As filed with the Securities and Exchange Commission on October 17, 1996
Registration No. 333-8857
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
THE TRANSLATION GROUP, LTD.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
7389
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
22-3382869
(I.R.S. EMPLOYER IDENTIFICATION NO.)
7703 MAPLE AVENUE
PENNSAUKEN, NEW JERSEY 08109
609-663-8600
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL
EXECUTIVE OFFICES AND PRINCIPAL PLACE OF BUSINESS)
CHARLES CASCIO
C/O THE TRANSLATION GROUP, LTD.
7703 MAPLE AVENUE
PENNSAUKEN, NEW JERSEY 08109
609-663-8600
(NAME, ADDRESS AND TELEPHONE NUMBER,
OF AGENT FOR SERVICE)
COPIES TO:
RICHARD F. HOROWITZ, ESQ. MICHAEL BECKMAN, ESQ.
IRVING ROTHSTEIN, ESQ. BECKMAN & MILLMAN, P.C.
HELLER, HOROWITZ & FEIT, P.C. 116 JOHN STREET
292 MADISON AVENUE NEW YORK, NEW YORK 10038
NEW YORK, NEW YORK 10017 TELEPHONE: (212) 227-6777
TELEPHONE: (212) 685-7600 FACSIMILE: (212) 227-1486
FACSIMILE: (212) 696-9459
CHARLES PEARLMAN, ESQ.
ROXANNE K. BEILLY, ESQ.
ATLAS, PEARLMAN, TROP &
BORKSON, P.A.
NEW RIVER CENTER, SUITE 1900
200 EAST LAS OLAS BOULEVARD
FORT LAUDERDALE, FLORIDA 33301
TELEPHONE: (954) 763-1200
FACSIMILE: (954) 766-7800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the 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 of
1933 check the following box.
[X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
TITLE OF EACH CLASS AMOUNT PRICE PER AGGREGATE AMOUNT OF
OF SECURITIES TO BE TO BE SECURITY OFFERING REGISTRATION
REGISTERED REGISTERED PRICE (1) FEE
---------- ---------- -------- --------- -------------
<S> <C> <C> <C> <C>
Common Stock, $.001 Par Value(2) 1,295,000 $ 3.00 $ 3,885,000 $1,339.55
Common Stock Purchase Warrants(3) 1,725,000 $ .20 $ 345,000 $ 118.96
Common Stock, $.001 Par Value(4)(11) 1,725,000 $ 4.00 $ 6,900,000 $2,379.12
Representative's Securities (5)(11) 100,000 $ .40 $ 250 $ .09
Common Stock, $.001 Par Value(6)(11) 110,000 $ 3.60 $ 396,000 $ 136.54
Common Stock Purchase Warrants(6)(11) 150,000 $ .24 $ 36,000 $ 12.41
Common Stock, $.001 Par Value(7)(11) 150,000 $ 4.80 $ 720,000 $ 248.26
Common Stock, $.001 Par Value(8) 441,000 $ 3.00 $ 1,323,000 $ 456.17
Common Stock Purchase Warrants(9)(11) 300,000 $ .20 $ 60,000 $ 20.69
Common Stock, $.001 Par Value(10) 300,000 $ 4.00 $ 1,200,000 $ 413.76
Total $14,865,250 $5,125.54
=========== =========
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to rule 457 under the Securities Act of 1933.
(2) Includes up to 195,000 shares of Common Stock which may be purchased by
the Representative to cover over-allotments, if any.
(3) Includes up to 225,000 redeemable Common Stock Purchase Warrants which
may be purchased by the Representative to cover over-allotments, if
any.
(4) Reserved for issuance upon exercise of the Common Stock Purchase
Warrants.
(5) Issued to the Representative entitling the Representative to purchase
one share of Common Stock ("Representative's Stock Warrants") and one
Common Stock Purchase Warrant ("Representative's Warrants") for each
ten of such securities sold in the offering.
(6) Reserved for issuance upon exercise of Representative's Securities.
(7) Reserved for issuance upon exercise of the Warrants underlying the
Representative's Warrants.
(8) Represents shares of Common Stock offered by Selling Security Holders.
(9) Represents Warrants offered by Selling Security Holders.
(10) Reserved for issuance upon exercise of Selling Security Holders'
Warrants.
(11) Pursuant to Rule 416, there is also being registered such additional
securities as may become issuable pursuant to the anti-dilution
provisions of the Warrants or the Unit Purchase Option.
ii
The registrant hereby amends the 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.
iii
THE TRANSLATION GROUP, LTD.
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED
THEREIN BY ITEMS 1 THROUGH 23 OF FORM SB-2
<TABLE>
<CAPTION>
REGISTRATION STATEMENT PROSPECTUS CAPTION
ITEM AND HEADING OR LOCATION
---------------- -----------
<S> <C>
1. Front of Registration Statement and Outside Front
Cover of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus Inside Front/Outside Front Cover
Page
3. Summary Information and Risk Factors Prospectus Summary, Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page, Risk Factors,
Underwriting
6. Dilution Dilution
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters and
Control Persons Management
11. Security Ownership of Certain Beneficial Owners
and Management Security Ownership of Certain
Beneficial Owners and Management
12. Description of Securities Description of Securities
13. Interests of Named Experts and Counsel Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities
15. Organization Within Last Five Years Business, Certain Relationships
and Related Transactions,
Executive Compensation
16. Description of Business Business
17. Management's Discussion and Analysis or Plan of
Operation Management's Discussion and
Analysis and Plan of Operation
18. Description of Property Business
iv
19. Certain Relationships and Related Transactions Certain Relationships and
Related Transactions
20. Market for Common Equity and Related Stockholders
Matters Description of Securities
21. Executive Compensation Executive Compensation
22. Financial Statements Consolidated Financial Statements
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure Not Applicable
</TABLE>
SUBJECT TO COMPLETION
DATED OCTOBER 10, 1996
-----------------
THE TRANSLATION GROUP, LTD.
----------------------
1,300,000 SHARES OF COMMON STOCK AND
1,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
The Translation Group, LTD. (the "Company") offers hereby 1,100,000
shares of Common Stock, $.001 par value (the "Common Stock") and its Chairman
and Chief Operating Officer offers an additional 200,000 shares for an aggregate
of 1.3 million shares of Common Stock at a price of $3.00 per share, and
1,500,000 Redeemable Common Stock Purchase Warrants (the "Warrants") at a price
of $.20 per Warrant each of which, upon exercise, entitles the owner thereof to
purchase one share of Common Stock during the three years following the date
hereof at a price of $4.00 per share. The Common Stock and the Warrants offered
hereby (collectively, the "Securities") will be separately tradeable immediately
upon issuance and may be purchased separately. Beginning one year from the date
hereof unless earlier permitted by the representative, the Warrants may be
redeemed, at a price of $.25 per Warrant, on thirty day's prior written notice
at any time after the price for the Common Stock closes at no less than $6.00
per share for a period of twenty consecutive trading days ending on the 3rd day
prior to the day on which the Company gives notice, as reported on the principal
exchange on which the Common Stock is traded. Application for listing has been
made to, and the Common Stock and Warrants are expected to trade separately on,
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") as small cap issues under the symbols THEO and THEOW, respectively.
Even if the securities are listed on NASDAQ, no assurance can be given that an
active trading market will develop, or if developed, will be sustained. See
"Description of Securities."
Prior to this Offering, there has been no public market for the Common
Stock or Warrants and there can be no assurance that such a market will develop
after the completion of this Offering. The offering price of the Common Stock
and the exercise price of the Warrants have been arbitrarily determined by the
Company and Werbel-Roth Securities, Inc., the representative of the Underwriters
(the "Representative") and bear no relationship to the Company's assets, book
value, results of operations or other generally accepted criteria of value.
Simultaneously herewith, the Company is also registering for sale 241,000 shares
of Common Stock owned and being offered under an alternative prospectus by
certain selling security holders which are not being underwritten and 300,000
warrants and the underlying Common Stock owned and being offered under an
alternative prospectus by certain founders of the Company and two executive
officers, none of which is being underwritten. The holders of these warrants
have agreed not to transfer the warrants or the underlying Common Stock for
eighteen months from the date of this Prospectus without the consent of the
Representative. The proceeds from the sale of the 441,000 shares and 300,000
warrants will not inure to the benefit of the Company, but rather to such
holders. See "Selling Security Holders."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION
AS DESCRIBED HEREIN. See "RISK FACTORS" and "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
------ ----------- ----------
Per Share (3) $3.00 $.30 $2.70
Per Warrant $.20 $.02 $.18
Total $4,200,000 $420,000 $3,240,000
(1) Does not include additional compensation to the Representative in the
form of (a) a non-accountable expense allowance of three percent of the
gross proceeds of this Offering ($.09 per share of Common Stock and
$.006 per Warrant) and (b) a Security, purchasable at a nominal price,
giving it the right to acquire 110,000 shares of Common Stock at an
initial exercise price of $3.60 per share (the "Representative's Stock
Warrants") and 150,000 Warrants at an initial exercise price of $.24
per Warrant to purchase shares of Common Stock at $4.80 per share (the
"Representative's Warrants," and collectively with the Representative's
Stock Warrants, the "Representative's Securities"). In addition, the
Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act") and to retain the Representative as a financial
consultant for the three years following the closing of this Offering
for an aggregate fee of $78,000 payable at closing. See "Underwriting."
(2) Only includes the securities offered on behalf of the Company and not
the securities offered on behalf of selling security holders who will
pay their own direct underwriter's costs. Before deducting estimated
expenses of $373,000 payable by the Company ($391,900 if the
over-allotment option is exercised in full), including the
Underwriters' expense allowance of $108,000 ($126,900 if the
over-allotment option is exercised in full).
(3) For the purpose of covering over-allotments, if any, the Company has
granted to the Representative an option, exercisable within forty five
days of the date hereof, to purchase an additional 195,000 shares of
Common Stock and 225,000 Warrants upon the same terms and conditions as
the Securities offered hereby. If such over-allotment option is
exercised in full, the Total Price to Public will be $4,830,000, the
Total Underwriting Discount will be $483,000 and the Total Proceeds to
the Company will be $3,807,000. See "Underwriting."
WERBEL-ROTH SECURITIES, INC. MILLENNIUM SECURITIES CORP.
THE DATE OF THE PROSPECTUS IS OCTOBER __, 1996.
2
The Company intends to furnish to its stockholders annual reports
containing audited financial statements examined and reported upon by an
independent certified public accounting firm. The Company's fiscal year end is
March 31. The Company has filed a Registration Statement on Form 8-A with the
Securities and Exchange Commission to register under, and be subject to the
reporting requirements of, the Securities Exchange Act of 1934.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMPANY'S SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The Securities are being offered on a "firm commitment" basis subject
to receipt and acceptance of the Securities by the Representative, subject to
approval of certain legal matters by its counsel and subject to prior sale. The
Representative reserves the right to withdraw, cancel or modify the Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates representing the Securities will be made at the offices of the
Representative against payment therefor in New York funds, on or about
_________, 1996.
ADDITIONAL INFORMATION
The Company has filed with the headquarters office of the Securities
and Exchange Commission located at 450 Fifth Street, N.W., Washington, D.C.
20549, a Registration Statement on Form SB-2 under the Securities Act of 1933
with respect to the securities offered hereby. This Prospectus filed as part of
such Registration Statement does not contain all the information set forth in,
or annexed as exhibits to, the Registration Statement. For further information
pertaining to the securities offered hereby and the Company, reference is made
to the Registration Statement and the exhibits thereto. The Registration
Statement and exhibits thereto may be inspected at the Headquarters Office of
the Securities and Exchange Commission located at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at certain of the Commission's regional offices
at the following addresses: 7 World Trade Center, 13th Floor, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may be obtained from the Public Reference Section of the SEC,
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. at prescribed rates. The
Commission also maintains a Web Site that contains reports, proxy and
information statements and other information regarding registrants such as the
Company, that file electronically with the Commission. This material can be
found at http://www.sec.gov.
3
PROSPECTUS SUMMARY
Prospective investors should read this Prospectus carefully before
making any investment decision regarding the Company, and should pay particular
attention to the information contained in this Prospectus under the heading
"Risk Factors" and Financial Statements and related notes appearing elsewhere in
this Prospectus. In addition, prospective investors should consult their own
advisors in order to understand fully the consequences of an investment in the
Company.
The following summary does not purport to be complete and is qualified
by more detailed information appearing elsewhere in this Prospectus.
THE COMPANY
The Translation Group, Ltd. ("TTGL" or the "Company") translates
conventional documents and software written in one language into other
languages. The Company specializes as a provider of high tech translation and
localization services in the information technology ("IT") sector of the
translation market. Localization is the art of converting from one language to
another giving careful consideration to custom of the local area.
TTGL was incorporated in Delaware on July 7, 1995. It began
implementation of its consolidation program when it acquired the Bureau of
Translation Services, Inc., a Pennsylvania corporation formed in 1984 ("BTS"),
as a wholly owned subsidiary on January 17, 1996 through an exchange of stock.
Prior to the acquisition of BTS, TTGL's only activity was related to the
negotiations and other matters pertaining to the raising of funds under a
private placement. BTS experienced significant growth in fiscal 1996 when its
sales increased by 20% and when its operating income increased by 440% over
fiscal 1995. The primary reason for this change is the increased use of
translation tools and machine memory data bases, due to an extraordinary amount
of repeat business from existing customers, which essentially allows the
translators to increase their speed and accuracy thus bringing down costs and
allowing for higher margins. There is no assurance that this increase of gross
profit will continue, or necessarily be maintained at the current rate in the
future. See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations."
In addition to its administrative offices located in Haddonfield, N.J.,
the Company maintains a center devoted specifically to Japanese translation in
Westmont, N.J. and a facility in Wiesloch, Germany, managing European
translation. The Company's client list includes GE, ARCO, Brown & Williamson,
Caterpillar, Linotype-Hell, Quantum; and large computer hardware and software
companies such as Compaq, Compuware, Intel, Okidata, SAP, Dell, Syncro, Oracle
and Bentley Systems. The Company finds itself in the position of being selective
in accepting new clients and estimates that it currently accepts only one
project for every two projects presented to it.
In mid-1995, the Company entered into a five year agreement with debis
Systemhaus KSP-Kommerzielle Systeme und Projekte GmbH ("debis"), a division of
Daimler Benz AG. Under this agreement the Company obtained the license rights to
Keyterm, an innovative concept oriented proprietary database system running
under UNIX and Windows for developing and maintaining foreign language
glossaries. Keyterm has been in use in Germany for several years and is being
further developed, marketed and supported by the Company. In addition to
exclusive North America licensing rights, the Company is assuming and
maintaining the contract rights for current Keyterm customers in Europe. Clients
of "debis" currently include major government agencies in Germany, including the
German Ministry of the Interior and Deutsche Telecom AG.
4
The process of localization for the information technology market is
highly labor intensive, with much of the hands on work being done by independent
translators. Through the agreement with "debis" and the integration of its own
proprietary software tools, the Company has been successful in the high tech
automating of approximately 70% of the translation process. The Company believes
that its process is quicker, more efficient and has given it a competitive edge
in the bidding, completion and turn around time of its projects. The Company is
working to further advance its automation and believes that its research and
development will enable it to achieve even higher levels of automated
translation.
The IT translation industry is dominated by small to medium size
companies, each with a handful of clients adapting IT products for global
markets. This is considered by the Company to provide substantial opportunities
for consolidation in this highly fragmented industry. The Company intends to
pursue a strategy which will enable it to expand its business through
identifying companies that fit the Company's consolidation guidelines, acquiring
these companies, and integrating such acquired operations into the Company's
existing operations. Management believes that such acquisitions will enable the
Company to achieve economies of scale, maintain its gross margins and eventually
become the largest pure translation company. The Company may retain senior
management of the acquired companies after the acquisition. Additionally, the
Company intends to expand its existing translation services and to continue to
research and develop more advanced technologies. There can be no assurances that
suitable acquisitions can be identified, consummated or successfully operated or
that the Company's goals will otherwise be achieved. The Company is currently
reviewing potential candidates for acquisition. However, it is not currently
conducting any negotiations for any such acquisitions.
The corporate offices of the Company are located at 7703 Maple Avenue,
Pennsauken, New Jersey 08109 and its telephone number is (609) 663-8600. The
administrative offices and facility are at 44 Tanner Street, Haddonfield, New
Jersey 08033 and its telephone number is (609) 795-8669.
RECENT DEVELOPMENTS
On June 25, 1996, the Company and Dr. Julius Cherny agreed to negotiate
the terms of an exclusive License Agreement or joint venture covering telephone
and computer uses in relation to a real-time completely automated machine
translation system for which a patent application has been filed by Dr. Cherny.
The proposed system would operate via standard telecommunications systems and
would have the ability to instantaneously translate voice from one language into
another. In addition, in return for financing the projects, the Company would
also receive a right of first refusal for all other non-translation applications
covered by the patent application. It is currently estimated that a working
prototype could be produced in less than 24 months at a cost of approximately $5
million, although no assurance can be given of success. See "Business-Research
and Development".
5
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered
Common Stock by the Company 1,100,000 shares of Common Stock
Warrants by the Company(1) 1,500,000 redeemable Warrants.
Common Stock by Selling
Security Holders 441,000 shares of Common Stock
(200,000 of which is being
underwritten)
Warrants by Selling Security 300,000 redeemable Warrants
Holders (none of which is being
underwritten)
Price Per Share being underwritten $3.00
Price Per Warrant being underwritten $ .20
Common Stock Outstanding Before Offering 2,452,000 shares(2)
Common Stock Outstanding After Offering 3,552,000 shares(3)(4)
Comparative Common Stock Ownership Upon
Completion of Offering
Present Shareholders 2,252,000 (63.4%)(2)
Public Shareholders 1,300,000) (36.65)(3)(4)
Estimated Net Proceeds $2,867,000 ($3,415,100 if the over-allotment option
is exercised in full), after deducting filing,
printing, legal, accounting and miscellaneous
expenses payable by the Company estimated at
$265,000.
Use of Proceeds For marketing, development of systems, purchasing
advanced information technology products, acquiring
related companies, and for working capital and
general corporate purposes. See "Use of Proceeds."
Proposed NASDAQ Symbols (5)
Common Stock THEO
Warrants THEOW
</TABLE>
- ------------------------------
(1) The Warrants will be exercisable at $4.00 per share for a period of
three years commencing on the date of this Prospectus. Beginning twelve
months after the date hereof (unless earlier permitted by the
Representative) the Warrants will be redeemable at $.25 per Warrant
upon the giving of thirty (30) days prior written notice and provided
that the price of the Common
6
Stock has equaled or exceeded $6.00 for twenty (20) consecutive trading
days.
(2) Following give-back of an aggregate of 1,330,000 shares to the Company
by current stockholders immediately prior to this Offering. Such shares
will be canceled by the Company and be available for reissue. See
"Certain Relationships and Related Transactions."
(3) Assumes the Representative's over allotment option for 195,000 shares
is not exercised. See "Underwriting."
(4) Excludes (i) up to 1,500,000 shares of authorized but unissued Common
Stock reserved for issuance upon exercise of the Warrants included in
the Offering (ii) up to 110,000 shares of authorized but unissued
Common Stock issuable upon exercise of the Representative's Stock
Warrants; (iii) up to 150,000 shares of authorized but unissued Common
Stock issuable upon exercise of the Warrants underlying the
Representative's Warrants; (iv) up to an additional 420,000 shares of
Common Stock (including 225,000 shares of Common Stock underlying
warrants) issuable upon exercise of the Representative's over-allotment
option; (v) 340,000 shares of authorized but unissued Common Stock
reserved for issuance upon exercise of warrants previously issued; and
(vi) up to 2,500,000 shares of authorized but unissued Common Stock
reserved for issuance under the Company's Stock Plans. See "Description
of Securities" and "Underwriting."
(5) Even if the securities are listed on NASDAQ, no assurance can be given
that an active trading market will develop, or if developed, will be
sustained.
7
SUMMARY OF FINANCIAL INFORMATION
The following has been summarized from the Company's financial
statements included elsewhere in this Prospectus. This information should be
read in conjunction with the financial statements and related notes thereto:
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS:
YEAR ENDED MARCH 31, FIVE MONTHS ENDED AUG 31,
-------------------- -------------------------
1995 1996 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Total Revenues $ 2,149,135 $ 2,586,306 $ 1,104,186 $ 1,468,937
----------- ----------- ----------- -----------
Gross Profit 430,135 847,658 414,251 405,185
General expenses and depreciation 299,627 264,180 121,414 149,024
----------- ----------- ----------- -----------
Operating Income 130,408 583,478 292,837 256,161
Non-operating expenses, net 2,870 3,007 1,990 (1,544)
----------- ----------- ----------- -----------
Income before income taxes 127,538 580,471 290,847 257,705
Provision for income taxes 69,852 232,600 116,400 107,926
----------- ----------- ----------- -----------
Net Income(1) $ 57,686 $ 347,871 $ 174,447 $ 149,779
=========== =========== =========== ===========
SUMMARY BALANCE SHEET:
MARCH 31, 1995 MARCH 31, 1996
-------------- --------------
ACTUAL AS ADJUSTED(2)
------ --------------
Current assets $ 359,528 $1,207,361 $4,074,361
Current liabilities 232,610 430,228 430,228
---------- ---------- ----------
Working capital $ 126,918 $ 777,133 $3,644,133
Total assets 426,743 1,438,832 4,305,832
Stockholder's equity 194,133 1,008,604 3,875,604
Book value per share $ .099 $ .411 $ 1.091
Shares outstanding(3) 1,970,000 2,452,000 3,552,000
</TABLE>
(1) The following is a calculation of pro forma earnings per share: (a) as
if all shares were outstanding for the entire period; and (b) as if all
shares were outstanding for the entire period after reflecting the give
back of 1,330,000 shares pursuant to the underwriting Agreement:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31 FIVE MONTHS ENDED AUG 31
1995 1996 1995 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Net Income $57,686 $347,871 $174,447 $149,779
(a) Pro forma Shares out-
standing 3,782,000 $ .02 $ .09 $ .05 $ .04
(b) Pro forma shares out-
standing after give-back
2,452,000 $ .02 $ .14 $ .07 $ .06
</TABLE>
(2) Gives effect to the issuance of 1,100,000 shares of Common Stock and
1,500,000 Warrants and application of the estimated net proceeds
therefrom. Does not take into account exercise of the over-allotment
option, the Warrants, the 200,000 shares of Common Stock being sold by
an executive officer of the Company, or the Representative's
Securities. See "Use of Proceeds."
(3) Includes an aggregate of 1,330,000 shares returned to the Company by
various current stockholders.
8
RISK FACTORS
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK, INCLUDING, BUT NOT NECESSARILY LIMITED TO, THE RISKS DESCRIBED BELOW.
BEFORE SUBSCRIBING FOR THE SECURITIES OFFERED HEREBY, EACH PROSPECTIVE INVESTOR
SHOULD CONSIDER CAREFULLY THE GENERAL INVESTMENT RISKS ENUMERATED ELSEWHERE IN
THIS PROSPECTUS AND THE FOLLOWING RISK FACTORS, AS WELL AS THE OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS.
1. Special Risks Specific to the Company's Business. The following are
certain factors regarding the Company's business which investors in this
Offering should be aware.
- Difficulty in Maintaining High Growth;
Fluctuations in Gross Margins. While the
Company experienced significant growth in
fiscal 1996 (440% increase in operating
income), no assurance can be given that even
with projected growth due to the Company's
consolidation plans and other growth through
application of the proceeds of this
Offering, that the Company will be able to
maintain or even approximate such growth in
the future. Moreover, it should be noted
that due to the nature of the Company's
business, gross margins may fluctuate
significantly from quarter-to-quarter and
from year-to-year. See "Management's
Discussion and Analysis of Financial
Conditions and Results of Operations."
- Dangers of Reliance on International Trade.
Approximately 29% of the Company's sales for
the fiscal year ended March 31, 1996 were to
foreign markets of which 22% were to the Far
East. Export sales for the year ended March
31, 1995 amounted to 48% of gross revenues
principally to the Far East. For a brief
period, the Company hedged the Japanese yen
by foreign currency exchange transactions.
Foreign currency fluctuations to date have
had no impact on the Company. The Company
currently only bills at agreed amounts in US
Dollars. Future markets may include areas of
political instability, and/or currency
valuation fluctuation. See "Management's
Discussion and Analysis of Financial
Conditions and Results of Operations-Foreign
Currency Fluctuations."
- Ability to Remain Current with Evolving
Technology. The Company's business is
concentrated in the high technology niche of
the translation industry. Thus, the Company
is heavily dependent upon its ability to
adapt as the computer and related software
industries continue to develop new products
thereby causing current state of the art
technology to quickly become out of date. No
assurance can be given that the Company will
be able to expand or even continue in its
niche.
- Reliance upon Software Marketing License.
The Company currently holds a five year
exclusive marketing license in North America
to a product developed by debis Systemhaus
KSP ("debis"), a wholly-owned subsidiary of
Daimler-Benz, and a non-exclusive license
elsewhere. While the Company believes that
its relationship with debis is good, no
assurance can be given that the marketing
license will always be available to the
Company or that the product, not yet
marketed in North America, will be
commercially successful.
9
- Plans to Make Unspecified Acquisitions with
the Proceeds Without Stockholder Approval.
The Company intends to act as a consolidator
in the translation industry and to acquire
other companies in this field. Under
applicable law, the Company is not obligated
to seek stockholder approval or disseminate
information about target companies to its
stockholders prior to consummating any
transactions and has no intention of
voluntarily doing so. Thus, since a
substantial portion of the proceeds of this
Offering will be used for this purpose and
such acquisitions will be made without any
oversight or input from the stockholders, a
substantial portion of the proceeds will be
used solely in management's discretion.
2. Potential Need for Additional Financing. It is possible that
significant additional funding will be required following the Offering in order
for the Company to further expand the marketing of its services, to develop
technology and the licensing or sale thereof and to acquire other businesses
and/or technologies. Therefore, the Company will likely be required to raise
additional funds through alternative financing methods. There can be no
assurance that the Company will be able to obtain additional funding when
needed, or that such funding, if available, will be obtainable on terms
acceptable to the Company.
3. Dependence on Key Personnel. The success of the Company depends in
part upon the continued successful performance of the Company's current
President and Chief Executive Officer and its Chairman and Chief Operating
Officer, each of whom have employment agreements until December 2000, for the
continued research, development, marketing and operation of the Company.
Although the Company has employed, and will likely employ in the future,
additional qualified employees as well as retaining consultants having
significant experience, if Ms. Theodora Landgren or Mr. Charles Cascio fail to
perform their duties for any reason, the ability of the Company to market,
operate and support its products may be adversely affected. While the Company
will own two year key man life insurance policies following the close of this
Offering in the face amount of $2,000,000 on the lives of each of Ms. Landgren
and Mr. C. Cascio, there can be no assurance that the insurance proceeds would
adequately compensate the Company for the loss of their lives. While the Company
is located in areas where the available pool of people is substantial, there is
significant competition for qualified personnel. See "Management".
4. Competition. Although the Company believes that the services it
provides are unique in several ways, and that the processes it uses have been
developed over a period of time and are part of its "trade secrets" and
"know-how" and are considered as its intellectual properties, Berlitz and AT&T,
among others, claim to provide similar services to those provided by the
Company, and other competitive products similar to its products are currently
being marketed. Moreover, there can be no assurance that there are no products
that would compete effectively with the Company's proposed products or that
other companies, many of which have financial resources, research and
development capabilities, marketing staffs and facilities greater than those of
the Company, are not currently developing, or in the future will not develop,
products that may have advantages over the Company's proposed products or that
may undercut what the Company believes are the advantages of the Company's
products. See "Business - Competition" and "Business Research and Development."
5. Patents and Protection of Proprietary Information. Currently, the
Company's services and work in tools (i.e., pieces of software that make the
translation quicker) are not protected by patents and/or copyrights and the
Company relies on its prior development activities that have resulted in a body
10
of information and processes that it has designated as "trade secrets" and
"know-how" and is considered as its intellectual property. However, the
commercial success of the Company may in the future depend, in part, upon the
ability of the Company to obtain strong patent protection. Accordingly, the
Company may file or cause to be filed on its behalf patent applications, where
appropriate, relating to new developments or improvements to technology or the
uses of products thereof. Given the importance of the proprietary information to
the Company, there are significant risks that the Company's failure to obtain
patent protection, preserve its trade secrets or operate without infringing upon
the proprietary rights of others may significantly and adversely effect the
Company. No assurance of obtaining patent protection can be given. There is also
no assurance that (i) any patents will be issued to the Company; (ii) any issued
patents will prove enforceable; or, (iii) the Company will derive any
competitive advantage therefrom. To the extent that any patents can not be
issued, the Company may be subject to more competition. The issuance of patents,
in some but not all aspects of a product, may be insufficient to prevent
competitors from essentially duplicating the product by designing around the
patented aspects. In addition, there is no assurance that the Company's products
or processes will not infringe patents owned by others. In any event, the
Company will continue to rely on what it believes to be its proprietary
know-how. However, there can be no assurance that the obligation to maintain the
confidentiality of such proprietary information will not wrongfully be breached
by employees, consultants, advisors, suppliers or others, or that the
proprietary know-how will not otherwise become known or be independently
developed by competitors in such a manner that the Company has no practical
recourse.
6. Dependence on Principal Customers. For the year ended March 31,
1996, two of the Company's customers accounted for approximately 22% and 15%,
respectively, of the Company's sales, and for the year ended March 31, 1995, the
same two of the Company's customers accounted for approximately 43% and 28%,
respectively. The Company's policy, since the beginning of its current fiscal
year, has been to diversify its customer base so as to alleviate the risks
associated with depending on any one particular customer for business.
Management believes that the Company's prior concentration of sales will
continue to decline in the future as the Company diversifies its customer base,
especially following the start of the Company's acquisition program.
Accordingly, the Company believes that the loss of any individual customer will
not have a material adverse impact on the Company. See "Business."
7. Need to Increase Marketing Capability. In order to achieve continued
growth following the Offering, the Company will have to expand its marketing and
sales and develop a network of marketing and sales representatives and/or
acquire other companies. There can be no assurance that the Company will be able
to build such a marketing staff or sales force, that the cost of establishing
such a marketing staff or sales force will not exceed any product revenues, or
that the Company's direct sales and marketing efforts will be successful.
Similarly, there can be no assurance that the Company will be able to acquire
other companies or even if acquired, whether such acquisitions will be
beneficial to the Company. Alternatively, the Company may enter into
co-marketing or other licensing arrangements. To enter into co-marketing or
other licensing arrangements, the Company must establish and maintain corporate
relationships. There can be no assurance that such corporate relationships can
be established or maintained on terms acceptable to the Company, if at all. To
the extent the Company enters into co-marketing or other licensing arrangements,
any revenues received by the Company will be dependent on the efforts of third
parties, and there can be no assurance that such efforts will be successful.
Although the Company believes that future corporate partners, if any, will have
an economic motivation to commercialize any such products, the Company may not
have any control over such partners' commercialization efforts. See "Business -
Services and Clients."
11
8. Need of Support for International Expansion. One element of the
Company's strategy is to identify, develop and exploit opportunities in
international markets. The Company may seek to enter into an alliance with some
strategic partners to accomplish this objective and it is premature to determine
whether such alliances will eventuate, or be successful. There can be no
assurance that the Company will be able to locate strategic partners or that
such strategy ultimately will be successful. Alternatively, the Company's
international success will depend, in part, upon its own ability to provide its
international customers with technical support and customer service for its
products. The Company does not presently have the personnel to provide such
services in all locations. There can be no assurance that such services can be
provided on acceptable terms, if at all. Failure to provide such technical
support and customer services could have a material adverse effect on the
Company's ability to expand into international markets. See "Business."
9. No Liability Insurance. The marketing and sale of services of the
type proposed to be sold by the Company entails a risk of product liability
claims and claims of omission by consumers and others. While the Company has a
general policy of disclaiming liability arising from its work, the Company has
no liability insurance covering these areas. In the event of a successful
liability claim against the Company, lack of insurance coverage could have a
material adverse effect on the Company.
10. Dilution; Cheap Stock. Purchasers of the Common Stock (including
the shares underlying the Warrants) offered hereby will experience immediate and
substantial dilution in the net tangible book value of such shares of Common
Stock in that the net tangible book value of such shares will be substantially
less than the offering price per share of such shares. Specifically, the
investors in this Offering will experience immediate dilution of $1.91 per share
of Common Stock, or approximately 64% of the $3.00 Offering price. In addition,
since the current stockholders of the Company have acquired their respective
equity interests at a cost substantially below the Offering price, the public
investors will bear most of the risk of loss. See "Dilution."
11. Voting Control; Potential Anti-Takeover Effect; Voting Trust
Agreement. After the completion of this Offering, the executive officers and
directors of the Company will beneficially own approximately 33.36% of the
Company's outstanding Common Stock and, accordingly, will most likely be able to
elect all of the directors and, therefore, to control totally the Company's
affairs. In addition, the Company is subject to provisions of the General
Corporation Law of the State of Delaware respecting business combinations which
could, under certain circumstances, also hinder or delay a change in control.
Furthermore, Ms. Theodora Landgren, the Chairman and Chief Operating Officer of
the Company has, including her own shares of Common Stock and pursuant to the
terms of a Voting Trust Agreement with certain of the founders of TTGL, voting
control over an aggregate of 795,000 shares of Common Stock (approximately 22%
of the shares of Common Stock following the Offering) for two years following
the date of this Prospectus giving management voting control over approximately
39.70% of the outstanding Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
12. No Payment of Dividends. The Company has not paid any dividends on
its Common Stock. For the foreseeable future, the Company anticipates that all
earnings, if any, that may be generated from the Company's operations will be
used to finance the growth of the Company and that cash dividends will not be
paid to holders of the Common Stock. See "Description of Securities."
13. Arbitrary Determination of Offering Price and Warrant Exercise
Price. The offering price of the Common Stock and the exercise price of the
Warrants have been arbitrarily determined by negotiation between the Company and
the
12
Representative and bears no relationship to the assets, book value, operating or
financial results or net worth of the Company or other generally accepted
criteria of value and should not be considered as indicating any intrinsic value
for the Securities. See "Underwriting."
14. No Assurance of Public Market for the Common Stock or Warrants.
Prior to this Offering, there was no public market for the Common Stock or
Warrants, and there can be no assurance that such markets will develop or, if
developed, will be sustained after completion of this Offering. While the
Representative has informed the Company that it will endeavor to make a market
in the Common Stock and Warrants, there can be no assurance that a trading
market will develop or be sustained or that the securities offered hereby will
be saleable at or near their Offering price. In the event the Representative,
for any reason, ceases making a market in the Company's securities, the trading
market in the Company's securities will likely be materially adversely affected.
See "Underwriting."
While the Company expects the securities to be listed for trading on
NASDAQ, no assurance can be given that an active and liquid trading market for
the securities will develop or, if developed, will be sustained. Moreover, no
assurance can be given that the Company will meet the criteria for maintaining a
listing on NASDAQ. Currently, the NASDAQ maintenance criteria will require the
Company to have: (i) two registered and active market makers, (ii) total assets
of at least $2 million, (iii) minimum bid price per share of $1 or a market
value of public float of $1 million and $2 million in capital and surplus, (iv)
300 stockholders, and (v) 100,000 shares held by non-insiders which shares must
have a market value of at least $200,000.
15. Exercise of Warrants Subject to Current Effective Registration and
Qualification. Any exercise of the Warrants must be made pursuant to a
prospectus which is current at the time of exercise. The Company is obligated to
file post-effective amendments to the registration statement when material
changes to the Company occur so that the prospectus will contain current
information. Assuming such amendments were not required, this Prospectus would,
in any event, no longer be current after July 31, 1997 (i.e., 16 months after
the date of the certified financial statements included herein). The Company
will endeavor to maintain a current effective registration statement under the
Securities Act of 1933 relating to the Common Stock issuable upon exercise of
the Warrants. If the Company is unable to maintain a current registration
statement for any reason, the holders of the Warrants will be unable to exercise
them. Although the securities offered hereby will not knowingly be sold to
purchasers in jurisdictions in which they are not registered or otherwise
qualified for sale, purchasers may buy Warrants in the aftermarket which may
develop for the Warrants in, or purchasers of the Warrants may move to,
jurisdictions in which the shares of Common Stock underlying the Warrants are
not registered or qualified during the period when the Warrants are exercisable.
In such event, the Company would be unable to issue shares to those persons
desiring to exercise their Warrants unless and until the shares could be
registered or qualified for sale in jurisdictions in which such purchasers
reside, or an exemption to such qualification exists in such jurisdictions. No
assurance can be given that the Company will be able to effect any required
registration or qualifications. See "Description of Securities - Warrants."
16. Possible Depressive Effect of Rule 144 Sales and Shares Currently
Held by Selling Security Holders. At the time of the completion of this
Offering, 2,011,000 unregistered Shares of the Company's Common Stock will be
held by present stockholders. Under Rule 144 of the Act, 1,770,000 of such
Shares are expected to be able to be publicly sold beginning July 7, 1997,
subject to volume restrictions (i.e. during any three month period an amount
equal to the greater of the average weekly trading volume or 1% of the then
outstanding shares, or approximately 35,500 shares assuming only the existing
shares and the shares
13
Common Stock offered hereby are outstanding). The holders of such 1,770,000
shares have agreed not to make any Rule 144 sales for a period of two years from
the date of this Prospectus without the prior written consent of the
Representative. Also, up to 241,000 shares of Common Stock currently held by
certain security holders are being registered hereby and will be available for
sale, a further 241,000 shares of Common Stock will become available for resale
in January 1998, and 300,000 Warrants owned by certain founders of the Company
along with the underlying shares of Common Stock are being registered hereby and
will be available for resale 18 months after the date of this Prospectus unless
earlier permitted by the Representative. Any such sales could have a depressive
effect on the market price for the Common Stock being offered hereby. See
"Description of Securities - Shares Available for Future Sale" and "Selling
Security Holders."
17. Possible Issuance of Substantial Amounts of Additional Shares
Without Stockholder Approval. After this Offering (excluding the over-allotment
option), the Company will have an aggregate of 4,600,000 shares of Common Stock
authorized but unissued and reserved for issuance pursuant to (i) the Company's
Stock Plan, (ii) exercise of the Warrants being offered hereby, (iii) exercise
by the Representative of the Representative's Stock Warrants and the exercise of
the Warrants underlying the Representative's Warrants, and (vi) exercise of
currently outstanding warrants and an additional 6,848,000 shares of Common
Stock authorized but unissued and not reserved for specific purposes. All of
such shares may be issued without any action or approval by the Company's
stockholders; however, for 18 months the approval of the Representative is
required. Although there are no other present plans, agreements, commitments or
undertakings with respect to the issuance of additional shares, or securities
convertible into any such shares by the Company, any shares issued would further
dilute the percentage ownership of the Company held by the public stockholders
and would likely have an adverse impact on the market price of the Common Stock.
In addition to the above referenced shares of Common Stock which may be issued
without stockholder approval, the Company has 1,000,000 shares of authorized
preferred stock. While the Company has no present plans to issue any shares of
preferred stock, the Board of Directors has the authority, without stockholder
approval, to create and issue one or more series of preferred stock and to
determine the voting, dividend and other rights of holders of such preferred
stock; however for 18 months the approval of the Representative is required. The
issuance of any preferred stock could have an adverse effect on the rights of
holders of Common Stock and could have the effect of discouraging, or used as a
defensive measure against, a takeover candidate. The mere existence of this
potential could have an adverse impact on the market price of the Common Stock.
See "Description of Securities."
18. Representative's Securities. In connection with this Offering, the
Company will sell to the Representative for a nominal amount, warrants to
purchase up to 110,000 shares of Common Stock and 150,000 Warrants. The
Representative's Securities will be exercisable commencing on the effective date
of this Prospectus and will continue to be exercisable until five years from the
date hereof at an exercise price of $3.60 per share and $.24 per warrant, with
the warrants underlying the Representative's Warrant allowing the purchase of
Common Stock at $4.80 per share. For the life of the Representative's
Securities, the holder thereof will be given the opportunity to profit from a
rise in the market price of the Common Stock with a resulting dilution in the
interest of the Company's other stockholders. The terms on which the Company
could obtain additional capital during the life of the Representative's
Securities may be adversely affected because the holder of the Representative's
Securities might be expected to exercise them if the Company were able to obtain
any needed additional capital in a new offering of securities at a price greater
than the exercise price of the Representative's Stock Warrants. A similar
adverse impact on the Company's ability to raise additional capital could be
caused by the large
14
number of Warrants issued hereby or by the issuance of a significant amount of
stock options. See "Underwriting."
19. Potential Adverse Effect of Redemption of Warrants. The Warrants
may be redeemed by the Company at any time after one year from the date hereof,
unless earlier permitted by the representative, at a price of $.25 per Warrant
on thirty days prior written notice provided that the trading price of the
Common Stock for the preceding twenty (20) consecutive trading days has equaled
or exceeded $6.00. Notice of redemption of the Warrants could force the Warrant
holders to exercise the Warrants at a time when it might be disadvantageous for
the holders to do so or to sell the Warrants at their then current market price
when the holders might otherwise wish to hold the Warrants for possible
appreciation. Alternatively, the holders may accept the redemption price, when
it is likely to be substantially less than the market value of the Warrants at
the time of redemption. Any holders who do not exercise Warrants prior to their
expiration or redemption, as the case may be, will forfeit the right to purchase
the shares of Common Stock underlying the Warrants. While the Company may
legally be permitted to give notice to redeem the Warrants at a time when a
current prospectus is not available thereby leaving the Warrant holders no
opportunity to exercise their Warrants prior to redemption, the Company does not
intend to redeem the Warrants unless a current prospectus is available at the
time of the redemption. See "Description of Securities - Warrants."
20. Underwriters' Influence on the Market. A significant amount of the
securities offered hereby will be sold to customers of the Underwriters. Such
customers subsequently may engage in transactions for the sale or purchase of
such securities through or with the Underwriters. Although it has no legal
obligation to do so, the Representative has indicated that it intends to act as
a market-maker and otherwise effect transactions in the securities offered
hereby. To the extent the Underwriters act as market-makers in the Common Stock
or Warrants, they may be dominating influences in those markets. The degree of
participation in those markets by the Underwriters may significantly effect the
price and liquidity of the Company's securities. The Underwriters may
discontinue such activities at any time or from time to time. Moreover, pursuant
to Rule 10b-6, neither the Underwriters nor any other broker-dealer which
solicit exercise of any of the Warrants, including the Representative's
Warrants, will be able to act as a market-maker with respect to the Company's
Securities for a period of two or nine business days prior to any solicitation
by it of the exercise of any of the Warrants, including the Representative's
Warrants, until the later of termination of such soliciting activity or the
termination (by waiver or otherwise) of any right that any Underwriter or
soliciting broker-dealer may have to receive a fee for the exercise of warrants
following such solicitation. Accordingly, neither the Representative nor any
other soliciting broker-dealer will be able to act as a market-maker during
certain periods and, as a result, holders of the Company's Securities may find
it more difficult to sell their holdings. Also, the same restriction may arise
if any of the Underwriters becomes involved in a distribution of any of the
currently restricted securities.
21. Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction,
and,
15
if the broker dealer is the sole market-maker, the broker-dealer must disclose
this fact and the broker-dealer's presumed control over the market, and monthly
account statements showing the market value of each penny stock held in the
customer's account. In addition, broker-dealers who sell such securities to
persons other than established customers and accredited investors (generally,
those persons with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse), the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security that becomes
subject to the penny stock rules. If the Company's securities become subject to
the penny stock rules, investors in this Offering may find it more difficult to
sell their shares and/or Warrants.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and notes thereto contained in this
Prospectus.
(A) GENERAL
The Company has been in business since 1984. Generally, sales have been
increasing year to year. Net sales for its fiscal year ended March 31, 1996,
were approximately 20% higher than its net sales for its fiscal year ended March
31, 1995.
Notwithstanding the Company's increased sales and its strong
competitive position in its industry, it remains a small company due to capital
constraints. Those capital constraints were partially alleviated by its private
offering, completed in January, 1996, from which it received net proceeds of
$463,000. The offering being made by this prospectus is intended to provide the
Company with substantial additional capital, to be used in the manner set forth
under "USE OF PROCEEDS" and thus to permit the Company to pursue its strong
competitive position and attempt to expand its business, its sales and its
earnings.
(B) RESULTS OF OPERATIONS
Fiscal 1996 compared to fiscal 1995
Net sales for the fiscal year ending March 31, 1996 increased to
$2,586,000 from $2,149,135 or approximately 20% over net sales for the prior
fiscal year, ending March 31, 1995. The Company believes this increase is
primarily due to the growth of its reputation with regard to its ability to
deliver quality work on a timely basis. During the current fiscal year 1996, 54%
of the Company's sales were to four major customers in the high-tech area, of
which two accounted for 37% in fiscal year 1996 and 70% in the prior fiscal year
ended March 31, 1995.
The Company's operating income for the fiscal year ended March 31,
1996, was $583,500 in comparison to $130,400 for the prior fiscal year, or an
increase of 440%. Of this increase of $453,000, approximately $331,000 (or 73%)
is attributable to the increase in gross margin -- from 20% to 33%;
approximately $87,000 (or 19%) is attributable to the increase in sales volume
of $436,000; and $35,000 (or 8%) to the decrease in general and administrative
expenses and depreciation.
There was a significant increase in gross profit from 20% to 33%. The
company benefitted from the increasing use of translation tools due to the
extraordinary amount of repeat business from existing customers. Therefore, the
relative stability of customers' requirements and contents permitted a more
effective use of translation memory storage, i.e. machine tool translation. In
addition, there were the gains derived from an organizational structure
established for a two million dollar level, increasing its sales by 20%.
There is no assurance that this increase of gross profit will continue,
or necessarily be maintained at the current rate in the future. In anticipation
of increasing volume, the Company has increased its production staff to
concentrate on job flow, quality control, editing and customer communications.
17
Likewise, there can be no assurance that the type of translation products and
customer requirements will permit the use of machine tool translation of
previously stored memory data, to the previous extent.
Total general and administrative expenses and depreciation decreased in
the amount $35,000 for fiscal 1996 in comparison to fiscal 1995, from $299,627
to $264,180. This decrease was caused by the providing for bad debts in prior
years ($36,000 in fiscal year ended March 31, 1995) and recovering $45,000 in
the current fiscal year. Excluding such accounts for bad debts, general and
administrative expenses increased by $25,000 (12%) over the prior fiscal year
and depreciation by $19,000 (35%).
As a result of the Company's new employment agreements, it should be
noted that salary expenses will increase by approximately $180,000 per year.
(C) LIQUIDITY AND FINANCIAL RESOURCES
Net working capital at March 31, 1996 was $777,000, an increase of
approximately $650,000 from the end of the prior fiscal year. The increase in
net working capital was primarily due to the Company completing in January 1996
a private offering of 120.5 units of its securities at a price of $5,000 per
unit, each unit consisting of 4,000 shares of Common Stock. The gross proceeds
from the offering were $602,500; the net proceeds were $463,000. On March 31,
1996, the Company had $530,000 in cash or cash equivalents. See Statement of
Cash Flow for other sources and uses of working capital.
Inflation has not been a significant factor in the Company's
operations.
(D) TRENDS
Based on its special expertise, the Company has succeeded in increasing
its translation and localization services in the burgeoning market for Asian
languages. With the increased capital provided by the private offering and the
infusion of additional capital anticipated from this Offering, the Company
believes that it has an excellent opportunity to capture additional business in
these growing markets.
(E) FOREIGN CURRENCY FLUCTUATIONS
Although most of the Company's business is transacted in United States
dollars, billings to one large Japanese customer used to be in Japanese yen, at
an agreed rate of exchange on a per order basis. During the fiscal year ended
March 31, 1996, the Company's billings to this customer amounted to 20% of its
total sales in comparison to 37% for the fiscal year ended March 31, 1995. Thus,
the Company could have been significantly affected by fluctuations in the
exchange rate between the United States dollar and the Japanese yen. In an
effort to mitigate this risk, the Company had purchased forward exchange
contracts as a hedge against adverse currency fluctuations. However, to further
avoid this risk, the Company has recently changed its policy and now only bills
its customers in US Dollars at agreed upon amounts. Accordingly, the Company is
not impacted by exchange rate fluctuations.
FIVE MONTHS ENDED AUGUST 31, 1996 IN COMPARISON TO AUGUST 31, 1995 (UNAUDITED)
While the sales for the five months ended August 31, 1996 increased by
$315,000, or 33%, over the corresponding five months ended August 31, 1995,
operating income declined $37,000 or 12%. Gross profits declined from 37.5% to
27.5% of sales. Selling, general and administrative expenses remained
approximately the same in relation to sales (8%) but increased in dollar amounts
18
by $27,500 over the prior period. Accordingly, operating income declined from
$293,000 to $256,000.
The reason for the decrease in gross profit was the increasing costs
associated with new customers, different languages and changing customers'
products. These types of changes impacted the use of memory stored translation
as well as introducing new learning curves associated with additional employees.
The Company hired additional in-house Korean, Chinese and Japanese translators,
as well as increasing support staff in editing, quality control and customer
communication as foundations for its expanding business.
During the five month period ended August 31, 1996, the Company's
working capital increased by $139,000 to $916,000. Cash decreased by $262,000 to
$269,000 and receivables increased by $327,000 to $969,000. These changes are
attributable primarily to increased volume of sales and payment of deferred
offering costs and to the charges described in the previous paragraph. See
Statement of Cash Flow for other sources and uses of working capital.
The Company's two largest customers that accounted for approximately
71% for the year ended March 31, 1995 and 37% for the year ended March 31, 1996,
accounted for 29% for the five months ended August 31, 1996. Two other customers
accounted for approximately 35% of sales for the five months ended August 31,
1996 in comparison to approximately 9% for the year ended March 31, 1996.
19
DILUTION
At March 31, 1996, the Company had a net tangible book value of
$1,008,604, or $.41 per share of Common Stock. Net tangible book value per share
represents the amount of total tangible assets less liabilities, divided by
2,452,000, the number of shares of Common Stock outstanding at March 31, 1996
(after giving effect to the give-back of an aggregate of 1,330,000 shares
returned to the Company by various current stockholders). After giving effect to
the sale of the 1,300,000 shares of Common Stock and 1,500,000 Warrants hereby,
the pro forma net tangible book value at March 31, 1996 would have been
$3,875,604 or $1.09 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $ .68 per share (or 60.29%) to
the existing stockholders and an immediate dilution of $1.91 per share (or
36.33%) to investors in this Offering. The following table illustrates this per
share dilution:
Public offering price per share $ 3.00
Net tangible book value per share before offering $ .41
Increase attributable to investors in offering $ .68
--------
Net tangible book value per share after offering (1) $ 1.09
--------
Dilution per share to investors in offering (2) $ 1.91
========
- -----------------
(1) After deduction of underwriting discounts and commissions, the
Underwriter's non- accountable expense allowance and other estimated
expenses of the offering. See "Use of Proceeds" and "Underwriting."
(2) Does not give effect to (a) 420,000 shares issuable upon exercise of
the Representative's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 110,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
150,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,500,000 shares of
Common Stock underlying the Warrants; (e) 340,000 shares of Common
Stock issuable upon exercise of previously issued warrants; or (f)
2,500,000 shares of Common Stock reserved for issuance pursuant to the
Company's Stock Plan. See "Underwriting," "Executive Compensation -
Stock Plan" and "Description of Securities."
The following table presents as of March 31, 1996 the relative share
purchases, percentages of equity ownership in the Company, total cash paid,
percentage of total cash invested, and the average price per share of Common
Stock to the current and public shareholders after giving effect solely to the
sale of the shares of Common Stock offered hereby:
<TABLE>
<CAPTION>
Percentage Average
Percentage Total of Total Price
Shares of Equity Cash Cash Per
Common Stock Only Purchased Ownership Paid Invested Share
- ----------------- --------- --------- ---- -------- -----
<S> <C> <C> <C> <C> <C>
Public Investors(1) 1,300,000 36.60% $3,900,000 86.20% $ 3.00
Current Stockholders(2) 2,252,000 63.40% $ 624,270(3) 13.80% $ .28
--------- ----- ---------- -----
Total 3,552,000 100.00% $4,524,270 100.00%
========= ====== ========== ======
</TABLE>
- -------------------
(1) Includes 200,000 shares sold in the Offering by a Selling Security
Holder.
(2) Does not include 200,000 shares sold in the Offering on behalf a
Selling Security Holder.
(3) Does not give effect to the shares of Common Stock issued to the
shareholders of BTS in exchange for their shares in such company.
20
USE OF PROCEEDS
The net proceeds of this Offering, after deducting discounts and
commissions, the Representative's expense allowance and expenses of this
Offering, will be approximately $2,867,000 ($3,415,100, if the over-allotment
option is exercised in full). The amount of net proceeds to be received by the
Company reflects the Company's best estimate of the amount of expenses incurred
in the Offering of $355,000 paid or to be paid by the Company at or around the
closing of this Offering out of proceeds.
The Company intends to use such net proceeds as follows:
<TABLE>
<CAPTION>
WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT
-------------- --------------
APPROX. APPROX.
APPROX. % OF NET APPROX. % OF NET
$ AMOUNT PROCEEDS $ AMOUNT PROCEEDS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Advertising and promotion $ 200,000 6.98% $ 200,000 5.86%
Research and Systems Development $ 800,000 27.90% $1,000,000 29.28%
Purchasing advanced information
technology products $ 500,000 17.44% $ 650,000 19.03%
Acquisition of service providers $1,150,000 40.11% $1,300,000 38.07%
Working capital and general
corporate purposes $ 217,000 7.57% $ 265,100 7.76%
---------- ---- ---------- ----
TOTAL $2,867,000 100.00% $3,415,100 100.00%
========== ====== ========== ======
</TABLE>
The foregoing table represents the Company's best estimate of the
allocation of the proceeds of this Offering based upon the current state of the
Company's development, its current plans and current economic and industry
conditions, and is subject to reapportionment of proceeds among the categories
listed above or to new categories in the event of drastic changes to the current
economic and industry conditions or an entirely unforseen opportunity,
acquisition or otherwise, is presented to the Company. While the Company has no
specific current acquisition plans, it currently intends to simultaneously focus
its energies and assets towards growing its business internally, while at the
same time exploring opportunities to expand its business through acquisitions.
Research and development expenses relate to the estimated payments to Dr. Julius
Cherny for development of his automated translation machine pursuant to a
license agreement, currently being negotiated. Part of the proceeds of this
Offering has been allocated for this project and the Company currently intends
to finance a portion of the balance (up to approximately $750,000) through
proceeds received from the potential exercise of the Warrants and the remainder
through other external financing, of which no assurance can be given.
The Company has allocated $500,000 for capital expenditures. The
Company plans to use these funds to develop its Website, upgrade its customer
communications network, continue the practice of purchasing hardware and
software, both new and "replacement" based upon customers' requirements and the
changing technology and required capital expenditures to transfer the research
results from Dr. Cherny's machine to a production mode. To the extent the
$500,000 is not used, it will be retained as additional working capital.
The Company expects that the net proceeds of this Offering will be
sufficient for it to reach its objectives over at least the next 12 months.
Until used, the Company intends to invest the proceeds of this Offering in
government securities, certificates of deposit, money market securities or
commercial paper. The Company has not used its current revolving line of credit
during the past six months, and it expires, in any event, on December 31, 1996.
Exercise of all the Warrants would generate approximately an additional
$6,912,000 in net proceeds to the Company. The Company intends to use such funds
for acquisitions ($5,750,000), research and development relating to Dr. Cherny's
project ($750,000) and working capital ($412,000). No assurance can be given
that any or all of the Warrants will be exercised and that these funds will be
available to the Company.
21
CAPITALIZATION
The following table sets forth the capitalization of the Company at
March 31, 1996, after giving effect to the return of an aggregate 1,330,000
shares of Common Stock from various stockholders of the Company (to be canceled
and available for reissuance) and the increase of authorized capital from
5,000,000 shares of Common Stock and as adjusted to reflect receipt of the net
proceeds from this Offering:
MARCH 31, 1996
--------------
ACTUAL AS ADJUSTED(2)
------ --------------
Shareholders' Equity(1)
Preferred stock, $.001 par value,
1,000,000 shares authorized;
None issued and outstanding -- --
Common stock, $.001 par value, 15,000,000
shares authorized; Issued and
outstanding 3,782,000 at March 31, 1996,
and 3,552,000 as adjusted $ 3,782 $ 3,552
Additional paid-in capital 462,868 3,330,098
Retained earnings 541,954 541,954
------- -------
Capitalization Total $1,008,604 $3,875,604
========== ==========
- ----------
(1) Does not give effect to (a) 420,000 shares issuable upon exercise of
the Underwriter's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 100,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
150,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,500,000 shares of
Common Stock underlying the Warrants; (e) 340,000 shares of Common
Stock issuable upon exercise of previously issued warrants; or (f)
2,500,000 shares of Common Stock reserved for issuance pursuant to the
Company's Stock Plan. See "Underwriting," "Executive Compensation -
Stock Plan" and "Description of Securities."
(2) Gives effect to the issuance and sale of 1,100,000 shares of Common
stock and 1,500,000 Warrants.
22
BUSINESS
THE COMPANY
The Translation Group, Ltd. ("TTGL") was incorporated under the laws of
Delaware on July 7, 1995. On January 17, 1996, TTGL consummated its first
acquisition when the shareholders of Bureau of Translation Services, a
Pennsylvania corporation ("BTS") exchanged their shares of BTS for shares of
TTGL (the "Stock Exchange") so that BTS became a wholly owned subsidiary of
TTGL. TTGL and BTS are sometimes referred to herein collectively as the
"Company." The corporate offices of the Company are located at 7703 Maple
Avenue, Pennsauken, New Jersey 08109 and its telephone number at that location
is (609) 663-8600. The administrative offices and facility are at 44 Tanner
Street, Haddonfield, New Jersey 08033 and its telephone number at that location
is (609) 795-8669.
BUSINESS OF THE COMPANY
The Company translates conventional documents and software written in
one language into other languages. The Company's headquarters is located in
Haddonfield, New Jersey, where it leases approximately 3,600 square feet of
space. It also leases approximately 1,100 square feet of space in nearby
Westmont, New Jersey wherein it houses its Japanese Projects Center. A European
office is maintained near Heidelberg, Germany.
The Company functions in the so-called "high tech" niche of the
translation industry, providing translation, localization, software and tools to
a range of world wide companies who have needs in computer related hardware
and/or software fields, referred to in the industry as Informational Technology
("IT"). Localization is the art of converting contracts, marketing tools,
advertising, engineering specs, computer hardware and software support
materials, packaging, TV shows, etc. into local languages, giving careful
consideration to custom and tradition indigenous to the local area.
In mid-1995, the Company entered into a five year Agreement with debis
Systemhaus KSP- Kommerzielle Systeme und Projekte GmbH ("debis"), a wholly owned
subsidiary of Daimler Benz, whereby the Company acquired license rights to a
software product known as KEYTERM. KEYTERM is a concept-oriented fully
relational proprietary database running under UNIX and Windows for developing
and maintaining glossaries. It has a customizable structure for entering
terminology and lexicographical information. The product has been in use in
Germany for several years and is being further developed, marketed and supported
by the Company. Further, the Company has assumed contract rights with existing
debis customers in Europe. However, the Company has no obligations to assume
previous Debis obligations, will receive fees for all current and future
services and will have the exclusive right to market KEYTERM throughout North
America, and elsewhere non-exclusively. Finally, under the debis Agreement, the
Company is allowed to use the indication "Bureau of Translation Services in
partnership with debis Systemhaus".
In general, the Company uses various machine tools (also referred to as
translation tools "TT") that are software applications for extracting and
formatting data, for online dictionaries, for presentation of text (e.g.,
prepress) and for customer networking. On the other hand, the Company's machine
translation ("MT") abilities depend upon the storage and access to previously
translated material in machine usable form. Thus, the ability to exploit this
type of MT depends on the stability of customers, types of products, material to
be translated and customers requirements. If variables upset this
storage-access-use of previously translated material, such as occurs with
first-time customers or when translating materials in new topics, the Company
will be unable
23
to exploit this advantage. For this reason the Company is embarking on the
development of its own phased in system of document translation which would not
be limited to previously translated material. See "Research and Development."
COMPETITIVE POSITION
The Company believes it has a good position in the localization
industry, in part because, through BTS, it entered this market early. Initially,
the Company provided translation of technical material in various industries
heavily weighted toward engineering and analytical instrumentation. However, by
the mid-1980's, the Company recognized the opportunity in the computer industry.
Thus, the Company made the transition from a "generic" translation bureau, to
one whose business emphasizes translation services in the Information Technology
field (IT).
The Company has leveraged ten years of localization experience into a
set of processes which it considers its principal competitive advantage. Every
operational process, from bidding through delivery of the completed project, is
scrupulously tracked and accounted for, making job costing accurate and
predictable, while at the same time offering its customers savings over others
in the industry. The Company believes that its competitive bidding system is
unique in the industry. The Company seeks to build long-term relationships with
clients, most of whom continue to work with the Company over several years and
many projects.
At present, key markets for the Company's services are customers
located in Japan, Europe (including Scandinavia) and in "the Americas" the
dialects of Canadian French, Latin American Spanish and Brazilian Portuguese.
The Company does not provide Middle and Near Eastern languages at this time.
Growth markets are primarily in Asia. Japanese now represents the Company's
largest single language, by volume, and the Company believes that Chinese will
also become significant in the near future, although no assurance can be given
that the Company will realize any significant revenues from this market.
The IT translation industry is highly fragmented and is dominated by
numerous small to medium size companies, each with a handful of clients adapting
IT products for global markets. The Company believes that this industry
phenomenon provides it with substantial opportunities for consolidation. The
Company intends to pursue a strategy which will enable it to expand its business
through identifying companies that fit the Company's consolidation guidelines,
acquiring these companies, and integrating the acquired operations into the
Company's existing operations. Management believes that such acquisitions will
enable the Company to achieve economies of scale, maintain its gross margins and
eventually become the world's largest pure translation company. The Company may
retain senior management and other employees of the acquired companies after the
acquisition. Additionally, the Company intends to expand its existing
translation services and to continue to research and develop more advanced
technologies. There can be no assurances that suitable acquisitions can be
identified, consummated or successfully operated or that the Company's goals
will otherwise be achieved. The Company is currently reviewing potential
candidates for acquisition. However, it is not currently conducting any
negotiations for any such acquisitions.
SERVICES AND CLIENTS
The Company provides translation and localization services (i.e.,
translating so that the result is reader friendly, using local dialect so that
it is easily readable and not stilted) to a range of industries and sectors,
with an emphasis on IT companies. During fiscal 1995 and 1996, approximately 80%
of the Company's revenues came from localization work for software publishers,
24
computer hardware manufacturers and computer and peripherals vendors. The
Company also has an active business in the legal area, translating depositions,
patents, and material relating to international contracts and law suits for
large law firms in the Philadelphia area.
The Company has a large number of IT-based clients. The Company has not
entered into any long-term contracts with any of its clients in accordance with
industry practice. Significant customers includes Dell Products LP, for whom the
Company translates documents and manuals for Asian markets. The Company also has
a long-standing relationship with SAP-AG (a leading software producer) whereby
the Company is responsible for Japanese translation of its "Financial
Accounting" support materials. The strong relationships the Company has
developed with its IT clients have also generated a volume of more conventional
translation work. For example, the Company is translating software messages and
conventional documentation for Okidata, a peripherals manufacturer. Bentley
Systems, a leading CAD/CAM software developer, relies on the Company for Korean
and Japanese software localization and translation of related documentation.
Synchro, Inc., a developer of telephony software, uses the Company to localize
the software into at least ten languages. Because many American companies have a
large number of Hispanic and Vietnamese employees in the United States, the
Company has been engaged to translate corporate personnel materials into Spanish
and Vietnamese.
At the request of clients, the Company has also recently expanded its
software localization services to include video and multi-media translation.
While these translation contracts require an investment in equipment and
facilities, the Company believes the costs are justified by the higher value
contracts generated by this application. The Company has also been working in
the media sector for several years, translating copy for a client who places
"info-mercials" (commercial advertisements presented through an information
format) on European broadcast channels, and for whom the Company has translated
the product literature, packaging labels and even TV scripts. In addition, the
Company has been testing and exploring multimedia localization. Currently, the
Company performs multimedia localization using external studio facilities. If it
proves feasible and attractive, the Company may consider establishing its own
studio, and broaden its localization services to full multimedia capability. The
Company sees multimedia localization as similar, in process, to other software
localization that it already performs, and while it adds a layer or two of
additional technical complexity, it does not require a substantially different
skill set.
THE TRANSLATION PROCESS
The Company considers its highly detailed project management, tracking
and costing procedures to be at the heart of its specialized services. In the
view of the Company, much of what passes for "process" and "quality" in the
localization business is of a very low standard. The Company places a strong
emphasis on efficient processes, and believes that centralized project
management is essential to efficiency. Thus, even when a project may have team
members in many different locations, most work is coordinated centrally in the
United States via electronic communication. Certain core functions such as
editing, proofreading, desktop publishing and client coordination are part of
central project management. In preparing work for translation into multiple
languages the project editor may identify problems or issues which are relevant
across the entire project. Similarly, in a multiple-language project, problems
may be picked up by the translators in one or two languages that are relevant to
others. The Company believes that central control of the process is the only way
certain situations can be adequately handled, such as identification of software
bugs.
All the Company's translators are native speaking professionals in the
target language, and generally are required to know the subject matter of the
25
area in which they translate. In addition, a project must have technically
knowledgeable staff in the source language, preferably a specialist in that
area.
The Company's project manager often has a direct phone line for
customers, who call him or her directly. The Company supports an extensive range
of communications facilities linking its internal systems to both clients and
translators. These include an in-house local area network ("LAN"), dial-up
bulletin board (BBS), modem transfer and multiple Internet and CompuServe
connections. Some of the Company's staff have remote connections to clients'
LANs as well. Most translation projects use one or the other of the following
processes to exchange files:
- the client dials into the Company's own systems and
"drops off" files, usually via FTP (file transfer
protocol) at any time; the files are then picked up,
and entered into the translation process.
- the client shares a common messaging platform with
the Company (either LAN-to- LAN or using a wide-area
service provider) and files are sent back and forth
on the internal network systems between the Company
and the client.
- the client is connected via a high speed dedicated
line directly to the Company's network and several of
the Company's machines may be connected, via a
Router, directly through this line so that
translators are able to work directly inside the
client environment.
Files are prepared for translation by the Company's technical staff and
are distributed electronically to translators either locally or abroad.
Translated versions are returned to the Company's central project management for
checking and proofing (and also compilation, if software is involved) and the
target language versions are distributed to appropriate client locations which
may be multiple locations or a central site.
In terms of process, the Company considers itself an extension of the
client's documentation department. All project activities are closely tracked
using spreadsheets which are fully available to the client. Thus, the client
always knows the status of the project.
TRANSLATION TOOLS
The Company has an internal IT standard which is based around a Novell
LAN, Windows NT for handling Japanese, and Microsoft applications. All client
projects, however, are handled on a purely customized basis.
As the Company uses increasingly advanced technological translation
tools (i.e., pieces of software that make the translation quicker), the most
notable impact has been a change in the structure of the project team. Under the
old, "pre-tools" model, a typical project might consist of a project manager
with 50 translators and editors working in various languages. Translation tools
have created an entirely new type of team, particularly where translation memory
databases are used to leverage previously translated material for re-use in new
or updated programs and documentation. The same project team might now include a
project manager, 2 technical analysts, 5 technical clerks and 15
translators/editors.
The Company believes it was one of the first extensive outside
commercial users of a workbench environment for software translation called XL8.
It has selected as its corporate standard the integrated Transit/Termstar
Translation Management System. The product was designed for use in translation
and editing of software, help and documentation. The manager controls the flow
of materials
26
and translators use limited version workstations. It is believed to be the most
versatile product of its kind commercially available on the market; it runs in
Windows environment, and may be used for Asian as well as European languages.
Its advantages over manual efforts are versatility, language independence, and
easy file handling.
The Company has followed the progress of machine translation (MT) over
the years. After much careful review and consideration, the Company concluded
that to the best of its knowledge no one system exists that meets its standards
of accuracy, efficiency and efficacy. Therefore, the Company intends to complete
its own MT system which it hopes will be capable of automatic document
translation. Until such a machine is available, the Company will continue to
upgrade both its hardware and software as technology in this or other adaptable
fields progress. The Company intends to take necessary action to maintain its
position as a leader in the use of MT. No assurance can be given that other
companies will not develop a competitive machine which could have an adverse
affect on the Company. See "Business - Research and Development."
For the Company the fastest growing translation market at the moment is
for Asian languages. The Company's business in Japan is primarily in translation
for manufacturers of applications software, including a substantial volume of
Unix-based systems and customized implementations. The principal applications
are financial and manufacturing, with systems encompassing everything from order
entry to distribution. The Company believes these are strong growth application
areas in Asia.
RESEARCH AND DEVELOPMENT
The Company has devoted only minimal resources to formal research and
development to date. On the other hand, monies have been spent continually, and
charged to operations, for the continuing development of Company tailored
processes and disciplines used in the translation field. The Company anticipates
investing significant amounts on research and development in the foreseeable
future with specific emphasis on developing a proprietary real-time completely
automated machine translation system. The proposed system would operate via
standard telecommunications systems and ultimately would have the ability to
instantaneously translate voice from one language into another. The Company
intends to enter into a licensing agreement with the inventor, Dr. Cherny, for
the exclusive rights to such technology as they regard translation applications
and have a right of first refusal for all other applications covered by the
patent application in return for financing the project. Part of the proceeds of
this Offering has been allocated for this project and the Company currently
intends to finance a portion of the balance (up to approximately $750,000)
through proceeds received from the potential exercise of the Warrants and the
remainder through other external financing. The Company intends to closely
monitor the progress of the project and will discontinue financing the project
unless certain development milestones are reached. The initial phase of
development will be directed towards generating specific context dictionaries,
i.e., relationships between words in different languages but in the same
context. In any given language words have multiple meanings. In addition, words
of one language do not often translate on a one to one basis, into another
language. Context is the key to translating a message from one language into
another. The first milestone of the first phase will take the many thousands of
documents already translated and amassed by the Company and organize them by
context and analyze them through the use of appropriate neural network systems
for the purpose of generating specific context dictionaries. The second
milestone of the first phase will generalize the context dictionary generator
making it capable of generating context dictionaries from written materials in
different languages on the same topic, not previously translated or amassed.
While Dr. Cherny has estimated that a working prototype can be produced in
approximately 12-15 months,
27
the project is still in its infancy and until the first two milestones are
completed (costing approximately $250,000 and $500,000, respectively) the
likelihood of the success of the project can not be predicted. It is currently
projected that following the success of the first two milestones, final
development of this machine will take approximately a further nine months with
additional costs of approximately $4 million. No assurance can be given that the
Company will have sufficient funds to finance the project or that even if
funded, that the project will be able to successfully develop such a system.
However, in any event, if the first two milestones are successful, even if the
instantaneous voice translation machine is ultimately never completed, the
Company will still benefit from using the specific and general context
dictionary generators.
COMPETITION
Berlitz and AT&T, among other companies offering similar services,
currently compete with the Company. Most of these competitors have substantially
greater financial resources, more extensive experience, and better established
research and development, marketing and servicing capabilities than the Company.
The Company now competes primarily on the basis of faster delivery and, in its
opinion, higher quality.
SUPPLIES AND MATERIALS
The materials and supplies used to produce the Company's products are
obtainable from a wide variety of suppliers. There is not currently, nor has
there been in the recent past, a shortage of any of these materials. The Company
believes that its current sources of supply are adequate to meet its future
needs.
EMPLOYEES
The Company presently employs twenty-nine (29) full-time people,
comprised of five (5) Executives, two (2) in Administrative positions, two (2)
in Sales and Marketing, and twenty (20) in Translation. In addition, the Company
also uses the services of ten (10) independent contractors as full time
tele-workers and uses up to a further sixty (60) freelance and/or independent
translators on an as-needed basis. The Company has never had a problem with
access to qualified personnel. The Company has entered into written employment
agreements with each of Ms. Landgren and Messrs. Charles and Michael Cascio. See
"Management - Employment Agreements".
28
PROPERTY
The Company's principal operating facility is located in Haddonfield,
New Jersey, where it occupies approximately 3,600 square feet at a monthly rate
of $2,875 pursuant to a lease that extends until March, 1998. The Company has
another domestic operating facility in Westmont, New Jersey, where it occupies
approximately 1,100 square feet at a monthly rate of $1,200 pursuant to a lease
that extends until June, 1999. The Company also has an operating facility
outside Heidelberg, Germany, where it occupies approximately 1,200 square feet
at a monthly rate of $1,000, pursuant to a lease that extends at least until
January, 1997. The Company's corporate office is located in Pennsauken, New
Jersey, where it occupies approximately 800 square feet at a monthly rate of
$666.67 as a tenant at will. The Company believes that all of its facilities are
currently adequate and further believes that, if necessary, adequate facilities
could be located in the event the Company needs to replace or expand its current
facilities. The Company is maximizing the utility of its current facilities by
scheduling two or three shifts per day.
LEGAL PROCEEDINGS
The Company is not a party to, or involved in, any legal proceedings.
29
MANAGEMENT
The directors and/or executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Theodora Landgren 49 Chairman and Chief Operating Officer
Charles D. Cascio 57 President, Chief Executive Officer and
Director
Richard J.L. Herson 77 Director and Chief Accounting Officer
Luis M. Garcia-Barrio, Ph.D 52 Vice President/Special Projects
John Wetter 51 Vice President/Production
Michael C. Cascio, Esq. 31 Secretary and Treasurer
Julius Cherny, Ph.D 59 Director
Gary M. Schlosser 46 Director
Theodora Landgren has been the Chairman and Chief Operating Officer of the
Company since January 17, 1996. In addition, she has been Chairman and President
of BTS since the founding of that firm in 1984. Prior to starting BTS she
studied linguistics and computer programming at several universities including
Universities of Denver and Innsbruck (Austria) and USC College of Continuing
Education, as well as teaching English to non-English speaking students at the
University of Stockholm, Sweden. Ms. Landgren is active in the American
Translator's Association (ATA), Society of Technical Communication (STC) where
she annually speaks on translation processes, and serves as an elected executive
committee member on the board of the Localization Industry Standards Association
(LISA). LISA is the leading association and is headquartered in Geneva,
Switzerland, dedicated to promoting standards for the computer industries. She
also serves as the newly elected president of the Logos User's Group in the
United States. Logos, Inc. is the developer of a machine translation system. She
is a respected authority on product globalization and has published articles in
major magazines on the subject. Ms. Landgren lived many years in Europe prior to
opening BTS thereby gaining hands on expertise in multi-lingual product
adaptation.
Charles D. Cascio became a Director, President and Chief Executive Officer of
the Company in May of 1996. He had previously been engaged by the Company, from
inception, as a full time financial consultant. From late 1992 until July 1996
he was Chairman and President of Electro-Kinetic Systems, Inc., a publicly held
provider of laboratory testing products. From 1990 to late 1992, Mr. Cascio was
employed as a full time marketing and financial consultant to a large privately
held development, building and entertainment company located in Southern New
Jersey. From 1987 to 1990, he was a full time financial operations and marketing
consultant to Drug Screening Systems, Inc., a publicly held manufacturer of drug
screening systems to detect the presence of "drugs of abuse," when he sold his
interest at a substantial profit. From 1984 to 1987, Mr. Cascio managed a wholly
and family owned sporting entertainment and recreational facility, known as the
Coliseum, located in Voorhees, N.J., which was sold for a profit in 1987. Mr.
Cascio holds a Bachelors Degree in Economics from Iona College and is the father
of Michael Cascio.
Richard J.L. Herson was Secretary, Treasurer and a Director of TTGL since
inception until February 1, 1996, when he resigned as Secretary and Treasurer
and was appointed Chief Accounting Officer. Mr. Herson was previously a General
Partner in the firm of Hertz, Herson and Company, CPA's with offices in New
York, Boston and Charlotte. He is currently Treasurer of Entrepren Associates,
Inc. a consulting firm, and Secretary of the Bruner Foundation, where he is
responsible for its investments and accounting operations. He holds a Bachelor's
Degree from
30
the City College of New York and an M.S. in Accounting from Columbia University.
He has also authored numerous articles and a book on accounting.
Luis M. Garcia-barrio, Ph.D has been the Vice President/Special Projects of the
Company since April 1996. Prior thereto, since January 1991, he held the
position of International Production Manager. Dr. Barrio also is the head of
Research and Development. Dr. Barrio holds degrees in Linguistics, Education,
and the Humanities, including a Masters Degree and Ph.D. from the University of
Pennsylvania. He is a certified State and Federal Court interpreter and has
served on the faculty as Chairman, Associate Professor and Curriculum
Development Administrator of several major universities in both the US and
abroad. In addition, he has published over two (2) dozen papers on literature
and linguistics.
John Wetter has been Vice President/Production for the Company since April 1996.
Since his arrival in July 1995, he has been responsible for the significant
increase in the turn around time and quality of the Company's project work by
concentrating on increased productivity through computerization and training.
From 1989 until June 1995, Mr. Wetter owned and operated Colortech Graphics,
Inc., a specialty music printing company. Mr. Wetter holds an MBA in Business
from the University of Scranton and has served as an adjunct professor at the
University of Vermont.
Michael C. Cascio, Esq. is currently the Secretary and Treasurer of the Company.
Prior thereto he was President, CEO and a Director of TTGL from inception until
May 10, 1996. Mr. M. Cascio is also acting as house counsel to the Company.
Since 1995 Mr. M. Cascio practices law in his own firm, The Law Offices of
Michael C. Cascio. From 1991 through 1994, he was a litigation associate with
several New Jersey law firms including Parker, McCay and Criscuolo. Mr. M.
Cascio holds a Juris Doctor from Rutgers University School of Law, and a
Bachelor of Arts Degree in History from the University of Delaware. Mr. M.
Cascio will only devote a portion of his time to the Company in the beginning as
he completes some current obligations and he anticipates devoting more of his
time to the Company in the future, on an as-needed basis. Mr. M. Cascio is the
son of Charles Cascio.
Julius Cherny, Ph.D has been a Director since May 10, 1996. Dr. Cherny is a
founder and partner of Mottola, Cherny and Associates, a consulting firm
specializing in providing financial, organizational and systems consulting
services. Dr. Cherny holds a Ph.D. in accounting and is currently on staff at
the NYU Graduate School of Business and previously at the Hagen School of
Business at Iona College. Dr. Cherny has held positions as Director, Senior Vice
President, and Chief Financial Officer with firms in the securities industry.
Dr. Cherny has published numerous papers and authored several books dealing with
Finance, Accounting and Advanced Mathematical Theory.
Gary M. Schlosser was appointed a Director in August 1996. Since August 1, 1994,
Mr. Schlosser has been the President and a director of Jefferson Bank of New
Jersey. From October 1989 through July 1994 he was Executive Vice President of
Glendale National Bank of New Jersey and prior thereto, from July 1988, he was
President of Glendale Mortgage Services Corporation, a subsidiary of Atlantic
Bancorporation. Mr. Schlosser is a member of the Camden County Bankers
Association and the South Jersey Security Bankers Association.
BOARD OF DIRECTORS
Each director is elected at the Company's annual meeting of
stockholders and holds office until the next annual meeting of stockholders, or
until his successor is elected and qualified. At present, the Company's bylaws
require no fewer than one director. Currently, there are five directors of the
Company. The bylaws permit the Board of Directors to fill any vacancy and the
new director may
31
serve until the next annual meeting of stockholders or until hi s successor is
elected and qualified. Officers are elected by the Board of Directors and their
terms of office are, except to the extent governed by employment contracts, at
the discretion of the Board. Other than as indicated above, there are no family
relations among any officers or directors of the Company. The officers of the
Company, other than Michael Cascio, Esq. and Richard J.L. Herson, devote full
time to the business of the Company. See "Certain Transactions." Upon completion
of this Offering the Company will establish separate Audit and Compensation
Committees. The Audit Committee will consist of Mr. Herson and Dr. Cherny. The
Audit Committee will make recommendations to the Board of Directors regarding
the selection of independent auditors, reviews the results and scope of the
audit and of the services provided by the Company's independent auditors, and
review and evaluate the Company's internal control functions. The Compensation
Committee will consist of Ms. Landgren and Mr. Herson. The Compensation
Committee will make recommendations to the Board of Directors concerning
compensation for executive officers and consultants of the Company. While the
Representative has the right to designate a member to the Board of Directors
during the next two years, it has advised the Company that it has no current
intent to exercise this right.
32
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVES
From inception (July 7, 1995) through March 31, 1996, the Company paid
an aggregate of $99,070 of compensation to all of its executive officers, of
which $8,462 was paid to its then chief executive officer, Michael Cascio.
EMPLOYMENT AGREEMENTS
As of December 7, 1995, the Company entered into formal five year
written employment contracts with the Company's Chairman/Chief Operating Officer
and its President/Chief Executive Officer for an annual base salary of $104,000
each during each of the five years thereof, plus annual cost of living
adjustments. These agreements also (i) contain restrictions on competing with
the Company for two years following termination of employment, (ii) provide for
severance payments in the event of termination without cause by the Company in
an amount equal to the aggregate amount of payments due under the term of the
Agreement (without regard to extensions), but in no event less than one year's
compensation, (iii) provide that the Company will purchase a life insurance
policy naming as beneficiary a person chosen by each officer in an amount equal
to 2.5 times such officer's salary and (iv) provide a car or a car allowance.
The Company has also entered into an oral agreement with Mr. Herson to pay him
an annual compensation of $25,000 to begin following the close of this Offering
and a written agreement with Mr. Michael Cascio similar to the above-described
contracts, with an annual salary of $40,000.
STOCK OPTION PLAN
The Board of Directors and stockholders of the Company have adopted a
Stock Option Plan (the "Option Plan") as an incentive for, and to encourage
share ownership by, the Company's officers, directors and other key employees
and/or consultants and potential management of possible future acquired
companies. The Option Plan provides that options to purchase a maximum of
2,500,000 shares of Common Stock (subject to adjustment in certain
circumstances) may be granted under the Option Plan, 2,200,000 of which shares
may not be issued for 18 months from the date of this prospectus, without the
consent of the Representative. The Option Plan also allows for the granting of
stock appreciation rights ("SARs") in tandem with, or independently of, stock
options. Any SARs granted will not be counted against the 2,500,000 limit.
The purpose of the Option Plan is to make options (both "incentive
stock options" within the meaning of Section 422A of the Internal Revenue Code
of 1986, as amended (the "Code"), and non-qualified options) and "stock
appreciation rights" (with non-qualified options only) available to certain
officers, directors and other key employees and/or consultants of the Company in
order to give such individuals a greater personal interest in the success of the
Company and, in the case of employees, an added incentive to continue and
advance in their employment.
The Plans are currently administered by the majority vote of a
Committee (the "Committee") appointed by the Board of Directors and comprised of
at least two members of the Board who, in the case of the Option Plan, are not
eligible to receive options, other than pursuant to a formula, it being intended
that such plan shall qualify under Rule 16b-3 as promulgated pursuant to the
Securities Exchange Act of 1934, as amended. The Committee will designate those
persons to receive grants under the Plans and determine the number of shares
and/or options, as the case may be, to be granted and the price payable for the
shares of Common
33
Stock thereunder. The price payable for the shares of Common Stock under each
option will be fixed by the Committee at the time of the grant, but, for
incentive stock options, must be not less than 100% (110% if the person granted
such option owns more than 10% of the outstanding shares of Common Stock) of the
fair market value of Common Stock at the time the option is granted, and 85% of
such price for non-qualified stock options. The above notwithstanding, the
Company intends shortly to amend the Option Plan so it will conform to the
recent revisions of Rule 16b-3.
There are currently no outstanding stock options. On the date of this
Prospectus the Company plans to issue 100,000 options to each of its Chairman
and President. Pursuant to agreement with the Representative, the Company will
not issue more than an additional 100,000 stock options, for a total of 300,000
stock options, during the 18 months following the date of this Prospectus
without the consent of the Representative.
COMPENSATION OF DIRECTORS
Directors of the Company are not compensated for their services, in
that capacity. See "Executive Compensation - Employment Agreements" for
descriptions of other agreements between the Company and certain of its
directors.
34
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into Employment Agreements with each of Ms.
Theodora Landgren and Messrs. Charles and Michael Cascio, and an oral agreement
with Mr. Herson all of whom are executive officers and/or directors. The Company
believes the terms of these agreements are within industry norms. See "Executive
Compensation - Employment Agreements."
Peter Landgren (who is fluent in 3 languages) is retained by the
Company to perform translation services on an as-needed basis at the standard
rate paid for comparable work. During fiscal 1995, Peter Landgren received an
aggregate of $24,000. Peter Landgren is the adult son of Theodora Landgren.
The Company and Dr. Cherny have recently agreed to begin negotiating
the terms of an exclusive license agreement or joint venture for the rights to
an automated machine translation system for which Dr. Cherny has filed a patent
application. See "Business - Research and Development."
As part of the Company's January 1996 transaction with BTS, as a
shareholder of BTS, Ms. Landgren received a pro rata amount of stock in the
Company, amounting to 1,355,000 shares of Common Stock, which has since been
reduced to 770,000 shares by accounting for her give-back to the Company of
585,000 shares and which will be further reduced to 570,000 shares by the sale
by the Underwriters of 200,000 shares on her behalf as part of this Offering.
As a prerequisite for the Representative entering into this transaction
with the Company, it required that not more than 2,452,000 shares of Common
Stock be outstanding. In order to meet this limit an aggregate of 1,330,000
shares of Common Stock were returned to the Company by various stockholders
including Ms. Landgren (585,000 shares), Mr. Cascio and his family members
(600,000 shares) and Mr. Herson (15,000 shares). In an attempt to compensate
such people for their loss, on May 24, 1996, the Company granted 100,000
warrants, to each of Ms. Theodora Landgren and Mr. Charles Cascio. These
warrants are identical in all respects to the 1,500,000 Warrants being offered
by the Company hereby and, while they are being registered herewith, they are
subject to restrictions on transferability for 18 months. See "Selling Security
Holders."
As a general rule it is the Company's intention that all transactions
with its officers, directors or stockholders will be made on terms no less
favorable to it than those available from unaffiliated parties.
35
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law, as amended,
authorizes the Company to indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Company if it is determined that such person
acted in accordance with the applicable standard of conduct set forth in such
statutory provisions. Article 9 of the Company's Certificate of Incorporation
contains provisions relating to the indemnification of directors and officers,
to the full extent permitted by Delaware law.
The Company may also purchase and maintain insurance for the benefit of
any director or officer which may cover claims for which the Company could not
indemnify such person.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore unenforceable.
36
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock, $.001 par value, as of the date hereof
and after the Offering by (i) each person known by the Company to own
beneficially more than five percent of the Company's outstanding shares of
Common Stock, (ii) each director and executive officer of the Company who owns
shares and (iii) all directors and executive officers of the Company as a group.
As of the date hereof, the Company had 2,452,000 shares of Common Stock
outstanding. Unless otherwise indicated, all shares of Common Stock are owned by
the individual named as sole record and beneficial owner with exclusive power to
vote and dispose of such shares. None of the people listed below owns any other
securities of the Company.
<TABLE>
<CAPTION>
Approximate Approximate
Percentage Percentage
Shares of Class of Class
Owned Before After
Name and Address Beneficially Offering Offering
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
Theodora Landgren 770,000 31.40% 22.38%(4)
(1)(2)(3)
Charles D. Cascio 400,000 16.31% 11.26%
(1)(2)(3)(5)
Michael C. Cascio 100,000 4.08% 2.82%
(1)(2)(6)
Richard J.L. Herson 115,000 4.69% 3.24%
(1)(2)
All Executive Officers and
Directors as a Group 1,385,000 56.48% 39.70%
</TABLE>
(1) Uses the Company's address at 7703 Maple Avenue, Pennsauken,
New Jersey 08109.
(2) Reflects the return, pursuant to agreement with the
Representative, of shares of Common Stock immediately prior to
the Company's initial public offering.
(3) Does not include 100,000 Warrants subject to restrictions on
transferability for 18 months following the date hereof which
are being registered herewith.
(4) Reflects the sale of 200,000 shares of Common Stock in this
Offering. Includes an additional 225,000 shares of Common
stock held in a voting trust under which she has sole voting
control for two years following the date of this Prospectus.
Without including such shares, Ms. Landgren will own
approximately 16.05% after the Offering. The parties to the
Voting Trust Agreement are Mark Schindler, Eugene Stricker,
Richard Gray, Donna Gray, Steven Gray, David Gray, Joyce Gray,
Alvin Horowitz and Steven Gray as custodian for Samuel and
Emily Gray, minor children.
(5) Father of Michael Cascio. Does not include an aggregate of
200,000 shares owned by adult, independent children of Mr.
Cascio. Mr. Cascio disclaims beneficial interest in such
shares.
(6) Son of Charles Cascio.
37
DESCRIPTION OF SECURITIES
The Company has authorized capital stock consisting of 15,000,000
shares of Common Stock, par value $.001 per share and 1,000,000 shares of
Preferred Stock, par value $.01 per share. As of the date of this Prospectus,
2,452,000 shares of Common Stock are issued and outstanding.
The following are brief descriptions of the securities offered hereby
and other securities of the Company. The rights of the holders of shares of the
Company's capital stock are established by the Company's Certificate of
Incorporation, the Company's Bylaws and Delaware Law. The following statements
do not purport to be complete or give full effect to statutory or common law,
and are subject in all respects to the applicable provisions of the Certificate
of Incorporation, Bylaws and state law.
COMMON STOCK
The holders of Common Stock have no preemptive or subscription rights
in later offerings of Common Stock and are entitled to share ratably (i) in such
dividends as may be declared by the Board of Directors out of funds legally
available for such purpose and (ii) upon liquidation, in all assets of the
Company remaining after payment in full of all debts and obligations of the
Company and any preferences granted in the future to any preferred stock. The
Company has not paid any dividends on the Common Stock.
Holders of Common Stock are entitled to one vote for each share held
and have no cumulative voting rights. Accordingly, the holders of more than 50%
of the issued and outstanding shares of Common Stock entitled to vote for
election of directors can elect all the directors if they choose to do so. After
completion of this Offering, the current stockholders collectively will continue
to own more than 50% of the outstanding shares of Common Stock. All shares of
Common Stock now outstanding are fully paid and nonassessable and all shares of
Common Stock which are the subject of this Offering, when issued, will be fully
paid and nonassessable. The Board of Directors is authorized to issue additional
shares of Common Stock within the limits authorized by the Company's Certificate
of Incorporation without stockholder action.
Section 203 of the Delaware General Corporation Law provides that if a
person acquires 15% or more of the stock of a Delaware corporation, he becomes
an "interested stockholder" and may not engage in a "business combination" with
that corporation for a period of 3 years. The term "business combination"
includes a merger, a sale of assets or a transfer of stock. The 3 year
moratorium may be terminated if any of the following conditions are met: (1) the
Board of Directors approved the acquisition of stock or the business combination
before the person became an interested stockholder, (2) the interested
stockholder acquired 85% of the outstanding voting stock, excluding in the
determination of outstanding stock is any stock owned by individuals who are
officers and directors of the corporation and any stock owned by certain
employee stock plans, or (3) the business combination is approved after the
person became an interested stockholder by voting stock which is not owned by
the interested stockholder. Theodora Landgren owns, either directly or
beneficially, 15% or more of the stock of the Company and may be an interested
stockholder.
WARRANTS
The Warrants offered hereby will be issued in registered form under a
Warrant Agreement (the "Warrant Agreement") between the Company and American
Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"). The
following summary of the provisions of the Warrants is qualified in its entirety
38
by reference to the Warrant Agreement, a copy of which is filed as an exhibit to
the registration statement of which this Prospectus is a part.
Each Warrant will be separately transferable and will entitle the
registered holder thereof to purchase one share of Common Stock at $4.00 per
share (subject to adjustment as described below) for a period of three years
commencing on the date of this Prospectus. A holder of Warrants may exercise
such Warrants by surrendering the certificate evidencing such Warrants to the
Warrant Agent, together with the form of election to purchase on the reverse
side of such certificate attached thereto properly completed and executed and
the payment of the exercise price and any transfer tax. If less than all of the
Warrants evidenced by a Warrant certificate are exercised, a new certificate
will be issued for the remaining number of Warrants. See "Underwriting."
For a holder of a Warrant to exercise the Warrants, there must be a
current registration statement on file with the United States Securities and
Exchange Commission and various state securities commissions. This Prospectus
will become outdated, at the latest, on July 31, 1997. The Company will be
required to file post-effective amendment to the registration statement when
events require such amendments and to take appropriate action under state
securities laws. While it is the Company's intention to file post-effective
amendments when necessary and to take appropriate action under state securities
laws, there is no assurance that the registration statement will be kept
effective or that such appropriate action under state securities laws will be
effected. If the registration statement is not kept current for any reason, the
Warrants will not be exercisable, and holders thereof may be deprived of value.
The Company has authorized and reserved for issuance a number of shares
of Common Stock sufficient to provide for the exercise of the Warrants. When
issued, each share of Common Stock will be fully paid and nonassessable. Warrant
holders will not have any voting or other rights as shareholders of the Company
unless and until Warrants are exercised and shares issued pursuant thereto. The
exercise price and the number of shares of Common Stock issuable upon the
exercise of each Warrant are subject to adjustment in the event of a stock
split, stock dividend, recapitalization, merger, consolidation or certain other
events.
At any time after 12 months from the date of this Prospectus, unless
earlier permitted by the Representative, any or all of the Warrants may be
redeemed by the Company at a price of $.25 per Warrant, upon the giving of 30
days written notice and provided that the closing price or bid price of the
Common Stock for the twenty (20) preceding trading days has equaled or exceeded
the lower of $6.00 or 167% of the then exercise price of the Warrants offered to
the public hereby. The right to purchase the Common Stock represented by the
Warrants noticed for redemption will be forfeited unless the Warrants are
exercised prior to the date specified in the notice of redemption. While the
Company may legally be permitted to give notice to redeem the Warrants at a time
when a current prospectus is not available thereby leaving the Warrant holders
no opportunity to exercise their Warrants prior to redemption, the Company does
not intend to redeem the Warrants unless a current prospectus is available at
the time of redemption.
There are currently 340,000 warrants outstanding. Of these warrants,
300,000 were issued by the Company, at no cost, to the persons who participated
in the give-back to the Company of shares of Common Stock to satisfy the
capitalization requirements set by the Representative, are identical to the
Warrants offered by the Company, are held by certain founders of the Company and
are subject to an 18 month restriction on transferability unless earlier
released by the Representative. The other 40,000 warrants are identical to the
Warrants offered by the Company except that each is exercisable at $1.50 per
share until January 17, 2001 and they do not have registration rights.
39
PREFERRED STOCK
The Board of Directors is authorized to issue up to 1,000,000 shares of
Preferred Stock, par value $.001, without any further vote or action by the
stockholders, in one or more series, and to fix the rights, preferences and
privileges and qualifications thereof including, without limitation, liquidation
preference, voting rights and the limitation or exclusion thereof. The issuance
of Preferred Stock could decrease the amount of earnings and assets available
for distribution to holders of Common stock or adversely affect the rights and
powers, including voting rights, of the holders of Common Stock, and may have
the effect of delaying, deferring or preventing a change in the control of the
Company. There are currently no shares of Preferred Stock outstanding. The
Company may issue shares of Preferred Stock as part of an acquisition, however,
such issuance is subject to the approval of the Representative for a period of
18 months.
SHARES AVAILABLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 3,552,000
shares of Common Stock outstanding (3,747,000 shares if the Underwriter's
over-allotment option is exercised in full). Of these shares, the 1,300,000
shares sold in this offering (1,495,000 shares if the Underwriter's
over-allotment option is exercised in full) and 241,000 shares held by selling
security holders will be freely tradeable without restriction or further
registration under the Securities Act of 1933, except for any shares purchased
by an "affiliate" of the Company (in general, a person who has a control
relationship with the Company) which will be subject to the limitations of Rule
144 adopted under the Securities Act. Except as described below, all of the
remaining 2,011,000 shares of Common Stock are "restricted securities," as that
term is defined under Rule 144 promulgated under the Securities Act.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate of the
Company), who has owned restricted shares of Common Stock beneficially for at
least two years is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the total number of outstanding
shares of the same class (approximately 35,500 shares assuming only the existing
shares and the shares of Common Stock offered hereby are outstanding) or the
average weekly trading volume of the Company's Common Stock on all exchanges
and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. A person who has
not been an affiliate of the Company for at least the three months immediately
preceding the sale and who has beneficially owned shares of Common Stock for at
least three years is entitled to sell such shares under Rule 144 without regard
to any of the limitations described above. None of the shares of restricted
stock presently outstanding will be eligible for resale under Rule 144 prior to
July 7, 1997; additionally, the holders of 1,770,000 shares (officers,
directors, founders and their families) have agreed not to make any public sales
for a period of two years from the date of this Prospectus, without prior
written consent of the Representative.
Of the 2,452,000 shares of Common Stock currently outstanding, 441,000
are being registered herewith.
As a result of this Offering, an additional 1,500,000 shares of Common
Stock (1,725,000 if the Underwriters over-allotment option is exercised) will be
40
subject to issuance pursuant to the exercise of the Warrants offered hereby. In
addition, 300,000 warrants currently held by certain founders of the Company are
being registered hereby, although without the prior consent of the Underwriter
such warrants and the Common Stock underlying them are restricted from transfer
for 18 months.
As of the date hereof and prior to the Offering, there were 56 record
holders of the Common Stock.
DIVIDEND POLICY
The Company has paid no dividends and does not expect to pay dividends
on its Common Stock in the foreseeable future as it intends to retain earnings
to finance the growth of its operations.
TRANSFER AGENT
The Company has engaged American Stock Transfer & Trust Company, 40
Wall Street, New York, New York 10005, to act as Transfer Agent for the
Company's Common Stock.
41
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement between the Company and the Underwriters named below, for which
Werbel-Roth Securities, Inc. is acting as Representative (a copy of which
agreement is filed as an exhibit to the Registration Statement of which this
prospectus forms a part), the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed to
purchase, the number of shares of Common Stock and Warrants set forth opposite
its name. All 1,300,000 shares of Common Stock and 1,500,000 Warrants offered
must be purchased by the several Underwriters if any are purchased. The shares
of Common Stock and Warrants are being offered by the Underwriters subject to
prior sale, when, as and if delivered to and accepted by the Underwriters and
subject to approval of certain legal matters by counsel and to certain other
conditions.
Number
------
Underwriter of Shares of Warrants
----------- --------- -----------
Werbel-Roth Securities, Inc.
Millennium Securities Corp.
Total 1,300,000 1,500,000
=========== ===========
The Representative has advised the Company that the Underwriters
propose to offer the shares of Common Stock and the Warrants to the public at
the offering prices set forth on the cover page of this Prospectus and that the
Underwriters may allow to certain dealers who are members in good standing of
the National Association of Securities Dealers, Inc. ("NASD") concessions of
$___ per share of Common Stock and $____ per warrant.
The Company has granted the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 195,000 shares of
Common Stock and 225,000 Warrants from it, at the public offering prices less
the underwriting discounts set forth on the cover page of this Prospectus. The
Underwriters may exercise this option solely to cover over-allotments in the
sale of the shares of Common Stock and Warrants offered hereby.
The Company has agreed to pay the Representative a non-accountable
expense allowance of 3% of the gross proceeds to the Company of the shares of
Common Stock and Warrants sold in the offering (including the over-allotment
option).
The Representative will (i) receive a Warrant solicitation fee equal to
4% of the exercised price of all Warrants it causes to be exercise and (ii)
enter into a three year consulting agreement with the Company providing for a
fee equal to $26,000 per annum, payable in full ($78,000) at the closing of this
Offering. Also, during the three years beginning on the date hereof, the
Representative has the right of first refusal on future transactions by the
Company and to act as broker on all Rule 144 sales.
The underwriting agreement provides for reciprocal indemnification
between the Company and the Underwriters against certain civil liabilities,
including liabilities under the Securities Act of 1933.
The Company has agreed to sell to the Representative or its designees,
at a price of $250, warrants (the "Representative's Warrants") to purchase
110,000 shares of Common Stock of the Company and 150,000 Warrants. Other than a
higher exercise price and the redemption feature, the warrants underlying the
Representative's Warrants are identical in all respects to the Warrants offered
to the public hereby, as to which they will be treated pari passu with the
public Warrants. The Warrants issuable upon exercise of the Representative's
Warrants will entitle the holder to purchase shares of Common Stock at a price
of $4.80
42
per share or 120% of the then exercise price of the Warrants offered to the
public hereby, whichever is lower, for a period of five years commencing on the
date hereof. The Representative's Warrants will not be transferable for one year
from the date hereof except to officers and partners of the Underwriters or
members of the selling group and are exercisable during the five year period
commencing one year from the date of this Prospectus. Any profit realized upon
any resale of the Representative's Warrants or upon any sale of the underlying
securities thereof may be deemed to be additional underwriter's compensation.
The Company has agreed to register (or file a post-effective amendment with
respect to any registration statement registering) the Representative's Warrant
and the underlying securities under the Securities Act at its expense on one
occasion during the five years following the date of this Prospectus and at the
expense of the holders thereof on another occasion, upon the request of a
majority of the holders thereof. The Company has also agreed to "piggy-back"
registration rights for the holders of the Representative's Stock Warrants and
the Representative's Warrants and the underlying securities at the Company's
expense during the seven years following the date of this Prospectus.
The Company has also agreed, for a period of two years from the date of
this Prospectus, if so requested by the Representative, to nominate and use its
best efforts to elect a designee of the Representative as a director of the
Company or, at the Representative's option, as a non-voting advisor to the
Company's Board of Directors. The Representative has not yet exercised its right
to designate such a person.
The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation (commencing one year from the date of this Prospectus),
to pay to the Representative a fee of four percent of the exercise price for
each Warrant exercised, provided however, that the Representative will not be
entitled to received such compensation in Warrant exercise transactions in which
(i) the market price of Common Stock at the time of the exercise is lower than
the exercise price of the Warrants, (ii) the Warrants are held in any
discretionary account; (iii) disclosure of compensation arrangements is not
made, in addition to the disclosure provided in this Prospectus, in documents
provided to holders of Warrants at the time of exercise; (iv) the exercise of
the Warrants is unsolicited; or (v) the transaction was in violation of Rule
10b-6 promulgated under the Exchange Act.
The Company has agreed with the Representative that for a period of 18
months from the date of this Prospectus, the Company will not sell or otherwise
issue any securities of the Company except as contemplated by this Prospectus or
pursuant to employee benefit plans without the prior written consent of the
Representative.
The Underwriters have informed the Company that they do not expect
sales of shares of Common Stock to be made to discretionary accounts to exceed
2% of the shares of Common Stock offered hereby.
PRICING OF THE OFFERING
Prior to this offering, there has been no public trading market for any
of the Company's securities. Consequently, the initial offering prices of the
shares of Common Stock and Warrants have been determined by negotiations between
the Company and the Representative. Among the factors considered in determining
the offering prices were the Company's financial condition and prospects, the
industry in which the Company is engaged, certain financial and operating
information of companies engaged in activities similar to those of the Company
and the general market condition of the securities markets. Such prices do not
necessarily bear any relationship to any established standard or criteria of
value based upon assets, earnings, book value or other objective measures.
43
SELLING SECURITY HOLDERS
The Company is registering the shares of Common Stock (the "Reoffer
Shares") purchased by investors in the Company's January 1996 private placement
offering (the "Selling Stockholders") and 300,000 warrants and the underlying
Common Stock. These warrants and the underlying Common Stock are restricted from
transfer for 18 months, without the prior consent of the Representative. Other
than the minimal incremental costs of preparing this Prospectus and a
registration fee to the SEC, the Company is not paying any costs relating to the
sales by the Selling Stockholders. The Selling Stockholders are obligated to
effect the sale of their securities through the Underwriter. The following
disclosure regarding Reoffer Shares and Selling Stockholders is also applicable
to these warrants, their underlying Common Stock and the warrant holders.
Each of the Selling Stockholders may be deemed to be an "underwriter"
of the Company's Common Stock offered hereby, as that term is defined under the
Act. Each of the Selling Stockholders may sell the Reoffer Shares from time to
time for his own account in the open market at the prices prevailing therein, or
in individually negotiated transactions at such prices as may be agreed upon.
The net proceeds from the sale of the Reoffer Shares by the Selling Stockholders
will inure entirely to their benefit and not to that of the Company.
None of the Selling Stockholders has held any position or office, or
had any material relationship with the Company or any of its predecessors or
affiliates within the last three years, and none of the Selling Stockholders
will own any of the outstanding Common Stock of the Company after completion of
the offering of such shares. However, the selling warrant holders all currently
own at least 1% of the outstanding Common Stock and two of them are executive
officers.
The Selling Stockholders have advised the Company that their Reoffer
Shares may be offered for sale from time to time by them in regular brokerage
transactions in the over-the-counter market, or, either directly or through
brokers or to dealers, or in private sales or negotiated transactions, or
otherwise, at prices related to the then prevailing market prices. Thus, they
are required to deliver a current prospectus in connection with the offer or
sale of the Reoffer Shares. In the absence of a current prospectus, these shares
may not be sold publicly without restriction unless held for three years, or
after two years subject to volume limitations and satisfaction of other
conditions. The Selling Stockholders have been advised that Rules 10b-6 and
10b-7 of the General Rules and Regulations promulgated under the Securities
Exchange Act of 1934 will be applicable to their sales of Reoffer Shares. These
rules contain various prohibitions against trading by persons interested in a
distribution and against so-called "stabilization" activities.
The Selling Stockholders might be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act and any profit on the resale of the
Reoffer Shares as principal might be deemed to be underwriting discounts and
commissions under the Act.
Any sale of Reoffer Shares by Selling Stockholders through
broker-dealers may cause the broker-dealers to be considered as participating in
a distribution and subject to Rule 10b-6 promulgated under the Securities
Exchange Act of 1934, as amended. If any such transaction were a "distribution"
for purposes of Rule 10b-6, then such broker-dealers might be required to cease
making a market in the Company's equity securities for either two or nine
trading days prior to, and until the completion of, such activity.
44
Included in the 1.3 million shares of Common Stock being offered herein
by the Underwriters are 200,000 shares owned by Ms. Theodora Landgren, the
Chairman, Chief Operating Officer and a Director of the Company. After the
Offering, Ms. Landgren will directly own 550,000 shares representing 16.05% of
the outstanding shares of Common Stock. See "Security Ownership of Certain
Beneficial Owners and Management."
LEGAL MATTERS
The validity of the issuance of the Units offered hereby will be passed
upon for the Company by the law firm of Heller, Horowitz & Feit, P.C., New York,
New York. The law firms of Atlas, Pearlman, Trop & Borkson, P.A., Fort
Lauderdale, Florida and Beckman & Millamn, P.C., New York, New York will pass on
certain aspects of this Offering on behalf of the Underwriters.
Irving Rothstein, Esq. is associated with the law firm of Heller,
Horowitz & Feit, P.C., counsel to the Company. On January 16, 1996, Mr.
Rothstein was appointed an Assistant Secretary of the Company. This is purely an
administrative position and Mr. Rothstein was appointed solely to assist, and to
ease the burdens of, the executive officers of the Company in the execution of
various documents and/or certificates on behalf of the Company. Neither Mr.
Rothstein nor his law firm receive any additional compensation for these
efforts.
EXPERTS
The audited financial statements of the Company as of March 31, 1995
and 1996 and for the fiscal years then ended are included herein and in the
registration statement in reliance upon the report of Votta and Company
independent certified accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
45
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
The Translation Group, LTD
We have audited the accompanying balance sheets of THE TRANSLATION GROUP,
LTD. and its consolidated subsidiary at March 31, 1996 and 1995, and the
related statements of operations, stockholders' equity and cash flows for
both of the years in the two year period ended March 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated
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 aforementioned consolidated financial statements
present fairly, in all material respects, the financial position of The
Translation Group, Ltd. and its subsidiary at March 31, 1996 and 1995, and
the results of their operations, stockholders' equity and their cash flows
for each of the years in the two year period ended March 31, 1996, in
conformity with generally accepted accounting principles.
As discussed in Notes 1, 2 and 3 to the consolidated financial statements
the consolidated financial data reflect the result of a business
combination merger, accounted for as a recapitalization.
Votta & Company
Haddonfield, New Jersey
May 1, 1996
(July 1, 1996 as to Note 17)
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31,
MARCH 31, MARCH 31, 1996
1996 1995 (UNAUDITED)
---- ---- -----------
ASSETS:
Current assets:
<S> <C> <C> <C>
Cash and cash equivalents (Note 2) $530,340 $2,238 $268,822
Accounts receivable, net of allowance for
doubtful accounts of $20,000, $65,000,
and $7000 respectively (Notes 2 and 4) 642,481 325,665 969,473
Prepaid rent (Note 12) 31,625
Deferred offering costs (Note 19) 34,540 155,937
--------- ------- -----------
Total current assets 1,207,361 359,528 1,394,232
--------- ------- -----------
Property and equipment (Notes 2 and 15) 362,178 165,429 406,524
Less: accumulated depreciation and amortization (189,466) (114,715) (220,776)
----------- --------- -------------
Net property and equipment 172,712 50,714 185,748
---------- --------- ------------
Other assets (Note 8) 58,759 16,501 56,597
----------- --------- -------------
TOTAL ASSETS $1,438,832 $426,743 $1,636,577
=========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 55,834 $ 22,008 $ 130,210
Accrued liabilities 26,000 23,870 8,590
Accrued income taxes (Notes 2 and 16) 115,000 7,882
Deferred income taxes (Notes 2 and 16) 233,394 115,794 339,394
Line of credit (Note 6) 40,000
Notes payable (Note 7) 23,056
----------- --------- -------------
Total current liabilities 430,228 232,610 478,194
----------- --------- ------------
Stockholders' equity:
Common stock (Notes 3,9,10,11,17 and 19):
$1 par value, 1000 shares authorized,
50 outstanding 50
$.001 par value, 5,000,000 shares authorized
3,782,000 outstanding 3,782 3,782
Preferred stock, $.001 par value,
1,000,000 authorized,
none outstanding (Note 14)
Additional paid in capital (Notes 3, 9 and 10) 462,868 462,868
Retained earnings 541,954 194,083 691,733
--------- -------- ------------
Total stockholders' equity 1,008,604 194,133 1,158,383
--------- -------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,438,832 $426,743 $1,636,577
=========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-1
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
AND THE FIVE MONTH PERIODS ENDED
AUGUST 31, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31,
MARCH 31, MARCH 31, 1996 1995
1996 1995 (UNAUDITED) (UNAUDITED)
---- ---- ---------- ----------
<S> <C> <C> <C> <C>
Revenue (Notes 2, 3 and 5) $2,586,306 $2,149,135 $1,468,937 $1,104,186
Cost of services provided 1,738,648 1,719,100 1,063,752 689,935
----------- ----------- ----------- ------------
Gross profit 847,658 430,035 405,185 414,251
Selling, general and
administration expense 189,429 244,290 117,714 90,214
Depreciation and amortization
(Notes 2 and 15) 74,751 55,337 31,310 31,200
------------ ------------ ------------ ------------
Operating income 583,478 130,408 256,161 292,837
----------- ----------- ----------- -----------
Non-operating income (expense)
Other income 220 696 1,544
Interest expense (Notes 6 and 7) (3,227) (3,566) 0 (1,990)
------------- ------------- --------------- -------------
(3,007) (2,870) 1,544 (1,990)
------------ ------------- ------------ -------------
Income before income taxes 580,471 127,538 257,705 290,847
Provision for income taxes
(Notes 2 and 16) 232,600 69,852 107,926 116,400
--------- ---------- --------- ----------
Net income (Note 3) $ 347,871 $ 57,686 $ 149,779 $ 174,447
======== ======== ========= ==========
Net income per common share
outstanding (Note 2) $.18 $.04 $.04 $.11
==== ==== ==== ====
Weighted average shares
outstanding
(Notes 2, 3, 9, 10 and 11) 1,964,400 1,510,000 3,782,000 1,510,000
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-2
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED MARCH 31, 1996 AND 1995
AND THE FIVE MONTH PERIODS ENDED
AUGUST 31, 1996 AND 1995(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31,
MARCH 31, MARCH 31, 1996 1995
1996 1995 (UNAUDITED) (UNAUDITED)
---- ---- ---------- ----------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income $347,871 $57,686 $149,779 $174,447
Depreciation and amortization 74,751 55,337 31,310 31,200
CHANGE IN OPERATING ASSETS
AND LIABILITIES:
Accounts receivable (316,816) ( 9,073) (326,992) (148,609)
Prepaid rent 31,625 (31,625) 2,162 14,125
Other assets ( 42,258) (15,151) 2,162 (10,568)
Accounts payable 33,826 (76,708) 74,376 49,799
Accrued liabilities 2,130 ( 2,350) (17,410) (714)
Accrued income taxes 107,118 7,882 (115,000) 121,337
Deferred income taxes 117,600 35,329 106,000 (4,937)
------- --------- --------- -----------
Net cash flows provided by
operating activities 355,847 21,327 (95,775) 226,080
------- --------- ----------- --------
CASH FLOWS (USED FOR)
INVESTING ACTIVITIES
Purchase of property and equipment (196,749) (54,975) (44,346) (103,045)
--------- ---------- ----------- ---------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Issuance of common stock 446,600
Deferred offering costs (34,540) (121,397)
Net borrowings (payments) under
line of credit 40,000 40,000
Payment on long-term debt (3,056) ( 1,223) (33,294)
---------- --------- --------- ----------
Net cash flows provided by
(used in) financing activities 369,004 38,777 (121,397) (33,294)
------- ------ --------- --------
Net increase in cash and
cash equivalents 528,102 5,129 (261,518) 89,741
Cash and cash equivalents,
beginning of year 2,238 ( 2,891) 530,340 2,238
--------- ---------- ------- --------
Cash and cash equivalents,
end of year $530,340 $ 2,238 $268,822 $91,979
======= ======= ======= ======
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest $ 3,227 $ 3,556 $ 0 $ 2,238
======== ====== ========== ======
Taxes $ 8,933 $ 9,725 $ 5,069 $ 4,900
========= ======= ========== =======
</TABLE>
See accompanying notes to consolidated financial statements
F-3
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND 1995
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
COMMON COMMON PAID-IN RETAINED STOCKHOLDERS'
SHARES STOCK CAPITAL EARNINGS EQUITY
------ ----- ------- -------- ------
YEAR ENDED MARCH 31, 1995:
- --------------------------
<S> <C> <C> <C> <C> <C>
Balance March 31, 1994 50 50 --- $136,397 $136,447
Net Income March 31, 1995 --- --- --- 57,686 57,686
------ ------ ------ -------- --------
Balance at March 31, 1995 50 50 --- 194,083 194,083
YEAR ENDED MARCH 31, 1996:
- --------------------------
Formation of TTGL 1,770,000 1,770 --- 1,770
Conversion of note 20,000 20 19,980 --- 20,000
Recapitalization 1,510,000 1,510 (1,460) --- 50
BTS shares acquired (50) (50) --- --- (50)
Private Placement 482,000 482 444,348 --- 444,830
Net income - March 31, 1996 --- --- --- 347,871 347,871
------ ------ ------ -------- --------
Balance at March 31, 1996 3,782,000 3,782 462,868 541,954 1,088,604
FIVE MONTHS ENDED AUGUST
31, 1996 (unaudited): --- --- --- 149,779 149,779
- --------------------- ------ ------ ------ -------- --------
Balance at August 31, 1996 3,782,000 $3,782 $462,868 $691,733 $1,158,383
========= ====== ======== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
--------------------
DESCRIPTION OF COMPANY
----------------------
The Translation Group, LTD (TTGL) was incorporated in the State of
Delaware on July 6, 1995, specifically to acquire 100% of the issued and
outstanding shares of the Bureau of Translation Services, Inc. (BTS). BTS
was incorporated in 1984 in the State of Pennsylvania and is presently
located in Haddonfield, New Jersey.
TTGL with its wholly owned subsidiary BTS (the Company) translate and
localize documents and software into various languages. Localizing is
translating so that the result is reader friendly using local dialect. The
Company provides services to a range of industries with a concentration in
information technology companies.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
PRINCIPLES OF CONSOLIDATION
---------------------------
THe consolidated financial statements include the accounts of TTGL and
BTS. The acquisition is being accounted for as a recapitalization of BTS
as of January 17, 1996. Accordingly the consolidated financial statements
include the results of operations of BTS for all periods reported upon and
the results of operations of TTGL from January 17, 1996.
Preparation of the consolidated financial statements in conformity with
generally accepted accounting principals requires management to make
estimates and judgments 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.
REVENUE RECOGNITION
-------------------
Revenues are recognized on the accrual method of accounting upon billing
to customers. Customers are billed upon completion of project milestones
which are defined at the beginning of the projects.
F-5
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
MARKETING AND ADVERTISING
-------------------------
The Company adopted the American Institute of Certified Public Accountants
Statement of Position (SOP) 93-7, Reporting on Advertising Cost. In
accordance with SOP 93-7, the Company expenses marketing and advertising
costs as incurred. Marketing and advertising expense for each of the years
ended March 31, 1996 and 1995 approximated $53,000.
FOREIGN CURRENCY TRANSACTIONS
-----------------------------
Assets and liabilities of foreign operations of the Company's German
office are translated at end of period rates of exchange. Income, expense
and cash flows are translated at weighted average rates of exchange for
the period. The results of foreign operations are immaterial to the
financial statements taken as a whole.
The Company occasionally entered into foreign currency forward exchange
contracts as hedges to limit the effect of exchange rate fluctuations. At
March 31, 1996, the Company had no foreign currency exchange contracts in
effect. As of March 31, 1995, approximately $55,000 of foreign exchange
contracts were outstanding, denominated in Japanese Yen.
Gains and losses from exchange rate fluctuations were immaterial for the
years ended March 31, 1996 and 1995.
FISCAL YEAR
-----------
The Company's fiscal year ends on March 31.
UNAUDITED INTERIM
-----------------
The financial statements as of August 31, 1996 and for the five months
ended August 31, 1996 and 1995 are unaudited. In the opinion of
management, all adjustments consisting only of normal recurring items
considered necessary for a fair presentation have been included.
CASH AND CASH EQUIVALENTS
-------------------------
Cash includes demand deposits, certificates of deposits and cash
equivalents, which are highly liquid investments with a maturity of three
months or less when purchased. Because of the short maturity of these
instruments, the carrying amount is a reasonable estimate of fair value.
F-6
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
PROPERTY AND EQUIPMENT
----------------------
Property and equipment are stated at cost and consisted of the following:
AUGUST
March 31, March 31, 31,1996
1995 1996 (UNAUDITED)
---- ---- -----------
Furniture and fixtures $ 26,174 $ 15,366 $ 33,850
Computer equipment 221,212 126,600 250,254
Software 114,792 23,463 122,420
-------- --------- --------
Total $362,178 $ 165,429 $406,524
======== ========= ========
Depreciation and software amortization is computed using an accelerated
method over the estimated useful lives of the assets.
For the years ended March 31, 1996 and 1995, depreciation and amortization
expense was $74,751 and $55,337 respectively. For the five months ended
August 31, 1996 depreciation expense was $31,310 (unaudited).
INCOME TAXES
------------
Deferred income tax assets and liabilities are determined in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes (SFAS No. 109), and result from revenues and expenses being
recognized in different time periods for financial reporting purposes than
for income tax purposes. Under SFAS No. 109, deferred income taxes arise
from temporary differences and carryforwards which are tax effected at the
enacted tax rates and subsequently adjusted for changes in tax laws and
rates. Deferred income tax assets and liabilities are classified as
current or non-current based upon the financial reporting classification
of assets and liabilities to which they relate.
RESEARCH AND DEVELOPMENT
------------------------
Research and development cost are charged to operations when incurred.
F-7
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
EARNINGS PER COMMON SHARE
-------------------------
In calculating average earnings per common share, the following weighted
average shares outstanding were used:
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
-------------- -------------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C> <C> <C>
TTGL SHARES ISSUED
TO BTS SHAREHOLDERS 1,510,000 1,510,000 1,510,000 1,510,000
TTGL SHARES
(2,272,000) ISSUED FOR
PERIOD AFTER MERGER 454,400 0.0 2,272,000 0.0
--------- --------- --------- ---------
TOTAL 1,964,400 1,510,000 3,782,000 1,510,000
========= ========= ========= =========
</TABLE>
NOTE 3 - BUSINESS COMBINATION MERGER
------------------------------------
On January 17, 1996, pursuant to the terms of an Agreement and Plan of
Reorganization, dated December 7, 1995, TTGL completed a business
combination merger transaction, with BTS, a provider of translation
services. The business combination merger was effected by the exchange of
1,510,000 of TTGL common shares for all the issued and outstanding common
shares of BTS. TTGL had no significant operations prior to the merger.
Concurrent with the merger, TTGL issued 482,000 shares pursuant to a
private placement offer (Note 9).
For financial reporting purposes, the above acquisition is accounted for
as a recapitalization of BTS. All financial information prior to the
merger reflect the results of operations of BTS only. Subsequent to the
merger, the financial statements reflect the consolidated results of
operations of TTGL and BTS. For the year ended March 31, 1996, the
consolidated results of operations of the companies consisted of the
following:
TTGL BTS
---- ---
Revenue -0- $ 2,586,306
========= ===========
Net Income(Loss) $( 1,562 ) $ 349,433
========= ===========
F-8
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - FINANCIAL INSTRUMENTS
------------------------------
CREDIT RISK
-----------
Concentrations of credit risk with respect to accounts receivable are
limited due to the dispersion across different geographic areas of the
Company's customer base. As of March 31, 1996 and 1995, the Company had no
significant concentrations of credit risk with regards to its accounts
receivable.
NOTE 5 - SIGNIFICANT CUSTOMERS
------------------------------
For the year ended March 31, 1996, two customers represented 37% of the
Company's revenue. For the year ended March 31, 1995, two customers
represented 71% of the Company's revenue. For the years ended March 31,
1996 and 1995, the Company generated approximately eighty percent (80%) of
its revenue from information technology companies (i.e. computer
industry).
For the five month period ended August 31, 1996, four customers
represented 73% of the company's revenue. For the five month period ended
August 31, 1995, three customers represented 50% of the Company's revenue.
For the years ended March 31, 1996 and 1995, 29% and 48%, respectively, of
the Company's revenues were to foreign markets. For the five month period
ended August 31, 1996 and 1995, 34% and 30%, respectively, of the
Company's revenues were to foreign markets
NOTE 6 - LINE OF CREDIT
-----------------------
The Company maintains and periodically amends or replaces a revolving
credit line agreement with a commercial bank that is used to finance
working capital requirements. The maximum amount of funds available to the
Company from the credit line is $40,000, with an interest rate at the
bank's prime rate plus 1.5%. The credit line is secured by the Company's
accounts receivable and equipment and personally secured by the president
of BTS. The prime rate at March 31,1996 and 1995 was 8.25 percent and 6.00
percent respectively.
At March 31, 1996 and 1995, the amount outstanding on the Company's line
of credit was zero and $40,000 respectively.
F-9
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 - NOTES PAYABLE
Outstanding debt at March 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
August 31,1996
1996 1995 (unaudited)
---- ---- -----------
<S> <C> <C> <C>
Note payable to a bank,
term of sixty months,
interest rate of 9.50%,
monthly payments of $525
through January, 1998,
secured by
computer equipment $ -0- $20,178 $ -0-
Note payable to a bank,
term of twenty-four months,
interest rate of 10%,
monthly payments of $231,
through April, 1996,
secured by computer equipment -0- 2,878 -0-
---- ------- ----
Total debt $-0- $ 23,056 $-0-
=== ======= ===
</TABLE>
NOTE 8 - RELATED PARTY TRANSACTIONS
-----------------------------------
Other assets include a loan to an officer of the Company at March 31, 1996
and 1995, in the amounts of $35,000 and $12,000 respectively, and at
August 31, 1996 of $40,600 (unaudited).
NOTE 9 - PRIVATE PLACEMENT OFFERING
-----------------------------------
On January 17, 1996, the Company completed a private placement offering
without registration under the Securities Act of 1933 in reliance on the
exemption by Regulation D, of its common stock, whereas it issued 482,000
shares of common stock for $1.25 per share. The cost of the stock issuance
of approximately $157,700, is treated as a reduction of shareholder's
equity.
F-10
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 10 - WARRANTS
------------------
On January 17, 1996. upon the close of the business combination merger
(Note 3) and the private placement offering (Note 9), stock warrants were
issued to the Placement Agent to purchase 40,000 shares of the Company.
Each warrant entitles the registered holder to purchase one share of the
Company's common stock at $1.50 per share for a period of five years
commencing six months after issuance. Warrant holders do not have any
voting rights or other rights as shareholders of the Company unless and
until the Warrants are exercised and shares issued pursuant thereto.
NOTE 11 - STOCK OPTIONS
-----------------------
On November 29, 1995 TTGL adopted a Stock Option Plan (Plan). Under the
Plan, 2,500,000 shares of the Company's Common Stock are reserved for
issuance upon the exercise of options. Options granted under the Plan may
be either (i) options intended to constitute incentive stock options under
Section 422A of the Internal Revenue Code of 1986, as amended, or (ii)
non-qualified stock options may be granted under the Plan to employees
(including officers and directors who are employees) of the Company or a
subsidiary corporation thereof on the date of the grant.
For incentive stock options the exercise price is the fair market value of
the Common Stock on the date of the grant. Non-qualified options may not
have an exercise price of less than 50% of the fair market value of a
share of the Company's Common Stock on the date the option is granted.
Options granted under the Plan will expire not more than ten years from
the date of the grant.
Additionally, under the Plan, participants may be granted stock
appreciation rights. These rights consists of rights to receive either
cash or shares of Common Stock equal to the amount by which shares of
Common Stock on the date the stock appreciation right is exercised exceeds
the per share option price.
F-11
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 12 - COMMITMENTS
---------------------
The Company routinely enters into non-cancelable lease arrangements for
premises used in the normal course of business. Future minimum obligations
under lease commitments in effect at March 31, 1996 and 1995 are
approximately $74,000 per year. The majority of these leases are due to
expire by March 31, 1999. In February 1995, BTS relocated its corporate
operations. Upon relocating, BTS voluntarily paid its monthly operating
lease obligation for one year in advance.
The Company also periodically rents locations to house translators. These
are temporary commitments. Additionally, the Company has operating leases
on office equipment, which are immaterial in nature. Rent expense under
operating leases for the period ended March 31, 1996 and 1995 was
approximately $68,000 and $80,000, respectively.
NOTE 13 - EMPLOYMENT AGREEMENTS
-------------------------------
On January 17, 1996, pursuant to an agreement dated December 7, 1995, the
Company entered into employment and consulting agreements with officers of
the Company and other individuals. Expenses under these agreements
approximate $273,000 per year, through the year 2001.
NOTE 14 - PREFERRED STOCK
-------------------------
The Company's Board of Directors is authorized to issue up to 1,000,000
shares of Preferred Stock without further vote or action by the
stockholders, in one or more series, and fix the rights, preferences and
privileges and qualifications thereof including, without limitation,
liquidation preference, voting rights and the limitation or exclusion
thereof. No preferred shares are outstanding and the Company has no
current plan to issue any such shares.
NOTE 15 - LICENSING AGREEMENT
-----------------------------
Effective May 24, 1995, BTS entered into an agreement with a German
company, whereby BTS acquired license rights to a software product known
as KEYTERM. KEYTERM is a concept-oriented database for developing and
maintaining glossaries. The agreement requires BTS to assume contract
rights with existing KEYTERM customers in Germany and France and to have
exclusive North American marketing rights.
F-12
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The KEYTERM software cost approximately $75,000, and is capitalized in the
Consolidated Balance Sheet under property and equipment. Amortization
expense of KEYTERM, included in depreciation expense, approximated $12,000
for the year ended March 31,1996.
NOTE 16 - INCOME TAXES
----------------------
The provisions for current and deferred income tax expense for the years
ending March 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, August
1996 1995 1996
(unaudited)
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal $ 88,000 $ 17,990 $ -0-
State 26,556 8,651 -0-
--------- --------- ---------
114,556 26,641 -0-
--------- --------- ---------
Deferred:
Federal 92,217 34,343 92,464
State 25,827 8,868 15,462
--------- --------- ---------
118,044 43,211 107,926
--------- --------- ---------
$ 232,600 $ 69,852 $ 107,926
========= ========= =========
Components of Deferred
Tax Assets and Liabilities:
Accounts Receivable $ 257,136 $ 130,266 $ 387,789
Accounts payable and
Accrued liabilities ( 23,742) (14,472) (48,395)
--------- --------- ---------
$ 233,394 $ 115,794 $ 339,394
========= ========= =========
Reconciliation of effective income tax rate:
Federal income tax rate 34.0% 34.0% 34.0%
State taxes, net of
Federal income tax benefit 6.0% 6.0% 6.0%
Tax effect of non-deductible
expenses -- 15.0% 1.8%
----- ----- ----
40.0% 55.0% 41.8%
====== ===== =====
</TABLE>
F-13
THE TRANSLATION GROUP, LTD.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 17 - VOTING CONTROL
------------------------
As of March 31, 1996, Ms. Theodora Landgren, Chairperson of the Board of
Directors and Chief Operating Officer of the Company controls
approximately eighty percent (80%) of the Company's outstanding voting
common stock and accordingly controls the Company's affairs.
If the Company is successful in its Initial Public Offering (see Note 19),
Ms. Landgren will have sole voting control of the Company `s majority
voting stock for up to two years after the Initial Public Offering.
NOTE 18 - STATEMENT OF CASH FLOWS
---------------------------------
As part of the private placement offering (NOTE 9), the Company converted
a $20,000 note payable into 20 shares of common stock in a non-cash
transaction.
NOTE 19 - SUBSEQUENT EVENTS
---------------------------
It is anticipated that the Company will attempt to offer up to 1 million
of its common voting shares in an Initial Public Offering during 1996.
There can be no assurance that the Company's initial public offering will
be successful.
Deferred offering costs of approximately $35,000 relating to the initial
public offering are included in current assets as of March 31, 1996. If
the initial public offering is successful, these cost will be offset
against the proceeds of the offering. If the offering is not successful,
these cost will be expensed.
F-14
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAD BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
TABLE OF CONTENTS
Page
----
Additional Information....................................................... 3
Prospectus Summary........................................................... 4
Risk Factors................................................................. 9
Management's Discussion and Analysis of Financial Conditions and
Results of Operations................................................... 17
Dilution .................................................................... 20
Use of Proceeds.............................................................. 21
Capitalization............................................................... 22
Business .................................................................... 23
Management................................................................... 30
Executive Compensation....................................................... 33
Certain Relationships and Related Transactions............................... 35
Disclosure of Commission Position on Indemnification For
Securities Act Liability................................................ 36
Security Ownership of Certain Beneficial Owners and Management............... 37
Description of Securities.................................................... 38
Underwriting................................................................. 42
Selling Security Holders..................................................... 44
Legal Matters................................................................ 45
Experts .................................................................... 45
Index to Financial Statements................................................
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
1,300,000 SHARES OF COMMON STOCK
AND 1,500,000 REDEEMABLE COMMON
STOCK WARRANTS
THE TRANSLATION GROUP, LTD.
PROSPECTUS
WERBEL-ROTH SECURITIES, INC.
MILLENNIUM SECURITIES CORP.
, 1996
[ALTERNATE PROSPECTUS PAGES]
SUBJECT TO COMPLETION
DATED OCTOBER 10, 1996
-----------------
THE TRANSLATION GROUP, LTD.
----------------------
241,000 SHARES OF COMMON STOCK
300,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
300,000 SHARES UNDERLYING THE WARRANTS
This Prospectus covers the offer and proposed sale of 241,000 shares of
Common Stock, $.001 par value (the "Common Stock") of The Translation Group,
Ltd. (the "Company") and 300,000 Common Stock Purchase Warrants (the "Private
Warrants" and collectively with the 241,000 shares of Common Stock and the
300,000 shares of Common Stock underlying the Private Warrants, the
"Securities"), each of which, upon exercise, entitles the owner thereof to
purchase one share of Common Stock during the three years following the date
hereof at a price of $4.00 per share. Beginning one year from the date hereof
unless earlier permitted by the Representative (as defined below), the Private
Warrants may be redeemed, at a price of $.25 per warrant, upon written notice of
not less than thirty days provided that the closing price for the Common Stock
has been at least $6.00 per share for a period of twenty consecutive trading
days ending on the 3rd day prior to the day the Company gives notice, as
reported on the principal exchange on which the Common Stock is traded.
Application for listing has been made to, and the Common Stock and Private
Warrants are expected to trade separately on, the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") as small cap
issues under the symbols THEO and THEOW, respectively. Prior to this offering,
there has been no public market for the Common Stock or the Warrants and no
assurance can be given that any such market will develop, or if developed, will
be sustained. See "Description of Securities."
The holders of the Private Warrants have agreed not to transfer the
warrants or the underlying Common Stock for eighteen months from the date of
this Prospectus without the consent of the Representative. The proceeds from the
sale of the Securities will not inure to the benefit of the Company, but rather
to such holders (the "Selling Securityholders"). See "Selling Security Holders."
Simultaneously herewith, the Company is offering, as part of its initial
public offering (the "IPO"), 1,100,000 shares of Common Stock and its Chairman
and Chief Operating Officer is offering an additional 200,000 shares for an
aggregate of 1.3 million shares of Common Stock at a price of $3.00 per share,
and 1,500,000 Redeemable Common Stock Purchase Warrants (the "IPO Warrants" and
collectively with the Private Warrants, the "Warrants"). All of the Warrants
contain identical terms.
The offering price of the Common Stock in the IPO and the exercise price of
the Warrants have been arbitrarily determined by the Company and Werbel-Roth
Securities, Inc., the representative of the Underwriters for the IPO (the
"Representative") and bear no relationship to the Company's assets, book value,
results of operations or other generally accepted criteria of value.
The Company intends to furnish its security holders with annual reports
containing audited financial statements and the audit report of the independent
certified public accountants and such interim reports as it deems appropriate or
as may be required by law. The Company's fiscal year ends March 31.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION AS
DESCRIBED HEREIN. See "RISK FACTORS" and "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of the Prospectus is October __, 1996.
PLAN OF DISTRIBUTION
The Securities offered hereby may be sold from time to time directly by the
Selling Security holder. Alternatively, the Selling Securityholders may from
time to time offer such Securities through underwriters, dealers or agent. The
distribution of the Securities by the Selling Securityholders may be effected in
one or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, including the Underwriters, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. Usual and customary or specifically negotiated brokerage fees or
commissions may be paid by the Selling Securityholders in connection with such
sales of Securities. The Selling Securityholders and intermediaries through whom
such Securities are sold may be deemed "underwriters" within the meaning of the
Securities Act with respect to the Securities offered, and any profits realized
or commission received may be deemed underwriting compensation. The Selling
Securityholders may also transfer the Securities pursuant to applicable
exemptions from registration under the Securities Act including Rule 144 under
such Act.
At the time a particular offer of the Securities is made by or on behalf of
a Selling Securityholder, to the extent required, a Prospectus will be
distributed which will set forth the number of shares of Common Stock and
Warrants being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, if any, the purchase price paid by
any underwriter for the shares of Common Stock and Warrants purchased from the
Selling Securityholder and any discounts, commissions or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
Under the Securities Act of 1934, as amended (the "Exchange Act"), and the
regulations thereto, any person engaged in a distribution of the Securities of
the Company offered by this Prospectus may not simultaneously engage in
market-making activities with respect to such securities of the Company during
the applicable "cooling off" period (nine days) prior to the commencement of
such distribution. In addition, and without limiting the foregoing, the Selling
Securityholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including without limitation, Rule 10B-6
and 10B-7, in connection with transactions in such Securities, which provisions
may limit the timing of purchases and sales of such Securities by the Selling
Securityholders.
The Representative will receive a Warrant solicitation fee equal to 4% of
the exercise price of all Warrants it causes to be exercised.
SELLING SECURITY HOLDERS
The Company is registering the shares of Common Stock (the "Reoffer
Shares") purchased by investors in the Company's January 1996 private placement
offering (the "Selling Stockholders") and 300,000 warrants and the underlying
Common Stock. These warrants and the underlying Common Stock are restricted from
transfer for 18 months, without the prior consent of the Underwriters. Other
than the minimal incremental costs of preparing this Prospectus and a
registration fee to the SEC, the Company is not paying any costs relating to the
sales by the Selling Stockholders. The Selling Stockholders are obligated to
effect the sale of their securities through the Underwriters. The following
disclosure regarding Reoffer Shares and Selling Stockholders is also applicable
to the Private Warrants, their underlying Common Stock and their holders.
Each of the Selling Stockholders and intermediaries to whom such securities
may be sold may be deemed to be an "underwriter" of the Company's Common Stock
offered hereby, as that term is defined under the Act. Each of the Selling
Stockholders may sell the Reoffer Shares from time to time for his own account
in the open market at the prices prevailing therein, or in individually
negotiated transactions at such prices as may be agreed upon. The net proceeds
from the sale of the Reoffer Shares by the Selling Stockholders will inure
entirely to their benefit and not to that of the Company.
Except as indicated below, none of the Selling Securityholders has held any
position or office, or had any material relationship with the Company or any of
its predecessors or affiliates within the last three years, and none of the
Selling Stockholders will own any of the outstanding Common Stock of the Company
after completion of the offering of such shares.
2
However, the selling warrant holders all currently own at least 1% of the
outstanding Common Stock and two of them are executive officers.
The Selling Stockholders have advised the Company that their Reoffer Shares
may be offered for sale from time to time by them in regular brokerage
transactions in the over-the-counter market, or, either directly or through
brokers or to dealers, or in private sales or negotiated transactions, or
otherwise, at prices related to the then prevailing market prices. Thus, they
may be required to deliver a current prospectus in connection with the offer or
sale of the Reoffer Shares. In the absence of a current prospectus, if required,
these shares may not be sold publicly without restriction unless held for three
years, or after two years subject to volume limitations and satisfaction of
other conditions. The Selling Securityholders have been advised that Rules 10b-6
and 10b-7 of the General Rules and Regulations promulgated under the Securities
Exchange Act of 1934 will be applicable to their sales of Reoffer Shares. These
rules contain various prohibitions against trading by persons interested in a
distribution and against so-called "stabilization" activities.
The Selling Securityholders might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Act and any profit on the resale of the Reoffer
Shares as principal might be deemed to be underwriting discounts and commissions
under the Act.
Any sale of Reoffer Shares by Selling Stockholders through broker-dealers
may cause the broker-dealers to be considered as participating in a distribution
and subject to Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended. If any such transaction were a "distribution" for purposes of Rule
10b-6, then such broker-dealers might be required to cease making a market in
the Company's equity securities for either two or nine trading days prior to,
and until the completion of, such activity.
3
================================================================================
Names Shares Shares Shares
----- Held Offered owned After
Sale
================================================================================
Barry & Rosalind Kaplan 4,000 2,000 2,000
Mitchell Kurk 4,000 2,000 2,000
Ross Allen 20,000 10,000 10,000
Michael Hadden 20,000 10,000 10,000
George Langer 20,000 10,000 10,000
David Medich 20,000 10,000 10,000
James Miller 20,000 10,000 10,000
Robert Dumano 20,000 10,000 10,000
Bryan Saterbo 20,000 10,000 10,000
Joseph Savage 20,000 10,000 10,000
Achyut Saharabudhe 20,000 10,000 10,000
Gary Spieler, IRA 20,000 10,000 10,000
Scott Sosnick 20,000 10,000 10,000
C. Ray Council 16,000 8,000 8,000
Seth Markowitz 8,000 4,000 4,000
Richard Lasnier 4,000 2,000 2,000
Gloria Tempchin 4,000 2,000 2,000
Lee-Dan, Ltd. (1) 80,000 40,000 40,000
Arthur Brown 20,000 10,000 10,000
Greg Opinski 20,000 10,000 10,000
David Gray 16,000 8,000 8,000
Shalom Maidenbaum 12,000 6,000 6,000
Richard Gray 10,000 5,000 5,000
Milton Ackerman 8,000 4,000 4,000
Irwin Strauss 8,000 4,000 4,000
Simon Barukhin 4,000 2,000 2,000
Solomon Bolder 4,000 2,000 2,000
Daniel Ehrlich 4,000 2,000 2,000
Marcus Ehrlich 4,000 2,000 2,000
Susan Felton 4,000 2,000 2,000
Sherry Hirschman 4,000 2,000 2,000
Seth Roslyn 4,000 2,000 2,000
Naomi Selbst 4,000 2,000 2,000
Sheila Schwartzberg 4,000 2,000 2,000
Marilyn Slonim 4,000 2,000 2,000
Jeremy Weinstein 4,000 2,000 2,000
Abraham Weiss 4,000 2,000 2,000
================================================================================
================================================================================
(1) Represents approximately 1.13% after this Offering and the IPO.
4
================================================================================
Names Warrants Warrants Warrants
----- Held Offered owned After
Sale
================================================================================
Theodora Landgren(1) 100,000 100,000 -0-
Charles Cascio(2) 100,000 100,000 -0-
Mark Schindler(3) 33,000 33,000 -0-
Eugene Stricker(3) 33,000 33,000 -0-
Richard Gray(4) 26,000 26,000 -0-
Donna Gray 2,000 2,000 -0-
Steven Gray 2,000 2,000 -0-
David Gray 1,000 1,000 -0-
Joyce Gray 1,000 1,000 -0-
Alvin Horowitz 1,000 1,000 -0-
Steven Gray, as custodian
for Emily Gray 1,000 1,000 -0-
Steven Gray, as custodian
for Samuel Gray 1,000 1,000 -0-
================================================================================
(1) The Chairman and Chief Operating Officer. Ms. Landgren currently owns
770,000 shares representing approximately 31.40% of the outstanding stock.
Following this Offering and the IPO, Ms. Landgren will own approximately 16.05%
of the outstanding stock.
(2) The President and Chief Executive Officer. Mr. Cascio currently owns
400,000 shares representing approximately 16.31% of the outstanding stock.
Following this Offering and the IPO, Mr. Cascio will own approximately 11.26% of
the outstanding stock.
(3) Currently owns 75,000 shares representing approximately 3.06% of the
outstanding stock. Following this Offering and the IPO, the balance will
represent approximately 2.11% of the outstanding stock.
(4) Currently owns 60,000 shares representing approximately 1.74% of the
outstanding stock. Following this Offering and the IPO, the balance will
represent approximately 1.69% of the outstanding stock.
LEGAL MATTERS
The validity of the issuance of the Units offered hereby will be passed
upon for the Company by the law firm of Heller, Horowitz & Feit, P.C., New York,
New York.
Irving Rothstein, Esq. is associated with the law firm of Heller, Horowitz
& Feit, P.C., counsel to the Company. On January 16, 1996, Mr. Rothstein was
appointed an Assistant Secretary of the Company. This is purely an
administrative position and Mr. Rothstein was appointed solely to assist, and to
ease the burdens of, the executive officers of the Company in the execution of
various documents and/or certificates on behalf of the Company. Neither Mr.
Rothstein nor his law firm receive any additional compensation for these
efforts.
5
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAD BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Additional Information........................................................
Prospectus Summary............................................................
Risk Factors
Management's Discussion and Analysis
of Financial Conditions and
Results of Operations.......................................................
Dilution
Use of Proceeds
Capitalization
Business
Management
Executive Compensation........................................................
Certain Relationships and Related
Transactions
Disclosure of Commission Position on
Indemnification For Securities Act
Liability
Security Ownership of Certain
Beneficial Owners and Management............................................
Description of Securities.....................................................
Underwriting
Selling Security Holders......................................................
Legal Matters
Experts
Index to Financial Statements.................................................
- --------------------------------------------------------------------------------
Until _________, 1996 (25 days after the date of this Prospectus) all dealers
effecting transactions in the Registered Securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
241,000 SHARES OF COMMON STOCK
300,000 REDEEMABLE COMMON
STOCK WARRANTS
300,000 SHARES UNDERLYING WARRANTS
THE TRANSLATION GROUP, LTD.
------------------------
PROSPECTUS
-----------------------
, 1996
6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended,
authorizes the Registrant to indemnify any director or officer under certain
prescribed circumstances and subject to certain limitations against certain
costs and expenses, including attorneys' fees actually and reasonably incurred
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which such person is a party by reason of
being a director or officer of the Registrant if it is determined that such
person acted in accordance with the applicable standard of conduct set forth in
such statutory provisions. Article 9 of the Registrant's Certificate of
Incorporation contains provisions relating to the indemnification of directors
and officers and Article 9 of the Registrant's By-Laws extends such indemnities
to the full extent permitted by Delaware law.
The Registrant may also purchase and maintain insurance for the benefit
of any director or officer which may cover claims for which the Registrant could
not indemnify such persons.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following statement sets forth the estimated expenses in connection
with the offering described in the Registration Statement, all of which will be
borne by the Registrant.
Securities and Exchange Commission Fee.......................... $ 5,126.00
NASD Fee ....................................................... $ 2,047.00
NASDAQ Listing Fee.............................................. $ 10,000.00
Accountants' Fees............................................... $ 25,000.00
Legal Fees...................................................... $ 50,000,00
Blue Sky Qualification, Fees and Expenses....................... $ 50,000.00
Company's Administrative Expenses............................... $ 75,000.00
Printing and engraving.......................................... $ 30,000.00
Miscellaneous................................................... $ 17,827.00
-----------
TOTAL.................................................. $265,000.00
===========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In July 1995, the Registrant sold an aggregate of 1,770,000 shares of
Common Stock at par value ($.001) to its founders. These sales were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
On January 17, 1996 the shareholders of BTS exchanged all of their
shares for an aggregate of 1,510,000 shares of the Registrant. The result of
this transaction was that BTS became a wholly-owned subsidiary of the
Registrant. None of the shareholders of BTS received any consideration other
than shares of the Registrant. This exchange and issuance of securities was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
In January 1996, the Registrant sold a total of 120.5 Units of its
securities, each Unit consisting of a 4,000 shares of Common Stock, for an
aggregate of 482,000 shares at $1.25 per share, for a total purchase price of
$5,000 per Unit, to 36 accredited persons in a private offering exempt from
registration pursuant to Sections 3(b), 4(2) and 4(6) of the Securities Act of
1933. The Registrant received gross proceeds of $602,500 from this offering. The
Placement Agent for such private placement received 40,000 warrants.
In January 1996, the Registrant issued 20,000 shares of Common Stock in
satisfaction of an outstanding $20,000 note. The issuance was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
In May 1996, the Company granted at no cost a total of 300,000 warrants
to certain of its founders. See "Description of Securities - Warrants." The
issuance was exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933.
ITEM 27. EXHIBITS
The following exhibits were filed as part of SB-2 Registration Statement dated
July 25, 1996 (Registration No. 333-8857):
1.1 Form of Underwriting Agreement
1.2 Form of Selected Dealers Agreement
1.3 Form of Agreement Among Underwriters
3.1 Restated Certificate of Incorporation
3.2 By-Laws
4.4 Form of Representative's Warrant Agreement
4.5 Form of Representative's Warrant
4.6 Form of Subscription Agreement between Registrant and
investors pursuant to December 7, 1995 Private Placement
Memorandum
5 Opinion re: legality
10.1 Lease Agreement between BTS and J.C.G. Partnership dated
January 18, 1995.
10.5 The Translation Group, Ltd. 1995 Stock Option Plan
23.1 Consent of Heller, Horowitz & Feit, P.C. (included in the
Opinion filed as Exhibit 5)
23.2 Consent of Votta and Company
The following exhibits were filed as part of Amendment No. 1 to the SB-2
Registration Statement dated September 19, 1996:
1.1.1 Revised Form of Underwriting Agreement
10.2 Employment Agreement between the Registrant and Theodora
Landgren dated as of December 7, 1995, as amended.
10.3 Employment Agreement between the Registrant and Charles
Cascio dated as of December 7, 1995, as amended.
10.4 Agreement between the Bureau of Translation Services,
Inc. and debis Systemhaus
KSP-Kommerzielle Systeme und Projekte GmbH dated May 24,
1995.
10.5 Voting Trust Agreement between Ms. Theodora Landgren and
various stockholders dated as of September 11, 1995.
23.3 Consent of Votta and Company
The following exhibits are filed herewith:
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
4.3 Form of Warrant Agreement
10.7 Consulting Agreement
23.4 Consent of Votta and Company
II-2
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of
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
(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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceedings) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its 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.
The Company will provide to the Representative of the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Representative to permit prompt delivery to each purchaser.
II-3
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has authorized this registration
statement or amendment to be signed on its behalf by the undersigned, in the
City of Pennsauken and State of New Jersey on the 15th day of October, 1996.
THE TRANSLATION GROUP, LTD.
By: /s/ Charles D. Cascio
Charles D. Cascio,
President,
Chief Executive Officer and
Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement or amendment was signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ THEODORA LANDGREN Chairman and Chief Operating Officer October 15, 1996
Theodora Landgren
/s/ CHARLES D. CASCIO President, Chief Executive Officer and
Charles D. Cascio Director October 15, 1996
/s/ RICHARD J.L. HERSON Chief Accounting Officer and Director October 15, 1996
Richard J.L. Herson
/s/ JULIUS CHERNY Director October 15, 1996
Julius Cherny
/s/ GARY M. SCHLOSSER Director October 15, 1996
Gary M. Schlosser
</TABLE>
EXHIBIT INDEX
ITEM 27. EXHIBITS
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
4.3 Form of Warrant Agreement
10.7 Consulting Agreement
23.4 Consent of Votta and Company
EXHIBIT 4.1
FORM COMMON STOCK CERTIFICATE
Number Shares
T
THE TRANSLATION GROUP, LTD.
Common Stock
$.001 Par Value CUSIP 893745 109
Incorporated under the Laws of the State of Delaware
THIS CERTIFIES THAT
IS THE OWNER OF
Fully paid and non-assessable shares of
Common Stock of The Translation Group, Ltd
(hereinafter called the Corporation) transferable on the books of the
Corporation or by the holder hereof in person or by duly authorized Attorney,
upon surrender of this Certificate properly endorsed. This Certificate is not
valid until countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
[SEAL]
/s/ /s/
Secretary President
Countersigned and Registered
American Stock Transfer & Trust Company
(New York)
By:
Authorized Signature
Reverse Side of Stock Certificate
THE TRANSLATION GROUP, LTD.
The Corporation will furnish to any shareholder a full statement of the
powers, designations, limitations and relative participating, optional or other
special rights of the shares of each class authorized to be issued, the
qualifications, limitations and restrictions of such preferences and rights, the
variations in the rights and preferences between the shares of any series of any
authorized preferred class so far as they have been fixed and determined, and
the authority of the Board of Directors to fix and determine the relative rights
and preferences of subsequent series of any such preferred class. In addition,
it contains the usual information relating to transfer of the stock represented
by the certificate and it allows for completion of information required in
connection with any such transfer.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF FIT MIN ACT-________Custodian__________
(Cust) (Minor)
TEN ENT - as tenants by the
entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act__________________________
survivorship and not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received,___________________________hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________
________________________________________________
_______________________________________________________________________________
(Please print or typewrite name and address
including postal zip code of assignee)
_______________________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _________________________________ Attorney
to transfer the said shares on the books of the within Corporation with
full power of substitution in the premises.
Dated_________________________ ___________________________________________
NOTICE: The signature to this assignment
must correspond with the name as as
written upon the face of the
Certificate, in every particular,
without alteration or enlargement
or any change whatever.
EXHIBIT 4.2
NO ________ WARRANTS
REDEEMABLE COMMON STOCK PURCHASE WARRANT
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON ________, 1999
THE TRANSLATION GROUP, LTD.
CUSIP 893745 11 7
THIS CERTIFIES THAT, FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Common Stock Purchase Warrants (the "Warrants") specified above. Each
Warrant initially entitles the Registered Holder to purchase, subject to the
terms and conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$.001 par value, of The Translation Group, Ltd., a Delaware corporation (the
"Company"), of the Company at any time prior to the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Purchase Form on the reverse hereof duly executed, at the
corporate office of American Stock Transfer & Trust Company as Warrant Agent, or
its successor (the "Warrant Agent"), accompanied by payment of $4.00 (the
"Purchase Price") in lawful money of the United States of America in cash or by
official bank or certified check made payable to the Company.
This Warrant Certificate and each Warrant represented hereby
are issued pursuant to and are subject in all respects to the terms and
conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated
______________, 1996 between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the
Warrant Agreement, the Purchase Price or the number of shares of Common Stock
subject to purchase upon the exercise of each Warrant represented hereby are
subject to modification or adjustment.
Each Warrant represented hereby is exercisable at the option
of the Registered Holder, but no fractional shares of Common Stock will be
issued. In the case of the exercise of less than all the Warrants represented
hereby, the Company shall cancel this Warrant Certificate upon the surrender
hereof and shall execute and deliver a new Warrant Certificate or Warrant
Certificates of like tenor, which the Warrant Agent shall countersign, for the
balance of such Warrants.
The term "Expiration date" shall mean 5:00 P.M. (New York City
time) on ____________, 1999, or such earlier date as stated in a notice advising
that the Warrants shall be redeemed. If such date shall in the State of New York
be a holiday or a day on which the banks are authorized to close, then the
Expiration Date shall mean 5:00 P.M. (New York City time) the next following day
which in
the State of New York is not a holiday or a day on which banks are authorized to
close.
The Company shall not be obligated to deliver any securities
pursuant to the exercise of this Warrant unless a registration statement under
the Securities Act of 1933, as amended, with respect to such securities is
effective, unless the Company receives an opinion of counsel, satisfactory to
the Company's counsel, that an exemption from is available. The Company has
covenanted and agreed that it will file a registration statement and will use
its best efforts to cause the same to become effective and to keep such
registration statement current while any of the Warrants are outstanding. This
Warrant shall not be exercisable by a Registered Holder in any state where such
exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender
hereof by the Registered Holder at the corporate office of the Warrant Agent,
for a new Warrant Certificate or Warrant Certificates of like tenor representing
an equal aggregate number of Warrants, each of such new Warrant Certificates to
represent such number of Warrants as shall be designated by such Registered
Holder at the time of such surrender. Upon due presentment with any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the
Registered Holder shall not be entitled to any rights of a stockholder of the
Company, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive notice of
any proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at
a redemption price of $.25 per Warrant, provided the market price (as defined in
the Warrant Agreement) for the securities issuable upon exercise of such Warrant
shall exceed $6.00 per share for twenty consecutive business days, ending on the
3rd day prior to the day on which notice is given, as reported on the Nasdaq
Stock Market, Inc. or such other primary exchange upon which the Common Stock is
traded. Notice of redemption shall be given not later than the thirtieth day
before the date the fixed for redemption, all as provided in the Warrant
Agreement. On and after the date fixed for redemption, the Registered Holder
shall have no rights with respect to this Warrant except to receive the $.25 per
Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof,
the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant represented
hereby (notwithstanding any notations or writing hereon made by anyone other
than a duly authorized officer of the Company or the Warrant Agent) for all
purposes and shall not be affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by
the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed manually or in facsimile by two of its officers
thereunto duly authorized and a facsimile of its corporate seal to be imprinted
hereon.
Dated: __________________________
Countersigned: THE TRANSLATION GROUP, LTD.
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: ATTEST:
By:______________________________ PRESIDENT SECRETARY
Authorized Officer
EXHIBIT 4.3
COMMON STOCK PURCHASE WARRANT AGREEMENT
THIS AGREEMENT, dated as of this ____ day of ________, 1996,
is between THE TRANSLATION GROUP, LTD., a Delaware corporation (the "Company"),
WERBEL- ROTH SECURITIES, INC. (the "Underwriter") and AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent (the "Warrant Agent").
RECITALS
A. The Company is issuing, in connection with a public
offering, up to 1,100,000 shares of the Company's common stock, $.001 par value
(the "Common Stock"), and up to 1,500,000 Common Stock Purchase Warrants (the
"Public Warrants" or "Warrants"), not including, in both cases, over-allotments.
B. The Company has as of the date hereof 300,000 issued and
outstanding Common Stock Purchase Warrants, which shall be treated herein as
Public Warrants.
C. One Warrant entitles the registered holder to purchase one
share of Common Stock.
D. The Company desires to provide for the issuance of
certificates representing the Warrants.
E. The Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of certificates representing the
Warrants and the exercise of the Warrants.
AGREEMENTS
In consideration of the recitals and the mutual agreements set
forth below, and for the purpose of defining the terms and provisions of the
Warrants and the certificates representing the Warrants and the respective
rights and obligations thereunder of the Company, the holders of certificates
representing the Warrants and the Warrant Agent, the parties agree as follows:
1. Definitions. As used herein, the following terms shall have
the following meanings, unless the context shall otherwise require.
(a) "Common Stock" shall mean common stock of the Company
of any class, whether now or hereafter authorized, which has the right to
participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage, which at the date hereof consists of 15
million shares of authorized Common Stock, $.001 par value per share, and as
further defined in section 8(e) below.
(b) "Warrant Expiration Date" shall mean 5:00 p.m. (New
York City time) on ____________, 1999, or if such a date shall in the State of
New York be a holiday or a day on which banks are authorized to close, then 5:00
p.m. (New York City time) on the next following day which in the State of New
York is not a holiday on which banks are authorized to close. Unless exercised
during the Warrant Exercise Period, the Warrants will automatically expire. The
Warrants may be called for redemption and the expiration date therefor
accelerated, on the terms and conditions set forth in sections 4(b) and 4(c) of
this Agreement. If so called for redemption, Warrant Certificate holders shall
have a period of at least thirty (30) days after the date of the call notice
within which to exercise the Warrants. However, Warrant Certificate holders will
receive the redemption price only if such certificates are surrendered to the
Corporate Office (defined below) within the redemption period.
(c) "Warrant Exercise Period" shall mean from ___________,
1996 until the Warrant Expiration Date.
(d) "Corporate Office" shall mean the office of the Warrant
Agent (or its successor) at which at any particular time its principal business
is conducted, currently located at 40 Wall Street, New York, New York 10005.
(e) "Exercise Date" shall mean the date a certificate
representing a Warrant is surrendered for exercise. "Surrender" for purposes
hereof shall mean in the event of (i) personal delivery by a Registered Holder,
the date it is received by the Warrant Agent, (ii) mailing, the postmark date,
and (iii) delivery by a messenger or similar service the date of dispatch, as
reflected on the delivery receipt.
(f) "Purchase Price" shall mean $4.00 per share for the
Public Warrants, unless such purchase price has been adjusted as hereinafter
provided. Each Warrant is exercisable for one share of Common Stock upon payment
of the Purchase Price at any time during the Warrant Exercise Period. The
Warrants, which are being publicly offered pursuant to a registration statement
and prospectus filed by the Company with the Securities and Exchange Commission,
will trade on NASDAQ (as defined below) as a small cap issue under the symbol
[THEOW] immediately after the effective date of such registration statement.
(g) "Registered Holder" shall mean the person or persons in
whose name or names any certificates representing the Warrants shall be
registered from time to time on the books maintained by the Warrant Agent
pursuant to section 6.
(h) "Subsidiary" or "Subsidiaries" shall mean any
corporation or corporations, as the case may be, of which stock having ordinary
power to elect a majority of the Board of Directors of such corporation
(regardless of whether or not at the time stock of any other class or classes of
such corporation shall have or may have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned by
2
the Company or by one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
(i) "Transfer Agent" shall mean American Stock Transfer &
Trust Company or its authorized successor.
(j) "Warrant Certificate" shall mean a certificate
representing Warrants.
2. Warrants and Issuance of Warrant Certificates.
(a) Each Warrant shall entitle the Registered Holder
thereof to purchase one share of Common Stock upon its exercise. The Warrants
will be separately transferable once the Underwriter determines to separate the
Units.
(b) Upon closing of the offering, Warrant Certificates
representing an aggregate of not more than 1,800,000 Warrants (or up to
2,025,000 in the event the Underwriters over-alotment option is exercised) to
purchase an aggregate of not more than a like number of shares of Common Stock,
shall be executed by the Company and delivered to the Warrant Agent and shall be
countersigned, issued and delivered by the Warrant Agent upon written order of
the Company signed by its President or a Vice President and its Treasurer or an
Assistant Treasurer or its Secretary or Assistant Secretary.
(c) From time to time, up to the Warrant Expiration Date,
plus such additional time as may reasonably be required to perform, accomplish
and complete necessary administrative functions connected with the exercise of
the Warrants, the Warrant Agent, in its capacity as the Company's Transfer
Agent, shall countersign and deliver stock certificates representing an
aggregate of not more than 1,800,000 shares of Common Stock, or up to 2,025,000
in the event the Underwriters over-alotment option is exercised (subject to
adjustment pursuant to section 8 of this Agreement), upon the exercise of the
Warrants pursuant to the terms of this Agreement.
(d) From time to time, up to the Warrant Expiration Date,
the Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement. Except as provided in
section 7 hereof, no Warrant Certificates shall be issued except (i) Warrant
Certificates initially issued hereunder, (ii) upon the exercise of any Warrants,
to evidence the unexercised Warrants held by the exercising Registered Holder
and (iii) upon any transfer or exchange of Warrants.
3
3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates shall be substantially in the
form annexed hereto as Exhibit A (the provisions of which are hereby
incorporated herein) and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or automated
quotation system on which the Warrants may be listed, or to conform to usage.
The Warrant Certificates shall be dated the date of issuance thereof (whether
upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen
or destroyed Warrant Certificates). Warrant Certificates shall be numbered
serially with the letters, "__" on Warrant Certificates of all denominations.
(b) Warrant Certificates shall be executed on behalf of the
Company by its President or any Vice President and its Treasurer or an Assistant
Treasurer or its Secretary or an Assistant Secretary, by manual signatures or by
facsimile signatures printed thereon. Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to hold such position with the Company
before the date of issuance of the Warrant Certificates or before
countersignature by the Warrant Agent and issue and delivery thereof, such
Warrant Certificates, nevertheless, may be countersigned by the Warrant Agent,
issued and delivered with the same force and effect as though the person who
signed such Warrant Certificates had not ceased to be such officer of the
Company.
4. Exercise; Redemption.
(a) Each Warrant represented by a Warrant Certificate may
be exercised during the Warrant Exercise Period, upon the terms and subject to
the conditions set forth herein and in the Warrant Certificate. A Warrant shall
be deemed to have been exercised immediately prior to the close of business on
the Exercise Date, provided that the Warrant Certificate representing such
Warrant, with the appropriate exercise form thereon duly executed by the
Registered Holder thereof or his or her attorney duly authorized in writing,
together with payment in cash, or by official bank or certified check made
payable to the Company, of an amount equal to the Purchase Price has been timely
received by the Warrant Agent. Payment must be made in United Sates funds. The
person entitled to receive the securities deliverable upon such exercise shall
be treated for all purposes as the holder of such securities as of the close of
business on the Exercise Date. The Company shall not be obligated to issue any
fractional share interests or fractional warrant interests upon the exercise of
any Warrants. Computations resulting in the issuance of fractional shares be
rounded to the nearest whole share. As soon as practicable on or after the
Exercise Date and in any event within 10 days after having received
authorization from the
4
Company, the Warrant Agent, on behalf of the Company, shall cause to be issued
to the person or persons entitled to receive the same a certificate or
certificates for the shares of Common Stock, and the Warrant Agent shall deliver
the same to the person or persons entitled thereto. No adjustment shall be made
in respect of cash dividends on any shares delivered upon exercise of any
Warrant. Upon the exercise of any Warrants, the Warrant Agent shall promptly
notify the Company in writing of such fact and of the number of securities
delivered upon such exercise and shall cause all payments of an amount in cash
or check made payable to the order of the Company, equal to the Purchase Price,
less any Warrant solicitation fee, as hereinafter described.
(b) If at the time of exercise of any Warrant after
____________, 1996 (i) the market price of the Company's Common Stock is equal
to or greater than the then Purchase Price of the Warrant, (ii) the exercise of
the Warrant is solicited by the underwriter at such time while the Underwriter
is a member of the National Association of Securities Dealers, Inc. ("NASD"),
(iii) the Warrant is not held in a discretionary account, (iv) disclosure of the
compensation arrangement is made in documents provided to the holders of the
Warrants; and (v) the solicitation of the exercise of the Warrant is not in
violation of Rule 10b-6 (as such rule or any successor rule may be in effect as
of such time of exercise) promulgated under the Securities Exchange Act of 1934,
then the Underwriter shall be entitled to receive from the Company upon exercise
of each of the Warrant(s) so exercised a fee of four percent (4%) of the
aggregate price of the Warrants so exercised (the "Exercise Fee"). The
procedures for payment of the warrant solicitation fee are set forth in
subparagraph (c) below.
(c) (1) Within five (5) days of the last day of the each
month commencing with ____________ 1997, the Warrant Agent will notify the
Underwriter of each Warrant Certificate which has been properly completed for
exercise by holders of Warrants during the last month. The Company and Warrant
Agent shall determine, in their sole and absolute discretion, whether a Warrant
Certificate has been properly completed. The Warrant Agent will provide the
Underwriter with such information, in connection with the exercise of each
Warrant, as the Underwriter shall reasonably request.
(2) The Company hereby authorizes and instructs the
Warrant Agent to deliver to the Underwriter the Exercise Fee promptly after
receipt by the Warrant Agent from the Company of a check payable to the order of
the Underwriter in the amount of the Exercise Fee. The Warrant Agent shall not
issue the shares of Common Stock issuable upon exercise of the Warrants until
receipt and forwarding of such check to the Underwriter. In the event that an
Exercise Fee is paid to the Underwriter with respect to a Warrant which the
Company or the Warrant Agent determines is not properly completed for exercise
or in respect of which the Underwriter is not entitled to an Exercise Fee, the
Underwriter will promptly return such Exercise Fee to the Warrant Agent which
shall forthwith return such fee to the Company.
The Underwriter and the Company may at any time, after
_________________, 1997, and during business hours, examine the records of the
Warrant Agent, including its
5
ledger of original Warrant certificates returned to the Warrant Agent upon
exercise of Warrants. Notwithstanding any provision to the contrary, the
provisions of this paragraph and of subparagraph (b) above may not be modified,
amended or deleted without the prior written consent of the Underwriter.
(d) The Warrants may be redeemed at any time during the
exercise period by the Company beginning on ____________, 1997, unless earlier
permitted by the Underwriter, on 30 days' prior written notice to all Registered
Holders of the Warrants, at a redemption price of $.25 per Warrant, if the
closing bid price of the Common Stock as reported by the National Association of
Securities Dealers Automated Quotation System (NASDAQ) (or a national securities
exchange or the National Quotation Bureau or the NASD Bulletin Board, as the
case may be) is at least $6.00 on 20 consecutive trading days ending three (3)
days prior to the date of the written notice of redemption. All Warrants must be
redeemed if any are redeemed.
(e) If the Company calls the Warrants for redemption, the
price at which such Warrants are to be redeemed shall not be paid to any Warrant
holder unless the certificates representing such Warrants are surrendered to the
Corporate Office within the redemption period specified in the Company's notice
to Registered Holders. At the end of any such redemption period respecting
Warrants called for redemption, any Warrants not exercised or tendered for
redemption shall expire and the certificate(s) therefor shall become void.
5. Reservation of Shares; Listing; Payment of Taxes, Etc.
(a) The Company covenants that it will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of Warrants shall be duly and validly issued any fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issue thereof,
and that upon issuance such shares shall be listed on each national securities
exchange or automated quotation system, if any, on which the other shares of
outstanding Common Stock of the Company are then listed.
(b) If any Common Stock reserved for issuance upon exercise
of Warrants hereunder requires registration with or approval of any governmental
authority under any federal or state law, before such securities may be validly
issued or delivered upon such exercise, then the Company covenants that it will
in good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be; provided, however, that the
Company need not endeavor to seek such registration or approval in a state in
which the Warrants were not sold by the Company pursuant to the registration
statement unless an exemption from registration under such state's laws is
available; provided, further, that Warrants may not be exercised by, or shares
of Common
6
Stock issued to, any Registered Holder in any state in which such exercise would
be unlawful.
(c) The Company shall pay all documentary, stamp or similar
taxes and other governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise of
Warrants; provided, however, that if shares of Common Stock are to be delivered
in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent, unless it is acting as such, is
hereby irrevocably authorized to requisition the Company's Transfer Agent from
time to time for certificates representing shares of Common Stock required upon
exercise of the Warrants, and the Company will authorize its Transfer Agent to
comply with all such requisitions. The Company will file with the Warrant Agent
a statement setting forth the name and address of its Transfer Agent for shares
of Common Stock or other capital stock issuable upon exercise of the Warrants
and of each successor Transfer Agent.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants or may be
transferred in whole or in part. Warrant Certificates to be so exchanged shall
be surrendered to the Warrant Agent at its Corporate Office, accompanied by an
Assignment, when necessary, and the Company shall execute and the Warrant Agent
shall countersign, issue and deliver in exchange therefor the Warrant
Certificate(s) which the Registered Holder shall be entitled to receive.
(b) The Warrant Agent shall keep at such office, books in
which, subject to such reasonable regulations as it may prescribe, it shall
register Warrant Certificates and the transfer thereof. Upon due presentment for
registration of transfer of any Warrant Certificate at such office, the Company
shall execute and the Warrant Agent shall issue and deliver to the transferee or
transferees a new Warrant Certificate or Certificates representing an equal
aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder
thereof or his or her attorney duly authorized in writing.
7
(d) The Company may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed upon any
exchange, registration or transfer of any Warrant Certificates.
(e) All Warrant Certificates surrendered for exercise or
for exchange in case of mutilated Warrant Certificates shall be promptly
canceled by the Warrant Agent and thereafter retained by the Warrant Agent until
termination of the agency.
(f) Prior to due presentment for registration of transfer
thereof the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than the Company or the Warrant Agent) for
all purposes and shall not be affected by any notice to the contrary.
7. Loss or Mutilation. Upon receipt by the Company and the
Warrant Agent of evidence satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of any Warrant Certificate and (in the case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Company shall
execute and the Warrant Agent shall countersign and deliver a new Warrant
Certificate representing an equal aggregate number of Warrants. Applicants for a
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
8. Adjustments to Exercise Price and Number of Securities.
(a) Computation of Adjusted Exercise Price. Except as
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances or
sales referred to in subparagraph (g) of this section 8), including shares held
in the Company's treasury and shares of Common Stock issued upon the exercise of
any options, rights or warrants to subscribe for shares of Common Stock and
shares of Common Stock issued upon the direct or indirect conversion or exchange
of securities for shares of Common Stock, for a consideration per share less
than the Purchase Price in effect immediately prior to the issuance or sale of
such shares, or without consideration, then forthwith upon such issuance or
sale, the Purchase Price shall (until another such issuance or sale) be reduced
to the price (calculated to the nearest full cent) equal to the quotient derived
by dividing (i) an amount equal to the sum of (a) the total number of shares of
Common Stock outstanding immediately prior to the issuance or sale of such
shares, multiplied by the Purchase Price in effect immediately prior to such
issuance or sale, and (b) the aggregate of the amount of all consideration, if
any, received by the Company upon such issuance or sale, by (ii) the total
number of shares of Common Stock outstanding immediately after such issuance or
sale; provided, however, that in no event shall the Purchase Price be adjusted
pursuant to this computation to an amount in excess
8
of the Purchase Price in effect immediately prior to such computation, except in
the case of a combination of outstanding shares of Common Stock, as provided by
subparagraph (c) of this section 8.
For the purposes of any computation to be made in accordance
with this subparagraph (a), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of
Common Stock for a consideration part or all of which shall be cash, the amount
of the cash consideration therefor shall be deemed to be the amount of cash
received by the Company for such shares (or, if shares of Common Stock are
offered by the Company for subscription, the subscription price, or, if either
of such securities shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price) before
deducting therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others performing
similar services, or any expenses incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than
as a dividend or other distribution on any stock of the Company) of shares of
Common Stock for a consideration part or all of which shall be other than cash,
the amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Company and shall include any amounts payable to security
holders or any affiliates thereof, including without limitation, pursuant to any
employment agreement, royalty, consulting agreement, covenant not to compete,
earnout or contingent payment right or similar arrangement, agreement or
understanding, whether oral or written; all such amounts being valued for the
purposes hereof at the aggregate amount payable thereunder, whether such
payments are absolute or contingent, and irrespective of the period or
uncertainty of payment, the rate of interest, if any, or the contingent nature
thereof.
(iii) Shares of Common Stock issuable by way of
dividend or other distribution on any stock of the Company shall be deemed to
have been issued immediately after the opening of business on the day following
the record date for the determination of shareholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued without
consideration.
(iv) The reclassification of securities of the
Company other than shares of Common Stock into securities including shares of
Common Stock shall be deemed to involve the issuance of such shares of Common
Stock for a consideration other than cash immediately prior to the close of
business on the date fixed for the determination of security holders entitled to
receive such shares, and the value of the consideration allocable to such shares
of Common Stock shall be determined as provided in subparagraph (a) of this
section 8.
9
(v) The number of shares of Common Stock at any one
time outstanding shall include the aggregate number of shares issued or issuable
(subject to readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities exclusive of any option under the Company 1996 Stock
Option Plan and any additional options which are not vested or then exercisable.
(b) Options, Rights, Warrants and Convertible and
Exchangeable Securities. In case the Company shall at any time after the date
hereof issue options, rights or warrants to subscribe for shares of Common
Stock, or issue any securities convertible into or exchangeable for shares of
Common Stock, for a consideration per share less than the Purchase Price in
effect immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of subparagraph (a) of this section 8., provided
that:
(i) The aggregate maximum number of shares of Common
Stock, as the case may be, issuable under such options, rights or warrants shall
be deemed to be issued and outstanding at the time such options, rights or
warrants were issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as consideration
received on the issue or sale of shares in accordance with the terms of the
Warrants), if any, received by the Company for such options, rights or warrants.
(ii) The aggregate maximum number of shares of
Common Stock issuable upon conversion or exchange of any convertible or
exchangeable securities shall be deemed to be issued and outstanding at the time
of issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on the
issue or sale of shares of Common Stock in accordance with the terms of the
Warrants) received by the Company for such securities, plus the minimum
consideration, if any, receivable by the Company upon the conversion or exchange
thereof.
(iii) If any change shall occur in the price per
share provided for in any of the options, rights or warrants referred to in
subparagraph (i) of section 8(b), or in the price per share at which the
securities referred to in subparagraph (ii) of this section 8(b) are convertible
or exchangeable, such options, rights or warrants or conversion or exchange
rights, as the case may be, shall be deemed to have expired or terminated on the
date when such price change became effective in respect of shares not
theretofore issued pursuant to the exercise or conversion or exchange thereof,
and the Company shall be deemed to have issued upon such date new options,
rights or warrants or convertible or exchangeable securities at the new price in
respect of the number of shares issuable upon the exercise of such options,
rights or warrants or the conversion or exchange of such convertible or
exchangeable securities, provided, however, in no event shall the adjustment
10
provide the Holder with any greater rights arising from consecutive adjustments
than if the last adjustment occurred initially.
(c) Subdivision and Combination. In case the Company shall
at any time subdivide or combine the outstanding shares of Common Stock, the
Purchase Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
(d) Adjustment in Number of Securities. Upon each
adjustment of the Purchase Price pursuant to the provisions of this section 8,
the number of securities issuable upon the exercise at the adjusted Purchase
Price of each Warrant shall be adjusted to the nearest full amount by
multiplying a number equal to the Purchase Price in effect immediately prior to
such adjustment by the number of securities issuable upon exercise of the
Warrants immediately prior to such adjustment and dividing the product so
obtained by the adjusted Purchase Price.
(e) Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. In the event that the Company shall after the date hereof issue
securities with greater or superior voting rights than the shares of Common
Stock outstanding as of the date hereof, the Registered Holder, at its option,
may receive upon exercise of any Warrant either shares of Common Stock or a like
number of such securities with greater or superior voting rights.
(f) Merger or Consolidation. In case of any consolidation
of the Company with, or merger of the Company with, or merger of the Company
into, another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Registered Holder a supplemental warrant agreement providing that the holder
of each Warrant then outstanding or to be outstanding shall have the right
thereafter (until the expiration of such Warrant) to receive, upon exercise of
such Warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such Warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in this section 8. The above provision of
this subsection shall similarly apply to successive consolidations or mergers.
(g) No Adjustment of Purchase Price in Certain Cases. No
adjustment of the Purchase Price shall be made:
11
(i) Upon the issuance or sale of the Warrants, the
shares issuable upon the exercise of the Warrants; the securities issuable upon
the exercise of the Representative's warrants, and the shares of Common Stock
issuable upon the exercise of any of them;
(ii) If the amount of said adjustment shall be less
than two cents (2(cent)) per security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment so carried forward, shall amount
to at least two cents (2(cent)) per security;
(iii) Upon the issuance of up to 300,000 Shares of
Common Stock under the Company's Stock Option Plan; or
(iv) Upon the issuance of shares Common Stock upon
exercise of the 340,000 warrants currently outstanding.
(h) Dividends and Other Distributions. In the event that
the Company shall at any time prior to the exercise of all Warrants fix a record
date for the determination of stockholders entitled to receive (including any
such distribution made to the stockholders of the Company in connection with
consolidation or merger in which the Company is the continuing corporation in a
distribution to all holders of Common Stock) evidence of its indebtedness, cash,
or assets (other than distributions and dividends payable in shares of Common
Stock), or rights, options,or warrants to subscribe for or or purchase shares of
Common Stock, or securities convertible into, or exchangeable for, shares of
Common Stock in a distribution to all holders of Common Stock, then, in each
case, the Purchase Price in effect at the time of such record date shall be
adjusted by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the market price per
share of Common Stock on such record date, less the fair market value (as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of the portion of the
evidence of indebtedness or assets so to be distributed, or such rights,
options, or warrants, or convertible or exchangeable securities, or the amount
of cash, applicable to one share of Common Stock, and the denominator of which
shall be the market price per share of Common Stock on such record date. Such
adjustment shall be made successively whenever any event listed above shall
occur and become effective at the close of business on such record date.
9. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a
ministerial capacity for the Company, and its duties shall be determined solely
by the provisions hereof. The Warrant Agent shall not, by issuing and delivering
Warrant Certificates or by any other act hereunder, be deemed to make any
representations as to the validity or value or
12
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
(b) The Warrant Agent shall not at any time (i) be liable
for any recital or statement of fact contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document or instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with counsel
for the Company and shall incur no liability or responsibility for any action
taken, suffered or omitted by it in good faith in accordance with the opinion or
advice of such counsel.
(d) Any notice, statement, instruction, request, direction,
order or demand of the Company shall be sufficiently evidenced by an instrument
signed by its President, a Vice President, its Treasurer, an Assistant
Treasurer, its Secretary, or an Assistant Secretary (unless other evidence in
respect thereof is herein specifically prescribed). The Warrant Agent shall not
be liable for any action taken, suffered or omitted by it in accordance with
such notice, statement, instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent the usual
and customary compensation it normally receives for its services of this nature
and to reimburse it for its reasonable expenses hereunder; it further agrees to
indemnify the Warrant Agent and save it harmless against any and all losses,
expenses and liabilities, including judgments, costs and counsel fees, for
anything done or omitted by the Warrant Agent in the execution of its duties and
powers hereunder except those arising as a result of the Warrant Agent's
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be
discharged from all further duties and liabilities hereunder (except liabilities
arising as a result of the Warrant Agent's own negligence or willful
misconduct), after giving 30 days' prior written notice to the Company. At least
15 days prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to each
Registered Holder at the Company's expense. Upon such resignation the Company
shall appoint in writing a new warrant agent. If the Company shall fail to make
such appointment within a period of 30 days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then any Registered
Holder may apply in any court of competent jurisdiction for the appointment of a
new warrant agent. After acceptance in writing of such appointment by the new
warrant agent is received by the Company, such new warrant agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named herein as the warrant agent, without any
13
further assurance, conveyance, act or deed; provided, however, that if for any
reason it shall be necessary or expedient to execute and deliver any further
assurance, conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed and delivered by the resigning
Warrant Agent. Not later than the effective date of any such appointment the
Company shall file notice thereof with the resigning Warrant Agent and shall
forthwith cause a copy of such notice to be mailed to each Registered Holder.
(g) Any corporation into which the Warrant Agent or any new
warrant agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the corporate trust business of the
Warrant Agent shall be a successor warrant agent under this Agreement without
any further act, provided that such corporation is eligible for appointment as
successor to the Warrant Agent under the provisions of the preceding paragraph.
Any such successor warrant agent shall promptly cause notice of its succession
as warrant agent to be mailed, at its expense, to the Company and to each
Registered Holder.
(h) The Warrant Agent, its subsidiaries and affiliates, and
any of its or their officers or directors, may buy and hold or sell Warrants or
other securities of the Company and otherwise deal with the Company in the same
manner and to the same extent and with like effect as though it were not the
Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
10. Modification of Agreement. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections in this
Agreement (a) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (b) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant Certificates;
provided, however, that this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Registered Holders representing not less than 50% of the Warrants then
outstanding; provided, further, that no change shall be made in the terms or
provisions of any Warrant which would adversely affect such registered Holders,
other than such changes as are expressly permitted by this Agreement as
originally executed, without the consent in writing of the Registered Holders of
the Warrants affected.
11. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when mailed, first-class postage prepaid, when delivered to a telegraph
office for transmission, or when delivered to any commercial overnight air
courier service or other commercial messenger or delivery service which
regularly retains its receipts; if to a Registered Holder, at the
14
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company at 7703 Maple Avenue, Pennsauken, New Jersey 08109,
Attention: President, or at such other address as may have been furnished to the
Warrant Agent in writing by the Company, with a copy to the Company's counsel,
Heller, Horowitz & Feit, 292 Madison Avenue, New York, New York 10017,
Attention: Irving Rothstein, Esq.; and, if to the Warrant Agent, at the
Corporate Office.
12. Governing Law; Section Headings. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
Section headings in this Agreement appear for convenience of reference only and
shall not be used in any interpretation of this Agreement.
13. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the Registered Holders from time to time of Warrant
Certificates or any of them. Nothing in this Agreement shall be construed to
confer any right, remedy or claim upon any other person.
14. Counterparts. This Agreement may be executed in
counterparts, which taken together shall constitute a single document.
THE TRANSLATION GROUP, LTD.
BY: _________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY: _________________________
Authorized Officer
15
EXHIBIT 10.7
CONSULTING AGREEMENT
This Agreement, entered into as of _____________________,
1996, acknowledges and confirms the terms of our corporate finance agreement
(the "Agreement") as follows:
1. The Translation Group, Ltd., with its executive offices
located at 7703 Maple Avenue, Pennsauken, New Jersey 08109 (the "Company"),
hereby engages Werbel-Roth Securities, Inc. (the "Consultant") and Consultant
hereby agrees to render services to the Company as its corporate finance
consultant, financial advisor and investment banker.
2. During the term of this Agreement.
(a) Consultant shall provide advice to, and consult with,
the Company concerning financial planning, corporate organization and structure,
financial matters in connection with the operation of the business of the
Company, private and public equity and debt financing, acquisitions, mergers and
other similar business combinations and shall review and advise the Company
regarding its overall progress, needs and financial condition. Said advice and
consultation shall be provided by Consultant to the Company in such form, manner
and place as the Company reasonably requests except that Consultant shall
provide such services from its principle place of business during such hours as
may be determined by Consultant.
(b) The services of Consultant are non-exclusive and
subject to paragraph 5 hereof, Consultant may render services of the same or
similar nature, as herein described, to an entity whose business is in
competition with the Company, directly or indirectly.
3. The Company shall pay to Consultant for its consulting
services hereunder the sum of Seventy-Eight Thousand Dollars ($78,000) for the
Term (as defined herein), which amount shall be paid at closing of the Company's
initial public offering ("Closing") pursuant to the Company's registration
statement filed with the Securities and Exchange Commission on Form SB-2, File
No. 333-8857. The Company will also reimburse Consultant, promptly upon receipt
of invoices therefore, for out-of-pocket expenses incurred in connection with
its services hereunder. All expenses in excess of $25.00 shall be approved in
advance by the Company.
4. The term of this Agreement shall be for three years
commencing on the Closing (the "Term").
5. Consultant will not disclose to any other person, firm, or
corporation, nor use for its own benefit, during or after the term of this
Agreement, any trade secrets or other information
designated as confidential by the Company which is acquired by Consultant in the
course of performing services hereunder. (A trade secret is information not
generally known to the trade which gives the Company an advantage over its
competitors. Trade secrets can include, by way of example, products or services
under development, production methods and processes, sources of supply, customer
lists, marketing plans and information concerning the filing or pendency of
patent applications).
6. The Company agrees to indemnify and hold Consultant, its
affiliates, control person, officers, employees and agents (collectively, the
"Indemnified Persons") harmless from and against all losses, claims, damages,
liabilities, costs or expenses (including reasonable attorneys' and accountants'
fees) joint and several arising out of the performance of this Agreement,
whether or not Consultant is a party to such dispute. This indemnity shall not
apply, however, where a court of competent jurisdiction has made a final
determination that Consultant engaged in gross recklessness and/or willful
misconduct in the performance of its services hereunder which gave rise to the
loss, claim, damage, liability, cost or expense sought to be recovered hereunder
(but pending any such final determination, the indemnification and reimbursement
provision of this Agreement shall apply and the Company shall perform its
obligations hereunder to reimburse Consultant for its expenses).
The provisions of this paragraph (6) shall survive the
termination and expiration of this Agreement.
7. This Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and supersedes and cancels any
prior communications, understandings, and agreements between the parties. This
Agreement cannot be modified or changed, not can any of its provisions be
waived, except by written agreement signed by all parties.
8. This Agreement shall be governed by the laws of the State
of Florida any dispute arising out of this Agreement shall be adjudicated in the
courts of the State of Florida or in the federal court for the Southern District
of Florida, and the Company hereby agrees that service of process upon it by
registered mail at the address shown in this Agreement shall be deemed adequate
and lawful.
9. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
2
IN WITNESS WHEREOF, the parties have executed this Agreement
as of _______________, 1996.
WERBEL-ROTH SECURITIES, INC.
By:_________________________
Name: Howard Roth
Title: President
ACCEPTED AND AGREED to this
_____ day of ___________, 1996
THE TRANSLATION GROUP, INC.
By:____________________________
Name: Charles D. Cascio
Title: President
3
EXHIBIT 23.4
VOTTA & COMPANY
A PROFESSIONAL CORPORATION
CERTIFIED PUBLIC ACCOUNTANTS
19 CHESTNUT STREET
HADDONFIELD, NEW JERSEY 08033
(609) 795-8188
FAX: (609) 795-7310
We hereby consent to the use in the Registration Statement of
Form SB-2 of The Translation Group, Ltd. of our report dated May 1, 1996 (July
1, 1996 as to Note 17), appearing in the Prospectus, which is part of this
Registration Statement.
Votta & Company
Haddonfield, New Jersey
October 15, 1996
