Filed Pursuant to Rule 424(b)(3) and (c)
File No. 333-125766
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 24, 2005)
This Prospectus Supplement supplements the Prospectus dated June 24, 2005, of
Techedge, Inc., relating to the public offering and sale by the Techedge
stockholders identified in the Prospectus of 2,794,118 shares of Techedge common
stock, par value $0.0001 per share. This Prospectus Supplement should be read in
conjunction with the Prospectus, and this Prospectus Supplement is qualified by
reference to the Prospectus.
Recent Developments
Completion of Proposed Offering to Certain of the Selling Stockholders
Pursuant to a subscription agreement dated April 29, 2005, and amended as of May
4, 2005 and May 27, 2005, among Techedge, Inc. and Alpha Capital
Aktiengesellschaft and Whalehaven Capital Fund Limited, Alpha and Whalehaven had
agreed that, following the effectiveness of the registration statement of which
the Prospectus is a part, they would purchase from Techedge, for a gross
purchase price of $500,000, 1,000,000 shares of its common stock and warrants to
purchase a total of 400,000 additional shares of Techedge common stock at an
exercise price of $0.75 per share. On July 5, 2005, Techedge sold 500,000 shares
of its common stock to each of Alpha and Whalehaven pursuant to the subscription
agreement for an aggregate purchase price of $250,000 per subscriber and issued
to each of Alpha and Whalehaven for no additional consideration a warrant to
purchase 200,000 shares of common stock at an exercise price of $0.75 per share,
which warrant is exercisable at any time through the close of business on July
5, 2010. The shares and the warrants were issued in a private placement of
securities exempt from registration under the Securities Act of 1933, as
amended, pursuant to Section 4(2) of the Securities Act.
Each of the warrants provides that until July 5, 2010, if Techedge shall issue
any common stock except for certain excepted issuances, prior to the complete
exercise of the warrant for a consideration per share less than the purchase
price that would be in effect at the time of such issuance, then, and thereafter
successively upon each such issuance, the purchase price shall be reduced to
such other lower issuance price. For purposes of this adjustment, the issuance
of any security or debt instrument of Techedge carrying the right to convert
such security or debt instrument into common stock or of any warrant, right or
option to purchase common stock shall result in an adjustment to the purchase
price upon the issuance of the above-described security, debt instrument,
warrant, right, or option and again at any time upon any subsequent issuances of
shares of common stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the purchase price in effect upon such
issuance. The reduction of the purchase price pursuant to the subscription
agreement is in addition to the other rights of the subscribers under the
subscription agreement.
The table below sets forth information concerning the resale of the shares of
common stock beneficially owned by Alpha and Whalehaven, including the number of
shares beneficially owned by each of them as of August 16, 2005, the number of
shares registered for resale and the number of shares they will beneficially own
if they sell all of the registered shares.
Amount of Shares to % of Shares to be
Amount of Shares be Beneficially Owned Beneficially Owned
Beneficially Owned Amount of After Secondary After Secondary
Name of Beneficial Owner Prior to Offering Shares Offered Offering Offering
------------------------ ----------------- -------------- -------- --------
Whalehaven Capital Fund Limited(1) 1,347,059(2) 1,347,059 0 0%
Alpha Capital Aktiengesellschaft 1,347,059(2) 1,347,059 0 0%
- -------------
(1) Whalehaven Capital Fund Limited has indicated that Evan Schemenauer, Arthur
Jones and Jennifer Kelly exercise joint voting or investment power over the
shares beneficially owned by it.
(2) Includes (i) 1,000,000 outstanding shares and (ii) 347,059 shares issuable
upon exercise of outstanding warrants.
Techedge's Financial Results for the Quarter ended June 30, 2005
On August 12, 2005, Techedge filed its quarterly report on Form 10-QSB for the
quarter ended June 30, 2005, to report the following information and events:
2
June 30, 2005 Financial Statements
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheet
June 30, 2005
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents $ 10,450
Accounts receivable, net of bad debt reserve of $14,326 36,565
Due from related party 248,986
Prepaid consulting 121,700
Prepaid expenses and other current assets 7,979
-----------
Total Current Assets 425,680
Property and equipment, net of accumulated depreciation 160,753
Investment in unconsolidated subsidiary 324,167
Other assets 30,237
-----------
Total Assets 940,837
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses 691,092
Due to officers 958,724
-----------
Total Current Liabilities 1,649,816
-----------
Commitments and contingencies --
Stockholders' Equity:
Common Stock, stated value $.0001, 100,000,000
shares authorized; 81,455,000 shares issued and outstanding 8,146
Additional paid-in capital 5,978,786
Deficit accumulated during development stage (6,692,385)
Accumulated other comprehensive income (3,526)
-----------
Total Stockholders' Equity (Deficit) (708,979)
-----------
Total Liabilities and Stockholders' Equity $ 940,837
===========
See notes to the unaudited consolidated financial statements
3
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
For the Three Months Ended June 30, 2005 and 2004
and for the Period from
September 13, 2000 (date of inception) through June 30, 2005
(UNAUDITED)
Three Months Ended For the Period From
June 30, September 13, 2000
------------------------------ (Date of Inception)
2005 2004 to June 30, 2005
------------ ------------ -------------------
Revenues $ 61,111 $ 78,850 $ 1,285,053
Cost of Sales 31,334 41,260 656,145
------------ ------------ ------------
Gross Profit 29,777 37,590 628,908
------------ ------------ ------------
Costs and expenses:
Research and development 143,796 104,168 2,005,156
General and administrative (including
stock-based compensation of
$91,800, $0, and $161,911, respectively) 532,465 364,183 4,974,591
Depreciation and amortization 14,941 19,830 316,784
------------ ------------ ------------
Total costs and expenses 691,202 488,181 7,296,531
------------ ------------ ------------
Loss from operations (661,425) (450,591) (6,667,623)
------------ ------------ ------------
Other income (expense):
Loss from unconsolidated subsidiary -- -- (60,134)
Gain (Loss) on foreign currency 594 1,037 1,254
Interest income 72 322 34,118
------------ ------------ ------------
Total other income (expense) 666 1,359 (24,762)
------------ ------------ ------------
Net Loss $ (660,759) $ (449,232) $ (6,692,385)
------------ ------------ ------------
Unrealized gain on foreign
currency translation, net of tax -- -- (3,526)
------------ ------------ ------------
Comprehensive Loss $ (660,759) $ (449,232) $ (6,695,911)
============ ============ ============
Loss Per Common Share, basic and diluted $ (0.01) $ (0.01)
============ ============
Weighted Average Common Shares Outstanding,
basic and diluted 81,080,604 68,810,810
============ ============
See notes to the unaudited consolidated financial statements
4
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
For the Six Months Ended June 30, 2005 and 2004
and for the Period from
September 13, 2000 (date of inception) through June 30, 2005
(UNAUDITED)
Three Months Ended For the Period From
June 30, September 13, 2000
------------------------------ (Date of Inception)
2005 2004 to June 30, 2005
------------ ------------ -------------------
Revenues $ 127,614 $ 158,029 $ 1,285,053
Cost of Sales 68,221 77,398 656,145
------------ ------------ ------------
Gross Profit 59,393 80,631 628,908
------------ ------------ ------------
Costs and expenses:
Research and development 341,820 187,314 2,005,156
General and administrative (including
stock-based compensation of
$148,300, $0, and $161,911, respectively) 970,525 560,151 4,974,591
Depreciation and amortization 34,013 48,009 316,784
------------ ------------ ------------
Total costs and expenses 1,346,358 795,474 7,296,531
------------ ------------ ------------
Loss from operations (1,286,965) (714,843) (6,667,623)
------------ ------------ ------------
Other income (expense):
Loss from unconsolidated subsidiary -- -- (60,134)
Gain (Loss) on foreign currency 594 (2,031) 1,254
Interest income 239 2,681 34,118
------------ ------------ ------------
Total other income (expense) 833 650 (24,762)
------------ ------------ ------------
Net Loss $ (1,286,132) $ (714,193) $ (6,692,385)
------------ ------------ ------------
Unrealized gain on foreign
currency translation, net of tax -- 3,526 (3,526)
------------ ------------ ------------
Comprehensive Loss $ (1,286,132) $ (710,667) $ (6,695,911)
============ ============ ============
Loss Per Common Share, basic and diluted $ (0.02) $ (0.01)
============ ============
Weighted Average Common Shares Outstanding, basic
and diluted 80,614,588 63,426,795
============ ============
See notes to the unaudited consolidated financial statements
5
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2005 and 2004
and for the Period from
September 13, 2000 (date of inception) through June 30, 2005
(UNAUDITED)
Three Months Ended For the Period From
June 30, September 13, 2000
------------------------------ (Date of Inception)
2005 2004 to June 30, 2005
------------ ------------ -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,286,132) $ (714,193) $(6,692,385)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 48,129 56,508 399,502
Loss on unconsolidated subsidiary -- -- 60,134
Provision for doubtful accounts -- -- 14,326
Loss on foreign currency exchange -- 3,526 (3,526)
Stock-based compensation 148,300 -- 161,911
Changes in operating assets and liabilities:
Accounts receivable (1,626) (4,126) (50,891)
Due from related parties (30,728) (7,090) (248,986)
Prepaid expenses and other current assets 8,125 (46,376) 7,979
Other assets -- (9,653) (30,237)
Accounts payable and accrued expenses 406,887 (22,287) 716,624
Other liabilities (260,000) -- --
----------- ----------- -----------
Net cash (used in) operating activities (967,045) (743,691) (5,681,507)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated subsidiary -- -- (408,270)
Purchase of property and equipment (16,663) (38,406) (221,865)
----------- ----------- -----------
Net cash (used in) investing activities (16,663) (111,703) (630,135)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from private placement of common stock 855,000 504,000 1,363,800
Repurchase of treasury stock -- -- (432)
Net proceeds from private placement of preferred stock -- -- 4,000,000
Net proceeds from (repayments of) officers' advances 84,282 -- 958,724
----------- ----------- -----------
Net cash provided by financing activities 939,282 504,000 6,322,092
----------- ----------- -----------
Net increase (decrease) in cash (44,426) (351,514) 10,450
Cash and Cash Equivalents, beginning of period 54,876 711,630 --
----------- ----------- -----------
Cash and Cash Equivalents, end of period $ 10,450 $ 360,236 $ 10,450
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ -- $ -- $ --
=========== =========== ===========
Income taxes paid $ -- $ 500 $ 2,173
=========== =========== ===========
See notes to the consolidated financial statements
6
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
(UNAUDITED)
1. BASIS OF PRESENTATION
These financial statements should be read in conjunction with a reading of the
Company's Annual Report on Form 10-KSB for the fiscal year ended December 31,
2004.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles applicable to
interim financial information and with the requirements of Form 10-QSB and Item
310 of Regulation S-B of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. Interim results are not necessarily indicative of results
for a full year. In the opinion of management, all adjustments considered
necessary for a fair presentation of the financial position and the results of
operations and cash flows for the interim periods have been included.
2. LOSSES DURING THE DEVELOPMENT STAGE AND MANAGEMENT'S PLANS
Through June 30, 2005 the Company had incurred development stage losses totaling
$6,692,385, and net cash used in operating activities of $5,681,507. At June 30,
2005 the Company had $10,450 of cash and cash equivalents and $36,565 of net
trade receivables to fund short-term working capital requirements.
The Company's ability to continue as a going concern and its future success is
dependent upon its ability to raise capital in the near term to: (1) satisfy its
current obligations, (2) continue its research and development efforts, and (3)
successfully develop, deploy and market its products on a wide scale.
3. STOCKHOLDERS' EQUITY
In April 2005, the Company completed a private placement of 95,000 shares of
common stock at a purchase price of $1.00 per share, or gross proceeds of
$95,000, and, for no additional consideration, a cashless 2-year warrant to
purchase an additional 95,000 shares at an exercise price of $1.50 per share. A
value of $36,770 of the proceeds has been allocated to the warrant.
In May 2005, the Company completed a private placement of 500,000 shares of
common stock at a purchase price of $0.50 per share, or gross proceeds of
$250,000, and for no additional consideration, a cashless 5-year warrant to
purchase an additional 147,059 shares at an exercise price of $0.75 per share. A
value of $71,470 of the proceeds has been allocated to the warrant.
Also in May 2005, the Company completed a private placement of 500,000 shares of
common stock at a purchase price of $0.50 per share, or gross proceeds of
$250,000, and for no additional consideration, a cashless 5-year warrant to
purchase an additional 147,059 shares at an exercise price of $0.75 per share. A
value of $68,240 of the proceeds has been allocated to the warrant.
7
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
(UNAUDITED)
4. RELATED PARTY TRANSACTIONS
The Company records material related party transactions. The Company incurs
costs for certain administrative expenses from a company owned 100% by the
Company's CEO. Those charges are included in general and administrative
expenses. The Company also provides services to a related party and those
amounts are included in revenue.
The Company also purchases equipment used in research and development from a
company owned 100% by the Company's CEO.
The Company also engages in advances to and advances from related parties. The
advances have no stated terms of repayment and carry no interest.
Following is a summary of transactions and balances with affiliated entities and
related parties for three months and six months ended June 30, 2005 and 2004:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenues from related party $ 0 $ 33 $ 0 $ 65
General and administrative expenses to related party $ 10,890 $ 3,721 $ 21,780 $ 7,370
Due from related party $248,986 $ 48,672 $248,986 $ 48,672
Amounts due to officers consist of advances from the Company's CEO to fund the
Company's operations. It also includes compensation deferred by the Company's
CEO, CFO, CTO and COO. No written repayment agreements exist with any of these
officers. Amounts are unsecured, non-interest bearing and due upon demand.
5. SUBSEQUENT EVENTS
In July 2005, the Company completed a private placement of 1,000,000 shares of
common stock at a purchase price of $0.50 per share, or gross proceeds of
$500,000 and, for no additional consideration, a cashless 5-year warrants to
purchase an aggregate of 400,000 additional shares at an exercise price of $0.75
per share. A value of $168,000 of the proceeds has been allocated to the
warrant.
In July 2005, the Company entered into a service agreement pursuant to which the
Company agreed to issue warrants to purchase up to an aggregate of 200,000
shares (the "Warrant Shares") of the Company's common stock in exchange for
investor relations services. Techedge has the right to terminate the service
agreement at any time on or after October 5, 2005, upon 30 days prior written
notice. The Warrant Shares shall vest in accordance with the following schedule
and are purchasable at the following exercise prices:
o 50,000 Warrant Shares are immediately vested and may be purchased at
an exercise price of $0.90 per share;
8
Techedge, Inc. and Subsidiary
(A Development Stage Company)
Notes to Consolidated Financial Statements
(UNAUDITED)
o 50,000 Warrant Shares will vest on the 91st day following the date
of the service agreement and may be purchased at an exercise price
of $1.10 per share;
o 50,000 Warrant Shares will vest on the 181st day following the date
of the service agreement and may be purchased at an exercise price
of $1.30 per share;
o 50,000 Warrant Shares will vest on the 271st day following the date
of the service agreement and may be purchased at an exercise price
of $1.50 per share.
The warrants shall terminate on the 24-month anniversary of the effective date
of a registration statement filed by the Company to register the resale of the
Warrant Shares; provided, however, in the event that Techedge elects to
terminate the service agreement early as described above, the Warrants will
terminate as to any Warrant Shares that are not then vested.
9
Management's Discussion and Analysis or Plan of Operation
NOTE REGARDING FORWARD-LOOKING STATEMENTS
You should read the following discussion together with the more detailed
business information and consolidated financial statements and related notes
that appear elsewhere in this report and in the documents that we incorporate by
reference into this report. This report may contain certain "forward-looking"
information within the meaning of the Private Securities Litigation Reform Act
of 1995. In some cases, you can identify forward-looking statements by our use
of words such as "may," "will," "should," "could," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "predict," "potential" or "continue" or the
negative or other variations of these words, or other comparable words or
phrases. This information involves risks and uncertainties. Our actual results
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in Part I, Item 1 of our annual report on Form
10-KSB under the caption "Business--Risk Factors," which annual report was filed
on March 31, 2005.
Unless the context requires otherwise, references to "we," "us," "our,"
"Techedge" and the "Company" refer to Techedge, Inc. and its consolidated
subsidiaries.
CRITICAL ACCOUNTING POLICIES
See "Summary of Significant Accounting Policies" in the Notes to Consolidated
Financial Statements December 31, 2004 in our annual report on Form 10-KSB filed
on March 31, 2005 for our critical accounting policies. These policies include
revenue recognition, determining our allowance for doubtful accounts receivable,
accounting for cost of revenue, valuation of long-lived assets and research and
development costs. No significant changes in our critical accounting policies
have occurred since December 31, 2004.
BUSINESS OVERVIEW
Techedge is a mobile voice over Internet protocol, or VoIP, solution provider.
Techedge has developed network services for carriers combining matured wireless
products with advanced VoIP technology. Techedge is primarily focused on
providing low cost mobile VoIP products and services and carving a niche in
providing enabling technology to communications service providers targeting
underserved markets in the United States. We are in the development stage, and
have not yet initiated sales from our principal product, IP-PCS systems and
solutions. We have substantially completed development of our initial product
offering and are engaged in efforts to initiate commercialization of this
product. We are headquartered in New Jersey, with research and development and
support centers in both the U.S. and China.
The following discussion should be read in conjunction with our condensed
consolidated financial statements and the notes thereto:
RESULTS OF OPERATIONS
Revenues
Current revenues are from limited sales of VoIP and value added communications
services to business and residential customers. Such revenues are not
significant as we continue to focus on the commercialization of our initial
IP-PCS product and development of additional IP-PCS systems and solutions.
Revenue decreased to $61,111 in the 2nd quarter of 2005 from $78,850 in the 2nd
quarter of 2004. The decrease in VoIP service revenues is due to reduced
marketing and sales activities, and significant rate cuts in response to
continued price reductions among competitors.
10
No customer represented more than 10% of our total revenues for the 2nd quarter
of 2005 or 2004.
Comprehensive Loss
Comprehensive loss increased to $(660,759) in the 2nd quarter of 2005 from
$(449,232) in the 2nd quarter of 2004. The increase in loss is due to decreased
revenues, and an increase in legal, accounting, finance, and research and
development expenses.
Cost of Revenues and Gross Margin
The cost of service revenues consists of costs primarily associated with network
operations and related personnel, telephony origination and termination services
provided by third-party carriers, and indirect costs associated with purchasing,
scheduling and quality assurance.
The cost of revenues was $31,334 in the 2nd quarter of 2005, compared to $41,260
in the 2nd quarter of 2004.
Gross margins decreased to $29,777 in the 2nd quarter of 2005 from $37,590 in
the 2nd quarter of 2004, primarily due to the decrease in revenue.
Research and Development Expenses
Research and development ("R&D") expenses consist primarily of personnel for
system design, implementation, and testing, and equipment costs associated with
IP-PCS systems and solutions development. R&D expenses increased to $143,796 in
the 2nd quarter of 2005 from $104,168 in the 2nd quarter of 2004. R&D costs,
including software development costs, are expensed as incurred.
General and Administrative Expenses
General and administrative ("G&A") expenses consist primarily of personnel and
related overhead costs for sales, marketing, finance, legal, human resources and
general management. Such costs also include sales commissions, trade show,
advertising and other marketing and promotional expenses.
G&A expenses increased to $532,465 including stock-based compensation of $91,800
in the 2nd quarter of 2005 from $364,183 in the 2nd quarter of 2004. We
experienced a significant increase in legal, accounting, finance, and SEC filing
fees associated with becoming a publicly traded firm as a result of Techedge's
acquisition of China Quantum Communications, Ltd., in June 2004, offset by a
significant decrease in marketing and sales expenses. We anticipate that G&A
expenses will increase as we seek to commercialize our IP-PCS systems and
solutions.
Other Income (Expense)
Other income was $666 in the 2nd quarter of 2005 compared to $1,359 in the 2nd
quarter of 2004.
Income Taxes
No tax provision has been recorded for 2005 or 2004, as a result of the
cumulative operating losses we have generated.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents; working capital deficit. As of June 30, 2005, we had
cash and cash equivalents of $10,450 and a working capital deficit of
$(1,224,136), as compared to $54,876 and $(1,094,470), respectively, at December
31, 2004. The increase in our working capital deficit reflects a decrease in
current assets and an increase in current liabilities. Our current liabilities
of $1,649,816 include $958,724 in non-secured loans from and deferred
compensation due to the officers of the Company which are payable on demand.
11
Net cash provided by operating activities. Net cash used in the 6 months ending
June 30, 2005 was $967,045, as compared to $743,691 in the 6 months ending June
30, 2004.
Net cash used in investing activities. Net cash used in investing activities was
$16,663 in the 6 months ending June 30, 2005, as compared to $111,703 in the 6
months ending June 30, 2005.
Net cash provided by financing activities. Net cash provided by financing
activities was $939,282, including $855,000 through the issuance of common
stock, and $84,282 from officers' advances in the 6 months ending June 30, 2005,
as compared to $504,000 net cash provided by financing activities in the 6
months ending June 30, 2004.
Capital Stock Transactions. In April 2005, the Company completed a private
placement of 95,000 shares of common stock at a purchase price of $1.00 per
share, or gross proceeds of $95,000, and, for no additional consideration, a
cashless 2-year warrant to purchase an additional 95,000 shares at an exercise
price of $1.50 per share. A value of $36,770 of the proceeds has been allocated
to the warrant.
In May 2005, the Company completed a private placement of 500,000 shares of
common stock at a purchase price of $0.50 per share, or gross proceeds of
$250,000, and, for no additional consideration, a cashless 5-year warrant to
purchase an additional 147,059 shares at an exercise price of $0.75 per share. A
value of $71,470 of the proceeds has been allocated to the warrant.
Also in May 2005, the Company completed a private placement of 500,000 shares of
common stock at a purchase price of $0.50 per share, or gross proceeds of
$250,000, and, for no additional consideration, a cashless 5-year warrant to
purchase an additional 147,059 shares at an exercise price of $0.75 per share. A
value of $68,240 of the proceeds has been allocated to the warrant.
Currency exchange fluctuations. For the purpose of funding the operations of our
Chinese subsidiary, we have implemented simple currency hedging against
fluctuations in the Chinese Renminbi to United States dollar exchange rate.
Need for current financing. Our ability to continue as a going concern is
dependent upon our ability to raise capital in the near term to: (1) satisfy our
current obligations and (2) continue our mobile VoIP system and solution
development and commercialization efforts. Furthermore, our future success will
depend on our ability to successfully market and sell our IP-PCS products and
solutions. We do not have sufficient capital to fund our operations at the
current level unless we receive additional capital either through external
independent or related party funding, revenues from sales, further expense
reductions or some combination thereof.
SUBSEQUENT EVENTS
In July 2005, the Company completed a private placement of 1,000,000 shares of
common stock at a purchase price of $0.50 per share, or gross proceeds of
$500,000, and, for no additional consideration, cashless 5-year warrants to
purchase an aggregate of 400,000 additional shares at an exercise price of $0.75
per share. A value of $168,000 of the proceeds has been allocated to the
warrant.
In July 2005, the Company entered into a service agreement pursuant to which the
Company agreed to issue warrants to purchase up to an aggregate of 200,000
Warrant Shares in exchange for investor relations services. Techedge has the
right to terminate the service agreement at any time on or after October 5,
2005, upon 30 days prior written notice. The Warrant Shares shall vest in
accordance with the following schedule and are purchasable at the following
exercise prices:
o 50,000 Warrant Shares are immediately vested and may be purchased at
an exercise price of $0.90 per share;
12
o 50,000 Warrant Shares will vest on the 91st day following the date
of the service agreement and may be purchased at an exercise price
of $1.10 per share;
o 50,000 Warrant Shares will vest on the 181st day following the date
of the service agreement and may be purchased at an exercise price
of $1.30 per share;
o 50,000 Warrant Shares will vest on the 271st day following the date
of the service agreement and may be purchased at an exercise price
of $1.50 per share.
The warrants shall terminate on the 24-month anniversary of the effective date
of a registration statement filed by the Company to register the resale of the
Warrant Shares; provided, however, in the event that Techedge elects to
terminate the service agreement early as described above, the Warrants will
terminate as to any Warrant Shares that are not then vested.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
13
Results of Techedge's 2005 Annual Meeting of Stockholders
On May 20, 2005,Techedge held its annual meeting of stockholders to vote on the
following matters: (i) the election of directors, (ii) to approve a new equity
compensation plan, Techedge 's 2005 Equity Compensation Plan (the "2005 Plan")
and (iii) the ratification of the appointment of Rosenberg Rich Baker Berman &
Company as the independent registered public accounting firm of Techedge for its
2005 fiscal year. Proxies representing 54,129,389 shares of common stock or 67%
of the total shares outstanding on the record date for the meeting were
represented at the meeting.
(a) Election of Directors. At the meeting the following three nominees for
directors were elected to serve until the Company's 2006 annual meeting of
stockholders.
Nominee For Withheld Broker Non-Votes
------- --- -------- ----------------
Peter Wang 54,129,389 0 0
Ya Li 54,129,389 0 0
Charles Xue 54,129,389 0 0
(b) Approval of 2005 Plan. The stockholders also voted on whether to approve the
2005 Plan which had previously been approved by Techedge's board of directors.
The 2005 Plan was approved by the following vote:
For Against Abstaining Broker Non-Votes
--- ------- ---------- ----------------
52,820,233 0 1,809,156 0
(c) Ratification of Appointment of Rosenberg Rich Baker Berman & Company. The
remaining matter voted upon at the meeting was the ratification of the
appointment of Rosenberg Rich Baker Berman & Company as the Company's
independent registered public accounting firm for its 2005 fiscal year. At the
meeting, the appointment of Rosenberg Rich Baker Berman & Company as Techedge's
independent registered public accounting firm was ratified by the following
vote:
For Against Abstaining Broker Non-Votes
--- ------- ---------- ----------------
54,129,389 0 0 0
Recent Sale of Unregistered Securities
On July 6, 2005, Techedge, Inc., entered into a service agreement with Elite
Financial Communications Group, LLC pursuant to which Elite will provide
investor relations services to Techedge. The service agreement expires on July
6, 2006. However, Techedge has the right to terminate the service agreement at
any time on or after October 5, 2005, upon 30 days prior written notice. As
compensation, Techedge has agreed to pay Elite $7,500 per month in advance
through the term of the service agreement and agreed to issue to Elite warrants
(the "Warrants") to purchase up to 200,000 shares (the "Warrant Shares") of
Techedge's common stock, par value $.0001 per share. The Warrant Shares shall
vest in accordance with the following schedule and are purchasable at the
following exercise prices:
o 50,000 Warrant Shares are immediately vested and may be purchased at
an exercise price of $0.90 per share;
o 50,000 Warrant Shares will vest on the 91st day following the date
of the service agreement and may be purchased at an exercise price
of $1.10 per share;
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o 50,000 Warrant Shares will vest on the 181st day following the date
of the service agreement and may be purchased at an exercise price
of $1.30 per share;
o 50,000 Warrant Shares will vest on the 271st day following the date
of the service agreement and may be purchased at an exercise price
of $1.50 per share.
Under the service agreement, Techedge is required to register the Warrant Shares
for resale by Elite on the first applicable registration statement that Techedge
files with the United States Securities and Exchange Commission pursuant to the
Securities Act of 1933 after January 2, 2006. The Warrants shall terminate on
the 24-month anniversary of the effective date of such registration statement;
provided, however, in the event that Techedge elects to terminate the service
agreement early as described above, the Warrants will terminate as to any
Warrant Shares that are not then vested. The issuance of the Warrants may
trigger an anti-dilution adjustment under one or more of Techedge's existing
outstanding warrants.
On July 6, 2005, Techedge become obligated to issue the Warrants to Elite. The
Warrants were issued in a private placement of securities intended to be exempt
from registration under the Securities Act of 1933, as amended, pursuant to
Section 4(2) of the Securities Act.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST 18, 2005.
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