As filed with the U.S. Securities and
Exchange Commission on May 31, 2000
Registration No. 333-40001-NY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 6 TO
FORM SB-2
Registration Statement
Under The Securities Act of 1933
New Jersey 2899 223-319-224
State of Standard Industrial IRS Employer
Incorporation Classification Code Identification No.
PPA TECHNOLOGIES, INC.
163 South St.
Hackensack, New Jersey 07601
(201) 457-1221
Address, including zip code and telephone number, including area code of
registrant's principal executive offices and principal place of business or
intended principal place of business.
ROGER L. FIDLER
163 South St.
Hackensack, New Jersey 07601
(Name and Address of Agent for Service)
Copies of Communication to:
Jay Hait, Attorney at Law,
130 William St., Suite 807, New York, NY 10038 (212)349-0124
Approximate date of proposed sale to public: As soon as possible after the
effective date of the Registration Statement.
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CALCULATION OF REGISTRATION FEE
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Title of Amount to be Proposed maximum Proposed maximum Amount
each class registered offering price aggregate Registration
of Securities l per Unit (1) offering Price (1) Fee
-------------------------------------------------------------------------------
Units consisting
of 1 Share of
Common Stock
and 1 Class
<S> <C> <C> <C> <C>
A Warrant 1,000,000 $6.00 $6,000,000.00 $1,845.46
Common Stock,
No par value
Per share, being
Part of Units 1,000,000 - - -
Class A Warrants
No par value per
Warrant, being
Part of Units 1,000,000 - - -
Common Stock,
no par value
per share,(2)
underlying
Class A
Warrants 500,000 $10.00 $5,075,000.00 $1,537.88
Underwriter's
warrants, no
par value 100,000 $0.001 $100.00 $0.04
Units, consisting Of 1 share of Common stock, no par value per share, and 1
Class A Warrant underlying Underwriter's
Warrants 100,000 $9.90 $990,000.00 $339.88
Common Stock, 100,000
No par value,
Per share,
Underlying
Underweriter's
Warrants
Class A Warrants, 100,000 No par value per Warrant, being Part of Units
Underlying Underwriter's Warrants
Common Stock,
no par value
per share,
underlying
warrants in
Underwriter's
Warrant Units 50,000 $10.00 $500,000.00 $151.08
</TABLE>
Total Registration-Fee ----------------------------- $ 3,874.30
The Exhibit Index is located at page 54
(1) Estimated solely for the purpose of calculating the registration fee. (2)
Pursuant to Rule 416 there are also being registered such additional shares as
may be issued pursuant to the anti-dilution provisions of the Warrants.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or on such date as the Commission, acting pursuant to
said Section 8(a), may determine.
PPA TECHNOLOGIES, INC.
CROSS REFERENCE SHEET FOR PROSPECTUS
(Pursuant to Item 501 of Regulation S-B)
Item No. Caption in Prospectus
1. Forepart of the Registration
Statement and Outside Front Cover
Page of Prospectus............................Forepart, Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus...........................Inside Front Cover Page
3. Summary Information Risk Factors
and Ratio of Earnings
to-Fixed Charges.............................. Prospectus Summary
4. Use of Proceeds.............................. Use of Proceeds
5. Determination of Offering Price.............. Description of Securities
6. Dilution..................................... Dilution
7. Selling Security Holders..................... Not Applicable
8. Plan of Distribution......................... Plan of Distribution
9. Legal Proceedings............................ Legal Proceedings
10. Directors and Executive Officers............. Management
11. Security Ownership of Certain
Beneficial Owners and Management............. Principal Shareholders
12. Description of Securities to Be
Registered................................... Description of Securities
13. Interest of Named Experts and
Counsel ..................................... Legal Counsel, Experts
14. Information With Respect To
The Registrant; Organization
with Five Years............................. Prospectus Summary;
The Company; Dividend Policy;
Selected Financial Information;
Management's Discussion
Analysis of Financial Condition
and Results of Operations;
Business; Management; Principal
Shareholders; Certain
Transactions; Description of
the Securities.
15. Disclosure of Commission
Position on Indemnification
For Securities Act Liabilities.................... Not Applicable
16. Description of Business....................... Business of the Company
17. Description of Property....................... Business of the Company
18. Interest of Management and Others
in Certain Transactions....................... Certain Transactions;
Principal Shareholders
19. Certain Market information.................... Risk Factors; Description
of Securities; Plan of
Distribution
20. Remuneration of Directors and Officers........ Remuneration
21. Financial Statements.......................... Financial Statements
PROSPECTUS
PPA TECHNOLOGIES, INC.
1,000,000 Units,
Each consisting of One Share of Common Stock
and One Class A Redeemable Common Stock Purchase Warrant,
offered at a price of $6.00 per Unit
-----------------------------
1,000,000 Units (the "Units")offered hereby on a best efforts basis for a
maximum of ninety (90) days(the "Offering"), each Unit consisting of one share
of common stock, no par value, (hereinafter referred to as "Share" or "Share of
Common Stock") and one "Class A" Redeemable Common Stock Purchase Warrant
(hereinafter referred to as the "Warrants" or "Redeemable Warrants"),
exercisable into one-half share of common stock per warrant for a period of one
year from the effective date ("Effective Date") of the registration statement of
which this Prospectus ("Prospectus") is a part at an exercise price of $10.00
per share, are being offered by PPA Technologies, Inc. (the "Company" or "PPA").
The Warrants are redeemable at the Company's option commencing 90 days after the
Effective date of the registration statement (the "Registration Statement") of
which the Prospectus is a part) upon 30 days notice of redemption to the Warrant
holders at $.05 per Warrant if the closing bid price of the Common Stock in the
over-the-counter market as reported by the National Association of Securities
Dealers, Inc. ("NASD") shall have for a period of 30 consecutive trading days
ending within 15 days of the notice of redemption average in excess of $10.00
per share (subject to adjustments in the case of a stock split, stock dividend,
recapitalization or similar event). Since it is the Company's present intention
to exercise such right, Warrant holders should presume that the Company would
call the Redeemable Warrants for redemption if such criteria are met. The
Redeemable Warrants are immediately detachable and separately tradable from the
Units upon issuance. It is anticipated that the Shares of Common Stock and
Redeemable Warrants will be included on the NASDAQ Electronic Bulletin Board
Market ("Bulletin Board") under the symbols "PPAS" and "PPAW", respectively.
With respect to this best efforts offering of 1,000,000 Units, there will be no
escrow account and no minimum purchase.
Prior to the offering, there has been no market for the securities of the
Company. There can be no assurance that a market for the Company's securities
will develop after completion of this offering or, if developed, that it will be
maintained. As a consequence of such a limited market, a purchaser of the Shares
may be unable to sell the Shares when desired and may have to hold the Shares
indefinitely. See "Risk Factors - Limited Trading Market." The determination of
the offering price of the Shares was made arbitrarily by the Company. See "Risk
Factors - Arbitrary Offering Price."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION TO
PUBLIC INVESTORS. A PROSPECTIVE PURCHASER MAY LOSE HIS TOTAL INVESTMENT. 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 ADEQUACY OR ACCURACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
=================================================================
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<CAPTION>
Price to Underwriting Proceeds to
Public Discounts Company(1)
-----------------------------------------------------------------
<S> <C> <C> <C>
Per Unit $6.00 $0.48(2) $5.40
-----------------------------------------------------------------
Total $6,000,000 $480,000 $5,520,000
(Maximum)
=================================================================
</TABLE>
(1) Before deducting expenses payable by the Company in connection with the
Offering estimated at approximately $225,000 if the maximum is sold. These
expenses include filing fees, printing, legal and accounting fees. Net proceeds
to the Company after such expenses are estimated to be $5,295,000 if the maximum
is sold.
(2) The underwriting discount of $0.48 per Unit will be paid to selected NASD
member broker/dealers, if any, who may participate in this best efforts
offering.
The date of this Prospectus is June __, 2000.
AVAILABLE INFORMATION
The Company intends to file with the Securities and Exchange Commission (the
"Commission"), New York, New York, a registration statement on Form SB-2 under
the Act with respect to the Units offered hereby. For further information about
the company and the securities being offered hereby, reference is made to the
registration statement and to the financial statements and exhibits filed as a
part thereof. Statements contained in this Prospectus as to the contents of any
contract or any other document are not necessarily complete, and in each
instance, reference is made to the copy of such contract or document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including exhibits
thereto, may be inspected without charge at the Commission's principal office in
Washington, D.C., and the Northeast Regional Office located at 7 World Trade
Center, New York, New York and copies of all or any part thereof may be obtained
from such offices after payment of the fees prescribed by the Commission.
REPORTS TO SHAREHOLDERS
The Company intends to furnish its shareholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year, commencing with the next fiscal year. In addition, the Company
may, from time to time, issue unaudited interim reports and financial
statements. As a result of the effectiveness of the registration statement of
which this Prospectus is a part, the Company will incur a reporting obligation
under the Securities Exchange Act of 1934.
Glossary
Coalescent - A liquid material which when exposed to the environment becomes a
solid.
Reactive Coalescent - A coalescent which becomes solid due to a chemical
reaction.
Volatile Organic Compound ("VOC") - liquid substances which evaporate when
exposed to the environment.
Coupling Agent - A material which can either bond two materials together with
greater strength or, alternatively, can also serve to bond two different
materials together more weakly.
Resin - Organic polymer.
Halogenated - Compounds containing a halogen, e.g. chlorine or flourine.
Phr - Parts per hundred of resin.
V0 - Flame spread rate.
Plate-out - Bloom to the surface of mobile phases.
Cross-linking - Establishment of chemical bonds between different substances.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed information
and financial statements, including the notes thereto, appearing elsewhere in
this Prospectus and, accordingly, should be read in conjunction with such
information and statements.
The Company
PPA Technologies, Inc. (the "Company", "PPA Technologies" or "PPA") was
incorporated on July 22, 1994 under the laws of the State of New Jersey. The
Company's principal offices are located at 163 South St., Hackensack, NJ 07601
and its telephone number is (201) 457-1221.
PPA Technologies was formed to develop and manufacture innovative specialty
chemical products with applications in the plastics and coatings industries.
After research, development and testing, PPA has begun to sell certain products.
In general, PPA's products improve processing and/or the end product. This
is accomplished through its proprietary Coupling Agents and Reactive
Coalescents. In these areas, the Company's products are an advance in
environmental performance, product performance, cost performance, or, in many
cases, performance in more than one of these parameters. (See "Business of the
Company").
The Offering
The Company is offering hereby on a best efforts basis a maximum of
1,000,000 Units at an offering price of $6.00 per Unit. Each Unit is comprised
of one (1) share of common stock (no par value per share) and one (1) Class A
redeemable common stock purchase warrant exercisable for five years from the
Effective Date at an exercise price of $10.00 per common share and allowing the
purchase of one-half (1/2) share. The Redeemable Common Stock Purchase Warrants
(hereinafter referred to as the "Warrants" or "Redeemable Warrants") are
redeemable at the Company's option commencing (90 days after the Effective Date)
upon 30 days notice to the Warrant holders at $.05 per Warrant if the closing
bid price of the Common Stock in the over-the-counter market as reported by the
NASD shall have for a period of 30 consecutive trading days ending within
fifteen days of the notice of redemption average in excess of $10.00 per share
(subject to adjustments in the case of a reverse stock split, stock dividend,
recapitalization or similar event). The Redeemable Warrants are immediately
detachable and separately tradable from the Units upon issuance. The offering
price of the Units and the exercise price of the Redeemable Warrants was
determined by the Company. Such prices bear no relation to the book value,
assets or earnings of the Company, or to any other generally recognized
objective criteria of value.
Common Stock:
On June 20, 1996, the stockholders approved an increase in the authorized
capital to 10,000,000 Shares of Common Stock, no par value, and 1,000,000 shares
of preferred stock having a par value of $100.00 each. On June 28, 1996 the
Board of Directors effected a 1,000 to 1 stock split upon the filing of the
Amendment of the Certificate of Incorporation authorized by the stockholders.
All financial and stock related numbers set forth herein reflect this stock
split, except where otherwise specifically stated.
Common Stock Outstanding at December 31, 1999 ...... 1,697,500(1)(4)
Preferred Stock Outstanding at December 31, 1999.... 4,806(1)
To be offered(2)
Maximum ...................................... 1,000,000
To be outstanding after the Offering(2)
Maximum ...................................... 2,697,500
Use of Proceeds......... The Company intends to use the maximum net proceeds
of this offering principally for production equipment,
salaries, inventory, advertising, administrative overhead
and working capital. The maximum proceeds of this Offering
will enable the Company to expand marketing of its entire
line of products, and to build an inventory of its products.
The minimum proceeds of this Offering would be used as
working capital and payment of debt. (See "Use of
Proceeds.")
Risk Factors and Dilution ..... Prospective Investors should carefully consider
the factors described under the captions "Risk
Factors" and "Dilution."
Bulletin Board Proposed Listing Symbol (3) .....................PPAS, PPAW
--------------
(1) Does not include an aggregate of 500,000 shares reserved for issuance under
the Company's Stock Grant and Stock Option Plans nor does it include options on
1,280,000 shares, exercisable at $1.00 per share, and on 120,000 shares at
$1.50, held by management.
(2) Does not include the exercise of any of the Redeemable Warrants contained in
said Units, nor the exercise of any Underwriter's Warrants or the Unit Warrants
contained in the Units issuable upon the exercise of the Underwriter's Warrants,
nor the outstanding warrants held by current shareholders.
(3) The Company intends to apply for and anticipates listing on the Bulletin
Board Market, but there can be no guarantee that such listing will be approved,
or if approved that such listing will be maintained, or if listed that a market
will develop or if developed, that such market will be sustained.
(4) Recent convertible bond conversions have created an additional 82,880 shares
of freely tradable common stock.
SUMMARY FINANCIAL INFORMATION
The following table summarizes certain selected financial data of the Company
and is qualified in its entirety by the more detailed financial statements
contained elsewhere in this Memorandum.
Income Statement:
<TABLE>
<CAPTION>
For the
Nine Months period from
Year Ending Year Ending Year Ending Ended Inception, June 22
June 30, June 30, June 30, March 31, 1994 to March 31,
1997 1998 1999 2000 2000
<S> <C> <C> <C> <C> <C>
Sales 131,335 148,537 101,272 19,061 786,758
Cost Of Goods 61,453 95,687 54,696 5,894 500,334
------- ------- ------ ------- --------
Gross Profit 69,882 52,850 46,576 13,167 286,424
Operating Expenses 211,080 1,029,258 426,237 234,710 1,455,179
Non-cash
Compensation -0- 500,000 -0- -0-
500,000
Other Income -0- -0- -0- -0- -0-
Other Expenses 3065 43,385 47,160 27,137 120,747
Net Profit(Loss) (144,263) (1,019,793) (426,821) (354,868)
From Operations(2,214,757)
Including Loss
Attributed From
Non-Cash Compensation
Per share (0.15) (0.15) (0.09) (0.08) (0.49)
Shares Outstanding 3,355,067 3,355,067 4,516,291 4,516,291 4,516,291
Dividends -0- -0- -0- -0- -0-
</TABLE>
Balance Sheet
as of: March 31
2000 As Adjusted(1)
Maximum
Cash And Cash Equivalents 1,414 5,296,414
Working Capital (deficit) (1,238,920) 4,056,080
Total Assets 341,409 5,636,409
Current Liabilities 1,296,316 1,296,316
Long Term Debt -0- -0-
Stockholders' (deficit) (954,907) 4,340,093
Equity
(1) Gives effect to the issuance and sale of the maximum of 1,000,000 Units
offered hereby and the receipt of the estimated net proceeds ($5,211,000 if
the maximum is sold) before their application. See "Use of Proceeds".
RISK FACTORS
The Units being offered hereby are speculative and involve a high degree of
risk. In addition to the other information in this Prospectus, prospective
investors, prior to making an investment, should carefully consider the
following risks and speculative factors inherent in and affecting the business
of the Company and this Offering.
Accumulated Losses; History of Operating Losses; Explanatory Paragraph
Within Accountants' Opinion. The Company commenced in July of 1994. In order to
execute its business strategy and develop new products, the Company will require
significant funds. Increased spending and decreased sales levels resulted in a
net loss of $426,821 for the fiscal year ended June 30, 1999, and a loss of
$210,814 for the nine months ended March 31, 2000 and may result in future
losses as the Company will incur significant expenses in connection with
research and development of its products, development of its direct and indirect
selling and marketing strategies, and the hiring of additional personnel. There
can be no assurance that the Company will be profitable in the future or that
the net proceeds of this Offering, together with any funds provided by
operations and presently available capital, will be sufficient to fund the
Company's ongoing operations. At March 31, 2000, the Company's current
liabilities exceeded its current assets by $1,238,920 and its cash balance was
$1,414. At March 31, 2000, the Company's accumulated deficit was $2,214,203
and its stockholder equity deficit was $954,907. The Company is dependent on
generating additional sales to improve cash flow, and it is possible that the
Company will require additional debt or equity bridge financing prior to
completion of this Offering. The Company believes its current operating funds,
along with the proceeds of the Offering after deducting amounts used to repay
debt, will be sufficient to finance its cash requirements for at least the next
12 months. See "Use of Proceeds." If the Company has insufficient funds, there
can be no assurance that additional financing can be obtained on acceptable
terms, if at all. The absence of such financing would have a material adverse
effect on the Company's business, including a possible reduction or cessation of
operations. The report of the Company's independent accountants on the Company's
financial statements as of June 30, 1999 contains an explanatory statement
concerning the Company's ability to continue as a going concern. See "Financial
Statements-Report of Independent Auditors."
No Trading Market. There is no trading market for the Company's Common
Stock and there is no assurance that such a market will develop after this
Offering, or if such a market develops, that it will be maintained. Holders of
the Shares may, therefore, have difficulty in selling their stock should they
desire to do so and should be able to withstand the risk of holding their Shares
indefinitely. See "Description of Securities."
Broad Discretion of Management in Allocation of the Proceeds of Offering. A
substantial portion of the proceeds of the offering will be used for general
working capital. If the maximum number of Shares is sold, working capital will
comprise 10.6% of total net proceeds if the maximum is sold, and up to 84% of
net proceeds if only 10% of the maximum is sold. Management will have broad
discretion as to the use of such proceeds and management reserves the right to
reallocate all proceeds to working capital. See "Use of Proceeds."
Additional Capital. If only 10% of the maximum is sold, the Company would
use the proceeds solely to bolster working capital and pay a note that is in
default while the Company would continue to seek other sources of funding for
its other planned endeavors. The Company believes that the maximum proceeds of
this offering will allow the Company to meet all of its presently planned future
operations for at least twelve months. If les than the maximum is raised, which
the Company presently believes to be the most likely scenario, the Company would
be required to pursue its development plans at a significantly reduced rate. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company would also be forced to rely upon unrelated third
parties to manufacture a much greater percentage of its products than would
otherwise be the case. If less than the maximum is sold, the Company would also
reduce planned expenditures for marketing and advertising. If these reduced
expenditures were to continue indefinitely, the Company may be unable to
penetrate its target markets and would thus be adversely affected. However, a
significant portion of the proceeds will be used to develop and improve product
lines. Thus, while the Company has no plans that would require it to seek
additional funding if the maximum is sold, it may be required to do so to
complete or accelerate these development programs. There can be no assurance
that such funding will be available on terms acceptable to the Company, and the
failure to procure such funding on acceptable terms could materially and
adversely effect the Company. If an amount is raised that is less than the
maximum, the Company would also allocate its resources, more or less,
proportionately between the various uses set forth in the "Use of Proceeds"
section of this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources."
Limitations Imposed by Environmental Regulation. Federal, state and local
environmental laws govern air emissions and discharges into water and the
generation, transportation, storage, and treatment and disposal of solid and
hazardous waste. These laws establish standards governing most aspects of the
construction and operation of the Company's facilities, and often require
multiple governmental permits before these facilities can be constructed,
modified, or operated. There can be no assurance that all required permits will
be issued for the Company's projects under development or for future projects,
or that the requirements for continued environmental regulatory laws and
policies governing their enforcement may change, requiring new technology or
stricter standards for the control of discharges of air or water pollutants, or
for solid or hazardous waste or ash handling and disposal. Such future
developments could affect the manner in which the Company operates its plants
and could require significant additional expenditures to achieve compliance with
such requirements. It is possible that compliance may not be technically or
economically feasible. To the date of this Prospectus, the Company has not
experienced any delays or costs associated with environmental regulations that
have materially effected the Company's business. See "Business of the Company
Governmental Regulation".
Untested Marketing Strategy. To date, the Company has experienced
development and shipment delays due to a lack of working capital and resultant
inadequate staffing and there is no assurance that such delays will not
continue. To date, the Company's product marketing efforts have been very
limited and the Company has not been able to capitalize on the interest
generated by said marketing efforts. There is no assurance that if the Company
applies the proceeds of this offering to marketing and distribution that these
problems will disappear. See "Business of the Company - Marketing".
Dependence On Others; Limited Manufacturing Capability. At its present
stage of development, the registrant has developed and continues to develop new
chemicals and new uses for existing chemicals by combining them with chemicals
proprietary to the Company. The Company's strategy for the research,
development, marketing, distribution, and commercialization of its products
entails entering into various arrangements with third party toll manufacturers,
(other companies which the Company pays to manufacture the Company's products or
components thereof) and it is dependent upon the ability of these outside
parties to perform their responsibilities. The Company may also enter into
marketing agreements and arrangements with various third parties, rely on
collaborative partners to conduct research efforts and trials, and to
manufacture and distribute certain of the Company's products. The Company does
not currently have in place all such relationships. The Company does have those
relationships in place which are presently deemed adequate to support the
Company's business for the next twelve months, including toll manufacturing of
proprietary chemicals, and end users in the ink, paint, and plastic industries
which will run field tests on the Company's products. There can be no assurance
that the Company will be successful in establishing all the necessary
collaborative arrangements or that, if established, the arrangements will be
successful or on terms that will enable the Company to achieve profitability.
See "Business of the Company".
Risks Related To Low-Priced or Penny Stocks. In addition, if the trading
price of the Common Stock were to fall below $5.00 per share, trading in the
Common Stock would also be subject to the requirements of certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in the Common Stock, which could
severely limit the market price and liquidity of the Common Stock and the
ability of purchasers in this offering to sell the Common Stock in the secondary
market. See "Description of Securities"; "Underwriting".
Business Dependent Upon Key Employee. The business of the Company is
specialized. The continued employment of Gerald Sugerman is critical to the
Company's proposed product development and the conduct of the Company's
business. Upon closing, the Company intends to procure key man insurance
insuring Mr. Sugerman. There can be no assurance that the Company will be able
to retain Mr. Sugerman or other equally qualified individuals to run the affairs
of the Company. See "Management".
Use of Proceeds to Benefit Insiders. The law firm of the President of the
Company, Roger Fidler, will receive $150,000 from the gross proceeds as an
expense of the offering for services associated with this offering if the
maximum is sold. Gerald Sugerman, the Executive Vice President, Secretary and
Treasurer of the Company, will receive from the net proceeds of the offering
$200,000 for payment of future salary and redemption of preferred stock if the
maximum is sold. Otherwise, the proceeds devoted to those purposes will be paid
in amounts equal to the maximum amount described in the "Use of Proceeds"
section of this Prospectus multiplied by the ratio of the amount of the offering
actually sold divided by $6,000,000. The amounts to be paid to the insiders
which are not paid by the proceeds of this offering will be paid from either the
net profits of the Company, if any, or the proceeds of future financing. See
"Use of Proceeds".
Potential Conflict of Interest. The Law Firm of Roger L. Fidler is a sole
proprietorship owned and operated by Roger L. Fidler, President of the Company,
and this law firm drafted this Prospectus. Since Mr. Fidler will be the
recipient of some of the benefits which will accrue from the successful
conclusion of this offering, there is a potential conflict of interest in that
he is responsible in both capacities for assuring the accuracy of this
Prospectus. See "Management".
Thin Management. The Company employs two officers, one of whom, the
President, is only a part time employee. This thin management exposes the
Company to the risks associated with being undermanaged. See "Management".
No Cumulative Voting - Control by Management. The Company's Certificate of
Incorporation does not provide for cumulative voting. The Company's present
management will own approximately 65.49% of the Company's outstanding Common
Stock following the offering, if the maximum is sold. Thus, the Company's
present management will be able to continue to elect all of the Company's
directors and control the Company. Thus, Management will be able to continue to
control the election of all of the Company's directors and control the Company.
See "Principal Shareholders" and "Description of Securities."
Lack of Dividends. The Company has not paid dividends since its inception
and does not intend to pay any dividends in the foreseeable future, but intends
to retain all earnings, if any, for use in its business operations. Prospective
investors who seek dividend income from their investment should not purchase the
Shares offered by this Prospectus. See "Description of Securities--Dividends"
Immediate Substantial Dilution. The present shareholders have acquired a
controlling interest in the Company at a cost substantially below the offering
price of the Shares. Upon the completion of the offering, investment in the
Company's Common Stock will result in an immediate substantial dilution of
approximately $4.46 per share (74.3%) if the maximum number of Units is sold at
$6.00 per Unit, while the present shareholders will realize an immediate
increase in the net tangible book value of approximately $2.21 per share (36.8%)
if the all Units are sold. The foregoing assumes that no Redeemable Warrants are
exercised. See "Dilution."
Inexperience of Management. Gerald Sugerman is the originator of the
Company's business concept and has run the Company since inception. No officer
of the Company has had, prior to the organization of the Company, experience in
the managerial aspects of the inks, paints, and plastics polymer additives
industry. Since the business is relatively new, the experience of management can
give no assurance that the business will continue to succeed. See "Management."
Arbitrary Offering Price. The Offering Price at which the Units are being
offered has been arbitrarily determined by the Company. There is no relationship
between the said prices and the Company's assets, book value, net worth or any
other economic or recognized criteria of value.
Sales Pursuant to Rule 144. Officers, Directors and/or affiliates of the
Company hold 1,697,500 Common Shares of the Company, all of which are, subject
to quantity limitations discussed below, available for sale. Such shares are
"restricted securities" under Rule 144, as promulgated by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, which
shares may not be freely resold. Rule 144 provides, in essence, that any
shareholder of the Company, after holding restricted securities for a period of
one year, may, every three months, sell them in an unsolicited brokerage
transaction in an amount equal to 1% of the Company's outstanding Common Shares,
or the average weekly trading volume, if any, during the four weeks preceding
the sale. After two years, non-affiliated shareholders holding restricted
securities are no longer subject to the 1% limitation and may sell unlimited
amounts of shares they own. If a substantial part of the shares which can be
sold were so sold, the price of the Company's Common Shares might be adversely
affected. (See "Principal Shareholders" and "Plan of Distribution")
Product Protection and Infringement. The Company relies on a combination of
patent and trade secret laws, nondisclosure and other contractual agreements and
technical measures to protect its proprietary rights in its products. The
Company has applied for several patents, both domestic and foreign, and will be
applying for several more patents. Such protection may not preclude competitors
from developing products with features similar to the Company's products. The
Company believes that its products, trademark and other proprietary rights do
not infringe on the proprietary rights of third parties. There can be no
assurance, however, that third parties will not assert infringement claims
against the Company in the future. The successful assertion of such claims would
have a material adverse effect on the Company's business, operating results and
financial condition. See "Business of the Company-Proprietary Rights."
Possible Difficulties In Obtaining Supplies. The success of the
Company's additive products will depend on the ability of the Company to obtain
significant amounts of raw materials at affordable prices. The Company may
encounter shortages or delays in obtaining adequate amounts of raw materials,
and the Company has not yet entered into an arrangement pursuant to which it
will ensure adequate access to those materials. The failure of the Company to
obtain adequate materials at affordable prices could have a material adverse
affect on the Company's ability to produce and deliver its products.
Revenue Concentration from a Small Group of Customers. The Company
presently, and historically, derives the majority of its revenues from a small
group of customers, or a single customer. The Company expects this trend to
continue for some time. The Company has experienced material losses related to
one of it's customers inability to pay for the Company's products. As the
Company's customer base expands it may be subject to increased credit risk. Such
concentration exposes the Company to the risk of severe fluctuations in revenue,
cost of goods sold and business continuity. The inability of one of these
significant customers to satisfy its obligations to the Company could have an
adverse material affect on the Company. See "Financial Statements"
USE OF PROCEEDS
The net proceeds to be realized by the Company from the sale of the maximum
number of Units offered hereby, after deducting all commissions and expenses of
the offering, is estimated at $5,295,000. Included in the expenses of this
offering are the commissions and projected legal fees, accounting fees, filing
fees and printing costs. No officer, director or affiliate of the Company, or
associated person of them, will receive any portion of the gross proceeds of
this offering, except for legal fees owed to the law firm of its President to be
paid from gross proceeds as an expense of the offering in an amount not to
exceed $150,000, if the maximum is sold, and payments from the net proceeds to
Gerald Sugerman, Vice President and Secretary of the Company, for future
payments due under his employment contract, which provides for payments of
$10,000 per month, and for redemption of his preferred stock not to exceed a
combined total of $200,000, if the maximum is sold. If less than the maximum is
sold these amounts will be reduced to an amount equal to the maximum amount
which these persons would have been paid if the maximum was sold multiplied by
the ratio of the amount sold in this offering divided by the maximum. (See
"Remuneration of Officers and Directors") These funds will be used by the
Company in substantially the following manner:
Maximum
ADMINISTRATIVE
Officers Salary $200,500 3.84 %
Equipment 6,000 0.12
Supplies 2,000 0.04
Salaries 40,000 0.77
Overhead 60,000 1.15
------ ------
308,500 5.92
PRODUCTION & CUSTOMER SERVICE
Salaries 240,500 4.62
Equipment 1,793,500 34.42
Inventory 451,500 8.66
------- ------
2,485,500 47.70
PRODUCT DEVELOPMENT
Equipment 301,000 5.78
Supplies 175,500 3.37
Salaries 110,500 2.12
------- ------
587,000 11.27
MARKETING
Advertising 501,500 9.62
Salaries 652,000 12.51
Travel and Entertainment 50,000 0.96
------ ------
1,203,500 23.09
WORKING CAPITAL 551,600 10.58
DEBT REPAYMENT 74,900 1.44
TOTAL ------------------------ $5,211,000 100%
In the event that the maximum is not raised, and at the present time the
Company is forecasting that it will not raise that maximum, the Company will
allocate the proceeds first to repay debt, and would then apportion the
remaining proceeds more or less proportionately to the above stated uses in the
relative percentages set forth above.
Since the proceeds of this Offering, will be applied over time, the actual
expenditure of such proceeds for any purpose could vary significantly from the
anticipated expenditures described above. The Company reserves the right,
therefore, to reallocate proceeds among the uses described above, including to
working capital, depending upon factors such as the results of the Company's
marketing efforts, the Company's success in developing new products, and
technological advances in the industry.
The net proceeds of this offering may not be used immediately. Any net
proceeds of this offering that are not expended immediately will be deposited
only in short-term interest bearing obligations of the United States government.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
DIVIDEND POLICY
The payment by the Company of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company has not paid any
dividends to date and does not anticipate that it will be in a position to pay
any dividends in the foreseeable future.
DILUTION
As of March 31, 2000, there were 1,697,500 of the Company's Common Shares
issued and outstanding. See "Description of Securities." If all Units
(1,000,000) offered hereby are sold there will be 2,697,500 Shares outstanding.
As of March 31, 2000, the approximate net tangible book value of the
Company's common stock (total tangible assets less total liabilities) was
$(1,140,257) or $(.67) per share. See "CAPITALIZATION." Giving effect to the
sale of 1,000,000 Units and receipt of the net proceeds therefrom, the pro forma
net tangible book value of the Company would be approximately $4,154,743, or
$1.54 per share. This represents an immediate dilution of $4.46 (74.3%)for each
share of Common Stock purchased by new investors and an immediate increase of
$2.21 (36.8%) per share to existing shareholders.
Maximum
Sale price per unit $6.00 (100.00%)
Net tangible book value per unit
before offering............ $(0.67) ((11.2%))
Increase to present shareholders
in net tangible book value
attributable to sale of
shares offered........... $2.21 (36.8%)
Pro Forma net tangible book value
per share after offering... $1.54 (25.7%)
Dilution of net tangible book
value per share to new
investors.................. $4.46 (74.3%)
The officers and directors of the Company have acquired their common
shares for cash of $101,750. If the maximum number of Shares is sold, the new
investors shall acquire 1,000,000 shares (about 37.1% of the total outstanding
common shares) at a price of $6.00 per share or a total of $6,000,000. The
following table summarizes the number of shares acquired from the Company and
the aggregate consideration paid by the existing shareholders and to be paid by
new shareholders in this Offering:
<TABLE>
<CAPTION>
Number of Percentage Aggregate Aggregate
Shares Acquired of Shares Consideration Consideration
from Company Held by Group Paid for Shares Paid as a Percentage
Existing
<S> <C> <C> <C> <C>
shareholders........1,697,500 62.9% $236,750 3.8%
New shareholders....1,000,000 37.1% $6,000,000 96.2%
(Maximum)
Total...............2,697,500 100.0% $6,236,750 100%
(Maximum)
</TABLE>
SELECTED FINANCIAL INFORMATION
The following table sets forth certain selected financial data for the
years ended June 30, 1997, 1998, and 1999, and the fiscal quarter ended March
31, 2000. This information is derived from the Company's financial statements
which appear elsewhere in this Prospectus. The selected financial data is
qualified by reference to, and should be read in conjunction with, the Company's
financial statements and notes thereto included elsewhere in this Prospectus and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS".
Income Statement:
<TABLE>
<CAPTION>
For the
Nine Months period from
Year Ending Year Ending Year Ending Ended Inception, June 22
June 30, June 30, June 30, March 31, 1994 to March 31,
1997 1998 1999 2000 2000
<S> <C> <C> <C> <C> <C>
Sales 131,335 148,537 101,272 19,061 786,758
Cost Of Goods 61,453 95,687 54,696 5,894 500,334
------- ------- ------ ------- --------
Gross Profit 69,882 52,850 46,576 13,167 286,424
Operating Expenses 211,080 1,029,258 426,237 234,710 1,455,179
Non-cash
Compensation -0- 500,000 -0- -0-
500,000
Other Income -0- -0- -0- -0- -0-
Other Expenses 3065 43,385 47,160 27,137 120,747
Net Profit(Loss) (144,263) (1,019,793) (426,821) (354,868)
From Operations(2,214,757)
Including Loss
Attributed From
Non-Cash Compensation
Per share (0.15) (0.15) (0.09) (0.08) (0.49)
Shares Outstanding 3,355,067 3,355,067 4,516,291 4,516,291 4,516,291
Dividends -0- -0- -0- -0- -0-
</TABLE>
Balance Sheet
as of: March 31
2000 As Adjusted(1)
Maximum
Cash And Cash Equivalents 1,414 5,296,414
Working Capital (deficit) (1,238,920) 4,056,080
Total Assets 341,409 5,636,409
Current Liabilities 1,296,316 1,296,316
Long Term Debt -0- -0-
Stockholders' (deficit) (954,907) 4,340,093
Equity
(1) Gives effect to the issuance and sale of the maximum of 1,000,000 Units
offered hereby and the receipt of the estimated net proceeds ($5,295,000 if
the maximum is sold) before their application. See "Use of Proceeds".
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 2000 and as adjusted to give effect to the issuance and sale of the
shares upon the closing of this offering:
Actual As Adjusted
(Maximum)
Long Term Liabilities 0 0
Stockholders' Equity:
Preferred Stock, 480,600 480,600
$100 par value per
share, authorized
1,000,000 shares,
issued and outstanding
4,806 shares; as
adjusted 4,806
Common Stock, no par
value authorized
10,000,000 shares;
issued and outstanding
1,697,500 shares; as
adjusted 2,697,500 779,250 6,074,250
Deficit Accumulated During
Development Stage (2,214,757) (2,214,757)
Total Stockholders' Equity (954,907) 4,340,093
Total Capitalization (954,907) 4,340,093
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1998 AND 1999 AND FOR
THE NINE MONTHS ENDED MARCH 31, 1999 AND 2000 AND FOR THE PERIOD FROM INCEPTION
(JULY 22, 1994) TO MARCH 31, 2000.
Development stage activities.
The Company has been a development stage enterprise from its inception July
22, 1994, to March 31, 2000. The Company develops and manufactures innovative
specialty chemical products with applications in the plastics and coatings
industries. To date the Company has had minimal sales of these additives
representing limited quantities produced from its research and development
facilities in Hackensack, New Jersey.
During this period, management devoted the majority of its efforts to
obtaining new customers for its products, developing sources of supply,
developing and testing formulas, pursuing and finding a management team to begin
the process of: completing its marketing goals; furthering its research and
development for its products; marketing limited quantities of the Company's
products; completing the documentation for and selling initial shares through
the Company's private placement; and completing the documentation for the
Company's initial public offering. These activities were funded by the Company's
management and investments from stockholders and borrowings from related third
parties. The Company has not yet generated sufficient revenues during its
limited operating history to fund its ongoing operating expenses, repay
outstanding indebtedness, or fund its product development activities. For the
period of inception July 22, 1994, to March 31, 2000, the Company completed the
development of its first product line. The recent acquisition and construction
of operating assets positions the Company to produce initial quantities of
products with present production facilities. There can be no assurance that
sales to utilize such capacity will develop. Further investments into processing
and production as defined in the Company's operating plan will significantly
reduce the cost of preparation, processing and production by enabling the
Company to operate without reliance upon outside vendors and suppliers.
During this developmental period, the Company has been financed through
officer's loans with a balance of $139,349 from Roger Fidler, of which $100,000
of the aggregate debt was converted to shares of common stock through the
exercise of 100,000 options at $1.00. In addition, Mr. Sugerman either advanced
to the Company or paid on behalf of the Company expenses aggregating $232,962 of
which all but $183,556 was converted to shares of preferred stock as of March
31, 2000. The Company also financed its activities through the sale of $372,500
in 12% bridge notes and through the sale of shares of common stock aggregating
$236,750. Although, the sales of limited quantities of developed products were
primarily in the ink business with test quantities of additives and paints being
supplied for testing by paint manufacturers, retailers and volume users of these
products, it is expected that the near term significant sales will come from
customers using the Company's paint additives and the sale of paints.
Results of Operations for the year ended June 30, 1999 as compared to the
year ended June 30, 1998
For the year ended June 30, 1999, the Company generated net sales of
$101,272 as compared to $148,537 for the year ended June 30, 1998 representing
an decrease of $47,265 or 31.8%. Of these sales approximately 60% were to two
large customers. Sales decreased over the same period last year as a result of a
return of approximately $24,000 in merchandise sold during the year by one large
customer and writing of approximately $11,000 I sales to the same customer as a
bad debt. The Company's cost of goods sold for the year ended June 30, 1999 was
$54,696 or 54.0% of sales as compared to $95,687 or 64.4% of sales for the year
ended June 30, 1998.Cost of goods sold for the year ended June 30, 1999,
includes a loss on nonreturned inventory from this one customer of approximately
$4,400 and a return to inventory of $9,600 that was determined to be usable. The
Company's gross profit on sales was approximately $ 46,576 or 46.0% of sales as
compared to $52,850 or 35.6% of sales for the year ended June 30, 1998. The
decrease in gross profit is the result of having produced very limited
quantities of additives and test quantities of paints, paint additives and Ink
additives for sales to potential customers for testing purposes. The decrease in
gross profit is also the result of $4,400 charge to cost of goods sold from the
return of the sale.
The Company's general and administrative costs aggregated approximately
$269,660 or for the year ended June 30, 1999 as compared to $429,109 for the
year ended June 30, 1998 representing an decrease of $163,902. This decrease
represents a scale back of sales help and support staff that were hired to test
a marketing sales program and reflects a reduction in office staff and
production help with a redirection of providing test quantities of products to
large purchasers for their evaluation. The reduction in general and
administrative expenses is enables the management of the Company to provide the
working capital from personal funds until the completion of the public offering.
The Company expended monies for general and administrative expenses as follows:
$117,257 in wages; $42,192 for rent; $9,190 in legal and professional related to
the public offering; $125,565 for office expense; 33,269 in laboratory and
supplies expenses, research and development of $54,644; depreciation of $33,794;
and a write off to bad debt expense of $57,139.
Results of Operations for the nine months ended March 31, 2000 as compared to
the nine months ended March 31, 1999
For the nine months ended March 31, 2000, the Company generated net sales
of $19,061 as compared to $94,752 for the nine months ended March 31, 1999
representing an decrease of $75,691 or 80.0%. Of these sales approximately 90%
were to two large customers. Sales decreased over the same period last year as a
result of a concentration of efforts towards producing samples for specific
targeted clients. The Company's cost of goods sold for the nine months ended
March 31, 2000 was $5,894 or 30.9% of sales as compared to $62,491 or 65.9% of
sales for the nine months ended March 31, 1999. The Company's gross profit on
sales was approximately $13,167 or 69.1% of sales as compared to $32,261 or
34.0% of sales for the nine months ended March 31, 1999. The increase in gross
profit is the result of having produced very limited quantities of additives and
test quantities of paints and paint additives for sales to potential customers
for testing purposes.
The Company's general and administrative costs aggregated approximately
$234,710 or for the nine months ended March 31, 2000 as compared to $205,888 for
the nine months ended March 31, 1999 representing an increase of $28,822. This
increase represents additional expenses incurred for distributing samples of the
company's products for tests by potential customers. General and administrative
expenses remains at a level that can be funded by the management of the Company
to provide the working capital from personal funds until the completion of the
public offering. The Company expended monies for general and administrative
expenses as follows: $16,500 in wages; $31,599 for rent; $86,099 for office
expense; $33,000 in professional fees; $67,512 in laboratory supplies and
materials for the production of samples.
Results of Operations for the period of inception (July 22, 1994) to March
31, 2000.
For the period from the Company's inception, July 22, 1994, through March
31, 2000, the Company generated net sales of $786,758. Of these sales
approximately 40% were to two large customers. The Company's cost of goods sold
on sales was approximately 63.6% for the period from the Company's inception
July 22, 1994, through March 31, 2000. The gross profit from sales for this
period from inception to March 31, 2000 is 36.4%. Management believes the gross
profit will improve and stabilize once the Company's manufacturing facilities
become realized at the completion of the public offering and its marketing plans
become fully implemented.
The Company's general and administrative costs aggregated approximately
$2,365,077 for the period from inception July 22, 1994, through March 31, 2000.
Of these initial start-up costs, approximately $580,092 is attributed to wages
and reimbursed expenses of ,Gerald Sugerman; approximately $90,176 in rent;
legal and professional fees of $116,135; filing fees, office expenses including
salaries, outside labor, printing, laboratory and computer supplies of
approximately $915,191; research and development of $169,887; salaries of
approximately $213,085; depreciation of $87,497, commissions of $83,000 and a
write off to bad debt expense of $110,014 for the loss relating to Enviro Ink..
Liquidity and Capital Resources.
The Company's cash balance at June 30, 1999 and March 31, 2000 was $9,539
and $1,414 respectively. Working capital at June 30, 1999 and March 31, 2000 is
negative at $714,139 and $1,238,920 respectively. For the year ended June 30,
1999, working capital was provided by decreases in accounts receivable of $609
and in accounts payable and accrued expenses of $29,167 and was reduced by an
increase in inventory of 29,167. For the nine months ended March 31, 2000,
working capital was provided by a decrease in accounts receivable of $307, a
decrease in inventory of $38,402 and an increase accounts payable and accrued
expenses of $309,818. The Company continued to be funded in part through officer
loans aggregating $797,352. Of which $474,447 was eventually converted to both
shares of common and preferred stock. The Company also financed its activities
through the sale of $372,500 in 12% bridge notes. The Company expended cash as
follows: $181,160 in capital assets; paid security deposits of $5,000; purchased
inventory of $50,190; and funded a related party accounts receivable which was
eventually deemed uncollectable and written off amounting to $99,014 and an
additional accounts receivable of $11,000.
Management believes that it will be able to fund the Company and the
initial cost of the offering from personal resources until the completion of the
initial public offering. The Company is initiating an initial public offering of
1,000,000 Units at $6.00 per Unit for an aggregate of $6,000,000. The Company
will defer the expenses of the Offering until the Offering is completed and the
offering expenses will be deducted from proceeds received therefrom. The
Offering proceeds will be sufficient to satisfy Management's objectives of
purchasing equipment for office, production and product development of
$2,106,000, purchasing supplies for office and product development of $177,000,
financing the payment of administrative, production, and marketing salaries of
$1,240,000, pay advertising of $500,000, purchase inventory of $450,000, pay
overhead of $60,000, pay travel and entertainment expenses of $50,000, provide
working capital of $412,000, pay Underwriter's Discounts of $600,000 and pay
projected offering expenses of $347,000. The Company is currently obligated to
repay $25,000 of the initial 12% bridge notes. This investor has agreed to wait
to be paid out of the offering. The balance of the bridge note holders have
agreed to either convert their notes into stock or to wait and be paid out from
the proceeds of the offering. The balance of the bridge notes does not come due
until December 31, 2001.
If less than the maximum is sold, the Company will be forced to reduce
the number of products which the Company plans to market, and if necessary to
limit the plans to marketing of only one or two products effectively, and if
even less funds are raised to limit the amount spent marketing of that product
or products. The products to be eliminated from marketing would be decided at
the conclusion of the offering based upon management's assessment at that time
of the most promising product or products. In addition, the Company would hire
fewer people, buy less equipment and limit development of new products. The
Company, under such circumstances, might consider the sale of one or more
product lines to fund marketing and development of other product lines.
Management believes that there is not a realistic likelihood of the maximum
being sold. The effect of this to early investors will be that fewer product
lines will be marketed with less resources resulting in slower growth in
revenues that would otherwise be expected. Such slower growth in revenues would
more likely than not result in less demand for the Company's securities with
resultant lower prices for the Company's common stock and warrants and less
liquidity in the market for the Company's securities than would otherwise be the
case.
BUSINESS OF THE COMPANY
SUMMARY
PPA Technologies, Inc., hereinafter referred to as "PPA" or "the Company",
was incorporated in the State of New Jersey in July, 1994 to develop and
manufacture innovative specialty chemical products with broad application in the
plastics and coatings industries. The Company now markets proprietary products
including VOC free coalescents, organometalic coupling agents, and reactive
diluents and has recently launched the marketing of inks, paints and coatings
utilizing the Company's proprietary technologies.
THE INDUSTRY
Industry
The Company operates in two polymer based industries, plastics and
coatings. Each of these industries is vast in total worldwide production and
sales.
The plastic industry is composed of several subsets. However to present a
concept of general size, worldwide sales of polyvinyl chloride ("PVC") exceeded
18 billion dollars in 1995, and those of polyethylene were in excess of 50
billion. Sales by the twenty five largest film and sheet plastics manufactures
were 12.4 billion dollars in 1996. Domestic sales of PVC pipe totaled about 8.7
billion dollars in 1996.
The global paints and coatings market totaled $65 billion in 1995. In
North America alone 4.7 million metric tons were produced in 1995 having a value
of about 15 billion dollars. The top ten producers accounted for about 60% of
the market.
Organometallic Coupling Agents
These coupling agents are organometallic compounds which may be delivered
in liquid, powder or pelletized forms depending primarily upon customer need.
These products are presently used primarily by plastics compounders and
manufacturers of plastic products to obtain improved line speed, faster
throughput, lower operating temperatures and pressures, better dry blend and hot
melt flow, reduced energy requirements, better control over wall/sheet
thickness, higher impact resistance and greater flame retardance.
Since only small proportions (.2 to 2% of the total product mix by weight) of
these compounds are used, worldwide market volumes of coupling agents are quite
low, and total only several million pounds. However, because of the great
benefits to be derived from their use, profit margins on coupling agents are
quite high. Also, the totality of products in which coupling agents could be
beneficially used is vast, including at least 10% of the total plastics, and an
even larger proportion of the coating output worldwide. At present there are
only a few sources of these compounds, one of which is PPA.
Reactive Diluents / Coalescents
Reactive / diluents / coalescents allow resin producers, formulators, and
coatings end-users to utilize Low / Zero VOC solutions in place of current
solvent-based packages. In architectural and industrial coatings, volatile
organic solvents have been historically required and applied to a) dissolve the
resin, and b) to provide coalescing action. These traditional solvents, which
comprise the competing products for the Company's reactive diluents /
coalescents, have markets exceeding $5 billion per year. Historically, they have
been used because of their low price and a lack of concern regarding the
environmental impact of their use, i.e. the consequences of evaporation of the
solvent into the air. With increasing restrictions being placed upon the use of
VOC's because of these environmental concerns the use of solvents is under wide
spread attack and many companies have been attempting to develop replacements
for these solvents in a wide variety of applications. To date such replacements
have been generally unsatisfactory expensive and limited in application. the
Company's reactive diluents basically replace VOCs which contribute little (if
anything) to the finished coating except for ease of application and cost; with
nonpolluting alternatives which add significantly to the product's performance.
The architectural coatings market alone was over 450 million gallons in
1995 out of a total paint and coatings volume of one billion gallons. This
market largely divided into latex and oil based (solvent borne) segments. In
latex based coatings, conventional coalescents typically comprise 15 to 40% of
the complete formulation; in oil based systems, the percentage of solvent used
varies from about 25 to 50% in most products. Displacement of these VOC
requirements by the Company's VOC free alternatives, (3-7% requirements) could
create a market potential in excess of $400 million versus the present
architectural requirement of 67.5 million gallons of coalescents or $918
million. As the Clean Air Act, 42 U.S.C. sections 7401-7671, is further enforced
along with new environmental legislation, the need to replace solvent with
reactive diluents / coalescents will increase.
According to the Chemical Marketing Reporter, October 19, 1995 edition "The
$300 million additives segment is expected to continue to outpace the coatings
business as a whole, and the bulk of this growth comes from the push to reduce
solvent use." As the percentage of solvents in coatings continues to shrink in
favor of water and additives, including reactive coalescents, demand for
reactive coalescents, such as those produced by the company, should increase.
Flame Retardants
Flame retardants comprise 40% to 50% of all additives for plastics
worldwide. Historically, halogenated materials have been the preferred flame
retardants, comprising about 80% of the market. In the past ten years, this
group of chemicals has become the subject of legislated restrictions and in
general has lost market share to less effective additives because of well known
disadvantages: they often cause localized corrosion of metals in direct contact
(e.g. wire and cable), cannot incinerate scrap or used product due to hazardous
fumes generated, and their thermal decomposition and/or combustion results in
toxic fumes. Effective early in 1991, Western Electric banned all use of
halogenated chemicals from its wire and cable coatings.
Flame retardants comprise a significant percentage of all additives for
plastics worldwide. Almost 90% of the $3 billion per year domestic plastic
additives sector is comprised of just four products - plasticizers, flame
retardants, impact modifiers and lubricants. Of the approximately 35 billion
pound annual polyolefin market, about 10% or 3.5 billion pounds contain flame
retardant. At an average loading of 50 phr flame retardant, the 3.5 billion
pounds polyolefins sector translates to about one billion pounds of flame
retardant sold annually.
Halogen-based FR chemicals are added at 15 to 50 phr and are currently sold
at$1.40 to $2.40 per pound. The Company's flame retardants will cost about 40%
less to achieve the same degree of flame retardance. Aluminum and magnesium
hydroxides do not have many of the disadvantages of the halogen compounds
discussed above, but these hydroxides offer limited application., and the need
for as much as 75 to 85 phr in the formulation to achieve a 94V0 UL (a standard
flame spread rate measurement) rating, only a small number of uses are
practical. consequent to the severe degradation of the plastics properties
engendered by the necessity to use such high proportions of filler. Usage of low
levels of the company's organometalic coupling agents in both halogen and
hydrate based flame retarded plastics (0.3- 0.5%), significantly reduces FR
requirements, enhances processability and upgrades physical properties. (See
"The Company's Products - Flame Retardants").
THE COMPANY'S PRODUCTS
Coupling Agents
PPA offers approximately 15 different organometallic coupling agents
available in liquid, powder or pelletized forms. Like their competitor products,
they can be and are used primarily by plastics compounders and manufacturers of
plastic products to obtain improvements such as: higher line speed, faster
throughput, lower operating temperatures and pressures, better dry blend flow
and hot melt flow, reduced energy requirements, better control over wall/sheet
thickness, higher impact resistance and greater flame retardance.
Since all coupling agents are presently proprietary products, the
opportunity for the production of value added products utilizing these compounds
is more than feasible. The overwhelming advantage of the coupling agents in
almost all applications is the ability to produce a more cost effective product
with the coupling agent thereby creating a true "value added" situation enabling
either direct sales of the agent or production of a more finished product at
competitive price advantages in large markets of essentially fungible
commodities. Most purchasers in fact prefer receipt of compounded resins (resins
in to which additives, such as the coupling agents, have been added) rather than
the pure coupling agents (which would then be added to the resin by the end
user). While margins on the value added products are lower than the coupling
agents, the total gross profit from operating a compounding facility is many
times greater than from sale of the coupling agents alone. It is the Company's
intention to move into value added products where feasible.
Our coupling agents have already been successful in extrusion,
injection and blow molding operations, so Management assumes that coupling
agents can be beneficially utilized in a large part of the total plastics
market.
Reactive Coalescents
Approximately 23 reactive coalescent packages have been developed
to-date. These products allow resin producers and coatings end-users to utilize
Zero VOC solutions in place of current solvent-based packages. In architectural
(building) and industrial coatings, volatile organic solvents have been
historically required and applied to a) dissolve the resin, and b) to provide
coalescing action. PPA coalescing packages are 100% solids (after application),
Zero VOC (as measured by present test methodologies), water-reducible systems
that provide all of the necessary dissolution and coalescing of solvent-based
systems, but which are a) without solvents for immediate Clean Air Act
compliance, b) more cost effective since there is no wasted solvent to evaporate
out of the coating, and of considerable importance, and c) generate harder, more
durable films due to chemically reactive cross-linking versus no cross-linking
in organic solvent systems.
Flame Retardants
PPA flame retardants are non-halogenated for health and safety concerns,
and they utilize coupling agents for maximum dispersion efficiency. The end
result allows the end user to: a) use lower cost resin than with alterative
flame retardants, b) run at 10 to 20% higher speed, and at lower temperatures,
and c) only PPA offers a concentrated compound that the customer can add at a
1:1 rate to achieve high resistance such as Vo.
PPA flame retardants are targeted for polyolefins only at this time.
This means high density polyethylene, low density polyethylene, and
polypropylene.
With respect to cost, PPA materials cost will be $0.95 to $1.10 per
pound of compound for large volume purchases. This represents a distinct price
advantage over the competition which typically sells for $2.80 per pound and
requires as much as 45 weight percent in polyolefins to acheive 94 V0. The
anticipated sales volume is 1% of the market for olefins (hydrocarbons
containing at least one double bond) or 10 MM lbs/yr.
PPA flame retardants offer U.L.94 V0 efficacy in 1/16" polypropylene at
just 30 to 35 phr. PPA coupling agents are employed for their large surface
activity which creates the following advantages in comparison to both
halogenated and non-halogenated flame retardants:
1. The ability to use lower cost resin than with alternative flame retardants;
2. The melt index is basically unaffected; 3. Manufacturing processes can run at
10 to 20% higher speeds, and at lower temperatures; and, 4. PPA can offer a
concentrated compound that the customer can add at a 1:1 rate to achieve high
resistance such as V0. (This advantage is in comparison to non-halogenated
additives only).
As with all of the Company's products, the apparent technological superiority
in flame retardant technology has yet to be translated into sales due to, in the
Company's opinion, lack of funds for marketing, advertising, and sales efforts.
Governmental Regulation
As a chemical manufacturer the Company is subject to a wide variety of
local, state and federal regulations. While the Company believes that it is in
compliance with all applicable regulations, there can be no assurance that from
time to time unintentional violations of such regulations will not occur. In the
event of such violations, the company may be subject to fines, injunctive action
and other forms or governmental action which would have a material and adverse
impact on the Company (see Risk Factors-Limitations Imposed by Environmental
Regulation.) The following is a brief survey of some of the applicable federal
regulations believed by the Company to include all material regulations. Many
states, including the State of New Jersey where the Company has its principle
place of business, also regulate certain aspects of the chemical industry. In
general, compliance with federal regulation would comprise the more difficult
burden. One example discussed herein below, California, has more stringent
regulation.
The Resource Conservation and Recovery Act 42 U.S.C. Sec. 6901-6987
("RCRA") was enacted in 1976. The Comprehensive Environmental Response,
Compensation and Liability Act, 42 USC Sec. 9601-9657 ("CERCLA") was enacted in
1980. These statutes regulate the disposed of hazardous waste and the clean-up
of chemicals that have been, or will be, subject to illegal disposal. The Toxic
Substance Control Act (hereinafter TOSCA) also governs aspects of chemical
disposal. The Clean Air Act and the Clean Water Act also control emissions into
the atmosphere and water systems (hereinafter these statutes are referred to as
PCS.)
The Company believes that it is a) not in violation of the PCS and b)
not subject to the PCS because of the nature of the materials being utilized by
the Company at this time. However, existing environmental laws may be amended
and new laws may be enacted by Congress and state legislatures and new
environmental regulations may be issued by regulatory agencies. For these
reasons, the Company cannot predict the specific environmental control
requirements that it will face in the future.
Compliance with Federal, State and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment,
or otherwise relating to the protection of the environment, may have a material
effect on the capital expenditures, earnings and competitive position of the
registrant and its subsidiaries.
MARKETING
Having completed Research & Development work for fifteen coupling
agents, limited marketing and sales have commenced. Various powder and pellet
forms of these are also available. The current list of active customers includes
five plastics manufacturers. As a result of the sales effort PPA coupling agents
have been accepted in several different applications such as PVC pipe production
and sporting goods production.
Trials are ongoing for the utilization of coupling agents in PVC window
frames, PVC electrical conduit, glass and carbon reinforced nylon structural
composites, carbon filled polystyrene electrical conductors, color concentrates
in polyethylene, polypropylene and ABS (acrylonitrile butadiene styrene), and
several ink and paint applications, including waterbourne and solvent based
systems. So far these tests have been successful.
The reactive coalescent packages have proven successful in wood coatings
and architectural applications. Regional, national and international companies
have shown interest in these products and testing by these companies are also
ongoing. More specifically, the Company has submitted fifty formulations to a
major western United States regional paint and coatings manufacturer which is
considering adopting the Company's technology as the major technology for most
of its coatings applications. Similarly, all major United States alkyd resin
manufacturer's are currently evaluating the Company's reactive coalescent
technology to maintain performance standards for their alkyd paints since United
States Environmental Protection Agency ("EPA") AIM standards promulgated under
the Clean Air Act have rendered traditional technology illegal for the
production of flat alkyd paints as of September, 1999. Among the end-users
evaluating finished products supplied by the company is a major naval
contractor.
Marketing in these areas have to date been limited to direct mail to
potential customers and referrals through the personal business contacts of the
officers. The Company has employed two commission only salesmen to expand this
effort with primary focus on printing inks in Europe and alkyd paint products in
the United States. Recent tests in January and March, 2000 of the ink product
attracted the attention of the majority of high volume gravure ink purchasers in
Germany with total combined gravure ink purchasers in excess of 1 billion
dollars. Initial impact of these tests has been a request from two of these
printers for test runs in their own facilities and a further test request from
the printer at whose facilities the tests were run. Since these test runs
consume approximately one hundred thousand dollars for paper the Company
believes these test requests to be an indicator of serious interest. However,
there can be no assurance that any of these printers will become customers for
the Company's ink. The Company now intends to run a two to three day test run of
this publication gravure ink on a test press in the United States before
returning to Germany for further tests in order to reduce costs to the Company
for shipping and travel. A similar test in the United States for a printer of
french fry containers had been successfully concluded when the printer decided
not to purchase the Company's ink. In response to this decision, the customer
for whom the printing was being done, a Fortune 500 company which PPA had
contacted directly, decided to change printers. The new printer tested the ink
on its press in May with mixed results, so another test will be run there in
June. The Company believes that this approach to marketing will be useful in the
future due to the environmentally friendly aspects of the Company's products and
the desire of larger companies to be sensitive to environmental concerns. The
Company intends to expand these marketing efforts upon the successful conclusion
of this Offering (See "Use of Proceeds") by attendance at trade shows,
advertising in trade journals and by hiring additional sales personnel. The
Company also plans to expand marketing to other foreign markets, especially with
products that have significant environmental impacts, such as paints and inks.
In addition, the Company has obtained the services of two manufacturer's
representatives to represent the Company's paint additives business and has
initiated discussions with six other manufacturer's representatives. The Company
is also exploring potential distribution channels for a new line of VOC Free
automotive paints. The Company has also begun discussions with a potential
manufacturer's representative for paint in the European maritime industry.
The Company is also presently conducting a test of a new water based
automotive paint and clear coat at a body shop in Hackensack, New Jersey. So far
the results have produced a marginally acceptable product so the body shop is
continuing to test revised versions of the paint and clear coat, but has not yet
deemed them good enough to commence purchases. The Company believes that
sampling to body shops constitutes both a viable marketing strategy and an aid
to product development and intends to continue this methodology.
ADDITIONAL FINANCING
The Company believes that the maximum proceeds of this Offering will
allow the Company to meet all of its presently planned future operations for at
least twelve months. However, the Company's anticipated development projects may
require a substantial amount of funds in order to fully develop these proposed
future products to their fullest potential. (See "Use of Proceeds" and
"Financial Statements.") The proceeds of this Offering may be inadequate to
permit the Company to achieve its research objectives, and there can be no
assurance that the Company will be able to raise additional funds when needed on
terms acceptable to the Company, if at all. (See "Risk Factors - Additional
Capital.")
COMPETITION
In each of the product areas in which the Company operates it is subject to
competition from firmly established, very large and very numerous competitors
which have far greater resources, staffs, facilities and reputations than those
possessed by the Company. The same will be true after this offering. There can
be no assurance that the Company will be able to sell its products successfully
in light of this competition, or that if it does succeed in selling its products
initially that the Company will be able to withstand attempts by these
competitors to market against the Company. Further, there can be no assurance
that any new market opened by the Company will not become the object of efforts
by these competitors to take over these markets. Also, there can be no assurance
that new products will not be developed by these competitors that are superior
to or marketed more successfully than the Company can market its products. In
the event that the Company cannot successfully compete against these larger
companies the business of the Company will be materially and adversely affected.
EMPLOYEES
The Company employs a President and an Executive Vice President for
Scientific Affairs. In addition, the Company employs one chemical technician,
two commission only marketing representatives, and one part-time secretary.
During the next twelve months the Company anticipates opening several production
facilities requiring the acquisition of about one hundred production personnel,
plant management and technical sales representatives. There can be no assurance
that the Company will be able to hire such personnel or if hired retain their
service.
PROPRIETARY RIGHTS
The Company relies on a combination of patent and trade secret laws,
nondisclosure and other contractual agreements and technical measures to protect
its proprietary rights in its products. Despite these precautions, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that the Company regards as proprietary.
The Company believes that its products, trademark and other proprietary
rights do not infringe on the proprietary rights of third parties. There can be
no assurance, however, that third parties will not assert infringement claims
against the Company in the future. (See "Risk Factors - Product Protection and
Infringement.") In the event that pending applications are not granted, or if
subsequently obtained patents are either invalidated or designed around, the
Company would be materially and adversely affected.
FACILITIES
The Company leases 4,000 square feet of industrial space and 2,000 square
feet of office space under a three year lease with an option to extend the lease
for three years at 163 South St. in Hackensack, New Jersey. The lease contains
cost of living increases and current rent payments, including taxes, are $3,513
per month. The Company anticipates renting additional production facilities upon
the successful conclusion of this offering as required by demand for the
Company's products.
MANAGEMENT
The names of the Officers and Directors of the Company, their ages and
positions with the Company are as follows:
Name Age Position
Roger Fidler 49 President, Director
Gerald Sugerman 61 Executive Vice President,Secretary,
James Wright 66 Director
Albert Mersberg 59 Director
The above officers and directors will hold office until the next annual meeting,
or until their successors are elected and qualified.
MANAGEMENT
Roger L. Fidler Mr. Fidler has been President of the Company and a director
of the company since inception in July 1994. Until February, 1999, Mr. Fidler
devoted a minimal amount of his time to the Company. Starting in February, 1999,
he has devoted about half of his time to the Company. He has been continuously,
and is presently, engaged in the private practice of law as a sole proprietor
since 1983 and has held several directorships in both private and public
corporations. During the time period from 1992 to the present, Mr. Fidler has
been employed both as President of the Company and engaged in the private
practice of law. He is currently President and Sole Director of Global Agri-Med
Technologies, Inc., a public company. Mr. Fidler holds degrees in Law (J.D.)
from the University of South Carolina, Columbus, South Carolina (1977), in
Physics (M.S.) from the University of Illinois Urbana, Illinois (1974) and a
B.S. from Dickinson College (1972), Carlisle, PA.
Gerald Sugerman, Ph.D. Dr. Sugerman has served full time as Executive Vice
President, Sectretary, Treasurer, and as a director of the Company since
inception in July of 1994. As PPA's Chief Scientist he is in charge of all
technical developments. From February, 1992 until July, 1994, Dr. Sugerman was
President of Pi-Tech Inc., a specialty chemical company. Dr. Sugerman received
his Ph.D. in organic chemistry from Fordham University in 1960, and holds
several other degrees. He has authored over 100 papers and holds more than fifty
patents. Dr. Sugerman is also a director and minority shareholder in Blue Ridge
Technologies, Inc., a related party.
James Wright Mr. Wright has been a director since inception. Mr. Wright is
a retired businessman who until 1989 was a principal in a sand and gravel mining
company in New Jersey. Mr. Wright holds a Bachelor of Science degree in Business
Administration from Rider University (B.S. 1961), Lawrenceville, New Jersey. Mr.
Wright serves on the Audit Committee.
Albert Mersberg Mr. Mersberg became a director of the Company in September,
1997. He had previously consulted for the Company from inception until November,
1996. He is currently President of Blue Ridge Technologies, Inc., a related
party to the Company by virtue of having two common directors and one common
shareholder, where he had been employed since July 1999. He was previously
employed at Blue Ridge Paint, Inc. of Henry Va, where he was a Technical manager
from June, 1998 until July, 1999. From December, 1996 to June, 1998 Mr. Mersberg
was the Technical Manager of New Product Development for Sampson Coatings, Inc.
of Richmond, VA. Prior to that, Mr. Mersberg was employed by Lawrence McFadden
Co. in Philadelphia, PA from 1991 to December, 1996 in a similar capacity. He
holds a B.S. degree in Chemistry from the State University of New York at
Buffalo.
REMUNERATION OF OFFICERS AND DIRECTORS
No officer of the Company has received compensation since inception in
July, 1994 except Dr. Sugerman, Exec. V.P. of the Company. Directors are not
compensated for serving on the Board of Directors. No contingent forms of
remuneration, property, or other benefits were conferred during that period.
The Company has entered into written employment and assignment agreements
with Gerald Sugerman and Roger Fidler. Pursuant to these Agreements, Mr.
Sugerman assigned his rights to any and all technologies and improvements
thereto to the products presently marketed by the Company and which he may
develop from time to time while employed by the Company. Mr. Fidler's contract
was modified with his consent to provide that his salary will commence upon
completion of financing or gross profits in excess of $30,000 per month. The
capacity and annual salaries for key management is set forth below.
<TABLE>
<CAPTION>
Summary Compensation Table
Fiscal Annual Compensation Long Term
Name & Position Year Salary Bonus Other(1) Compensation
<S> <C> <C> <C> <C>
Roger Fidler Current -0-(2) -0- $500,000 -0-
President 1998 -0-(2) -0- -0- -0-
1997 -0-(2) -0- -0- -0-
1996 -0-(2) -0- -0- -0-
Gerald Sugerman Current $120,000(3) -0- -0- -0-
Executive Vice 1998 $120,000(3) -0- -0- -0-
President; 1997 $120,000(3) -0- -0- -0-
Director 1996 $120,000(3) -0- -0- -0-
</TABLE>
(1) Mr. Fidler's contract provides for sale commissions which have not
been earned to the date of this Prospectus. The $500,000 in non-cash
compensation is the result of the exercise of options on 100,000
shares at $1.00 per share. Mr. Sugerman's contract provides for
royalties of 5% on sales to a maximum of $350,000 in payments, and 2%
of sales thereafter.
(2) Mr. Fidler's contract provides for his base compensation of $120,000
to begin either after financing has been completed or the Company
reaches $30,000 per month in gross income. Neither of these conditions
has been met yet, and therefore Mr. Fidler has not yet received any
remuneration from the Company.
(3) Mr. Sugerman has been accruing $10,000 per month as part of his
remuneration agreement with the Company. This amount has been
converted into preferred stock on various occasions, as noted in the
Financial Statements.
STOCK OPTION INFORMATION
The following table sets forth certain information with respect to the
value of stock options held by the Named Executive Officers and Directors for
through the period ended December 31, 1999.
<TABLE>
<CAPTION>
Fiscal Year-End Option Value Table
Number Of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired Options On Dec. 31, 1999 December 31, 1999($)(1)(2)(3)
On Value ------------------------ ------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Roger Fidler -0- -0- 445,000 -0- 2,100,000 -0-
Gerald Sugerman -0- -0- 850,000 -0- 4,200,000 -0-
James Wright -0- -0- 100,000 -0- 500,000 -0-
Albert Mersberg -0- -0- 5,000 -0- 25,000 -0-
-----------
</TABLE>
(1) Based upon an assumed initial public offering price of $6.00 per share of
Common Stock.
(2) Options are in-the-money if the fair market value of the Common Stock
exceeds the exercise price.
(3) Represents the total gain which would be realized if all the in-the-money
options beneficially held at December 31, 1999 were exercised, determined
by multiplying the number of shares underlying the options by the
difference between the per share option exercise price and $6.00, the fair
market price as of the initial public offering date, as determined by the
offering price.
EMPLOYEE STOCK OPTION PLAN INFORMATION
The Company has adopted a Stock Grant Program and a Stock Option
Program. The Stock Grant Program provides for the issuance to officers,
directors and key employees stock grants as determined by the Board of
Directors. The recipient must continue employment with the Company for two years
after the grant is made or forfeit the stock. The stock option program is also
available for officers, directors and key employees and permits the Board to
issue options which are exercisable in equal amounts over a five year period.
Any unvested options expire upon the termination of employment with the Company.
To the date of this Prospectus, no stock options have been issued pursuant to
the Stock Option Program and no grants were made under the Stock Grant Plan.
CERTAIN TRANSACTIONS
The Company was organized primarily through the efforts of Roger Fidler and
incorporated on July 22, 1994 under the laws of the State of New Jersey. On July
29, 1994, the Company's Board of Directors approved the issuance of 75 shares
each to Mr. Fidler and James Wright as consideration for organizational expenses
and services valued at $100 each.
On October 24, 1994, an agreement was made by which the Company acquired
certain license rights in return for the assumption of certain liabilities and
the issuance of 975 Shares to Gerald Sugerman.
Effective November 1, 1994, the Company entered into a two year employment
contract with Gerald Sugerman which provides for salary of $120,000 per annum.
In June, 1996 the Company entered into a five year employment agreement with Dr.
Sugerman requiring the payment of $10,000 per month plus 5% royalty on sales he
makes up to a maximum salary of $350,000. In addition, he receives life
insurance equal to twice his annual salary, disability insurance, vacation pay,
and sick leave.
On February 5, 1996, the Company entered into an employment agreement with
Roger Fidler by which Mr. Fidler's salary would be set by the Board of Directors
from time to time. This salary will commence at the rate of $10,000 per month
when the Company has additional financing of $2,000,000 or more, or gross
profits exceeding $30,000 per month. In addition, Mr. Fidler receives commission
on gross sales of between 10% and 15% on sales initiated by him. No such sales
have been made to the date of this Prospectus.
Roger Fidler and Gerald Sugerman have from time to time loaned the Company
cash, or have expended cash on behalf of the Company. During the last fiscal
year the highest amounts loaned by Mr. Fidler was $54,504, and the largest
amount loaned by Dr. Sugerman was $133,797. As at May 9, 2000, the balance of
these loans were, respectively, $143,673 and $194,598. These loans are evidenced
by notes bearing 6% interest and due January 1, 2001. The intent of the Company
is to pay these notes from either profits or future financing.
Blue Ridge Technologies, Inc., a Virginia corporation, on which board of
directors Gerald Sugerman and Albert Mersberg, both directors of the Company,
also serve and in which Gerald Sugerman is a significant minority shareholder,
leases certain equipment from the Company for $850 per month.
The transactions between officers and directors of the Company and the
Company and its affiliates are made on terms no less favorable to the Issuer
than those available from unaffiliated parties. Future transactions will be
handled in the same fashion.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to the share
ownership, both before and after the prospective closing of the offering made
hereby, of the Company's common stock by its officers and directors, both
individually and as a group, and by the present record and/or beneficial owners
of more than 5% of the outstanding amount of such stock:
<TABLE>
<CAPTION>
Number of Percentage(2) Percentage(2)
Name Shares of shares of shares
Owned Owned Prior After
to Offering Offering
(Maximum)
Gerald
<S> <C> <C> <C> <C>
Sugerman(1) 1,825,000 71.6% 47.1%
8 Cambridge Dr
Allendale, NJ 07401
Roger Fidler(1) 620,000 28.9% 15.49%
400 Grove Street
Glen Rock, NJ 07452
James Wright 175,000 9.74% 2.9%
244C Mayflower Way
Jamesburg, NJ 08831
Albert Mersberg -0- -0- -0-
1607 Mulberry Road
Martinsville, VA 24112
Officers
and Directors
as a Group(4 persons) 2,620,000 110.24% 65.49%
-----------------
</TABLE>
(1) Gives effect to 445,000, 850,000 and 100,000 shares underlying options held
by Fidler, Sugerman, and Wright respectively. Due to the method of
computing percentages of beneficial ownership required by federal
regulation the totals exceed 100%
(2) Does not give effect to (i) up to 500,000 shares of Common Stock issuable
upon the exercise of the Class A Unit Warrants; and (ii) the common shares
underlying the Underwriter's Warrant Units (150,000 shares). See "Plan of
Distribution" and "Certain Transactions."
DESCRIPTION OF SECURITIES
Preferred Stock
The authorized capital stock of the Company consists in part of 1,000,000
shares of Preferred Stock, $100 par value per share (the "Preferred Stock"). The
Company's present issued and outstanding number of Preferred shares is 4,806.
The holders of Preferred Stock have preference as to liquidation, receive a 5%
dividend, and may have their shares redeemed by the Company at par value plus
accrued dividends during a five year period.
Common Stock
The authorized capital stock of the Company consists of, in part,
10,000,000 shares of Common Stock, without par value (the "Common Stock"). The
Company's present issued and outstanding number of common shares is 1,697,500.
The holders of Common Stock have equal ratable rights to dividends from funds
legally available therefore, when, as and if declared by the Board of Directors
of the Company; are entitled to share ratably in all of the assets of the
Company available for distribution to holders of Common stock upon liquidation,
dissolution or winding up of the affairs of the Company; do not have preemptive,
subscription or conversion rights and there are no redemption or sinking fund
provisions applicable thereto. Such shares are entitled to one vote per share on
all matters which stockholders may vote on at all meetings of shareholders. 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.
Non-Cumulative Voting
The holders of shares of Common Stock of the Company do not have cumulative
voting rights. Thus, the holders of more than 50% of such outstanding shares,
voting for the election of directors, can elect all of the directors to be
elected, and in such event, the holders of the remaining shares will not be able
to elect any of the Company's directors. If the shares offered hereby are sold,
the present shareholders will own approximately 60.9% of the Company's
outstanding shares. If the options held by management were exercised, the
present shareholders would own 73.9% of the Company's outstanding shares, and in
either event, will remain in a position to elect all of the members of the Board
of Directors. Further, if Mr. Sugerman, Executive Vice President of the Company,
exercised his options only, he would own approximately 53.6% of the Company's
Common Stock and would therefore control the Company. (See "Principal
Shareholders").
Transfer Agent and Registrar
The Company has chosen Jersey Transfer & Trust Company of Verona, New
Jersey as its transfer agent.
Reports to Shareholders
The Company intends to furnish its shareholders with annual reports
containing audited financial statements as soon as practicable at the end of
each fiscal year, commencing with the next fiscal year. In addition, the Company
may, from time to time, issue unaudited interim reports and financial
statements.
Dividends
The payment by the Company of dividends, if any, in the future rests within
the discretion of its Board of Directors and will depend, among other things,
upon the Company's earnings, its capital requirements and its financial
condition, as well as other relevant factors. The Company has not paid any
dividends to date and does not anticipate that it will be in a position to pay
any dividends in the foreseeable future.
PLAN OF DISTRIBUTION
The Company is offering hereby up to a maximum of 1,000,000 Units on a
"best efforts" basis. There is no minimum amount required to close this
Offering. The securities offered hereby may be sold by selected broker/dealers
who are members of the National Association of Securities Dealers, Inc. ("NASD
Member Firms").
The Company will pay to such firms a commission not to exceed 8% of the
gross amount of all Units sold by such an NASD Member Firm. All other sales will
be effected by Roger Fidler, President and a director of the Company, without
compensation. Officers and directors of the Company may purchase up to ninety
(90) percent of this Offering, including Units needed to close the Offering.
The Company does not anticipate
sales to discretionary accounts by the NASD Member Firms to exceed ten (10%)
percent of the total number of Units offered hereby.
The Company will agree to indemnify the NASD Member Firms against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payment that the NASD Member Firms may be required to make.
The offering
will terminate 90 days after the Effective Date, unless extended for an
additional sixty (60) days by the Company. There will be no escrow account. All
subscriptions will be accepted or rejected within one day of receipt.
Shareholders who currently hold four percent (4%) or more of the Company's
outstanding shares have agreed to "lock-up" their securities (i.e. not to sell,
grant any option for sale, or otherwise dispose of, directly or indirectly, any
shares they hold) of the Company's Common Stock or other securities of the
Company which they hold for a period of three months from the date of the
consummation of the Offering.
The holders of 1,500,000 outstanding shares of Common Stock, including all
of the Company's directors, officers and principal stockholders, have agreed not
to directly or indirectly, offer to sell, contract to sell, sell, transfer,
assign, encumber, grant an option to purchase, pledge or otherwise dispose of
any beneficial interest in such securities for a period of three(3) months
following the conclusion of this Offering. An appropriate legend shall be marked
on the face of the certificates representing all of such securities.
Prior to this Offering, there has been no public market for the Securities.
Consequently, the initial public offering prices of the Securities and the terms
of the Redeemable Warrants have been arbitrarily determined by the Company and
are not necessarily related to the Company's asset value, net worth or other
established criteria of value. The factors considered in such public offering
price, in addition to prevailing market conditions, include the history of and
prospects for the industry in which the Company competes, an assessment of the
Company's management, the prospects of the Company, its capital structure and
certain other factors as were deemed relevant.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete but does include all
material terms . Reference is made to a copy of each such agreement which is
filed as an exhibit to the Registration Statement.
The Company may also sell to the NASD Member Firms, if any, warrants (the
"Underwriter's Warrants") to purchase up to 100,000 Units at a price $9.90 per
Unit. The purchase price of these warrants is $0.001 per warrant. The
Underwriter's Warrants will be exercisable for a period of four years commencing
one year after the Effective Date of this Offering, at an initial per Unit
exercise price of 165% of the offering price per Share. The Underwriter's
Warrants cannot be transferred, assigned or hypothecated for one year from the
date of their issuance, except that they may be assigned, in whole or in part,
to any successor, officer or partner of any participating NASD Member Firm (or
to officers and partners of any such successor or partner). The Underwriter's
Warrants will contain anti-dilution provisions providing for appropriate
adjustment of the exercise price and number of Shares which may purchased upon
exercise upon the occurrence of certain events. The anti-dilution provisions of
the Underwriter's Warrants generally are triggered by the issuance of Common
Stock (or securities convertible or exchangeable into common stock) by the
Company at prices below the market price of the Common Stock at the time of such
issuance (subject to certain exceptions), as well as stock splits, stock
dividends and other similar dilutive events in which the Company increases its
outstanding stock without receiving additional consideration.
The Company will upon request of any participating NASD Member Firm,
within the four-year period commencing one year from the Effective Date,
register the Underwriter's Warrants and the underlying securities once at the
Company's expense. The Company has also agreed, during the four-year period
commencing one year from the Effective Date, to register on a "piggy-back"
basis, and on an unlimited number of occasions, the Underwriter's Warrants and
the underlying securities whenever the Company files a Registration Statement.
LITIGATION
There is no pending or threatened litigation involving the Company, except
that one of the Company's bridge note purchasers, Eve Chang, filed on September
9, 1999, a complaint for collection in the Superior Court of New Jersey for
Bergen County, Law Division. The Company believes that it has a meritorious
counterclaim against Mrs. Chang and her husband, An Lou Chang, based upon
misrepresentations made by An Lou Chang with respect to the Company's dealings
with Enviro Ink, Inc. of Montreal, Canada. Management intends to defend this
legal action vigorously. Eve Chang seeks collection on the bridge note with
interest in the total amount of $75,851.81. The Company seeks damages in the
amount of $85,000 plus punitive damages due to the intentional nature of the
Chang's actions. However, the Company has also allocated a sufficient amount of
the proceeds of this Offering to effect a complete pay-off of the debt
comprising the subject matter of this action.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby are being passed
upon for the Company by Jay Hait, Esq., 130 William St., Suite 807 New York, NY
10038. The Law Office of Roger Fidler is owed $150,000 for services rendered in
connection with this offering. Mr. Fidler is the beneficial owner of 175,000
shares of the Company's Common Stock, holds an option to acquire 445,000 more
shares, and from inception until the date of this Prospectus was and is a
director and president of the Company. Mr. Hait is the beneficial owner of
31,000 shares of the Company's Common Stock.
EXPERTS
The financial statements of PPA Technologies, Inc. for the years ending
June 30, 1999 and June 30, 1998 included elsewhere in this Prospectus have been
included herein and in reliance upon the report of Thomas P. Monahan, CPA, an
independent certified public accountant, appearing elsewhere herein, and upon
the authority of said firm as an expert in accounting and auditing.
ADDITIONAL INFORMATION
The Company will not become subject to the reporting requirements of
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 until
completion of this Offering. The Company has filed with the Securities and
Exchange Commission (the "Commission"), Washington, D.C. 20549, a Registration
Statement on Form S-1, including amendments thereto, under the Act with respect
to Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Securities offered hereby,
reference is hereby made to such registration statement and to the exhibits and
schedules filed therewith. Statements contained in the Prospectus regarding the
contents of any contract or other document referred to are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement, each such
statement being deemed to be qualified in its entirety by such reference. The
registration statement, including all exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, Public
Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549-1004, and at the
regional offices of the Commission located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at 7 World
Trade Center, Suite 1300, New York, New York 10048 and copies of all or any part
thereof may be obtained from such offices upon the payment of prescribed fees.
<PAGE>
`
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(201) 790-8775
Fax (201) 790-8845
To The Board of Directors and Shareholders
of PPA Technologies, Inc.
I have audited the accompanying balance sheet of PPA Technologies, Inc. as of
June 30, 1999 and the related statements of operations, cash flows and
shareholders' equity for the years ending June 30, 1998 and 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PPA Technologies, Inc. as of
June 30, 1999 and the results of its operations, shareholders equity and cash
flows for the years ending June 30, 1998 and 1999 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
PPA Technologies, Inc. (a development stage company) will continue as a going
concern. As more fully described in Note 2, the Company has incurred operating
losses since inception and requires additional capital to continue operations.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans as to these matters are described in Note
2. the financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result from the possible
inability of PPA Technologies, Inc. (a development stage company) to continue as
a going concern.
s/Thomas Monahan
----------------------
Thomas P. Monahan, CPA
September 23, 1999
Paterson, New Jersey
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, March 31,
1999 2000
------------- -------------
Assets
<S> <C>
Current assets
<S> <C> <C>
Cash $ 9,539 $1,414
Accounts receivable 6,099 5,792
Inventory 88,592 50,190
------- ------
Total current assets 104,230 57,396
Capital assets-net 107,750 93,663
Other assets
Deferred offering costs 184,000
Security deposit 5,000 5,000
License 1,350 1,350
------- -----
6,350 190,350
------- -----
Total Assets $218,330 $341,409
======= =======
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities
Accounts payable and accrued expenses $165,168 $474,986
Notes payable-short term portion 464,900 498,425
Officer loan payable 188,301 322,905
------- -------
Total current liabilities 818,369 1,296,316
Stockholders Equity
Common Stock-10,000,000 common shares
authorized, no par. At June 30, 1999,
and March 31, 2000, the number
of shares outstanding was 1,697,500
and 1,697,500 respectively 779,250 779,250
Preferred Stock-1,000,000 preferred shares authorized, $100 par value. At June
30, 1999 and March 31, 2000, the number of shares outstanding was 4,806
and 4,806 respectively . 480,600 480,600
Deficit accumulated during development stage (1,859,889) (2,214,757)
-------- ---------
Total stockholders equity (600,039) ( 954,907)
------- ---------
Total liabilities and stockholders equity $218,330 $341,409
======== =========
</TABLE>
See accompanying notes to financial statement
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the
period from
For the For the For the For the inception,
year year nine months nine months July 22,
ended ended ended ended 1994 to
June 30, June 30, March 31, March 31, March 31,
1998 1999 1999 2000 1999
--------- ------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Sales $148,537 $101,272 $94,752 $19,061 $786,758
Cost of goods sold 95,687 54,696 62,491 5,894 500,334
------- ------ ------- ----- -------
Gross profit 52,850 46,576 32,261 13,167 286,424
Operating expenses
General and
administrative 429,109 269,660 205,888 234,710 1,455,179
Bad debt expense 41,875 68,139 57,139 110,014
Non cash compensation
charges 500,000 542,500
Research and
development 50,243 54,644 54,644 65,000 169,887
Depreciation 8,031 33,794 10,084 25,831 87,497
------ ------ ------ ------ --------
Total operating
expenses 1,029,258 426,237 327,755 325,541 2,365,077
(Loss) from operations (976,408)(379,661) (295,494) (312,374) (2,078,653)
Other expenses
Interest expense (43,385) (47,160) (35,985) (42,494) (136,104)
-------- ------ ------- -------- ---------
Total other expenses (43,385) (47,160) (35,985) (42,494) (136,104)
Net loss $(1,019,793$(426,821)$(331,479) $(354,868) $(2,214,757)
========== ======= ======= ======== ==========
Net loss per share
basic and diluted $(.15) $(0.09) $(0.07) $(0.08) $(.49)
==== ==== ===== ==== ====
Weighted average
number of shares
outstanding basic
and diluted 3,512,567 4,516,291 4,516,291 4,516,291 4,516,291
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
For the For the
three three
months months
ended ended
March 31, March 31,
1999 2000
Unaudited Unaudited
--------- ---------
<S> <C> <C>
Sales $38,620 $7,890
Cost of goods sold 29,585 2,130
------ -------
Gross profit 9,035 5,760
Operating expenses
General and
administrative 51,135 72,457
Bad debts
Research and
development 20,000 20,000
Depreciation 2,000 9,000
------ ------
Total operating
expenses 73,135 101,457
(Loss) from operations ( 64,100) (95,697)
Other expenses
Interest expense (13,635) (15,357)
-------- --------
Total other expenses (13,635) (15,357)
Net loss $( 77,735) $(111,054)
========= =======
Net loss per share
basic and diluted $(.02) $(0.03)
======= =======
Weighted average
number of shares
outstanding basic
and diluted 4,516,291 4,516,291
========= ==========
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the
period from
For the For the For the For the inception,
year year nine months nine months July 22,
ended ended ended ended 1994 to
June 30, June 30, March 31, March 31, March 31,
1998 1999 1999 2000 1999
Unaudited Unaudited Unaudited
--------- ------- ------------ ------------ ---------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net profit (loss) $(1,019,793)$(426,821) $(331,479) $(354,868) $(2,214,757)
Depreciation 8,031 33,794 27,666 25,831 87,497
Non cash common stock
compensation 500,000 542,500
Non cash preferred
stock compensation 76,153 30,000 106,153
Adjustments
Accounts receivable (3,975) 609 ( 1,833) 307 (5,792)
Inventory (16,748) (29,167) (15,862) 38,402 (50,190)
Accounts payable and
accrued expenses 20,146 127,339 31,636 309,818 474,986
------- ------- ------ ------ -------
TOTAL CASH FLOWS
PROVIDED (USED) FROM
OPERATIONS (424,165) (294,246) (259,872) 19,490 (1,059,603)
CASH FLOWS FROM INVESTING ACTIVITIES
Accounts receivable
related party (41,876) (25,765)
Deferred offering
costs (184,000) (184,000)
License Fee (1,350)
Security deposit (5,000)
Capital asset additions (128,012) (5,025) (145,939) (11,744) (181,160)
-------- ------- ------- ------- -------
TOTAL CASH FLOWS
PROVIDED (USED)FROM
INVESTING ACTIVITIES (169,890) 36,851 (171,704) (195,744) (371,510)
CASH FLOWS FROM FINANCING ACTIVITIES
Officer loan (43,834) 185,734 (21,124) 134,604 322,905
Preferred stock 71,347 36,500 58,000 374,447
Notes payable 170,885 44,700 93,347 33,525 498,425
Sale of common stock 185,000 96,331 236,750
------- ------- ------ -------- -------
CASH FLOWS PROVIDED
(USED) FROM FINANCING
ACTIVITIES 383,398 266,934 226,554 168,129 1,432,527
NET INCREASE (DECREASE (210,657) 9,539 (205,022) (8,125) 1,414
CASH BALANCE BEGINNING
OF PERIOD 210,657 -0- 210,657 9,539 -0-
-------- ------- --------- --------- ---------
CASH BALANCE END OF
PERIOD $-0- $9,539 $5,635 1,414 $1,414
======== ======= ========= ========= ========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS EQUITY
Deficit
accumulated
during Common Common Preferred
Preferred development
Date Stock Stock Stock Stock stage Total
---- ------ ----- --------- --------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
7-22-1994(1) 150 $100 $100
7-24-1994(2) 1,350 1,350 1,350
6-30-1995 Net loss (111,797) (111,797)
--------- ----- --------- --------- -------- -------
6-30-1995 1,500 1,450 (111,797) (110,347)
========= ===== ========= ========= ======== =======
5-31-1996(3) 30,000 300 300
2-28-1996(4) 42,500 42,500
6-28-1996(5)1,500,000 1,450 1,450
6-30-1996(6) 25,000 50,000 50,000
6-30-1996(7) 2,966 296,600 296,600
6-30-1996 Net loss (157,215) (157,215)
-------- ------ -------- -------- ------- -------
6-30-1996 1,555,000 94,250 2,966 $296,600 $(269,012) $121,838
6-30-1997 Net loss (144,263) (144,263)
-------- ------- ------- -------- ------- --------
6-30-1997 1,555,000 $94,250 2,966 $296,600 $(413,275) $(22,425)
6-30-1998(6) 42,500 85,000 85,000
6-30-1998(8) 100,000 100,000 100,000
6-30-1998(8) 500,000 500,000
6-30-1998(7) 1,475 147,500 147,500
6-30-1998 Net loss (1,019,793)(1,019,793)
-------- ------- -------- -------- --------- ---------
6-30-1998 1,697,500$779,250 4,441 $444,100 $(1,433,068) $(209,718)
6-30-1999(7) 365 $36,500 36,500
6-30-1999 Net loss (426,821) (426,821)
-------- ------- -------- -------- --------- --------
6-30-1999 1,697,500$779,250 4,806 $480,600 $(1,859,889) $(600,039)
Unaudited
Net loss (354,868) (354,868)
-------- ------- -------- -------- --------- --------
03-31-2000 1,697,500$779,250 4,806 $480,600 $(2,214,757) $(954,908)
========= ======= ========= ======== ========== =======
</TABLE>
(1) Sale of 150 shares of common stock for $100.
(2) Exchange of shares of common stock for acquisition of license agreement. (3)
30 shares of Common stock sold Pursuant to Reg. D at $10 per share restated
to 30,000 shares post forward split at $.01 per share.
(4) Issuance of 425,000 options to Roger Fidler as compensation valued at $.10
per option (5) Forward split of common shares in a ratio of 1,000 to 1. (6)
Private placement of 25,000 shares of common stock at $2.00 per share for
$50,000.
(7) Conversion of debt into preferred stock at $100 par value each by Gerald
Sugarman.
(8) Issuance of compensatory stock to Mr. Roger Fidler
See accompanying notes to financial statements.
<PAGE>
PPA TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
Note 1. Organization of the Company and Issuance of Capital Stock
a. Creation of the Company
PPA Technologies, Inc. (the "Company") was incorporated on July 22,1994
under the laws of the State of New Jersey with an authorized number of common
shares of 2,500 no-par value. On June 20, 1996, the certificate of incorporation
was amended changing the number of common shares authorized to 10,000,000, no
par value each and 1,000,000 preferred shares, $100 par value each.
b. Description of the Company
The Company has under development and will manufacture and distribute
specialty chemicals and chemical additives.
c. Issuance of Common stock
On July 23, 1994, the Company sold 75 shares of common stock to Roger
Fidler and 75 shares of common stock to James Wright for a total consideration
of $100.
On July 24, 1994, the Company acquired certain patented technologies from
Broadwater Developments, Inc. ("Broadwater"), a British Columbia corporation for
375 shares of common stock and Gerald Sugerman for 975 shares of common stock
relating to coupling agents to be used as paint additives. The Company has
assigned a value of $1.00 per share of common stock or $1,350 as the cost basis
of this transaction.
On May 31, 1996, the Company sold, pursuant to a private placement under
"Rule 504" of the Securities Act of 1933, as amended, an aggregate of 30,000
shares of common stock at $.01 per share for an aggregate consideration of $300.
On June 28, 1996, the Company forward split the number of common shares
outstanding in the ratio of 1,000 to 1 restating the number of common shares
outstanding from 1,500 to 1,500,000.
As of June 30, 1996, the Company sold 25,000 shares of common stock at
$2.00 per share for a total of $50,000 through a private placement.
As of July, 1997, the Company sold 42,500 shares of common stock for
aggregate consideration of $85,000 or $2.00 per share.
As of June 30 1998, Mr. Fidler exercised 100,000 options into 100,000
shares of common stock for and aggregate consideration of $100,000. In addition
the Company recognized $500,000 as non cash compensation for an aggregate
consideration of $600,000 or $6.00 per share.
d. Issuance of Preferred Stock
On June 30, 1996, the Company issued 2,966 shares of preferred stock to
Gerald Sugerman in exchange for moneys due plus accrued and unpaid salary and
moneys advanced to the Company aggregating $296,600 including accrued interest.
As of June 30, 1998, the Company issued 1,475 shares of preferred stock
to Gerald Sugerman in exchange for moneys due for accrued and unpaid salary and
moneys advanced to the Company during the period July 1, 1997 through June 30,
1998 aggregating $147,500 including accrued interest.
As of June 30, 1999, the Company issued 365 shares of preferred stock to
Gerald Sugerman in exchange for moneys due for accrued and unpaid salary and
moneys advanced to the Company during the period July 1, 1998 through December
31, 1998 aggregating $36,500 including accrued interest.
Note 2. Summary of Significant Accounting Policies
a. Basis of presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $2,172,257 for the period from inception July 22, 1994 to March 31, 2000.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the completion of a public offering and with the increase
in working capital, the Company will experience an increase in sales. The
Company will require substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing long-term need to
obtain additional financing. The Company's future capital requirements will
depend on numerous factors including, but not limited to, continued progress
developing its source of inventory, continued research and development and
initiating marketing penetration. The Company plans to engage in such ongoing
financing efforts on a continuing basis.
The financial statements presented at June 30, 1999 consist of the
balance sheet as at June 30, 1999 and the statements of operations, cash flows
and stockholders equity for the year ended June 30, 1998 and 1999.
The unaudited financial statements presented at March 31, 2000 consist of
the unaudited balance sheet as at March 31, 2000 and the unaudited statements of
operations, cash flows and stockholders equity for the nine months ended March
31, 1999 and 2000
b. Cash and Cash Equivalents
The Company treats temporary investments with a maturity of less than six
months as cash.
c. Property and equipment
Depreciation of property and equipment is computed using the
straight-line method over five years. Amortization of leased equipment is
computed using the straight-line method over the shorter of the estimated useful
lives of the assets or the lease term. Amortization of leasehold improvements is
computed using the straight-line method over the shorter of the estimated useful
lives of the assets or the remaining lease term.
d. Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("Statement No. 128"). Statement No. 128 applies to entities with publicly held
common stock or potential common stock and is effective for financial statements
issued for periods ending after December 15, 1997. Statement No. 128 replaces
APB Opinion 15, Earnings per Share ("EPS"). Statement No. 128 requires dual
presentation of basic and diluted earnings per share by entities with complex
capital structures. Basic EPS includes no dilution and is computed by dividing
net income by the total number of common shares outstanding for the period.
Diluted EPS reflects the potential dilution of securities that could share in
the earnings of the Company such as common stock which may be issuable upon
exercise of outstanding common stock options or the conversion of debt into
common stock.
Pursuant to the requirements of the Securities and Exchange Commission,
the calculation of the shares used in computing basic and diluted EPS include
the 12% Convertible Bridge Notes, converted into shares of common stock, the
exercise of a stock grant and stock option program, and the exercise of stock
options granted to Mr. Fidler and Mr. Sugerman and the sale of shares of common
stock through the Company's initial public offering. public offering, as if they
were converted into common stock as of the original dates of issuance.
<TABLE>
<CAPTION>
Year Year
June 30, June 30,
1998 1999
-------- -------
<S> <C> <C>
Total number common
shares outstanding 1,697,500 1,697,500
Effect of the assumed conversion
of convertible 12% bridge notes 140,067 143,791
Effect of the exercise of options
pursuant to Non Statutory Stock
Option Plan 300,000 300,000
Effect of the issuance of
shares of common stock
pursuant to Stock Grant
program 2200,000 200,000
Effect of the exercise of
stock options 1,175,000 1,175,000
Proforma sale of Shares
through registered offering 1,000,000
--------- ---------
Shares used in calculating
per share amounts - Diluted 3,512,567 4,516,291
========= =========
</TABLE>
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect 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.
g. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of.
(SFAS No. 121) effective January 1, 1996. SFAS No. 121 requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the estimated undiscounted cash flows to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. There was no effect of such adoption on the Company's financial position or
results of operations.
h. Income taxes:
The Company uses the liability method of accounting for income taxes. The
liability method measures deferred income taxes by applying enacted statutory
rates in effect at the balance sheet date to the differences between the tax
bases of assets and liabilities and their reported amounts in the financial
statements. The resulting asset or liability is adjusted to reflect changes in
the tax law as they occur.
i. Stock-based compensation:
The Financial Accounting Standards Board has issued SFAS No.123,
"Accounting for Stock-Based Compensation", which encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation under a fair value based method. The Company has elected to
continue to account for its stock-based employee compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No.25
("APB No.25"), "Accounting for Stock Issued to Employees" and disclose the pro
forma effects on net loss and loss per share basic and diluted had the fair
value of such compensation been expensed. Under the provisions of APB No.25,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's common stock at the date of the grant over
the amount an employee must pay to acquire the stock.
j . Recent accounting pronouncements:
The Financial Accounting Standards Board has recently issued statements of
Financial Accounting Standards No.130, "Reporting Comprehensive Income," and
No.131, "Disclosures about Segments of an Enterprise and Related Information,"
and No.132, "Employers' Disclosures about Pensions and Other Post retirement
Benefits." The above pronouncements will not have a significant effect on the
information presented in the financial statements.
Note 3. Related Party Transactions
a. Issuance of Common shares
On July 23, 1994, the Company sold 75 shares of common stock to Roger
Fidler and 75 shares of common stock to James Wright for a total consideration
of $100.
On July 24, 1994, the Company acquired certain patented technologies from
Broadwater Developments, Inc. ("Broadwater") for 375 shares of common stock and
Gerald Sugerman for 975 shares of common stock relating to coupling agents to be
used as paint additives. The Company has assigned a value of $1.00 per share of
common stock or $1,350 as the cost basis of this transaction.
As of June 30 1998, Mr. Fidler exercised 100,000 options into 100,000
shares of common stock for and aggregate consideration of $100,000. In addition
the Company recognized $500,000 as non cash compensation for an aggregate
consideration of $600,000 or $6.00 per share.
b. Issuance of Preferred Stock
On June 20, 1996, the certificate was amended authorizing the issuance of
1,000,000 shares of preferred stock. The preferred stock may be issued in such
classes and with such preferences as the board of directors may, from time to
time, decide in their sole discretion.
On June 30, 1996, the Company issued 2,966 shares of preferred stock to
Gerald Sugerman in exchange for moneys due plus accrued and unpaid salary and
moneys advanced to the Company aggregating $296,600 including accrued interest.
As of June 30, 1998, the Company issued 1,475 shares of preferred stock
to Gerald Sugerman in exchange for moneys due for accrued and unpaid salary and
moneys advanced to the Company during the period July 1, 1997 through June 30,
1998 aggregating $147,500 including accrued interest.
As of June 30, 1999, the Company issued 365 shares of preferred stock to
Gerald Sugerman in exchange for moneys due for accrued and unpaid salary and
moneys advanced to the Company during the period July 1, 1998 through December
31, 1998 aggregating $36,500 including accrued interest.
The shares of preferred stock have preference as to liquidation, pay a 5%
cumulative dividend and may be redeemed by the Company at par value plus
accumulated dividends for a period of 5 years.
c. Employment Agreement
On June 30, 1995, the Company entered into a five year employment
agreement with Mr. Gerald Sugerman requiring the payment of a salary of $10,000
per month, a royalty of 5% of net sales until a total of $350,000 in royalties
is earned and thereafter a 2% royalty on gross sales. For the period from July
22, 1994 to June 30, 1999 and March 31, 2000, the Company has paid or accrued a
salary for Mr. Sugerman aggregating $420,000 and $510,000 respectively, of which
$390,000 and $480,000 respectively of accrued salary and $267,441 and $309,323
respectively in additional loans payable and reimbursable expenses which were
offset by the issuance of 4,806 shares of preferred stock representing $480,600
as of June 30, 1999. As of June 30, 1999 and March 31, 2000, the officer loan
balance due was $133,797 and $183,556 respectively.
d. Officer Compensation
No other officers or employees were paid in excess of $100,000.
e. Accounts receivable - related party
The Company entered into an informal marketing and supply agreement to
both sell component of raw and finished materials and to buy finished products
from Enviro Ink, a Montreal, Canadian company. The arrangement was instituted to
permit the Company to strategically position itself in seeking a market share of
the printing ink business in Canada. At June 30, 1998 and September 30, 1998,
the net amount due the Company was $83,752 and $114,275 respectively. Sales to
Enviro Ink for the year ended June 30, 1998 and for the six months ended
December 31, 1998 were $88,023 and $16,856 respectively.
As of December 31, 1998, the Company reviewed its business relationship
with Enviro Ink and has determined that the amounts receivable at June 30, 1998
and December 31, 1998 may possibly be uncollectible in total. The Company has
set up a 100% reserve for the doubtful collection of the accounts receivable at
June 30, 1999 was $57,137.
f. Corporate Relationships.
Both the Company and Enviro Ink share Dr. Gerald Sugarman as a member of
senior management and as a principal shareholder. An Lou Chang is a 51%
shareholder in Enviro Ink and a shareholder in the Company.
Note 4 - Inventory
Inventory has been recorded at the lower of cost or market under the
first-in first-out method. At June 30, 1999 and March 31, 2000, inventory
components were as follow:
<TABLE>
June 30, 1999 March 31, 2000
<S> <C> <C>
Raw material $15,376 $28,805
Finished goods 73,216 21,385
------ ------
Total $88,592 $50,190
====== ======
</TABLE>
Note 5 - Capital Assets
Capital Assets for the Company consisted of the following at June 30,
1999:
<TABLE>
<CAPTION>
Accumulated
Asset depreciation Balance
<S> <C> <C> <C>
Office equipment $ 41,682 $23,737 $ 17,945
Production equipment 118,938 $34,974 83,964
Leasehold Improvements 8,346 2,505 5,841
------ ------- -------
Total $168,966 $61,216 $107,750
======== ======= =======
Capital Assets for the Company consisted of the following at March 31, 2000:
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Asset depreciation Balance
<S> <C> <C> <C>
Office equipment $ 47,276 $30,269 $ 17,007
Production equipment 125,538 $53,527 72,011
Leasehold Improvements 8,346 3,701 4,645
------ ------- -------
Total $181,160 $87,497 $ 93,663
======== ======= =======
</TABLE>
Note 6 - License Agreement
On October 24, 1994, the Company entered into an agreement with
Broadwater and Pi-Tech, Inc., ("Pi-Tech"), a Delaware corporation controlled by
Broadwater and Gerald Sugerman for the licensing of certain patented
technologies relating to coupling agents used in paints. The Company acquired
the licensing agreement for 375 shares of common stock with Broadwater and 975
shares of common stock with Gerald Sugerman.
Note 7 - 12% Convertible Bridge Notes
Beginning May 1, 1996, the Company offered 12% Convertible Bridge Notes
("Notes") and then sold under Rule 504 to the Securities Act of 1933, as
amended, 20 Units consisting of a $25,000 Convertible Note bearing interest of
12% and is convertible in whole in or in part into a maximum of 8,300 shares of
common stock. The term of the note is two years with interest payable annually
in arrears. Each Debenture is in the face amount of $25,000 and may be sold in
1/2 Units.
As of June 30, 1999 and March 31, 2000, the Company has borrowed an
aggregate of $372,500 and accrued interest in the aggregate of $92,400 and
$125,925 respectively. As of June 30, 1999 and March 31, 2000, the total balance
due was current.
In the event of a public offering of the Company's stock, the Company may
compel the conversion of the Notes by paying the Note and accrued interest at
the closing of the public offering.
The indebtedness evidenced by the Notes is of equal priority regardless
of the date of any individual Note and is subordinate and junior to any and all
other indebtedness of the Company, whenever incurred, except indebtedness which
by its terms is expressly subordinated in right of payment to the Notes.
The Company has reserved sufficient authorized but unissued shares for
conversion of the Convertible Notes which shares, upon issuance and delivery,
will be duly and validly issued, fully paid and nonassessable.
Note 8 - Commitments and Contingencies
a. Lease Agreements
Through March 13, 1997, the Company occupied laboratory, plant and
warehousing space in Perkasie, Pennsylvania on a month to month basis for $500
per month.
On March 13, 1997, the Company entered into a lease agreement with an
unrelated parted for office and warehousing space at 163 South Street,
Hackensack, New Jersey for a period of 4 years with a monthly rent of $2,500 and
real estate taxes payable separately. The lease requires deposit of 2 months
rent aggregating $5,000 and two months free rent.. The minimum lease payments
each of the next four years is $30,000. The Company has an option to renew the
lease for an additional 4 years at a rental equal to the higher of $30,000 per
year or $30,000 per year plus 90% of the Consumer Price Index for April, 1997.
At June 30, 1998, the future minimum rental payments under the operating lease
are as follows: <TABLE>
<S> <C>
June 30, 2000 30,000
June 30, 2001 30,000
-------
$ 60,000
</TABLE>
For the years ending June 30, 1999 and the nine months ended March 31,
2000, the Company paid an aggregate of $42,156 and $31,599 respectively.
b. Employment Agreement with Gerald Sugerman
On May 23, 1995, the Company entered into an employment with Gerald
Sugerman as Vice President for Scientific Affairs. The Company is obligated to
pay Mr. Sugerman 10,000 per month, life insurance equal to twice the his annual
salary, medical and disability insurance, automobile expenses equal to $0.30 per
mile, four weeks paid vacation, five sick days, six personal days, all of which
will be accumulated if not taken, reimbursement for travel and promotion
expenses, 5% of gross sales until Mr. Sugerman has received $350,000, 2% of net
sales thereafter and Mr. Sugerman is granted an option to purchase up to 850,000
shares of common stock at $1.00 per share for a period of 4 years beginning July
1, 1996.
As of June 30, 1999 and March 31, 2000, the Company has reserved 850,000
and 850,000 shares respectively of common stock pending the exercise of this
option
c. Employment agreement with Roger Fidler
In February, 1996, the Company entered into an employment agreement with
Roger Fidler as President and Director of Marketing. The Company is obligated to
pay Mr. Fidler a commission on sales equal to 15% of sales of coupling agents,
ink and paint vehicles and 10% of hard resin sales. Commissions on other
products sold through the efforts of Mr. Fidler will be negotiated in good faith
from time to time, but will be based upon the above scale as modified for
differences in the costs of production of the goods sold. The commissions will
be paid only on accounts opened by Mr. Fidler and will be paid for the term of
the contract and for one year after termination. Commissions will not be paid on
existing customers for the purchase of products presently purchased by them.
Upon the successful conclusion of a financing in excess of $500,000 or
sales of $2,000,000 per annum, whichever will occur first, Mr. Fidler will be
entitled to Company paid life insurance plan equal to twice his annual salary,
medical and disability insurance, automobile expenses equal to $0.30 per mile,
reimbursement for travel and promotion expenses Mr. Fidler is granted an option
to purchase up to 425,000 shares of common stock at $1.00 per share for a period
of 4 years beginning July 1, 1996. In February, 1996, non cash compensation
expense of $42,500 was charged to operations for the value of the options
granted. As of June 30, 1998, Mr. Fidler has exercised 100,000 options for an
aggregate consideration of $100,000.
As of June 30, 1999, the Company has reserved an aggregate of 325,000 and
325,000 shares of common stock respectively pending the exercise of these
options.
As of March 31, 2000, the Company has accrued a minimal compensation of
$1,000 per month or an aggregate of $14,000 for the period from February, 1999
to March 31, 2000 as compensation to Mr. Fidler as consideration for services
while the Company is in the development stage.
As of June 30, 1999 and March 31, 2000, the Company is obligated to
repay and Officer loan balance of $54,504 and $139,349 respectively due on
demand without interest.
d. Letter of Intent for Corporate Financing
On April 15, 1996, the Company entered into an financing agreement with
Kenneth Jerome & Co., Inc. of Florham Park, New Jersey concerning an initial
public offering of 1,000,000 Units at $6.00 per Unit for an aggregate of
$6,000,000. Each Unit consisting of 1 share of common stock and 1 five-year
common stock "A" Purchase Warrant. Each Warrant entitling the owner to purchase
1 share of common stock at an exercise price of $7.00. The aggregate amount of
the public offering is subject to adjustment to include in the initial public
offering an over-allotment of 15%. The Company may redeem at $0.05 per class "A"
Warrant provided, however, that the closing bid price of the Company's common
stock in the over-the-counter market as reported by NASDAQ will have for 30
consecutive business days ending 15 days of the date of redemption average in
excess of $8.50 per share (subject to adjustments in the case of a reverse stock
split, stock dividend, etc.).
The Company, after applying the net proceeds of the initial public
offering must meet the criteria for listing on either NASDAQ or a regional
exchange.
The Company will prepare and file with the Securities and Exchange
Commission a Registration Statement on Form SB-2 for the maximum number of Units
offered:
a. 1,150,000 Units, each Unit consisting of one share of common stock and
one five-year common stock A Purchase Warrant, including the over-allotment.
b. 1,150,000 shares of common stock to be issued upon closing, 1,150,000
shares of common stock to be issued upon exercise of the A Warrants and 115,000
shares of common stock to be issued upon exercise of the Underwriter's Warrants.
c. The Company will pay all expenses of the proposed offering and the
issuance, sale and delivery of all of the Units, accounting and legal fees, cost
of "tombstone" advertisements not to exceed $5,000, 3% non-accountable expenses
or a maximum of $207,000 and all administrative costs.
d. The gross commission to the Underwriter will be 10% of the total
proceeds of the public offering.
e. If the offering is sold within the Underwriting Period, the Company
will sell to the Underwriter, Underwriter's Warrants to purchase Units which
Units will equal 10% of the Units offered to the public, at a price of $.001 per
Underwriter's Warrant. The exercise price of the Underwriter's Warrant will be
approximately 120% of the offering price of the Units. The Underwriter's
Warrants will be exercisable for a period of 4 years following the expiration of
1 year from the Effective Date. The Company agrees that it will, upon request by
the Underwriter, within the period commencing 12 months from the Effective Date,
and for a period of 4 years thereafter, on one occasion, at the Company's
expense, file a post-effective amendment to Register the Underwriter's Warrants.
f. The Underwriter's Warrants will contain various anti dilution
provisions which will protect the Underwriter as to the exercise price of the
Underwriter's Warrants and the percentage of common stock to which the
Underwriter is entitled.
g. Non statutory Stock Option Plan
On January 1, 1997, the Company adopted a Non statutory Stock Option Plan
("Plan"). 300,000 shares of common stock are reserved under the Plan. The Plan
is administered by the Board of Directors.
Stock options under the Plan may be granted to employees, officers,
directors, consultants of the Company or any other parties who have made a
significant contribution to the business and success of the Company. The
exercise price under the Plan may be more equal to or less than the current
market price of the Shares of Common Stock.
At June 30, 1999 and March 31, 2000, the number of options granted
pursuant to this program is -0-. As of June 30, 1999 and March 31, 2000, the
Company has reserved 300,000 shares of common stock pending the issuance and
exercise of options into shares of common stock.
h. Stock Grant Program
The Company has adopted a stock grant program with 200,000 shares of
common stock. The stock grant program provides for the issuance to officers,
directors and key employees stock grants as determined by the Board of
Directors. The recipient must continue employment with the Company for two years
after the grant is made or forfeit the stock.
As of June 30, 1999 and March 31, 2000, the number of shares of common
stock granted pursuant to this program is -0-.
As of June 30, 1999 and March 31, 2000, the Company has reserved 200,000
shares of common stock pending issuance.
I. Registered Offering
The Company is offering a minimum of 1,000,000 Units to a maximum of
1,150,000 Units at an offering price of $6.00 per Unit. Each Unit consists of 1
share of common stock and one redeemable common stock "A" Purchase Warrant,
exercisable into 1 share of common stock per warrant for a period of 5 years
from the effective date of the registration statement of which this prospectus
is a part at an exercise price of $7.00 per share. The "A" Purchase Warrants are
redeemable at the Company's option commencing 90 days after the effective date
upon 30 days notice to the Warrant holders at $.05 per Warrant if the closing
bid price of the common stock in the over-counter-market as reported by NASDAQ
will have for a period of 30 consecutive trading days ending within 15 days of
the notice of redemption average in excess of $8.50 per share (subject to
adjustments in the case of a reverse stock split, stock dividend, etc.). Since
it is the Company's present intention to exercise such right, Warrant holders
should presume that the Company would call the Redeemable Warrants for
redemption if such criteria are met. The Redeemable Warrants are immediately
detachable and separately tradable from the Units upon issuance.
The shares are being offered by the Company and/or selected dealers on a
"firm commitment basis". The Underwriter will purchase 1,000,000 Units for later
resale, and has reserved the right to purchase up to an additional 150,000 Units
on the date of the Initial Public Offering in case of over booking of sales.
The Company has agreed to sell to the Underwriter, at a nominal price,
warrants to purchase 10% of the number of shares sold by the Underwriter or
dealers at an exercise price of $7.80 per share, which warrants will be
exercisable for four years commencing one year after issuance.
Note 9 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of June 30, 1999 and March 31, 2000,
the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carryforward and was fully
offset by a valuation allowance.
At June 30, 1999 and March 31, 2000, the Company has net operating loss
carry forwards for income tax purposes of $1,804,522 and $2,214,757
respectively. These carryforward losses are available to offset future taxable
income, if any, and expire in the year 2010. The Company's utilization of this
carryforward against future taxable income may become subject to an annual
limitation due to a cumulative change in ownership of the Company of more than
50 percent.
The components of the net deferred tax asset as of March 31, 2000 are as
follows:
Deferred tax asset:
Net operating loss carry forward $ 753,017
Valuation allowance $( 753,017)
----------
Net deferred tax asset $ -0-
==========
The Company recognized no income tax benefit for the loss generated for
the year ended June 30, 1998 and 1999 and for the six months ended March 31,
2000.
The Company's deferred tax asset has been fully reserved by a valuation
allowance since realization of its benefit is uncertain. The difference between
the statutory tax rate of 34% and the Company's effective tax rate of 0% is
substantially due to the increase in the valuation allowance of $592,180 for the
period from inception July 22, 1994, to March 31, 2000. The Company's ability to
utilize its net operating loss carryforwards may be subject to an annual
limitation in future periods pursuant to Section 382 of the Internal Revenue
Code of 1986, as amended.
Note 10 - Business and Credit Concentrations
At June 30, 1999 and March 31, 2000, the Company has concentrated its
credit risk by maintaining deposits in one banks. The maximum loss that could
have resulted from this risk totaled $-0- which represents the excess of the
deposit liabilities reported by the banks over the amounts that would have been
covered by the federal insurance
The amount reported in the financial statements for accounts receivable
and investments approximates fair market value. Because the difference between
cost and the lower of cost or market is immaterial, no adjustment has been
recognized and investments are recorded at cost.
Financial instruments that potentially subject the company to credit risk
consist principally of trade receivables. Collateral is generally not required.
Note 11 - Supplemental Cash Flow Information
The following is supplemental cash flow information for the Company for
the period from inception July 22, 1994 to March 31, 2000:
Acquisition of licensing agreement for 1,350 shares of common stock $( 1,350)
Issuance of shares of preferred stock in settlement of note
Payable and other accrued expenses to Gerald Sugerman $(330,000)
Capital stock 331,350
-------
$ -0-
=======
Note 12 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management for its continued existence. The Company will also be
dependent upon its ability to raise additional capital to complete is marketing
program, acquire additional equipment, management talent, inventory and working
capital to engage in profitable business activity. Since its organization, the
Company's activities have been limited to the entering into the marketing of
providing limited quantities of chemical coupling agents and other chemical
additives at competitive pricing, hiring personnel, acquiring equipment and
warehousing space, conducting research and development of its formulas and
preparation of documentation and the sale of a private placement offering.
<PAGE>
SUBSCRIPTION AGREEMENT
The undersigned hereby subscribes for ______________ Units of the offering of
PPA Technologies, Inc. described herein. Subscriber acknowledges receipt of the
Prospectus in which the Subscription Agreement is included.
------------------------------- -------------------------------
(Signature of Subscriber) (Signature of Subscriber)
------------------------------- -------------------------------
Print Name Print Name
------------------------------- -------------------------------
Date Date
------------------------------- -------------------------------
Address Address
------------------------------- -------------------------------
Social Security or Taxpayer Social Security or Taxpayer
Identification number Identification number
Form of Ownership Resided (check one):
[ ] Individual
[ ] Joint Tenants with rights of survivorship [ ] Tenants in Common [ ] Trust [
] Corporate [ ] Partnership
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers.
The By-Laws of the Company provide for indemnification of officers and
directors to the maximum extent allowed by the law of New Jersey, set forth in
greater detail below.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and persons controlling the
registrant pursuant to the foregoing provisions or otherwise, the registrant 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.
Article VII of the By-Laws of the Company provide for the maximum
indemnification allowed by the law of the State of New Jersey as follows:
"Every person who is or was a director, officer, employee or agent of
the Corporation, or of any corporation which he has served as such at
the request of the Corporation, shall be indemnified by the Corporation
to the fullest extent permitted by law against all expenses and
liabilities reasonably incurred by or imposed upon him, in connection
with any proceeding to which he may be made, or threatened to be made,
a party, or in which he may become involved by reason of his being or
having been a director, officer, employee or agent of the Corporation,
or such other corporation, at the time the expense or liabilities are
incurred."
ITEM 25. Other Expenses of Issuance and Distribution
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts) are estimated as follows:
Maximum
Registration Fee-Securities and
Exchange Commission......................... $ 5,025.00
NASD Fee ................................... 2,175.00
Transfer Agent's Fee and Expenses .......... 2,800.00
Legal Fees and Expenses .................... 150,000.00
Blue Sky Fees and Expenses ................. 15,000.00
Printing Expenses (including securities) ... 25,000.00
Miscellaneous .............................. 25,000.00
Total.............................. $225,000.00
Estimated.
ITEM 26. Recent Sales of Unregistered Securities
The following sales made by the issuer within the past three years were
made under circumstances not involving any public offering, and which were
exempt from the registration requirements of the Securities Act of 1933, as
amended, by reason of Section 4(2) thereof and/or the Rules and Regulations
promulgated thereunder, specifically, Rule 504, Regulation D:
Purchaser Security Amount Date Consideration
- ----------------------------------------------------------------
An Lou Chang Common 30,000 shares 07/01/97 $60,000
Eve Chang Debt $60,000 note 07/01/97 $60,000
Carl D. Fraley Debt $50,000 note 07/01/97 $50,000
Ray Beeler Debt $50,000 note 07/01/97 $50,000
Henry MacUga Debt $25,000 note 07/01/97 $25,000
Haskell Bernat Debt $25,000 note 07/01/97 $25,000
Edward Santangelo Debt $25,000 note 07/01/97 $25,000
Martin Santangelo Debt $25,000 note 07/01/97 $25,000
David Schotz Debt $25,000 note 07/01/97 $25,000
Lois S. MacUga Debt $12,500 note 07/01/97 $12,500
Aaron Lehman Debt $12,500 note 07/01/97 $12,500
David Lipson Debt $12,500 note 07/01/97 $12,500
ITEM 27. Exhibits and Financial Statement Schedules
1.(b) Form of Selected Dealers Agreement
3.(a) Registrant's Certificate of Incorporation
(b) Amendment to Certificate of Incorporation
(c) Registrant's By-Laws
4.(a) Specimen Security Certificate
(b) Form of Warrant
(c) Form of Underwriter's Warrant
(e) Form of Warrant Agreement
5.(a) Consent and Opinion of Jay Hait, Esq.
10. Material Contracts
(a) Employment Agreement between the Company
and Gerald Sugerman
(b) Employment Agreement between the Company
and Roger Fidler
(c) Lease
(d) Lease/Sale Agreement between the Company
and Blue Ridge Technologies, Inc.
24.(a) Consent of Thomas Monahan, Certified Public
Accountant
ITEM 28. Undertakings
The undersigned Registrant hereby undertakes that:
(A) To file, during any period in which offers or sales
are being made, a post-effective amendment to this Registration Statement:
(i) to include any Prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the Prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; and,
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement, including
(but not limited to) any addition or deletion of a managing underwriter.
(B) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(C) To remove from registration, by means of a post-effective amendment to
the Registration Statement, any of the securities offered hereby which are not
sold pursuant to the terms of this offering.
(D) Will provide to the purchasers at the closing certificates in such
denominations and registered in such purchasers' names to permit prompt delivery
to each purchaser.
(E) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer 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
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this Amendment
No. 5 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Hackensack and State of
New Jersey, on the 25th day of May, 2000.
PPA TECHNOLOGIES, INC.
BY: /S/ Roger Fidler
Roger Fidler, President
Chief executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
/S/ Roger Fidler President, May 25, 2000
Roger Fidler Director
/S/ Gerry Sugerman Director, May 25, 2000
Gerry Sugerman Treasurer,
Secretary,
Chief Financial and
Accounting Officer
/S/ James Wright Director, May 25, 2000
James Wright
/S/ Albert Mersberg Director, May 25, 2000
Albert Mersberg
EX-1
3
FORM OF SELECTED DEALERS AGREEMENT
PPA TECHNOLOGIES, INC.
163 South Street
Hackensack, NJ 07601
SELECTED DEALERS AGREEMENT Gentlemen: PPA Technologies, Inc. (the
"Company"), proposes to offer on a "best efforts" basis 1,000,000 Units (the
"Units" or "Securities") of PPA Technologies, Inc., a New Jersey corporation,
(the "Company"). The Units to be offered for sale are more particularly
described in the enclosed preliminary Prospectus ("Prospectus"). We invite your
participation, as a Selected Dealer, on the terms and conditions stated herein.
1. Offering Price. The Units are to be reoffered to the public
at a price of not less than $6.00 per Unit and shall not be directly or
indirectly offered or sold to the public by Selected Dealers at any lower price
during the period this Agreement is in effect. The Company proposes to issue and
sell 1,000,000 Units.
2. Selected Dealers. Members of the National Association of
Securities Dealers, Inc. (the "NASD") who shall agree to reoffer Units hereunder
(hereinafter referred to as "Selected Dealers" or "Participating Dealers") will
be allowed a selling concession of _______ percent (__%) payable as hereinafter
provided. No concession shall be earned or paid unless a Closing shall take
place prior to the "Termination Date" as defined in the Registration Statement
filed with the United States Securities and Exchange Commission. You agree that
in reoffering said securities, if your offer is accepted after the Effective
Date, you will make a bona fide public distribution of same. You will advise us
upon request of the Securities purchased by you remaining unsold and we shall
have the right to repurchase such Securities upon demand at the public offering
price without payment of any concession with respect to any Securities so
repurchased.
3. Subscriptions. The Company reserves the right to reject
all offers to purchase, in whole or part, to make allotments and to close the
subscription books at any time without notice. The Units allotted to you will be
confirmed, subject to the terms and conditions of this Agreement. Payments for
Units purchased by you are to be made by check or money order only and shall be
made payable to the the Issuer. In respect of all Units purchased by you
pursuant hereto, you will promptly transmit (i.e., by no later than noon of the
next business day following receipt by you) to PPA Technologies, Inc., having
its principal office at 163 South Street, Hackensack, New Jersey 07601, your
certified check or cashier's check for payment for the full amount of the Public
offering Price for the number of Units purchased, without deduction for any
commission or concession, in compliance with the Securities Exchange Act of
1934, as amended (the "1934 Act"). Your transmittal letter to the Company
accompanying checks or money orders shall include a written account of sale,
which shall include each Purchaser's name and address, the number of Units
Purchased, the amount paid therefor, Social Security number, taxpayer
identification number, and whether the consideration received was in the form of
a check or money order.
NO COMMISSIONS SHALL BE PAYABLE, AND ALL SUBSCRIPTIONS ARE SUBJECT TO
REJECTION BY THE COMPANY, UNLESS AND UNTIL THE SELECTED DEALER HAS COMPLIED
WITH THE ABOVE PROVISIONS.
Each sale shall subject to acceptance of such sale by the undersigned. In
the event any order submitted to you is not accepted, the Company will return
all funds paid by the purchasers. Payment of the selling concessions in respect
of each such sale will be made to the Selected
Dealer, by the Company when and only in the event that the subscriptions are
accepted by the Company. The offering is made subject to the issuance and
delivery of the Units and the acceptance hereof by the Company, to the approval
of legal matters by counsel, and to the terms and conditions herein set forth.
If an offer to purchase is rejected or if a payment is received which
proves insufficient or worthless, any compensation paid to the Selected Dealer
shall be returned either by the Selected Dealer's remittances in cash or by a
charge against the account of the Selected Dealer, as the Company may elect.
4. Offering to Public. Neither you nor any other person is, or has
been, authorized to give any information or to make any representations in
connection with the sale of the Units other than as contained in the Prospectus.
The Selected Dealer will not reoffer the Units pursuant to this Agreement unless
the Prospectus is furnished to the purchaser at least 48 hours prior to the
mailing of the confirmation of sale, or is sent to the person under such
circumstances that it would be received by him 48 hours prior to his receipt of
a confirmation of the sale. The Dealer understands that during the 90 day period
after the first date upon which the Units of the Company are bona fide offered
to the public, all Dealers effecting transactions in the Units shall be required
to deliver the Company's current Prospectus to any purchasers thereof prior to
or concurrent with the receipt of the confirmation of sale. Additional copies of
the then current Prospectus will be supplied by the Company in reasonable
quantities upon request. No Selected Dealer is authorized to act as agent for
the undersigned in any respect.
5. Compliance with Securities Laws. Upon becoming a Selected Dealer, and in
purchasing and reoffering the Units, you agree to comply with all applicable
requirements of the Securities Act of 1933, as amended (the "1933 Act") , the
1934 Act, any applicable state securities or "Blue Sky" laws, and the Rules of
Fair Practice of the NASD, including, but not limited to, Article III, Section I
thereof, and the interpretations of said section promulgated by the Board of
Governors of such Association, including an Interpretation with respect to
free-riding and withholding dated November 1, 1970, and as thereafter amended,
and including information concerning the Board of Governor's Interpretation
thereof dated March 2, 1979, to NASD members. You also agree to comply with
Sections 8, 24, 25 and 36 of Article III of the Rules of Fair Practice of the
NASD. You also agree to comply with all requirements of Rules 2730, 2740, 2420,
and 2750 of the NASD Conduct Rules. Upon application, you will be informed as to
the states in which we have been advised by counsel to the Company or counsel to
the Underwriter that the Units have been qualified for sale under the respective
securities or Blue Sky Laws of such states, but we assume no obligation or
responsibility as to the right of any Selected Dealer to sell the Units in any
state or as to any sale therein.
By acceptance of this Agreement, you represent that you are a member in
good standing of the NASD.
By acceptance of this Agreement, each Selected Dealer has assumed full
responsibility for thorough and prior training of its representatives concerning
the selling methods to be used in connection with the offer and sale of the
Units, giving special emphasis to the NASD's principles of full and fair
disclosure to prospective investors, suitability standards and the prohibitions
against "Free-Riding and Withholding." .
Each Selected Dealer agrees to indemnify and hold harmless the
Underwriter, the Company and the other Selected Dealers against and from any
liability, loss, damage, or expense arising out of any failure by the Selected
Dealer to comply with the 1933 Act, the 1934 Act, applicable securities laws of
any state, the rules and regulations of the Securities and Exchange Commission
and the Rules of Fair Practice of the NASD, due to any act of omission by the
Selected Dealer.
By submitting an offer to purchase you confirm that you may, in
accordance with Rule 15c3-1 adopted under the 1934 Act, agree to purchase the
number of Units you may become obligated to purchase under the provisions of
this Agreement.
6. Prospectus and Offering. We have been advised by the Company that
the offering under the Registration Statement on Agreement, each Selected Dealer
acknowledges receipt of a copy of Form SB-2 (File No. )with respect to the
subject Units commenced on ___________________, 2000 . By signing this Agreement
each Selected Dealer acknowledges receipt of a copy of the Prospectus included
in said Registration Statement. Additional copies of the Prospectus will be
supplied to you in reasonable quantities upon request.
You will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase securities in the
open market or otherwise make a market in the Securities or otherwise attempt to
induce others to purchase the Securities in the open market. Nothing contained
in this paragraph shall however preclude you from acting as agent in the
execution of unsolicited orders of customers effectuated for them through a
market maker.
7. Liability, Nothing herein will constitute the Company or the
Selected Dealers as an association, partnership or joint venture with each
other, or as an unincorporated business or other separate entity, but you will
be responsible for your share of any liability or expense based ode any claim to
the contrary. As the Company, we shall have full authority to take such action
as we may deem advisable in all matters pertaining to the offering. The Company
shall not be under any liability (except for its own want of good faith) for or
in respect of: the validity or value of, or title to any of the Units or
securities underlying the Units; the form of, or the statements contained in, or
the validity of the Prospectuses or any amendment or supplement thereto; any
document incorporated by reference therein or any other instruments executed by
or on behalf of the Company or others; the form or validity of this Agreement;
the delivery of the Units or the securities underlying the Units; the
performance by the Company of the Units or the securities underlying the Units
or others of any agreement on its or their part; the qualifications of the Units
or the securities underlying the Units for sale or the legality of the Units and
such securities for investment under the laws of any jurisdiction; or any matter
in connection with any of the foregoing; provided, however that nothing in this
paragraph shall be deemed to relieve the Company from any liability imposed by
federal securities laws.
8. Communications. All communications from Selected Dealers should be
addressed to PPA Technologies, Inc., 163 South Street, Hackensack, New Jersey
07601, Attention: Roger Fidler, President. Any notice from the Company to a
Selected Dealer shall be deemed to have been duly given if mailed, telecopied,
or telegraphed to such Selected Dealer at the address first appearing in this
Agreement.
9. Amendment. This Agreement may be supplemented or amended by the
Company by written notice thereof to you, and any such supplement or amendment
to this Agreement shall be effective after the date of such supplement or
amendment.
10.Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey.
This Agreement supersedes any prior understanding you have with the
Company with respect to the subject matter hereof. If the foregoing is
acceptable to you, please sign and return the enclosed copy of this Agreement.
Very truly yours,
PPA TECHNOLOGIES, INC.
By:______________________________
Roger Fidler, President
OFFER TO PURCHASE
The undersigned does hereby offer to purchase (subject to the right to
revoke as set forth in the Agreement) _______________* Units in accordance with
the terms and conditions set forth above. We hereby acknowledge receipt of the
Prospectus referred to herein above relating to such Units. We further state
that in purchasing such Units we have relied upon such Prospectus and upon no
other statement whatsoever, written or oral.
- -------------------------------
(Name of Dealer)
By:_____________________________
Name:
Title:
Address:
EX-4
4
FORM OF WARRANT
FORM OF REDEEMABLE WARRANT
VOID AFTER 5:00 P.M. ,2001 WARRANT FOR PURCHASE OF SHARES OF
PPA TECHNOLOGIES, INC.
(A New Jersey Corporation)
Warrant No. warrant for Shares
THIS WARRANT CERTIFICATE CERTIFIES that
___________________________________________ (hereinafter called the "Holder"),
or registered assigns, is the registered holder of the number of Warrants of PPA
Technologies, Inc. (hereinafter called the "Corporation") which entitle the
Holder to purchase one-half fully paid and non-assessable share of Common Stock
(no par value per share) ("Shares") of the Corporation for Each Warrant held,
subject to the redemption and other provisions hereof and of the Warrant
Agreement (as defined below), at any time before 5:00 p.m., , 2001, a price of
$10.00 per Share, subject to certain adjustments, however, as to the number of
Shares purchasable and the purchase price, all as more fully set forth in the
Warrant Agreement. This Warrant may be redeemed at any time after at a price of
$.05 per Warrant on 30 days' prior written notice to the warrantholders if the
closing bid price of the Common Stock as reported by NASDAQ Bulletin Board
averages in excess of $10.00 for a period of 20 consecutive trading days ending
within 15 days of the notice of redemption. In the event the Company exercises
the right to redeem the Redeemable Warrants, such Redeemable Warrants will be
exercisable until the close of business on the date for redemption fixed in such
notice. If any Redeemable Warrant called for redemption is not exercised by such
time, it will cease to be exercisable and the holder will be entitled only to
the redemption price.
Any whole number of Warrants may be exercised by the Holder hereof upon
surrender of this Warrant with the subscription form attached duly executed, to
the Corporation's Warrant Agent at its principal office, 201 Bloomfield Avenue,
Verona, New Jersey 07044, or such other address as the Corporation may designate
by notice in writing to the registered holder hereof, at any time within the one
year period from , 2000 and until 5:00 P.M.
, 2001 inclusive, accompanied by payment of said purchase price (such
surrender and payment being hereinafter referred to as the exercise of this
Warrant). If this Warrant is exercised in respect of less than all of the Shares
covered hereby, the Holder shall be entitled to receive a new Warrant covering
the number of Shares in respect of which this Warrant shall not have been
exercised.
The number of Shares which will be received upon the exercise of this
Warrant is subject to modification and adjustment upon the happening of certain
events specified in the Warrant Agreement provided, however, that as more
particularly set forth herein, the Corporation shall not be required to issue
any fractional Shares in connection with the exercise of this warrant.
This Warrant is issued subject to the condition, and every Holder
hereof, by accepting the same, agrees with any subsequent Holder hereof and with
the Corporation that this Warrant and all rights hereunder are issued and shall
be held subject to all of the terms, conditions, limitations and provisions set
forth in the Warrant Agreement, the terms and provisions of which are
incorporated herein by reference. The Warrant Agreement is available for
inspection at the offices of the Warrant Agent, Jersey Transfer & Trust Company.
This Warrant does not confer upon the Holder hereof any rights
whatsoever as a stockholder of the Corporation. Upon the exercise of this
Warrant, the subscription form annexed hereto must be duly executed and the
accompanying instructions for registration of Shares filled in.
This Warrant Certificate is transferable in whole or in part by the
registered holder hereof, except no fractional warrants will be issued. This
Warrant Certificate shall not be valid for any purpose until it has been
countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be issued and
authenticated by the signatures of its President and its Secretary and its
corporate seal to be affixed hereon.
PPA TECHNOLOGIES, INC.
By:
ROGER FIDLER
President
ATTEST:
Countersigned:
Secretary Jersey Transfer & Trust Company
BY:
Authorized Signature
FORM OF EXERCISE
(To be executed by the registered Holder desiring to exercise the right to
purchase Shares evidenced by the within Warrant.)
The undersigned hereby exercises the right to purchase Shares
evidenced by the within Warrant according to the terms
and conditions thereof and herewith makes payment of the purchase price in full.
Kindly issue all Shares in accordance with the instructions given below.
Instructions for registration of Shares:
Name (Please print in block letters)
Signature Date
Street
City
State Zip Code
ASSIGNMENT
FOR VALUE RECEIVED
hereby sell, assign and transfer unto
(Name)
(Address)
the right to purchase the Shares of Common Stock evidenced by the within
Warrant, and do hereby irrevocably constitute and appoint
, attorney to transfer the said right on the books
of the Corporation with full power of substitution.
Dated: , 199_
Signature
EX-5
5
CONSENT AND OPINION OF JAY HAIT
JAY HAIT
Attorney at Law
130 William St., Suite 807
New York, NY 10038
Tel: (212) 349-0124 Fax: (212) 898-1334
January 25, 2000
Board of Directors
PPA Technologies, Inc.
163 South Street
Hackensack, New Jersey 07601
RE: Opinion of Counsel on Legality of Issuance
of Securities by the Company
Gentlemen:
You have requested that I render an opinion as to the legality of the
issuance and sale of certain securities of PPA Technologies, Inc. (hereinafter
the "Company") in connection with the public offering of said securities which
are the subject of a Registration Statement, File No. 333-40001-NY on Form SB-2
filed with the Securities and Exchange Commission. These securities are
1,000,000 Common Shares (no par value), 1,000,000 Redeemable Common Stock
Purchase Warrants ("Redeemable Warrants")(no par value), 500,000 Common Shares
(no par value) underlying said Redeemable Warrants, 100,000 Underwriter's
Warrants ("Warrants") and 150,000 Common Shares underlying said Warrants.
As Counsel to the Company, I have examined the Company's charter
documents and have supervised the Company's Board of Directors in connection
with the authorization of the 1,000,000 Common Shares (for sale to the public)
and the 1,015,000 Redeemable Warrants, 500,000 Common Shares underlying said
Redeemable Warrants, 100,000 Underwriter's Warrants and 150,000 Common Shares
underlying said Warrants, the Redeemable Warrants and the Warrants being
exercisable pursuant to the terms set forth in the Registration Statement. After
review of the Securities Act of 1933, as amended, rules and regulations
promulgated thereunder, and other statutes, rules, regulations and such other
sources of law as deemed necessary, I render the following opinion in reliance
upon the representations of management and corporate records as presented to me
by the management of the Company:
(1) The Company is a duly incorporated and validly existing corporation
in good standing under the laws of the State of New Jersey and is duly
authorized to transact the business in which it is engaged and in which it
proposes to engage.
(2) The total authorized capital of the Company is Ten million
(10,000,000) Common Shares (no par value) and 1,000,000 Preferred Shares (Par
value $100.00/share).
(3) (a) When any of the Common Shares offered by Prospectus are
purchased in accordance with the terms of the Registration Statement, and
certificates for the 1,000,000 Common shares have been duly executed and
delivered upon payment to the Company of the agreed price per share, said Common
Shares will have been duly authorized and issued as fully paid and
non-assessable securities of the Company. The 1,000,000 Common Shares will be
entitled to the rights set forth in the Certificate of Incorporation of the
Company.
(b) When any of the Redeemable Warrants issued pursuant to the
terms of the Registration Statement and certificates for the Redeemable Warrants
have been duly executed and delivered upon payment to the Company of the agreed
price for the Redeemable Warrants, said Redeemable Warrants will have been duly
and validly authorized and issued as fully paid and non-assessable securities of
the Company. The 500,000 Common Shares underlying the Redeemable Warrants will
be entitled to the rights set forth in the Certificate of Incorporation of the
Company.
(c) When any of the Warrants issued pursuant to the terms of
the Registration Statement and certificates for the Warrants have been duly
executed and delivered upon payment to the Company of the agreed price for the
warrants, said Warrants will have been duly and validly authorized and issued as
fully paid and non-assessable securities of the Company. The 150,000 Common
Shares underlying the Warrants will be entitled to the rights set forth in the
Certificate of Incorporation of the Company.
(d) When any of the Redeemable Warrants are exercised in
accordance with their terms, and certificates for the 500,000 Common Shares
issuable upon exercise of said Redeemable Warrants have been duly executed and
delivered upon payment to the Company of the agreed exercise price per share,
said 500,000 Common Shares will have been duly and validly authorized and issued
as fully paid and non-assessable securities of the Company. The 500,000 Common
Shares will be entitled to the rights set forth in the Certificate of
Incorporation of the Company.
(e) When any of the Warrants are exercised in accordance with
their terms, and certificates for the 150,000 Common Shares issuable upon
exercise of said Warrants have been duly executed and delivered upon payment to
the Company of the agreed exercise price per share, said 150,000 Common Shares
will have been duly and validly authorized and issued as fully paid and
non-assessable securities of the Company. The 150,000 Common Shares will be
entitled to the rights set forth in the Certificate of Incorporation of the
Company.
(4) The contemplated issuances and sales of up to 1,000,000 Common
Shares, 1,000,000 Redeemable Warrants which may be exercised to purchase up to
500,000 Common Shares, 100,000 Warrants which may be exercised to purchase up to
150,000 shares of the Company's Common Stock do not violate applicable federal,
state or local statutes or regulations.
CONSENT
I HEREBY CONSENT TO THE INCLUSION OF THIS OPINION AS AN EXHIBIT TO THE
COMPANY'S REGISTRATION STATEMENT, AND TO THE USE IN THE REGISTRATION STATEMENT
AND RELATED PROSPECTUS OF MY NAME UNDER THE CAPTION "LEGAL MATTERS."
Sincerely,
/s/ Jay Hait
Jay Hait, Esq.
EX-24
6
CONSENT OF THOMAS MONAHAN, CPA
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The undersigned, Thomas P. Monahan, CPA, hereby consents to the use of his
Accountant's report dated September 23, 1999 and the audited financial statement
submitted herewith in Amendment Number 6 to the Registration Statement upon Form
SB-2 of PPA Technologies, Inc, and the references made thereto in said
Registration Statement.
Date: May 25, 2000
/s/ Thomas P. Monahan
Thomas P. Monahan, CPA.
