As filed with the Securities and Exchange Commission on November 26, 1996
Registration No. 333-8857
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 4
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 B. 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 Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be To Be Price per Offering Registration
Registered Registered Security 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>
A fee for the securities listed above has already been paid. The below listed
securities represent either securities added to the Offering or for which there
is now a higher Offering price. An additional fee was previously submitted for
these securities.
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be To Be Price per Offering Registration
Registered Registered Security Price (1) Fee
---------- ---------- -------- --------- ---
<S> <C> <C> <C> <C>
Common Stock, $.001 Par Value(12) 115,000 $ 3.00 $ 345,000 $ 104.55
Common Stock Purchase Warrants(13) 115,000 $ .20 $ 23,000 $ 6.97
Common Stock, $.001 Par Value(4)(11) 115,000 $ 4.00 $ 460,000 $ 139.39
Common Stock, $.001 Par Value(6)(11) 10,000 $ 3.90 $ 39,000 $ 11.82
Common Stock Purchase Warrants(6)(11) 10,000 $ .24 $ 2,400 $ .73
Common Stock, $.001 Par Value(7)(11) 10,000 $ 5.20 $ 52,000 $ 15.76
Common Stock, $.001 Par Value(8) 241,000 $ 3.00 $ 723,000 $ 219.09
Common Stock, $.001 Par Value(14) 110,000 $ .30 $ 33,000 $ 10.69
Common Stock Purchase Warrants(14) 150,000 $ .02 $ 3,000 $ .91
Common Stock, $.001 Par Value(14) 150,000 $ .40 $ 60,000 $ 18.18
Total $ 1,740,400 $ 527.39
=========== =========
A fee for the securities listed above has already been paid. The below listed
securities represent either securities added to the Offering or for which there
is now a higher Offering price. An additional fee is being submitted for these
securities.
Common Stock, $.001 Par Value(14) 1,840,000 $ 2.00 $ 3,680,000 $ 1,115.15
Common Stock, $.001 Par Value(14) 160,000 $ 2.60 $ 416,000 $ 126.06
Common Stock, $.001 Par Value(14) 300,000 $ 2.00 $ 600,000 $ 181.82
Total $ 4,696,000 $ 1,423.03
=========== ==========
</TABLE>
ii
(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.
(12) Includes up to 15,000 shares of Common Stock which may be purchased by
the Representative to cover over-allotments, if any.
(13) Includes up to 15,000 shares of redeemable Common Stock Purchase
Warrants which may be purchased by the Representative to cover
over-allotments, if any.
(14) Represents an increase in the proposed offering price for these
securities.
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
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>
iv
SUBJECT TO COMPLETION
DATED NOVEMBER 26, 1996
-----------------
THE TRANSLATION GROUP, LTD.
----------------------
700,000 SHARES OF COMMON STOCK AND
1,600,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
The Translation Group, Ltd. (the "Company") offers hereby 600,000
shares of Common Stock, $.001 par value (the "Common Stock") and its Chairman
and Chief Operating Officer offers an additional 100,000 shares for an aggregate
of 700,000 shares of Common Stock at a price of $6.00 per share, and 1,600,000
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 $6.00 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. The Warrants are redeemable by the
Company, for $.25 per Warrant, on not less than thirty (30) nor more than sixty
(60) days' written notice if the average closing price per share of Common Stock
is at least $12.00 per share during a period of thirty (30) consecutive trading
days ending not earlier than three (3) days of the date the Warrants are called
for redemption. Any redemption of the Warrants during the one-year period
commencing on the date of this Prospectus shall require the consent of
Werbel-Roth Securities, Inc. (the "Representative"), as representative of the
several underwriters (the "Underwriters"). See "Description of Securities."
The Company has applied for inclusion of the Common Stock and Warrants
on the OTC Bulletin Board under the symbols THEO and THEOW, respectively,
although there can be no assurance that such securities will be accepted for
quotation or, if accepted, that an active trading market will develop. In the
event the Securities are not quoted on the OTC Bulletin Board, quotes for the
Securities may be included in the "pink" sheets for the over the counter market.
While the Company has applied for inclusion of its Securities on the NASDAQ
Small Cap Market, the application is currently being reviewed by the NASDAQ
staff. No assurance can be given that the Company's Securities will ever be
listed for inclusion on the NASDAQ Small Cap Market. See "Risk Factors."
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 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. The holders
of these shares have agreed that while these shares are being registered now,
they will only become freely tradeable in blocks of one-third every six months
beginning six months from the date hereof. Also included herewith are 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 which 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 offered by the selling security
holders, 341,000 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) $6.00 $.60 $ 5.40
Per Warrant $.20 $.02 $ .18
Total $4,520,000 $452,000 $3,528,000
(1) Does not include additional compensation to the Representative in the
form of (a) a non-accountable expense allowance of three percent of the
gross proceeds of this Offering ($.18 per share of Common Stock and
$.006 per Warrant) and (b) a Security, purchasable at a nominal price,
giving it the right to acquire 60,000 shares of Common Stock at an
initial exercise price of $7.80 per share (the "Representative's
Stock") and 160,000 Warrants at an initial exercise price of $.26 per
Warrant to purchase shares of Common Stock at $7.80 per share (the
"Representative's Warrants," and collectively with the Representative's
Stock, 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 $42,300 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 $302,600 payable by the Company ($322,940 if the
over-allotment option is exercised in full), including the
Underwriters' expense allowance of $117,600 ($137,940 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 105,000 shares of
Common Stock and 240,000 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 $5,198,000, the
Total Underwriting Discount will be $519,800 and the Total Proceeds to
the Company will be $4,138,200. See "Underwriting."
WERBEL-ROTH SECURITIES, INC. MILLENNIUM SECURITIES CORP.
THE DATE OF THE PROSPECTUS IS NOVEMBER __, 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".
On November 21, 1996, the Company enacted a reverse stock split in the
ratio of 1:2 of all of its outstanding shares of Common Stock (the "Reverse
Split"). Unless otherwise indicated, all amounts of shares of Common Stock are
stated in post-Reverse Split figures.
5
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Securities Offered
Common Stock by the Company 600,000 shares of Common Stock
Warrants by the Company(1) 1,600,000 redeemable Warrants.
Common Stock by Selling
Security Holders 341,000 shares of Common Stock
(100,000 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 $6.00
Price Per Warrant being underwritten $ .20
Common Stock Outstanding Before Offering 1,226,000 shares(2)
Common Stock Outstanding After Offering 1,826,000 shares(3)(4)
Comparative Common Stock Ownership Upon
Completion of Offering
Present Shareholders 1,126,000 (61.66%)(2)
Public Shareholders 700,000 (38.34%)(3)(4)
Estimated Net Proceeds $3,225,000 ($3,814,860 if the
over-allotment option is
exercised in full), after
deducting filing, printing,
legal, accounting and
miscellaneous expenses payable
by the Company estimated at
$185,000.
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 Trading Symbols (5)
Common Stock THEO
Warrants THEOW
</TABLE>
- ------------------------------
(1) The Warrants are redeemable by the Company, for $.25 per Warrant, on
not less than thirty (30) nor more than sixty (60) days' written notice
if the average closing price per share of Common Stock is at least
$12.00 per share during a period of thirty (30) consecutive trading
days ending not earlier than three (3) days of the date the Warrants
are called for redemption. Any redemption of the Warrants during the
one-year period
6
commencing on the date of this Prospectus shall require the consent of
the Representative. See "Description of Securities."
(2) Following give-back of an aggregate of 665,000 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 105,000 shares
is not exercised. See "Underwriting."
(4) Excludes (i) up to 1,600,000 shares of authorized but unissued Common
Stock reserved for issuance upon exercise of the Warrants included in
the Offering (ii) up to 60,000 shares of authorized but unissued Common
Stock issuable upon exercise of the Representative's Stock Warrants;
(iii) up to 160,000 shares of authorized but unissued Common Stock
issuable upon exercise of the Warrants underlying the Representative's
Warrants; (iv) up to an additional 345,000 shares of Common Stock
(including 240,000 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) The Company has applied for inclusion of the Common Stock and Warrants
on the OTC Bulletin Board under the symbols THEO and THEOW,
respectively, although there can be no assurance that such securities
will be accepted for quotation or, if accepted, that an active trading
market will develop. In the event the Securities are is not quoted on
the OTC Bulletin Board, quotes for the Securities may be included in
the "pink" sheets for the over the counter market. While the Company
has applied for inclusion of the Securities on the NASDAQ Small Cap
Market, the application is currently being reviewed by the NASDAQ
staff. No assurance can be given that the Company's Securities will
ever be listed for inclusion on the NASDAQ Small Cap Market. See "Risk
Factors."
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:
SUMMARY OF OPERATIONS:
<TABLE>
<CAPTION>
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:
As at March 31, August 31, 1996
-------------------- -------------------------
1995 1996 Actual As Adjusted(2)
---- ---- ------ --------------
(Unaudited)
Current assets $ 359,528 $1,207,361 $1,394,232 $4,619,232
Current liabilities 232,610 430,22 478,194 478,194
---------- ---------- ---------- ----------
Working capital $ 126,918 $ 777,133 $ 916,038 $4,141,038
Total assets 426,743 1,438,832 1,636,577 4,861,577
Stockholders' equity 194,133 1,008,604 1,158,383 4,383,383
Book value per share $ .20 $ .82 $ .95 $ 2.40
Shares outstanding(3) 985,000 1,226,000 1,226,000 1,826,000
</TABLE>
(1) The following is a calculation of pro forma earnings per share after giving
effect to the reverse stock split as if the Reverse Split had been enacted prior
to the entire period: (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 1,891,000 $ .03 $ .18 $ .09 $ .08
(b) Pro forma shares out-
standing after give-back
1,226,000 $ .05 $ .28 $ .14 $ .12
</TABLE>
(2) Gives effect to the issuance of 600,000 shares of Common Stock and
1,600,000 Warrants and application of the estimated net proceeds
therefrom. Does not take into account exercise of the over-allotment
option, the Warrants, the 100,000 shares of Common Stock being sold by
an executive officer of the Company, or the Representative's
Securities. See "Use of Proceeds."
(3) Gives effect to an aggregate of 665,000 shares returned to the Company
by various current stockholders (except for the year ended March 31,
1995 which also does not include the 241,000 shares issued in the
January 1996 private placement).
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. While the Company currently has no
understandings, arrangements or agreements with
respect to any acquisitions, 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. Over 15 years ago, the
Company's President and Chief Executive Officer pled guilty to tax evasion and
proxy fraud. The Company does not believe this will impact his ability to lead
the Company to its objectives.
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."
10
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
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. The
initial success of this program is evidenced by the fact that during the five
month period ending August 31, 1996, the amount of sales from the same two
customers referred to above were even further reduced and accounted for
approximately only 26% and 3%, respectively, of the Company's sales. While two
other customers combined to provide approximately 35% of the Company's sales
during this period, they had never previously accounted for 10% or more of sales
and the Company does not expect them to be such principal customers in the
future. 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, which it
expects will commence before year end. Accordingly, the Company believes that
the loss of any individual customer will not have a material adverse impact on
the Company's future operating results and financial condition. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" and "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
11
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."
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 $3.60 per share
of Common Stock, or approximately 60% of the $6.00 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 32.45% 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 397,500 shares of Common Stock (approximately 22%
12
of the shares of Common Stock following the Offering) for two years following
the date of this Prospectus giving management voting control over approximately
38.61% 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 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; No
Assurance of NASDAQ Listing. 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." The Company's Securities
are not presently included for trading on the NASDAQ system, and there can be no
assurances that the Company will ultimately qualify for inclusion within that
system. In order for an issuer to be included in the NASDAQ system, it is
required to have total assets of at least $4,000,000, capital and surplus of at
least $2,000,000, a minimum price per share of not less that $3.00, have
publicly-held shares with a market value of at least $1,000,000 as well as
certain other criteria. In addition to quantitative standards, the staff of
NASDAQ may also consider other factors including but not limited to the nature
and scope of a company's operations in conjunction with any and all conditions
and/or circumstances surrounding an entity's operations. The Company's initial
application for inclusion in the NASDAQ system is still being reviewed by the
NASDAQ staff. No assurance can be given that the Securities of the Company will
ever qualify for inclusion on the NASDAQ system. Until the Company's shares
qualify for inclusion in the NASDAQ system, the Company's Securities may be
traded in the over-the-counter markets through "pink" sheets or on the OTC
Bulletin Board. As a result, an investor may find it more difficult to dispose
of, or to obtain adequate quotations as to the price of, the Securities offered
hereby.
While the Company believes that eventually the Securities will be
listed for trading on NASDAQ, no assurance can be given that they ever will be
so listed, and even if listed 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.
13
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, 885,000 unregistered Shares of the Company's Common Stock will be held
by present stockholders. Under Rule 144 of the Act, all 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 18,000 shares assuming only the existing shares and the
shares Common Stock offered hereby are outstanding). The holders of such 885,000
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, 241,000 shares of Common Stock currently held by certain
security holders are being registered hereby and will be available for sale, in
blocs of one-third every six months beginning six months after the date hereof.
Also, 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 4,660,000 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 8,514,000 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
14
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 60,000 shares of Common Stock and 160,000 Warrants. The
Representative's Securities will be exercisable commencing one year following
the effective date of this Prospectus and will continue to be exercisable for a
period of four years thereafter at an exercise price of $7.80 per share and $.26
per warrant, with the warrants underlying the Representative's Warrant allowing
the purchase of Common Stock at $7.80 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 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
are redeemable by the Company, for $.25 per Warrant, on not less than thirty
(30) nor more than sixty (60) days' written notice if the average closing price
per share of Common Stock is at least $12.00 per share during a period of thirty
(30) consecutive trading days ending not earlier than three (3) days of the date
the Warrants are called for redemption. Any redemption of the Warrants during
the one-year period commencing on the date of this Prospectus shall require the
consent of the Representative. 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
15
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, 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 August 31, 1996, after adjustment for the Reverse Split, the Company
had a net tangible book value of $1,158,383, or $.94 per share of Common Stock.
Net tangible book value per share represents the amount of total tangible assets
less liabilities, divided by 1,226,000, the number of shares of Common Stock
outstanding at August 31, 1996 (after giving effect to the give-back of an
aggregate of 665,000 shares returned to the Company by various current
stockholders). After giving effect to the sale of the 600,000 shares of Common
Stock and 1,600,000 Warrants hereby, the pro forma net tangible book value at
August 31, 1996 would have been $4,383,383 or $2.40 per share of Common Stock.
This represents an immediate increase in pro forma net tangible book value of
$1.46 per share (or 155%) to the existing stockholders and an immediate dilution
of $3.60 per share (or 60%) to investors in this Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Public offering price per share $ 6.00
Net tangible book value per share before offering $ .94
Increase attributable to investors in offering $1.46
-----
Net tangible book value per share after offering (1) $ 2.40
------
Dilution per share to investors in offering (2) $ 3.60
======
</TABLE>
- -----------------
(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) 345,000 shares issuable upon exercise of
the Representative's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 60,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
160,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,600,000 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) 700,000 38.34% $4,200,000 87.06% $6.00
Current Stockholders(2) 1,126,000 61.66% $ 624,270(3) 12.94% $ .55
--------- ------ ---------- ------
Total 1,826,000 100.00% $4,824,270 100.00%
========= ====== ========== ======
</TABLE>
- -------------------
(1) Includes 100,000 shares sold in the Offering by a Selling Security
Holder.
(2) Does not include 100,000 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 $3,225,000 ($3,814,860, 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 approximately $303,000 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 $ 300,000 9.30% $ 400,000 10.49%
Research and Systems Development $ 800,000 24.81% $1,050,000 27.52%
Purchasing advanced information
technology products $ 675,000 20.93% $ 850,000 22.28%
Acquisition of service providers $1,150,000 35.66% $1,150,000 30.15%
Working capital and general
corporate purposes $ 300,000 9.30% $ 364,860 9.15%
---------- ------ ---------- ------
TOTAL $3,225,000 100.00% $3,814,860 100.00%
========== ====== ========== ======
</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 $675,000 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
$675,000 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
$9,216,000 in net proceeds to the Company. The Company intends to use such funds
for acquisitions ($6,000,000), additional research and development relating to
Dr. Cherny's project ($1,000,000) and working capital ($2,216,000). No assurance
can be given that any or all of the Warrants will be exercised and that these
funds will become available to the Company.
21
CAPITALIZATION
The following table sets forth the capitalization of the Company at
August 31, 1996, after giving effect to (i) the return of an aggregate 665,000
shares of Common Stock from various stockholders of the Company (to be canceled
and available for reissuance), (ii) the increase of authorized capital from
5,000,000 shares of Common Stock, (iii) the Reverse Split and (iv) as adjusted
to reflect receipt of the net proceeds from this Offering:
<TABLE>
<CAPTION>
August 31, 1996
---------------
Actual As Adjusted(2)
------ --------------
<S> <C> <C>
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 1,891,000 at August 31, 1996,
and 1,826,000 as adjusted $ 1,891 $ 1,826
Additional paid-in capital 464,759 3,689,824
Retained earnings 691,733 691,733
---------- ----------
Capitalization Total $1,158,383 $4,383,383
========== ==========
</TABLE>
- ---------------
(1) Does not give effect to (a) 345,000 shares issuable upon exercise of
the Underwriter's over-allotment option (including shares of Common
Stock underlying the Warrants); (b) 60,000 shares of Common Stock
issuable upon exercise of the Representative's Stock Warrants; (c)
160,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Representative's Warrants; (d) 1,600,000 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 600,000 shares of Common stock
and 1,600,000 Warrants, net of expenses.
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 $1,000,000)
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 78 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 60 Director
Gary M. Schlosser 46 Director
THEODORA LANDGREN has been the Chairman of the Board of Directors 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 John B. Canuso,
Inc., 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 his 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 677,500 shares of Common Stock, which has since been
reduced to 385,000 shares by accounting for her give-back to the Company of
292,500 shares and which will be further reduced to 285,000 shares by the sale
by the Underwriters of 100,000 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 1,226,000 (post-Reverse Split)
shares of Common Stock be outstanding. In order to meet this limit an aggregate
of 665,000 shares of Common Stock were returned to the Company by various
stockholders including Ms. Landgren (292,500 shares), Mr. Cascio and his family
members (300,000 shares) and Mr. Herson (7,500 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 1,600,000 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."
It is the Company's policy 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 1,226,000 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 385,000 31.40% 21.77%(4)
(1)(2)(3)
Charles D. Cascio 200,000 16.31% 10.95%
(1)(2)(3)(5)
Michael C. Cascio 50,000 4.08% 2.74%
(1)(2)(6)
Richard J.L. Herson 57,500 4.69% 3.15%
(1)(2)
All Executive Officers and
Directors as a Group 692,500 56.48% 38.61%
</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 100,000 shares of Common Stock in this Offering.
Includes an additional 112,500 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 15.61% 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 100,000
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 $.001 per share. Effective November 21, 1996, the
Company enacted a reverse stock split in the ratio of 1:2 of all of its
outstanding Common Stock. As of the date of this Prospectus, 1,226,000 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
38
Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent"). The
following summary of the provisions of the Warrants is qualified in its entirety
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 $6.00 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 $12.00 or 200% 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
39
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.
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 1,826,000
shares of Common Stock outstanding (1,931,000 shares if the Underwriter's
over-allotment option is exercised in full). Of these shares, the 700,000 shares
sold in this offering (805,000 shares if the Underwriter's over-allotment option
is exercised in full) 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. In addition, another 241,000 shares of
Common Stock held by selling security holders are being registered now which
will be freely tradeable in blocks of one-third every six months beginning six
months from the date hereof. Except as described below, all of the remaining
885,000 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 18,000 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 the 885,000 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.
40
Of the 1,226,000 shares of Common Stock currently outstanding, 341,000
are being registered herewith.
As a result of this Offering, an additional 1,600,000 shares of Common
Stock (1,840,000 if the Underwriters over-allotment option is exercised) will be
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
Representative 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.
CERTAIN MARKET INFORMATION
The Company has applied for inclusion of the Common Stock and Warrants
on the OTC Bulletin Board under the symbols THEO and THEOW, respectively. In the
event the Common Stock is not quoted on the OTC Bulletin Board, quotes for the
Common Stock may be included in the "pink" sheets for the over-the-counter
market. While the Company has applied for inclusion of its Common Stock on the
NASDAQ Small Cap Market, the application is currently being reviewed by the
NASDAQ staff. While the Company meets the quantitative criteria for inclusion on
the NASDAQ system, the Company's application for listing on the NASDAQ Small Cap
Market has not been approved. The Company does not agree with the concerns of
the staff and intends to vigorously pursue the application including appealing
any negative determination. No assurance can be given that the Company's
securities will ever be listed for inclusion on the NASDAQ Small Cap Market. See
"Risk Factors."
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 700,000 shares of Common Stock and 1,600,000 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. 325,000 700,000
Millennium Securities Corp. 375,000 900,000
------- -------
Total 700,000 1,600,000
======= =========
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. The
Representative has further advised the Company that the Underwriters propose to
offer the Securities through members of the National Association of Securities
Dealers, Inc. ("NASD"), and may allow a concession, in their discretion, to
certain dealers who are members of the NASD and who agree to sell the Securities
in conformity with the NASD Conduct Rules. Such concessions shall not exceed the
amount of the underwriting discount that the Underwriters are to receive.
The Company has granted the Underwriters an option, exercisable for 45
days from the date of this Prospectus, to purchase up to 105,000 shares of
Common Stock and 240,000 Warrants, 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 exercised commencing
one year from the date of this prospectus and (ii) enter into a three year
consulting agreement with the Company providing for a fee equal to $15,326.67
per annum, payable in full ($45,980) 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
60,000 shares of Common Stock of the Company at an exercise price of $7.80 per
share and 160,000 Warrants at an exercise price of $.26 per warrant. Other than
a higher
42
exercise price, the redemption feature and no anti-dilution protection for any
issuance of securities below the initial offering price of the Company's
Securities offered hereby, 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 $7.80 per share or 130% of the
then exercise price of the Warrants offered to the public hereby, for a period
of three 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 four 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 receive 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
43
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.
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 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
44
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.
Included in the 700,000 shares of Common Stock being offered herein by
the Underwriters are 100,000 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 275,000 shares representing 15.60% 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 & Millman, 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, 3 and 19 to the consolidated financial
statements, the consolidated financial data reflect the result of a
business combination merger, accounted for as a recapitalization and a 1
for 2 reverse split of the outstanding common shares.
Votta & Company
Haddonfield, New Jersey
May 1, 1996
(November 1996 as to Notes 17 and 19)
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
1,891,000 outstanding 1,891 1,891
Preferred stock, $.001 par value,
1,000,000 authorized,
none outstanding (Note 14)
Additional paid in capital (Notes 3, 9 and 10) 464,759 464,759
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 (Notes 2 and 19) $.35 $.08 $.08 $.22
==== ==== ==== ====
Weighted average shares
outstanding
(Notes 2, 3, 9, 10, 11 and 19) 996,000 755,000 1,891,000 755,000
========= ========= ========= =========
</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 STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996 AND 1995
AND THE FIVE MONTH PERIOD ENDED
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 885,000 885 885 --- 1,770
Conversion of note 10,000 10 19,990 --- 20,000
Recapitalization 755,000 755 (705) --- 50
BTS shares acquired (50) (50) --- --- (50)
Private Placement 241,000 241 444,589 --- 444,830
Net income - March 31, 1996 --- --- --- 347,871 347,871
------ ------ ------ -------- --------
Balance at March 31, 1996 1,891,000 1,891 464,759 541,954 1,088,604
FIVE MONTHS ENDED AUGUST
31, 1996 (unaudited): --- --- --- 149,779 149,779
- --------------------- ------ ------ ------ -------- --------
Balance at August 31, 1996 1,891,000 $1,891 $464,759 $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. All statements
and reference to shares issued, shares outstanding and earnings per share
reflect a 1 for 2 reverse split of outstanding Common Shares voted on
November 18, 1996. (See Note 19 below.)
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 after giving effect to the 1 for 2
reverse split (see Note 19):
<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 755,000 755,000 755,000 755,000
TTGL SHARES
(1,136,000) ISSUED FOR
PERIOD AFTER MERGER 241,000 0.0 1,136,000 0.0
--------- --------- --------- ---------
TOTAL 996,000 755,000 1,891,000 755,000
========= ========= ========= =========
</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
755,000 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 241,000 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 241,000
shares of common stock for $2.50 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 controlled
approximately eighty percent (80%) of the Company's outstanding voting
common stock and accordingly controlled the Company's affairs.
If the Company is successful in its Initial Public Offering (see Note 19),
Ms. Landgren will have voting control of 22.38% of the Company`s 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 700,000
common voting shares in an Initial Public Offering during 1996, of which
100,000 are for a selling security holder and 600,000 for the benefit of
the Company. See Underwriting and Summary of Financial information
elsewhere in this Prospectus. There can be no assurance that the Company's
initial public offering will be successful.
Deferred offering costs of approximately $35,000 as of March 31, 1996 and
$155,937 as of August 31, 1996 (unaudited) relating to the initial public
offering are included in current assets. If the initial public offering is
successful, these costs will be offset against the proceeds of the
offering. If the offering is not successful, these costs 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
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.......................................................................
</TABLE>
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.
700,000 SHARES OF COMMON STOCK
AND 1,600,000 REDEEMABLE COMMON
STOCK WARRANTS
THE TRANSLATION GROUP, LTD.
PROSPECTUS
WERBEL-ROTH SECURITIES, INC.
MILLENNIUM SECURITIES CORP.
, 1996
ALTERNATE PROSPECTUS
SUBJECT TO COMPLETION
DATED NOVEMBER 21, 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 $6.00 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 nor more than sixty days provided that the closing
price for the Common Stock has been at least $12.00 per share for a period of
thirty consecutive trading days ending not earlier than the 3rd day prior to the
day the Company gives notice, as reported on the principal exchange on which the
Common Stock is traded. The Company has applied for inclusion of the Common
Stock and Warrants on the OTC Bulletin Board under the symbols THEO and THEOW,
respectively, although there can be no assurance that such securities will be
accepted for quotation or, if accepted, that an active trading market will
develop. In the event the Common Stock is not quoted on the OTC Bulletin Board,
quotes for the Common Stock may be included in the "pink" sheets for the over
the counter market. While the Company has applied for inclusion of its Common
Stock on the NASDAQ Small Cap Market, the application is currently being
reviewed by the NASDAQ staff. No assurance can be given that the Company's
securities will ever be listed for inclusion on the NASDAQ Small Cap Market. See
"Risk Factors."
The shares of Common Stock offered hereby are restricted from transfer
for six months from the date hereof at which time one-third of such shares will
become freely transferable with one-half of the remaining shares becoming freely
transferable six months thereafter and the balance six months thereafter. 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"), 600,000 shares of Common Stock and its
Chairman and Chief Operating Officer is offering an additional 100,000 shares
for an aggregate of 800,000 shares of Common Stock at a price of $6.00 per
share, and 1,600,000 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 November __, 1996.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby are restricted from transfer
for six months from the date hereof at which time one-third of such shares will
become freely transferable with one-half of the remaining shares becoming freely
transferable six months thereafter and the balance six months thereafter.
Subject to the previous sentence, 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.
There are no current or future plans, arrangements or understandings of
or known by the underwriters with respect to engaging in transactions with the
Selling Securityholders, including transactions involving short selling. The
Selling Securityholders are not obligated to sell the Securities through the
underwriters.
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 Securityholders") 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 Securityholders. The following disclosure regarding Reoffer
Shares and Selling Securityholders is also applicable to the Private Warrants,
their underlying Common Stock and their holders.
2
Each of the Selling Securityholders 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 Securityholders 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 Securityholders
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 Securityholders 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 Securityholders 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
<TABLE>
<CAPTION>
============================================================================================================================
Names Shares Shares Shares
----- Held Offered owned After
Sale
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Barry & Rosalind Kaplan 2,000 2,000 -0-
Mitchell Kurk 2,000 2,000 -0-
Ross Allen 10,000 10,000 -0-
Michael Hadden 10,000 10,000 -0-
George Langer 10,000 10,000 -0-
David Medich 10,000 10,000 -0-
James Miller 10,000 10,000 -0-
Robert Dumano 10,000 10,000 -0-
Bryan Saterbo 10,000 10,000 -0-
Joseph Savage 10,000 10,000 -0-
Achyut Saharabudhe 10,000 10,000 -0-
Gary Spieler, IRA 10,000 10,000 -0-
Scott Sosnick 10,000 10,000 -0-
C. Ray Council 4,000 4,000 -0-
Seth Markowitz 4,000 4,000 -0-
Richard Lasnier 2,000 2,000 -0-
Gloria Tempchin 2,000 2,000 -0-
Lee-Dan, Ltd. 40,000 40,000 -0-
Arthur Brown 10,000 10,000 -0-
Greg Opinski 10,000 10,000 -0-
David Gray 4,000 4,000 -0-
Shalom Maidenbaum 6,000 6,000 -0-
Richard Gray 5,000 5,000 -0-
Milton Ackerman 4,000 4,000 -0-
Irwin Strauss 4,000 4,000 -0-
Simon Barukhin 2,000 2,000 -0-
Solomon Bolder 2,000 2,000 -0-
Daniel Ehrlich 2,000 2,000 -0-
Marcus Ehrlich 2,000 2,000 -0-
Susan Felton 2,000 2,000 -0-
Sherry Hirschman 2,000 2,000 -0-
Seth Roslyn 2,000 2,000 -0-
Naomi Selbst 2,000 2,000 -0-
Sheila Schwartzberg 2,000 2,000 -0-
Marilyn Slonim 2,000 2,000 -0-
Jeremy Weinstein 2,000 2,000 -0-
Abraham Weiss 2,000 2,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
4
<TABLE>
<CAPTION>
============================================================================================================================
Names Warrants Warrants Warrants
----- Held Offered owned After
Sale
============================================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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) 25,000 25,000 -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-
- ----------------------------------------------------------------------------------------------------------------------------
============================================================================================================================
</TABLE>
(1) The Chairman and Chief Operating Officer. Ms. Landgren currently
owns 385,000 shares representing approximately 31.40% of the outstanding stock.
Following this Offering and the IPO, Ms. Landgren will own approximately 15.61%
of the outstanding stock.
(2) The President and Chief Executive Officer. Mr. Cascio currently
owns 200,000 shares representing approximately 16.31% of the outstanding stock.
Following this Offering and the IPO, Mr. Cascio will own approximately 10.95% of
the outstanding stock.
(3) Currently owns 37,000 shares representing approximately 3.06% of
the outstanding stock. Following this Offering and the IPO, the balance will
represent approximately 2.05% of the outstanding stock.
(4) Currently owns 30,000 shares representing approximately 1.74% of
the outstanding stock. Following this Offering and the IPO, the balance will
represent approximately 1.64% of the outstanding stock.
LEGAL MATTERS
The validity of the issuance of the Securities 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.......... $ 7,076.00
NASD Fee........................................ $ 2,221.00
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
Printing and engraving.......................... $ 33,281.00
Miscellaneous................................... $ 7,422.00
-----------
TOTAL.................................. $185,000.00
===========
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In July 1995, the Registrant sold an aggregate of 1,770,000 shares of
Common Stock at par value ($.001) to its founders (885,000 shares following the
Reverse Split). 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 (755,000 shares following the
Reverse Split) 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 (241,000 shares following the Reverse Split) 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
(10,000 shares folowing the Reverse Split) 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 were filed as part of Amendment No. 2 to the SB-2
Registration Statement dated October 17, 1996:
4.1 Specimen Common Stock Certificate
4.2 Specimen Warrant Certificate
4.3 Form of Warrant Agreement
23.4 Consent of Votta and Company
II-2
The following exhibits were filed as part of Amendment No. 3 to the SB-2
Registration Statement dated November 14, 1996:
1.1.2 Revised Underwriting Agreement
4.3.1 Revised Form of Warrant Agreement
4.4.1 Form of Revised Representative's Warrant Agreement
4.5.1 Form of Revised Representative's Warrant
10.6 Consulting Agreement between the Represenrative and the
Registrant
23.5 Consent of Votta and Company
The following exhibit is filed herewith:
23.6 Consent of Votta and Company
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 20th day of November, 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 November 20, 1996
Theodora Landgren
/s/ CHARLES D. CASCIO President, Chief Executive Officer and
Charles D. Cascio Director November 20, 1996
/s/ RICHARD J.L. HERSON Chief Accounting Officer and Director November 20, 1996
Richard J.L. Herson (Principal Financial Officer)
/s/ JULIUS CHERNY Director November 20, 1996
Julius Cherny
/s/ GARY M. SCHLOSSER Director November 20, 1996
Gary M. Schlosser
</TABLE>
EXHIBIT INDEX
23.6 Consent of Votta and Company
EXHIBIT 23.6
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.
/S/ Votta & Company
Haddonfield, New Jersey
November 20, 1996
