and President of The Otto Law Group. Mr. Otto's
practice focuses on corporate finance, securities, mergers and acquisitions and
corporate law and governance. Mr. Otto is admitted to practice law in New York
and Washington.
MICHAEL J. LIGHTFOOT has served as our Vice President of Administration since
January 1, 2005. Prior to joining our Company, Mr. Lightfoot was a member of
Michael J. Lightfoot, P.C., a law firm specializing in contracts, advising on
content and data protection, banking, insurance, WiFi and international
transactions from 1998 until December 2004.
THE OFFERING
- --------------------------------------------------------------------------------
Securities Offered 36,775,080 shares of Selling Stockholder common
stock. See "Selling Stockholders". 4,000,000
shares of stock being registered for TechAlt.
- --------------------------------------------------------------------------------
Selling Stockholders The Selling Stockholders are identified in this
prospectus with the maximum amount of our common
shares that each may sell either outright or upon
conversion of convertible securities.
- --------------------------------------------------------------------------------
Plan of Distribution The Selling Stockholders and TechAlt may sell
shares of common stock through agents or brokers,
acting as principal agent in transactions, which
may involve block transactions, on the
over-the-counter bulletin board or on other
exchanges on which the shares are then listed,
pursuant to the rules of the applicable exchanges
or in the over-the-counter bulletin board, or
otherwise at market prices prevailing at the time
of sale, at negotiated prices or at fixed prices;
through brokers or agents in private sales at
negotiated prices; or by any other legally
available means.
- --------------------------------------------------------------------------------
Offering Price At prevailing market prices on the
over-the-counter bulletin board or on other
exchanges on which the shares are then listed or
at negotiated prices.
- --------------------------------------------------------------------------------
Use of Proceeds We will not obtain any funds from the sale of the
common stock sold by the Selling Stockholders. We
will receive proceeds from the cash exercise of
warrants currently outstanding (or anticipated to
be outstanding at the time of the effectiveness of
this registration statement) and included in this
prospectus. We intend to use any such cash
proceeds received from the exercise of the
Warrants for general corporate purposes, which may
include repaying indebtedness, making additions to
our working capital, funding future acquisitions
or for further developing our products and hiring
additional personnel.
We will receive funds from the sale of the
4,000,0000 shares of common stock sold by TechAlt.
We intend to use any such cash proceeds received
from the of the shares for general corporate
purposes, which may include repaying indebtedness,
making additions to our working capital, funding
future acquisitions or for further developing our
products and hiring additional personnel.
- --------------------------------------------------------------------------------
7
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider the
following risk factors and all other information contained in this prospectus
before purchasing any shares of common stock. Any of the following risks could
materially harm our business, operating results and financial condition, and
could result in a decrease in the trading price of our shares of common stock,
common stock or public warrants, or in a complete loss of your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE NO HISTORY OF PROFITABLE OPERATIONS AND MAY INCUR FUTURE LOSSES.
Since our inception, we have incurred losses and we may never achieve or sustain
profitability. In addition, we expect our operating expenses to increase
significantly as we expand our sales and marketing efforts and otherwise support
our expected growth. Given these planned expenditures, we may incur additional
losses in the near future.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY IN THE EMERGENCY FIRST RESPONDERS MARKET.
Our management determined to concentrate on the emergency first responders
market in late 2002 and TechAlt did not begin to focus on secured wireless
communications until August 2004 when it was licensed certain intellectual
property by Technology Alternatives, Inc. We have a limited operating history
based upon which you can evaluate our present business and future prospects. We
face risks and uncertainties relating to our ability to implement our business
plan successfully. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by public companies that have
recently changed their business strategies. If we are unsuccessful in addressing
these risks and uncertainties, our business, results of operations, financial
condition and prospects will be materially harmed.
WE ARE MATERIALLY DEPENDENT ON ACCEPTANCE OF OUR PRODUCTS BY THE EMERGENCY FIRST
RESPONDERS MARKET, AND IF EMERGENCY FIRST RESPONDERS DO NOT PURCHASE OUR
PRODUCTS, OUR REVENUES WILL BE ADVERSELY AFFECTED AND WE MAY NOT BE ABLE TO
EXPAND INTO OTHER MARKETS.
A substantial number of emergency first responders may not purchase our toolset.
In addition, if our toolset is not widely accepted by the emergency first
responders market, we may not be able to expand sales of our products into other
markets.
IF WE ARE UNABLE TO MANAGE OUR GROWTH, OUR GROWTH PROSPECTS MAY BE LIMITED AND
OUR FUTURE PROFITABILITY MAY BE ADVERSELY AFFECTED.
We intend to expand our sales and marketing programs and our manufacturing
capability. Rapid expansion may strain our managerial, financial and other
resources. If we are unable to manage our growth, our business, operating
results and financial condition could be adversely affected. Our systems,
procedures, controls and management resources also may not be adequate to
support our future operations. We will need to continually improve our
operational, financial and other internal systems to manage our growth
effectively, and any failure to do so may lead to inefficiencies and
redundancies, and result in reduced growth prospects and profitability.
MOST OF OUR END-USERS ARE SUBJECT TO BUDGETARY AND POLITICAL CONSTRAINTS WHICH
MAY DELAY OR PREVENT SALES.
Most of our end-user customers are government agencies. These agencies often do
not set their own budgets and therefore have little control over the amount of
money they can spend. In addition, these agencies experience political pressure
that may dictate the manner in which they spend money. As a result, even if an
agency wants to acquire our products, it may be unable to purchase them due to
budgetary or political constraints. Some government agency orders may also be
canceled or substantially delayed due to budgetary, political or other
scheduling delays which frequently occur in connection with the acquisition of
products by such agencies.
IF WE ARE UNABLE TO PROTECT OUR RIGHT TO USE CERTAIN INTELLECTUAL PROPERTY, WE
MAY LOSE A COMPETITIVE ADVANTAGE OR INCUR SUBSTANTIAL LITIGATION COSTS TO
PROTECT OUR RIGHTS.
Our future success depends in part upon our proprietary technology. Pursuant to
the Agreement and Plan of Merger effected December 2004, we acquired United
States Patent No. 6,587,441 owned by Technology Alternatives, Inc. on wireless,
redundant, secure, real-time, network for a proprietary interactive data
transfer system having a remote terminal and a host data center. Controllers for
the remote terminal and the host data center receive the proprietary language
messages and packetize and encrypt the messages for sending over the best
wireless carrier among the plurality of wireless carriers the controllers are
connected to. The wireless control protocol monitors the communications to
provide for selection of the most reliable communication carrier for any part of
a transmission. Each network segment of the signal path has at least one
state-controlled gate which reports the status of that signal path. Real time
transmission and acknowledgment of securely packetized messages on wireless
communications carriers via an object oriented coding control application
provides for reliable datagram transfer independent of the reliability of any
one signal path. The scope of any patent to which we have or may obtain rights
may not prevent others from developing and selling competing products. The
validity and breadth of claims covered in technology patents involve complex
legal and factual questions, and the resolution of such claims may be highly
uncertain, lengthy, and expensive. In addition, our patents may be held invalid
upon challenge, others may claim rights in or ownership of our patents.
8
WE ARE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH MAY CAUSE US
TO INCUR LITIGATION COSTS AND DIVERT MANAGEMENT ATTENTION FROM OUR BUSINESS.
Any intellectual property infringement claims against us, with or without merit,
could be costly and time-consuming to defend and divert our management's
attention from our business. If our products were found to infringe a third
party's proprietary rights, we could be required to enter into royalty or
licensing agreements in order to be able to sell our products. Royalty and
licensing agreements, if required, may not be available on terms acceptable to
us or at all.
WE NEED ADDITIONAL FINANCING.
We could be required to cut back or stop operations if we are unable to raise or
obtain needed funding. Our ability to continue operations will depend on our
positive cash flow, if any, from future operations or our ability to raise
additional funds through equity or debt financing. Although we anticipate that
future revenues and new capital from private and institutional investors will be
sufficient to fund our current operations and capital requirements for the
current fiscal year, we could be required to cut back or stop operations if we
are unable to raise or obtain funds when needed.
YOU COULD LOSE YOUR ENTIRE INVESTMENT.
Our common stock offered in this prospectus is highly speculative, involves a
high degree of risk and should not be purchased by any person who cannot afford
the loss of his entire investment. A purchase of our common stock in this
offering would be unsuitable for a person who cannot afford to sustain such a
loss.
IF WE WERE TO LOSE THE SERVICES OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER OUR
BUSINESS WOULD SUFFER.
We are substantially dependent upon the continued services of James E. Solomon,
our Chief Executive Officer. We have a three (3) year employment agreement with
Mr. Solomon. The loss of the services of Mr. Solomon through incapacity or
otherwise would have a material adverse effect upon our business and prospects.
To the extent that his services become unavailable, we will be required to
retain other qualified personnel, and there can be no assurance that we will be
able to recruit and hire qualified persons upon acceptable terms. We do not
maintain key person life insurance on the life of Mr. Solomon.
In addition to Mr. Solomon, if we were to lose the services of one or more of
our key employees, such as James Hurley, our Chief Financial Officer, or Peter
Lynch, our President & Chief Operating Officer, our business, operating results,
financial condition or business prospects could be materially adversely
affected.
PENNY STOCK REGULATIONS
The Securities Enforcement Penny Stock Act of 1990 requires specific disclosure
to be made available in connection with trades in the stock of companies defined
as "penny stocks". The Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. Such exceptions include any
equity security listed on NASDAQ and any equity security issued by an issuer
that has (I) net tangible assets of at least $2,000,000, if such issuer has been
in continuous operation for three years; (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years; or (iii) average annual revenue of at least $6,000,000, if such issuer
has been in continuous operation for less than three years. Unless an exception
is available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith as well as the written consent of the
purchaser of such security prior to engaging in a penny stock transaction. The
regulations on penny stocks may limit the ability of the purchasers of our
securities to sell their securities in the secondary marketplace. Our common
stock is currently considered a penny stock.
THE PRICE AT WHICH THE SELLING STOCKHOLDERS RESELL THEIR STOCK OFFERED IN THIS
PROSPECTUS MAY BEAR NO RELATIONSHIP TO OUR VALUE.
The prices at which the Company or the Selling Stockholders resell our common
shares will be determined by the then prevailing market prices of our common
shares offered and sold on the over-the-counter market or on any other then
applicable exchange where our Common Shares are traded, or may be at negotiated
prices which, in all likelihood, will bare no relationship to our assets, book
value, net worth or other economic or recognized measure of value. All of the
exercise and conversion prices and rates of the Company's outstanding warrants,
convertible preferred stock and convertible note were arbitrarily determined by
us and, as well, bare no relationship to our assets, book value, net worth, or
any other economic or recognized measure of value. These exercise prices or
conversion rates should not be regarded as any indication of current or future
market prices for our common shares.
9
RISKS RELATED TO THIS OFFERING
THERE IS NO CURRENT MARKET FOR THE COMPANY'S COMMON STOCK
The Company's common stock does not currently trade on any exchange or the
over-the-counter bulletin board. The Company has applied for listing the common
stock on the over-the-counter bulletin board. However there is no assurance that
the common stock will ever trade on any exchange or the over-the-counter
bulletin board.
THE PRICE OF OUR SECURITIES MAY BE VOLATILE, WHICH MAY LEAD TO LOSSES BY
INVESTORS.
The price of our securities may fluctuate significantly in response to a number
of factors, including:
o Our quarterly operating results;
o Changes in earnings estimates by analysts and whether our earnings meet or
exceed such estimates;
o Announcements of technological innovations by us or our competitors;
o Additions or departures of key personnel; and
o Other events or factors that may be beyond our control.
Volatility in the market price of our securities could lead to claims against
us. Defending these claims could result in significant litigation costs and a
diversion of our management's attention and resources.
WE WILL NEED TO COMPLY WITH FEDERAL AND STATE SECURITIES LAWS TO MAINTAIN THE
TRADEABILITY OF OUR SECURITIES.
We must maintain in effect the registration statement filed with the Securities
and Exchange Commission with respect to the shares of common stock and must also
comply with the securities laws of a state for the shares of common stock to be
tradable in that state. If we do not comply with federal or state securities
laws, your ability to sell the securities offered by this prospectus may be
significantly reduced.
WE DO NOT INTEND TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.
Any investors who have or anticipate any need for immediate income from their
investment should not purchase any of the shares of common stock offered hereby.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the common stock by
the Selling Stockholders. The Company will receive the proceeds from the
exercise of the warrants held by the Selling Shareholders and from sale of the
4,000,000 shares of common stock being registered for the Company on this
registration statement. Any such proceeds will be used for general corporate
purposes, which may include repaying indebtedness, making additions to our
working capital, funding future acquisitions or for further developing our
products and hiring additional personnel.
DETERMINATION OF OFFERING PRICE
The shares will be sold at prevailing market prices on the over-the-counter
bulletin board or on other exchanges on which the shares are then listed or at
negotiated prices.
CAUTIONARY WARNING REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including the information we incorporate by reference, includes
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"could," "expects," "plans," "intends," "anticipates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of such terms and other
comparable terminology. These forward-looking statements include, without
limitation, statements about our market opportunity, our strategies,
competition, expected activities and expenditures as we pursue our business
plan, and the adequacy of our available cash resources. Although we believe that
the expectations reflected in any forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Actual results may differ materially from the predictions
discussed in these forward-looking statements. Changes in the circumstances upon
which we base our predictions and/or forward-looking statements could materially
affect our actual results. Additional factors that could materially affect these
forward-looking statements and/or predictions include, among other things: (1)
whether the prime vendor contract for secured first responder communications
between IBM and Cook County is successfully completed; (2) whether our
significant component suppliers are able to deliver their products on a timely
basis; (3) whether the investors in the Offering elect to exercise their
warrants to purchase correspondece shares of common stock for $1.00 per share
from us; (4) the ability of the Company to attract and retain key personnel; (5)
the Company's ability to comply with federal, state and local government
regulations; and (6) other factors over which we have little or no control.
10
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our Securities and
Exchange Commission filings are available to the public over the Internet at the
Securities and Exchange Commission's web site at http://www.sec.gov. You may
also read and copy any document we file at the Securities and Exchange
Commission's public reference room located at 450 Fifth Street, N.W.,
Washington, DC 20549. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms and their
copy charges.
This prospectus is part of a Form SB-2 registration statement that we filed with
the SEC. This prospectus provides you with a general description of the
securities that may be offered for sale, but does not contain all of the
information that is in the registration statement. To see more detail, you
should read the entire registration statement and the exhibits filed with the
registration statement. Copies of the registration statement and the exhibits
are on file at the offices of the Commission and may be obtained upon payment of
the fees prescribed by the Commission, or examined without charge at the public
reference facilities of the Commission described above.
You should rely only on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information.
Neither TechAlt nor any Selling Stockholder is making an offer of the securities
covered by this prospectus in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement or in any other document incorporated by reference in this prospectus
is accurate as of any date other than the date on the front of those documents.
Upon request, we will provide without charge a copy of our Annual, Quarterly and
Current Reports we have filed electronically with the Commission as well as a
copy of any and all of the information that has been or may be incorporated by
reference in this prospectus. Requests for such copies should be directed to:
Investor Relations; TechAlt, Inc., 3311 N. Kennicott Ave., Suite A, Arlington
Heights, IL 60004; (847) 870-2601.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Solomon and the Company entered into an Employment Agreement on or around
August 24, 2004. Per the terms of the Employment Agreement, Mr. Solomon is to be
employed by the Company as the Chief Executive Officer for an initial period of
three (3) years, which period shall be automatically renewed until terminated by
the Company. Solomon's annual salary is One Hundred and Seventy Five Thousand
Dollars ($175,000). Solomon is eligible to receive an annual cash bonus of up to
Two Hundred Seventy Five Thousand Dollars ($275,000) in connection with the
gross revenues of the Company and it is anticipated that Mr. Solomon will be
granted options to purchase up to one million (1,000,000) shares of the common
stock of the Company, subject to vesting.
In August of 2004, the Company issued 600,000 shares of common stock to Ms.
Diana Loera, a family member of George Loera and 125,000 shares of common stock
to Christopher Solomon, a family member of James E. Solomon. These shares were
rescinded, ab initio, in connection with the Agreement to Rescind Intellectual
Property License Agreement between the Company and Technology Alternatives,
Inc., which was executed on December 15, 2004.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
No market currently exists for our common stock. As of January 19, 2005,
approximately 1,369,500 shares of our common stock may be sold pursuant to Rule
144 of the Securities Act. As of January 19, 2005, there were approximately
12,027,719 shares issued of our common stock, 3,300,000 shares of Series A
Preferred stock outstanding convertible into 6,600,000 shares of our common
stock and warrants outstanding to purchase approximately 7,350,000 shares of our
common stock. Services By Designwise, Ltd., an Illinois corporation, currently
holds a Secured Convertible Promissory Note which is convertible into 1,150,000
shares of our common stock.
TechAlt is registering 4,000,000 shares of its common stock which may be sold by
us from time to time.
We have approximately 98 shareholders of record of our common equity.
The Company has not declared or paid, nor has it any present intention to pay,
cash dividends on its Common stock.
SELLING SECURITY HOLDERS
The shares of common stock being offered by the Selling Stockholders are (i)
issuable upon conversion of the Series A Preferred shares issued or Series A
Preferred shares which may be issued by us in the near future (ii) issuable upon
exercise of the Warrants to purchase shares of our common stock, (iii) issuable
upon exercise of Options to purchase 1,000,000 shares of common stock, (iv)
issuable upon conversion of a $1,150,000 Secured Convertible Promissory Note
issued to Services By Designwise, Ltd., (v) shares of common stock which were
issued to Paul Masanek in connection with the Agreement and Plan of Merger
between the Company and Technology Alternatives, Inc., (vi) shares of common
stock issuable to Sunrise Securities Corp., Sunrise Financial Group, Inc., or
their designees, in connection with investment banking and public relations
services, respectively, and (vii) shares of common stock issued and issuable to
Excipio Group, S.A. in connection with business development services.
11
We are registering the shares of common stock in order to permit the
Selling Stockholders to offer the shares for resale from time to time. Paul
Masanek, a former member of the Board of Directors and executive officer of the
wholly-owned subsidiary of the Company, Technology Alternatives, Inc. and
Services By Designwise, Ltd., manufactures certain goods for the Company.
Sunrise Securities Corp., provides investment banking services to the Company
along with public relations services.
The table below lists the Selling Stockholders and other information regarding
the beneficial ownership of the shares of common stock by each of the Selling
Stockholders, or which the Company believes the Selling Stockholder will own
within the next sixty (60) days. The second column lists the number of shares of
common stock beneficially owned by each Selling Stockholder, based on its
ownership, or anticipated ownership within the next sixty (60) days, of Common
Stock of the Company. The third column lists the shares of common stock being
offered by this prospectus by the Selling Stockholders.
In accordance with the terms of registration rights agreements with Paul
Masanek, SBD, the holders of the Series A Preferred Shares and the Warrants,
this prospectus generally covers the resale of at least the sum of (i) 130% of
the maximum number of shares of common stock issuable upon conversion of the
Series A Preferred Shares (assuming that the Series A Preferred Shares are
convertible at their initial Conversion Price and without taking into account
any limitations on the conversion of the Series A Preferred Shares set forth in
the Certificate for the Series A Preferred Shares) (ii) 130% of the maximum
number of shares of common stock issuable upon exercise of the related Warrants
(without taking into account any limitations on the exercise of the Warrants set
forth in the Warrants), in each case as of the trading day immediately preceding
the date this registration statement was initially filed with the Securities and
Exchange Commission. Because the conversion price of the Series A Preferred
Shares and the exercise price of the Warrants and the Secured Convertible
Promissory Note may be adjusted, the number of shares that will actually be
issued may be more or less than the number of shares being offered by this
prospectus. If all shares being registered are sold, none of the Selling
Stockholders will own any shares of common stock of the Company and (iii) 130%
of the maximum number of shares of common stock issuable upon exercise of the
750,000 warrants held by Masanek, conversion of the 1,150,000 Promissory Note
held by SBD, and currently held by Masanek in connection with the Merger.
Under the terms of the Series A Preferred Shares and the Warrants, certain of
the Selling Stockholders may not convert the Series A Preferred Shares or
exercise the Warrants to the extent such conversion or exercise would cause such
Selling Stockholder, together with its affiliates, to beneficially own a number
of shares of common stock which would exceed 9.99% of our then outstanding
shares of common stock following such conversion or exercise, excluding for
purposes of such determination shares of common stock issuable upon conversion
of the Series A Preferred Shares which have not been converted and upon exercise
of the Warrants which have not been exercised. The number of shares in the
second column does not reflect this limitation. The Selling Stockholders may
sell all, some or none of their shares in this offering. See "Plan of
Distribution".
- ---------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES OF COMMON SHARES OF COMMON STOCK BEING
STOCK BENEFICIALLY REGISTERED BY THIS PROSPECTUS FOR
OWNED THE SELLING STOCKHOLDERS
- ---------------------------------------------------------------------------------------------------------------
Paul Masanek* 5,426,560 7,054,528
- ---------------------------------------------------------------------------------------------------------------
Services By Designwise, Ltd.(1)* 1,150,000 1,495,000
- ---------------------------------------------------------------------------------------------------------------
Derek Caldwell** 400,000 520,000
- ---------------------------------------------------------------------------------------------------------------
Cherokee Holdings II, LLC(2)** 900,040 1,170,052
- ---------------------------------------------------------------------------------------------------------------
Cranshire Capital, LP(3)** 1,000,000 1,300,000
- ---------------------------------------------------------------------------------------------------------------
Crestview Capital Master, LLC(4)** 6,800,000 8,840,000
- ---------------------------------------------------------------------------------------------------------------
DKR SoundShore Oasis Holding Fund, 1,000,000 1,300,000
Ltd.(5)**
- ---------------------------------------------------------------------------------------------------------------
12
- -------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES OF COMMON SHARES OF COMMON STOCK BEING
STOCK BENEFICIALLY REGISTERED BY THIS PROSPECTUS FOR
OWNED THE SELLING STOCKHOLDERS
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Iroquois Capital, LP(6)** 125,000 162,500
- -------------------------------------------------------------------------------------------------------------
Smithfield Fiduciary, LLC(7)** 4,000,000 5,200,000
- -------------------------------------------------------------------------------------------------------------
David Matthews** 200,000 260,000
- -------------------------------------------------------------------------------------------------------------
Craig and Elizabeth Snider** 400,000 520,000
- -------------------------------------------------------------------------------------------------------------
Chahram Pahlavi** 600,000 780,000
- -------------------------------------------------------------------------------------------------------------
Andrew Escoll and Tina Snider** 200,000 260,000
- -------------------------------------------------------------------------------------------------------------
Edward Snider** 200,000 260,000
- -------------------------------------------------------------------------------------------------------------
Jay Leifer** 300,000 390,000
- -------------------------------------------------------------------------------------------------------------
Elena Neuman Lefkowitz** 200,000 260,000
- -------------------------------------------------------------------------------------------------------------
Robert H. Craft, III** 400,000 520,000
- -------------------------------------------------------------------------------------------------------------
William F. Callanan** 800,000 1,040,000
- -------------------------------------------------------------------------------------------------------------
Christian Kinch** 200,000 260,000
- -------------------------------------------------------------------------------------------------------------
Randall E. Harris** 160,000 208,000
- -------------------------------------------------------------------------------------------------------------
Nathan Low Roth IRA** 800,000 1,040,000
- -------------------------------------------------------------------------------------------------------------
Nicholas Paras** 100,000 130,000
- -------------------------------------------------------------------------------------------------------------
Nathan Low*** 1,277,250 1,277,250
- -------------------------------------------------------------------------------------------------------------
Derek Caldwell*** 687,750 687,750
- -------------------------------------------------------------------------------------------------------------
Nathan Low**** 504,000 504,000
- -------------------------------------------------------------------------------------------------------------
Derek Caldwell**** 444,000 444,000
- -------------------------------------------------------------------------------------------------------------
Bartholomew Intl. Investments (8)**** 200,000 200,000
- -------------------------------------------------------------------------------------------------------------
American Friends of Shalva**** 40,000 40,000
- -------------------------------------------------------------------------------------------------------------
Dov Weiner**** 20,000 20,000
- -------------------------------------------------------------------------------------------------------------
Marsha Kucher**** 2,000 2,000
- -------------------------------------------------------------------------------------------------------------
Excipio Group, S.A.(9)***** 600,000 600,000
- -------------------------------------------------------------------------------------------------------------
TOTAL 29,166,600 36,775,080
* Issued pursuant to a private placement with Paul Masanek and Services by
Designwise, Ltd., in connection with the settlement of certain litigation.
** Issued/issuable pursuant to a private placement of Series A Convertible
Preferred Stock and Warrants to purchase common stock.
***Earned by Sunrise Securities Corp as commission in connection with the
private placement of Series A Convertible Preferred Stock and Warrants to
purchase common stock.
****Earned by Sunrise Financial Group, Inc. for public relations services.
*****Issuable in exchange for business development services.
(1) Paul Masanek controls the voting and dispositive power with respect to
shares held by Services By Designwise, Ltd., an Illinois corporation.
(2) Derek Caldwell exercises sole voting power and dispositive powers with
respect to shares owned by Cherokee Holdings II, LLC. Cherokee is not a
reporting company listed under Section 13 or 15(d) of the Exchange Act or an
investment company. Cherokee is an affiliate of a broker-dealer, as Derek
Caldwell is an officer of Sunrise Securities Corp., a registered broker-dealer.
The shares of common stock being registered under this prospectus were acquired
in the ordinary course of business and at the time of purchase the seller did
not have any agreements, plans or understandings, directly or indirectly, with
any person to distribute the securities.
13
(2) Mitchell P. Kopin, President of Downsview Capital, Inc. (the General
Partner) of Cranshire Capital, LP, exercises sole voting power and dispositive
powers with respect to shares owned by Cranshire Capital, LP. Cranshire Capital,
LP is not a registered broker-dealer or an affiliate of a broker-dealer, nor is
it a reporting company listed under Section 13 or 15(d) of the Exchange Act or
an investment company.
(4) Shared voting and dispositive powers are exercised by: Stewart Flink, Robert
Hoyt, Richard Levy and Dan Warsh. Crestview is not a reporting company listed
under Section 13 or 15(d) of the Exchange Act or an investment company.
Crestview is an affiliate of a broker-dealer, as Stewart Flink is the sole
principal of Dillon Capital, a registered broker-dealer. The shares of common
stock being registered under this prospectus were acquired in the ordinary
course of business and at the time of purchase the seller did not have any
agreements, plans or understandings, directly or indirectly, with any person to
distribute the securities.
(5) DKR SoundShore is not a reporting company listed under Section 13 or 15(d)
of the Exchange Act or an investment company, nor is it a registered
broker-dealer or an affiliate of a registered broker-dealer. DKR SoundShore
Oasis Holding Fund Ltd. (the "Fund") is a master fund in a master-feeder
structure. The Fund's investment manager is DKR Oasis Management Company LP (the
"Investment Manager"). Pursuant to an investment management agreement among the
Fund, the feeder funds and the Investment Manager, the Investment Manager has
the authority to do any and all acts on behalf of the Fund, including voting any
shares held by the Fund. Mr. Seth Fischer is the managing partner of Oasis
Management Holdings LLC, one of the general partners of the Investment Manager.
Mr. Fischer has ultimate responsibility for trading with respect to the Fund.
Mr. Fischer disclaims beneficial ownership of the shares. The shares of common
stock being registered under this prospectus were acquired in the ordinary
course of business and at the time of purchase the seller did not have any
agreements, plans or understandings, directly or indirectly, with any person to
distribute the securities.
(6) Iroquois is not a reporting company listed under Section 13 or 15(d) of the
Exchange Act or an investment company. Joshua Silverman exercises sole voting
power and dispositive powers with respect to shares owned by Iroquois Capital,
LP. Iroquois Capital, LP is not a broker-dealer or an affiliate of a
broker-dealer. The shares of common stock being registered under this prospectus
were acquired in the ordinary course of business and at the time of purchase the
seller did not have any agreements, plans or understandings, directly or
indirectly, with any person to distribute the securities.
(7) Smithfield is not a reporting company listed under Section 13 or 15(d) of
the Exchange Act or an investment company. Highbridge Capital Management, LLC is
the trading manager of Smithfield Fiduciary LLC and consequently has voting
control and investment discretion over securities held by Smithfield. Glenn
Dubin and Henry Swieca control Highbridge. Each of Highbridge, Glenn Dubin and
Henry Swieca disclaims beneficial ownership of the securities held by
Smithfield. Smithfield is an affiliate of a registered broker-dealer. The shares
of common stock being registered under this prospectus were acquired in the
ordinary course of business and at the time of purchase the seller did not have
any agreements, plans or understandings, directly or indirectly, with any person
to distribute the securities.
(8) Bartholomew is not a reporting company listed under Section 13 or 15(d) of
the Exchange Act or an investment company. Bartholomew is not a registered
broker dealer or an affiliate thereof. The shares of stock being registered
under this prospectus were acquired in the ordinary course of business and the
Seller did not have any agreements, plans or understandings, directly or
indirectly, with any person to distribute the securities.
(9) Excipio Group, S.A. is not a reporting company listed under Section 13 or
15(d) of the Exchange Act or an investment company. David Coloris exercises sole
voting power and dispositive powers with respect to shares owned by Excipio
Group, S.A. Excipio Group, S.A. is not a broker-dealer or an affiliate of a
broker-dealer. The shares of common stock being registered under this prospectus
were acquired in the ordinay course of business and at the time of purchase the
seller did not have any agreements, plans or understandings, directly or
indirectly, with any person to distribute the securities.
PLAN OF DISTRIBUTION
We are registering the shares of common stock (i) issuable upon conversion of
the Series A Preferred shares, (ii) issuable upon exercise of the Warrants,
(iii) issuable upon conversion of the Secured Convertible Promissory Note held
by Services By Designwise, Ltd., (iv) issuable upon exercise of the Warrant held
by Paul Masanek, and (v) held by Paul Masanek in connection with the Agreement
and Plan of Merger between the Company and Technology Alternatives, Inc. We will
not receive any of the proceeds from the sale by the Selling Stockholders of the
shares of common stock. We will bear all fees and expenses incident to our
obligation to register the shares of common stock. We are also registering
840,000 shares of common stock and 800,000 shares of common stock underlying
warrants which the Company intends to issue to Sunrise Securities Corp., for
investment banking services in connection with its recent Series A Preferred
stock and Warrant financing, 240,000 shares of common stock and 1,000,000 shares
of common stock underlying options the Company intends to grant to Sunrise for
public relations services, and 600,000 shares issued or issuable to Excipio
Group, S.A., in connection with business development services.
The Selling Stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the Selling
Stockholders will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
14
o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
o through the writing of options, whether such options are listed on an options
exchange or otherwise;
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o pursuant to Rule 144 under the Securities Act;
o broker-dealers may agree with the selling securityholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the Selling Stockholders effect such transactions by selling shares of common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the Selling Stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the Selling Stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume.
The Selling Stockholders may also sell shares of common stock short and deliver
shares of common stock covered by this prospectus to close out short positions.
The Selling Stockholders may also loan or pledge shares of common stock to
broker-dealers that in turn may sell such shares. The Selling Stockholders may
pledge or grant a security interest in some or all of the preferred shares,
warrants or shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, the list of Selling Stockholders to include the pledgee, transferee
or other successors in interest as Selling Stockholders under this prospectus.
The Selling Stockholders also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus. The Selling Stockholders and any broker-dealer participating in
the distribution of the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At
the time a particular offering of the shares of common stock is made, a
prospectus supplement, if required, will be distributed which will set forth the
aggregate amount of shares of common stock being offered and the terms of the
offering, including the name or names of any broker-dealers or agents, any
discounts, commissions and other terms constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.
Under the securities laws of some states, the shares of common stock may be sold
in such states only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock may not be sold unless such
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with. There can
be no assurance that any Selling Stockholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The Selling Stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the Selling
Stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market- making
activities with respect to the shares of common stock.
15
We will pay all expenses of the registration of the shares of common stock
pursuant to the registration rights agreement, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with
state securities or "blue sky" laws; provided, however, that a Selling
Stockholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the Selling Stockholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the Selling Stockholders will be entitled to contribution. We may
be indemnified by the Selling Stockholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the Selling Stockholder specifically for use in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this prospectus forms
a part, the shares of common stock will be freely tradable in the hands of
persons other than our affiliates.
LEGAL PROCEEDINGS
The Company is currently not involved in any litigation.
Paul Masanek ("Masanek"), and a company controlled by him, Services By
Designwise, Ltd. ("SBD"), previously filed a lawsuit in the State of Illinois
against us (the "Lawsuit") 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 alleged 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.,
amounted to a transfer of all or substantially all of the assets of Technology
Alternatives, Inc., effectively diluted his ownership in Technology
Alternatives, Inc., and diverted a corporate opportunity from Technology
Alternatives, Inc.
On December 16, 2004, the Lawsuit was dismissed with prejudice and Masanek and
SBD settled all their disputes in connection with the Lawsuit. In connection
therewith, the Company entered into several agreements with Masanek and/or SBD,
namely (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"), and (x) an Assignment and Bill
of Sale (collectively, the "Settlement Documents"). The material terms of the
Settlement Documents are set forth below:
Agreement and Plan of Merger
Pursuant to the Merger Agreement, all of the shares of common stock of
Technology Alternatives, Inc.(previously held by Solomon and Masanek) were
exchanged for 9,544,000 shares of the common stock of the Company. TechAlt
Acquisitions, Inc., a wholly-owned subsidiary of the Company, merged with and
into Technology, with Technology becoming a wholly-owned subsidiary of the
Company. 500,000 shares of the common stock of the Company were 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 released each other from any and all
liabilities in connection with or arising from their relationship and Masanek
(i) voted 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
were exchanged for approximately 9,544,000 shares of our common stock, and (ii)
transferred certain of the intellectual property of SBD to us. The Company (i)
rescinded ab initio the License Agreement immediately prior to the consummation
of the Merger Agreement (which rescission included rescission ab ignition of the
10,044,000 shares of common stock issued pursuant to the License Agreement),
(ii) paid Masanek $650,000 in cash, (iii) entered into Sales, Consulting,
Registration Rights, Right of First Refusal and Escrow Agreements, (iv) issued
to Masanek the Warrant and to SBD the Note, (v) agreed to provide Masanek with
all the information a member of the Board of Directors is entitled to receive
(upon his request), (vi) agreed to provide Masanek a 10% finder's fee in the
event Masanek introduces to us a company that purchases all or substantially all
of our assets or stock, (vii) provided 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) paid the attorneys' fees of Masanek.
Sales Agreement
Pursuant to the Sales Agreement, for a period of three years, and on an annual
basis, SBD shall (i) manufacture and supply to us certain equipment and systems
with an aggregate purchase price of $1,250,000 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.
16
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
(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 December 15, 2004, 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. At the election of SBD, any or all
of the Note may be converted despite prepayment.
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. The Warrant also contains a cashless exercise
provision.
Registration Rights Agreement
Pursuant to the Registration Rights Agreement, Masanek and SBD shall be entitled
to have registered by the Company for resale those shares of common stock
issuable to Masanek upon consummation of the Merger Agreement and upon exercise
of the Warrant. SBD shall be entitled to have registered those shares of common
stock issuable upon conversion of the Note
Right of First Refusal Agreement
Pursuant to the Right of First Refusal Agreement effective November 19, 2004,
for a period of one year, 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 and SBD prior to any sale by
Masanek or SBD of those shares.
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.
Assignment and Bill of Sale
Pursuant to the Assignment and Bill of Sale, SBD assigned 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.
In addition to the above documents, immediately prior to the effectiveness of
the Agreement and Plan of Merger pursuant to which Technology Alternatives,
Inc., became a wholly-owned subsidiary of the Company, the Company and
Technology agreed to rescind the Intellectual Property License Agreement
executed by the parties on August 20, 2004 pursuant to an Agreement to Rescind
Intellectual Property License Agreement (the "Rescission Agreement"). Pursuant
to the Rescission Agreement, Technology rescinded ab initio its licensing of
certain of its intellectual property licensed to the Company and the 10,044,000
shares of common stock issued in connection with the Intellectual Property
License Agreement were rescinded ab initio pursuant to the Rescission Agreement.
17
DIVIDEND POLICY
We have never declared or paid any cash dividends on our shares of common stock
and do not anticipate paying any cash dividends in the foreseeable future.
Currently, we intend to retain any future earnings for use in the operation and
expansion of our business. Any future decision to pay cash dividends will be at
the discretion of our board of directors and will depend upon our financial
condition, results of operations, capital requirements and other factors our
board of directors may deem relevant.
TECHALT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes to
the financial statements included elsewhere in this prospectus. This discussion
contains forward-looking statements that relate to future events or our future
financial performance. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements. These risks and other factors include, among
others, those listed under "Risk Factors" and those included elsewhere in this
prospectus.
When used in this prospectus, the words or phrases "would be", "will allow",
"intends to", "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform act of 1995. The Company cautions readers not to
place undue reliance on any forward-looking statements, which speak only as of
the date made, and advises readers that forward-looking statements involve
various risks and uncertainties. The Company does not undertake, and
specifically disclaims any obligation to update any forward-looking statements
to reflect occurrences or unanticipated events or circumstances after the date
of such statement.
YEARS ENDED DECEMBER 31, 2003 AND 2002
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operation and financial condition as of December 31, 2003 and 2002 and for
the years then ended. The discussion should be read in conjunction with the
financial statements and notes thereto.
PLAN OF OPERATION - At December 31, 2003, the Company has no business
operations, and very limited assets or capital resources. The Company's business
plan is to seek one or more potential business ventures that, in the opinion of
management, may warrant involvement by the Company. The Company recognizes that
because of its limited financial, managerial and other resources, the type of
suitable potential business ventures which may be available to it will be
extremely limited. The Company's principal business objective will be to seek
long-term growth potential in the business venture in which it participates
rather than to seek immediate, short-term earnings. In seeking to attain the
Company's business objective, it will not restrict its search to any particular
business or industry, but may participate in business ventures of essentially
any kind or nature. It is emphasized that the business objectives discussed are
extremely general and are not intended to be restrictive upon the discretion of
management.
The Company will not restrict its search for any specific kind of firms, but may
participate in a venture in its preliminary or development stage, may
participate in a business that is already in operation or in a business in
various stages of its corporate existence. It is impossible to predict at this
stage the status of any venture in which the Company may participate, in that
the venture may need additional capital, may merely desire to have its shares
publicly traded, or may seek other perceived advantages which the company may
offer. In some instances, the business endeavors may involve the acquisition of
or merger with a corporation which does not need substantial additional cash but
which desires to establish a public trading market for its common stock.
The Company does not have sufficient funding to meet its long-term cash needs.
The Company believes that its cash at December 31, 2003 will be sufficient to
support the company's planned operations for the next twelve months. The sole
officer and director has express intent that to the extent necessary the Company
will seek to raise additional funds through the sale of equity securities or by
borrowing funds until a suitable business venture can be completed. As of
December 31, 2003, Management does not anticipate raising funds during the next
twelve months. There is no assurance that the Company will be able to
successfully identify and/or negotiate a suitable potential business venture or
raise additional funds if and when needed.
The Company has experienced net losses during the development stage (1994 to
present) and has had no significant revenues during such period. During the past
two fiscal years the Company has had no business operations. In light of these
circumstances, the ability of the Company to continue as a going concern is
significantly in doubt. The accompanying financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
Off-Balance sheet arrangements - The Company does not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on its financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors.
18
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
During the nine months ended September 30, 2004, the Company's net loss was
$834,000 as compared to a net loss of $5,000 during the comparative prior year
period. Prior to August 24, 2004, the Company had no business operations, and
very limited assets or capital resources, and its business plan was to seek one
or more potential business ventures that, in the opinion of management, may
warrant involvement by the Company. As a result of transactions occurring in
August 2004, as described below, and which include, but not limited to the
License Agreement, sale of Series A Convertible Preferred Stock, the
Compensation Agreement, the financial consulting arrangement and the Agreement
with IBM, the Company's operations now relate to sales of wireless,
multi-network communications hardware and software solutions to be used by
emergency first responders such as Police, EMS and other Homeland Security
Agencies.
The Company's net loss of $834,000 for the nine months ended September 30, 2004,
all of which for the exception of $18,000 related to the period August 24
through September 30, 2003, included $173,000 of compensation agreement expense
representing amounts owed the Company's Chief Executive Officer upon execution
of the Compensation Agreement, which such amounts have not been paid as of
September 30, 2004, and $150,000 of financial consulting services expense
representing the value of 300,000 shares of Company common stock issued to a
financial consultant for services provided. In connection with the License
Agreement, the Company paid certain TAI liabilities of approximately $238,000,
which were subsequently paid to TAI and others. The amount of paid liabilities
has been allocated to "In-process Research and Development" costs pertaining to
the intellectual property rights licensed in connection with the License
Agreement and were immediately expense as of the license date as a result of the
licensed Intellectual Property not having yet attained technological
feasibility.
Selling, general and administrative expenses of $222,000 included approximately
$135,000 of legal and accounting fees, $101,000 of which are accrued at
September 30, 2004. The remaining $87,000 of selling, general and administrative
and the $51,000 of research and development expenses are comprised primarily of
compensation and related expenses.
LIQUIDITY AND CAPITAL RESOURCES
During the nine-months ended September 30, 2004, cash used by operating
activities was approximately $137,000 as compared to cash used of $8,000 during
the comparative prior year period. Cash provided by financing activities for the
nine-months ended September 30, 2004 was $158,000, resulting primarily from net
proceeds received from sale of Series A Convertible Preferred Stock during
August 2004 of $460,000 and net proceeds of $15,000 received from the sale of 15
million shares of Company common stock in March 2004, reduced by $238,000 of
payments to TAI and others in connection with the License Agreement, and by
$77,000 of payments to two of the Company's former majority shareholders in
connection with cancellation of approximately 27.2 million shares of Company
common stock pursuant to terms of the License Agreement, and by $10,000 for
repayment of notes payable to related parties. Cash provided by financing
activities during the comparative prior year period, was $10,000 resulting from
proceeds pursuant to borrowings from related parties.
RECENT DEVELOPMENTS -
LICENSE AGREEMENT - On August 20, 2004, the Company and its then majority (52%)
shareholder and sole member of its board of directors (the "Warranting
Shareholder") entered into an Intellectual Property License Agreement with
Technology Alternatives, Inc. ("TAI"), which agreement (the "License Agreement")
was consummated on August 24, 2004 ("Closing"). Pursuant to the License
Agreement, in exchange for the issuance of 10,044,000 shares of Company common
stock ("Common Stock"), the Company licensed certain intellectual property owned
by TAI. The initial term of the License is 6 months, which 6 month term is
automatically extended for additional 6 month terms until terminated by mutual
agreement of the Company and TAI. As partial consideration for entering into the
License Agreement, the Company will also receive $100,000 cash to satisfy
certain liabilities. In connection with the License Agreement, 27,219,000 shares
of Common Stock were cancelled.
The License Agreement provides for the Company to raise equity funding (cash) of
at least $500,000 within 5 days following Closing (the "Initial Funding"), and
of at least an additional $3.5 million within 90 days following Closing (the
"Final Funding"). In the event the fundings are not timely completed or if the
"Historical Stockholders" own less than 8% of the outstanding common stock upon
consummation of the Final Funding, then the Warranting Shareholder shall have
the option for 14 calendar days to terminate the Agreement, subject to certain
remedy provisions.
After issuance of shares and cancellation of shares in connection with the
License Agreement, TAI owns 4 million shares of the 12 million total outstanding
and James E. Solomon ("Solomon"), the majority shareholder of TAI, directly or
beneficially owns an additional approximately 4.5 million shares. In certain
circumstances, Solomon, voting shares directly or beneficially owned, along with
voting shares beneficially owned by TAI, has control to vote approximately 71%
of the Company's outstanding common shares.
In connection with the License Agreement, Solomon was appointed to the Board of
Directors of the Company and appointed President and Chief Executive Officer of
the Company, and the Warranting Shareholder resigned from all positions as an
officer and director of the Company.
19
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
with a cashless exercise provision (the "Warrants") and Additional Investment
Rights to purchase 3.5 million additional shares of Series A Preferred and
warrants to purchase 7,000,000 shares of common stock at a purchase price of
$1.00 per share (the "Series A Preferred Rights") (the "Offering"). Each share
of Series A Preferred is convertible under certain circumstances into two shares
of the Company's common stock. In October 2004, pursuant to the Additional
Investment Rights, the Company issued an additional 170,000 shares of Series A
Convertible Preferred Stock and Warrants to purchase 340,000 shares of common
stock, each security having the same terms as those in the Offering, and
received cash proceeds of $170,000. The Series A Preferred contain registration
rights and damages of up to 3% per month based on filing and effectiveness
deadlines.
Terms of Series A Preferred provides for, among other things, cumulative
dividends to be paid to holders at a rate of 5% per annum, which accumulate
daily from issuance date and payable quarterly, in certain circumstances payable
in the Company's common stock, each preferred share to be convertible into 2
shares of Company common stock, subject to anti-dilution conversion rate
adjustments, a $2.00 per share liquidation preference amount, payment of
dividends and distributions to holders of common stock to the same extent as if
such holders of preferred stock had converted into common shares, voting rights
on an as-converted basis and limits payment of dividends on common stock until
certain financial targets are met.
COMPENSATION AGREEMENT - In August 2004, the Company entered into an Employment
Agreement with Solomon, pursuant to which Solomon is to be employed by the
Company as Chief Executive Officer for an initial period of 3 years, which
period shall be automatically renewed until terminated by the Company. The
Employment Agreement provides for annual compensation of $175,000, an
opportunity for Solomon to earn additional annual bonuses upon the Company
attaining certain financial targets, and for the Company to grant Solomon
options to purchase 1 million shares of Company common stock at an exercise
price being fair value at date of grant, subject to vesting. During the three
months ended September 30, 2004, the Company recorded approximately $130,000 of
compensation expense incurred upon execution of the Employment Agreement for
compensation due upon signing and approximately $43,000 of expense relating to
reimbursement to Solomon for costs and expenses incurred in connection with
development and support of Intellectual Property acquired pursuant to the
License Agreement. The Employment Agreement also provides for the Company to pay
Solomon for certain executive officer benefits throughout the term.
LITIGATION AND SETTLEMENT AGREEMENT - Paul Masanek ("Masanek"), and a company
controlled by him, Services By Designwise, Ltd. ("SBD"), filed a lawsuit in the
State of Illinois against us asserting among other things, that it was improper
for the Company to enter into an Intellectual Property License Agreement with
Technology Alternatives, Inc. pursuant to which certain of the intellectual
property of Technology Alternatives, Inc. was licensed to the Company. Masanek
also alleges that the License Agreement was an attempt to "squeeze" him out from
being permitted to make decisions regarding Technology Alternatives, Inc., was
not an acceptable business transaction for Technology Alternatives, Inc.,
amounts to a transfer of all or substantially all of the assets of Technology
Alternatives, Inc., effectively dilutes his ownership in Technology
Alternatives, Inc., and diverts a corporate opportunity from Technology
Alternatives, Inc.
The Company has reached an agreement in principal with Masanek and SBD to
dismiss the lawsuit against the Company. The settlement agreements anticipated
to be executed by the parties consist of the following agreements: (i)
Settlement Agreement, (ii) Sales Agreement, (iii) Consulting Agreement, (iv)
Secured Convertible Promissory Note convertible into 1,125,000 shares of our
common stock at $1.00 per share, (v) a Warrant to purchase 750,000 shares of our
common stock, exercise price of $1.00 per share, (vi) Registration Rights
Agreement, (vii) Right of First Refusal Agreement, (viii) Security Agreement,
and (ix) Agreement and Plan of Merger by and among the Company, Technology
Alternatives, Inc., TechAlt Acquisitions, Inc., James E. Solomon and Masanek
("Merger Agreement") (collectively, the "Settlement Documents"). The Settlement
Documents will not become effective until the satisfaction of certain conditions
of an Escrow Agreement. As of the date of this Registration Statement, the
material terms of the Escrow Agreement were still being negotiated among the
parties.
FINANCIAL CONSULTING ARRANGEMENT - Pursuant to terms of an arrangement with a
financial consultant, in August 2004, the Company issued 300,000 shares of its
common stock for services provided. The Company has accounted for this as
financial consulting expense of $150,000, the estimated fair value of common
stock issued, and as an increase in common stock and paid-in capital.
AGREEMENT WITH IBM - On October 11, 2004, the Company entered into a Statement
of Work ("SOW") with International Business Machines Corporation ("IBM") for the
Phase 1 Implementation of the Company's wireless communications product line in
connection with Cook County's mobile wireless video and data network project.
The SOW serves as the Company's official notice and authorization to begin
implementation of and billing for the project. Pursuant to terms of the SOW, the
Company will be providing hardware and software, and maintenance services
through 2009, under Phase 1 for which it will receive payments of approximately
$2.9 million.
In Phase 1 of the project, 15 radio towers and 32 municipal and county buildings
will be configured as wireless hotspots. The Company's multi-network capable
communications modules will be used to transmit video and data to police, fire,
and emergency services vehicles. This live streaming video will help first
responders orchestrate a coordinated response to emergencies. The wireless
network will provide first responders in remote locations with information
already shared on the county's wired network. Police, fire and emergency
services personnel will have real-time access to law enforcement databases, GIS
information, hazmat information and other data on the Cook County network.
FACILITIES LEASE - In September 2004, the Company entered into a lease agreement
for corporate office facilities having a term ending August 2006 and providing
for minimum rental payments of approximately $40,000, $123,000 and $83,000 in
2004, 2005 and 2006, respectively.
20
EMPLOYEES - As of November 2004, the Company has 17 full-time employees,
approximately 12 of which work at the Company's corporate office facilities in
Arlington Heights, Illinois, a suburb of Chicago. Monthly compensation expense
approximates $150,000 .
PROMISSORY NOTE - In October 2004, the Company entered into a $13,000 Promissory
Note payable to a bank, due April 2007, bearing interest at an annual rate of
5.75%, and payable at $467 per month for 30 months. The Promissory Note is
collateralized by an automobile owned by the Company and is guaranteed by
Solomon.
REGISTRATION STATEMENT ON FORM SB-2 - The Company is in the process of filing a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
regarding the registration of approximately 34 million shares of the Company's
common stock to be sold by certain stockholders of the Company. The selling
stockholders will offer the common stock in amounts, at prices and on terms to
be determined at the time of the offering. The Company will not receive any
proceeds from the sales of the common stock by the selling stockholders. Shares
of the Company's common stock are not currently quoted on any exchange or the
over-the-counter bulletin board market. The Company has applied for trading of
its common stock on the over-the-counter bulletin board.
BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTIES - Since inception, the
Company has incurred losses and may never achieve or sustain profitability.
Operating expenses are expected to increase significantly as the Company expands
its sales and marketing efforts and otherwise supports its expected growth.
Given these planned expenditures, the Company may incur additional losses in the
near future. The Company needs additional financing and could be required to cut
back or stop operations if sufficient funding is not raised. The Company's
ability to continue operations will depend on positive cash flow, if any, from
future operations and its ability to raise additional funds through equity or
debt financing. While, Company management anticipates that cash to be received
in the future resulting from the Agreement with IBM, and additional cash to be
received from private and institutional investors will be sufficient to fund our
current operations and capital requirements for the next 12 months, there can be
no assurance that such amounts will be realized.
As disclosed in report of Independent Registered Public Accounting Firm on the
Company's financial statements for the years ended December 31, 2003 and 2002,
these matters raise substantial doubt about the Company's ability to continue as
a going concern. The accompanying financial statements have been prepared on the
basis that the Company will continue as a going concern and do not include any
adjustments to reflect the possible future effects on the recoverability of
assets and liquidation of liabilities that may result from these uncertainties.
CRITICAL ACCOUNTING POLICIES
The Company's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which among other
things, requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of financial statements and reported amounts of
revenues and expenses during reporting periods. These estimates and assumptions
are affected by management's application of accounting policies. Critical
accounting policies applied in September 30, 2004 financial statements include
accounting for research and development costs, accounting for issuance and
cancellation of common shares in connection with the License Agreement, as well
as preparation of financial statements on a going concern basis.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs, which are
comprised primarily of compensation and related costs, are expensed as incurred.
The value of acquired In-process Research and Development is charged to expense
on the date of acquisition.
ACCOUNTING FOR THE LICENSE AGREEMENT - Inasmuch as Solomon has a majority
ownership interest in the Company after the issuance of common shares in
connection with the License Agreement, the Intellectual Properties rights
acquired by the Company have been recorded in the amount of Solomon's net book
value of such assets, and that same value assigned to shares issued. As a result
of previously expensing costs 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.
TECHNOLOGY ALTERNATIVES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes to
the financial statements included elsewhere in this prospectus. This discussion
contains forward-looking statements that relate to future events or our future
financial performance. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements. These risks and other factors include, among
others, those listed under "Risk Factors" and those included elsewhere in this
prospectus.
21
YEARS ENDED DECEMBER 31, 2003 AND 2002
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the results of
operation and financial condition as of December 31, 2003 and 2002 and for the
years then ended for Technology Alternatives, Inc., an Illinois corporation
("TAI"). The discussion should be read in conjunction with the financial
statements and notes thereto
PLAN OF OPERATION - At December 31, 2003, TAI plans to continue developing its
product offerings and focus on establishing itself as a preferred service
provider within the emergency first responder and Homeland security markets. In
addition, TAI recognizes that to meet its market objectives it must also finding
suitable sources of capital.
For the fully year ending December 31, 2003, TAI generated revenues of
approximately $192,000 which was $156,000 higher than the same period in 2002.
During the past two fiscal years TAI successfully installed its first responder
technologies into several municipalities, primarily in the Chicago Metropolitan
area. Based on the market's acceptance of these installations, certain municipal
funding is being provided by the U.S. Department of Homeland Security and TAI's
product offering is uniquely suitable for that market, TAI's management
anticipates orders and revenues to grow significantly in 2004 and beyond.
However, due to its recent emergence from its development stage, negative
working capital, and continued losses, TAI's independent registered public
accounting firm have expressed concern regarding our ability to continue as a
going concern (please see footnote 1 of the condensed consolidated financial
statements). TAI intends to raise additional funds through the sale of equity
securities or by borrowing funds or by continued revenue growth, until a viable
business based has been established.
TAI's net loss for the full year ending December 31, 2003 was $686,000 compared
to a net loss of $516,000 during the comparative prior year period. Increased
losses were primarily the result of additional employee expenses in business
development and SG&A of approximately $240,000 and higher facility expenses of
$41,000. These increased expenses were partially offset by lower applications
development expenses of $115,000.
Off-Balance sheet arrangements - TAI does not have any off-balance sheet
arrangements that it believes will have a current or future material effect on
TAI's financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
TechAlt paid approximately $226,000 of TAI's liabilities. The impact of these
payments was to increase payables to TechAlt by this same amount.
During the nine months ended September 30, 2004, TAI's net loss was
approximately $815,000 as compared to a net loss of $433,000 during the
comparative prior year period. General and administrative expenses for the nine
months ended September 30, 2004 amounted to $740,000 as compared to $375,000
during the comparative prior year period. Increase was primarily due to higher
legal, TechAlt expenses, and travel related costs which increased $159,000,
$100,000 and $37,000 respectively.
Research and Development expenses for the nine months ended September 30, 2004
amounted to $52,000 as compared to approximately $11,000 during the comparative
prior year period. Increase was primarily the result of higher product
development expenses.
TAI's net loss of $814,000 for the nine months ended September 30, 2004, did not
include compensation for Jim Solomon, TAI's Chief Executive Officer. Per his
employment agreement, expenses for Mr. Solomon are TechAlt's obligations.
LIQUIDITY AND CAPITAL RESOURCES
During the nine-months ended September 30, 2004, cash used by operating
activities and capital spending was approximately $532,000 as compared to cash
used of $250,000 during the comparative prior year period. Cash provided by
financing activities for the nine-months ended September 30, 2004 amounted to
$532,000, resulting primarily from net proceeds received from capital and
working capital contributions from a related party amounting to approximately
$150,000, approximately $215,000 in advances from an officer and approximately
$226,000 in cash advances from TechAlt. Cash provided by financing activities
during the comparative prior year period, was $250,000 resulting from operating
costs paid by a related party and working capital borrowings from related party.
RECENT DEVELOPMENTS -
On December 15, 2004, TechAlt paid $650,000 to Masanek, which payment caused
certain documents and agreements to become effective pursuant to terms of an
Escrow Agreement entered into on November 20, 2004 between TechAlt, TAI,
Masanek, SBD and Solomon, and their respective attorneys. Material terms of the
agreements and transactions occurring subsequent to these payments are as
follows:
22
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 TAI 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 date of the License Agreement and
the historical operations of TAI.
SETTLEMENT AGREEMENT - Pursuant to terms of the Settlement Agreement between
TechAlt, TAI, SBD, Solomon and Masanek, (i) TAI and TechAlt agreed to rescind
the License Agreement entered into in August 2004, which rescission included the
rescission, ab initio, of 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. TAI 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 TAI 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 TAI 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.
CONTRACT TO SUPPLY EQUIPMENT TO COOK COUNTY - In July 2004, TAI was awarded a
contract to supply certain equipment, software and services to a contractor
doing business with Cook County Commissioner's 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, TAI entered into a Statement of Work
("SOW") with International Business Machines Corporation ("IBM") for the Phase 1
Implementation of TAI's wireless communications product line in connection with
Cook County's mobile wireless video and data network project. The SOW serves as
TAI's official notice and authorization to begin implementation of and billing
for the project. Pursuant to terms of the SOW, TAI 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. TAI'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 40 million shares of TAI'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.
23
BUSINESS
THE COMPANY
The Company was incorporated in Nevada on December 29, 1994 as Top Flight
Software, Inc. The Company subsequently changed its name to Dendo Global Corp.
The Company had been developing and marketing management software for pigeon
breeders and racers. However, the business proved to be unsuccessful and, during
January 1999, the Company discontinued its operations. In August of 2004, the
Company was licensed certain intellectual property of Technology Alternatives,
Inc. pursuant to an Intellectual Property License Agreement. The Intellectual
Property License Agreement was rescinded on December 15, 2004 at which time the
Company acquired Technology Alternatives, Inc., pursuant to an Agreement and
Plan of Merger. The Company, through its proprietary hardware, network, and
communications components, delivers a complete technology solution that
communicates data and mission critical imagery between remote first responders
and central command and control centers by using any and all existing public
wireless networks, coupled with secure agency networks. These existing wireless
networks include the new 802.11 or Wi-Fi networks, and spread spectrum
technologies, which include licensed frequencies, for which the carriers pay a
fee to the government to be utilized in a specific location and unlicensed
frequencies, which are free to the public to use; 802.11 or Wi-Fi networks fall
into this unlicensed category.
The Company solution provides a scalable, robust, secure, communications method
for first responders to provide interoperable communications and interagency
interoperability, communication and collaboration. The proposed Homeland
Security Agency ("HSA") budget to build this capability was $3.5 billion out of
the proposed $37.5 billion for the entire Fiscal Year 2003 HSA budget.
The Company currently offers an integrated line of products and services. The
current product offerings include: Police In-Car Video Recording Systems;
Portable Surveillance-Cam Video Recording Systems; Wireless Communications
Module; and Ruggedized Enclosure for Cisco 3200 Mobile Wireless Router
Police In-Car Video Recording Systems. The Company's principal product consists
of a ruggedized, climate- controlled "vault", which houses either VCR, DVD or
Hard Drive and control electronics, an overhead console providing a video
monitor and user interface, a forward facing 176X Zoom camera and an infra-red
rear seat camera/microphone. Enhanced versions of the systems, with a universal
laptop computer interface product, have been completed and have resulted in
relationships with, ruggedized tablet PC makers focused in the law enforcement
and emergency response industries.
Portable Surveillance-Cam Video Recording Systems. Utilizing a Pan-Tilt-Zoom
camera packaged with custom controls, tripod mount, and wireless transmission
system, these cameras are ideal for temporary surveillance situations such as
monitoring drug, gang, vandalism, and other activities.
Wireless Communications Module. Available in multi-network capable Mobile or
Fixed Location versions, this product creates a secure incident scene virtual
private network that allows first responders to maintain communications even if
major infrastructure is destroyed. The Communications Module also provides
wireless connectivity among in-building camera systems, emergency response
vehicles and dismounted first responders. Designed to be the common interface
solution in a bank robbery or school security situation, the ruggedized
enclosure allows it to withstand harsh environmental conditions such as weather
and temperature extremes in vehicles or remote placement scenarios.
Current Services Offerings: The Company has developed a series of value added
enhanced offerings and capabilities that provide a potential ongoing revenue and
relationship opportunities with both customers and solution partners. These
enhanced capabilities represent the critical differences in the Company's
ability to deliver a true "turnkey solution" for secure mobile wireless first
responder systems and differentiate the Company from most other integrators in
this space. These offerings include:
o Grant Writing
o Integration Services
o Project Implementation Services
o Maintenance and Support Services
Grant Writing. In the Fiscal Year 2004 budget, the Department of Homeland
Security has made $3.5 billion available to first responders nationwide for
equipment purchases. The Company has an on-staff grant writer to assist our
customers in obtaining these federal funds.
Integration Services. The Company's standards-based products are
open-architectured, allowing for integration with peripheral devices. The
Company has established strategic alliances with companies providing
infrastructure design and installation, peripheral device manufacturers, and
software vendors. The Company believes these relationships will generate
additional revenues for the Company when sold as part of a turnkey solution
package.
Maintenance and Support Services. In addition to the revenue stream generated by
the implementation, there are continuing revenues associated with on going
service, support, and expansion of these networks.
24
MARKETS
TechAlt is intensely focused on attractive market opportunities. The market for
communications and emergency services has been experiencing tremendous growth.
TechAlt intends to leverage the installed base of 600 local and state law
enforcement agencies with close to 2,600 units of its basic in-car VHS-based
recording systems, to develop a structured market for state-of-the-art Homeland
Security Solutions. These solutions for local, state, and federal police, fire
and EMT agencies represent a 490,000-vehicle opportunity nationwide. Assuming a
conservative 4 building to 1 police car ratio, TechAlt sees a 1,960,000
in-building camera opportunity. This in combination with TechAlt's reseller
partner's contract opportunities, positions the Company very well for accessing
the $3.5 billion interagency interoperability, communication and collaboration
Homeland Security market.
In addition, the interest being expressed by education, corporate and commercial
organizations in providing a better level of image-based security for 802.11 or
WiFi applications, as well as secure mobile wireless services continues to grow
at a 58% annual growth rate.
In the United States and internationally, emergency services markets are
experiencing a fundamental shift from wired to wireless communications. This
shift is being driven by the compelling economic and practical advantage of
migrating from a wired to a wireless infrastructure can improve an
organization's financial performance through increased productivity and reduced
costs. With TechAlt's systems, productivity can be increased through greater
functionality and flexibility in remote access locations, vehicles, portable
handheld computers and cell phones. Costs can be reduced through lower
communications expenses, as well as fewer man-hours, less paperwork and reduced
court time, and by improved community support. The result is vastly improved
community and officer safety. TechAlt is now positioned to become the dominant
market leader in providing cost-effective, reliable, and secure wireless data
communications for law enforcement and emergency services.
The solutions developed by TechAlt for this mission, critical wired and wireless
data and image delivery capability, provide an equally advantageous sales
opportunity in multiple commercial markets. Most notably these markets include
transportation, logistics, banking, insurance, vending and technical support
verticals. While TechAlt has targeted its initial marketing efforts to the first
responder communications and in-car video market, this niche represents only a
small portion of TechAlt's potential market.
Current examples of public-safety customers include the Cook County Sheriff's
Department, the Illinois State Police and the Las Vegas Metro Police. Over 600
public-safety agencies are using TechAlt's legacy equipment. The company will
also focus on private companies in industries, such as banking, casino and
retail, which have security concerns.
SALES/GROWTH STRATEGY
TechAlt will build an integrated sales team consisting of both direct and
indirect resources. Specifically, it will develop an in-house direct sales force
that will identify, train and support a network of channel partners and Value
Added Resellers ("VARS"). These partners currently include: IBM, Cisco Systems ,
Anixter International, Nextel Communications, Symbol Technologies, Verizon,
Unisys, Panasonic, cMedia, SAIC and GTSI.
One of TechAlt's stronger channel partners is Cisco, which has produced a new
line of wireless routers for the law enforcement and Department of Defense
markets for multi-network mobile communications support. TechAlt has been
certified by Cisco as a producer of a "ruggedized" enclosure for deployment in
police and emergency services vehicles. The TechAlt video solutions provide an
ideal application to demonstrate the capabilities of the Cisco Mobile Access
Router (MAR). As a result of this demonstrated capability, Cisco chose to
feature TechAlt at its International Partner Summit April 18th, 2003.
COMPETITIVE ADVANTAGES
TechAlt has a technology and marketing strategy that positions it to benefit
from the convergence of two rapidly growing markets: wireless communications and
applications to support the objectives of Homeland Security. As more and more
security threats move into the electronic world, the demand for flexible,
cost-effective communications alternatives has exploded.
TechAlt uses the mobile imaging applications and secure wireless data
communications as its entry point into this expanding marketplace. By proving
its wireless communications technology in this demanding environment, TechAlt is
well positioned to expand into other industries, including community-wide
wireless network management, banking, retail, health care, insurance, and
transportation. TechAlt believes that its technology and operational model
position it as an effective provider of secure wireless communications and
imagery to any market that uses applications that:
Serve significant numbers of remote users, Have time-critical communications,
and Require market-proven technology
TechAlt is currently working to extend itself into the areas of community-wide
wireless "Hot Spot" networks, security monitoring for banks, wireless
advertising, and wireless credit card authorizations. In addition, TechAlt is
working to expand the flexibility of the TechAlt solution to provide wireless
data communications technology for a wide variety of industries and
municipalities.
25
EMPLOYEES
As of January 19, 2005, we had 23 full-time employees. Our employees are not
covered by any collective bargaining agreement, and we have never experienced a
work stoppage. We believe that our relations with our employees are good.
PROPERTY
The Company currently leases office space for its corporate office for $8,448
per month plus additional rent for real property taxes. The term of the lease is
two years.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
NAME AGE POSITION
James E. Solomon 56 Chief Executive Officer;
Chairman of the Board of Directors
George Loera 53 Director
C. Pete Ashi 44 Director
Peter Lynch 57 President & Chief Operating Officer
James J. Hurley 56 Chief Financial Officer
Barbara Roberts 41 Vice President of Sales and Business
Development
David M. Otto 45 Secretary
Michael J. Lightfoot 54 Vice President of Administration
JAMES E. SOLOMON is the Chairman of our Board of Directors and has served as our
Chief Executive Officer since August 2004. Mr. Solomon is also the President and
Chief Executive Officer of Technology Alternatives, Inc. of Schaumburg,
Illinois. Mr. Solomon's career has been that of the technology entrepreneur and
he has been active in the technology industry for the past 32 years. Mr.
Solomon's experience includes work as a developer, engineer, and creator of
businesses in the PC, CD-ROM, Relational Database, Telecommunications and
Wireless industries.
After many years of participation in the AeA (American Electronics Association),
Mr. Solomon became the chairman for the Midwest Council, member of the national
board of directors, International and Technology committees. Through the AeA, he
has become an advisor on wireless technologies to World Business Chicago,
Chicago Software Association - Wireless Roundtable, Chicagoland Chamber of
Commerce, Metropolitan Planning Commission, Chicagoland Workforce Boards, the
Mayor's Council of Technology Advisors (Chicago) and currently is a Member of
the Governor's Broadband Task Force (Illinois).
Mr. Solomon has successfully raised over $15,000,000 through venture funds in
multiple rounds for several of his companies. He developed relationships with
every major telecommunications carrier and several minor carriers in the U.S.,
Canada, Ecuador, Colombia, Peru, Australia, New Zealand, and China markets. Mr.
Solomon developed partner relationships with NCR, Diebold, Fujitsu, and created
strategic relationships with Chase, Citicorp, First Union, Nations, Bank of
America and Wells-Fargo Banks.
Mr. Solomon's companies developed the technology for the electronic image
capture, store and forward of "mug shots" for law enforcement for the Chicago
police department. Other clients have included AT&T, Hyatt Hotels, Wal-Mart,
Kmart, J.C. Penney's, and Sears for development of mission critical on-line
transaction processing applications. Mr. Solomon's company was one of the first
licensees of CD-ROM technology in the U.S. and developed strong international
relationships in the Netherlands and Japan. As a result he became one of the
industry leaders in tools for image digitization, storage, retrieval and
transmission for the insurance, banking and intelligence markets.
Mr. Solomon has held a series of positions with ever increasing responsibilities
for both domestic and international companies including GOOItech, Sayers
Advanced Systems, Informix, MicroTRENDS, Digital Research, Wang Laboratories and
Tandem Computer. These organizations gave him the opportunity to develop
relationship and management skills with customers in the Telecommunications,
Insurance, Financial, Banking, Distribution and Pharmaceutical industries.
Mr. Solomon's educational background includes the University of Missouri at
Columbia, Civil Engineering, University of Missouri at Kansas City, Business
Administration, and the Stanford University Executive MBA Program. In addition
to Mr. Solomon's AeA duties his professional memberships have included the Chief
Information Officer Organization, Strategic Account Management Association
(SAMA), Wireless Data Forum, Cellular Telephone Industry Association (CTIA),
American Banking Association, Banking Industry Association, and the
International Association of Home Financing.
26
PETER LYNCH has served as our Chief Operating Officer since October of 2004 and
as our President since February 2005. Mr. Lynch has extensive senior executive
level management experience in the broadband communications industry including a
combination of domestic and international entrepreneurial assignments. Mr.
Lynch's radio frequency experiences originate from building and growing cable
television operations initially. Mr. Lynch jointly founded a British competitive
communications carrier that provided cable TV and voice communication services
over an integrated network. Mr. Lynch's wireless communication industry
experience started with a publicly traded, MMDS television services provider
where he led their evolution into a wireless ISP business model as the company's
Chief Operating Officer. Internetworking and data communications remained at the
center of Mr. Lynch's activities when he became the President of a competitive
local exchange carrier (CLEC) that pioneered the integration of packet telephony
and high-speed Internet using ATM circuits. Mr. Lynch returned to the wireless
arena when he became Chairman of a leading provider of antennas to the LMR,
Wi-Fi, and WLAN markets.
GEORGE LOERA has served as a member of our Board of Directors since August of
2004. For the past 18 years Mr. George Loera has been the owner and President of
Chicago United Industries. Ltd., a multi-million dollar distribution and supply
company located in Chicago, Illinois. Mr. Loera is active in local civic and
business affairs, being Co-Founder and Past President of the Mexican-American
Chamber of Commerce of Illinois from 1992 to 1995. Mr. Loera also served as
Chairman of the Board of that organization. Mr. Loera is also the Founder and
Co-Chair of Paths to Achievement, a mentoring organization for Chicagoland
middle school children.
Mr. Loera also previously served as a director for 6 years and as Vice President
for the Hispanic American Construction Industry Association, an association
focusing on promoting opportunities for Hispanic construction, engineering and
supply companies. He has been a member of the Hispanic American Construction
Industry Association for the past 18 years.
Mr. Loera was the Co-Chair of the Latino Coalition in Defense of Affirmative
Action from 1987 to 1989. Mr. Loera is currently a Director for the Latino
Technology Association, an association focusing on promoting opportunities for
Latino technology businesses.
Mr. Loera earned his BBA in Organizational Management from the University of
Iowa in 1977, and was enrolled in the Electrical Engineering Curriculum at the
University of Illinois, Champaign, Illinois from 1969 to 1970. Mr. Loera also
served as a Sergeant in the United States Marine Corps, 1st Force Reconnaissance
Company, Fleet Marine Force, Pacific from 1971 to 1973.
C. PETE ASHI has served as a member of our Board of Directors since August of
2004. Mr. C. Pete Ashi has over 22 years of Information Systems industry
experience. Over the past five years, Mr. Ashi has served as the Vice President
of National Operations for TM Floyd & Company, a $55,000,000 Information
Technology consulting firm with major clients in the Health Insurance and
Property & Casualty industries. His career has evolved from computer programming
and support, to recruiting, sales and marketing, and management.
Mr. Ashi formed Ashi & Associates, a Dallas based search firm, in 1984 and
served as President from 1984 to 1987. Mr. Ashi relocated to Chicago in 1988 to
lead a start-up branch for IMI Systems, Inc., an Information Technology
consulting firm. Mr. Ashi worked for IMI Systems, Inc. from 1987 to 1989. In
March, 1989 Mr. Ashi was recruited to Keane, Inc, a billion dollar publicly
traded Information Technology consulting firm, to develop a sales territory. Mr.
Ashi worked for Keane, Inc. until 1993. Following his work with Keane, Inc., Mr.
Ashi joined TM Floyd & Company in 1993 as Director of Business Development and
was subsequently promoted to Vice President of Operations in 1994, followed by a
promotion to Vice President of National Operations in 1999.
Mr. Ashi is also the co-founder of the Friends of Drummond, a charitable
organization chartered with promoting education in his community, and sits on
the board of Ant Systems, Inc. Aside from his responsibilities to TM Floyd &
Company, he is the Chairman of the Illinois Century Network Policy Committee.
Mr. Ashi attended the University of Pennsylvania from 1978 to 1980 and graduated
from the University of Pittsburgh's School of Computer Technology with a BS in
1981.
JAMES HURLEY has served as our Chief Financial Officer since November 23, 2004.
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.
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.
BARBARA ROBERTS has served as our Vice President of Sales and Business
Development since October of 2004. Ms. Roberts has nineteen years of practical
and industry experience combining the disciplines of Executive Management,
Sales/Marketing, Finance, Operations, and Systems Integration. During her twelve
years with Electronic Data Systems, Inc. ("EDS"), Ms. Roberts was responsible
for systems and management duties across the markets of federal, state and local
government, HealthCare, social services, transportation, and communications. Ms.
Roberts was responsible for the EDS market deployment and replication of the
U.S. operations for "Red Light Enforcement" traffic camera systems. From 1998
until 2001, as President of Redflex Traffic Systems, Inc, Ms. Roberts was
instrumental in developing the first digital traffic camera programs in the
world for ticketing red light running and speeding offenders. Ms. Roberts'
strong entrepreneurial track record and global business experience helped grow
Redflex from a startup company to an internationally recognized multi-million
dollar firm, handling camera manufacturing, application development, court
integration, and on-going citation processing. Prior to joining TechAlt, Inc.,
Ms. Roberts worked for Technology Alternatives, Inc., of Schaumburg, Illinois
beginning in 2002.
27
Ms. Roberts graduated from Humboldt State University located in Arcata, CA in
1985 with her B.A in Business Administration/Finance and double minors in
Computer Information Systems and Speech Communications.
DAVID M. OTTO has served as our Secretary since August of 2004. David M. Otto is
a Seattle-based attorney and President of The Otto Law Group. Mr. Otto's
practice focuses on corporate finance, securities, mergers and acquisitions and
corporate law and governance. Mr. Otto began his law practice on Wall Street in
New York City in 1987, where he concentrated on significant corporate leveraged
buyout and takeover transactions and equity and debt offerings for investment
banks, venture capital firms and Fortune 1000 companies. In 1991, Mr. Otto moved
to Seattle in order to dedicate his extensive experience in corporate law and
finance, mergers and acquisitions, corporate governance, public and private
securities offerings and venture capital financing to entrepreneurs, technology
innovators, start-up, emerging growth and middle-market businesses. In July of
1999, Mr. Otto founded his own firm, The Otto Law Group, PLLC, in Seattle,
Washington, to better serve technology-based start-up, emerging growth and
middle-market companies with respect to corporate finance, securities, strategic
development, corporate governance, mergers, acquisitions and venture capital and
private equity matters. Recent transactions completed by The Otto Law Group
include an initial public offering for a digital technology company, acquisition
and financing of an education services and products public company, private
financing for the national expansion of a window coverings manufacturer, the
Securities Exchange Act of 1934 Act compliance work for several technology and
service businesses, a share exchange and proxy for a publicly held company,
rendering opinions regarding various cross-border financings and acquisitions
and private placements for electronic component, digital music, e-commerce and
wireless broadband companies.
Mr. Otto has authored "Venture Capital Financing" and "Taking Your Company
Public" and lectured to businessmen, accountants, lawyers, and graduate students
at the University of Washington Business School on venture capital financing and
going public. He is currently a member of the Board of Directors of Dtomi, Inc.,
Uniphyd Corporation, SinoFresh Healthcare, Inc., Excalibur USA Custom Window
Fashions, Inc. and Saratoga Capital Partners, Inc. He is also a member of the
American Bar Association Committee on the Federal Regulation of Securities,
Subcommittee on the 1933 Act and Chairman of the Legislation Subcommittee of the
ABA's Venture Capital and Private Equity Committee. Mr. Otto is admitted to
practice law in New York and Washington.
Mr. Otto graduated from Harvard University in 1981 with his A.B. in Government
and Fordham University School of Law in 1987 where he earned his Juris Doctorate
and served as a Commentary Editor on the Fordham International Law Journal.
MICHAEL J. LIGHTFOOT has served as our Vice President of Administration since
January 1, 2005. Prior to joining our Company, Mr. Lightfoot was a member of
Michael J. Lightfoot, P.C., a law firm specializing in contracts, advising on
content and data protection, banking, insurance, WiFi and international
transactions from 1998 until December 2004. From 1997 until 1998 Mr. Lightfoot
served as General Counsel - Vice President of Business Development for
Inventions Machine Corporation of Boston, Massachusetts, for whom Mr. Lightfoot
handled commercial, intellectual property and licensing matters. Mr. Lightfoot
graduated from Lewis University in 1974 with his B.S. in Computer Science and
Northern Illinois Universiy in 1978 where he earned his Juris Doctorate.
There are no family relationships among the Company's officers and directors.
All Directors of the Company hold office until the next annual meeting of the
shareholders and until successors have been elected and qualified. Executive
Officers of the Company are appointed by the Board of Directors at meetings of
the Company 's Directors and hold office until they resign or are removed from
office.
None of the Directors or Officers has been involved in any bankruptcy or
criminal proceeding during the past five years.
EXECUTIVE COMPENSATION
None of TechAlt's executive officers earned in excess of $100,000 during the
fiscal years ended December 31, 2003 and 2002. For Technology Alternatives,
Inc., in 2002 Jim Solomon's compensation was $100,500, and $39,000 in 2003.
EMPLOYMENT AGREEMENTS
Mr. Solomon and the Company entered into an Employment Agreement. Per the terms
of the Employment Agreement, Mr. Solomon is to be employed by the Company as the
Chief Executive Officer for an initial period of three (3) years, which period
shall be automatically renewed for one year terms until terminated by the
Company. Mr. Solomon's annual salary is One Hundred and Seventy Five Thousand
Dollars ($175,000). He is eligible to receive an annual cash bonus of up to Two
Hundred Seventy Five Thousand Dollars ($275,000) in connection with the gross
revenues of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any options to any of our officers during the year ended
December 31, 2003.
STOCK OPTION PLANS
The Company does not currently have a Stock Option Plan but is in discussions to
adopt a Stock Option Plan for its employees.
28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 19, 2005:
- -------------------------------------------------------------------------------------------------
Name and Address of Beneficial Owner Amount and Nature of Percentage of
Beneficial Ownership Class(1)
- -------------------------------------------------------------------------------------------------
James E. Solomon, President and CEO, Director
3311 N. Kennicott Ave., Suite A, 3,867,440 32%(2)
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
C. Pete Ashi, Director
3311 N. Kennicott Ave., Suite A, 75,000 1%
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
Diane Marie Loera
3311 N. Kennicott Ave., Suite A, 600,000 4%
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
Peter Lynch
3311 N. Kennicott Ave., Suite A none
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
James Hurley
3311 N. Kennicott Ave., Suite A none
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
Barbara Roberts
3311 N. Kennicott Ave., Suite A none
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
David M. Otto
900 4th Avenue, Suite 314 none
Seattle, WA 98164
- -------------------------------------------------------------------------------------------------
Paul Masanek 4,676,560 38%
5250 Cleveland Street
Skokie, IL 60077
- -------------------------------------------------------------------------------------------------
Michael Lightfoot
3311 N. Kennicott Ave., Suite A 25,000 1%
Arlington Heights, IL 60004
- -------------------------------------------------------------------------------------------------
Directors and Executive Officers as a Group 4,567,440(3) 38%
- -------------------------------------------------------------------------------------------------
(1) The Company currently has 3,300,000 shares of Series A Preferred stock
issued and outstanding which may be converted into 6,600,00 shares of common
stock, in the aggregate, subject to certain adjustments. None of the shares of
Series A Preferred stock are held by the above shareholders. The Series A
Preferred vote with the common stock on an as converted basis.
(2) Family member of George Loera, a member of the board of directors of the
Company.
(3) Based on 12,027,719 shares of common stock issued and outstanding as of
January 19, 2005. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as otherwise indicated, we
believe that the beneficial owners of the common stock listed above, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
29
DISCLOSURE OF SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our articles of incorporation allows and our bylaws require that we indemnify
our directors and officers who are or were a party to, or are threatened to be
made a party to, any proceeding (including a derivative action if the director
or officer is not found liable to us), against all expenses reasonably incurred
by a director or officer in connection with such a proceeding (including
expenses, judgments, fines and amounts paid in settlement), if the director or
officer acted in good faith, in a manner he or she believed was not opposed to
our best interests, and, with respect to a criminal proceeding, had no reason to
believe that his or her conduct was unlawful.
Our bylaws generally require that we advance to our directors and officers
expenses incurred by them in defending a proceeding in advance of its final
disposition, provided that the director or officer agrees to reimburse us for
such advances if it is ultimately found that the director or officer is not
entitled to indemnification. In addition, our bylaws permit us to purchase
insurance on behalf of our directors and officers against any liability asserted
against them in such capacity. We intend to obtain such insurance.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of us in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
DESCRIPTION OF SECURITIES
COMMON STOCK
Holders of our common stock are entitled to one vote for each share on all
matters submitted to a stockholder vote and may not cumulate their votes.
Holders of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of our liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock.
Holders of our common stock have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to our common stock.
The rights of the holders of common stock are subject to any rights that may be
fixed for holders of preferred stock. All outstanding shares of common stock
are, and the shares underlying all options and public warrants will be, duly
authorized, validly issued, fully paid and non-assessable upon our issuance of
these shares.
PREFERRED STOCK
Our certificate of incorporation provides for the issuance of up to 100,000,000
shares of preferred stock. As of the date of this prospectus, there are
3,300,000 outstanding shares of Series A Preferred stock.
Effective August 23, 2004, the Company filed a Certificate of Designations with
the Nevada Secretary of State designating the preferences and rights of
4,000,000 shares of Series A Preferred. The Certificate of Designation was
amended on December 28, 2004 to increase from 4,000,000 to 4,820,000 that amount
of shares of Series A Preferred designated and authorized for issuance. Each
share of Series A Preferred converts into two (2) shares of common stock,
subject to certain adjustments, and votes on an as converted basis with the
common stock shareholders of the company.
The holders of the Series A Preferred are be entitled to receive cumulative
dividends ("Dividends") at a rate of 5.0% per annum (the "Dividend Rate"), which
shall be cumulative, accumulate daily from the Issuance Date and be due and
payable beginning on October 1, 2004 (the "First Dividend Date") and on the
first day of each Calendar Quarter after the First Dividend Date (each,
including the First Dividend Date, a "Dividend Date"). Any accumulated and
unpaid cash Dividend Payments which are not paid within five (5) Business Days
of such accumulated and unpaid Dividends' Dividend Date shall bear interest at
the rate of 15.0% per annum from such Dividend Date until the same is paid in
full (the "Default Interest"). No Dividends will be paid by the Company
subsequent to the first fiscal quarter in which the Company has EBITDA of One
Million Dollars ($1,000,000) or more.
In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of the Series A Preferred are entitled to receive
in cash out of the assets of the Company, whether from capital or from earnings
available for distribution to its stockholders (the "Liquidation Funds"), before
any amount shall be paid to the holders of any of the capital stock of the
Company of any class junior in rank to the Series A Preferred in respect of the
preferences as to distributions and payments on the liquidation, dissolution and
winding up of the Company, an amount per Series A Preferred share equal to Two
Dollars ($2.00).
30
The common stock of the Company is junior in rank to all issued shares of Series
A Preferred with respect to the preferences as to distributions and payments
upon the liquidation, dissolution and winding up of the Company. Further,
without the prior express written consent of certain of the shareholders of the
Series A Preferred, the Company may not authorize or make any amendment to the
Company's Articles of Incorporation or bylaws, or file any resolution of the
board of directors of the Company with the Secretary of State of the State of
Nevada or enter into any agreement containing any provisions, which would
adversely affect or otherwise impair the rights or relative priority of the
holders of the Series A Preferred relative to the holders of the common stock or
the holders of any other class of capital stock.
If at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of common stock (the "Purchase
Rights"), then the holders of Series A Preferred will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of common stock acquirable upon complete conversion of the Series A
Preferred (without taking into account any limitations or restrictions on the
convertibility of the Series A Preferred) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of common stock
are to be determined for the grant, issue or sale of such Purchase Rights.
If at any time from and after the Issuance Date, (i) EBITDA equals or exceeds
$1,000,000 (the "EBITDA Requirement") and (ii) the Equity Conditions shall have
been satisfied or waived in writing by the Required Holders from and including
the Mandatory Conversion Notice Date through and including the Mandatory
Conversion Date (each, as defined below), the Company shall have the right to
require each holder of the Series A Preferred to convert all or any portion of
the Series A Preferred then outstanding as designated in the Mandatory
Conversion Notice into fully paid, validly issued and nonassessable shares of
common stock.
On any matter presented to the stockholders of the Company for their action or
consideration at any meeting of stockholders of the Company (or by written
action of stockholders in lieu of meeting), each holder of outstanding Series A
Preferred shall be entitled to the number of votes equal to the number of whole
shares of common stock into which the Series A Preferred held by such holder are
convertible (subject to the limitations of Section 4(a) above) as of the record
date for determining stockholders entitled to vote on such matter. Except as
provided by law, holders of Series A Preferred shall vote together with the
holders of common stock, and with the holders of any other series of preferred
stock the terms of which so provide, as a single class.
Subject to certain limitations prescribed by law and the rights and preferences
of the preferred stock, our board of directors is authorized, without further
stockholder approval, from time-to-time to issue up to an aggregate of
100,000,000 shares of our preferred stock, in one or more additional series.
Each new series of preferred stock may have different rights and preferences
that may be established by our board of directors. A majority of our
disinterested, independent directors must approve any issuance by us of our
preferred stock.
The rights and preferences of future series of preferred stock may include:
o number of shares to be issued;
o dividend rights and dividend rates;
o right to convert the preferred stock into a different type of security;
o Voting rights attributable to the preferred stock;
o right to receive preferential payments upon a liquidation of the company;
o right to set aside a certain amount of assets for payments relating to the
preferred stock; and
o prices to be paid upon redemption of the preferred stock.
Each share of Series A Preferred Stock is convertible into 2 shares of common
stock. There are 4 million shares of Series A Preferred Stock authorized.
WARRANTS
Each Warrant entitles the holder to purchase one share of our common stock at an
exercise price per share of $1.00 per share of common stock. The exercise price
is subject to adjustment upon the occurrence of certain events as provided in
the Warrant. Our Warrants may be exercised at any time prior to the fifth
anniversary date of the closing of this offering, which is the expiration date.
Those of our warrants which have not previously been exercised will expire on
the expiration date. A Warrant holder will not be deemed to be a holder of the
underlying common stock for any purpose until the Warrant has been properly
exercised. The warrants contain a cashless exercise provision in the event the
shares of common stock underlying the warrants are not registered by the
Company.
31
Adjustments of exercise price
The exercise price is subject to adjustment if we declare any stock dividend to
stockholders, effect any split or reverse split with respect to our common
stock, or sell securities at a price below the exercise price of the Warrant.
Therefore, if we effect any stock split or reverse split with respect to our
common stock, the exercise price in effect immediately prior to such stock split
or reverse split will be proportionately reduced or increased, respectively. Any
adjustment of the exercise price will also result in an adjustment of the number
of shares purchasable upon exercise of a Warrant or, if we elect, an adjustment
of the number of Warrants outstanding.
OPTIONS
The Company intends to issue options to the designees of the Sunrise Financial
Group, Inc., to purchase (i) 500,000 shares of the common stock of the Company,
exercisable for $.50 per share, and (ii) 500,000 shares of the common stock of
the Company, exercisable for $1.00 per share (the "Options") in connection with
the Public Relations Retainer Agreement and public relations services pursuant
thereto. The Options shall be exercisable upon the earlier of either (a) the
Company's shareholder equity exceeding $10 million, or (ii) four (4) years from
the date of issuance.
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon on our
behalf by The Otto Law Group, PLLC, of Seattle, Washington.
EXPERTS
The financial statements of TechAlt, Inc. as of and for the years ended December
31, 2002 and 2003 included in this prospectus have been audited by Pritchet,
Siler & Hardy, PC, independent registered public accounting firm, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in auditing and accounting and in giving
said reports.
The financial statements of Technology Alternatives, Inc., as of and for the
years ended December 31, 2002 and 2003 included in this prospectus have been
audited by Salberg & Co., P.A., independent registered public accounting firm,
as indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting
and in giving said reports.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On October 20, 2004 (the "Dismissal Date"), Pritchett, Siler & Hardy, PC
("PS&H"), was dismissed as independent auditor of TechAlt, in connection with
the engagement of Salberg & Company, P.A., as the independent registered public
accounting firm for the Company ("Salberg"). PS&H's reports on the Company's
10-KSB and 10-KSB for each of the years ended December 31, 2003 and 2002,
respectively, and all subsequent interim periods up and until the Dismissal
Date, did not contain an adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles,
other than reflecting an uncertainty as to the Company's ability to continue as
a going concern.
During each of the two (2) years ended December 31, 2003 and 2002, and all
subsequent interim periods up and until the Dismissal Date, there were no
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if
not resolved to PS&H's satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement.
The Company requested PS&H to furnish a letter addressed to the United States
Securities and Exchange Commission, stating whether they agree with the
statements made by the Company in the Current Report on Form 8-K, and, if not,
stating the respects in which it does not agree. A copy of this letter, dated as
of October 20, 2004, is filed as Exhibit 16.1 to the Current Report on Form 8-K.
On October 20, 2004, the Company engaged Salberg as its independent registered
public accounting firm to audit the Company's financial statements. During each
of the two (2) years ended December 31, 2003 and 2002, and all subsequent
interim periods up and until the Dismissal Date, the Company did not consult
Salberg on any matters described in Item 304(a)(2)(i) of Regulation S-B. During
each of the two (2) years ended December 31, 2003 and 2002, and all subsequent
interim periods up and until the Dismissal Date, the Company did not consult
Salberg on any matters described in Item 304(a)(2)(ii) of Regulation S-B.
The decision to change accountants was recommended and approved by the Board of
Directors of the Company on October 20, 2004.
32
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
INDEX TO FINANCIAL STATEMENTS
PRO FORMA
Pro forma financial information F - 3
Pro forma Balance sheet as of September 30, 2004 F - 4
Pro forma Statements of Operations:
For the year ended December 31, 2003 F - 5
For the nine-months ended September 31, 2004 F - 6
TECHALT (FKA DENDO GLOBAL CORP.)
Report of Independent Registered Public Accounting Firm F - 7
Balance Sheets F - 8
Statements of Operations F - 9
Statements of Cash Flows F - 9
Statements of Changes in Stockholders' Deficit F - 10
Notes to financial statements F - 12 - 17
TECHNOLOGY ALTERNATIVES, INC.
Report of Independent Registered Public Accounting Firm F - 18
Balance Sheets F - 19
Statements of Operations F - 20
Statements of Cash Flows F - 21
Statements of Changes in Stockholders' Deficit F - 22
Notes to financial statements F - 23 - 27
F-1
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.
F-2
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.
F-3
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 $ 90,159
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 (650,000)
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 Techalt Merger and
other assets Warrants Rescission of Consolidated
acquired by Techalt to Masanek License Agreement Pro forma
----------------- ------------ ------------------ ----------
Current assets
Cash and cash equivalents $ 1,139
Accounts receivables 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 (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 Excipio
Group, S.A. 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.
F-4
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 interest
dividends on amortization
on Additional notes of Consolidated
TechAlt TAI Financing 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
==========
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.
F-5
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 interest
dividends on amortization
on Additional notes of Consolidated
TechAlt TAI Financing 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)
======== ========= ======== ======== ======== ============
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.
F-6
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Dendo Global Corp
We have audited the accompanying balance sheet of Dendo Global Corp. (a
development stage company) at December 31, 2003, and the related statements of
operations, changes in stockholders' deficit, and cash flows for the years ended
December 31, 2003 and 2002 and for the period from inception on December 29,
1994 through December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements audited by us present fairly, in all
material respects, the financial position of Dendo Global Corp. as of December
31, 2003, and the results of its operations and its cash flows for the years
ended December 31, 2003 and 2002 and for the period from inception on December
29, 1994 through December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company has incurred losses since its inception, has current
liabilities in excess of current assets and has no on-going operations. These
factors raise substantial doubt about its ability to continue as a going
concern. Management's plans in regards to these matters are also described in
Note 5. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
PRITCHETT, SILER & HARDY, P.C.
February 16, 2004
Salt Lake City, Utah
F-7
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(dollars in thousands except per share data)
December 31,
-------------- September 30,
2003 2004
-------------- -----------------
(unaudited)
Current assets
Cash and cash equivalents $ -- $ 1
----- -----
Total current assets -- 1
Deposit -- 20
----- -----
Total $ -- $ 21
===== =====
Current liabilities
Accounts payable $ 4 $ 42
Excess of checks issued over bank balance -- 8
Compensation and other amounts payable to officer -- 172
Accrued professional fees -- 101
Notes payable and other amounts due to related parties 12 --
Accrued preferred stock dividends -- 3
----- -----
----- -----
Total current liabilities 16 326
----- -----
Commitments (Notes 5 and 7)
Stockholders' Deficit
Series A Convertible Voting Preferred stock, $0.001 par value, 4 million
shares authorized in 2004, 500,000 shares issued and
outstanding at September 30, 2004, liquidation preference of -- 460
$1 million
Preferred stock, $0.001 par value, 100 million shares authorized at October
15, 2004, of which 4 million were designated as Series A Convertible
Preferred stock in 2004, none of the remaining 96
million shares authorized have been designated, issued or outstanding -- --
Common stock and additional paid-in capital. $0.001 par value,
500 million shares authorized at October 15, 2004,
shares issued and outstanding of 13,875,000
and 12,000,000, respectively at December 31, 2003 and September 30, 2004 73 261
Receivable from principal stockholder (100)
Deficit accumulated to August 23, 2004 (89) (107)
Deficit accumulated August 24, 2004 to September 30, 2004 -- (819)
----- -----
Total stockholders' deficit (16) (305)
Total $ -- $ 21
===== =====
See accompanying notes to financial statements.
F-8
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
From the
Development
From Inception Stage Period
on December 29, August, 24,
Year ended December 31 1994 Through Nine months ended September 30 2004 Through
--------------------------- December 31, --------------------------- September 30,
2002 2003 2003 2003 2004 2004
------------ ------------ ----------- ------------ ------------ -----------
(unaudited) (unaudited) (unaudited)
Revenue $ -- $ -- $ -- $ -- -- $ --
Cost of goods sold -- -- -- -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Gross profit -- -- -- -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Operating expenses
Selling, general and administrative 6 7 43 5 222 204
Compensation agreement expense -- -- -- -- 173 173
Financial consulting expenses -- -- -- -- 150 150
Acquired in-process research
and development -- -- -- -- 238 238
Research and development -- -- -- -- 51 51
------------ ------------ ----------- ------------ ------------ -----------
Total operating expenses 6 7 43 5 834 816
------------ ------------ ----------- ------------ ------------ -----------
Loss from continuing operations before
interest (6) (7) (43) (5) (834) (816)
Interest expense -- (1) (1) -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Loss from continuing operations (6) (8) (44) (5) (834) (816)
Loss from discontinued operations -- -- (45) -- -- --
------------ ------------ ----------- ------------ ------------ -----------
Net loss (6) (8) (89) (5) (834) (816)
Preferred stock dividends -- -- -- -- (3) (3)
------------ ------------ ----------- ------------ ------------ -----------
Net loss attributable to common
shareholders $ (6) $ (8) $ (89) $ (5) $ (837) $ (819)
============ ============ =========== ============ ============ ===========
Basic and diluted loss attributable
to common Shareholders per share:
Loss from continuing operations $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.03) $ (0.09)
Loss from discontinued operations -- -- (0.01) -- -- (0.00)
------------ ------------ ----------- ------------ ------------ -----------
Net loss attributable to common
shareholders per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) $ (0.03) $ (0.09)
============ ============ =========== ============ ============ ===========
Weighted average shares used
in computing loss per share 13,875,000 13,875,000 8,837,413 13,875,000 26,596,259 9,574,582
============ ============ =========== ============ ============ ===========
See accompanying notes to financial statements.
F-9
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
From the
Development
From Inception Stage Period
on December 29, August 24,
1994 Through 2004 through
Year ended December 31 December 31, Nine months ended September 30 September 30,
---------------------- ------------------------------
2002 2003 2003 2003 2004 2004
----- ----- ---- ---- ----- -----
(unaudited) (unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (6) $ (8) $(89) $ (5) $(834) $(816)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization expense -- -- 10 -- -- --
Non-cash expense -- -- 9 -- -- --
Financial consulting expense paid in stock -- -- -- -- 150 150
Acquired in-process research and development -- -- -- -- 238 238
Changes in operating assets and liabilities:
Accounts payable 5 (3) 4 (3) 46 1
Accrued compensation and related liabilities -- -- -- -- 173 173
Accrued professional fees -- -- -- -- 101 101
Accrued preferred stock dividends -- -- -- -- 3 3
Other -- -- 1 -- (14) (6)
----- ----- ---- ---- ----- -----
Net cash used by operating activities (1) (11) (65) (8) (137) (156)
----- ----- ---- ---- ----- -----
Cash flows from investing activities:
Purchase of property, plant & equipment -- -- (6) -- -- --
Payments for other assets -- -- (13) -- (20) --
----- ----- ---- ---- ----- -----
Net cash used by investing activities -- -- (19) -- (20) --
----- ----- ---- ---- ----- -----
Cash flows from financing activities:
Proceeds from sale of common stock -- -- 77 -- 15 --
Excess checks issued over bank balance -- -- -- -- 8 8
Payment of stock issue costs -- -- (4) -- -- --
Payment for cancellation of shares -- -- -- -- (77) (77)
Proceeds from notes payable to related parties 1 10 11 10 -- --
Payments on notes payable to related parties -- -- -- -- (10) --
Proceeds from sale of preferred stock, net -- -- -- -- 460 460
of issue costs
Payments to stockholder for liabilities
paid in connection with the Intellectual
Property License Agreement -- -- -- -- (238) (238)
Proceeds from capital lease -- -- 8 -- -- --
Payments on capital lease -- -- (8) -- -- --
----- ----- ---- ---- ----- -----
Net cash provided (used) by
financing activities 1 10 84 10 158 153
----- ----- ---- ---- ----- -----
Net increase (decrease) in
cash and cash equivalents -- -- -- 2 1 (3)
Cash and cash equivalents, beginning of period -- -- -- -- -- 4
----- ----- ---- ---- ----- -----
Cash and cash equivalents, end of period $ -- $ -- $ -- $ 2 $ 1 $ 1
===== ===== ==== ==== ===== =====
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid for interest $ -- $ -- $ -- $ -- $ -- $ --
===== ===== ==== ==== ===== =====
Non-cash investing and financing activities
Transfer of assets to former president $ -- $ -- $ 9 $ -- $ -- $ --
===== ===== ==== ==== ===== =====
Receivable from stockholder obtained
in connection with the Intellectual
Property License Agreement and
issuance of common stock $ -- $ -- $ -- $ -- $ 100 $ 100
===== ===== ==== ==== ===== =====
Liabilities assumed in connection with
the Intellectual Property License Agreement $ -- $ -- $ -- $ -- $ 238 $ 238
===== ===== ==== ==== ===== =====
See accompanying notes to financial statements.
F-10
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
Common stock and
Series A Convertible additional Receivable
Preferred Stock paid-in capital from
------------------- ------------------ Principal Accumulated
Shares Amount Shares Amount Shareholder Deficit Total
------- ------ ---------- ------ ----------- ----------- -----
Balance at December 29, 1994 (inception)
Issuance of common stock for cash
at $0.008 per share $ -- 62,500 $ -- $ -- $ -- $ --
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1994 -- -- 62,500 -- -- -- --
Issuance of common stock for cash at
$0.002 to $0.008 per
share in January to February 1995 812,500 2 2
Issuance of common stock for cash at
$0.010 per share in
September to December 1995, net of
stock issue costs of $4 500,000 46 46
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1995 -- -- 1,375,000 48 -- (6) 42
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1996 -- -- 1,375,000 48 -- (13) 35
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1997 -- -- 1,375,000 48 -- (29) 19
Issuance of common stock for cash
at $0.002 per share 12,500,000 25 25
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1998 -- -- 13,875,000 73 -- (36) 37
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 1999 -- -- 13,875,000 73 -- (61) 12
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2000 -- -- 13,875,000 73 -- (68) 5
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2001 -- -- 13,875,000 73 -- (75) (2)
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2002 -- -- 13,875,000 73 -- (81) (8)
Net loss
------- ------ ---------- ----- ----------- ----------- -----
Balance at December 31, 2003 -- -- 13,875,000 73 -- (89) (16)
Net loss for the period January 1, 2004
through August 24, 2004 (unaudited) (18) (18)
------- ------ ---------- ----- ----------- ----------- -----
Balance at August 23, 2004 (unaudited) -- -- 13,875,000 73 -- (107) (34)
Issuance of common stock for cash at $0.001
per share in March (unaudited) 15,000,000 15 15
Cancellation of shares in August for cash
at $0.0028 per share (unaudited) (27,219,000) (77) (77)
Issuance of common stock in connection
with Intellectual Property License
Agreement (unaudited) 10,044,000 100 (100) --
Issuance of common stock in consideration
for financial consulting services provided
at $0.50 per share in in August,
2004 (unaudited) 300,000 150 150
Issuance of Series A Convertible Preferred
stock in August (unaudited) 500,000 460 -- -- -- -- 460
Preferred stock dividends (unaudited) -- -- -- -- -- (3) (3)
Net loss for the period August 24, 2004 through
September 30, 2004 (unaudited) -- -- -- -- -- (816) (816)
------- ------ ---------- ----- ----------- ----------- -----
Balance at September 30, 2004 (unaudited) 500,000 460 12,000,000 261 (100) (926) (305)
======= ====== ========== ===== =========== =========== =====
See accompanying notes to financial statements.
F-11
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
NAME CHANGE - See Note 7 - Events (Unaudited) subsequent to date of Report of
Independent Registered Public Accounting Firm regarding the Company's name
change to TechAlt, Inc. and other related matters.
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Dendo Global Corp. (the "Company") was organized under the laws
of the State of Nevada on December 29, 1994 as Top Flight Software, Inc. The
Company subsequently changed its name to Dendo Global Corp. The Company had been
developing and marketing management software, however, the business proved to be
unsuccessful and, during January 1999, the Company discontinued its operations
and commenced exploring various other business opportunities. The Company is
considered to have entered a new development stage on August 24, 2004
(unaudited) as defined in Statement of Financial Accounting Standards No. 7. The
Company has not paid any dividends and any dividends that may be paid in the
future will depend upon the financial requirements of the Company and other
relevant factors. Activities during the new development stage include raising
capital, developing the corporate infrastructure and research and development.
CASH AND CASH EQUIVALENTS-- The Company considers all highly liquid debt
investments purchased with a maturity of three months or less to be cash
equivalents.
INCOME TAXES - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" [See Note 4].
LOSS PER SHARE - The computation of loss per share is based on the weighted
average number of shares outstanding during the period presented in accordance
with Statement of Financial Accounting Standards No. 128 "Earnings Per Share".
Dilutive loss per share is not presented as the effects of including common
stock equivalent shares, which there were none of prior to 2004, would be
anti-dilutive for all periods presented. The unaudited computations of loss per
share for period ended September 30, 2004, exclude 1 million shares potentially
issuable pursuant to terms of outstanding Series A Convertible Preferred Stock
and 1 million common shares issuable upon exercise of outstanding Warrants.
USE OF ESTIMATES--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The Company's financial instruments consist
of cash, accounts payable, amounts payable to related parties and Series A
Convertible Preferred Stock, and their carrying amounts approximate fair value
due to their short maturities and recent occurrences.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The accompanying balance sheet as of
September 30, 2004, the statements of operations and the statements of cash
flows for the nine months ended September 30, 2003 and 2004 and from inception
on August 24, 2004 through September 30, 2004, and the statement of changes in
stockholders' deficit for the nine months ended September 30, 2004, are
unaudited. The unaudited interim financial statements have been prepared on the
same basis as the annual financial statements and, in the opinion of management,
reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the Company's financial position, results of
operations and cash flows for the nine months ended September 30, 2003 and 2004.
The financial data and other information disclosed in these notes to financial
statements related to the nine months ended September 30, 2003 and 2004 are
unaudited. The results for the nine months ended September 30, 2004 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2004 or for any other interim period or for any future year.
RESEARCH AND DEVELOPMENT--Research and development costs, which are comprised
primarily of supplies, materials and related costs, are expensed as incurred.
The value of acquired In-process Research and Development is charged to expense
on the date of acquisition.
F-12
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS - Statement of Financial Accounting Standards
("SFAS") No. 146, "Accounting for Costs Associated with Exit or Disposal
Activities", SFAS No. 147, "Acquisitions of Certain Financial Institutions - an
Amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of FASB Statement No. 123", SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities", and SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity", were recently issued. SFAS No. 146,147,148,149 and 150
had no applicability to the Company or their effect on the financial statements
would not have been significant.
NOTE 2 - CAPITAL STOCK TRANSACTIONS
PREFERRED STOCK - At December 31, 2003 the Company had authorized 5,000,000
shares of preferred stock, $.001 par value, with such rights, preferences and
designations and to be issued in such series as determined by the Board of
Directors. No shares were issued and outstanding at December 31, 2003. See Note
7 - Events (Unaudited) subsequent to Date of report of the independent
registered public accounting firm.
COMMON STOCK - At December 31, 2003 the Company had authorized 50,000,000 shares
of common stock at $.001 par value. At December 31, 2003 there were 13,875,000
common shares issued and outstanding. See Note 7 - Events (Unaudited) subsequent
to Date of report of the independent registered public accounting firm.
CHANGE IN CONTROL - In August 1998, an individual purchased 12.5 million shares
of common stock of the Company representing a 90% controlling interest in the
Company. Total proceeds from the sale of stock were $25,000 (or $0.002 per
share). The former officer and director resigned and the individual was elected
as the new president and director.
STOCK SPLIT - In March 2003, the Company effected a 5-for-1 forward stock split.
The financial statements for all periods presented have been restated to reflect
the stock split.
NOTE 3 - RELATED PARTY TRANSACTIONS
ADVANCE - An officer of the Company had advanced $250 to the Company on a
non-interest bearing basis. In March 2003, this advance was extended into a new
note payable. During December 2003, an officer advanced $125 to the company on a
non-interest bearing basis.
NOTE PAYABLE - IN MARCH 2003, THE COMPANY SIGNED A $10,250 NOTE PAYABLE TO AN
officer of the Company. The Company received proceeds of $10,000 and extended a
$250 related party advance. The note accrues interest at 10% per annum and is
due on demand. At December 31, 2003, accrued interest payable on the note
amounted to $665.
NOTE PAYABLE - In September 2002, the Company signed a $1,000 note payable to an
entity controlled by a shareholder of the Company. The note accrues interest at
10% per annum and is due on demand. At December 31, 2003, accrued interest
payable on the note amounted to $130.
MANAGEMENT COMPENSATION - The Company did not pay any compensation to its
officers and directors during the years ended December 31, 2003 and 2002.
RENT - The Company has not had a need to rent office space during the years
ended December 31, 2003 and 2002. An officer of the Company allowed the Company
to use the officer's address, as needed, at no expense to the Company.
Also see Note 7 - Events (Unaudited) subsequent to date of report of the
independent registered public accounting firm for additional related party
transactions.
F-13
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 4 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". SFAS 109 requires
the Company to provide a net deferred tax asset/liability equal to the expected
future tax benefit/expense of temporary reporting differences between book and
tax and any available operating loss or tax credit carryforwards. At December
31, 2003, the Company has available unused operating loss carryforwards of
approximately $87,500, which may be applied against future taxable income and
which expire in various years through 2023. Due to substantial changes in the
Company's ownership, there will be an annual limitation on the amount of net
operating loss carryforwards which can be utilized. The amount of and ultimate
realization of the benefits from the operating loss carryforwards for income tax
purposes is dependent, in part, upon the tax laws in effect, the future earnings
of the Company, and other future events, the effects of which cannot be
determined. Because of the uncertainty surrounding the realization of the loss
carryforwards, the Company has established a valuation allowance equal to the
tax effect of the loss carryforwards and, therefore, no deferred tax asset has
been recognized for the loss carryforwards. Net deferred tax assets are
approximately $29,800 and $27,400 at December 31, 2003 and 2002, respectively,
with an offsetting valuation allowance of the same amount resulting in a change
in the valuation allowance of approximately $2,400 during the year ended
December 31, 2003.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America, which
contemplate continuation of the Company as a going concern. However, the Company
has incurred losses since its inception, has current liabilities in excess of
current assets and had no on-going operations. These factors raise substantial
doubt about the ability of the Company to continue as a going concern. In this
regard, management is proposing to raise any necessary additional funds not
provided by operations through loans or through additional sales of its common
stock. There is no assurance that the Company will be successful in raising this
additional capital or in achieving profitable operations. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. See Note 7 - Events (Unaudited) subsequent to Date of
report of the independent registered public accounting firm.
NOTE 6 - SUBSEQUENT EVENT
CHANGE IN CONTROL - In March 2004, the Company issued 15 million shares of its
common stock to an individual representing 52% controlling interest in the
Company. Total proceeds from the sale of stock amounted to $15,000 (or $0.001
per share). The former officer and director resigned and the individual was
elected as the sole officer and director of the Company.
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM.
Prior to August 24, 2004, the Company had no business operations, and very
limited assets or capital resources, and its business plan was to seek one or
more potential business ventures that, in the opinion of management, may warrant
involvement by the Company. As a result of transactions occurring in August
2004, as described below, and which include, but not limited to the License
Agreement, sale of Series A Convertible Preferred Stock, the Compensation
Agreement, the financial consulting arrangement and the Agreement with IBM, the
Company's operations now relate to sales of wireless, multi-network
communications hardware and software solutions to be used by emergency first
responders such as Police, EMS and other Homeland Security Agencies.
F-14
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
LICENSE AGREEMENT - On August 20, 2004, the Company and its then majority (52%)
shareholder and sole member of its board of directors (the "Warranting
Shareholder") entered into an Intellectual Property License Agreement with
Technology Alternatives, Inc. ("TAI"), which agreement (the "License Agreement")
was consummated on August 24, 2004 ("Closing"). Pursuant to the License
Agreement, in exchange for the issuance of 10,044,000 shares of Company common
stock ("Common Stock"), the Company licensed certain intellectual property owned
by TAI. The initial term of the License is 6 months, which 6 month term is
automatically extended for additional 6 month terms until terminated by mutual
agreement of the Company and TAI. Pursuant to terms of the License Agreement,
the Company is to receive $100,000 from TAI to satisfy certain liabilities and
27,219,000 shares of Common Stock were cancelled. The receivable from TAI is due
on demand and is presented as a component of Stockholders' Deficit in the
accompanying balance sheet at September 30, 2004.
In connection with the License Agreement the Company made payments to former
shareholders of approximately $77,000 for the cancellation of stock, which such
amounts have been recorded as a decrease in common stock and additional paid-in
capital in a manner similar to accounting for the acquisition of Treasury Stock.
Additionally, the Company paid certain TAI liabilities of approximately
$238,000, which were subsequently paid to TAI and others. The amount of paid
liabilities has been allocated to "In-process Research and Development" costs
pertaining to the intellectual property rights licensed in connection with the
License Agreement and were immediately expense as of the license date as a
result of the licensed Intellectual Property not having yet attained
technological feasibility.
The License Agreement provides for the Company to raise equity funding (cash) of
at least $500,000 within 5 days following Closing (the "Initial Funding"), and
of at least an additional $3.5 million within 90 days following Closing (the
"Final Funding"). In the event the fundings are not timely completed or if the
"Historical Stockholders" own less than 8% of the outstanding common stock upon
consummation of the Final Funding, then the Warranting Shareholder shall have
the option for 14 calendar days to terminate the Agreement, subject to certain
remedy provisions.
After issuance of shares and cancellation of shares in connection with the
License Agreement, TAI owns 4 million shares of the 12 million total outstanding
and James E. Solomon ("Solomon"), the majority shareholder of TAI, directly or
beneficially owns an additional approximately 4.5 million shares. In certain
circumstances, Solomon, voting shares directly or beneficially owned, along with
voting shares beneficially owned by TAI, has control to vote approximately 71%
of the Company's outstanding common shares. Inasmuch as Solomon has a majority
ownership interest in the Company after the issuance of common shares in
connection with the License Agreement, the Intellectual Properties rights
acquired by the Company have been recorded in the amount of Solomon's net book
value of such assets, and that same value assigned to shares issued. As a result
of previously expensing costs incurred in connection with developing such
assets, the net book value was $0, which is the value recorded by the Company
for this transaction accounted for in a manner similar to that ascribed for
transactions with entities under common control.
In connection with the License Agreement, Solomon was appointed to the Board of
Directors of the Company and appointed President and Chief Executive Officer of
the Company, and the Warranting Shareholder resigned from all positions as an
officer and director of the Company.
SALE OF SERIES A CONVERTIBLE PREFERRED STOCK, WARRANTS AND ADDITIONAL INVESTMENT
RIGHTS - On August 24, 2004, pursuant to the private offering exemption provided
in Rule 506 of Regulation D of the Securities Act of 1933, in exchange for
$500,000, before offering costs of approximately $40,000, the Company sold
500,000 shares of its Series A Convertible Preferred Voting Stock (purchase
price of $1.00 per share) (the "Series A Preferred"), warrants to purchase 1
million shares of the Company's common stock at an exercise price of $1.00 per
share with a cashless exercise provision for the period ending five years from
issuance (the "Warrants") and Additional Investment Rights to purchase 3.5
million additional shares of Series A Preferred with 7 million warrants at a
purchase price of $1.00 per share (the "Series A Preferred Rights") (the
"Offering"). Each share of Series A Preferred is convertible under certain
circumstances into two shares of the Company's common stock, at a conversion
price of $0.50 per common share, the price determined by Company management to
represent the fair value of such stock at the issuance date. The Series A
Preferred holders have voting rights on an as converted basis. The Series A
Preferred shares contain registration rights and damages of up to 3% per month
based on filing and effectiveness deadlines.
F-15
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM. (CONTINUED)
Terms of Series A Preferred provides for, among other things, cumulative
dividends to be paid to holders at a rate of 5% per annum, which accumulate
daily from issuance date and payable quarterly, in certain circumstances payable
in the Company's common stock, each preferred share to be convertible into 2
shares of Company common stock, subject to anti-dilution conversion rate
adjustments, at a $2.00 per share liquidation preference amount, payment of
dividends and distributions to holders of common stock to the same extent as if
such holders of preferred stock had converted into common shares, voting rights
on an as converted basis, and limits payment of dividends on common stock until
certain financial targets are met.
The use of proceeds from the Offering were designated for the Company's general
corporate and working capital purposes, and prohibited certain other uses,
including payments to TAI. The aforementioned payments of $238,000 to TAI and
others were otherwise prohibited, but have been orally consented to by Series A
Preferred shareholders. Pursuant to terms of a Securities Purchase Agreement
with respect to the Offering, under certain circumstances, the Company may be
required to redeem the Series A Preferred.
COMPENSATION AGREEMENT - In August 2004, the Company entered into an Employment
Agreement with Solomon, pursuant to which Solomon is to be employed by the
Company as Chief Executive Officer for an initial period of 3 years, which
period shall be automatically renewed until terminated by the Company. The
Employment Agreement provides for annual compensation of $175,000, an
opportunity for Solomon to earn additional annual bonuses upon the Company
attaining certain financial targets, and for the Company to grant Solomon
options to purchase 1 million shares of Company common stock at an exercise
price being fair value at date of grant, subject to vesting. During the three
months ended September 30, 2004, the Company recorded approximately $130,000 of
compensation expense incurred upon execution of the Employment Agreement for
compensation due upon signing and approximately $43,000 of expense relating to
reimbursement to Solomon for costs and expenses incurred in connection with
development and support of Intellectual Property acquired pursuant to the
License Agreement. The Employment Agreement also provides for the Company to pay
Solomon for certain executive officer benefits throughout the term.
LITIGATION AND SETTLEMENT AGREEMENT - In August 2004, Paul Masanek ("Masanek"),
a 45% shareholder of TAI, and Services By Designwise, Ltd., a company owned by
Masanek ("SBD") (SBD and Masanek, collectively "Masanek"), filed a lawsuit in
the Circuit Court of Cook County, Illinois (the "court"), against Solomon and
TAI (the "Lawsuit"). The Lawsuit is comprised of (i) a Verified Complaint for
Declaratory, Injunctive and Other Relief (the "Complaint"), (ii) a Motion for
Temporary Restraining Order (the "Restraining Order"), and (iii) a Motion for
Preliminary Injunction (the "Injunction"). The Lawsuit alleges Solomon and TAI,
among other things, engaged in ultra vires acts, breached their fiduciary duty
and were oppressive of Masanek in connection with certain contemplated
financials (the "Financing") and potential transaction involving TAI (the
"Transaction") and in the removal of Masanek as an executive officer and member
of the board of TAI. The Complaint also claims that Masanek owns 49% of TAI, not
45%. Masanek seeks, among other things, a declaratory judgment that Masanek's
removal from the board of TAI is invalid and that certain actions taken by
Solomon and TAI in connection with the Financing and the Transaction are
invalid. Masanek seeks injunctive relief reinstating his position on the board
and preventing the approval or implementation of the Financing between TAI and
Sunrise Securities Corp. an investment advisor, and the Transaction and ordering
TAI and Solomon to consider other financing and business combination
alternatives. Masanek seeks to have Solomon removed as a director and claims
Solomon breached an alleged "Directors Agreement: pursuant to which the parties
allegedly agreed that the board of TAI would be comprised of 2 persons, Solomon
and Masanek. Masanek also alleges that Solomon and TAI tortuously inferred with
SBD's relationship with its employees, that TAI owes Masanek approximately
$700,000 for services rendered and that TAI owes Masanek approximately $400,000
in connection with a loan.
In October 2004, the Company entered an Agreed Order along with TAI, Solomon,
Masanek (collectively, the "Parties"), in connection with the Lawsuit. Pursuant
to the Order and continuation of the pending standstill agreement, the Court
found that the Parties had agreed in principal to the full resolution of all
claims in the Lawsuit, subject to the execution of definitive Settlement
Agreements. The parties are still negotiating the final terms of the settlement
documents.
F-16
TECHALT, INC.
(FORMERLY DENDO GLOBAL CORP.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2004
NOTE 7 - EVENTS (UNAUDITED) SUBSEQUENT TO DATE OF REPORT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)
NAME CHANGE - Effective October 15, 2004, the Company changed its name from
Dendo Global Corp. to TechAlt, Inc.
CHANGE IN AUTHORIZED SHARES - In October 2004, the authorized shares were
increased to 500 million common and 100 million preferred.
ISSUED ADDITIONAL SERIES A PREFERRED - In October 2004, pursuant to the
Additional Investment Right, the company received $170,000 proceeds from the
sales of 170,000 shares of Series A Preferred stock and warrants to purchase
340,000 shares of common sock.
FINANCIAL ADVISOR ARRANGEMENT - Pursuant to terms of an arrangement with a
financial consultant, in August 2004, the Company issued 300,000 shares of its
common stock for services provided. The Company has accounted for this as
financial consulting expense of $150,000, the estimated fair value of common
stock issued, and as an increase in common stock and paid-in capital.
AGREEMENT WITH IBM - On October 11, 2004, the Company entered into a Statement
of Work ("SOW") with International Business Machines Corporation ("IBM") for the
Phase 1 Implementation of the Company's wireless communications product line in
connection with Cook County's mobile wireless video and data network project.
The SOW serves as the Company's official notice and authorization to begin
implementation of and billing for the project. Pursuant to terms of the SOW, the
Company will be providing hardware and software, and maintenance services
through 2009, under Phase 1 for which it is to receive payments of approximately
$2.9 million.
In Phase 1 of the project, 15 radio towers and 32 municipal and county buildings
will be configured as wireless hotspots. The Company's multi-network capable
communications modules will be used to transmit video and data to police, fire,
and emergency services vehicles. This live streaming video will help first
responders orchestrate a coordinated response to emergencies. The wireless
network will provide first responders in remote locations with information
already shared on the county's wired network. Police, fire and emergency
services personnel will have real-time access to law enforcement databases, GIS
information, hazmat information and other data on the Cook County network.
FACILITIES LEASE - In September 2004, the Company entered into a lease agreement
for corporate office facilities having a term ending August 2006 and providing
for minimum rental payments of approximately $40,000, $123,000 and $83,000 in
2004, 2005 and 2006, respectively.
EMPLOYEES - As of November 2004, the Company has 17 full-time employees,
approximately 12 of which work at the Company's corporate office facilities in
Arlington Heights, Illinois, a suburb of Chicago. Monthly gross wages
approximates $150,000.
PROMISSORY NOTE - In October 2004, the Company entered into a $13,000 Promissory
Note payable to a bank, due April 2007, bearing interest at an annual rate of
5.75%, and payable at $467 per month for 30 months. The Promissory Note is
collateralized by an automobile owned by the Company and is guaranteed by
Solomon.
REGISTRATION STATEMENT ON FORM SB-2 - The Company is in the process of filing a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
regarding the registration of approximately 34 million shares of the Company's
common stock to be sold by certain stockholders of the Company. The selling
stockholders will offer the common stock in amounts, at prices and on terms to
be determined at the time of the offering. The Company will not receive any
proceeds from the sales of the common stock by the selling stockholders. Shares
of the Company's common stock are not currently quoted on any exchange or the
over-the-counter bulletin board market. The Company has applied for trading of
its common stock on the over-the-counter bulletin board.
F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders'
Technology Alternatives, Inc.
We have audited the accompanying balance sheet of Technology Alternatives, Inc.
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
F-18
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.
F-19
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.
F-20
TECHNOLOGY ALTERNATIVES, INC.
STATEMENTS OF CASH FLOWS
January 29,
2002
(inception) to Year Ended Nine months
December 31, December 31 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.
F-21
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.
F-22
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.
F-23
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.
F-24
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.
F-25
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.
F-26
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.
F-27
40,775,080 SHARES OF COMMON STOCK
[TECHALT LOGO]
PROSPECTUS
FEBRUARY ___, 2005
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation allows and our bylaws require that we indemnify
our directors and officers who are or were a party to, or are threatened to be
made a party to, any proceeding (including a derivative action if the director
or officer is not found liable to us), against all expenses reasonably incurred
by a director or officer in connection with such a proceeding (including
expenses, judgments, fines and amounts paid in settlement), if the director or
officer acted in good faith, in a manner he or she believed was not opposed to
our best interests, and, with respect to a criminal proceeding, had no reason to
believe that his or her conduct was unlawful.
We have entered into separate indemnification agreements with each of our
directors and officers. The agreements provide for mandatory indemnification for
and limit the liability of our directors and officers in serving us to the
fullest extent permitted by the Nevada Corporation Law. Specifically, under the
agreements, our directors and officers will not be personally liable for
monetary damages for their errors or omissions, except for liability for the
breach of a director's or officer's duty of loyalty to us or our stockholders,
for intentional misconduct or acts not in good faith, for making any unlawful
distribution, for any transaction from which the director or officer derived an
improper benefit, or for violating section 16(b) of the Securities Exchange Act
of 1934, as amended, or similar laws.
Our bylaws and indemnification agreements generally require that we advance to
our directors and officers expenses incurred by them in defending a proceeding
in advance of its final disposition, provided that the director or officer
agrees to reimburse us for such advances if it is ultimately found that the
director or officer is not entitled to indemnification. In addition, our bylaws
permit us to purchase insurance on behalf of our directors and officers against
any liability asserted against them in such capacity. We intend to obtain such
insurance.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of SEC Registration and all other
estimated expenses, all of which we will pay, in connection with the issuance
and distribution of the securities being registered:
Nature of Expense Amount
SEC Registration fee $ 4,791
Accounting fees and expenses $ 15,000
Legal fees and expenses $ 50,000
Printing and related expenses $ 15,000
Blue sky legal fees and expenses $ 5,000
Transfer agent fees and expenses $ 5,000
Miscellaneous expenses $ 5,000
Total $ 99,971
===========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
We have issued the following securities within the last three years.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) and of the Securities Act of 1933, in March,
2004, the Company approved and closed on the sale of 15,000,000 shares of newly
issued and restricted shares of common stock of the Company to Mr. Lindsay Hedin
for an aggregate purchase price of $15,000 in a private offering. The Shares
represented approximately fifty-two percent (52%) of the total issued and
outstanding shares of common stock of the Company immediately after the sale.
After the sale of the Shares, Mr. Cornelius A. Hofman resigned as an officer and
director of the Company. Prior to Mr. Hofman's resignation, Mr. Lindsay Hedin
was appointed as a director of the Company and as the chief executive officer,
president, chief financial officer, secretary and treasurer of the Company.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under the section 4(2) of the Securities Act of 1933. On August
2004 the company issued 300,000 shares of common stock to a financial advisor in
exchange for services in connection with the introduction of TechAlt to TAI
(defined below).
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) and of the Securities Act of 1933, in August,
2004, TechAlt entered into an Intellectual Property License Agreement (the
"License Agreement") with Technology Alternatives, Inc., an Illinois corporation
("TAI"). Pursuant to the License Agreement, in exchange for the issuance of ten
million forty four thousand (10,044,000) shares of common stock to TAI and
certain other individuals and entities, TAI Licensed certain intellectual
property to the Company.
2
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) of the Securities Act of 1933, in August, 2004,
in exchange for Five Hundred Thousand Dollars ($500,000) the Company sold
500,000 shares of the Company's Series A Convertible Preferred Stock (purchase
price of One Dollar ($1.00) per share) (the "Series A Preferred"), warrants to
purchase 1,000,000 shares of the Company's common stock (exercise price of One
Dollar ($1.00) per share) (the "Warrants") and AIRs to purchase 3,500,000
additional shares of Series A Preferred (purchase price of One Dollar ($1.00)
per share), which exercise of the AIRs in the aggregate entitle the investors to
Additional Warrants (exercise price of One Dollar ($1.00) per share) to purchase
7,000,000 shares of common stock of the Company, in the aggregate (the
"Offering"). Each share of the Series A Preferred converts into two (2) shares
of the common stock of the Company.
Pursuant to the "safe harbor" private offering exemption provided by Rule 506 of
Regulation D under Section 4(2) and of the Securities Act of 1933, in October,
2004, the Company issued 170,000 shares of Series A Preferred and Warrants to
purchase 340,000 shares of common stock pursuant to the partial exercise on by
an investor in the Offering of its Additional Investment Right.
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 connection
with the Merger Agreement, the Company issued 10,044,000 shares of the common
stock of the Company to (i) James E. Solomon (4,867,440), (ii) Paul Masanek
(4,676,560), and (iii) Hudson Investment Advisors, LLC (500,000). The Company
also issued a Warrant to Paul Masanek to purchase 750,000 shares of common stock
of the Company for $1.00 per shares, and a Secured Convertible Promissory Note
to Services By Designwise, Ltd., convertible into 1,150,000 shares of the common
stock of the Company for $1.00 per share.
For purposes of the Exemption, the Company relied upon (i) certain
representations and warranties of James E. Solomon, Paul Masanek, Services by
Designwise, Ltd., and Hudson Investment Advisors, LLC made pursuant to the
Merger Agreements and/or separate Subscription Agreements executed in connection
with the Merger and (ii) its own independent investigation to confirm the
accredited/unaccredited status of James E. Solomon, Paul Masanek, and Hudson
Investment Advisors, LLC.
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 and in
accordance with the exercise of Additional Investment Rights ("AIR") held by
certain of the Company's accredited investors, on December 16, 2004 the Company
issued shares of Series A Preferred stock and Additional Warrants pursuant to
its Series A financing as follows:
Investor Series A Preferred Warrants
- -------- ------------------ ---------
Cranshire Capital, LP 218,750 437,500
Crestview Capital Master, LLC 1,317,500 2,635,000
DKR SoundShore Oasis 218,750 437,500
Smithfield Fiduciary/Highbridge 875,000 1,750,000
Each share of Series A Preferred stock purchased pursuant to the AIRs is
purchased for $1.00 per share and converts into two (2) shares of common stock.
Each share of Series A Preferred stock votes on as converted basis. In addition,
for each share of Series A Preferred stock purchased, the purchaser receives
warrants to purchase two (2) shares of common stock, exercise price of $1.00 per
share.
3
ITEM 27. EXHIBITS.
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
2.1 Form of Agreement and Plan of Merger Incorporated by reference to Exhibit
2.1 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
3.1(i) Articles of Incorporation Incorporated by reference to Exhibit
3.1 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.2(i) Certificate of Amendment to the Articles of Incorporated by reference to Exhibit
Incorporation 3.2 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.3(i) Certificate of Amendment to the Articles of Incorporate by reference to Exhibit 3.3(i)
Incorporation of the Company's 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 Amended Certificate of Designation Attached
- -------------------------------------------------------------------------------------------------------------
4.3 Form of Securities Purchase Agreement Incorporated by reference to Exhibit
10.3 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.4 Form of Registration Rights Agreement Incorporated by reference to Exhibit
10.4 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.5 Form of Warrant Incorporated by reference to Exhibit
10.5 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.6 Form of Additional Warrant Incorporated by reference to Exhibit
10.6 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
4.7 Form of Additional Investment Right Incorporated by reference to Exhibit
10.8 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.8 Form of Lock-Up Agreement Incorporated by reference to Exhibit
10.7 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.9 Form of Warrant issued to Paul Masanek Incorporated by reference to Exhibit
4.1 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
4.10 Form of Secured Convertible Promissory Note Incorporated by reference to Exhibit
4.2 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
4.11 Form of Registration Rights Agreement with Incorporated by reference to Exhibit
Paul Masanek and Services By Designwise, Ltd. 4.3 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
4.12 Form of Right of First Refusal Agreement Incorporated by reference to Exhibit
4.4 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
5.1 Form of Opinion of The Otto Law Group, PLLC Attached
- -------------------------------------------------------------------------------------------------------------
10.1 Employment Agreement with James E. Solomon Incorporated by reference to Exhibit
10.2 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.2 Intellectual Property License Agreement Incorporated by reference to Exhibit
10.1 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.3 Financial Advisory and Investment Banking Agreement Incorporated by reference to Exhibit
with Sunrise Securities Corp. 10.3 of the Company's Form SB-2
Registration Statement filed
November 15, 2004.
- -------------------------------------------------------------------------------------------------------------
10.4 Public Relations Retainer Agreement with Incorporated by reference to Exhibit
with Sunrise Financial Group, Inc. 10.4 of the Company's Form SB-2
Registration Statement filed
November 15, 2004.
- -------------------------------------------------------------------------------------------------------------
10.5 Base Agreement with International Business Machines Incorporated by reference to Exhibit
Corporation 10.5 of the 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.
5
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
10.7 Arias Technology Corporation, Inc., Agreement for Incorporated by reference to Exhibit
Consulting Services 10.7 of the 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.
- -------------------------------------------------------------------------------------------------------------
10.9 Form of Agreement to Rescind Intellectual Property Incorporated by reference to Exhibit
License Agreement 10.1 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.10 Form of Sales Agreement Incorporated by reference to Exhibit
10.2 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.11 Form of Security Agreement Incorporated by reference to Exhibit
10.3 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.12 Form of Settlement Agreement Incorporated by reference to Exhibit
10.4 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.13 Form of Technology Assignment and Bill of Sale Incorporated by reference to Exhibit
10.5 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.14 Form of Escrow Agreement Incorporated by reference to Exhibit
10.6 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.15 Form of Consulting Agreement Incorporated by reference to Exhibit
10.7 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.16 Form of Waiver and Amendment Agreement Attached
- -------------------------------------------------------------------------------------------------------------
23.1 Form of Consent of The Otto Law Group, PLLC (Exhibit 5.1)
- -------------------------------------------------------------------------------------------------------------
23.2 Consent of Pritchett, Siler & Hardy, PC, independent Attached
registered public accountants
- -------------------------------------------------------------------------------------------------------------
23.3 Consent of Salberg & Co., P.A., independent Attached
registered public accountants
- -------------------------------------------------------------------------------------------------------------
6
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person of us in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
We hereby undertake to:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the dollar value of the securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act if,
in the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) For purposes of determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this registration statement as of the time
it was declared effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
In addition, we hereby undertake to provide to the underwriters at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
7
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, in the City of Arlington Heights, Illinois on
February 14, 2005.
TECHALT, INC.
By: /s/ James E. Solomon
--------------------------------------
Name: James E. Solomon
Its: Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
- -----------------------------------------------------------------------------------------------------------
SIGNATURE TITLE DATE
- -----------------------------------------------------------------------------------------------------------
/s/ James E. Solomon Chief Executive Officer February 14, 2005
- --------------------------- (Principal Executive Officer) and Director
James E. Solomon
- ---------------------------------------------------------------------------------- ------------------------
/s/ James Hurley Chief Financial Officer (Principal Financial February 14, 2005
- --------------------------- Officer)
James Hurley
- ---------------------------------------------------------------------------------- ------------------------
/s/ George Loera Director February 14, 2005
- ---------------------------
George Loera
- ---------------------------------------------------------------------------------- ------------------------
/s/ C. Pete Ashi Director February 14, 2005
- ---------------------------
C. Pete Ashi
- ---------------------------------------------------------------------------------- ------------------------
8
EXHIBIT INDEX
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
2.1 Form of Agreement and Plan of Merger Incorporated by reference to Exhibit
2.1 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
3.1(i) Articles of Incorporation Incorporated by reference to Exhibit
3.1 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.2(i) Certificate of Amendment to the Articles of Incorporated by reference to Exhibit
Incorporation 3.2 of the Company's Form 10-SB filed
October 29,1999
- -------------------------------------------------------------------------------------------------------------
3.3(i) Certificate of Amendment to the Articles of Incorporate by reference to Exhibit 3.3(i)
Incorporation of the Company's 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 Amended Certificate of Designation Attached
- -------------------------------------------------------------------------------------------------------------
4.3 Form of Securities Purchase Agreement Incorporated by reference to Exhibit
10.3 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.4 Form of Registration Rights Agreement Incorporated by reference to Exhibit
10.4 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.5 Form of Warrant Incorporated by reference to Exhibit
10.5 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.6 Form of Additional Warrant Incorporated by reference to Exhibit
10.6 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
9
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
4.7 Form of Additional Investment Right Incorporated by reference to Exhibit
10.8 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.8 Form of Lock-Up Agreement Incorporated by reference to Exhibit
10.7 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
4.9 Form of Warrant issued to Paul Masanek Incorporated by reference to Exhibit
4.1 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
4.10 Form of Secured Convertible Promissory Note Incorporated by reference to Exhibit
4.2 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
4.11 Form of Registration Rights Agreement with Incorporated by reference to Exhibit
Paul Masanek and Services By Designwise, Ltd. 4.3 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
4.12 Form of Right of First Refusal Agreement Incorporated by reference to Exhibit
4.4 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
5.1 Form of Opinion of The Otto Law Group, PLLC Attached
- -------------------------------------------------------------------------------------------------------------
10.1 Employment Agreement with James E. Solomon Incorporated by reference to Exhibit
10.2 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.2 Intellectual Property License Agreement Incorporated by reference to Exhibit
10.1 of the Company's Form 8-K filed
August 27, 2004
- -------------------------------------------------------------------------------------------------------------
10.3 Financial Advisory and Investment Banking Agreement Incorporated by reference to Exhibit
with Sunrise Securities Corp. 10.3 of the Company's Form SB-2
Registration Statement filed
November 15, 2004.
- -------------------------------------------------------------------------------------------------------------
10.4 Public Relations Retainer Agreement with Incorporated by reference to Exhibit
with Sunrise Financial Group, Inc. 10.4 of the Company's Form SB-2
Registration Statement filed
November 15, 2004.
- -------------------------------------------------------------------------------------------------------------
10.5 Base Agreement with International Business Machines Incorporated by reference to Exhibit
Corporation 10.5 of the 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
Consulting Services 10.7 of the Company's Form SB-2
Registration Statement filed
November 15, 2004.
- -------------------------------------------------------------------------------------------------------------
10
- -------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------------------------
10.9 Form of Agreement to Rescind Intellectual Property Incorporated by reference to Exhibit
License Agreement 10.1 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.10 Form of Sales Agreement Incorporated by reference to Exhibit
10.2 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.11 Form of Security Agreement Incorporated by reference to Exhibit
10.3 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.12 Form of Settlement Agreement Incorporated by reference to Exhibit
10.4 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.13 Form of Technology Assignment and Bill of Sale Incorporated by reference to Exhibit
10.5 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.14 Form of Escrow Agreement Incorporated by reference to Exhibit
10.6 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.15 Form of Consulting Agreement Incorporated by reference to Exhibit
10.7 of the Company's Form 8-K filed
December 21, 2004.
- -------------------------------------------------------------------------------------------------------------
10.16 Form of Waiver and Amendment Agreement Attached
- -------------------------------------------------------------------------------------------------------------
23.1 Form of Consent of The Otto Law Group, PLLC (Exhibit 5.1)
- -------------------------------------------------------------------------------------------------------------
23.2 Consent of Pritchett, Siler & Hardy, PC, independent Attached
registered public accountants
- -------------------------------------------------------------------------------------------------------------
23.3 Consent of Salberg & Co, P.A., independent Attached
registered public accountants
- ------------------------------------------------------------------------------------------------------------
11